Insights from Gerard Cassidy, RBC Capital Markets Managing Director and Bank Analyst
By:
Sharon J. Lorman
Robert E. Kafafian
Guest: Gerard Cassidy, Managing Director, RBC Capital Markets
Podcast Show Notes:
Our This Month In Banking (TMIB) podcast features discussion with colleagues and other industry thought leaders on interesting banking news that happened this month. TMIB will be available on the last Wednesday of every month here, and on Apple and Droid podcast apps for your listening enjoyment. Join us on your commute, at your desk or at home.
Topic:Insights from Gerard Cassidy on JP Morgan’s Technology Spending, Comparing PNC and M&T Shareholder Letters, and How Community Banks Can Compete and Thrive
Start time: 1:28
This month Gerard S. Cassidy is TMIB’s guest. Mr. Cassidy is Managing Director of Equity Research with RBC Capital Markets and is also the President of the BancAnalysts Association of Boston, Inc. He is frequently quoted in financial publications regarding the banking industry and he appears on leading financial broadcasts discussing banking and economic issues and the impact on bank stocks. Mr. Cassidy is well known as the creator of the Texas Ratio, a ratio used by investors to determine whether a bank might be heading towards insolvency.
Under Jamie Dimon, JP Morgan Chase has become the technological leader in the banking industry. “Mobile first, digital everything” is their mantra. In the past two years, JP Morgan has invested more than $20 billion into new products for digital banking, investment advice, trading and cyber security. Deposits at Chase have grown more than twice the average annual rate for the rest of the industry. Notwithstanding the enormous spending on technology, JP Morgan also attributes its deposit growth to its physical branch network stating that convenient branch locations are still the top factor for customers when choosing a bank. The Bank announced in 2018 that it plans to open as many as 400 new branches in major cities across the East Coast and Mid-Atlantic regions. Three of the flagship expansion markets are Boston, Philadelphia and Washington, D.C. which is noteworthy considering the level of economic recovery has been higher in larger metropolitan markets. As evidenced by JP Morgan’s spending on technology, TKG believes that consumer deposits have largely been ceded to the biggest banks, and community banks must find niches in order to remain viable.
Even regional banks like M&T Bank Corporation ($120B in assets at March 31, 2019) and PNC Financial Services Group, Inc. ($393B in assets at March 31, 2019) must find ways to compete with the largest institutions. Both of these banks have chosen different paths as illustrated in their respective 2018 shareholder letters. M&T’s letter stressed a larger mission: to enable, encourage and empower customers and communities to thrive. It said more must be done to ignite economic activity beyond the biggest cities and across Middle America. The letter addressed technology and the digital revolution, but these areas were not front and center. In contrast, PNC’s letter opened with the demand for digital services and how the bank has invested heavily over years to build an advanced technological infrastructure capable of supporting growth. The letters highlight that regional banks have chosen different ways to compete.
How can community banks compete and prosper? Join us as Bob Kafafian and Gerard Cassidy gives us their opinions and insights!
This podcast relates to The Kafafian Group’s Strategic Management services. Click here for more information.
Watch for episode 43 of This Month in Banking to be released on Wednesday, May 29, 2019 and a new episode on the last Wednesday of every month.
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