One of the buzzwords in the banking industry is "cross-sell," and one regional bank is doing a remarkable job at executing on this key effort.
The big word
Whether we're considering regional banks like Huntington Bancshares (NASDAQ: HBAN ) and Fifth Third Bank (NASDAQ: FITB ) or giants like Bank of America (NYSE: BAC ) , one thing executives always push for isn't adding new customers, but instead developing deeper relationships with existing customers.
After all, Bank of America revealed last December how remarkably the revenue from each household jumps if it migrates from being one that just has an account with the bank to one that considers Bank of America for all financial services, from saving to borrowing and investing. The former brings in roughly $350 in revenue to the bank, whereas the latter brings in a staggering nine times more: $3,000.
And Bank of America isn't the only one, as Huntington Bancshares speaks to its "Optimal Customer Relationship Model," or OCR, as it seeks to not simply to gain customers, but also to develop more expansive relationships with them. Huntington says the end result of its "Welcome" culture, combined with execution and management from its sales force, results in this OCR, which in turn leads to "higher customer profitability."
And you can't go through a presentation from the company without seeing charts that reveal exactly how well it's doing at deepening those relationships:
So what does all of that at Bank of America and Huntington have to do with Fifth Third Bank? Well, as it turns out, although every bank reports it a little differently, the picture at Fifth Third is perhaps the brightest.
The reason for optimism
At a recent presentation, Fifth Third CFO Tayfun Tuzun provided a fascinating bit of insight into how the bank has progressed over the years. One of the most eye-opening things was the following chart, revealing that its customers went from having an average of 4.5 products with it to 5.5 over the past two years:
But it wasn't just that the relationships were deepening at Fifth Third. This happened as transactions at its branches were down by almost 20%, from 7.5 million during the first quarter of 2012 to just 6.1 million through the first three months of 2014.
Many bank executives talk about not only developing deeper relationships, but also doing so in an efficient way by utilizing mobile and online banking platforms. Fifth Third is clearly doing both and having great success.
While there were some broader benefits from changing interest rates, these increased relationships helped its branch banking business more than double its net income, from $34 million in the first quarter of 2013 to $80 million in the first quarter of this year.
The Foolish bottom line
The success of one line of business at Fifth Third shouldn't warrant an investment decision. After all, as its mortgage banking revenue was cut in half from $216 million to $108 million, its consumer lending business went from a $70 million gain last year to a loss of $6 million this year.
But the success of its branch banking business is undoubtedly something investors should monitor, as the success thus far is admirable, and it could be a sign of big things to come if it's able to continue its impressive run.
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