For a fourth consecutive year, customer loyalty and perceptions of brand image among retail banking customers continue to decline, primarily due to low marks in customer service, according to the J.D. Power and Associates 2010 U.S. Retail Banking Satisfaction Study.

“As retail banking customers become
considerably less loyal, banks need to
focus on getting the fundamentals right.”
— Michael Beird,
J.D. Power

Results of the study show that poor customer service is the most common reason why customers switched banks so far this year. Poor customer service is cited by 37% of customers who have changed their primary bank in 2010.

Fees continue to have a major impact on customer loyalty, as 29% of customers who switched banks in 2010 cite high fees for products or services as their reason for switching.

The percentage of customers who say they “definitely will not” switch banks during the next 12 months has decreased significantly during the past three years to 34% in 2010, compared with 46% three years ago in the 2007 study.

The gap in loyalty intent between customers of larger and smaller banks is considerable, with 41% of customers at smaller banks who say they “definitely will not” switch, compared with 32% at larger banks.

The study also found that 51% of customers in 2010 indicated a preference for online banking, an increase from 45% in 2008. In addition, 7% of customers report using a mobile device to execute such transactions as checking balances, transferring funds and paying bills.

J.D. Power and Associates handed out awards to the banks in 11 different regions that achieved the highest scores in its study. Arvest Bank had the highest overall satisfaction score of any bank in the country, and the only one to top the list in two separate regions (South Central and Southwest).

The Chase/WaMu merger clearly had an impact on how customers felt about the bank. It was ranked last in three regions — California, New England and the Northwest — all areas where the once-popular WaMu had a strong branch presence.

One thing to note about the winners (and losers) below: Regional players seem to have an edge.

California

• Winner: Bank of the West
• Last Place: Chase/WaMu

Florida

• Winner: BankAtlantic
• Last Place: Bank of America

Mid-Atlantic

• Winner: Northwest Savings Bank
• Last Place: Citibank

Midwest

• Winner: Commerce Bank
• Last Place: Charter One

New England

• Winner: Eastern Bank
• Last Place: Chase/WaMu

North Central

• Winner: Flagstar Bank
• Last Place: Bank of America

Northwest

• Winner: Sterling Savings Bank
• Last Place: Chase/WaMu

South Central

• Winner: Arvest Bank
• Last Place: Bank of America

Southeast

• Winner: United Community Bank
• Last Place: Bank of America

Southwest

• Winner: Arvest Bank
• Last Place: KeyBank

Texas

• Winner: Frost National Bank
• Last Place: BBVA Compass Bank

The 2010 U.S. Retail Banking Satisfaction Study is based on responses from nearly 48,000 participants regarding their experiences with their banking provider. The study analyzes customer satisfaction with the retail banking experience based on six factors: account activities, account information, facility, fees, problem resolution and product offerings. The study was fielded in January and February 2010. You can download the entire study’s results here.

STUDY
What makes for an ideal banking relationship
A survey of nearly 4,000 U.S. banking customers found that fewer than 50% of customers were highly satisfied or likely to recommend their primary bank. Trust and Respect are declining in importance as contributors to a satisfactory relationship. The survey also found that problem resolution is not being adequately addressed by most financial institutions. Read more at Bank Marketing News.

DIGITAL FUTURE
BofA to spend less on traditional media, doubling digital
America’s second-largest bank will be reducing its spending on traditional television and print advertising and, instead, doubling its digital spending. Read more at Reve News.

2020 SCENARIO
What mobile banking may look like in 10 years
A fictional scenario to get you thinking about where mobile banking is headed. Read more at TheFutureOfBanking.org.

BANK TECH
A new analytics tool from SAS to monitor social media
An analysis of positive and negative Twitter, Facebook sentiment about a bank can be integrated with CRM and other internal software. Read more at Banking Systems & Technology.

FLIP FLOP DOWN UNDER
ANZ backs down on ATM fees after glitch
ANZ refuses to refund customers who had to pay ATM fees at other banks after their own system shut down. But wait… Read more at Business Day.

GOING MOBILE
BofA rolls out text banking (but does so imperfectly)
Your best excuse to delay your text-banking project just ended. If you don’t support text banking yet, it’s time to move it up the priority list. Read more at Netbanker.

THE BANK CHANNEL
“From Online To Digital”
Here is the presentation Rob Findlay, NAB’s banking customer experience expert, gave at the FINSIA Innovation in Retail Banking Conference.

WAMU EXECS PROMISE BIG TALK
“We could have survived”
The top two executives of WaMu — the largest bank failure in U.S. history– planned to tell a Congressional subcommittee their thrift could have survived if regulators hadn’t seized it. Former CEO Kerry Killinger had planned on telling them the bank that was close to stabilizing its finances in 2008. Read more at Portfolio.

WHAT WAMU EXECS REALLY SAID
A blow-by-blow recap of Congressional testimony
Some former WaMu executives actually “formed something akin to a circular firing squad.” The Chief Credit Officer tell Senators that WaMu’s “Power of Yes” ad campaign” symbolized their philosophy towards lending and sent the wrong message to loan originators.” CEO Killinger stuck to his guns, accusing Congress of giving preferential treatment to banks who had them in their back pockets. Read more at KIRO’s blog.

Financial marketers often portray each other as sneaky, greedy, self-serving, mean, old farts.
These are just a handful of recent examples covered here at The Financial Brand.
is it any wonder why the banking industry has such an ugly image in the public eye?

J.D. Powers recently found that consumers feel a bank’s brand is more important than its pricing or product availability, which must make it tough for folks to find bearable financial providers, because another study earlier this year found that consumers now put banking in the same ultra-reviled category that was once reserved solely for big tobacco.

“Lawyers should go buy
bankers a drink and say,
‘Thanks for getting us
out of the spotlight
for a few months.’”
– Tom Yorton, Comedian

If the financial industry wants to find the culprit behind their branding woes, it needs to look no further than itself. Surely the high-risk actions taken by financial institutions during the subprime heyday have left nasty scars on the industry’s image. But financial institutions of all kinds have been making banks the subject of ridicule in their ads for decades.

WAMU – THE BANKERS’ PEN
In this TV spot circa 2007, WaMu is keeping a bunch of bankers in its lab. The affable host says, “It’s simple. If these stodgy, old bankers think an idea is wrong, we know it’s right.” Caged bankers were the butt of WaMu’s jokes in a popular ad campaign that lasted just up until its implosion.

Reality Check: It may be easy and effective for financial marketers to make their competitors look bad, but if you spend enough time telling people your industry sucks, they’ll believe it.

Considering people’s frustrations with the financial industry, it’s obvious why so many banks and credit unions would take their marketing in this direction. It’s not wrong at all for a financial institution that is truly superior to make its point by drawing stark contrasts between themselves and their competitor(s). In fact, when marketing anything, this has proven to be one of the most effective methods to shape people’s perceptions. That’s why politicians always “go negative.” By shaming your competition, you implicitly align yourself with all things wholesome and righteous (or so the theory goes).

The problem is that so many financial institutions are collectively sending the same, consistent message — “the other guy sucks” — consumers will just lump everyone in the same sucky category, right alongside big tobacco. “Banks? Bah…they’re all the same.”

Key Questions:

• How can financial institutions rebuild consumer trust when so many of the industry’s own marketing messages say bankers are untrustworthy scum?
• Do consumers really see a difference between banks and credit unions?
• At what point can the financial industry no longer withstand the mockery, self-loathing and shame it heaps on itself?

Survey Says… Brand image matters most for bank shoppers

Young Money: Insights into Gen-Y’s perspective on money and budgeting

Iconic Ironic: Ads from financial institutions prior to their bailouts

Free or fee? Can free checking survive?

First to Market: This tiny CU lets you scan and deposit checks with your iPhone

Forensic Marketing* Dissecting a gnarly disclosure from WaMu in this post mortem

Name Game: User-generated video contest to find new name of teen account

Branch Profitability: How one credit union tracks and calculates it

Branch Design: Looking at the evolution of financial retailing

Brand New: New logo for Union Bank (of Not-Just-California-Anymore)

Pedaling Loans: Another credit union offers bike loans

Netbanker: Prosper back in peer-to-peer lending game with full SEC approval

Game On: Do online interactive games make sense for banks?

Waterslide Extreme: Barclays creates iPhone game

Here’s what’s been making the news in the financial industry lately.
Click on the hotlinked summaries to read the full story.

Actions or Words? Ads say “Strong Bank, Powerful Leaders,” but the president quits

Hospital Discharge: Bank kicks credit union out of hospital

The Letter F: Marketing expert gives bank’s letter a failing grade

Don’t Bank on It: Delighting customers isn’t a winning strategy

YMCA vs. Credit Union: A critique of two ads in the same paper

No You Can’t: Bank sues credit union over “Yes You Can” slogan

Ads Yanked: Credit union pulls ads with a slogan that got them sued

The Uglification of WaMu: Seattlites moan about Chase branch changeouts

Retail Branches? Brand Republic explores the pros and cons

Slashed: $500 million from Amex global marketing budget

Virgin Territory: Sir Richard Branson plans to launch a bank on the internet

Indirect Losses: Shuttered dealerships cost credit unions key lending stream

The Edge: DATCU’s new Gen-Y website/promo

Risky Rebrand: Satander to kill off 3 big U.K. financial brand names

Brand a’kilter: Scottish credit unions look to shake “poor man’s” image

Thrifty Ways: One in five are ‘Active Savers,’ half learned while young

[Editor's Note: This is a follow-up piece to yesterday's article from Freddy J. Nager, "The post-WaMu blues: Chase has lost ‘that lovin' feeling." Chase just recently completed remodeling WaMu's branches which has triggered an outpouring of emotion from former WaMu customers and employees.]

The Financial Brand hopped on Twitter to see what people were saying now that the WaMu brand has almost been fully devoured by Chase. If you don’t yet “get” Twitter, don’t worry. You’ll get a sense of why it’s important after reading this, even without any prior experience with the popular social networking tool. Here are selected excerpts from a day-long scan of tweets mentioning “WaMu” (the bank, not the radio stations with the same call letters), which included about 30 in all:

WaMu is becoming Chase. I am becoming annoyed.

@KiltedDad (Seattle, WA)

In case u didn’t know, WaMu sucks now!!!

@dubyabejay (Seattle, WA)

my local wamu is now a chase bank. boo!
I liked the wamu brand

@bensonlee (National City, CA)

WAMU now Chase – you really screwed up. As a small business owner you really screwed us. Customer lost.

@enjaysauce

Looking to switch banks. I loved Wamu dearly,
but Chase is not cutting it for me!

@kgandstuff (New Jersey)

The Chase makeover of the Seattle WAMU branch is fugly. Time to switch banks.

@evermeire (Seattle, WA)

WAMU/Chase just lost a customer today. I loved the customer service at WAMU. So sad that it went away with the name.

@PlumCrazyRE (Duvall, WA)

You don’t have to know how Twitter works at all to find such an outpouring of emotion over the loss of a financial brand fascinating. These are people who took time out of their day to share their feelings with their friends (called “Followers” in Twitter)… about a bank. And these aren’t whacked out nut jobs, or digruntled Gen-Y types with nothing better to do. These are regular people.

Key Question: Would people mourn the loss of your brand if it went away? Would anyone pen a eulogy in song for your brand? Has any common consumer ever voluntarily mentioned your name and the word “brand” in the same sentence?

You’ll notice that four of the seven tweets above come from people in the Seattle area. If you are in sales or marketing with a financial institution in Western Washington, wouldn’t you be interested in reaching out to these people?

@coachandrew Have you ever considered switching to
[your bank]? We’d love to have your business. Send me
a message and I’ll give you a call.

Think about it. Four people a day, 365 days a year. That’s over 1,400 qualified leads a year. And we’re only talking about monitoring Twitter for conversations referencing one financial institution. Here’s the key thing: These people are at that critical moment when inertia in their financial relationships is weakest.

Using the advanced features at search.twitter.com, you can perform super robust scans of Twitter conversations. You can look for people who are talking about “banks,” “fees,” “switching,” “WaMu,” “Chase,” “BofA,” “Wells Fargo,” or any number of your competitors. You can limit your search to a targeted geographic area. You can even search for people who have a negative attitude. And the best part is, you can automate your Twitter searches, like this RSS feed that will give you almost-realtime updates for people mentioning “WaMu” within 100 miles of Seattle.

What makes this particularly interesting is that Chase has an active Twitter account. They use it around three times a week. But they don’t talk to- or acknowledge anyone. Why aren’t they in Twitter playing a little defense, responding to people’s questions and concerns?

Compare these tweets for Chase (shown left) and Bank of America (shown right). Again, you don’t have to know squat about Twitter or how it works to tell who is using the medium more effectively.

Chase vs. BofA on Twitter
Notice @chasebank only publishes a one-way, self-serving stream of tweets,
while @BofA_help is actively engaging other Twitter users with “@ Replies”
(a way to respond to a specific person directly in Twitter). Also, notice the highlighted
tweet in Chase’s Twitter stream making the announcement that “Chase is now in California.”

[Editor's Note: Look for an upcoming report on Twitter from Jeffry Pilcher, publisher of The Financial Brand. The report, titled "A Comprehensive Guide to Twitter for Financial Professionals," will be available for purchase through Online Financial Innovations, publishers of the Online Banking Report and Netbanker.com. Send an email if you have any questions or would like to reserve your copy today.]

By Freddy J. Nager
Founder, Atomic Tango

So my longtime bank, Washington Mutual (WaMu), recently got taken over by megabank Chase. ‘Twas a sad day for us WaMulians, because, for all its faults — and it had a few — WaMu was a friendly place to bank, with everything from chirpy messages on the ATMs to free candy at the teller windows. What wasn’t to like?

WaMu was expanding rapidly nationwide without losing its character. But WaMu’s execs decided to join the greedheads in quaffing some subprime Kool-Aid. We all know what happened after that… With WaMu on the verge of failure, along came a monster of the financial deep — Chase — to swallow it up.

“I’ve penned some
new lyrics to a classic
pop song that will
no longer be heard
in our bank…a little ditty
I call ‘The Post-WaMu
Chase Blues.’”

– Freddy J. Nager

We WaMulians sighed, but were still hopeful. Perhaps Chase would recognize what a great brand they had in WaMu, and would simply clean up its finances and keep it going. But it was not to be. The name was changed to Chase. And that’s not all…

The other day my wife and I strolled into a Chase branch. It was like entering the tomb of the unknown banker. WaMu’s bright yellow had been covered in deep corporate blue, and the flamboyant posters that once hyped WaMu’s services had been replaced by… blank walls.

The tellers who once wore casual shirts were now suited up. We guessed all this was to convey how solid and dependable our bank had become — but, uh, yo, East Coast dweebs, we’re all like laid-back Los Angelenos, you know? And we still vividly remember how Wall Street was like totally screwed up by men in conservative suits — men whose enormous badness made those Somali pirates look like shoplifters, right?

So, instead of instilling us with confidence, Chase’s ultra-corporate vibe just depressed us, and we couldn’t wait to leave the premises. Sorry, teller dude, but no thanks, we don’t have time to discuss your credit card offer…

Most striking of all was the silence.

It was like being in the public library of the undead. We felt compelled to whisper. And that’s when we realized there was no more pop music playing over the speakers, as there always had been in WaMu. Yes, the day when WaMu became Chase was also the day the music died.

In honor of this transformation, I’ve penned some new lyrics to a classic pop song that will no longer be heard in our bank. So with apologies to the Righteous Brothers and their hit “You’ve Lost That Lovin’ Feelin’,” here’s a little ditty I call “The Post-WaMu Chase Blues.”

“The Post-WaMu Chase Blues”

When you bought WaMu
you said everything would stay the same.
Then you spent 300 million
to redecorate and change the name.

You took a big happy bra-and
Then Chase-y, you done made it so bla-and…

CHORUS:
You lost that WaMu feeling.
You’re now just walls and a ceiling.
And that is so unappealing.
The fun is gone… it’s… wrong… whoohoo-not

Now your tellers wear suits
and no music ever fills the air.
Your vibrant colors are gone
and your once postered walls are bare.

It makes us all feel like snoozing
Oh Chase-y, don’t you know what you’re losing?

CHORUS:
You lost that WaMu feeling.
You’re now just walls and a ceiling.
And that is so unappealing.
The fun is gone… it’s… wrong… whoohoo-not

Chase-y, Chase-y, we still have all our savings with you.
If you would only please us — at least tease us — like WaMu used to doooo.
You had a brand… so grand… that millions of us came to adore.
And now… somehow… you think “trustworthy” means being a bore.

Oh Chase-y (Chase-y), Chase-y (Chase-y)
We beg you please… please,
Give us WaMu (give us WaMu).
We miss WaMu (we miss WaMu).
So bring it on back (so bring it on back).
Bring it on back (so bring it on back).

Bring back that WaMu feeling.
Its loss has sent us reeling.
Our souls are now congealing
‘Cause your brand… is… cold…
and it feels… so… old…
And we’re totally… not… sold…

Whoohoo-NOT.

[Editor's Note: This story originally appeared on the 'Cool Rules Pronto' blog. It is reprinted here with permission by the author, Freddy J. Nager, Founder & Fusion Director of the L.A.-based strategy agency and production company Atomic Tango.]

Bribes: one way to buy deposits

National Bank of Kansas City is offering a free $50 Lowe’s Gift Card for opening a personal checking account. TCF Bank just announced their $50 Free Cash Checking Campaign. Neighborhood Credit Union is offering a free $100 bonus. HomeStreet bank is offering up to $215 free. At least Key Bank is giving away something a little different: a free Garmin nüvi GPS for banking with Key.

Umpqua adds ‘green’ to its org chart

Umpqua Bank has created a new eco-banking division and given employee Dan Weldon the title of Eco-Banking Manager. As the bank’s new eco-chief, Weldon will lead the development, delivery and tracking of green programs, including the GreenStreet lending program which offers financing options designed to help small businesses. Weldon is a LEED Accredited Professional (which means he knows how to design green buildings), so he will oversee lending for Umpqua’s business customers seeking funds for green construction projects.

Take it back. No, you keep it.

Lately, banks have been lining up to give back TARP money. TCF Bank was one of the first, but the Treasury said no. TCF says it was asked to participate in TARP even though it didn’t need the money. TCF is understandably frustrated.

On the other hand, Shore Bank must be thrilled. The Treasury said yes to their request to return TARP money. Shore felt persecuted by Congress, and didn’t like the public perception that they needed a bailout.

Shore cut the Treasury a $25 million check the same day they were approved for repayment. Lucky for them. So far, they’re the only ones allowed to back the Treasury back.

Can you believe that banks have to ask to pay the Treasury back? What kind of lender doesn’t want his money back? Is there some sort of pre-payment penalty? (See also, Catch 22.)

Noteworthy articles and other items of interest

• Twitter Stats: Pew research shows who is, isn’t using Twitter
• Show Me You’re Nuts! Financial marketer dares credit unions to go crazy
• Green Sprout: Startup e3bank to specialize in green loans
• 6 Key Words for Banks: Stability, Customer, Savings, Value, Brand, Metrics
• Failure Friday: Three banks seized by FDIC on Friday May 1 (2009 total: 32)
• California Crush: CA credit unions threatened by collapse of corporates
• Doom or Gloom? Nobel Prize-winning economist: bank rescue doomed to fail
• Similar Name, Different Bank: One of two ‘Frontier’ banks in CO seized

The WaMu Story

A computer expert with no obvious connection to WaMu has created a website, wamustory.com, where he shares his complex views on the seizure of WaMu. It’s detailed, lengthy, and has an occasional hint of conspiracy.

Trouble for some, opportunity for others

Market Insights offers some thought-provoking advice about how financial institutions shouldn’t just hunker down, they should embrace the opportunity to:

• Reconnect with your customers.
• Deepen customer relationships.
• Reestablish your competitive position.
• Take advantage of customer churn.
• Expand your BRANCH NETWORK.

Read the whole article here at their blog.

It’s been known for months that JP Morgan Chase planned to replace Washington Mutual’s innovative retail BRANCH DESIGN with a much more traditional model. Now that the changes are actually being implemented, the failed thrift’s approach to branching is again being called into question.

In a recent Wall Street Journal story, Charles Scharf, the CEO of JP Morgan Chase’s retail financial services unit, said traditional branches “are superior in every way.”

Wrong. Just because WaMu collapsed does not mean its BRANCH DESIGN was inferior. That’s a fallacious, oversimplified inference (something The Financial Brand pointed out earlier this year).

Reality Check: Chase’s branch model isn’t superior to WaMu’s. Using Scharf’s own words, Chase branches are more accurately described this way: “They might be boring, but they’re practical.”

“Traditional branches are
superior in every way.
They might be boring,
but they’re practical.”
– Charles Scharf,
CEO/Chase Retail Banking

WaMu rolled out its retail BRANCH DESIGN with great fanfare in 2000, and used the new model as they moved into new markets such as Las Vegas and Atlanta. Later they remodeled existing branches to incorporate the new retail features. Before WaMu collapsed last September, they had spent roughly $1 billion on a branch-building binge.

Key Questions: Why would Chase want to spend millions undoing everything WaMu had taken $1 billion and 8 years to accomplish, despite a company-wide push to cut costs? Why would Chase basically drag the WaMu branches back to the past?

Actually, from Chase’s perspective, the argument to overhaul WaMu’s branches makes sense. For starters, it’s obvious why Chase would want to sanitize branches of all evidence linked to the largest bank failure in history. It’s also clear why Chase would want to standardize operations and create a consistent brand experience with one, basic branch delivery model.

But the real reason Chase needs to remodel WaMu’s branches is that the two banks had totally different business strategies.

It boils down to these two fundamental differences: (1) Chase offers small business, and (2) Chase offers private-banking services. WaMu never did.

Operationally, these two components of Chase’s business model necessitates branches with certain elements. WaMu branches branches were never designed to accommodate merchant services, nor did WaMu’s branches provide the degree of privacy required for a highly-consultative private banking audience. That’s because WaMu was a retail bank. Chase may offer retail financial services, but it’s a commercial bank at heart.

WaMu, as retail bank, was quite successful…at least from a branding perspective. The thrift did everything it could to distance itself from other competitors in the crowded retail financial space. It ran ads touting how WaMu was different as they made fun of bankers. They changed their name from Washington Mutual to WaMu.

WaMu new who it was and knew how to build its brand. That meant coming up with their own BRANCH DESIGN and breaking away from traditional branch offices donning stark decors and staff tucked safely away behind bullet proof glass.

MERCHANDISING-300x174.jpg" alt="" hspace="10" width="229" height="133" />Which is exactly what WaMu did when they introduced their “Occasio” branches. Occasio locations were stylish retail operations that didn’t feel much like a bank at all. They did away with the traditional teller counter and windows. Customers were greeted by a concierge, and dealt with tellers at free-standing “pods” that resembled tall bar tables.

Occasio broke down not just the physical wall between customer and teller, but also a psychological wall. It put the service rep side-by-side with the customer in a casual, conversational atmosphere. And without ever making security an issue.

Latin for “favorable opportunity,” Occasio became such a symbol of pride for WaMu’s brand that they trademarked the name and got a patent on the BRANCH DESIGN, reportedly the first patent for a store concept in history.

The branding was brilliant. The business model (risk management notwithstanding) also made a lot of sense. Occasio branches were designed to be high-speed transaction centers — no waiting, no lounge, no sofas, no chairs for tellers necessary. No need to sit down. Get in, get out.

WaMu’s branches took in a high volume of retail deposits to fuel their home lending operations. WaMu handled home lending through regional offices. (With big, one-time purchases — like a home loan — consumers are a lot more willing to drive 20-25 minutes). WaMu’s low-cost transaction centers helped them achieve their business objectives by feeding regional lending offices in a hub-and-spoke system.

Bottom Line: WaMu’s branches worked…for WaMu. Chase is talking up their more traditional BRANCH DESIGN because that’s what they know and what works best…for them. Every financial institution needs to find its own unique branch delivery model — one that compliments their brand and business strategies. That means carefully engineering an experience while balancing your privacy and security concerns.

Further Reading: John Ryan, one of the world’s leading financial architectural firms, published a blog post about Chase’s decision to kill WaMu’s branches just yesterday.

$500 billion FDIC bailout forebodes massive failures

Late last week, the U.S. Senate proposed to allow the FDIC to borrow as much as $500 billion from the Treasury Department. While the mainstream media obsesses over the seemingly never-ending stream of colossal bailouts pouring out of Washington, another — arguably more important angle — is going relatively unnoticed: Massive bank failures are on the way.

Bailout increases normal FDIC fund by 1000%

First, let’s put the dollar amount in perspective. Historically, the FDIC fund has maintained a reserve around one percent of all insured deposits. At the start of 2008, that was $52.4 billion. But one year and 25 bank failures later, the fund held $18.9 billion, down 64%. As of February this year, another 14 banks had failed, draining another $1.7 billion from the insurance fund. Three more banks have already failed in March, whose hits to the FDIC have not yet been calculated.

Currently, the FDIC’s deposit fund is at just 0.4% of banking industry assets. That’s barely a third of the 1.15% statutory minimum. So the FDIC desperately needs cash…and a lot more than the $15 billion in special assessments they just tagged on their insured institutions (for just this year alone).

How big is the problem?

It almost seems the FDIC’s insolvency is inevitable. At least that’s what the FDIC’s chief Sheila Bair is worried about.

Last month Bernanke sent a letter alerting Congress to the imminent dangers if the FDIC wasn’t given a “mechanism that would allow the FDIC to respond expeditiously to emergency situations that may involve substantial risk to the financial system.” In case you aren’t nuanced in the language of “Fed speak,” what Bernanke is saying is, “Look out. Something’s coming. Are you hearing me??? Are you listening? Something big is going to happen.”

At the current rate, the FDIC will seize over 100 banks by the end of the year. Some prominent research firms in the financial industry predict that the banking crisis will claim 1,500 banks before it’s all over. RBC Capital Markets recently upped their expectations for bank failures earlier this month, warning that they anticipate 1.000 institutions could fail over the next three to five years, up from their earlier forecast of only 300.

More than 1,900 financial institutions went under during 1987-1991, peaking with the failure of 534 banks in 1989.

Institutions on the FDIC’s  “problem list” grew to 252 lenders in the quarter ended December 31. Back in Summer 2008, there were only 90 so-called troubled banks. But nowhere on the list was IndyMac, Washington Mutual, nor Wachovia.

Reality Check: The FDIC doesn’t know which banks are going to fail this quarter or the next. All they know is that massive failures are on the way.

Some people speculate that either Citi or BofA are next. If either one failed, that would slam the fund for around $500 billion according to some estimates. When IndyMac failed, it cost the fund $9 billion and the bank had $31 billion in assets.

The five biggest U.S. bank holding companies — Bank of America, Citi, JPMorgan Chase, Wells Fargo and Wachovia (now owned by Wells) — had domestic deposits ranging between $271 billion and $701 billion at the end of the second quarter of 2008.

“It’s the biggest banks that need the bailout,” says Walker Todd, a former Fed official, lawyer and economic historian. “And those hold the vast majority of the estimated $4.54 trillion in FDIC insured deposits.”

Bottom Line: Whether it’s one big bank or hundreds of smaller ones, the shockwaves hammering the financial industry are far from over. By the end of the year, there will be far fewer bank brands covered by this publication. And it could be a long time — if ever — before we ever see the 8,000+ banks that the U.S. once had.

Key Questions: If the amount of insured accounts is fixed at $250,000, what will the affect be of making FDIC premiums permanently larger? What is the right amount for the FDIC to hold in reserve? Is it more than the historical 1%±?

[ratings]

WaMu holds a wake for its brand

Listen to a fascinating podcast from NPR’s “All Things Considered.” WaMu is laying off more than 9,200 employees as JPMorgan Chase takes over, so WaMu held a wake to give employees the chance to grieve and mourn.

“Make more loans? We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”

– John C. Hope III, Chairman
Whitney National Bank

New Study: Banks Slash Direct Mail By 25% in 2008

The worst three months in 2008 were September, October and November, when the country’s financial crisis intensified. Say goodbye to credit offers and hello to loyalty and retention messages, which saw a a whopping 85% increase.
– MediaPost’s Marketing Daily

The Sandpit

The Sandpit is a Gen-Y financial education site from Australia bearing the tagline, “Money. Get it. Grow it. Blow it.” It’s geeky and hip all at the same time.

http://www.thesandpit.com.au/

“Things have changed. The turmoil in the economy — especially in the banking arena — led us to change our views of what is best for our members. Plus, there’s an extreme reluctance by federal regulators to approve a new bank charter in this environment.”

– Scott Jorgensen, CEO/Beehive Credit Union,
on why he is abandoning plans to become bank

$4,120.18

That’s how much Linda Lance of Akron, Ohio got when she took her 5 gallon jug of coins down to Towpath Credit Union for Roll Your Change Week. The topically-themed promo, timed perfectly to synchronize with President Obama’s inauguration, is part of a wider Akron Saves initiative. Akron was chosen to be the nation’s first “Savings Community” by the U.S. Conference of Mayors and America Saves, a nonprofit group. In one week, the credit union took in 833 deposits including 188 new accounts, totaling $266,000 in coins. This is perhaps the most unusual deposit promotion to come around in quite a while.

Here are recent stories of interest from around the web.
Click on the hotlinked headlines to read more.

Credit cards linked to Fidelity, Schwab accounts

Fidelity and Schwab recently introduced new credit cards on their respective public sites. Instead of offering clients points for merchandise or cash back, the cards each give clients with 2% back on all spending – money which is then deposited directly into an investment account at the firm. The Fidelity card carries a 16.99% fixed APR while Schwab instead offers their card with a variable APR of Prime + 9.99%

Chase dumps WaMu’s branch model

WaMu’s Occasio branches popularized teller pods, adding a level of side-by-side intimacy to what is otherwise a pure, high-efficiency transaction center. This model doesn’t suit Chase, who just took WaMu over. JPMorgan Chase plans to offer more small business, mortgage and private-banking services, which doesn’t jive with the lack of private spaces in WaMu’s Occasio branches. Chase’s more traditional layout offers more privacy for bankers to meet with customers than Occasio’s more open floor plan. To make everything consistent — both from a brand and an operations perspective — WaMu Occasio branches will convert to Chase’s traditional branch layout.

Credit union uses Harley the Chihuahua as spokesdog

The spokesperson for Beacon FCU in Texas is no person at all. It is Harley, a motorcycle-riding Chihuahua. The spokesdog, who belongs to one of the credit union’s branch managers, has appeared in several newspapers and magazines including the Houston Chronicle.. At an annual member-appreciation event, the hot attraction was Harley’s photo booth, where she was in full Beacon gear with a Beacon t-shirt, pink riding helmet and riding goggles. “Harley gets excited as soon as she hears the roar of a hog,” Harley’s handler said.

Nothing smelly about this credit union

EPB Employees Credit Union recently ran an ad that read, “Absolutely no credit crunch here! We have plenty of money to lend! No ‘bailout’ needed. We’re stronger than 40 acres of garlic!” That’s good stuff.

Investment bank willing to pay over $250 for new logo

A small investment bank’s classified ad at GetAFreelancer.com called for something “professional, stylish and nothing outlandish.” The average bid from designers responding to the ad was $334, even though the bank said it was willing to pay a $250-$750 for its new identity. You have to wonder how strategic a process this is. What kind of criteria do the designers work from?

Remedial lessons on deterring robberies

Put up a sign that says “No hats. No sunglasses. No hoods.” That was one of the the suggestions offered by a risk manager in a CUNA article. He also suggested making would-be robbers wait in line. That, of course, means you’ve got to make everyone wait in line. Another suggestion: Make sure security cameras capture all the angles.

Here are recent stories of interest from around the web.
Click on the hotlinked headlines to read more.

Article blames WaMu problems on ‘café-style’ branches

An American Banker article suggests Chase’s takeover of WaMu is some sort of referendum on innovative BRANCH DESIGN, and that traditional, conventional branches are the way to go.

Beyond the fallacious inference that WaMu’s BRANCH DESIGN had anything to do with their collapse (hint: subprime mortgage lending), the article also described the bank’s the branches as “cafés.” There are a lot of words to describe WaMu branches, but café? Nope, doesn’t fit.

WaMu never ever tried to make their branches “hangouts.” They didn’t provide any comfy seating. There wasn’t any ambient alternative music. There wasn’t any free coffee. What ING Direct does can be called a café, but not WaMu’s Occasio branches.

The only thing WaMu did that was really any different was replace a traditional teller line with transaction “pods,” which supported the bank’s emphasis on transactional efficiency.

Research revises playbook for 700+ Wells Fargo copywriters

Wells Fargo researched how effective its written communications were. Following its ethnographic study (defined here), the bank shared its learnings with 700+ content writers in 30+ workshops. Among the findings:

• Marketing messages, especially those with presumptive language like “Congratulations!” or “Good News,” were viewed quite negatively; customers used words like “ploy” and “scheme” to describe them.
• The bank could mitigate negative reactions to bad news like a notice of insufficient funds if the communications provided relevant advice.
• Many consumers view the bank’s Website as the primary visual reference point, noticing differences with layout, color, and other design elements across communications.

Oh happy days… Credit union logo jet, circa 1999

The economy sucks now — the salad days are over and the gravy train has left the station. But less than a decade ago, even credit unions could afford to put their logo on jets.

Great advice for building your financial brand

October’s issue of American Banker has a fantastic article on bank branding — especially for its length (just over 700 words). The author, Cristi Kirisits, VP/Marketing at Silverton Bank, makes a number of excellent points, including:

• Your brand absolutely has to deliver on its promises
• You create familiarity and trust by delivering a consistent experience
• Every interaction is a make-or-break experience that will leave a lasting impression
• Establish an internal team of “brand champions”
• Only one competitor can be the cheapest — all the others must use branding

Earlier this year, The Financial Brand wrote about how Cristi’s bank changed names and became Silverton. They definitely “get it,” and are walking their talk.

Shrinking footprints, growing profitability

According to an expert quoted in a CUES article, branches traditionally break even with deposits in the $30-40 million range, although branches with smaller footprints and fewer employees can turn profitable at under $15 million. That may help explain why the average square footage of branches is dropping from 3,900 in 2004 down to 3,500 last year. You can even get away with 2,500 square feet in some markets. And some in-store branches are only 600 square feet.

Login to Wells online banking, see “safe & sound” splash screen

As Netbanker notes, the best time to get your customer’s attention is right after they log in to look at their account. That’s why login-screen marketing should be in your mix. Just don’t overuse it, or you’ll piss people off.

October 2008 was one of the roughest ever for the financial industry. Now that October has passed (and thankfully so), let’s take a minute to look at some of the ads banks and credit unions ran as the global financial crisis developed.

US Bank – “Roots”

The headline on this full-page ad from US Bank is awkward. The periods in “U.S.” and the overuse of the word “bank” make the headline choppy. Simply using “Bank Solid” would have been enough. Readers understand the implicit call to action: “You should be banking at US Bank.” That’s why advertisers advertise.

The artwork is visually captivating and the metaphor is relevant, although there isn’t a strong connection between the ads’ components (headline, artwork and offer). It feels a little slapped-together, which it probably was. It’s not until you get to the first sentence of the body copy (people read ad copy?) that the “roots” connection is made. The copy also promises a “guaranteed rate of return” on CDs, something BofA has started emphasizing in its ads as well.

Including product offers in your “safe and sound” message is smart. It doesn’t seem practical to run a pure image ad right now — one whose purpose is to simply reassure customers. That kind of ad doesn’t really work to build the brand as much as it “stops the bleeding.”

KeyBank – “Proven Over Time”

Any bank could run this ad. All you have to do is change the year in the first sentence of the body copy and swap out logos.

Banks run ads like this all the time. Some banks even run this kind of ad one day, then fail the next. People read this kind of stuff and roll their eyes. Why not provide more proof for the otherwise unsubstantiated claims like “proven over time” and “well-capitalized?” If you’ve got a cap ratio worth bragging about, why not explain it to people? And don’t use the excuse, “They don’t care,” or, “They won’t get it.” The typical American consumer isn’t as dumb or disengaged as you think. She is your wife, or your dad.

Using Moody’s and S&P as “proof” of your safety and soundness won’t fly with those who have been paying attention to financial news lately. These ratings’ agencies are the same bozos who gave triple-A grades to all those toxic subprime mortgage-backed securities.

Sterling Savings – “Really Boring”

This ad is great. Sterling is mixing product offers with its “safe and sound” message. The irony is that the bank says it is boring and predictable without being boring or predictable. This ad shows how you can convey a “safe and sound” message without having to surrender any sense of personality your financial institution may have. Temporarily renaming products “The Really Boring [X]” is brilliant.

Power Financial – “No Bailout Needed”

This ad for Power Financial from the marketing folks at Shared Idiz shares a similar strategy with Sterling Savings. The ad introduces the “safe and sound” message in a way that connects with people on a visceral level; things like corporate jets really rub the average American consumer the wrong way.

Again, it’s smart to include product offers. This is one of the few ads out there promoting lending (home equity and auto) as part of the “safe and sound” strategy. As previously noted at The Financial Brand, saying you’ve got money to lend in the middle of a credit crisis is one of the most effective ways to differentiate your financial institution while suggesting you’re healthy and strong.

WaMu + Chase = “Peace of Mind”

The headline on this ad from WaMu raises one big, implicit question: Didn’t WaMu checking accounts come with peace of mind before the takeover? It’s the word “now” that triggers the scrutiny. You wouldn’t wonder what was previously wrong with WaMu if the headline simply read, “Free checking. With free peace of mind.”

The body copy in this ad is pretty good. Too bad no one reads ad copy anymore though. If you’re one of the few who does, click on the ad to enlarge it.

ING Direct – “Manifesto”

As usual, ING Direct is taking its own unique direction on the financial crisis. Recognizing the public’s shift from credit-based spending to thrift-based savings, ING Direct is seizing the opportunity to tell its brand story in one of the most unique ads ever to come from a financial institution.

Netbanker reports that over 5,300 people have gone online to “sign” this “manifesto” at a special wethesavers.com microsite from ING Direct.

Tip of the Hat: To my dad, for mailing all but one of these ads to me.