|Thursday, May 12, 2016 12:54 PM ET
Commercial lending talent in short supply
By Kevin Dobbs
Kevin Dobbs is a senior reporter and columnist. The views expressed in this piece represent those of the author or his sources and not necessarily those of S&P Global Market Intelligence. Follow on Twitter @Kevin1Dobbs.
Four out of 10 bank executives say recruiting commercial lenders is among the most significant challenges they face this year, shining a spotlight on banks’ efforts to attract the talent needed to drive revenue growth in a highly competitive environment.
Such is a key finding of Bank Director‘s 2016 compensation survey of 262 bank executives and directors. Asked to identify pressing issues tied to attracting and retaining commercial lenders, 43% cited a dearth of available candidates, according to results released this week. An equal percentage said they would pay handsomely to recruit proven business lenders, indicating the challenge is not just a matter of compensation.
The survey’s results mirror what many recruiters see in the field. “It’s very difficult to recruit them,” Bruce Kershner, president of Kershner & Co, said in an interview. He based that assessment on the feedback he gets from the banks with which his executive search firm works. Kershner works hands-on to recruit chief lending officers, the executives who oversee commercial lenders, and he said at that level, too, it can prove trying to attract prized executives.
Kershner said there is not one single hurdle that stands before banks and coveted commercial loan officers. Rather, potential impediments are myriad.
In an era of low interest rates and stiff competition, banks in recent years have pushed hard to bolster interest income via higher loan volumes. With commercial-and-industrial lending a relative source of strength, many banks have set their sights on hiring proven commercial lenders to boost volume. Problem is, recruiters say, in a lot of markets there are not as many of these established revenue drivers as banks in search of them.
“Everybody is looking for them,” Kenny Steinbeck, a senior recruiter at Park Avenue Group focused on commercial lenders, said in an interview.
In other markets such as Florida, where Steinbeck focuses his efforts, it is less a matter of a talent drought and more an issue of luring successful lenders away from institutions that are working hard to retain top performers, he said. Steinbeck said banks that still provide pension plans, for example, have a strong motivator for talent to stay put. Others have upped the ante on signing bonuses in exchange for commitments from lenders to stay with the company not for just a year but for two or more in some cases. And still others have put in place special programs that pay out set amounts of cash, rather than less reliable stock options, for high performers, paid out over the course of years.
“To get these people to move, it can be hard,” Steinbeck said.
|Key findings from Bank Director’s 2016 compensation survey of bank executives and directors:
* 40% say recruiting commercial lenders is among the most significant challenges they face this year.
* 43% blamed a shortage of available candidates.
Another issue, recruiters and bankers say, is that fewer business school graduates have gone into banking in recent years. The fallout from the financial crisis cast a cloud over the industry, bankers have complained for years, persuading young talent to pursue options in other industries first.
What’s more, in the aftermath of that last recession, many cost-conscious banks cut training programs that identified strong sales talents and developed them into commercial lenders. Diana Chase, managing partner of community bank consulting firm ChaseCompGroup LLC, said in an interview that this has contributed to a shortage of young commercial lenders.
“When you are trying to get the younger talent, you’ve got to be able to sell them on your culture and of course be competitive on compensation,” Chase said. “But that’s not where it ends. You really need to be able to mentor them and help them develop.”
The Bank Director survey found that 23% of respondents view recruiting young talent as a challenge this year; 34% said they are actively trying to attract millennial employees — those under roughly 35 — but are struggling to do so. Of these respondents, 60% said millennials simply are not interested in the banking industry, and 54% said young professionals view their bank’s culture as overly traditional.
And yet not everyone is wrestling with the talent shortage. There are avenues to pursue.
ConnectOne Bancorp Inc. Chairman, President and CEO Frank Sorrentino said in an interview that his bank has proven an exception to the picture that the survey paints. And he credits the bank’s agile and tech-savvy culture.
Many community banks find themselves investing inordinate amounts of resources on compliance and other lingering challenges tied to the last downturn and the barrage of new regulations that emerged after the crisis, he said. And a majority of banks are indeed competing intensely for commercial business, particularly in growing markets such as New York and New Jersey, where ConnectOne operates.
“When a lot of people are chasing after the same assets, it does pose challenges,” Sorrentino said.
But ConnectOne, he said, focused early on developing a culture that could meet new compliance demands head-on while keeping lending talent free to pursue new business opportunities and to find innovative ways to deepen ties to existing customers, either through technology or new types of products and services. This has provided them competitive advantages and genuine senses of ownership of their own books of business, a cherished element that Sorrentino said many big banks do not provide.
Against that backdrop, ConnectOne has consistently grown and its commercial lenders’ careers and financial success along with it. The positive word-of-mouth that such growth generates has helped the bank attract talent away from competitors both big and small, Sorrentino said.
“It revolves around the strong culture here,” he said. “Good lenders want to satisfy their clients. … When you have existing employees speaking highly of their ability to do that, it’s infectious.”
Another important route to find commercial lending talent is of course M&A. Community bank consolidation has proven steady over the last few years, with many bank buyers citing talent among the critical reasons to pursue deals.
Chong Guk “C.G.” Kum, president and CEO of Los Angeles-based Hanmi Financial Corp., attests to that, having closed two bank deals in 2014. At the same time, he said in a recent interview, mergers also often cause some disruption, affecting lenders who work for the two banks that are coming together. If integrations are not handled well, he said, talented lenders tend to listen to offers from other banks.
“It creates dislocations and uncertainties and that creates opportunities for other institutions,” he said.