Solving the Three-Body Problem in Banking

The “Three-Body Problem,” currently made popular by our new favorite author, Cixin Liu, is the concept of instability when three similar-sized celestial objects interact. The problem is currently unsolvable. Banking has a similar physics problem when management juggles strategy, risk/profitability, and customer behavior. This article will discuss the challenge of managing three potentially opposing forces…

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Bank Earnings Call Questions – Get Ready for These

Now that 1Q is in the books, if you are a public bank, you may have an earnings call coming up in some form. We want to better prepare you and get you ready for bank earnings call questions. To do that, we wrote a Python script to analyze a representative sample of earnings call…

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Bank Value: Here is a Better Way to Calculate and Manage

Ask a banker about the value of their bank, and they will either talk about some derivation of book value or earnings multiple. While these bankers are not wrong, they are not exactly right. While both valuation methods provide everyone with a nice, tidy sum of value, the data could be more actionable. You might…

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Get These EOS Tools for Banking

In the last article, we covered the basics of EOS (HERE), the Entrepreneurial Operating System, and how some banks use it to improve productivity. EOS is a comprehensive business system that empowers a leadership team to run a more successful bank. EOS comprises a series of tools and concepts that guide leaders in managing and…

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Using EOS in Banking – A New Operating System

Likely, you do not have a common management framework at your bank. Maybe you practice some of the teachings in the seminal book Good to Great, you might work in Porter’s Five Forces, maybe you use an Objective and Key Results (OKRs) approach, or you might loosely use the McKinsey 7S Model. However, it is…

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Bank ERC Rebate – Getting Your Own

Yours might be the case of the emperor lacking clothes. While many banks are helping their clients with employee retention credits (ERC) (If you are not, see HERE), many banks with 500 employees or less still need to collect their OWN ERC rebates. During the pandemic, most banks retained their employees and suffered higher costs,…

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Applying Second-Order Thinking In Banking

We have used the term “second-order thinking” in our writings, and some bankers were curious about what exactly we mean. The term came to popularity in banking after Howard Marks wrote his seminal work on investments – The Most Important Thing. The “most important thing,” as described in the book, is the ability to drill…

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Building The Relationship Banking Model

In a recent article (here), we discussed why banks that take risks to earn higher revenue demonstrate lower performance as measured by ROA.   Empirical evidence, historical bank failures, and common sense teach us that many risks do not translate to higher yields.  While in that blog, we specifically considered the risk-return tradeoff for credit risk;…

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