Banking Industry Faces New Financial Landscape A Candidate Driven Marketplace

The future of the financial services industry continues to remain uncertain; while the absolute worst of the financial crisis and economic downturn continues to be in the past, the lack of clear direction as to economy, budget, taxes, health care and regulatory burden continue to promote slow growth rate, but steady. The competitive landscape remains in fluctuation and the debate about the incoming transformations to health care and regulatory change continues.

Angott Search Group (ASG) conducted its fourth annual survey of bankers across the country, from Wall Street to Main Street, to provide insight into their views on the industry, their immediate plans and the future of their organizations. Our focus included areas such as growth opportunity, hiring plans, obstacles, and compensation.

Growth opportunity
Organic growth versus acquisition growth remains a topic of debate regardless of asset size. The need to grow and reach critical mass has fueled the acquisition market in recent months. States like Michigan, Florida and Georgia that were once thought of as the hardest hit have now become darlings to bank investors and regional banks. These states will continue to see increased M&A pressure as these economies continue to lead the national recovery. According to our survey, 60 percent of the respondents indicated that the current banking environment will provide a good growth opportunity, 35 percent felt growth was stabilized, but not moving forward, and only 6 percent were forced to take a step back (an improvement of 5 percent year over year). These findings continue to reflect a cautiously optimistic outlook because of the economic uncertainties of the market, regulatory burdens and the Affordable Care Act, banks will continue to be careful when hiring.

Hiring plans
While the economy is showing slow growth, there is some stability in areas of the Midwest; where hiring is taking place for key positions and replacements to cover attrition. Hiring will be strategic to obtain additional market share. Almost 95 percent plan to make additions to staff or make selective hires within the next six months – with 34 percent are planning to add staff; another 60 percent will make selective new hires, replacing open positions and maintaining all-over staff size, and only 6 percent have no plans for taking on new hires.

The Commercial Lending arena is leading with 45 percent adding new hires, and the Retail Banking & Administration arena at 20 percent. During the second half of 2013, ASG’s own metrics support this change reflected in the survey. Our Financial Services practice experienced double-digit growth in Commercial Lending, Retail Lending, Information Technology, Marketing, and Executive positions. We are encouraged by the increase demand especially in IT and Marketing; investment in these two areas is a good sign for everyone.

During the height of the recession, candidates were in high demand, while jobs were in short supply. As our survey and our own job order metrics will bear out, the market is a candidate driven market. In years past, candidates had limited options for new employment; today they are entertaining several offers sometimes as many as four competing offers. It doesn’t take long for this to spread and make candidates more selective.

There is no ambiguity about the biggest obstacle that banks face right now federal oversight – over 55 percent (an increase of 7 percent) had it at the top of the list. Other barriers include the Affordable Care Act and week loan demand. Polled obstacles include – The concern over the local talent pool at 17 percent; problems with capital ratios at 7 percent, and access to capital the in secondary market at only 3 percent. The centralization process that occurred with the super regional banks over the past 10 years created efficiencies, but also left us with a talent gap in key operational areas such as commercial credit, portfolio management, consumer credit, and loan operations. In large part, these training programs have been dismantled.

The compensation arena, one of the toughest to analyze, is a moving target in most industries, but even more so with financial services companies. Incentive plans face much scrutiny, and many are still afraid to return to paying incentive plans for fear of regulatory retribution as our survey indicated that 35 percent do not expect any changes in executive compensation. Our survey results indicate that 29 percent expect revised bonus plan objectives; 23 percent anticipate an increase use of performance-based equity compensation while less than 13 percent will measure their performance against their peer group.

Although compensation is not currently the greatest factor in determining whether a candidate is attracted to a new position (only 23 percent see it as a major factor), forward-thinking banks should reevaluate this area. Most banks need to focus on returning dividends to shareholders although this could result in a problem with retaining top talent. The demand for this talent will bring back signing bonuses, stock options, and incentive plans. Many of our clients are in the process of implementing new incentive plans.

Our respondents report that what attracts candidates today has not changed in three years, with 34 percent citing a stable and growing organization as the key factor in evaluating a new job opportunity. While 23 percent indicate that, a better opportunity provides incentive to move. Another 15 percent believe that the prospect of long-term retention also plays a role. The Affordable Care Act has proved to be not so affordable for some of our clients/candidates and in fact has become a decision point for many candidates we work with. This dynamic will continue to be a challenge not only to retain talent, but will prevent some from being able to attract talent. This could become the single biggest threat to our recovery.

The banking industry continues to see many changes since the recession and executive management must still be prepared to take advantage of any opportunity that arrives. Regulations continue to be a burden for many institutions and keeping up with them can be both timely and costly. The Affordable Care Act, credit demand from small and middle market, and changing capital rules are all are uncertainties that are adversely influencing hiring and economic outlook.

Although our survey does not offer any quick solutions or reveal vast confidence, the situation is not all doom and gloom. The majority 60 percent – feel neutral about the outlook for the banking industry; 34 percent feel optimistic. Moreover, considering the depth and strength of the crisis, perhaps that alone qualifies as optimism for the future.