By now you’ve likely heard that commercial loan volume growth in 2018 had fallen short of many banks’ expectations. But there’s good news to share. In a recent PrecisionLender report, The State of Commercial Banking: Jan. 2019 Market Analysis, we learned that fee discipline has improved.
The reasoning may surprise you.
Although some borrowers are assumed to be highly fee averse, bankers generally reported more of a focus on rate during borrower conversations and less sensitivity to fees. Also, RMs who have achieved the greatest gains in fee incidence gave more credit to changes in banking culture than shifts in market conditions.
How can bankers work to get these fees?
We interviewed some of the top RMs we’ve seen practicing strong fee discipline and asked them how they did it. The majority articulated that they go into borrower conversations with confidence and expect success. These RMs propose fees on all term sheets and avoid taking an “all or nothing approach.” Meaning, they make modest concessions rather than eliminating the fee altogether if they receive pushback from the customer.
We’ve even seen some banks add incentives around fee collection to drive fee growth. And we’ve seen banks capitalize on event-based fee opportunities, such as modification and covenant violation waiver fees, which are more straightforward to negotiate, as they are for a specific, tangible event that is either requested or triggered by the customer.
There’s so much more…
In our The State of Commercial Banking: Jan. 2019 Market Analysis, we delve into key trends and deeper analysis on the commercial banking market. We encourage you to check out the report, pass it along to your colleagues, and connect with us on social media to continue to receive great content like this.
If you’re interested in learning how PrecisionLender can help your bank better price and manage the profitability of your commercial relationships, head over to precisionlender.com. for more.
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