Regional C&I Growth: Focusing to Win

By Michael Rice & J.D. Richards

While regional banks long have placed a priority on serving middle-market commercial and industrial firms, the stakes are sharply higher coming out of the Great Recession. Compared with overflowing demand at the top of the market, banks are now fighting over a shrinking pool of borrowers who are much more cautious and demanding.

A common management response is to tighten up the business as it stands, and concentrate on superior execution of the basics. Across the industry, middle-market commercial banks have cut costs, tackled capital and credit quality issues, and redoubled the general marketing and sales outreach to prime customers.

Often overlooked in the rush, however, is the fact that a meaningful number of commercial clients are not yet receiving the level of specialized service that will be needed to acquire and expand banking relationships over the next few years. Increasingly, commercial bankers are expected to exhibit expert knowledge of the industry sectors they serve. Meeting this requirement can make all the difference in a challenging market.

To be sure, many bankers — especially those from the largest institutions — believe that they’ve already gone as far as possible in serving “industry verticals.” There’s a decades-long trend of providing dedicated service to concentrated industries, with the healthcare sector being a prominent example.

But there are several reasons why industry verticals warrant a fresh look, especially among regional banks. For one thing, advances in management innovation and information technology have made this kind of organizational structure far more economical and effective than before. Many players haven’t paid enough attention to this opportunity anyway, plus the urgency for growth is much stronger in a tight market.

There are no magic bullets in a commercial banking market that has fallen from heady expansion to sharp contraction. Yet especially among regional banks, increased use of industry verticals should be high on the list of options for revenue generation.

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