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Banking Roundtable

D CEO talked with some of Dallas' most respected banking leaders to get their assessment on various trends and important changes in banking and finances.

D CEO has turned to some of Dallas’ most respected banking leaders to get their assessment regarding the current state of how Dallas businesses handle their banking and finances as well as the various trends they have been observing, and often establishing. These experts offer a glimpse into the state of banking from the perspectives of those sought after for delivering financial business advice and giving beneficial updates about important changes in banking.

Given that the rapid deployment of CARES Act and PPP funds has subsided, what are some of your biggest lessons learned?

BRIAN ENZLER: Proactive and constant communication with clients was imperative. Simply by communicating what we knew as soon as we could (the program was highly dynamic early on), being transparent and working hard on behalf of customers went a long way toward relieving some of the anxiety everyone experienced through the process. Fortunately, 100% of eligible businesses that asked our team for help with PPP received funds, whether they were existing customers or not, and we’re proud of that.

BILL DUNN: Fortunately, we got an early start on it, which proved very beneficial. That said, one big lesson was that with a program this massive and new to all involved, there were constant changes throughout the process, as the government and everyone else was learning as they went. If there is another round, hopefully the rules are more established at the outset.

How does a bank in 2020 differentiate itself from the competition? Has the COVID-19 economic climate shifted that?

DENNIS WRIGHT: To stand out today, a bank needs outstanding people to put in front of clients, consistency in management, and a strong balance sheet that can weather all economic cycles. All these elements are especially true right now, as COVID-19 has impacted nearly every industry and every business in some way.

BILL DUNN: Technology is a big differentiator but being involved in their community and being good advisors to business clients has always been, and will continue to be, a differentiator—now as much as ever.

BRIAN ENZLER: More than ever, businesses need guidance and proactive communication from their banks. They also need flexibility and a banker with deep understanding of the business. In addition to those critical needs, banks must differentiate with creative ideas and resource delivery that goes beyond capital and cash management, such as industry expertise and thought leadership, tools for optimizing working capital, and strategic connections that help the business grow.

What does your bank look for in an emerging business in which to invest?

BRIAN ENZLER: Our customers all have some key elements in common—high-quality management teams, a strong and differentiated value proposition, and appropriate capitalization. If a business checks all three boxes, they’re not only positioned for success in good times, but the tough times as well.

BILL DUNN: An adequate capital and liquidity structure to withstand up and down cycles. An experienced management team of operators/owners that have seen multiple cycles.

Given that the Fed has already cut the federal funds rate twice in 2020 (at time of publication), do you anticipate further adjustments?

BRIAN ENZLER: I don’t expect the Fed to implement a negative-rate posture, and with the severity of the downturn creating historic unemployment and contractions in consumer spending, the current near-zero target rate is likely here to stay for some time.

BILL DUNN: The Fed cannot reduce rates more without going into negative territory on the Fed Funds Rate, which Fed chairman Powell has indicated he does not want to do. Do not expect an increase in rates until 2022 at the earliest.

How are you positioning your clients for a slower growth economy?

BRIAN ENZLER: Our customers are generally well-positioned for the impact of business cycles, but there are some important tools we leverage to support them in lower-growth scenarios. We help prepare cash flow models, provide detailed working capital optimization analysis, streamline, and automate cash collections and disbursements, employ targeted and proprietary industry insights, and provide growth capital for those able to act opportunistically during the cycle. We’re so much more than capital providers; we’re advisors.

What are some of your clients’ biggest financial concerns, and how are you addressing them?

BILL DUNN: With the COVID environment, many businesses are just trying to stay afloat until things improve. We have worked with many clients to extend/defer multiple loan payments.

DENNIS WRIGHT: The biggest financial concern our clients face right now is simply the uncertainty of not knowing what the future holds and how the economy will or won’t respond. In some cities and industries, there is an uptick in consumer spending and activity, but clients wonder if that is sustainable and what will it look like three, six, or 12 months from now. To help clients during this time, we continue to have conversations with them like we always have regarding their business plan, cash flow projections, staff and benefits, and revenue projections. These conversations help clients get prepared for the future and have a plan in place if/when the time comes to make business-critical decisions. We are also still lending money to businesses right now using the same underwriting and credit standards we have always used.

BRIAN ENZLER: Almost all businesses today are concerned about liquidity. During uncertain times, access to liquidity can be the difference between thriving and dying. In addition to participating in Federal support programs, like PPP and Main Street Lending, we provided relief for any customers who needed it at the start of the shutdown. We also worked with them to maximize working capital and think through cost reduction measures to preserve liquidity.

How have the events of the recent economic rollercoaster changed investment behavior and investor decision making?

BRIAN ENZLER: Firms are, of course, investing in technologies that enable effective remote work and increase worker safety. Expansion capital is likely to be subdued until greater certainty takes hold, but investors will deploy capital to ensure business continuity and maintain or enhance customer interaction. We should see a trend (how big remains to be seen) toward onshoring, particularly with regard to critical healthcare products and higher value goods made in China, requiring significant investment in manufacturing and logistics domestically.

In today’s economic environment, which industries and markets show opportunity?

DENNIS WRIGHT: Overall, companies that maintained reasonable leverage and strong liquidity were able to pivot during these times are performing best. Just like before the pandemic, every customer is different, and every industry is different. However, some general industries that are performing well include food distribution services and food retail; consumer staples and goods; IT services; utilities and telecommunications; and certain manufacturers. I would add to this that companies can benefit right now by being nimble. I would encourage them to think about how they can continue to adapt and change to create products/services that are in demand for the next 12 to 24 months and then into the future. For instance, we see manufacturers shift from making their typical products to making PPE, sneeze guards, hand sanitizer, and more. Understanding what the need is today and shifting to meet those needs will pay off long-term for many companies right now.

BRIAN ENZLER: Businesses that embraced technology to deliver their product or service prior to the pandemic are seeing the benefits now. Not only is the ability to connect and transact with customers remotely is important, but to enhance their experience by utilizing technology is critical. Businesses that have historically interacted with customers primarily in person have a huge opportunity now to leapfrog competitors if they can find ways to do that.

BILL DUNN: Homebuilders, which Prosperity finances a lot of, are doing well in today’s low-interest rate environment, which is spurring more home purchases. Some temporary staffing agencies are also doing well, depending on what areas of concentration they have.

Are tools or technologies your bank has implemented changing the way you serve clients or the information and insights you’re able to provide?

BRIAN ENZLER: As a global bank, BMO brings a wealth of expertise and resources to support our customers, and by leveraging technology and new business norms, we have the ability to scale the delivery of those resources in a way we haven’t before. For example, bringing together industry leaders and experts in a roundtable format used to be either highly localized or a massive logistical effort, whereas now we are engaging leaders from multiple states and countries in a highly effective but streamlined video format where they can share insights and ideas.

DENNIS WRIGHT: The very fact that we were able to continue to do business as usual during the past three months was a huge technology success for UMB, and I believe the banking industry at large. From the onset, UMB implemented strategies designed to decentralize critical processes, including implementing virtual meetings, requiring remote working options for non-essential associates, geographic disbursement, and social distancing. We wouldn’t have been able to operate like this 20 years ago, and that not only excites me, but it gives me hope that we can weather any economic storm together if we can change and adapt accordingly.

What are businesses looking for in banking relationships now compared to 10 years ago, or even a year ago?

BILL DUNN: Businesses would always prefer a relationship with a bank as opposed to just a transaction. Now as much as ever, they are seeking an advisor in a bank to help them through these times. They also want a bank that can grow with them in good times.

DENNIS WRIGHT: Today, business owners are thoughtful about the decision of who they bank with because it is such an important component of their success, which has been especially evident during the past three months. First, any bank must have the basic products, services, and technology that a business needs for their daily operations. More importantly, business owners want to have a relationship with their banker. They want a banker who will pick up the phone when they call, especially during times like these. The truth is that relationships are still important, and I would argue, they are more important today than ever before given the world we are now living in.

What financial services products and programs have emerged as popular among your business clients?

BILL DUNN: Mobile access to banking services is big and growing. Also, products and services that help combat fraud are of huge importance as fraud attempts continue to be on the rise, both high tech and low-tech fraud.

DENNIS WRIGHT: We continue to talk with our clients about integrated payables more and more as they look to create efficiencies in their payables operations. This interest from clients has become even more evident during the past few months as they work from home and look for more efficiencies in their business operations as well as ways to cut down on fraudulent activity. Integrated payables allow you to create one file with all your payments that need to be made and then lets you to pay them off in the most efficient and effective way for your business. Having a one payment file submission versus separate payment streams has allowed companies to restructure this area and collect data that is improving their bottom line.

What are the pros and cons of charitable giving for businesses today?

DENNIS WRIGHT: We believe it’s important for business leaders to support causes they are passionate about as well as causes that resonate with their associates. During the past few months, this has become even more important for businesses as they look to support COVID-19 relief efforts and the racial inequities that face our nation. When you are trying to attract and retain the best talent, those people want to work somewhere that has heart and that is trying to do something good in the community. We believe it is our responsibility to give back to each community we serve, and we encourage our clients to do the same for their communities.

BILL DUNN: Banks are always, and should be, one of the leading charitable donors in their communities. It helps the overall health and welfare of the community and is the right thing to do. There really aren’t any cons.

What is the top question every CFO should ask their current banker?

DENNIS WRIGHT: Can I have your cell phone number? I say that half-jokingly, but during the past several months, access to your banker and financial team has been critically important at times. They need to feel confident their banker understands their current financial situation and that they are ready and available to provide counsel and thoughtful financial advice. During the past few months, one of the biggest challenges we have heard in the banking industry is that clients have not been able to talk to their banker and help them navigate the new economic environment we are in. I would advise CFOs to make sure you have access to your banker and to be in touch with them on a regular basis.

BILL DUNN: Is your bank here for the long haul, and what has been your performance through good times and bad in the economy?