Monday, February 9, 2009

Tone Deaf Bankers

Like most people, I am furious about the stories pouring out of the bailed-out banks themselves reporting how they have (ab)used the funds they received from taxpayers via the federal government. At the same time, I’m mystified at how clueless they seem. How can all those smart people be acting in such dumb ways?

If you read my post about the Customer Empathy Gap you know I’m not a huge fan of Wells Fargo Bank. I know their reputation for being well-run, but I don’t like the way they do it: I end up feeling they nickel and dime me on every interaction. That said, alone among bail-out recipients in any industry, Fortune magazine reported recently that Wells Fargo has actually paid the US Treasury $371 million “on the preferred shares the bank issued to the government in last fall's banking industry rescue.” The company also reported that it has been lending money aggressively even as the economy sputters.

Before we cheer Wells Fargo as the paragon of responsiblity in this mess, CNNMoney reported last week that this type of reporting is actually required by Paulson’s version of TARP. So, why did Wells beat BofA or Citi to the punch? And why, in the next breath, did Wells announce its upcoming employee or customer "thank you" party, or whatever it was in Las Vegas. Are bank leaders completely tone deaf?

A recent Boston Consulting Group survey shows that consumers want - even welcome - communications from their banks these days. Financial services companies of all stripes would be smart to talk to their customers about what and how they’re doing, reassure customers of their own financial viability as many households worry about theirs, and remind customers that their loyalty is valued.

Meanwhile, their own (mis)behavior is forcing banks into the brave new world of transparency – reporting on the amount of new and refinanced mortgages extended since receiving TARP funds, explaining and perhaps justifying to the public their decisions about expenses for corporate jets, customer retreats, sports and other forms of sponsorships, and more.

Over the past six months, the whole banking category’s stock performance has declined, but a quick comparison chart on Yahoo Finance shows that Wells Fargo's stock has dropped far less than Citigroup's or Bank of America's. As we come out of this recession, I’m guessing we’ll see an increase in the correlation between regard for brand and stock price.

Big banks better get busy repairing the damage they've inflicted on themselves. And with the cranky mood consumers are in, they'd better not spend much money doing it!

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