The small- and mid-cap banks in the northeastern and mid-Atlantic region that are favored as longer-term investment opportunities are the ones redesigning the operational overhead of the industry by focusing on their expense base, overall branch structure and cutting costs, says Collyn Gilbert, Managing Director at Stifel, Nicolaus & Co., Inc.
“For the healthier banks, the pain seems to be more from an administrative and an operational perspective. The weaker banks, I think, we will see it become more of an intense cost burden. They’re really going to have to raise capital or increase staffing, and the overall cost component is going to be too prohibitive for them to make meaningful profits,” she said.
Gilbert says Webster Financial Corporation (WBS) has introduced a banking branch that is a fraction of the size of the traditional branch, and it makes sense because the overhead costs are considerably lower than a traditional branch.
“We would argue that these banks don’t need so much of that real estate or traditional bricks and mortar, and all that staffing, in an industry that’s in a massive deleveraging mode and probably will be for a while,” she said.
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