Banks need to hone a distinctive, high-quality product or characteristic that sets them apart in order to stay independent, according to Craig Dahl, president and CEO of TCF Financial Corporation. Addressing attendees at the Bank Holding Company Association’s fall seminar, Dahl identified four areas to focus on: products, diversification, technology and cyber.
Perfecting a core product offering as a distinguishing factor is crucial, Dahl said. “You have to have a product that you’re really good at. You have to have something that is your core go-to, but yet it can’t be the only thing you do.”
Hyperspecialization without balance isn’t the way to stay strong and independent, Dahl said, citing TCF’s decision to focus on its equipment and inventory financing lines without ignoring other areas. “The success of our equipment finance business, the success of our inventory finance business have come on the backs of being very focused on what we’re going to do,” he said. “But that was not everything. That’s 40 percent of what we do; it’s not 100 percent. If you have the chance to remain independent there’s something you have to be great at, but you can’t ignore the other things as well.”
With technology, banks need to understand their own needs as well as what their budgets can reasonably buy, Dahl said: “If you’re going to have Grade A everything, you’re going to spend to get there.” Banks and their boards should identify what their particular customers and business models call for before going all-in on the cutting edge of technology adoption.
Of the four, cyber is the piece that most keeps Dahl himself up at night because of how little he knows about it. “In all the rest of the of the banking business, if you bring me into a meeting where there is a problem, I think I could add value in that discussion,” he said. “If you bring me into the room with a cyber discussion, the phrase ‘I don’t know what I don’t know’ is absolutely appropriate.”
That’s where a bank’s board can come in. “My view of the role of the directors is to bring them in and maximize the skills that they can bring,” Dahl said. “[They’re] going to bring their level of experience and expertise and that’s what we’re looking for.”
All told, complementary profiles — in technology, product lines, market areas and culture — were what made TCF’s merger of equals with Michigan’s Chemical Financial work so well, Dahl said. The merger, which closed at the beginning of August, created a $47 billion company which dovetailed together nicely from the characteristics of its component banks.
“We had complementary businesses and adjacent markets; we don’t have identical businesses in common markets,” Dahl said. TCF’s core was old, but it offered easy digital access and products while Chemical’s core was new and its digital product offerings were stale and generic, Dahl said. “We have a tremendous organization coming out of this transaction.”