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Few businesses can survive without happy customers. And when it comes to focusing on customers needs, banks can sure talk the talk, but can they… well, wait a second, do they even talk the talk?
After listening to Jamie Dimon lecture analysts on JPMorgan Chase & Co. (NYSE:JPM)‘s second-quarter conference call about focusing on client and larger business issues rather than accounting details, I got curious: How do the major banks stack up in terms of how they talk about their respective businesses? A great PR team and an effort to talk “as if” could make a management team sound like its focus is on something that it’s not. But my assumption is investors should be able to draw something from the way management discusses the business.
To test this, I went back through the second-quarter conference call transcripts from the largest banks to see the mix of discussion between customer-related issues — by looking for the words “client” and “customer” — and bottom-line-related issues — by looking for the words “profit” and “loss.” Here’s how it shook out.
I sorted based on the ratio between the “customer related” terms and the “bottom line” terms. It shouldn’t be all that surprising that among the top three banks are two — Goldman Sachs Group, Inc. (NYSE:GS) and Wells Fargo & Co (NYSE:WFC) — that are generally vocal about their customer focus. Front and center in Wells Fargo & Co (NYSE:WFC)’s annual report, the company states: “Our vision is to satisfy all our customers’ financial needs, help them succeed financially, be recognized as the premier financial services company in our markets and be one of America’s great companies.” And Goldman Sachs Group, Inc. (NYSE:GS)’s No. 1 business principal is, “Our clients’ interests always come first.”
Sure, there’s evidence that Goldman Sachs Group, Inc. (NYSE:GS) in particular lost a little of that client focus in favor of a Goldman focus during the financial crisis. But if my little word jumble is any evidence (along with Goldman Sachs Group, Inc. (NYSE:GS)’s Business Standards Committee, which is aiming at “a higher standard of client care”), at the very least, Goldman is very seriously talking the talk today.
Notably, both JPMorgan Chase & Co. (NYSE:JPM) and Bank of America Corp (NYSE:BAC) spent substantially more time talking about customers than they did about profits and losses. Comparatively, Citigroup Inc. (NYSE:C) offered less verbiage around customers and focused more on the bottom line. Perhaps we could chalk this up to the notion that B of A has beaten Citi to the punch in terms of moving on from crisis cleanup to growth initiatives.
It’s also worth pointing out that the particular mix of “customer” versus “client” is telling in terms of the type of business that each bank focuses on. Bank of America Corp (NYSE:BAC), Wells Fargo & Co (NYSE:WFC), and U.S. Bancorp (NYSE:USB) have a lot of retail business, and those banks were heavily tilted toward the us (NYSE:USB)e of “customer.” Meanwhile, Goldman Sachs Group, Inc. (NYSE:GS), Morgan Stanley (NYSE:MS), and JPMorgan, all of which tilt toward corporate customers, consistently used “client” to refer to customers. And while it might seem strange that PNC Financial Services (NYSE:PNC) also leaned toward “client,” consider that bank had (at March 31) $112 billion in assets in its Corporate & Institutional Banking business against $74 billion in its retail bank arm (U.S. Bancorp’s is split in the opposite direction).
What they were saying
When the management teams were waxing poetic about customers, here’s a look at what they were saying:
Brian Moynihan (CEO, Bank of America): “We have leading capabilities in the areas where our customers want us to be. We do more business with them; we’re gaining momentum across every customer group we serve.”