The World Cup is finally upon us. Having 7x the viewership of the Super Bowl and bringing in more than $4B in revenue (2x that of the Olympics), the World Cup is the greatest sports event on earth. It is hard for most American's to even fathom the passion of the average soccer fan. In America, most sporting events are largely passive in nature, corporate and all about the sponsorships. You may stand up in the final seconds or cheer loudly when your team scores, but most of the time you sit and watch. The average World Cup soccer fan, by contrast, reacts to everything. They scream when a player changes their socks, cry, dance, chant, boo, throw their drink and talk on the cell phone - most of the time all done simultaneously.
World Cup soccer, like banking, has changed over the last 10Ys. Soccer is an emotional game in the stands, but it used to be an emotional game tactically. Star players like Pele or Maradona used to run around, filling the open space, in hopes of creating a scoring opportunity. Now, like banking, the environment is more competitive. Single players are now quickly neutralized, so haphazard scoring occurs less and less frequently. Set plays are now common. In this World Cup, many teams will be running set plays just to achieve a corner kick, so it can then run a set play off of that. Event the Italian team, who's players on the field are often seen screaming, crying, dancing, chanting, booing, throwing their drink and talking on the cell phone, are now cold tacticians.
This natural evolution has also occurred in banking over the last 10Ys. Top performing banks like Bank of Hawaii ($12.4B, HI) or FirstBank ($10B, CO) have consistently succeeded because they tactically go after specific segments of the market (like small business) with specific products (like cash management services) in order to create specific value. On the lending side, these banks are as disciplined and unemotional, working on structuring, loan pricing and credit to create double digit return on equity.
In 2010, almost all of the top performing banks that we have talked to are trying to run set plays to generate more fee income. Coming up with new lines of business, increasing service fees and creating bundled products are just some of the pre-determined tactics that management has put in place for their players to execute. Given low rates and growing reserves, this tactic is one of the few that can immediately help lift ROE.
As we kick off the 2010 World Cup tournament, consider what your bank is strategically and tactically doing to create value. Banking, like soccer, is no longer about hiring a couple of superstars and letting them run around in the open field. Our industry has become more disciplined and quantitative in nature.
For proof of this in this World Cup, watch the penalty kicks. Several years ago statistical analysis was done showing that most players are left footed and so they kick to the goalie's right. Knowing this, many teams changed tactics to kick to the goalie's left. Knowing this, over the last year in soccer, shooting in the middle, traditionally the least likely to score, has been garnering the highest percentage of goals, as the goalie would either move left or right ahead of the kick. It should be interesting to see where all this double and triple-thinking will lead this year.