One scary thing in the banking industry is that earnings look bleak. Achieving a 12% return in 2011 is going to be more difficult than taking that regular sized Nestles bar away from your kid on Sunday night. Bankers will have to deal with more regulation, little loan growth, sticky asset quality issues and compressed margins, so earnings will be tricky. Since more verbal candy will likely be needed, we have compiled a compendium of comments we have heard bank CEOs say that you can use when you are stuck coming up with that perfect cliche' to describe your bank's performance. In addition, this guide will be handy for employees, investors and regulators to help interpret what the CEO really means. Here is our top 10 list for 2011:
"We have been successful in controlling costs this quarter" - Translation: Without loan growth it has been easy to keep a lid on compensation, but we remain jealous of "robo-signers," as the sheer efficiency of closing 400 foreclosed homes per day should be in some Banking Hall of Fame.
"Our stock price is a fickle mistress" - Translation: Since we have been trading at 50% of book value, if I focused you on our market capitalization you would kick the snot out of me like my spouse would if I was ever caught cheating with a mistress.
Any phrase using the word "bus" - "Getting on the bus," "Getting people in the right seats on the bus," or anything close usually means you are in trouble because the CEO is falling back on a 2001 management book for inspiration.
"We are focusing on building deposits" - Translation: We were focused on loan growth in 2006 when loan growth was easy. Now that deposits are roaring in, we are focused there.
"Our asset-liability position remains neutral" - Translation: Since we have no way to model loan floors, prepayment risk or deposit duration, we have no idea of our position if rates go up 400bp. Thus, we don't have an opinion.
"We continue to face regulatory headwinds" - Translation: Examinations are really rough right now so it is easier just to avoid originating any loans at all.
"That was in the past" - Translation: We screwed up and had to classify a bunch of loans. Focus on what we're doing this quarter, unless we have to take more writedowns and then we will put that performance in the past as well.
"We are committed to implementing best practices" - Translation: Seriously, would you come to work or invest in this bank if you knew they were following "worst practices"?
"We are controlling the controllables" - Translation: Everything going wrong is not really our fault since it's beyond our control. How were we supposed to know that lending into a 3 cap rate was a bad idea?
"Bottom line," "value creation" and "blocking and tackling" used in the same sentence - Translation: Your CEO has business cliche' Tourette Syndrome and should be evaluated by health professionals.
We can't decide if we are going trick-or-treating dressed as Ben Bernanke or Elizabeth Warren, but look for us in a scary costume. Until then, have a happy Halloween and if you are turning your bank into a haunted house, try not to put all your classified loans out front in a bowl because it may be too much for some kids to handle.