GFEP 9 | Zions Bank

 

A banker’s life: dull, unimaginative, inflexible. Right? Not so if you’ve met Scott Anderson, President and CEO of 147-year old Zions Bank, the 44th largest in America, with assets over $70B. This episode digs into how financial services are removing the stigma of being barriers to commercial progress and proving they’re the primary mover of it. Together with host, Rob Cornilles, Scott explores how banking, the source of some of this century’s broadest innovations, practices agility out of necessity. Scott also explains how his industry can more effectively tell its story so that they can continue to make the world go round.

Watch the episode here:

Scott Anderson | Out Of The Banker’s Box

If you were controlling over $70 billion in assets during one of the roughest economic stretches our country has ever gone through, what would you do with the money? Welcome to the world of banking. How do these institutions and those that lead them make the call as to which business gets financed, which homeowner gets a loan and who doesn’t? No one knows better than Scott Anderson, long-time President and CEO of Zions Bank, one of the most influential banks in the United States.

I want to thank Scott Anderson, the President and CEO of Zions Bank for taking the time to join us. This is an exciting opportunity for us to talk to someone in the financial world. As we’ve started and launched this show, Scott is the first person from the financial markets who is being interviewed for Game Face Exec. He’s our guinea pig, but he’s also our pioneer. Thank you, Scott, for joining us.

Thank you. I’m happy to be here.

It’s kind of you, one who leads a top 40 bank in this country, to take the time to address some key questions that I have, and I’m sure that our readers are interested in. This is a precarious time that we find ourselves in when you and I are talking, we’re wrapping up 2020. I’ve got to ask you from a financial-economic standpoint when 2020 began, if you were to have written in your journal what you forecast 2020 to look like, if we could have peek back into your journal entry, what would we have read?

You would have read that we thought 2020 was going to be a record year. The economy in the areas that we operate in was among the strongest in the country. People were optimistic. Job growth was high. Unemployment was low. People felt good about the future, and they were investing and spending. Whenever you have that combination, it’s always good for banks because we can step in and help them achieve their goals. We were projecting growth in loans, deposits, fee income and across the board in all of our products and services. That came to a screeching halt in March 2020.

Now that we’re looking into the year, it seems like these are two different worlds that we’re living in. Can you put on your prognosticator cap for us and tell us what is Zions Bank saying behind closed doors about the second half of 2020, even into 2021? What are we looking for?

It’s interesting as you ask that question and as you think about the response. Before you project in the second half of 2020 and into 2021, you have to look at the second quarter of 2020. That holds the key to what will happen. As we came into the second quarter, it was one of the most difficult times we have ever seen as a nation. We have the pandemic, then here in Utah, we had earthquakes. We have the government shutdown. We had the death of George Floyd and all of that social unrest that came up from there. The question is, how will that impact going forward? The interesting thing that happened in 2020, in this crisis which I call the COVID-19 recession, as opposed to the great recession several years ago in 2008, 2009, 2010, is that back then it was a banking crisis.

While we honor the healthcare workers as unsung heroes saving lives, we should also honor bankers who have saved the economy and businesses. Click To Tweet

If you recall, the banks had invested in a lot of residential real estate, the government had loosened the underwriting criteria, so Freddie and Fannie had purchased a lot of real estate. People were buying real estate with nothing down as an investment, and they were hoping that as the market continued to move up, they could sell at a profit before they had to pay off their loan or start making their own payments. When the market collapse, banks were in a difficult situation. If you recall, the government came in with about $700 billion package to help banks through that. The banks had to pay it back and the government took warrants as well as giving the money. In this time, the government stepped in and this is not a banking crisis.

Banking is strong. Banks are well-capitalized. The credit culture is sterling. It was a business crisis. It was a health crisis. The government stepped in in a different way. They provided huge amounts of money to individuals, states, counties, and most importantly to businesses. If you add everything together, it’s about a $5 trillion package, $2.5 trillion under the CARES Act. During that period of time, we put banks which were the conduit of getting this money out to businesses. We put on a huge number of loans. My organization did over 43,000 of these loans for about $7 billion, which was the ninth-largest lender in what they call the Paycheck Protection Plan in the country.

Banks were working around the clock, 18, 20, 22 hours a night to try and process these and get them through. The result is there is a lot of money in the hands of businesses, and with the stimulus checks that went to the individuals, there’s a lot of money in the hands of the individuals. With the extra stimulus that was paid on unemployment, even if you are unemployed, you’re making more money than when they were employed. We’re in this interesting phenomenon. Most of this Paycheck Protection Plan money will be forgiven, or at least the hope is that it will be forgiven. It’s a huge help to help businesses get back on track, to bring their people back and continuing to pay their employees. The question is, how will that move forward? If the economy can start up with this extra engine, then I think we will see a recovery. It won’t be V-shaped or U-shaped, but it will be a Nike shape.

That will be good. The question though is going to be, if the economy doesn’t come back, if people are not brought back on payroll, as we enter into the fourth quarter of 2020, when a lot of these benefits end and the unemployment $600 premium ends, what will happen? Will people have the money to continue making their payments on their cars and make their rent payments on their apartments? Will businesses be able to continue doing business if they’re not open up fully? That’s the question mark. The biggest question mark is, especially here in Utah as we are seeing the spikes in COVID-19 cases, will there be a second shut down? If there is, we are in real trouble as an economy.

If we don’t have a second shut down, if we learn to live with the virus, if we find a treatment for the virus and a vaccine that will I get us over it, then we’ll see the economy grow because the fundamentals are there, especially in our market. Job growth is good. Unemployment is still relatively good compared to the nation as a whole, and we have a diverse economy which helps. I think also for our particular market, you will see a lot of individuals who can work remotely. They’re being encouraged to work remotely. They are going to be moving from Seattle, San Francisco, Los Angeles and Atlanta, and they are going to be coming to Salt Lake City and Boise. They’re going to be enjoying our environment and lifestyle here, and yet they’ll have an East Coast or West Coast salary.

Scott, historically, especially in times like this, the banking industry enjoys a reputation of being helpful, supportive, sometimes our last backstop as a small business as I am, for example. In another cases, it seems like big banks in particular are viewed as the boogeyman. They are viewed as no one’s helper. They are portrayed as greedy. How do you respond to those two labels? What do you do to ensure that your reputation is where you want it to be in times like this?

Our industry hasn’t done a good job in explaining the critical role that plays in the economy. Often times we become a scapegoat. The economy’s not doing well because of banks. The consumer is hurting because of the high-interest rates. We don’t lend fairly. We discriminate in how we make our loans. First, you have to come and say, “What do banks do?” You have to appreciate the important job that banks do. It became clear during this COVID recession. When the economy shut down, banks were one of the few industries that were essential. They had to be open. We had to adapt to a new environment.

GFEP 9 | Zions Bank

Zions Bank: The banking industry has not done a good job in explaining the critical role that it plays in the economy.

 

As we try to put these paycheck protection loans together or the PPP loans, some banks said, “We’re not going to do it.” Others said, “We’re only going to do so much.” There was a great dissatisfaction among about 30% of clients of the banking industry that said, “Where’s the long-term relationship benefit of dealing with the bank?” You’ll see a lot of change and switching of banks as we move forward. Other banks, and I like to think that my institution is one of them, went out to help. While we honor the healthcare workers as unsung heroes saving lives, we should also honor bankers who have saved the economy and businesses, and help the business move forward and become sustainable again.

During this period, they were working 18 to 20 hours a night for weeks to try and get the work done, and get the money immediately in the hand of businesses. It’s a difficult situation. This is where you need to use your influence and figure out how to call in chips. This is where you have to figure out how do you create value in the community and get credit for it at the same time that you’re creating value for your customers. Banking hasn’t done a good job of explaining that crucial role that we play so people don’t understand it. While they may say, “I don’t have great faith, I’m upset at the banking industry, or they’re not fair.” If you ask them about their local banker, they always have high regards for them. That shows that banking is a personal business. It’s built on trust and establishing strong ties with your banker, the banker with the client, the banker with the community. On a local level, the banking reputation is good and strong. On a national level, banks don’t rate high on the reputation scale.

Is there a skillset or an attribute that people getting into the banking industry should work to develop so that communication of the value and the good that is found in banking and the services of banking could be better communicated? Not to mention those people who are already in it for decades such as yourself.

We have to do a better job. I don’t think it’s just who comes into banking, but it’s how we advertise what we do. I can’t talk about who my clients are and the deals that I do, but we have to talk more about and exert greater influence among thought leaders and people in the capital on Capitol Hill, here in Utah and in Congress on what we do. We are there helping small businesses where they’re helping consumers. We’re not only going after large corporations, we are there to provide value to everyone on the economic ladder, try and help them improve and grow.

When we spoke about the financial crisis of 2008, 2009, there were certain things that your bank had to do to respond to that. You had to participate in certain moves. You had to do things that were not anticipated in order to help yourself get through that and also all of your many customers. You’re doing the same thing several years later in this new unexpected crisis. Are there some common traits or common values or strategies that you’re tapping back into to help you and your leadership team, and not to mention your local branches, to get through this? What is that thread or that theme that we would have heard several years that’s coming back?

There are several lessons that were learned and they are still applicable. The first is that you have to be good at what you’re doing. You have to make good sound loans. You have to have sound concentration limits and underwriting policies. You have to be out in the market. Beyond that, you have to communicate well. Communicate to your employees, customers and to political leaders. You have to be agile. One thing that’s coming out of this COVID-19 recession is the importance of being able to turn on a dime and come up with new things. What this has done is moved some things that banks have been thinking about for years and it’s happening.

Bankers are salespeople and there's nothing wrong with that. What's important is they're not out there to sell the wrong product. Click To Tweet

Working remotely has been a discussion for several years. Many would say, “It can’t be done. We can’t trust the cloud. We can’t track what people are doing.” Overnight, we had 75% of our employees working remotely and it worked. The unsung heroes were our technology people, but it worked. People are able to do it. We can now sign documents online, and some of the concerns that we had, we’ve been able to work around. Being agile and turning on a dime is a lesson learned back then and is important. The other is that we have to look to the future. We have to think what the future is going to be. We can’t lose the advantages or the lessons that we’ve learned and hoping that we will go back to the old way of doing it.

We have to look to the future and say, we are going to come out of this, but it’s going to be a new and better operating environment. It’s going to be more digital than it ever has been, more conversations through Zoom and less in-person meetings. How do you develop the relationship through a computer screen? What else do you do? The combination of having good technology, all of the digital channels that work, and having a feeling of the traditional long-term relationship, and matching that with an in-person banker that you can meet with, talk to and call, that’s the winning solution going forward.

As you talk about that, an image came into my mind, Jimmy Stewart, in It’s a Wonderful Life. He was a banker who looked after the community and tried to do the right thing even when it was difficult. We’d all love to have a relationship like that with our banker, whether it’s for a home loan or a business loan. Talk a bit more though about the innovation that’s coming. We’re not asking you to disclose any trade secrets that Zions is may be developing, but the necessity. You talked about being agile and nimble. When it comes to technology, I think of all the bricks and mortar branches. If I’m not mistaken, you have branches in two states, but you have offices in ten states. I don’t know what all those offices represent in those various states, primarily in the West. How is this changing the traditional banking environment of, “I pull up to the bank, I walk in and I sit down with my banker, or I go up to the teller?” How is that going to be different several years from now?

You’ll have some people say branches are going to go away, and they’re going to be replaced by an online banking platform. What I see is that what people want is a combination of both. You have FinTech companies out there where you can do all of your banking online, and you never talk to anyone. There’s no office that you can go into. When those companies first came out, their goal was to destroy and put banks out of business. They realize they can’t do that. They’re trying to partner with banks with their technology. What I think is that the role of the branch will change. You may not go onto the branch as often to do a teller transaction, cash a check or make a deposit.

You are going to go in there to see your banker to get advice on a mortgage, an investment or a commercial loan. You may then work at home on the online application. You may call them. You may go back and forth. The platform that you need as a bank is that it’s online and someone can do all of the application online at home. They can start it at the bank and then finish it at home. They can start it at home and finish it at the bank. Tied to that technology is some of their giving advice and to answer questions. That’s a winning combination that if you had a FinTech company without a bank that you wouldn’t do. Branches will be around, but they won’t be the killer transaction branches. There will be offices where you go into to meet with experts in lending, investment, cash management, and treasury services, where you can come in and get advice on products and services that will help your company grow, help you manage your capital better and increase your cashflow.

When you talk about those people that I would come in and meet with, I call them salespeople. They’re in the business of influencing and providing me an education. They’re helping me see things that I might not otherwise see on my own. My research may not have exposed certain laws or regulations, or even some traps that may rest between me and where I’m trying to go. That consultative relationship is critical between me and my banker. I’m wondering, could you give us some insight when an applicant is coming into Zions Bank, whether they’re looking for a new business loan, or they want to remodel their home, can you describe some common attributes that successful applicant brings so that they can get what they’re looking for from your bank?

GFEP 9 | Zions Bank

Zions Bank: A good bank customer shares information with their banker even before they have to, especially if there’s a problem developing. That is also the same trait that a great banker has.

 

I would first go back to your original comment. The bankers are salespeople, and there’s nothing wrong with that. What’s important is they’re not out there to sell the wrong product, and they’re not being commissioned to sell a certain product. Bankers are there and they’re salespeople in the sense that they are to sit down and explain options and to say, “Here’s this,” and do exert their influence to try and guide you to what they think is best suited for your needs. Banks and certainly with our bankers, they don’t want to sell you any product that you don’t need or that won’t help you. They want to sell you products that will help you grow, manage your capital better, manage yourselves better, and manage your cashflow better.

If they’re able to do that, you’re going to come back to them because you’ll appreciate their advice. You’ll appreciate the services and products that they gave, and that you’ll see that those products and services, that advice and counsel, created value for you. When a customer comes in, if they come in with the idea that I’m going to be sitting down with someone who can help me. If they’re asking for the right questions, and if they come in prepared to share information, then that’s a winning situation. The best quality for a bank customer to have is that they’re open, transparent, and they share information with their banker even before they have to, especially if there’s a problem developing. Likewise, those are the same traits that a great banker has. They’re open, transparent, honest, and they share the right information for the benefit of the client. Our goal is the same, the client wants to grow and be successful. We want to give them the right products to help them grow and to help them be successful and then everyone wins.

I’m curious though, how much of the transaction comes down to numbers? It’s not so much personality. It’s not a relationship. Do you qualify or don’t you based on the math and the regulations that we’re operating under as a bank? That’s the cynicism that sometimes seeps into the customer’s mind when they have to walk into a bank. I’m not saying this about Zions Bank. I’m going to generalize though. I don’t want to feel walking into a bank is the same as walking onto a stereotypical car lot. Where it’s either I qualify or I don’t, and it all comes down to the numbers. Am I naive to think that it could be something more than that?

It should be something more than that, but you have to weigh two things. One is government regulations, especially the idea of fair lending where we don’t treat different people differently. You have that on the one hand. The other hand is that the customer, especially the on certain transactions, wants speed. If you want that mortgage, you want that done fast. If you’re a real estate broker, you want your customer to get that mortgage fast so you can close the deal. If you’re trying to get a credit card, you want it instantaneous. To do that, you have to have artificial intelligence and online capabilities where you can process these deals. If you combine all of that together, fair lending, not discriminating, the numbers become more important as we try and treat everyone the same. Beyond that, characters still mean a lot.

The numbers may say, “I should lend to you,” but I know that your character is such that I don’t want to, so you don’t. The character, project, and the impact it will have on the community means a lot. Is it a community development investment? Is it a community development loan? All of that comes into play. The smaller the deal, the more artificial intelligence and machine learning is involved in getting it done fast so that the customer gets what they want, and they get it at the right rate. The larger the deal, the more complex the deal. That’s when you have more interaction and a lot of other elements come into play besides the numbers.

Scott, you said you can’t disclose clients and we respect that. I am curious though, if there was a particular project that came across your desk in your banking career that at face value you may have looked at it and thought, “There’s no way we’re going to get a deal done here, but I want to do a deal. I want to find a way to make this work.” Is there one particular example that you think about that you could share with us? Are there qualities of those types of deals that may have looked difficult at the front end, but through whatever creativity or ingenuity that you, your bank and your customer exercise, you are able to get across the finish line?

Banking has to be creative going forward to continue existing. Click To Tweet

I’ll give you an example. It wasn’t a deal that I did or that Zions Bank did. It wasn’t a deal that happened recently, but it’s a terrific example, especially in this environment. Before I came to Zions, I was with Bank of America. One of my clients in San Francisco was The Golden Gate Bridge Authority. The Golden Gate Bridge was built during The Great Recession. A group of citizens got together and said, “We need a work project to get our people back to work. We need to connect the San Francisco Peninsula across the Bay so that we can go up and improve commerce.” People said it can’t be done. The currents in the Bay are too strong you can never build a bridge there. The winds are too strong. It’s suicidal.

Back then, there were no government handouts or funding for a project like that. The founder of Bank of America, A. P. Giannini, said, “We are going to do it because if it works, it’ll transform our entire community. It will pull us out of the great recession. It’ll put people back to work and increase our commerce. It will expand our markets, and it will make a difference in the lives of everyone else. If it doesn’t work, it’s going to bankrupt all of us.” He decided to do it, and he issued the bonds. He bought the bonds that finance the construction of The Golden Gate Bridge. The bridge was built and it’s an icon. It did everything that they had hoped it would do.

As I thought of going and staying into banking, I keep thinking of that example, because the role of the banker should be like A. P. Giannini back in the 1930s. They should have a broad vision. They should be a community developer. They should look at what’s best for the community and find creative ways to meet those needs. That was done not by numbers, it was done evaluating the risks carefully but making a decision that did have risk and could have failed but it didn’t.

I’m encouraged to hear a prominent banker like you speak that way and talk about weighing the risk, but also weighing reward, not just for your own entity and for your own personal gain, but also for the good of the community, to find community however you will. That’s encouraging. Let’s tell a lawyer joke between you and me. Most people say lawyers have no appetite for risk. They have not a creative bone in their body. They want to protect their client from any potential harm. I’ve experienced that in my life working with and even having lawyers as clients. When I find a creative lawyer who has that entrepreneurial thinking, that blood running through their veins, for me, it’s refreshing. That’s the way I am. I tend to be more of a risk-taker and to hear that from a banker as experienced as you, that’s so encouraging.

One of the stereotypes of bankers that is wrong is that we are conservative and we’re not innovative. Banking is innovative and a good banker is creative. We call it trying to be conservatively entrepreneurial. We want to be nimble, innovative, and bring creative solutions to the table to help the clients. If you look, we do. In the past, if you go back several years, if you wanted to make a deposit, you had to come into the bank and give the checks to the bank. The bank then would process those checks and would send the check back to whoever wrote it, and then you would file those checks in shoe boxes because you had to maintain a record.

We developed the technology at Zions where you could do all of that automatically. You could process electronically. You don’t have to give the check back to the original writer of the check. We had to get the laws changed and President Clinton signed the Check 21 Act that allowed that to happen. Every time you go into a grocery store, and if you give them a check and they run it through their machine and hand it back to you, that is the technology that was developed by a bank. You look at bank card, no one thinks of the charge card as being innovative now, but back in its day, it changed how banking was done. The whole idea that you could charge on a card and pay it back over time was unheard of. That was developed by Bank of America. That became the Visa card. You look at online mortgages and online accounts. You look at the information that you can give back to the customer on how they’re spending, where they’re writing their checks. If this is a check that they wrote, or if it’s a fraud coming in. All of those things are innovations that came from banks. Banking has to be creative going forward to exist.

GFEP 9 | Zions Bank

Zions Bank: Banking is innovative and a good banker is creative. Bankers call it being “conservatively entrepreneurial.”

 

Speaking of creativity, for those who aren’t familiar with Zions Bank throughout the country, Zions is extremely involved in sports marketing. You have a prominent role not only with BYU Athletics, with the Utah Jazz, and I’m sure there are other teams and athletic departments. You see sports marketing as a way to drive Zions’ business. Can you share with us, especially those who are reading who are in the sports business who may be calling on people like you wanting to develop that partnership, what are some of the imperatives that you have to see in order for you to make an investment in a sports property?

We have made a huge investment in a number of sports franchises where we buy tickets. We’re a sponsor. We’re a supporter. We provide banking services. We do it because it’s a way to reach our people. If you go to a Jazz game and you have 20,000 people sitting there, or you go to a BYU football game and you have a stadium full of people, they see that you’re there. They associate you with their team. That develops an affinity that we can come back and take advantage of. We also support the sports of the University of Utah.

Utah and BYU are competitors, but it doesn’t matter to the customer. Some customers are thrilled that we’re up there at the University of Utah, and they sell snicker at the Y. The Y customers are thrilled that we’re down there, but it makes sense. We’re doing something that brings great activity to the community. At the same time, it gives us great exposure to the people who are there physically, but also through the radio and TV. It allows us to support major businesses in our local community. These sports businesses are major businesses in our community.

What could those sports businesses do to cause you to disengage from them to say, “We’re not renewing that partnership, it’s been a good ride, but we’re moving on.” What are some things that they need to be watching out for so that they never hear those words out of your mouth?

One is cost. We can go out and sell high, and then beyond that there’s not a financial value to it. It’s always good to have a wide range of sponsorships that you can find the right place for your organization in there so you can always be part of it. Knowing that, others may come in ahead of you which is okay. It’s not an exclusive relationship, and have the sports franchise recognize that. That you can do your part, but you may not be able to do more than that. To have a wide variety of options, each with certain benefits and each with different costs.

Part of your reasoning for partnering with sports is because you’ve talked about community, and that Zions Bank wants to be viewed as an integral part of any community. As we wrap up here, I want to talk a little bit about corporate social responsibility. There’s been so much discussion about the social responsibility of individuals and companies. How do we ensure that CSR is not just a token effort by a company? When you have opportunities brought to you and they’re laid out on your desk, how do you judge whether or not a particular opportunity to do something within the community has value, real meaning, and real purpose versus something that looks like a field good PR move?

We do look at that and we try and evaluate that. The challenge is that there are probably more projects that have real value than you can do or that any company can do. We try to be as broad as we can in our approach. Some are large sponsorships, some are smaller sponsorships. As we look at it, we say, “What impact will this have on the business that we’re sponsoring? Is it a good business? Is it a business that we will be proud of to have our name associated with it?” There are some businesses that we wouldn’t sponsor because we would not want to be associated with that. That’s the first criteria. The second criteria is, how is it viewed in the community? Will this help the community by providing good entertainment, a good product and service or doing any number of good things? If there’s a good impact, if it’s a company that we want to do business with, if it helps the economy grow and expand, then we are there and try to do as much as we can.

Scott, this has been enlightening. I appreciate the insights you’ve given me. I’m sure those who are reading have gained a lot from this. To be able to pick the brain of someone who’s been in the banking industry for several years. For those who are getting into the financial sector, let’s imagine that I have one of my sons who’s going into the financial sector. This slowdown in the economy has a little bit affected that, but he’s got plans. He’ll be moving to New York City soon to take a job with a financial institution there. What can you say to encourage someone like that? Is this the right time to get into banking? Should he go in with a lot of hope that things are going to work out? Should he be may be looking at another career?

I’m glad that he’s looking at it because banking is a noble profession. You do a lot to create value for your customers, your community, your shareholders, and your employees. People should be proud to go into banking. They should recognize that it’s a great opportunity to be involved with people helping them in some of their most important situations. At the same time, you’re helping them in some of their most difficult situations, and you’re trying to create value. You go into it and you get a lot of positive and negative feedback, but you’re doing good. The second piece of advice I’d give them is that it’s a creative industry. They need to come in and say, “It’s creative.”

We may have rules, we may have guidelines, but the great banker is one who can look at them and look at the project and say, “I understand the risk but this is the right thing to do. This is how we can do it to benefit our client, our community and the economy.” You always have to find balance. Banking is an industry where it can suck all of your time out. There are always deadlines, a client that’s pushing to get it done, and it’s easy to spend your nights and your weekends working for your clients. To be a great banker, you also have to find that balance where you are putting aside the books and rejuvenating yourself and coming back with more vigor. Especially in New York, in that environment back there, they should take time for themselves.

Good advice coming from someone who’s worked internationally. You worked in Tokyo early in your career. You’ve worked in San Francisco. You were schooled on the East coast at universities that come from major markets. I’m going to pass that advice on to him. I’m sure he will be grateful for it. Scott, this has been insightful. Thank you for spending the time and giving us a peek into your world, and how you and bankers think because we can all take something from what you have said, and make our own banking relationships much more successful moving forward.

I enjoyed it. Thank you. Thanks for what you do to help keep us on target, sharp and knowing how we can use our influence better.

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