Academic journal article ABA Banking Journal

Scratch That Niche?

Academic journal article ABA Banking Journal

Scratch That Niche?

Article excerpt

There's an interesting byplay in this issue involving the question of whether to specialize or be a generalist. That question has been kicking around banking for decades, with sometimes one, now the other view having ascendancy. In the aftermath of the financial crisis, specialization--or nichemanship--retreated, with traditional community banking enjoying a renaissance.

The cover story (p. 34) profiles Steve Wilson, CEO of LCNB National Bank, a traditional (nonniche) community bank based in Lebanon, Ohio. In the ABA Community Banking department (p. 16), on the other hand, the latest installment of our Future of Community Banking series offers several examples of niche strategies.

What's interesting is that six years ago in this column we compared the views of a well-known bank stock analyst with the views of Steve Wilson. The analyst spoke of the "myth of diversification," saying that product and geographic diversification is protection from doing a poor job at what you already do. "The great banks," said the analyst, "are niche focused."


Several of those "great niche banks" have been sold. Others--Capital One, for instance--have diversified. That's not to say these companies weren't good investments then, or didn't have good strategies, but they're history now, or changed.

Wilson, on the other hand, has long resisted the idea of a niche strategy. He said in that earlier column that diversification helps to balance cyclical businesses, such as mortgage lending. …

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