Transparency, timeliness, relevant data and results drivers are among the key considerations all bank IR teams should have top of mind as they prepare their company’s earnings reports, conference call materials and other important communications for analysts and investors.
The most effective IR officers approach their jobs as facilitators of consistent and meaningful communication between management and Wall Street, said Aaron Deer, a managing director of equity research at Sandler O’Neill + Partners, during a recent webinar. ‘Don’t be a gatekeeper,’ he said.
Deer joined Tony Rossi, senior vice president at Financial Profiles, and Michael Bartlett, senior research analyst at Elizabeth Park Capital Management, for a September 20 online discussion on best practices in investor relations for regional and community banks. Nasdaq hosted the webinar, and Chris Anselmo, director and team leader of its advisory services unit, moderated.
The participants agreed that, while difficult at times, banks best serve their investors’ interests with clear, objective and timely reporting of material information – good or bad.
‘Don’t sugarcoat things, and try not to be misleading,’ Deer said. With developments that may adversely affect a bank’s performance or image, he added, ‘the best approach is to always be very upfront about it.’ Otherwise, a bank risks losing credibility. ‘And that can be really hard to restore,’ Deer warned.
Analysts and investors understand that setbacks are inevitable; they simply want to be informed and armed with necessary information to make sense of things. Bartlett said bank executives who demonstrate they can put themselves in shareholders’ shoes when communicating with the Street are typically more effective and more likely to deepen their credibility. ‘That is really impressive,’ he said.
Rossi underscored this thinking by emphasizing that banks should make a concerted effort to help analysts and investors genuinely understand the drivers of their company’s performance. For example, instead of simply noting a bank’s level of loan growth, banks should explain which business lines and geographies are driving loan production and discuss the impact loan payoffs/paydowns are having on total growth in the portfolio.
That kind of detail helps the Street form a complete view of the bank, and it helps analysts to design models to more accurately forecast earnings.
Rossi included that advice among a best practice presentation to launch the webinar. Here are several additional takeaways: