Performance vs. Political Correctness
In 2017, Fidelity Investments
analyzed the performance of more than 8 million clients and found that “women actually tend to outperform men when it comes to generating a return on their investments.”
Female investors returned an average of 40 basis points, or 0.4%, more each year than men, Fidelity found. They also saved a higher percentage of their paychecks — at every salary level.
That might not seem like much, but it adds up over time.
Holding all else equal, a woman who starts working at 22 will have $276,210 more when she’s 67, compared to a man who worked for the same length of time and earned the same salary.
If you care about the performance of the banking industry, you should care about this.
I’ve long wondered why, by my count, 17,373 banks have failed since the birth of the modern American banking industry in the mid-1860s. That’s more than three times the number of banks that have survived!
I’ve also long wondered why most publicly traded banks don’t earn their cost of capital. The annualized all-time total shareholder return of the typical publicly traded bank is just 4.3% — less than half the 10% cost of capital that governed the industry until the 2017 tax cuts raised the benchmark to 12%.
One explanation is that bankers periodically forget that banking is a cyclical industry.
Another explanation is that banking has always been dominated by men — particularly in the corner office.
A comprehensive analysis of U.S. banks, conducted by Bank Director’s team of data analysts, shows that just 6.3% of current bank CEOs in this country are women. Out of 5,092 banks in our database, only 320 are led by female CEOs.
I’ve spent years slicing and dicing historical data on banking, and I don’t think it’s a coincidence that the long-term performance of the banking industry leaves so much to be desired.
This isn’t a matter of political correctness; it’s a matter of performance.
John J. Maxfield, editor in chief of Bank Director