Put a smile on stockholders' faces: think of investor relations as a category of customer relations. A good practice is to segment stockholders and develop targeted communications for each group.

• Author: Hanley, Jr., Claude A.
• Position: Fundamentals: Investor Relations

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The challenge for investor relations is even greater today than it was just 12 months ago. Given the pall cast over the industry by deteriorating asset quality and the somewhat ominous economic outlook, the investment environment has shifted dramatically. Today's investors thus have a different set of concerns that need to be assuaged.

Don't forget, however, that investor relations always has been about far more than just numbers. If you are restructuring or upgrading your program, keep in mind that the purpose of investor relations (IR) is to differentiate the bank from its competitors and to communicate the company's intrinsic value and future earnings prospects. While a high stock value over the long term cannot be sustained without sound financial performance, numbers alone do not guarantee that investors will pay sufficient attention or recognize a bank's true potential.

Surveys confirm that information provided by corporate executives has an important influence on the investment decisions of investors and analysts. But how that information is communicated can make or break a bank's image, and thus its future success. Long gone are the days when banks can take an ad hoc approach to IR, setting their chief financial officer in front of a microphone to read aloud from a quarterly earnings report.

Ideally, banks should have a comprehensive approach to investor relations that serves to shape and inform the content and style of information shared, sets priorities regarding the investor relations vehicles used (e.g., conferences, one-on-one meetings, shareholder letters) and provides guidance on communications frequency and timing. This concept may be easy to grasp in theory, but effective implementation requires significant senior level commitment and a broad-based effort.

While no single recipe exists for creating a successful investor relations program, conversations with bank IR professionals and investors indicate that successful shareholder relations programs share a number of common ingredients. This article addresses such core elements and provides some IR best practices to help banks of all sizes gain greater value from their efforts in this arena.

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Back to basics

An effective approach to interacting with investors features extensive proactive disclosure of asset quality, targeted messaging and frequent communications.

During the halcyon days of sterling credit quality and low charge-off...