While summers are definitely more intense from a work perspective than they were 15-20 years ago, there is no doubt that post-Labor Day marks the time when banks and their customers reenergize and increase their business focus.

This year sees many banks, even those currently performing well, in the doldrums. For most, revenue prospects are bleak, as more quality businesses and consumers avoid debt and operate defensively. Whether it involves commercial customers, small businesses, or consumers, the most desirable customers are often those least likely to borrow. Even the youngest borrowers, 18-29, are leery of debt. As a small indication of what may be a larger trend, a story in a local Florida newspaper this week recounted that Broward College provided just 3,681 federally subsidized loans this year versus over 6,000 last year. In addition, unsubsidized student loans dropped to just 10 percent of the level of the prior year. At the same time, while lending levels are difficult to sustain, bank costs are increasing. Compliance and regulatory costs are likely to continue to rise as Dodd-Frank and other regulations kick in.

What should be some of the priorities for banks potentially facing a long-term environment of slow growth, high costs, more regulations, and increased activism?

First, some banks need to reconsider their basic operating model. Do you need as many lenders? As many branch managers? As many executives? Unfortunately, probably not. In light of a low growth world banks need to rethink some of their basic tenets (including traditional staffing requirements), if they are to survive.

Second, consider what you are offering to different segments. Many Baby Boomers no longer want to borrow, either personally or for their businesses. They have shifted to a mindset more focused on security and protection than expansion. But, how many banks understand that change and have altered their product set and expectations to align with their customers’ changed world view? Too often, banks continue to concentrate on loans when they should be focusing on the more compelling needs of customers.

Those that do need to borrow may not fit in the traditional bank “box.” Historically, banks have largely ignored these customers, allowing commercial finance companies or other higher rate providers to meet these needs. In recent days I have heard two bankers refer to themselves and their banking colleagues as “sheep,” all following the same path. That needs to change, if growth is to occur. We see equipment finance and other alternative providers growing at the same time as banks are bemoaning their lackluster opportunities. For one, banks need to consider whether they should build the capabilities required to service a more credit intensive target and assess how they could become comfortable operating in a higher risk/higher return business.

Third, determine what your future solution set needs to be. If Baby Boomers are borrowing less (and disappearing in number), what do they need now and how can you best provide these products to them? Planning, insurance, and investment capabilities are becoming more critical to this group. In addition, Gen X and Gen Y now comprise the majority of customers, but few banks have programs that meet their needs. Gen X and Y are wildcards that banks need to attract and maintain as customers.

In the main, Boomers have made their money and now want to preserve it. Gen X and Y have yet to generate stable success and are much more tentative in how they view their future and the degree to which they are willing to commit to major purchases like real estate. Selling the same products to them as were sold to Boomers and selling them in the same way simply won’t work.

Fourth, continue to exorcise costs wherever you can. The biggest issue we see with cost reduction is that it is often done carelessly and without significant consideration of the implications of the cost takeouts. For example, across the board cuts should be avoided. Some groups might merit a 10-20+ percent reduction while others, given their attractiveness and growth potential, should be considered for new investment. We have also worked with a number of banks that are simply operating in too many businesses given their size and skill set, and their best cost reduction action would involve exiting a marginal performer.

The good old days of banking are long gone. However, future days can still generate attractive returns if executives challenge past approaches and rethink some of the fundamentals of the way they have done business in the past. Not easy work, but necessary.