_sbi - session 5 strategy (final)

8/2/2019 _SBI - Session 5 Strategy (Final)

http://slidepdf.com/reader/full/sbi-session-5-strategy-final 1/83

© 2011 Maris Strategies, Ltd. All rights reserved.

Singapore

November, 2011

State Bank of India

Leadership Development Program

Session 5: Strategy Development




Module 4: Financial Strategy

November 19th

10:30 – 12:00 Session 1 The Future of Banking: What trends are reshaping the industry.12:00 – 13:00 Lunch

13:00 – 14:30 Session 2 The Competition: How is the competitive landscape in India changing?

14:30 – 16:00 Session 3 The Value Proposition: What are we providing to meet our customer needs?

16:00 – 16:30 Break

16:30 – 18:00 Session 4 Value Proposition Alignment: What is our product / market segmentation strategy?

November 20th

09:00 – 10:30 Session 5 Strategy Development: How do we engage in right to left thinking?

10:30 – 12:00 Session 6 Performance Measurement: Forget Moody‟s are we measuring the right things?

12:00 – 13:00 Lunch

13:00 – 14:30 Session 7 Risk what risk: How are we building our risk topology?

14:30 – 16:00 Session 8 Organizational Design and Strategy Implementation: Are we organized for success?

16:00 – 16:30 Break

16:30 – 18:00 Session 9 Wrap up and discussion on steps to implement our strategy




Four Things to Keep in Mind During this Session

Strategies are iterative, requiring refinement

Good strategies generate a series of questions

Customer loyalty is earned, not bought

Organic growth is a process of discovery




Strategic Thinking


http://slidepdf.com/reader/full/sbi-session-5-strategy-final 5/83 © 2011 Maris Strategies, Ltd. All rights reserved.

Trend: Evolution or Revolution?

2005 2015

Large Bank

Co-operativesSavings SocietiesBuilding Societies

Mid-tier Bank

Community Bank

IndustrySpecialists

Non-BankInstitutions

Universal Banks

IndustrySpecialists

Non-BankInstitutions

Middle squeeze:

Large banks makeacquisitions

Non-banks presentunique valuepropositions

Increase profitability with moretargeted offerings whileexpanding through selectedacquisitions and market entries.

Grow market share by buildingon local knowledge and deepcustomer relationships with awider range of products andservices

Expand customer base byproviding targeted products andservices for high growth nicheswhile leveraging superiorprocess capabilities

Build on existing customer baseand distribution networks with anemphasis on open sourcing oftargeted products and services




Most Banks Employ Five Major Strategies

PursueOperational Excellence,

Reduce Costs,Optimize

Develop NewProducts

Consolidate,

Structure,Transform Processes

Regionalize

andGlobalize

Acquire & Retain

Customers,SuppliersStrategic

Initiatives




Management Motivations for Strategy Development

New bank or new product

Cost

Revenue Cost

Revenue

Cost

Revenue

Working in a fixed butfluctuating profit margin

Losing customersor profits

Growing Bank Mature Bank Declining Bank




Life on Earth: Companies with a growth agenda

Revenues

Costs

Growth

External factors causerevenues to plateau and or

cost to expandexponentially

Failure pointmargin

Strategies:

•Top Line:• Accelerate growth

• investments in nextgeneration growth

• organic growth

Bottom Line:

• Cost containment

• process optimization




Life on Earth: Companies in decline

Revenues

Costs

Decline

Cost can never go to zerobut revenue can

Failure pointmargin

Strategies:Bottom Line:

• Cost containment

• process optimization

• reorganize

• cost avoidance

Top line:

• improve margin

• find new markets

• innovate or die




CorporateMentality

Employee Attitude

Economics

BusinessProcess

Employment

HumanResourcesOrganization

Growth Strategy Competitive Strategy Survival Strategy

R & DInvestmentInnovation

Zone of False Senseof Strategy Security

Cost containmentDownsizing

Outsourcing

Enthusiastic Optimism Next Quarter Focused Panic - Search for Next Job

Scramble for Talent

Policies & Benefits Outplacement, Terminations,Talent retention

Cost

Revenue Cost

Revenue

Cost

Revenue

Sold off

Outsourced

Process Defined

Process Refined

DownsizeRe-organize Labour

Skill Alignment

Management Attitudes and Strategy Development




Survey: What is your Bank‟s Primary Business Strategy?

Top-line Growth

Bottom-line Savings

12

7

389

3

7

2

Source: Maris Strategies Retail Banking Survey 2011

Number of

respondentbanks

75%

25%78 Banks




Survey: What is your Bank‟s Primary Business Strategy?

Cost Cutting Strategy

Growth Strategy

15%

46%39%

23%15%

0%

23%

39%

External

growth bymerger andacquisition

Cross selling

products andservices toexisting

customers

New

customeracquisition

Incremental

processimprovement

Broader

large-scalebusinessprocess re-engineering

Head

countreductions

Outsourcing

sharedservices

Eliminatio

ofunprofitabcustomers

75%

25%

Source: Maris Strategies Retail Banking Survey 2009




Q1 Q2 Q3 Q4 Q5

Revenues

Costs

ProfitabilityFailure point

Strategy Centres on Top-Line Growth

Top-line Growth

Bottom-line Savings




Why do some

Strategies Fail?

Electric Shaving sold by Slot

Machine 1940 in Subway

1992

2010

http://blog.modernmechanix.com/2007/05/02/use-of-electric-shaver-sold-by-slot-machine/




The Revenue Growth Strategy“Improve stability by broadening the sources of revenue from current customers”

The Productivity Strategy“Improve operating efficiency by shifting customers to morecost- effective channels of distribution”

Improve

Returns

ImproveOperating

Efficiency

BroadenRevenue

Mix

Increase

Customer

Confidence inOur Financial

Advice

Increase

Customer

SatisfactionThrough Superior

Execution

Increase

EmployeeProductivity

Access toStrategic

Information

Develop

StrategicSkills

Align

PersonalGoals

Financial Perspective

Customer Perspective

Internal Perspective

Learning Perspective

Cross-Sellthe Product

Line

Shift toAppropriate

Channel

ProvideRapid

Response

Develop NewProducts

MinimizeProblems

UnderstandCustomer

Segments

Balanced Scorecard Strategy Map Tells the Story of Your Strategy




Balanced Scorecard Links Cause and Effect Hypotheses

F1 - Improve Returns

F2 - Broaden Revenue Mix

F3 - Reduce Cost Structure

C1 - Increase CustomerSatisfaction With Our Products& People

C2 - Increase Satisfaction “After

the Sale”

I1 - Understand Our CustomersI2 - Create Innovative Products

I3 - Cross-Sell Products

I4 - Shift Customers to Cost-Effective

ChannelsI5 - Minimize Operational Problems

I6 - Responsive Service

L1 - Develop Strategic SkillsL2 - Provide Strategic Info

L3 - Align Personal Goals

Return on Investment

Revenue Growth

Deposit Service Cost Change

Share of Segment

Customer Retention

New Product Revenue

Cross-Sell Ratio

Channel Mix Change

Service Error Rate

Request Fulfillment Time

Employee Satisfaction

Revenue per Employee

Strategic Objectives Strategic Measurements(Lag Indicators) (Lead Indicators)

Revenue Mix

Depth of Relation

Satisfaction Survey

Product Development Cycle

Hours with Customers

Strategic Job Coverage Ratio

Strategic Info Availability RatioPersonal Goals Alignment (%)

F i n a n

c i a l

C u s t o m e r

I n t e r n a l

L e a r n i n g




Work Activity: Develop a Vision for 2018

Inside: Financial Services: What's Working; What Isn't

Nintendo Acquires Charles Schwab at Steep Discount

$1 1.00April 15, 2015

Financial Services/Cover StoryKey Results Headlines:

How Customers View Us:

Sidebar/Special Interest Profile:

52 FORTUNE April 15, 2015

Five years ago, who would have predictedthese would be the Critical Success Factors

for 2018:

Envision how the Media and Customers will see your Bank in 2018




Work Activity: What are our Financial Goals and Objectives?

Goals: Objectives:




Strategic Goals

• Increase bank‟s market share

• Overtake key rivals on quality or customer service or

product performance

• Attain lower overall costs than rivals

• Boost bank‟s reputation with customers

• Attain stronger foothold in international markets

• Achieve technological superiority

• Become leader in new product introductions

• Capture attractive growth opportunities




Strategic Objectives

Strategic objectives convert the mission of the institution into

specific performance targets for the organization to achieve

Strategic objectives are qualified in two broad categories:

Corporate perspective quantified by measures such as Economic ValueAdded (EVA), Net Present Value (NPV), Return on Investment (ROA),

Statement of Cash Flow, and Weighted Average Cost of Capital (WACC);

Shareholder Perspective quantified by measures such as: Expected

return for shareholders (Return on Stock) CAPM, Return on Equity (ROE),Market Price of Share Stock policy & Dividend Policy, Price Earning Ratio

(PER), and Earnings per Share (EPS).




Example of Strategic Goals and Objectives

Initiative Strategic Goal Specific Purpose Objectives

Improve

Communications

Less

Bureaucracy

Organic

Growth

Recognition

Accomplishments

A streamlinedeffectiveorganization with anagile response to

changes in thebusinessenvironment

Reduce unnecessarywork by streamliningprocesses andinfluencing individual

behaviour

Simple process inplace for identifyingand taking forwardincremented

improvements;Increased awareness

Reduce all businessprocess steps by 10%during next 12 months.

Reduce operating costsby 5% in 12 months

We want more staffto feel they arebeing recognized,as measured by theregular staff surveys

We want more staff tofeel they are beingmotivated

Ideas on best practicehave been shared andmanagers empoweredto provide smallmonetary incentives

Recognize staff thatimplement ideas withbonus incentive, allocate10% of cost savings and5% of revenueimprovement annually

Managers and staffbeing well informedon relevant things

Well informed managersand staff feel empoweredand can do their jobbetter

Awareness of needfor regularinformation, Financemeetings

Weekly email newsletterto all staff frommanagement

10% operating resultgrowth

Continuoussustainable growthboth by acquisitionbut also organic

Company wideorganic growthinitiatives with focuson big growth projects

Increase cross sell ratioto 3.5

Repackage 20% ofproduct portfolio




Work Activity: What are our Strategic Goals and Objectives?

Goals: Objectives:

Valuing Customer Centricity

W k A i i E l D i G l d Obj i




Note:Cross/up-selling, targetcustomer retention andtarget pricing strategyare the greatest value

creators in retailbanking. Average bankhas between 2.8 – 4.5products per customer

DecreaseCosts

10-30%

IncreaseRevenues

70-90%

Increase in

Overall Value

g y

Work Activity Example: Decomposing Goals and Objectives

Strategic InitiativeGoal

Objective

Next page

Tactical Objective

W k A ti it E l D i G l d Obj ti





Increase Revenueper Relationship

60-80 %

IncreaseRevenues

70-90%

Grow CustomerBase

20-40% Next page


W k A ti it E l D i G l d Obj ti




Increase CustomerReferrals 20-40%

Improve MarketingEffectiveness

60-80%

Improve CustomerSatisfaction 70-90%

Set-up SwitchingCosts for Customers

10-30%

Increase TargetCust. Reactivation

20-40%

Increase TargetCust. Retention

45-65%

Attract NewCustomers

5-25%

Grow CustomerBase

20-40%







Increase revenueper relationship

60-80 %

Increaserevenues

70-90%

Grow customerbase

20-40%

Next page






Increase revenueper product

Increase number ofproducts per

customer60-80%

Develop targeted pricing

strategy by customersegment 50-70%

Increase cross/ up-selling 50-70%

Foster bundling conceptswith external partners

5-25%

Develop personalizedproduct offerings

20-40%

Improve sales channelefficiency

5-25%

Increase overall pricelevel

20-30%

Increase revenue

per relationship 60-80 %

Increase volume percustomer

10-20%


20-40%



Decompose your Strategic Goals and Objectives




Decompose your Strategic Goals and Objectives

Right way Wrong way

Work Activity: Decompose your Strategic Goals and Objectives?




Work Activity: Decompose your Strategic Goals and Objectives?

Strategic Initiative Goal Objective

Strategic Initiative: Improve Cross-Selling




Cross-sell remains an illusive goal for most institutions; only a few banks have

successfully created a systematic capability to grow their business

organically in this way

Leading banks are using specific tactics to increase share of wallet

• Offering tightly integrated product bundles

• Using financial planning as a sales tool

• Knowing what to offer and when based on life and other key events

• Using a local market planning approach to drive cross-sell efforts

Strategic Initiative: Improve Cross-Selling

Revenue Enhancement through Cross-Selling


Cross-Selling Example




Increaserevenue

per product

20-40%

Increasenumber of

products percustomer

60-80%

Increase customer

referrals20-40%

Improve marketing

effectiveness60-80%

Improve customer

satisfaction70-90%

Set-up switching costs for

customers10-30%

Develop targeted pricing

strategy by customersegment

50-70%

Increase cross/ up-selling 50-70%

Foster bundling concepts

with external partners 5-25%

Develop personalizedproduct offerings

20-40%

Improve sales channelefficiency

5-25%

Increase overall pricelevel

20-30%

Reduce Marketing Cost

Reduce Selling Cost

Reduce Servicing Cost

Reduce Credit Risk Cost

Increase

revenueperrelationship

60-80 %

Increase targetcustomerreactivation

20-40%

Increase target

cust. Retention45-65%

Attract new

customers5-25%

Decrease

costs 10-30%

Increaserevenues

70-90%

Increase volume percustomer

10-20%

Increase inoverall value

Growcustomerbase

20-40%

Cross Selling Example

Tactical Agenda

Strategic Agenda

Process View Linear Techniques




Process View – Linear Techniques

LOB

LOB

LOB

LOB

Common Techniques to ImproveProcess Efficiency

Eliminate Activities

Automate or Digitize

Create Shared Services

Global Sourcing

Parallel Processing

BEFORE AFTER

Discrete activities within a process are often replicated across multiplebusiness units or channels. Often different techniques are applied for thesame activity across different units

The component view identifies the

collection of specialist capabilities thatcan be combined as a network tosupport the full array of process

ComponeComponen

Work Activity: List your Strategic Initiatives




Work Activity: List your Strategic Initiatives

Strategic Initiatives:




Growth Strategies

The Strategic End Game




Q1 Q2 Q3 Q4 Q5

Revenues

Costs

Managing the

Service Gap

The Strategic End Game

CustomersServed Managing the

Cost Gap

Managing theCustomerExpectation Gap

The Growth Agenda




e G o t ge da

Growth

Agenda

OperationalAgenda

Increase Product Demand

Increase Market(s)

Organic Growth

Merger or Acquisition

Reduce Costs

Improve Quality

Retool

Leverage technology

Sell assets

New product innovationNew applications for old products

Increase knowledge of existing marketFind new markets

Sell existing customers more things

Find new things to buyBuy customers

Enhance efficiency

Improve customer service

Buy new technology

Redeploy existing technology

Consolidate resources

Brand development

Strategic Need Strategic Initiative

Characteristics of Growth in a Bank




• Product Diversity - What you sell

• Product Demand – Why is the product valuable

• Market Expansion – Where you sell

• Market Timing – When to sell

• Customer Saturation – Who buys types of products

• Operational Excellence – How to deliver on customer expectations

Directions of Growth




Expand products orservices to existing

customer baseCreate new market

Gain share ofexisting customer

businessGain market share

New Products& Services

Existing

Not ServedServed

Product / Service

Offerings

Customers

Bank

What Questions Do We Need to Ask?




Not Served

How can we create

new products and or

how do we find new

uses for our existing

products?

How do we findnew markets for

our current products

and for newproducts?

How do we gain a

greater share

of existing

customer business?

How do we find new

customers in our

existing markets?

Increase Market Share E x p a n d P r o d u

c t P o r t f o l i o

Ways to Grow




• Market Concentration

– More frequent use

– Larger quantities

– New uses

• Innovation

– Replacement products

– Additional features

– Complementary items

– Completely new items

• Mergers and Acquisitions

– Gain immediate market share

• Penetration

– Segmentation

– More locations

– Minimize overhead

– Export

• Diversification

– Capacity Analysis

– Crossovers

Growth by Acquisition to build Shareholder Value




Establishing a Strategy for Growth

http://en.wikipedia.org/wiki/Image:Bankboston_logo.gif




• Growth is:

– A process of vision, leadership, investment, and managed intentions.

• Growth is not:

– A product of intermittent actions or changes in customer demand.

• Growth is achieved by:

– Expanding a firm's value proposition (building competencies to identify,analyse and rapidly capitalize on opportunities).

• Sustaining a growth agenda requires:

– A clear set of objectives identifying how the firm will achieve growth

• Sustainable growth is: – a business process in its own right that requires careful planning,

investment, execution, measurement and, above all, management

Characteristics of Growth and Shareholder Value




UnprofitableGrowth

ProfitableGrowth

CostCutting

BelowAverage

AboveAverage

BelowAverage

RevenueGrowth

AboveAverage

ProfitGrowth

Absolute Market Value Growth(CAGR 2000-2011)

0%

Setting the Growth Agenda: Screening Criteria




• Market Attractiveness

–Market size

–Market growth/cyclicality

– Intensity of competition

• Direct rivalry

• supplier power

• customer power

• substitutes

• potential entrants

–Degree of segmentation –Availability of channels

–Social/regulatory constraints

• Business Strengths

–Familiarity with market and

technology

–Fit with competencies

–Shared resources (manufacturing

facilities, R&D, sales force,

distribution)

–Prospects for advantages

–Availability of partners




Work ActivityMoving from Strategy to Action

Drivers of Market Share




Advertising &promotion

Share ofVoice

Referral

CompetitiveConsideration

Image

Awareness

TotalConsideration

Coverage

ChannelStrategy

Non-CompetitiveConsideration

Loyalty

CompetitiveHit Rate

OverallHit Rate

100%Hit Rate

MarketShare

• Sales effectiveness• Total offer meeting

customer needs• Fees & relationships

Work Activity: Drivers of Market Share




Map the factors that drive market share in your markets?

Use previous slide as aguide.

Note:

For banks with multiplemarkets: first develop ageneric model, then list theissues that are specific toeach market separately

Strategic Moves to Increase Market Share




• Market share: Which products in what markets?

• How can we move past close competitors or further dominate the market?

• How can we increase our visibility with customers?

• Top-of-mind awareness: Do customers remember our products? Or our capabilities

• Do customers consider us as a superior provider of banking services?

• What is the level of customer dialogue? Are Informed customers more loyal?

• Service delivery: How do we link to other products or services

• Strategic alliances: Can we partner with someone to get into new markets? – Co-

branding?

Things to consider:

How do we find new customers in existing markets?

How can we identify and sell to new markets?

Strategic Questions:

Work Activity: Strategic Moves to Increase Market Share




What is your strategic thinking on increase market share?


Discuss and answerquestions.

Are there any otherquestions to be answered?

Tactical Actions to Increase Market Share




• Are there opportunities to cross sell other products to our existing customers?

• How can we enhance brand quality?

• How can we enhance our product portfolio?

• How can we increase the effectivity of our marketing campaigns?

• Can any of our products be applied in new ways?

• Do we understand all the businesses our customers (SMEs & Corporates) are serving?

• How do we get closer to our customers‟ needs?

Things to consider:

How do we sell more to existing customers?

How can we find new uses for existing products?

Tactical Questions:

Work Activity: Tactical Actions to Increase Market Share




What tactical actions can you take to increase market share?




Strategic Moves to Expand the Product Portfolio




• Are there new product innovations in the pipeline?

• Can we create product variations?

• How can we repackage our product offerings with services to increase the value?

• Do we really know our customers?

• Do we really know what are competitors will be doing next?

• How do we set fees to gain a long-term competitive advantage, rather than to maximize

short-term profits?

• What is our relative cost position to our competitors and what set us apart?

Things to consider:

How do we enhance our products to command

higher fees?

How can we improve our service and relationships

with customers?

Strategic Questions:

Work Activity: Strategic Moves to Expand the Product Portfolio




What is your strategic thinking on expanding the product portfolio?




Tactical Actions to Expand Product Portfolio




• How can we assist our customers (SMEs) in selling their products?

• How do we create a dialogue with our customers to better understand their needs?

• How can we increase our products‟ usability with existing customers?

• Is quality a factor in our customers‟ decision process?

• How do we change the customers‟ perception of our products?

• Can we improve our customer assistance?

• What can we do to make it easy to do business with our bank?

Things to consider:

How do we educate our customers to understandour value proposition?

What approach can we use to adjust prices without

alienating our customers?

Tactical Questions:




Case Study

Rabobank Strategy 2010




• Development of new (international) growth possibilities

• Strengthen the capital base

• Cost reduction

• Revenue or organic growth

• Domestic mergers, acquisitions and alliances

Development of New (International) Growth Possibilities




Revenue economies and synergies Cost economies and synergies Synergetic

potential

Retail Banking - Export successful products- Develop new international services

- Eliminate overlap in international retailnetwork

Low

Corporate &

Investment Banking

- Reach scale by broadening client and product

coverage (especially mid corporate investmentbanking)

- Eliminate overlap in functions (e.g. FX

trade, international payments) andinternational network

- Sharing industry expertise

High

Private Banking - Provide international services to „global‟ clients - Share part of back office costs

- Close overlapping locations

Medium

Asset Management - Cross selling to larger distribution network

- Reach scale to attract institutional investors

- Share research, product developmentand back office costs

High

Leasing - Vendor leading for Pan European clients -Share back office costs Medium

Insurances - Export successful products

- Develop commercial lines

- Risk diversification Low

Internet / M-Banking - Export successful products and concepts - Share back office costs Low

Credit Card - Export successful products and marketing

approaches

-Administration can be centralized Low

Head Office / IT (Not applicable) -Eliminate costs in overlapping functions High

Cross border economies and synergies for partnering or M&A

Cost Reduction




• Restructure organization to be customer centric

– Consolidate branches (1,445 branches)• Customer visits to branches are down 95% during last 25 years

• Customers that do visit branches fall into two broad categories

– Working professional (reengineer service delivery for speed and

convenience)

– Wealthy (design branches for upscale customers)

• Refocus support from head office

– Head office to consolidate resource to provide

targeted support services to specific customer groups

– Optimize back office activities

• Target distribution channels based on customer preferences

Revenue Growth




• Improve selling power of front line people

– Upgrade CRM capabilities

• Gain larger market share in Urban areas

– Acquire new customers: urban professionals and young people

• Develop clear market segmentation strategy

– Customers

– Products

– Channels

Five Growth Levers




• Wealth management: identify ways to create a tighter relationship with

wealthy consumers to increase loyalty and drive cross-selling opportunities

• Generational strategy: identify strategies to capture new segments and / or

strategies to differentiate your offerings to existing segments

• Multichannel strategy: identify ways to create a consistent customer experience

across key channels: branches, online, mobile devices, and contact centres

• Role in payments ecosystem: identify strategies for achieving success through

new business models for collaborating with retailers, and define your strategy

related to mobile payments

• Growth in Asia and Emerging Markets: identify strategies for profitable growth

in geographical regions with strong underlying GDP growth

Multiple Distribution Options to Realize Revenue Growth




Strategy Description Pros Cons

Multi-channelling Selling products andservices of clients with

different channels,such as branchesATMs, telephone andinternet

- Customer can choose how and when contactwith the bank is wanted

- Different channels appeal to different types of

customers

- Cost savings, due to relatively cheap virtualchannels

- Customers become more anonymous

- Customers can switch more easily betweenbanks

- High investments in ICT systems

- Complexity of Control

Multi-labelling Selling identical self-made products under

different labels in themarket

- Reach different target groups

- Economies of scale in production

- Cannibalisation of existing labels

- complexity of process

- Reputation risk

- Complexity of control

Openarchitecture

Distribution of productsproduced by anotherfinancial institution

- Larger product offer for customers

- Reduce the need for customer to switch banks

- Fee income

- Customers may loose overview if too many

products are offered- Cannibalisation of own products


Co-Branding Linking two brands forthe selling of one

product or group ofproducts

- Product is also sold through the network of thepartner

- - May change the image of the brand

- -Explore new markets

- - Cooperation may lead to innovation

- - Create a bond with the customer of the partner

- - Sharing of the advertising budget

- Customer can fid the combination of brandsillogical

- - Negative publicity of the partner harms your

own brand

- - Complexity of control

White labelling Production of productsthat others will sell withtheir own label

- Increase scale of production

- Revenues from the selling of products

- Cannibalisation of your own labelled products

- - Deterioration of competitive position

- - supervisory institutions might not allow it

- - Reputation risk





Case Study




Vision of becoming in every manner

„the clear leader and Nigeria’s bank of First choice‟.

Our targets can be broadly broken down into:

(i) Scale (assets)

(ii) Profitability/capital efficiency

(ROA, ROE, cost-to-income)

(iii) Asset quality (NPLs) and

(iv) Service level metrics.

First Bank‟s Strategy




TALENT

Become a hub forthe best industrytalent; cultivate ahighly motivated,

capable andentrepreneurial

workforce.

PERFORMANCE

MANAGEMENT

Deliver unmatchedresults by creating aperformance culturewith clear individualaccountability at all

levels.

SERVICE

EXCELLENCE

Drive unparalleledservice levels by

developing world-class institutional

processes, systems

and capabilities.

GROWTH

Attain full benefitsof scale and scope

by acceleratinggrowth and

diversification ofassets, revenue and

profit.

Strategy

Growth Strategy




Institutional/Corporate Banking:

• Redefine business unit commercial strategy (optimised productportfolio, channel strategy and marketing communications approachlinked to deep customer insights)

• Drive deeper risk asset penetration in the middle market corporate

segment, underpinned by enhanced credit analysis and processingcapabilities

• Deepen share of wallet of large corporates to enhance fee/commissionincome

• Deepen capabilities in structured finance space to enhanceparticipation in infrastructure financing.

Growth Strategy




Retail Banking:

• Redefine business unit commercial strategy (optimised product

portfolio, channel strategy and marketing communications approach

linked to deep customer insights)

•Increase penetration and profits from consumer credit by redesigningcredit processes and tools (e.g., statistical models and credit scoring

algorithms)

• Develop a differentiated sales and service model for high net-worth and

affluent customers, and aggressively pursue this segment.

Growth Strategy




Public Sector Banking:

• Redefine business unit commercial strategy (optimised product portfolio,

channel strategy and marketing communications approach linked to deep

customer insights)

• Aggressively pursue key accounts not presently within portfolio.

Branch Network and Expansion

• Employing global positioning system mapping to superimpose macroeconomic

data (including aggregate output of each state) on the industry‟s branch

network.

• Bank‟s existing business locations influence the „city attractiveness‟ index that

will drive business location deployment going forward.

• Accordingly, 47 branches were opened in the year, bringing the total number of

branches on our network to 570

Growth Strategy




General Growth Initiatives:

• Significantly but conservatively scale up risk asset deployment and optimise

treasury portfolio to increase yield on earning assets

• Engage in enterprise transformation to reposition the FirstBank brand and, over

time, drive enhanced customer consideration, acquisition, and cross-sell/up-

sell

• Optimise branch network via more targeted new branch openings, deployment

of lighter/small format branches focused on sales (versus servicing).

Inorganic growth:

• Continue to explore the Nigerian landscape for merger or acquisition

opportunities, to extend the franchise in a manner that benefits shareholders• Explore international M&A (and organic) entry options.

Growth Strategy




Institutional/Corporate banking:

• Redefine business unit commercial strategy (optimised productportfolio, channel strategy and marketing communications approachlinked to deep customer insights)

• Drive deeper risk asset penetration in the middle market corporate

segment, underpinned by enhanced credit analysis and processingcapabilities

• Deepen share of wallet of large corporates to enhance fee/commissionincome

• Deepen capabilities in structured finance space to enhanceparticipation in infrastructure financing.

Service Excellence Strategy




Goal: modernise the Bank‟s fundamental operating model (processes,tools/systems, and roles/capabilities).

Key initiatives to drive this objective include:

• End-to-end process redesign (centralised processing and branch process re-

engineering) focused on priority processes with the objective of

standardisation, simplification and efficiency

• Branch transformation that updates the FirstBank branch format• TouchPoint reengineering for all electronic/other customer touchpoints,

including the Bank‟s interactive website (recently redesigned), e-statements

and customer communications, etc.

• Channel optimisation and migration to optimise channel functionality while

aggressively driving migration of transactions to the most appropriate channels

• Three-year IT transformation plan designed to stabilise and improve core

elements of the Bank‟s IT infrastructure, and enhance the IT

organisation/capabilities.

Performance Measurement Strategy




Create a performance culture

• Align individual, team and business objectives

• Clearly defined KPIs (with weightings)

• Individuals monitor performance targets

– Monthly and quarterly performance reviews with commensurate

rewards

• Dedicated business performance monitoring (BPM) unit

• Implement new operating structure to align Business Unit objectives

• Extend balanced scorecard usage to back-office/ support functions

• Expand portfolio of metrics to track critical improvement areas for the

future

Talent Strategy

„Bank of First Choice‟ must attract develop and retain the best performing




„Bank of First Choice‟ must attract, develop and retain the best-performingindustry talent available in the region.

• Staff productivity: wellbeing programmes for the field organisation and

critical back-office support functions

• Staff capability building: build and up-skill the competencies of the market

facing/ front office and back-office workforce - (e.g. FirstAcademy)

• Culture change: encourage entrepreneurship, leadership and a desired tochange

• Individual performance: ensure the alignment of individual KPIs targets to

job functions and corporate strategy

• FirstBank’s employee value proposition: FirstBank as a premium

employer• Career management: drive career development at all levels and sustain

organisational performance (management development programmes, student

mentoring, coaching, cross posting, secondment).





Scale:

• Estimated 13% market share of assets (our goal is 20%).

• Views inorganic growth as a viable and appropriate growth route,

where a suitable combination and terms can be found.

• While recent regulatory statements imply that certain limits may be

placed upon the relative size of banks, we believe that FirstBank

should aspire towards a 20% market share domestically.





Profitability/capital efficiency:

• Boost ROE by improving its leverage (with a strong emphasis on low-cost current and savings deposit mobilisation) and enhancing its share

of fee and commission income.

• Cost-cutting initiatives are ongoing

• Cost-to-income ratio improvements will come from the income side of

the equation by:

– improving its share of fee/commission income

– optimising its liquidity position (i.e., strongly incentivising growth in

the loan book versus liquid assets in the near-time)

– increasing its yield on earning assets.


Asset quality:




q y

• Bank experienced increase in non-performing loan ratio due to the

general slowdown in economic growth and direct or indirect exposure

to sectors affected by the 2008 –2009 decline in oil prices and the

domestic equity markets.

• The Bank made aggressive provisions and write-downs in 2009 in line

with prudential guidelines and expects that the overall asset portfolio

quality will improve shortly, all else being equal.

• As the Bank extends its franchise further in the middle-market

corporate (commercial) and consumer lending space, risk management

systems and processes will be strengthened to optimise portfolio

quality and to ensure that margins reflect and adequately compensate

for risk.


S i l l




Service levels:

• The greatest priority of the Bank, will be improving service delivery.

• The Bank is yet to break into the top quartile of Nigerian banks with

respect to service levels, based on independent industry surveys, but

has instituted major initiatives to address this lapse.

• Long reputed for very high transaction volumes (driven in part by its

very large mass market franchise), FirstBank will increasingly strive to

improve overall service delivery quality.

• The Bank will institute incentives to aggressively move routine

transactions to alternative channels and simultaneously ensure that

premium customers (e.g., corporates, high net-worth customers)

receive first-class service.

Goal to Improve Segmentation Analysis




Strategy to Sequence Growth Systematically




FirstBank Group – Priorities by growth horizon

Performance Results

TOTAL ASSETS (N Billi )

GROSS EARNINGS (NBilli )




TOTAL ASSETS (N'Billions)

Mar 07 Mar 08 Mar 09 Dec 09 Dec 10

7 6 3

1 , 1

6 5

1 , 6

6 7

1 , 7

7 2

1 , 9

5 7

GROSS EARNINGS (N'Billions)


7 9

1 3 1

1 8 5

1 7 5

2 0 8

DEPOSIT LIABILITIES (N'Billions)


5 8 2

6 6 2

1 , 0 7 2

1 , 2 4 4

1 , 3 3 1

PROFIT BEFORE TAXATION

(N'Billions)


2 2

3 8

4 6

8 3 4

Innovation

_sbi - session 5 strategy (final)

Documents