Whats Next For The Branch Network
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Transcript of Whats Next For The Branch Network
What’s Next for the Branch Network – Rationalize or Revisit?
David KersteinPeak Performance Consulting Group® November 5, 2009
Action Case study Take-away Now!
• Financial institutions need to more accurately target opportunities for de-novo growth and to optimize performance of existing branch networks
• “Best practice” banks are making more sophisticated use of segmentation data to target specific growth markets
• Innovative use of technology can improve service and distribution reach, while significantly reducing cost
Peak Performance Consulting Group -- Page 2
Bank Branches: Do We Have Too Many?
Banks have been building branches faster than population has been growing21% of branches have been open less than 10 years
1950
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Bank Branches Grew Twice as Fast as Population(indexed to 1950=100)
Bank BranchesHouseholdsPopulation
Source: FDIC, US Census, Peak Performance analysis
Peak Performance Consulting Group -- Page 3
Branches Losing Role as Transaction Point
Fewer checksDeposit activity shifting to direct deposit and remote captureGreater use of online payment and debit point of saleOnline bill payment projected to grow at CAGR of 19% through 2012
Peak Performance Consulting Group -- Page 4
Branches remain critical driver of deposit growth41% of all deposit growth comes from 8% of branches open less than 2 yearsNeed physical branch locations to continue to grow consumer and small business relationshipsAggressive growth in branches due to competition for deposits\\
Net Branch Household Growth
0
200
400
600
800
1,000
1,200
Year
Avg
Bran
ch H
HLDS
Peak Performance Consulting Group -- Page 5
Too Many Branches or Still Room to Grow?Differences in branch density driven by:
Self service channel usageCultural preferences for face-to-faceBranch formats: smaller, more community oriented vs. hub locationsCompetitive environment
0
200
400
600
800
1000
1200Room to Grow? Bank Offices per Million Residents
Source: Bank for International Settlements, Peak Performance analysis
Peak Performance Consulting Group -- Page 6
Industry Best Practices Drive Significant Improvement in Result
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Branch Deposit Growth
Non-BankPower® BranchesBranches using BankPower®
Month after opening or re-launch
Aver
age
Depo
sits
Source: Peak Performance client data
Pick the right spots: improved market and location analysisBetter local market knowledge and relationship managementLeveraging new distribution models
Peak Performance Consulting Group -- Page 7
Revitalization or Reinvention? We Need BothTremendous opportunity to improve revenue growth and cost effectiveness of existing branch network
Refine mix of branches: size, type, segments served Improve local market segmentation and sales management
Continued growth requires distribution expansion, but picking the right channels, markets, sites will be increasingly complexEconomics will drive shift to smaller, more cost efficient facilities that need to be managed differently
Greater use of technology for transaction processing and remote delivery of service
Different staff skills: more utilization of universal staff with fewer specialists
Tighter integration with hub branches or call centers to provide specialized expertise
Greater emphasis on micro-market knowledge and outside sales calling to improve market penetration
Peak Performance Consulting Group -- Page 8
Recipes for Success: the “Secret Sauce”
• John Zugschwert• Senior Vice President, Distribution Analysis• Citizens Bank• [email protected]
• Alex Calicchia• EVP and Chief Marketing Officer• MidSouth Bank• [email protected]
• Chuck Purvis• Chief Operating Officer• Coastal Federal Credit Union• [email protected]
Page 9
Thank you!
David KersteinPresidentPeak Performance Consulting Group512-607-6332dkerstein@ppcgroup.comwww.peakconsultinggroup.com
Peak Performance Consulting Group -- Page 10
Identifying Strategic Opportunities in Branch Distribution
BAI Retail Delivery
John ZugschwertSVP, Distribution Strategy
November 5, 2009
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RBS: Market Leading Customer Franchises
UK #1 Small business banking #1 Corporate and commercial #1 Cash management #1 Private banking #2 Personal checking #1 Auto insurance #2 Household insurance
US #1 branches in New
Hampshire and Rhode Island #2 branches in Pennsylvania #2 deposits in New England #3 deposits in Pennsylvania
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Twelve State Franchise Strong franchise in New England and Pennsylvania with good
branch distribution in the Mid-West
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12 States76 Metropolitan Areas
372 Branches
644 Branches
492 Branches
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Our Challenges
New England: well situated in terms of deposits and branch share
Mid Atlantic: well situated in terms of branch share but lag in deposit share
Mid-West: Sub-scale player with low branch share, but markets generally over-branched
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Strategic Market Development
Citizens Bank has a very large geographic footprint. The creation of specific strategies for each metropolitan market is critical to overall success.
Strategic Market Prioritization and Strategy
• Which MSA Level Markets have the highest potential?– Growth– Value– Economic Outlook
• What is the strategy for each market relative to position?– Overall convenience or niche opportunities?– How can Alternative Delivery Support Growth?
- ATM Network Partnerships- Co-Branding Opportunities
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Organizational Growth – De-Novo Branching
Once overall market strategies have been developed tactical plans can be executed. Given the competitive environment, prioritizing submarkets within metropolitan markets for growth and creating strategies is key to success.
Tactical Sub-Market Prioritization• Where are the highest potential sub-markets within each
metro market?• Can we create critical mass in the sub-markets?
Trade Area Opportunity Assessment• What is the long term potential for each individual branch
decision?– Combination of advanced modeling and market experiential
knowledge
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Market OpportunityCompetitive Environment
Deposit GrowthAverage Branch Size
Proximity to other CFG BranchesBrand Equity
Branch CharacteristicsSuitability
AccessibilityVisibility
TypeHours
StaffCustomer SatisfactionRelationship Building
ExecutionEngagement
Statistically 65% to 70% of the variability in branch performance can be attributed to the geographic market in which the branch is located.
Primary attributes are competitive strength of the market and proximity of other CFG locations.
Features of the branch directly effect the performance of the location.
In-Stores typically generate 33% of traditional free standing branch deposits and In-lines generate 70%. There is a trade off between expense and performance.
The staffing of the branch is critical to its ultimate success. Poor performing staff can undermine the branch’s performance. However staff performance alone cannot compensate for weak market conditions or poor branch design.
Branch Performance Hierarchy
Branch Performance can be explained with the following factors
Each factor builds from the lower factors in the pyramid.
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Organizational Growth - Existing Network Optimization
Maintaining the value of the Existing Citizens branch network has significant upside potential given the size of the overall network. Key focus areas include:
•Branch and Customer Segmentation – Focus on best opportunity– Branch segmentation will lead to strategy development and
prioritization of investment– Customer segmentation will lead to effective opportunity development
at customer and branch level
•Technology – Focus on High Quality Service Efficiency– CRM
» Customer Level and Market Level– Transaction Automation
•Branch Characteristics – Focus on the optimal branch features– Layout– Visual Appeal– Features – Drive-Thru/ATM/etc.
•Branch Placement – Are we in the right locations?– Trade area potential– Visibility– Accessibility
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Create 4 distinct branch segments with specific short and long term tactics for each
Segmenting the Branch Network
Segment 1 Large Branches
WithAdditional Opportunity
Segment 2 Large Branches
Currently Exceeding Their Market Opportunity
Segment 4 Smaller Branches
Currently Exceeding Their Market Opportunity
Segment 3 Smaller Branches
WithAdditional Opportunity
Additional Market Opportunity
Bran
ch S
ize
StrategyService &
Sales
StrategyService
StrategySales
StrategyPerformanceMaximization
Opportunities for impact:
• Goal Setting• Marketing/
Merchandising
• HR Allocations
• Partner Support
• Sales Activities/ Campaigns
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Recap
Strong franchise
Different strategic advantages in different markets
Refocusing resources to capitalize on opportunities
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Cranking Up the Offense: Building Deeper Customer Relationships__________________________________________________________________________________________________________
BAI Retail DeliveryNovember 5, 2009
Alexander CalicchiaExecutive Vice President & Chief Marketing Officer
MidSouth Bank Profile
WHO WE ARE• Headquartered in Lafayette, Louisiana• Total Assets: $938 Million
GROWTH-ORIENTED1985 – Chartered as a National Bank1987 – Acquired Breaux Bridge Bank & Trust (LA)1989 – Acquired Commerce & Energy Bank (LA)1993 – Listed on AMEX: MSL1995 – Acquired Sugarland State Bank (LA)2004 – Acquired Lamar Bank (Beaumont, TX)2008 – Merged MidSouth Bank Texas into MidSouth Bank, N.A.
BUSINESS FUNDAMENTALS• Small business focus supported by retail and commercial funding• Experienced leadership• Entrepreneurial management style• Organic growth• Quality relationships and dedication to customer service 22
Market Footprint
· Strategically Located along I-10, I-49 and Hwy 90 Corridors• 35 locations• 170+ ATMs
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MidSouth Bank Growth Strategy
“Cranking Up the Offense”
Delivering Value Through InitiativeAcquiring new customersIncreasing cross-sellingDeveloping and Maintaining Closer Relationships with customersImproving Operational Efficiency
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Strategic Vision
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“Staying True to Our Tradition”- Rusty Cloutier, CEO & President, MidSouth Bank
We are going to place even greater emphasis to develop deeper more personal relationships with our commercial and retail customers to better meet their needs.
Provide a greater emphasis on: decentralized decision-making, employee empowerment increased knowledge about our customer, improved processes
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Success Strategies
Our challengeThin distribution over a large footprintShift from acquisitions to organic growth
How we’ll succeed: Better tools: Oracle On-Demand CRM Better products: market and customer
segmentationClarity of Focus: better support infrastructureChanging the game on distribution
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Solution Key Benefits Features Metrics
Sales Improve sales productivityIncrease cross and up-sellingStreamline forecastingMaximize pipeline visibility
Account and opportunity management Contact management Activity and calendar management Outlook email integrationOutlook and Palm Synchronization
Cross-SellClose RateOpportunity CoverageEfficiency
Marketing/Campaign Mgmt
Accelerate lead to opportunity conversionMaximize marketing spend efficiency and ROIEasily administer campaigns
Closed-loop two-tier lead managementAutomatic lead assignmentsCampaign managementEasily import account, lead, and contact lists
Increased LeadsResponse RateClose Rate
Service Integrated support across multiple channels at low costEnhanced service effectivenessIncreased customer satisfactionSupport dispersed service agents
Hosted contact center: phone, web, email and chat Intelligent call queuing and routingComputer telephony integrationService request managementSolutions management
RetentionService to SaleCost/Call
Business Intelligence Drive more informed decisions across all levelsConvert insight into action Track and manage historical trends
Embedded interactive analytics Prebuilt dashboards with drillable charts35 prebuilt reports with 250+ analysesPowerful ad hoc analysis toolPrebuilt data warehouse
KPI AdherenceNew Program DevelopmentTrigger/Alert Programs
Better Tools: CRM On-Demand
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We Understand Our Customers
Younger Years38% Market
Penetration Index=60
Family Life40% Market
Penetration Index=137
Mature Years22% Market
Penetration Index=101
Elite4%
Wealthy Families6%
Wealthy Seniors3%
Up and Comers7%,
Boomer Comfort6%
Upscale Mature7%
Metro Mainstream14%
Middle Income Families14%
Midscale Mature2%
Fledgling17%
Working Class14%
Low Income Retirees5%
Lifestage
$
Consumer and small business segmentation in each marketProduct usage, preferences, and potential
Sales & marketing strategiesProduct development & pricing
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Example: High Level Consumer Segmentation in MidSouth Markets
Improve Effectiveness
Integrated brand communication: Web, Point of Sale, Newspaper
Intranet for employee communication and training
Video conferencing for remote training and management coordination
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Cranking Up the Offense
Town Hall meetings: Lending in the New Economy Integrated marketing Aggressive PR
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Rusty Cloutier Has Money to Spare JIM RENDON
Rusty Cloutier wants to lend money. If you live in Lafayette, La., you already know this. In large black letters hovering above a pile of bundled green bills, billboards all over town announce, “We have $200 million to lend.”
Questions & AnswerContact Info:
Alex [email protected]
(337)593-3008or find me on:
www.linkedin.com
Let’s Wrap It Up!
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Express Tellers: A New Model for
Improving Distribution Effectiveness
Chuck PurvisChief Operations Officer
Coastal Federal Credit UnionRaleigh, NC
About Coastal
• Headquartered in Raleigh, NC
• Chartered in 1967 to serve employees of IBM
• Today we serve 1,200+ employers & associations
• 201,000 members
• $2.2 billion in assets
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Community FocusNational Access
• 19 branches in the Raleigh-Durham and Charlotte markets
• Access to 3,797 shared branches nationwide
• Access to 55,000 surcharge-free ATM’s nationwide
• CO-OP Network• Allpoint Network
• Coastal24.com Online Banking34
Our Challenge
• Provide convenient branch access in two metro markets while controlling branch network costs
• On-campus locations ideal for members from large employers, but economics do not support free standing branch
• Need solutions that allow physical expansion at low cost to serve
35
Express Teller Technology• The Vision . . .
“To deliver first class member service right to theteller line . . . remotely!”• It is:A full-service, face-to-face member experience that uses the power of video to improve efficiency by reducing headcount while enabling cost-effective branch expansion.• It is NOT:The drive-up inside. There aren’t any pneumatic tubes loudly shuttling transactions to and from a teller room hidden in the back of the branch.
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Benefits of Express Teller
•Provides superior service than a traditional teller line or remote teller system.
•Leads to expense reduction – FTE may be reduced by as much as 50%*.
• Enables the ability to offer extended teller hours.
• Reduces the required footprint of the branch itself while at the same time facilitating branch expansion.
•Fosters sales by freeing the Branch Manager and platform staff from day-to-day operational
teller tasks.* Results based on a full conversion of a branch network of at least 10 locations.
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Two-Year Plan
10/31/09 12/31/09Target
12/31/10Target
Locations 13 13 15-19
Units 41 41 65
New Express Branches
1 1 1-4
Number of Express Tellers
21FT/2PT
25 36
7am-7 pm Locations
12 12 10-14
SaturdayHours
12 12 10-14
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Express Branch• Converted branch on IBM campus in 2009
• Installed standalone unit at Lenovo campus in July• Lenovo is converting thru-wall ATM space into office
space• Member service associate will start 4th Q
• 4,000 Lenovo employees work on campus
• Operates as a spoke of a larger branch
•Very Cost-effective: Express Branch model will allow us to open with as little as 1 Express Teller machine and 1 associate.
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Functionality• Cash and check deposits
• Cash and coin withdrawal• Official check withdrawal
• Account inquiries and transfers• Signature pad
• ID verification• Receipt printed• Check 21 enabled
• On-screen account # entry• Handset/hands free
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Express Teller Service Center
“We are replacing 110 branch tellers and
supervisors with 48 Express Tellers and 3
supervisors to service our 19 location branch
network.”
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A Success Out of the Gate!
1. During a Winter storm Coastal was able to open two branches with a single Express Teller from our headquarters that otherwise would have been closed.
2. Our Express Teller Machines , equipped with battery back-up power, kept member service up and running during a power outage.
3. Our extended hours transactions are spiking, 2,500 sessions in October.( 7:00-8:30 a.m. and 5:30-7:00 p.m.)
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Better Ability to Serve Extended Hours
1. 40,000 Express Teller sessions in October
2. Express Teller session comprise 65% of total branch transactions in October
3. 6% of Express Teller sessions done during extended teller hours in October
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Members Migrating to Express
Q1 2009 Q2 20090
2000400060008000
1000012000140001600018000
Wakefield (Express)IBM (Traditional)
Total Branch Sessions
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Serve More Members Without Increasing Wait Time
7 8 9 10 11 12 1 2 3 4 5 60:00
0:28
0:57
1:26
1:55
2:24
2:52
3:21
3:50
020406080100120140160180200
Avg. Wait TimeAvg. Session LengthAvg. # Sessions
Time Sessions
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In Summary
• Lower costs = morelocations
• Fewer employees• Extended hours• Better service• Member acceptance
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Questions?
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