retail banking group mobilization a&d value chain analysis 7/21/92 financial services company...

Retail Banking Group Mobilization A&D

Value Chain Analysis 7/21/92

Financial Services CompanyValue Chain Analysis

- 2 -© 1993 Gemini Consulting. Reproduction with Express Permission Only.

OBJECTIVE

• To identify and depict value-added functions

• To determine high-level allocation of resources

• To determine high cost areas

• To identify benefit areas


ASSUMPTIONS (HEADCOUNT)

1. All headcount figures are derived from RBG organizational charts

2. Both Relationship Managers (RMs) and Non-office Staff perform relationship management services and are counted in the "Customer/Relationship Management" link

3. There are 921 RMs located throughout the branches

• 80% (or 737) are dedicated to Consumer Banking relationships• 20% (or 184) are dedicated to Commercial and Professional Banking relationships

4. There are 4,737 Non-office staff members located throughout the branches

• 50% (or 2,369) perform services that support relationship management (i.e. tellers, customer service reps)

Of this 50%:

- 80% (or 1,895) support Consumer Banking relationships- 20% (or 474) support Commercial and Professional Banking relationships


ASSUMPTIONS (HEADCOUNT) (cont'd.)

5. Investment and Insurance services are handled by third parties. Thus, headcount is zero for most links in the chain for these services

6. Credit Services:

• For Consumer Banking, services are handled outside of the RBG by the National Consumer Asset Group. Thus, RBG headcount is zero.

• For Commercial and Professional Banking, figures are derived from the total staff headed by Credit Management.

7. Distribution and Treasury services are performed outside of RBG; thus, headcount is zero

8. Credit Controls figures are derived from total headcount inxxx's group

9. Staff Support figures are derived from the following groups:

• Human Resources• Information Systems• Finance• Marketing• Product Mgt• Legal


ASSUMPTIONS - FINANCIAL SCALE

1. Non-interest expenses in the value chain analysis are Salaries, Benefits, Occupancy, Equipment and Other, and Overhead Allocations

2. 80% of Total Salaries and Benefits are allocated to Consumer Banking;20% are allocated to Commercial and Professional Banking

Consumer Banking:

3. Salaries and Benefits are allocated as follows:- Customer Acquisitions 15%- Account Opening 15%- Customer Relationship Mgt 35%- Service 35%

4. Occupancy, Equipment and Other costs are allocated as follows:- Customer Acquisitions 20%- Customer/Relationship Mgt 20%- Savings Services 20%- Payment Services 15%- Credit Services 15%- Info/Advisory Services 10%


ASSUMPTIONS - FINANCIAL SCALE (cont'd)

5. Overhead expense is allocated as follows:- Payment Services 36%- Credit Services 30%- Savings Products 34%

Commercial and Professional Banking:

6. Total Commercial and Professional Banking salaries and benefits plus 20% of Consumer Banking salaries and benefits are allocated nearly equally across all areas

7. Occupancy expense is allocated as follows:- Customer/Relationship Mgt 67%- Credit Services 33%

8. Overhead is allocated nearly equally across all areas


RETAIL BANKING VALUE CHAIN - OWNERSHIP STRUCTURE

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Customer/Relationship Management:

Account Opening

Account Opening

Service

Collections

Investment Management

CreditApprovals Screening Pre-

QualifyingDis-Bursement Service

Account Opening

Service

Underwritings

Service

Transaction Processing

Service

Service

Account Opening

Account Opening


Account Opening

Account Opening

Service

Collections




Account Opening

Service

Underwritings

Service


Service

Service

Account Opening

Account Opening Investment Management

Savings Services:

Investment Services:

Insurance Services:

Credit Services:

Info & Advisory Services:

Staff Support: HR, IS, Finance, Marketing, Legal, Product Management

Savings Services:


Insurance Services:

Credit Services:


Payment Services:

Payment Services:

Delivery Channels: Distribution, etc.

Treasury/Balance Sheet Management

Credit Controls: Audits, Non-Credit Controls

Consumer Banking

Tech and Ops Group

Outside Vendors

National ConsumerAsset Group

Geoserve

Commercial Banking

Commercial &Professional

Banking

NY ConsumerBanking


OWNERSHIP STRUCTURE IMPLICATIONS

1. Consumer and Commercial Boundaries are not clearly defined

2. Simple business functions span multiple areas of ownership

- Excessive interface issues exist

3. There is no single point of contact for the customer

- Customers are passed:

• Function to function

• Executive to executive


RETAIL BANKING VALUE CHAIN

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(S

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Account Opening

Account Opening

Service

Collections




Account Opening

Service

Underwritings

Service


Service

Service

Account Opening

Account Opening


Account Opening

Account Opening

Service

Collections




Account Opening

Service

Underwritings

Service


Service

Service

Account Opening


Savings Services:


Insurance Services:

Credit Services:


Savings Services:


Insurance Services:

Credit Services:


Payment Services:

Payment Services:





Banking

NY ConsumerBanking

$17 2%

$14 2%

$11 1%

$14 2%

$35 4%

$11 1% $12 2%

$17 2%

$72 9%

$11 1%

$23 3%

$344%

$7 1% $22 3%

$113 14%

$72 9% $28 14%

$64 8%

Staff Support: HR, IS, Finance, Marketing, Legal, Product Management

Expenses ($million):1. Salaries2. Benefits3. Occupancy4. Equipment & Other5. Overhead Allocations

Tota

l:

$5

95

Tota

l:

$1

94

Gra

nd

To

tal:

$

78

9

$7810%

$354%

$51%

$101%

$101%

$203%

$203%

$101%

$51%

$61%

$61%

$81%

$51%


FINANCIAL SCALE IMPLICATIONS

1. There is substantial cost savings opportunity in the Consumer Bank

- The Consumer Bank is expected to lose approximately $100 million (1992)

- 75% of core RBG non-interest expense is associated with Consumer Banking

2. There is substantial cost savings opportunity in the customer acquisition and relationship management processes

- Approximately 33% of non-interest expense is dedicated to customer acquisition and relationship management processes

3. Streamlining transaction processing and back office operations constitutes a significant opportunity

- Transactions processing accounts for 12% of total costs in the consumer banking area


RETAIL BANKING VALUE CHAIN - HEADCOUNT ALLOCATION

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(Sa

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Ac

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(S

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Ma

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Account Opening

Account Opening

Service

Collections




Account Opening

Service

Underwritings

Service


Service

Service

Account Opening

Account Opening


Account Opening

Account Opening

Service

Collections




Account Opening

Service

Underwritings

Service


Service

Service

Account Opening


Savings Services:


Insurance Services:

Credit Services:


Savings Services:


Insurance Services:

Credit Services:


Payment Services:

Payment Services:





Banking

NY ConsumerBanking

719

184

184

0

107 107 ?

0

0

0

0

719

719

?

?

?

719

0

184

107

2,632

737

737

0

0 0

0

?

0

0

0

0

2,632

2,632

?

?

2,632

2,632

0

737

0

0

50

0

Staff Support: HR (92), IS (1,016), Finance (60), Marketing (49), Legal (0), Product Management (27)


HEADCOUNT IMPLICATIONS

• Large headcount in Consumer Banking provides the opportunity to explore the effectiveness of people deployment

- The customer/relationship management function represents the area of greatest opportunity


VALUE CHAIN DEVELOPMENT

Constructed by:

Reviewed by:

retail banking group mobilization a&d value chain analysis 7/21/92 financial services company...

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