Boosting Bank Profitability at Acceptable Risk

Aim of the Course This 5-day, top-level course is for the leaders of banks that want to increase profitability greatly and rapidly but also safely. It explores how the most profitable banks: Boost business and income from customers Make more money from asset & liability management (“ALM”) and treasury Contain risks at acceptable levels Achieve and maintain maximum cost-effectiveness Optimise the allocation of scarce resources, particularly people, time, capital and IT power Importantly, the course provides a forum for delegates to exchange opinions about how their banks could achieve superior profitability across all major lines of business: retail, SME and corporate banking, ALM and treasury. Benefits of the Course The course gives delegates the opportunity to: Understand the strategies, best-practices and associated targets for boosting profitability that are adopted by the most successful banks Assess ways of boosting business & income from customers – marketing and selling Examine how leading banks make more money from ALM” and related treasury activities Explore approaches to containing the cost of risks at acceptable levels – credit, market and operating risks Assess ways of achieving maximum cost-effectiveness – reorganization, reengineering and elimination of wastage See how to optimize the allocation of scarce resources – people, time, capital and IT power Set profit improvement priorities at their banks Learn how to guarantee the success of major profit improvement projects at their banks Learning Level This is an advanced, general management level course for senior bankers and their management teams who are ambitious to ensure that their banks increase profitability rapidly yet safely. Methodology The course is intensive and participative. Various methods are used: Formal presentations with discussions, including many real case histories from across Europe, the Arab world, former Soviet countries, Africa, Asia-Pacific and the Americas “Question & Answer” plenary discussions with the course director Case studies that illustrate the application of the approaches examined Group work in which delegates discuss improvement priorities for their own banks 50% of time at the course is spent on case studies and group work so that delegates can “learn by doing”. Because profit improvement is a serious, “hard” subject, the course includes specific numerical examples and a range of practical, analytical methods. To assist, the course director provides several Excel models that delegates could apply when they return to their banks. Who Should Attend? This course is for top bankers, senior managers who are expected to reach this level soon, those who support directly the top management teams of their banks, and “high-flyers” with the potential to rise to the top: Owners of banks and their main and supervisory board directors CEO’s, members of boards of management, and members of top executive committees General managers, executive vice presidents, executive directors responsible for "profit centre" divisions, involved in Retail Banking, SME Banking, Corporate Banking, Treasury and ALM, plus subsidiary companies involved in these businesses Senior executives responsible for support divisions, including Strategy, Marketing, Sales Support, Risk Management, Credit Risk, Market Risk, Operations, Finance, Human Resources, Information Technology and Internal Audit
Day 1 Setting Strategies and Targets for Boosting Profitability Establishing an Overall Profit Improvement Strategy How leading banks link strategy to profitability: - Main elements of strategy in leading banks - Importance of linking all the elements of strategy to profitability Boosting business and income from customers Making more money from ALM and associated treasury activities Controlling the cost of risks that go wrong Ensuring high cost-effectiveness Optimizing the allocation of scarce resources Upgrading planning and control and management information Fostering strong corporate governance and a progressive culture Setting Key Performance Targets for Driving Up Return-on-Equity (“ROE”) Understanding the main “drivers” of bank ROE across different countries Measuring the correlation between the “drivers” and ROE Choosing challenging yet realistic ROE objectives for individual banks Fixing high-level KPT’s (Key Performance Targets) for attaining ROE objectives Case history: a leading African bank keen to achieve a pretax ROE of 35%+ Group Work - Choosing High-Level KPT’s for Delegates’ Banks Key performance targets for bank boards and top teams Discussion: implications for KPT’s and best-practices at delegates’ banks Case History – Lessons from a Bank that Increased Profitability Greatly Introduction to the case history bank - a leading Arab bank Main transformation change made by the bank Impact of changes on the bank’s: - Balance sheet - Income, costs and profitability - Share price and market capitalisation Boosting Business and Income from Customers Case Histories: Building a Highly-Profitable Customer Base The nature and contributions of marketing strategy focused on profitability improvement World-class standards of marketing strategy in leading banks Examples of “winning” and “losing” marketing strategies: - Case history: a medium-sized European domestic bank - Case history: a major corporate banking group based in a former Soviet Country - Case history: a large Scandinavian retail bank - Case history: a medium-sized international bank based in the EU - Case histories: overview of some other banks around the world Important practical lessons Discussion: priorities for upgrading marketing strategy across delegates’ banks Day 2 Case Study: Profit Improvement from Focused Marketing Case histories: examples of banks that doubled profits via focused marketing Typical main opportunities grasped: - Growing and cheapening the deposit base - Credit marketing opportunities - Cross-selling other products and services Deciding how much to invest in implementing focused marketing Segmenting & Packaging Banking Products & Services Deposit, savings and investment services Loans and mortgages Insurance services International banking services Business and support services Examples of packages for retail, SME and corporate customers Discussion: product development priorities for delegates’ banks Boosting Deposit Growth in Personal Banking The factors that explain the varying deposit growth rates of competitor banks The relative importance of the “drivers” of deposit growth across illustrative countries Developing and implementing a deposit growth strategy Case histories: banks that successfully boosted deposit growth Case Study - Developing & Implementing a Marketing Strategy to Drive up Profitability Defining mutually-exclusive market segments Calculating the profitability of market segments and assessing their attractiveness Assessing a bank’s competitive strengths in different market segments Setting development priorities across market segments Specifying actions plans for moving ahead Setting profit improvement targets for individual market segments Setting the ROE target for the whole customer base Deploying Modern Sales Channels and Intensifying Selling & Cross-Selling New sales channels for banks: - Segmented branches - Point-of-sales offices - “POS Offices” - Mobile sales forces - Outbound call centres - Direct mailing: post, e-mails and SMS selling Case history: how one progressive bank is modernising its channels The meaning of “true selling” as used by world-class banks How selling intensity drives cross-selling and profitability World-class standards of selling & cross-selling Case history: - Steps taken by one bank that intensified selling greatly - Impact on cross-selling - Impact on profitability Day 3 Case Study - Redesigning Branch Networks for Fast Growth, Superior Service and High ROE Introduction to the case study bank and its strengths & weaknesses: - A clear marketing strategy - Low selling intensity in branches and head office - Undifferentiated service quality for different market segments - General purpose branches that serve all market segments - A very high cost/income ratio Profit improvement strategies to be evaluated: - Downsize the bank, segment the network, focus the workforce on to selling - Expand the bank, segment the network, focus the workforce on to selling Factors to be considered: - Different service quality levels for different types of customer - The balance between front and back-office personnel in branches - The amount of time spent selling in the branches - Income per customer from customers in different market segments - The balance between general-purpose and segmented branches - The size of the head office in relation to the branch network - The amount of time spent selling in head office Choosing the best strategy Making More Money from ALM and Treasury ALM - Not Just Risk Management but a Business with Risks The fundamental nature and purpose of alm in leading banks Modern methods for measuring ALM profits and risks Case Study - Measuring Correctly the Profitability from ALM Decisions Understanding the case study bank’s balance sheet and profit & loss account Assessing transfer rates for defining profitability and selecting the best: - “Psychological” transfer rates - Cost-of-funds - Single pool rate and dual pool rate - Mark-to-market rates - Calculating and attributing ALM profits: - “Gapping” profits - “Structural” ALM profits Calculating and attributing customer profits: - Deposit profits - Lending profits Restructuring the case study bank’s balance sheet to balance profits and risks Running ALM as a Business - The Role of ALCO in Banks with Active ALM How leading banks use ALM to increase profits at acceptable risk World-class standards of ALM and treasury management Case histories: using ALM to increase and smooth bank profitability The role of ALCO in progressive banks The support needed by ALCO’s for them to perform well Discussion: priorities for advancing ALM and treasury in delegates’ banks Day 4 Containing the Cost of Risks at Acceptable Levels Ensuring that Bank Lending Generates High Profits after Bad Debt Costs The 250 elements of credit risk management World-class standards of credit risk management The credit risk assessment methodology – “CRAM” Case histories: how illustrative banks became world-class at credit management Discussion: advancing credit policy and processes in delegates’ banks Case Study - Pricing Loans to Meet a Bank's ROE Objectives Explanation of target-roe risk-adjusted pricing of loans Calculating margins needed to meet the bank’s target return on equity Estimating margins to cover funding and opportunity costs Building in margins to pay for credit operating costs Calculating margins needed to cover bad debts Adjusting margins to exploit competitive dominance Establishing World-Class Risk Management Main responsibilities of a modern risk management division, including credit, market, operating and other risk management functions Organisation structure of a world-class risk management division Group Work - Minimising the Operating Costs of Credit Risk Management Estimating the (usually high) operating cost of credit management processes Best-practice standards for credit operating costs Setting priorities for reducing credit operating costs Achieving Maximum Cost-Effectiveness Reorganising Banks to Serve the Market Cost-Effectively Design principles for effective bank organisational structures - leadership, business and management principles Pros & cons of organisational options for modern banks: - Territorial and product structures - Segment and functional structures - Matrix organisational arrangements The economic impact of good & bad organisation structures Organising business & support divisions - how some banks reorganised successfully Discussion: priorities for reorganising delegates’ banks Case Study - Broadening Spans-of-Control and Reducing Layers of Management Spans-of-control and layers of management found in the most profitable banks Understanding the huge economic impact of spans-of-control & layers of management Calculating the major impact of broadening spans-of-control: reduction in the number of staff and managers, salaries and layers of managers Cutting Unnecessary Overhead Costs and Wastage in Banking Common examples of how banks waste money Methods for cutting excessive costs Day 5 Reengineering Processes & Operations to Free People for Selling The Large Operating Costs of Banks’ Management Processes and Operations Ways to Increase Cost-Effectiveness, for example: - Process Rationalisation - Increased Delegation - Automation - Centralisation and regionalisation - Outsourcing Optimising the Allocation of Scarce Resources Group Work - Moving Personnel into Income-Producing Jobs at Delegates' Banks Estimating the current selling intensity of delegates’ banks Increasing the number of existing types of selling job Creating new types of selling job Increasing selling time in all selling jobs Reengineering delegates’ banks to reach world-class standards of selling intensity Reallocating Equity to a Bank's Best or Most Promising Businesses Measuring the profitability of major strategic business units – “SBU’s” Impact on profitability of reallocating equity across SBU’s Key factors for success in reallocating equity in practice Discussion: reallocating equity in delegates’ banks Guaranteeing the Success of Profit Improvement Organising Major Profit Improvement Projects Setting clear, challenging yet realistic profit improvement targets and deadlines Gaining board and top team support for profit improvement, and removing “blockers” Planning and “branding” the work Forming and organising the profit improvement team, including project “champions” Organising top management governance of the profit improvement work Announcing the project to the whole workforce Taking immediate steps to freeze costs and boost income Communicating progress regularly to the workforce and rewarding success Case history: a bank that increased pretax profits by a factor of 4 over 1 year Profit Improvement Priorities for Delegates' Banks Setting priorities for boosting profitability: more income, better risks, and lower costs Defining the actions to be taken Proposing timetables for moving ahead Course summary, certificates, and close. Extra Presentation: Boosting Retail Banking Profitability Introduction to the Case History Bank Best-Practice Calculation of Retail Banking Profitability The “Drivers” of Retail Banking Profitability Impact on Profitability of Individual and Combined Best-Practices Priority Actions for Boosting Retail Banking Profitability