Retail Banking: Case Studies
Problem: A top-20 retail bank was facing a $100mm shortfall from its goal of double-digit earnings growth.
Solution: Novantas worked with a team of core executives to analyze customer segments, which led to a revised distinctive value proposition. From there we identified and prioritized a set of tactical initiatives.
Result: The result was a plan to generate an incremental $150mm of earnings within three years.
Problem: A top-10 bank was experiencing slow deposit growth and tightening spreads due to intense deposit pricing competition. It was unable to aggressively price liquid savings because it had a book of low-rate MMDA that it could not reprice.
Solution: Novantas used a customer elasticity analysis to develop a pricing strategy that identified opportunities to reduce rates on inelastic products, tiers and regions while increasing rates on elastic portions of the portfolio. In addition, we implemented a set of price optimization software that allowed the bank to manage prices on an ongoing basis.
Result: The bank beat the plan in both volume growth and margins, generating $55mm in increased annual earnings.
Problem: A top-10 bank was facing slowing growth in home equity and intense competition for credit-worthy borrowers. The bank had applied a ‘one-size-fits-all’ approach to pricing home equity loans and lines.
Solution: Novantas developed a risk-adjusted account-level profitability database to identify opportunities for risk-based pricing. The result was a revised pricing matrix with over 1,000 ‘cells.᾿ We analyzed price elasticities for each cell and identified opportunities to ‘harvest᾿ or ‘grow.᾿
Result: A net increase in spreads of 11 bp, with no diminishment in volume.
Local Market Based Goal Setting
Problem: A 1,500+ branch bank was not meeting productivity goals. We identified that one of the drivers was inappropriate goals not tailored by the local market opportunity.
Solution: Using Novantas᾿ Branchscape database, we were able to tailor goals for every branch in the network. The outcome was higher goals for a set of branches (where money was being left ‘on the table᾿ and incentives were overpaid) and lower goals where opportunities were less robust.
Result: The result was overall branch sales productivity improved by 2% in the first year. In addition, we identified markets where a substantial cause of under-performance was a sub-scale branch network. We developed a de novo plan, based on an understanding of ‘micro-markets᾿ within each MSA and we identified opportunities to ‘self-fund᾿ de novos through closures, relocations and ‘two-for-ones.᾿