While 2009 was a difficult year for
much of the retail banking industry, prospects for 2010 are, if
anything, even more uncertain. RBI spoke to a selection of
leading retail bankers from across the globe to discuss their
strategies and forecasts for the year ahead. Dan Jones reports.
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In a year in which much of the banking discussion centred
on looking back at the near cataclysmic events of 2008, or often on
maintaining rather than growing income levels, there were limited
opportunities for retail banks to dazzle.
Nonetheless, over the course of the year some
top-line performers emerged – those who successfully gained market
share, carved out new retail banking identities, reinforced their
status as customer service champions or forged ahead with new
product innovations.
Speaking to RBI, leading retail
bankers from around the globe voiced their opinions on the months
ahead and outlined the business propositions they will present to
customers over the course of the next 12 months.
There remains a huge degree of variance in
terms of retail banking aims and objectives for the new decade. Yet
one overriding objective continues to be the acquisition of
customer deposits – the rebalancing of the books is not over
yet.
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By GlobalData“A priority will be to fully leverage our
800-branch network and other channels like mobile and online
banking to grow deposits,” confirmed Vinit Chandra, CEO of Barclays
global retail bank, emerging markets, speaking to RBI.
Intelligent branch
banking
Such goals have been priorities for most retail banks
over the course of 2009; the difference in 2010 may be the more
refined manner the industry’s leading players go about fulfilling
this ambition.
Despite many regions witnessing a
return to profit growth and a potential peak in non-performing
loans, a combination of lower budgets and channel innovation means
2010 is unlikely to bring with it a return to a key retail banking
theme of old: the aggressive expansion of branch networks.
Rather, banks will seek to do something akin
to NAB, which is currently prioritising the provision of “better
branches and kiosks in better places, investing in our local market
approach and having the right staff in the right locations for our
customers”, according to Howard Silby, NAB personal banking’s
executive general manager strategy, business development and
marketing.
A more intelligent approach to branch banking
is also on the agenda at TD Canada Trust, which is in the process
of rolling out its ‘branch of the future’ concept across Canada
(see RBI 622). President and
CEO of Canada Trust, Tim Hockey, told RBI that the bank
would continue to expand its footprint via “15 to 20 new retail
branches, 15 relocations and two new commercial centres”, and, just
as crucially, “invest in the integrated customer experience across
and within channels”.
For TD, this integration will likely have two
key facets – a “significant year on year increase” in technology
spending and a further push to improve customer service, a metric
for which the bank is already something of a flag bearer. To this
end, TD will launch and enhance back office customer engagement
programmes over the next twelve months.
Indeed, of all developed markets it is perhaps
Canada alone that is bucking the trend of limited branch openings.
TD’s rival Royal Bank of Canada (RBC), the country’s largest bank,
also intends to expand not just next year but well into the next
decade.
“We will expand our physical footprint by
almost 10 percent over the next five years,” David McKay, group
head of Canadian banking at RBC, told RBI (see
Loyalty result thrills RBC).
Focusing on customer
service
Clearly, fine-tuning the cross-channel experience is not
just driven by a desire to improve customer service – it also
provides an opportunity to improve margins and efficiency, both of
which will remain under pressure in 2010.
“New internet banking, expanding RHB Easy
channels and self-service banking will be platforms for higher
transactional banking leading to higher deposit floats at lower
deposit acquisition cost,” said Renzo Viegas, head of retail at
Malaysia’s RHB.
The past 12 months have been successful ones
for RHB, Malaysia’s fourth-largest bank by assets, and in
particular for its retail banking strategy.
In May the bank launched a co-branded credit
card with Tesco; in October it agreed to purchase Indonesia’s PT
Bank Mestika for $340 million; and this month the bank has
announced that it will extend its ‘RHB Easy’ concept, first trialed
in July of this year.
The low-cost outlets offer banking services
outside regular working hours, with a total of 28 set to be
installed across Malaysia by the end of the year and a further 50
planned for 2010.
“Increasing off-branch self-service banking at
high retail traffic flow areas for customers’ convenience is a
priority for us for 2010,” Viegas said.
It is not just RHB which is looking to expand
its service hours. Though 2009 will not go down as a year to
remember for Citigroup in the US, the group says an initiative
pioneered in New York in September will now be rolled out
nationwide. As of that month, Citibank branches in New York
extended their opening hours by up to 40 percent; the bank also
stepped up its community and environmental initiatives as part of
the effort.
“[Extending the initiative across the US] is a
key focus and priority for us in 2010”, a Citi spokeswoman told
RBI (see News
Digest).
Given the ongoing economic downturn, the
amount of state aid provided to the financial services industry
since last year, and the very visible frustration at the sector
from consumers, it is no surprise that restoring reputations
remains a key concern for 2010. Silby was most explicit in
committing to this point, and pointed to NAB’s aggressive pricing
policies as “providing fair value products and services – leading
the restoration of the banking industry’s reputation in
Australia”.
A restricted Europe
In
Central and Eastern Europe, however, the thinking is very
different, given the more restrictive economic environment and what
some perceive to be a dangerously distorted playing field.
“Price war is dangerous for every business. It
is important for the EU and its members to correct as soon as
possible the moral hazard of 100 percent unlimited guarantee for
deposits in banks, for instance,” said Jan Rollo, CEO of Slovakia’s
Slovenska Sporitelna, a subsidiary of Austria’s Erste Bank. “This
creates a new bubble. If something you do doesn’t involve any risk
at all, you will only think about the price. And this will result
in imbalances on the market which will explode one day.”
His colleague Imre Sztanó, retail head of
Erste Bank Hungary, voiced similar sentiments: “Every banking
service has a price. I don’t think the right direction would be to
market services that have a price for free in a wide scope… It’s
important that the price/value rate of any service be right and
that customers should feel they’ve been given value.”
Others, such as France’s Crédit Agricole, are
still wary of the changing regulatory landscape: a key priority for
the bank, said a spokeswoman, was to “closely monitor the impact of
G20 decisions on the banking industry, after assessing the impact
that these may have on [our] areas of business”.
Acquisitions remain off the agenda for most of
the industry, despite a year in which the number of deals kept pace
with the total witnessed in 2008 (see
Dealing with a new reality).
While Crédit Agricole said the bank would look
to “expand” its international retail banking activities, Société
Générale would rather “reinvest selectively to strengthen the
universal banking model”, for example, and no other retail bank
spoken to by RBI pointed to inorganic expansion as a key
priority for 2010.
From a customer perspective, the likelihood is
that relative personal financial austerity will continue to hold
sway into 2010, even as wider economic circumstances improve.
“We believe customers in 2010 will continue
the process of paying down debt and rebuilding their level of
savings despite the likelihood of the UK’s economy turning the
corner out of recession,” said Brendan Cook, general manager of
customer propositions at HSBC.
Unsurprisingly, therefore, the prioritising of
the affluent customer is set to become ever more crucial to the
sustainability of the retail banking business model in 2010.
Barclays, for example, intends to “expand our premier banking
offering in most of our 14 emerging markets [country units]”,
according to Chandra.
The bank to beat in the segment remains HSBC,
however. HSBC said in its interim report that the total number of
customers in its own ‘Premier’ segment had grown by 23 percent in
the 12 months to 30 June; in November the bank said that numbers
had surpassed three million for the first time. The offering, now
available in 43 countries, is also a valuable acquisition tool. Of
the 541,000 customers who joined Premier in the first half of the
year, some 68 percent were new to bank.
Cook confirmed that Premier would continue to
be a “major focus” for the bank in 2010, but was also quick to
point out that the bank had room to grow in other areas: “I also
see a great opportunity for HSBC to capture further growth in the
UK mortgage market,” he said.
Mortgages are also on the agenda at TD Canada
Trust, which plans to add over 175 business bankers and mortgage
specialists in 2009, according to Hockey.
But it is Jiri Skorvaga, deputy CEO of Ceska
Sporitelna, the Czech subsidiary of Erste Bank, who perhaps
provides the most telling comment: “We are mainly directing our
loan offers at our own clients, because we already know a lot about
them.
“We are refusing applications from people who
are not our clients more often than before”.
In an age of newfound caution, the spectre of
the financial crisis continues to haunt the retail banking
industry.
