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Randy Burchfield, who manages marketing for BancorpSouth, says that he uses video-conferencing every week for his regular meetings with the bank’s lead ad agency, which is based a five-hour drive away in Little Rock, Ark. They wanted to cut operational costs and improve efficiency and effectiveness in their back-office support groups. While some banks have slashed their existing marketing budgets across the board, others are looking to re-engineer their marketing with an eye toward lower-cost, electronic channels such as online, email and SMS. Cost cutting measures are typically implemented during times of financial distress for a company or during economic downturns. In this one, we’re going to dive into a cost-cutting case study with big results—and great takeaways for you. Here are some common tactics that banks, large and small, are utilizing in their efforts to improve operating efficiency: Reviewing vendor contracts. “Banks will focus on what they can control — as opposed to taking any undue risks as they work through all this,” said Kevin Fitzsimmons, an analyst at D.A. The entire project broke even in just six months. With nearly 1,500 branches, 24,000 employees, and $175 billion in assets, they sought to cut costs and improve the efficiency of their retail branch network. Error rates dropped by an amazing 35 percent. “The racks in our branches used to look like those racks at a beach or mountain vacation spot, with all these brochures stuffed in there,” Lindsey says. Services. ➤Sharp cost-cutting by Brazilian banks could drive price-based fintech models out of business. As the credit crisis gripped financial services a couple of years ago, cutting costs was the call to action at banks worldwide, and especially in the U.S. That meant a relentless pursuit of greater efficiency and a deeper understanding of where are the excess expenses and processes in … Dubai’s Mashreq Bank may move jobs to Pakistan as part of cost-cutting move The report added that Mashreq Bank will also cut a large number of … They can also be enacted if … HSBC, Goldman Sachs and UBS are all promising new strategies for the new decade. San Francisco-based Wells Fargo & Co. and Bank of America Corp. in Charlotte both announced major cost-cutting initiatives this past spring (in March and April respectively) and others have followed in recent weeks. A formal feedback mechanism was also installed. A few months on and cracks are beginning to show. Deutsche Bank has expanded its cost-cutting plans with its CFO saying a previous target of bringing expenses down to €21bn by 2021 was not ambitious enough.. And the work paid off. Proven industry-leading practices were required to standardize NIGO fixes, streamline the workflow, and slash variance among teams. Instead, banks are being careful about worker hiring, training and deployment. Ineffective processes permeated the bank’s back-office operations. Much of the cost-cutting burden is falling on the bank’s staff. Over the course of two months, more than 125 individual-improvement and cost-cutting opportunities were identified. Perhaps the story of your bank, tactfully disguised as this one was, might end up in these blogs, too. He estimates that these efforts will reduce existing costs by between 10% and 15% per year. Although formal numbers have yet to be announced, the German lender may eliminate as many as 15,000 to 20,000 jobs, joining a growing list of global banks that have announced multiple jobs reduction rounds this year. For help in making these important decisions, here's some insight into potential areas for cost cutting and ideas on how to think about each reduction. And they wanted to improve the overall customer experience in the process. … Think about that: Half of the applications received were not in good order. BancorpSouth, for example, has “virtualized” many of its servers, Lindsey says, meaning that instead of using dedicated hardware, the company deploys generic shared hardware to more efficiently run specific areas of its operations. After the initial analysis and design phase of the assignment was complete, the implementation phase began. Copyright © Lab Consulting Partnership, 2021 | All rights reserved, Cut Banking Costs Now: Achieve “The New Normal” for Productivity “Big Rock” 1 of 3: The retail branch network, The Lab’s unique self-funding engagement model and money-back guarantee, Automate Paycheck Protection Program Loans, Lean Six Sigma Projects for Finance and Accounting, Robotic Process Automation in Credit Unions, Robotic Process Automation in Finance and Accounting, Robotic Process Automation in Financial Services, Robotic Process Automation in Health Insurance, Robotic Process Automation in Investment and Asset Management, Robotic Process Automation Insurance Claims, what are retail banks doing to control costs and improve efficiency. Five areas were addressed: The initial analysis shone a spotlight on a glaring weakness for the bank: The rate of not-in-good-order, or NIGO, inbound applications averaged 50 percent. The German lender says it had already given notice to or "eliminated" 900 employees as part of a shake-up announced two weeks ago. But those NIGO applications were still a problem. 1. In this bank, operating metrics were not consistently collected, employed, or understood. BancorpSouth has just begun to test virtualization at the desktop for its retail staff, which Lindsey hopes will not only reduce hardware and support costs, but also extend the life of the systems. “I haven’t traveled to Little Rock in two months,” he says. The French bank said the jobs would go as it looks to strip out around €450m within its capital markets unit by 2023. Reducing internal use of paper and electricity. Using standardization, the productivity variance of “in good order” applications plummeted to less than 15 percent. San Francisco-based Wells Fargo & Co. and Bank of America Corp. in Charlotte both announced major cost-cutting initiatives this past spring (in March and April respectively) and others have followed in recent weeks. Multiple retail branch forms and templates were standardized. Consider: Productivity shot up 30 percent. Here are some common tactics that banks, large and small, are utilizing in their efforts to improve operating efficiency: Realigning branch staff. BancorpSouth has also reduced the number of its in-branch marketing materials, from more than 25 to about half a dozen. Excessive customer touch points to gather follow-up information. Employee compensation accounts for about 44% of U.S. banks’ operating cost, according to the Federal Deposit Insurance Corp. This cuts Information Technology as well as support costs, he says. It’s just one of countless others we’ve delivered for clients for more than 25 years. Faced with a slow-growth economy and shrinking revenues, bank managers are pulling the only lever they have left: expense control. They’re all the more impressive when you realize that no new technology was required: Best of all, this project broke even in just six months. Up to 2,200 job cuts likely at Bank of Ireland under cost-cutting plan Broker says bank likely to cut headcount by up to 20% Wed, Jul 25, 2018, 10:27 Updated: Wed, Jul 25, 2018, 18:12. Thus management was poorly equipped to implement uniform routines across operational areas. But investors rewarded the bank for announcing the new cost-cutting target and sent the stock up 3.3% to $14.11. Whether true or not, Bank of America has already received heat and bad publicity for trying to apply cost cutting measures that ultimately would have minimal impact on … It’s another shocker that’s all too common in banking, and invites cost reduction. The cost-cutting and efficiency agenda will vary among regions and from bank to bank. It was a tall order. This story took place at one of the largest consumer banks in the United States. With nearly 1,500 branches, 24,000 employees, and $175 billion in assets, they sought to cut costs and improve the efficiency of their retail branch network. Implementing these initiatives is expected to improve efficiency in the respective units by about 25% and reduce the bank’s total costs by 4%. BAI is Bank Administration Institute and BAI Center, Cost-Cutting Tips for Revenue-Squeezed Bankers. “We may renegotiate to add more years in order to push for a better price,” says Michael Lindsey, senior vice president for BancorpSouth of Tupelo, Miss. Not surprisingly, the rate for this KPI (key performance indicator) was significantly higher than that of the bank’s competitors. NEW YORK. HSBC bank will shift its physical services into the digital sphere in a push to get more customers to migrate to mobile as part of cost-cutting program. This prevented a focus on a lean, customer-centric experience while applications were being processed. In the wake of coronavirus lockdowns, the world’s largest investment banks presented a united front in refusing to cut jobs. ➤Incorporating nonfinancial services is a way for fintechs to counterattack big techs' foray into finance. For institutions most affected by the crisis, particularly those in North America and the United Kingdom, tactical cost reductions are the immediate priority. Individual performance reporting was inconsistent. This website uses cookies and third party services. Our previous article discussed ways to increase operational efficiency in the banking sector. With so much of their money flowing out to vendors, it’s not surprising that many banks are looking to review or renegotiate outsourcing contracts. Inside Wells Fargo's Plan to Cut $10 Billion in Expenses The bank will try to complete its ambitious plan while also trying to balance other initiatives. Remember: a million clients across 17 countries. Fifth Third Bancorp is slashing costs, with plans to remove $200 million in expenses by early next year, including its recent decision to shed some jobs. New tools and techniques were required to report on productivity, quality, service, and cost data. Societe Generale is cutting 640 jobs within its investment bank in France as part of a broader plan to restructure its equity derivatives unit after a period of poor performance. Moving to less expensive marketing channels. The London-based bank, which is planning to cut 35,000 jobs to trim costs, is seeking to double the number of mobile users by 2022, which could generate more revenue per customer. Processing cycle time dropped by a third. Blood-thirsty bank analysts are excitedly burnishing the sharp edges of their cost-cutting calculations. And they wanted to improve the overall customer experience in the process. Redesigning the operating model for support functions and reducing the number of employees is expected to cut costs by about 15% (or 3% of the bank’s total costs). Published November 9, 2020 Updated November 9, 2020 . The German lender’s latest cost-cutting measure signals the bank is willing to slash just about anything to save a few dollars. Employee operating costs were cut by 16 percent. He points out that Extraco Banks, a Waco, Tex.-based community bank, was able to save $8,000 in paper costs last year, due to multiple initiatives such as imaging deposits at the teller line. Cost-cutting makes sense, industry observers said. Deutsche Bank is gearing up to cut hundreds of jobs in its equities trading and research, as well as derivatives trading, as part of a cost-cutting drive, according to the Wall Street Journal. Numerous non-technology improvements were implemented to fix this problem. Davidson. Eliminating unnecessary document printing and electricity usage can save even a smaller bank thousands of dollars annually and can also help boost the bank’s reputation as environmentally friendly. Cost cutting: A strength 1 Transform the way you cut costs The economic slow down is impacting the CEE region, prompting businesses to address a set of new challenges. Rather than looking to massive across-the-board cuts to boost returns, most financial companies are seeking to trim expenses selectively with an eye to keeping employees content, customers well-served and avoiding harm to client retention and sales growth. The Canadian Imperial Bank of Commerce plans to lay off an undetermined number of staff in an effort to cut costs and become a “more efficient bank,” according to a … “Banks have to be cautious about unnecessarily making radical changes; they need to be able to remain agile and fluid,” says David Albertazzi, senior analyst for Boston-based Aite Group. These provide clients with a number You might want to learn more about The Lab’s unique self-funding engagement model and money-back guarantee. Deep Digitization in Utilities Operations. The results of this lean effort, implemented in concert with the bank’s management team and internal change-management organization, are incredible. “In other scenarios, we may consolidate on fewer systems to increase efficiency and consistency,” Dillon adds. “Business as usual” within this bank included multiple back-office support functions which created positions dedicated solely to rework. Goldman Sachs CFO confident bank can hit cost-cutting targets. By Simon Gompertz Personal finance correspondent, BBC News This was linked directly to the bank’s management team. Deutsche Bank counts cost of job cutting with £2.8bn loss. This, in turn, helped them to focus their efforts on workforce performance and cost reduction in banking overall. Earlier this month, Deutsche Bank circulated a memo noting that free fresh fruit will no longer be provided to employees, according to the FT. Bankers will now need to dip into their own wallet to stave off scurvy, it appears. While layoffs are typically seen as the most direct way to reduce this cost and some banks such as BofA have announced branch-closure plans, most institutions try to avoid this if possible due to the risk of alienating customers. These were compounded by: These problems made themselves known in numerous KPIs, including processing cycle time, error rates, and backlog volumes. ... PwC has identified a bank of over 100 Cost Reduction Initiatives and Techniques. Replacing (some) employee travel with video conferencing. Since opening its doors in 1993, The Lab has helped some of the best companies in the world become even better. With increasing airfare and hotel costs, banks are “hunkering down and taking a closer look at travel expenses,” says Jim Neckopulos, Dallas-based senior vice president and leader of the financial practice at Hitachi Consulting. Even as they shy away from major core system replacements and other massive overhauls, savings can be found in the simplification or selective replacement of back office technology. Refining and consolidating back office systems. ABN Amro Bank NV plans to cut about 2,800 jobs over four years as the Dutch lender retreats from large parts of its investment bank and digitization allows it to operate with a smaller staff. 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