SBI - Session 5 Strategy (Final)

State Bank of India Leadership Development Program
Session 5: Strategy Development
Singapore November, 2011

2011 Maris Strategies, Ltd. All rights reserved.
Module 4: Financial Strategy

November 19th
10:30 12:00 Session 1 The Future of Banking: What trends are reshaping the industry.
12:00 13:00 Lunch

13:00 14:30 Session 2 The Competition: How is the competitive landscape in India changing? 14:30 16:00 Session 3 The Value Proposition: What are we providing to meet our customer needs? 16:00 16:30 Break 16:30 18:00 Session 4 Value Proposition Alignment: What is our product / market segmentation strategy?
November 20th
09:00 10:30 Session 5 Strategy Development: How do we engage in right to left thinking? 10:30 12:00 Session 6 Performance Measurement: Forget Moodys are we measuring the right things?
12:00 13:00 Lunch

13:00 14:30 Session 7 Risk what risk: How are we building our risk topology? 14:30 16:00 Session 8 Organizational Design and Strategy Implementation: Are we organized for success? 16:00 16:30 Break 16:30 18:00 Session 9 Wrap up and discussion on steps to implement our strategy
2011 Maris
Strategies, Ltd. All rights reserved.
Four Things to Keep in Mind During this Session
Strategies are iterative, requiring refinement Good strategies generate a series of questions Customer loyalty is earned, not bought Organic growth is a process of discovery
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Strategic Thinking
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Trend: Evolution or Revolution?

2005
Large Bank Co-operatives Savings Societies Building Societies Mid-tier Bank Community Bank
2015
Increase profitability with more targeted offerings while expanding through selected acquisitions and market entries. Grow market share by building on local knowledge and deep customer relationships with a wider range of products and services Expand customer base by providing targeted products and services for high growth niches while leveraging superior process capabilities
Universal Banks
Middle squeeze: Large banks make acquisitions Non-banks present unique value propositions
Industry Specialists
Industry Specialists
Non-Bank Institutions
Non-Bank Institutions
Build on existing customer base and distribution networks with an emphasis on open sourcing of targeted products and services
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Most Banks Employ Five Major Strategies
Develop New Products Pursue Operational Excellence, Reduce Costs, Optimize
Strategic Initiatives
Acquire & Retain Customers, Suppliers
Consolidate, Structure, Transform Processes
Regionalize and Globalize
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Management Motivations for Strategy Development
Growing Bank
Mature Bank
Declining Bank
Cost
Revenue
Revenue Cost
Revenue Cost
New bank or new product
Working in a fixed but fluctuating profit margin
Losing customers or profits
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Life on Earth: Companies with a growth agenda

External factors cause revenues to plateau and or cost to expand exponentially
Growth Revenues
margin
Strategies: Top Line: Accelerate growth investments in next generation growth organic growth Bottom Line: Cost containment process optimization
Failure point
Costs
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Life on Earth: Companies in decline
Revenues
margin
Strategies: Bottom Line: Cost containment process optimization reorganize cost avoidance
Failure point Decline
Costs
Top line: improve margin find new markets innovate or die

Cost can never go to zero but revenue can
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Management Attitudes and Strategy Development

Growth Strategy Corporate Mentality Competitive Strategy Survival Strategy
R&D Investment Innovation
Zone of False Sense of Strategy Security
Cost containment Downsizing Outsourcing
Employee Attitude
Economics
Enthusiastic Optimism
Cost Revenue
Next Quarter Focused

Revenue Cost
Panic - Search for Next Job

Revenue Cost Outsourced
Process Refined
Business Process
Process Defined
Sold off
Employment Human Resources Organization
Scramble for Talent Re-organize Labour Skill Alignment
Downsize
Policies & Benefits
Outplacement, Terminations, Talent retention

Survey: What is your Banks Primary Business Strategy?
75%
Top-line Growth
Number of respondent banks
12 7 38 9 3 7 2
Bottom-line Savings
25%
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78 Banks
Source: Maris Strategies Retail Banking Survey 2011

Survey: What is your Banks Primary Business Strategy?

Growth Strategy
75%
25%
Cost Cutting Strategy

46% 39% 23% 23% 39%
15%
15%
0%
External New growth by customer merger and acquisition acquisition
Cross selling products and services to existing customers
Incremental process improvement
Broader Head Outsourcing Elimination large-scale count shared of business reductions services unprofitable process recustomers engineering
2011 Maris Strategies, Ltd. All rights reserved. Source: Maris Strategies Retail Banking Survey 2009
Strategy Centres on Top-Line Growth
Revenues
Top-line Growth
Profitability Failure point
Bottom-line Savings
Costs
Q1 Q2 Q3 Q4 Q5
Electric Shaving sold by Slot Machine 1940 in Subway
Why do some Strategies Fail?
1992
2010
Balanced Scorecard Strategy Map Tells the Story of Your Strategy

The Revenue Growth Strategy Improve stability by broadening the sources of revenue from current customers
Improve Returns
Broaden Revenue Mix Improve Operating Efficiency
The Productivity Strategy Improve operating efficiency by shifting customers to more cost-effective channels of distribution Financial Perspective
Increase Customer Confidence in Our Financial Advice
Increase Customer Satisfaction Through Superior Execution
Customer Perspective
Internal Perspective
Understand Customer Segments Develop New Products Cross-Sell the Product Line Shift to Appropriate Channel Provide Rapid Response
Minimize Problems
Increase Employee Productivity
Learning Perspective
Develop Strategic Skills
Access to Strategic Information
Align Personal Goals
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Balanced Scorecard Links Cause and Effect Hypotheses

Strategic Objectives
Financial
Strategic Measurements
(Lag Indicators) (Lead Indicators)
F1 - Improve Returns F2 - Broaden Revenue Mix
Return on Investment Revenue Growth Deposit Service Cost Change Share of Segment
Revenue Mix
F3 - Reduce Cost Structure

C1 - Increase Customer Satisfaction With Our Products & People C2 - Increase Satisfaction After the Sale
Depth of Relation
Customer
Customer Retention
Satisfaction Survey
I1 -Understand Our Customers I2 -Create Innovative Products

Internal
New Product Revenue Cross-Sell Ratio
Product Development Cycle Hours with Customers
I3 -Cross-Sell Products
Learning
I4 -Shift Customers to Cost-Effective Channel Mix Change Channels I5 -Minimize Operational Problems Service Error Rate I6 -Responsive Service Request Fulfillment Time L1 - Develop Strategic Skills Employee Satisfaction L2 - Provide Strategic Info Revenue per Employee L3 - Align Personal Goals
Strategic Job Coverage Ratio Strategic Info Availability Ratio Personal Goals Alignment (%)
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Work Activity: Develop a Vision for 2018

Envision how the Media and Customers will see your Bank in 2018
Inside: Financial Services: What's Working; What Isn't Nintendo Acquires Charles Schwab at Steep Discount
April 15, 2015 $1 1.00
Financial Services/Cover Story

Key Results Headlines:
How Customers View Us:
Sidebar/Special Interest Profile: Five years ago, who would have predicted these would be the Critical Success Factors for 2018:
52 FORTUNE
April 15, 2015
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Work Activity: What are our Financial Goals and Objectives?
Goals:
Objectives:
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Strategic Goals
Increase banks market share Overtake key rivals on quality or customer service or product performance Attain lower overall costs than rivals
Boost banks reputation with customers

Attain stronger foothold in international markets Achieve technological superiority Become leader in new product introductions Capture attractive growth opportunities
Strategic Objectives
Strategic objectives convert the mission of the institution into specific performance targets for the organization to achieve Strategic objectives are qualified in two broad categories: Corporate perspective quantified by measures such as Economic Value Added (EVA), Net Present Value (NPV), Return on Investment (ROA), Statement of Cash Flow, and Weighted Average Cost of Capital (WACC);
Shareholder Perspective quantified by measures such as: Expected return for shareholders (Return on Stock) CAPM, Return on Equity (ROE), Market Price of Share Stock policy & Dividend Policy, Price Earning Ratio (PER), and Earnings per Share (EPS).
Example of Strategic Goals and Objectives
Initiative
Improve Communications
Strategic Goal Managers and staff being well informed on relevant things
Specific Purpose Well informed managers and staff feel empowered and can do their job better
Accomplishments Awareness of need for regular information, Finance meetings
Objectives Weekly email newsletter to all staff from management
Less Bureaucracy
Organic Growth
A streamlined effective organization with an agile response to changes in the business environment Continuous sustainable growth both by acquisition but also organic
We want more staff to feel they are being recognized, as measured by the regular staff surveys
Reduce unnecessary work by streamlining processes and influencing individual behaviour
Simple process in place for identifying and taking forward incremented improvements; Increased awareness Company wide organic growth initiatives with focus on big growth projects
Ideas on best practice have been shared and managers empowered to provide small monetary incentives
Reduce all business process steps by 10% during next 12 months.

Reduce operating costs by 5% in 12 months
10% operating result growth
Increase cross sell ratio to 3.5

Repackage 20% of product portfolio Recognize staff that implement ideas with bonus incentive, allocate 10% of cost savings and 5% of revenue improvement annually
Recognition
We want more staff to feel they are being motivated
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Work Activity: What are our Strategic Goals and Objectives?
Goals:
Objectives:
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Work Activity Example: Decomposing Goals and Objectives
Valuing Customer Centricity
Strategic Initiative
Goal
Increase Revenues
Objective
70-90%
Next page
Increase in Overall Value
Note: Cross/up-selling, target customer retention and target pricing strategy are the greatest value creators in retail banking. Average bank has between 2.8 4.5 products per customer
Decrease Costs
10-30%
Tactical Objective
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Grow Customer Base Increase Revenues
20-40%
Next page
70-90%
Increase Revenue per Relationship
60-80 %
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Increase Customer Referrals

Attract New Customers 5-25% Improve Marketing Effectiveness
20-40%
60-80%
Improve Customer Satisfaction
70-90%
Grow Customer Base
20-40%
Increase Target Cust. Retention
45-65%
Set-up Switching 10-30% Costs for Customers
Increase Target Cust. Reactivation
20-40%
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Grow customer base Increase revenues
20-40%
70-90%
Increase revenue per relationship
60-80 %
Next page
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Develop targeted pricing strategy by customer segment
50-70%
Increase revenue per product
20-40%
Increase overall price level Increase volume per customer
20-30%
10-20%
Increase revenue per relationship
60-80 %
Increase cross/ up-selling 50-70%
Increase number of products per customer
Foster bundling concepts with external partners
5-25%
60-80%
Develop personalized product offerings Improve sales channel efficiency 20-40%
5-25%
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Attract new customers Increase customer referrals 5-25% Improve marketing effectiveness Improve customer satisfaction
20-40% 60-80% 70-90%
Strategic Agenda
Increase 70-90% revenues
Grow customer base
20-40%
Increase target 45-65% cust. Retention
Set-up switching costs for 10-30% customers Increase target customer 20-40% reactivation Increase revenue per product Develop targeted pricing strategy by customer segment Increase overall price level Increase volume per customer 50-70%
Increase in overall value
20-30% 10-20%
20-40%
Increase revenue 60-80 % per relationship
Tactical Agenda
Reduce Marketing Cost Decrease 10-30% costs
Increase cross/ up-selling 50-70% 60-80% Foster bundling concepts with external partners Develop personalized product offerings Improve sales channel efficiency
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5-25% 20-40% 5-25%
Reduce Selling Cost

Reduce Servicing Cost
Reduce Credit Risk Cost
Decompose your Strategic Goals and Objectives
Right way
Wrong way
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Work Activity: Decompose your Strategic Goals and Objectives?
Goal
Objective
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Strategic Initiative: Improve Cross-Selling
Revenue Enhancement through Cross-Selling Cross-sell remains an illusive goal for most institutions; only a few banks have successfully created a systematic capability to grow their business organically in this way
Leading banks are using specific tactics to increase share of wallet

Offering tightly integrated product bundles Using financial planning as a sales tool Knowing what to offer and when based on life and other key events Using a local market planning approach to drive cross-sell efforts
Cross-Selling Example
Attract new customers Increase customer referrals 5-25% Improve marketing effectiveness Improve customer satisfaction
20-40% 60-80% 70-90%
Strategic Agenda
Increase 70-90% revenues
Grow customer base
20-40%
Increase target 45-65% cust. Retention
Set-up switching costs for 10-30% customers Increase target customer 20-40% reactivation Increase revenue per product Develop targeted pricing strategy by customer segment Increase overall price level Increase volume per customer 50-70%
Increase in overall value
20-30% 10-20%
20-40%
Increase revenue 60-80 % per relationship
Tactical Agenda
Reduce Marketing Cost Decrease 10-30% costs
Increase cross/ up-selling 50-70% 60-80% Foster bundling concepts with external partners Develop personalized product offerings Improve sales channel efficiency
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5-25% 20-40% 5-25%
Reduce Selling Cost

Reduce Servicing Cost
Reduce Credit Risk Cost
Process View Linear Techniques

BEFORE Common Techniques to Improve Process Efficiency Eliminate Activities Automate or Digitize AFTER
LOB LOB LOB LOB
Create Shared Services

Global Sourcing Parallel Processing
Discrete activities within a process are often replicated across multiple business units or channels. Often different techniques are applied for the same activity across different units The component view identifies the collection of specialist capabilities that can be combined as a network to support the full array of process
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Component Component
Work Activity: List your Strategic Initiatives
Strategic Initiatives:
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Growth Strategies
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The Strategic End Game
Managing the Customer Expectation Gap Managing the Service Gap Managing the Cost Gap
Customers Served
Revenues
Costs
Q1 Q2 Q3 Q4 Q5
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The Growth Agenda

Strategic Need
Increase Product Demand
New product innovation New applications for old products Increase knowledge of existing market Find new markets Brand development Sell existing customers more things
Growth Agenda
Increase Market(s)
Organic Growth Merger or Acquisition
Find new things to buy Buy customers Enhance efficiency

Improve customer service Buy new technology Redeploy existing technology Consolidate resources
Reduce Costs
Improve Quality
Operational Agenda
Retool Leverage technology Sell assets
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Characteristics of Growth in a Bank
Product Diversity - What you sell Product Demand Why is the product valuable Market Expansion Where you sell Market Timing When to sell Customer Saturation Who buys types of products Operational Excellence How to deliver on customer expectations
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Directions of Growth
New Products & Services
Expand products or services to existing customer base Product / Service Offerings Gain share of existing customer business
Existing
Served
Create new market
Bank
Gain market share
Customers
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Not Served
What Questions Do We Need to Ask?
Expand Product Portfolio
How can we create new products and or how do we find new uses for our existing products?
How do we find new markets for our current products and for new products?
How do we gain a greater share of existing customer business?
How do we find new customers in our existing markets?
Not Served
Increase Market Share

Ways to Grow
Market Concentration
More frequent use Larger quantities
Penetration Segmentation More locations Minimize overhead Export Diversification Capacity Analysis Crossovers
New uses
Innovation Replacement products
Additional features
Complementary items Completely new items
Mergers and Acquisitions

Gain immediate market share
Growth by Acquisition to build Shareholder Value
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Establishing a Strategy for Growth

Growth is:
A process of vision, leadership, investment, and managed intentions.
Growth is not:
A product of intermittent actions or changes in customer demand.
Growth is achieved by:

Expanding a firm's value proposition (building competencies to identify, analyse and rapidly capitalize on opportunities).
Sustaining a growth agenda requires:

A clear set of objectives identifying how the firm will achieve growth
Sustainable growth is:

a business process in its own right that requires careful planning,
investment, execution, measurement and, above all, management

Characteristics of Growth and Shareholder Value

Absolute Market Value Growth (CAGR 2000-2011)
Revenue Growth
Profitable Growth Unprofitable Growth

0%
Above Average
Below Average
Cost Cutting
Above Average
Below Average
Profit Growth
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Setting the Growth Agenda: Screening Criteria
Market Attractiveness
Market size Market growth/cyclicality
Business Strengths
Familiarity with market and technology Fit with competencies Shared resources (manufacturing facilities, R&D, sales force, distribution) Prospects for advantages Availability of partners
Intensity of competition

Direct rivalry supplier power
customer power
substitutes potential entrants
Degree of segmentation
Availability of channels
Social/regulatory constraints
Work Activity Moving from Strategy to Action
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Drivers of Market Share
Advertising & promotion
Sales effectiveness Total offer meeting customer needs Fees & relationships
Share of Voice Image Referral
Awareness
Competitive Consideration Total Consideration Non-Competitive Consideration Coverage Loyalty Channel Strategy
Competitive Hit Rate Overall Hit Rate 100% Hit Rate Market Share
Work Activity: Drivers of Market Share

Map the factors that drive market share in your markets?
Use previous slide as a guide. Note: For banks with multiple markets: first develop a generic model, then list the issues that are specific to each market separately
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Strategic Moves to Increase Market Share

Strategic Questions: How do we find new customers in existing markets?
How can we identify and sell to new markets?
Things to consider:
Market share: Which products in what markets? How can we move past close competitors or further dominate the market? How can we increase our visibility with customers?
Top-of-mind awareness: Do customers remember our products? Or our capabilities

Do customers consider us as a superior provider of banking services? What is the level of customer dialogue? Are Informed customers more loyal? Service delivery: How do we link to other products or services Strategic alliances: Can we partner with someone to get into new markets? Cobranding?
Work Activity: Strategic Moves to Increase Market Share

What is your strategic thinking on increase market share?
Use previous slide as a guide. Discuss and answer questions. Are there any other questions to be answered?
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Tactical Actions to Increase Market Share

Tactical Questions: How do we sell more to existing customers?
How can we find new uses for existing products?
Things to consider:
Are there opportunities to cross sell other products to our existing customers?
How can we enhance brand quality? How can we enhance our product portfolio? How can we increase the effectivity of our marketing campaigns?
Can any of our products be applied in new ways?

Do we understand all the businesses our customers (SMEs & Corporates) are serving? How do we get closer to our customers needs?
Work Activity: Tactical Actions to Increase Market Share

What tactical actions can you take to increase market share?
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Strategic Moves to Expand the Product Portfolio

Strategic Questions: How do we enhance our products to command higher fees?
How can we improve our service and relationships

with customers?
Things to consider:
Are there new product innovations in the pipeline? Can we create product variations? How can we repackage our product offerings with services to increase the value? Do we really know our customers? Do we really know what are competitors will be doing next? How do we set fees to gain a long-term competitive advantage, rather than to maximize short-term profits? What is our relative cost position to our competitors and what set us apart?
Work Activity: Strategic Moves to Expand the Product Portfolio

What is your strategic thinking on expanding the product portfolio?
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Tactical Actions to Expand Product Portfolio
Tactical Questions: How do we educate our customers to understand our value proposition? What approach can we use to adjust prices without alienating our customers?
Things to consider:
How can we assist our customers (SMEs) in selling their products? How do we create a dialogue with our customers to better understand their needs? How can we increase our products usability with existing customers? Is quality a factor in our customers decision process? How do we change the customers perception of our products?
Can we improve our customer assistance?

What can we do to make it easy to do business with our bank?
Work Activity: Tactical Actions to Expand the Product Portfolio

What tactical actions can you take to expanding the product portfolio?
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Case Study
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Rabobank Strategy 2010
Development of new (international) growth possibilities
Strengthen the capital base

Cost reduction
Revenue or organic growth

Domestic mergers, acquisitions and alliances
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Development of New (International) Growth Possibilities

Cross border economies and synergies for partnering or M&A
Revenue economies and synergies Retail Banking Corporate & Investment Banking - Export successful products - Develop new international services - Reach scale by broadening client and product coverage (especially mid corporate investment banking) - Provide international services to global clients - Cross selling to larger distribution network - Reach scale to attract institutional investors - Vendor leading for Pan European clients Cost economies and synergies - Eliminate overlap in international retail network - Eliminate overlap in functions (e.g. FX trade, international payments) and international network - Sharing industry expertise - Share part of back office costs - Close overlapping locations - Share research, product development and back office costs -Share back office costs Synergetic potential Low High
Private Banking Asset Management
Medium High
Leasing
Medium
Insurances
Internet / M-Banking Credit Card Head Office / IT
- Export successful products - Develop commercial lines

- Export successful products and concepts - Export successful products and marketing approaches (Not applicable)
- Risk diversification
- Share back office costs -Administration can be centralized -Eliminate costs in overlapping functions
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Low
Low Low High
Cost Reduction
Restructure organization to be customer centric
Consolidate branches (1,445 branches) Customer visits to branches are down 95% during last 25 years
Customers that do visit branches fall into two broad categories

Working professional (reengineer service delivery for speed and convenience) Wealthy (design branches for upscale customers)
Refocus support from head office

Head office to consolidate resource to provide targeted support services to specific customer groups
Optimize back office activities

Target distribution channels based on customer preferences
Revenue Growth Improve selling power of front line people

Upgrade CRM capabilities
Gain larger market share in Urban areas

Acquire new customers: urban professionals and young people
Develop clear market segmentation strategy

Customers Products Channels
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Five Growth Levers

Wealth management: identify ways to create a tighter relationship with
wealthy consumers to increase loyalty and drive cross-selling opportunities Generational strategy: identify strategies to capture new segments and / or strategies to differentiate your offerings to existing segments Multichannel strategy: identify ways to create a consistent customer experience across key channels: branches, online, mobile devices, and contact centres Role in payments ecosystem: identify strategies for achieving success through new business models for collaborating with retailers, and define your strategy related to mobile payments Growth in Asia and Emerging Markets: identify strategies for profitable growth in geographical regions with strong underlying GDP growth
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Multiple Distribution Options to Realize Revenue Growth

Strategy Multi-channelling Description Selling products and services of clients with different channels, such as branches ATMs, telephone and internet Selling identical selfmade products under different labels in the market Distribution of products produced by another financial institution Linking two brands for the selling of one product or group of products Pros
- Customer can choose how and when contact with the bank is wanted - Different channels appeal to different types of customers - Cost savings, due to relatively cheap virtual channels - Reach different target groups - Economies of scale in production
Cons
- Customers become more anonymous - Customers can switch more easily between banks - High investments in ICT systems - Complexity of Control
Multi-labelling
- Cannibalisation of existing labels - complexity of process - Reputation risk - Complexity of control - Customers may loose overview if too many products are offered - Cannibalisation of own products - Complexity of control - Customer can fid the combination of brands illogical - - Negative publicity of the partner harms your own brand - - Complexity of control
Open architecture
- Larger product offer for customers - Reduce the need for customer to switch banks - Fee income - Product is also sold through the network of the partner - - May change the image of the brand - -Explore new markets - - Cooperation may lead to innovation - - Create a bond with the customer of the partner - - Sharing of the advertising budget - Increase scale of production - Revenues from the selling of products
Co-Branding
White labelling
Production of products that others will sell with their own label
Cannibalisation of your own labelled products - Deterioration of competitive position - supervisory institutions might not allow it - Reputation risk Complexity of control
Case Study
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Vision of becoming in every manner the clear leader and Nigerias bank of First choice.
Our targets can be broadly broken down into:

(i) Scale (assets) (ii) Profitability/capital efficiency (ROA, ROE, cost-to-income) (iii) Asset quality (NPLs) and (iv) Service level metrics.
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First Banks Strategy
Strategy
GROWTH
Attain full benefits of scale and scope by accelerating growth and diversification of assets, revenue and profit.
SERVICE EXCELLENCE
Drive unparalleled service levels by developing worldclass institutional processes, systems and capabilities.
PERFORMANCE MANAGEMENT
Deliver unmatched results by creating a performance culture with clear individual accountability at all levels.
TALENT
Become a hub for the best industry talent; cultivate a highly motivated, capable and entrepreneurial workforce.
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Growth Strategy
Institutional/Corporate Banking:
Redefine business unit commercial strategy (optimised product portfolio, channel strategy and marketing communications approach linked to deep customer insights) Drive deeper risk asset penetration in the middle market corporate segment, underpinned by enhanced credit analysis and processing capabilities Deepen share of wallet of large corporates to enhance fee/commission income Deepen capabilities in structured finance space to enhance participation in infrastructure financing.
Growth Strategy
Retail Banking:
Redefine business unit commercial strategy (optimised product portfolio, channel strategy and marketing communications approach linked to deep customer insights) Increase penetration and profits from consumer credit by redesigning credit processes and tools (e.g., statistical models and credit scoring algorithms) Develop a differentiated sales and service model for high net-worth and affluent customers, and aggressively pursue this segment.
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Growth Strategy
Public Sector Banking:
Redefine business unit commercial strategy (optimised product portfolio, channel strategy and marketing communications approach linked to deep customer insights)
Aggressively pursue key accounts not presently within portfolio.
Branch Network and Expansion Employing global positioning system mapping to superimpose macroeconomic data (including aggregate output of each state) on the industrys branch network. Banks existing business locations influence the city attractiveness index that will drive business location deployment going forward.
Accordingly, 47 branches were opened in the year, bringing the total number of branches on our network to 570
Growth Strategy
General Growth Initiatives:
Significantly but conservatively scale up risk asset deployment and optimise treasury portfolio to increase yield on earning assets Engage in enterprise transformation to reposition the FirstBank brand and, over time, drive enhanced customer consideration, acquisition, and cross-sell/upsell Optimise branch network via more targeted new branch openings, deployment of lighter/small format branches focused on sales (versus servicing).
Inorganic growth: Continue to explore the Nigerian landscape for merger or acquisition opportunities, to extend the franchise in a manner that benefits shareholders Explore international M&A (and organic) entry options.
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Growth Strategy
Institutional/Corporate banking:
Redefine business unit commercial strategy (optimised product portfolio, channel strategy and marketing communications approach linked to deep customer insights) Drive deeper risk asset penetration in the middle market corporate segment, underpinned by enhanced credit analysis and processing capabilities Deepen share of wallet of large corporates to enhance fee/commission income Deepen capabilities in structured finance space to enhance participation in infrastructure financing.
Service Excellence Strategy

Goal: modernise the Banks fundamental operating model (processes, tools/systems, and roles/capabilities).
Key initiatives to drive this objective include:
End-to-end process redesign (centralised processing and branch process reengineering) focused on priority processes with the objective of standardisation, simplification and efficiency
Branch transformation that updates the FirstBank branch format TouchPoint reengineering for all electronic/other customer touchpoints, including the Banks interactive website (recently redesigned), e-statements and customer communications, etc. Channel optimisation and migration to optimise channel functionality while aggressively driving migration of transactions to the most appropriate channels Three-year IT transformation plan designed to stabilise and improve core elements of the Banks IT infrastructure, and enhance the IT organisation/capabilities.
Performance Measurement Strategy

Create a performance culture
Align individual, team and business objectives
Clearly defined KPIs (with weightings)

Individuals monitor performance targets Monthly and quarterly performance reviews with commensurate rewards Dedicated business performance monitoring (BPM) unit Implement new operating structure to align Business Unit objectives Extend balanced scorecard usage to back-office/ support functions
Expand portfolio of metrics to track critical improvement areas for the future
Talent Strategy
Bank of First Choice must attract, develop and retain the best-performing industry talent available in the region. Staff productivity: wellbeing programmes for the field organisation and
critical back-office support functions
Staff capability building: build and up-skill the competencies of the market
facing/ front office and back-office workforce - (e.g. FirstAcademy)
Culture change: encourage entrepreneurship, leadership and a desired to

change
Individual performance: ensure the alignment of individual KPIs targets to

job functions and corporate strategy
FirstBanks employee value proposition: FirstBank as a premium

employer
Career management: drive career development at all levels and sustain

organisational performance (management development programmes, student mentoring, coaching, cross posting, secondment).
Scale: Estimated 13% market share of assets (our goal is 20%).
Views inorganic growth as a viable and appropriate growth route,

where a suitable combination and terms can be found.
While recent regulatory statements imply that certain limits may be

placed upon the relative size of banks, we believe that FirstBank
should aspire towards a 20% market share domestically.
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Profitability/capital efficiency:
Boost ROE by improving its leverage (with a strong emphasis on lowcost current and savings deposit mobilisation) and enhancing its share
of fee and commission income.

Cost-cutting initiatives are ongoing Cost-to-income ratio improvements will come from the income side of
the equation by:

improving its share of fee/commission income optimising its liquidity position (i.e., strongly incentivising growth in
the loan book versus liquid assets in the near-time)

increasing its yield on earning assets.

Asset quality:
Bank experienced increase in non-performing loan ratio due to the general slowdown in economic growth and direct or indirect exposure
to sectors affected by the 20082009 decline in oil prices and the

domestic equity markets. The Bank made aggressive provisions and write-downs in 2009 in line
with prudential guidelines and expects that the overall asset portfolio
quality will improve shortly, all else being equal. As the Bank extends its franchise further in the middle-market
corporate (commercial) and consumer lending space, risk management

systems and processes will be strengthened to optimise portfolio quality and to ensure that margins reflect and adequately compensate
for risk.
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Service levels: The greatest priority of the Bank, will be improving service delivery. The Bank is yet to break into the top quartile of Nigerian banks with respect to service levels, based on independent industry surveys, but has instituted major initiatives to address this lapse. Long reputed for very high transaction volumes (driven in part by its very large mass market franchise), FirstBank will increasingly strive to improve overall service delivery quality.
The Bank will institute incentives to aggressively move routine

transactions to alternative channels and simultaneously ensure that premium customers (e.g., corporates, high net-worth customers)
receive first-class service.

Goal to Improve Segmentation Analysis
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Strategy to Sequence Growth Systematically

FirstBank Group Priorities by growth horizon
2011 Maris
Performance Results
TOTAL ASSETS (N'Billions) GROSS EARNINGS (N'Billions)
1,667
1,165
1,772
1,957
131
185
763
Mar 07
Mar 08
Mar 09
Dec 09
Dec 10
Mar 07
Mar 08
Mar 09
Dec 09
175
Dec 09
79
Dec 10
DEPOSIT LIABILITIES (N'Billions)
PROFIT BEFORE TAXATION (N'Billions)
582
662
1,244
1,072
1,331
22
38
46
Mar 07
Mar 08
Mar 09
Dec 09
Dec 10
Mar 07
Mar 08
Mar 09
Dec 10
2011 Maris
34
208
Innovation
2011 Maris
Deloitte 2011 Impairment Survey

Which of the following do you expect to have the greatest impact on your organization in the next 5 years?
2011 Maris

SBI - Session 5 Strategy (Final)

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SBI - Session 5 Strategy (Final)

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State Bank of India Leadership Development Program

Session 5: Strategy Development

Singapore November, 2011

Module 4: Financial Strategy

12:00 13:00 Lunch

12:00 13:00 Lunch

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Four Things to Keep in Mind During this Session

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Trend: Evolution or Revolution?

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Most Banks Employ Five Major Strategies

Develop New Products Pursue Operational Excellence, Reduce Costs, Optimize

Acquire & Retain Customers, Suppliers

Consolidate, Structure, Transform Processes

Regionalize and Globalize

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Management Motivations for Strategy Development

New bank or new product

Working in a fixed but fluctuating profit margin

Losing customers or profits

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Life on Earth: Companies with a growth agenda

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Life on Earth: Companies in decline

Failure point Decline

Top line: improve margin find new markets innovate or die

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Management Attitudes and Strategy Development

R&D Investment Innovation

Zone of False Sense of Strategy Security

Cost containment Downsizing Outsourcing

Next Quarter Focused

Panic - Search for Next Job

Employment Human Resources Organization

Scramble for Talent Re-organize Labour Skill Alignment

Policies & Benefits

Outplacement, Terminations, Talent retention

Survey: What is your Banks Primary Business Strategy?

Number of respondent banks

Source: Maris Strategies Retail Banking Survey 2011

Survey: What is your Banks Primary Business Strategy?

Cost Cutting Strategy

External New growth by customer merger and acquisition acquisition

Cross selling products and services to existing customers

Incremental process improvement

Strategy Centres on Top-Line Growth

Profitability Failure point

Electric Shaving sold by Slot Machine 1940 in Subway

Why do some Strategies Fail?

Balanced Scorecard Strategy Map Tells the Story of Your Strategy

Increase Customer Confidence in Our Financial Advice

Increase Customer Satisfaction Through Superior Execution

Increase Employee Productivity

Develop Strategic Skills

Access to Strategic Information

Align Personal Goals

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Balanced Scorecard Links Cause and Effect Hypotheses

F1 - Improve Returns F2 - Broaden Revenue Mix

F3 - Reduce Cost Structure