Bertrand LavayssièRe Capgemini

WRBR08_ CONVENTION_EFMA_ENGLISH

1

Bertrand LavayssièreManaging Director, Global Financial ServicesCapgemini

30th Efma Convention: Leadership in retail finance

13 p.m. & 14 March 2008 - Paris

Press conferenceAmsterdam, March 12th 2008


3

Introducing…

Patrick DESMARES, Secretary General, European Financial Management & Marketing Association (EFMA)

Bertrand LAVAYSSIERE, Managing Director, Global Financial services, Capgemini

Felix POTVLIEGE, Head Strategy & Business, Development of Retail Banking, ING Group


4

Agenda

Presentation of the World Retail Banking Report

Pricing Indexes – Key Findings

Organic Growth in Domestic Markets – Key Findings

Questions & Answers


5

DashboardsOverview based on

macroeconomic data and on analyses of local evolutions in

the retail banking sector(Cf. www.wrbr08.com)

Pricing indexes

Index of prices for product and services based on their

frequencies of use, and updated yearly

2008Spotlight

“Organic Growth in Domestic Markets”

The spotlight is based on case studies, quantitative analysis and interviews with 52 banks

The World Retail Banking Report (WRBR) aims to Highlight the Trends in the Retail Banking Industry on a Global Scale

© 2008 Capgemini - All rights reserved

Croatia Dashboard WRBR2008

• GDP at current prices and PPP : 229 billion HRK• Population : 4.44 million• GDP per head : 51560 HRK• Importance of Banking in GDP: n/a• Economic growth rate : 4.3%• Consumer confidence indicator : -26• Unemployment rate : 12.7%

• GDP at current prices and PPP : 229 billion HRK• Population : 4.44 million• GDP per head : 51560 HRK• Importance of Banking in GDP: n/a• Economic growth rate : 4.3%• Consumer confidence indicator : -26• Unemployment rate : 12.7%

Macro economic indicators (2006)Macro economic indicators (2006)

• Banking staff: 24000• Number of branches: 1114• Number of ATM: 2307• Households savings ratio : 1.9%• Inflation rate : 3.3%• Interest rate for consumer credit: 12%• Interest rate for residential mortgage: 5%

• Banking staff: 24000• Number of branches: 1114• Number of ATM: 2307• Households savings ratio : 1.9%• Inflation rate : 3.3%• Interest rate for consumer credit: 12%• Interest rate for residential mortgage: 5%

Retail banking environmentRetail banking environment

Taxation of xx on capital gains

Taxation of xx on capital gains

RETAIL BANKING MARKET

Type and size of PlayersType and size of Players ProductsProducts TrendsTrends

Regulatory ChangesIn December 2006, HNB announced further tightening of regulations. Effecti ve from January 2007, the growth of the banks’ loan portfolios i s rest ri cted to 12 percent per annum. Any excess of the growth rate must be foll owed by mandatory purchase of low-yielding HNB bills i n the amount of 50% of the excess placement.

Competition environment• Major Banks in pri vate foreign ownership have retained their dominant positions in all business segments •Increase of capital carried out, sharp competi tion and slowing down of the net i ncome growth showed the effects, Banks ROAE decrea sed to 12% or 9%. • Banks continue to compete with new products and services showing raise in fee income and income from other services such a s credi t cards, investment banking.• In meanwhile, two main sources of funds for Banks´ growth were more barely available: foreign funds become more expensive due to HNBrest ri ctions and domestic funds (client deposits) were channeled into investment funds and stock market.• Latest acquisi tions: Hungarian OTP Group (Nova Banka) end of 2005; Société Générale (Splitska Banka) in 2006; Bayrische Landesbank (Hypo Alpe Adria Bank Group) in 2007.

Customers • Customers are becoming more demanding in terms of product offerings .• At the end of 2006 IPO of INA introduced the significant number of small individual i nvestors at the money market. This moved the small pri vate investors into di fferent dimension, from non risky savings to taking certain risk for investments such a s securiti es (fol lowed by IPO of HT in Sep 2007)• Loans to retail customers remain a key business, but most Banks have started to target SME businesse s a s an untapped revenue segment.

Product Trends• Most Banks offer c redi ts in domestic HRK and EUR/CHF (value clause); Consumer loans have become highly popular among the customers. • Payments service s stil l represent the highest revenues for core banking services in Croatian banks. • Banks are focused to innovati ve and retail clients oriented products and services and they strongly compete wi th each other. • The signifi cant acti vi ti es in investment banking means for Banks greater competi ti on regarding funds source s and as a consequence new credit activiti es (margin credi ts).• Packages of products and se rvi ces are being introduced to the market.

Regulatory ChangesRegulatory ChangesIn December 2006, HNB announced further ti ghtening of regulationIn December 2006, HNB announced further tightening of regulation s. s. Effective from January 2007, the growth of the banksEffective from January 2007, the growth of the banks’’ loan portfolios is loan portfolios is rest ricted to 12 percent per annum. Any excess of the growth ratrestricted to 12 percent per annum. Any excess of the growth rat e must be e must be followed by mandatory purchase of followed by mandatory purchase of lowlow--yielding HNB bil ls in the amount of yielding HNB bill s in the amount of 50% of the excess placement50% of the excess placement . .

Competition environmentCompetition envi ronment•• Major Banks in private foreign ownership have retained their doMajor Banks in private foreign ownership have retained their dominant minant posi tions in all business segments positi ons in all business segments •• Increase of capital carried out, sharp competiti on and slowing dIncrease of capi tal carried out, sharp competition and slowing d own of the own of the net income growth showed the effects, Banksnet income growth showed the effects, Banks´ ROAE decrea sed to 12% ROAE decrea sed to 12% or 9%. or 9%. •• Banks continue to compete with new products and servi ces showinBanks continue to compete with new products and services showin g g rai se in fee income and income from other services such a s crediraise in fee income and income from other servi ces such a s credi t cards, t cards, i nvestment banking.investment banking.•• In meanwhile, two main sources of funds for BanksIn meanwhile, two main sources of funds for Banks´ growth were more growth were more barely available: foreign funds become more expensive due to HNBbarely available: foreign funds become more expensive due to HNBrest rictions and domestic funds (cl ient deposits) were channeledrestricti ons and domestic funds (cli ent deposi ts) were channeled into into investment funds and stock market.investment funds and stock market.•• Latest acquisitions: Hungarian OTP Group (Nova Latest acquisitions: Hungarian OTP Group (Nova BankaBanka ) end of 2005; ) end of 2005; SociSociéé ttéé GGéé nnéé ralerale ((SplitskaSpli tska BankaBanka ) in 2006; ) i n 2006; BayrischeBayri sche LandesbankLandesbank (Hypo (Hypo AlpeAlpe AdriaAdria Bank Group) in 2007.Bank Group) i n 2007.

Customers Customers •• Customers are becoming more demanding in terms of product offerCustomers are becoming more demanding in terms of product offerings .i ngs .•• At the end of 2006 IPO of INA introduced the significant numberAt the end of 2006 IPO of INA introduced the signifi cant number of small of small i ndividual investors at the money market. This moved the small pindividual investors at the money market. This moved the small p rivate rivate investors into different dimension, from non risky savings to tainvestors into different dimension, from non ri sky savings to ta king certain king certain risk for i nvestments such a s securities (foll owed by IPO of HT iri sk for investments such a s securities (followed by IPO of HT i n Sep n Sep 2007)2007)•• Loans to retail customers remain a key business, but most BanksLoans to retail customers remain a key business, but most Banks have have started to target SME businesse s a s an untapped revenue segment.started to target SME businesse s a s an untapped revenue segment.

Product TrendsProduct Trends•• Most Banks offer credits in domesti c HRK and EUR/CHF (value claMost Banks offer c redits in domestic HRK and EUR/CHF (value cla use); use); Consumer loans have become highly popular among the customers. Consumer loans have become highly popular among the customers. •• Payments service s still represent the highest revenues for corePayments servi ce s sti ll represent the highest revenues for core banking banking services in Croatian banks. services in Croatian banks. •• Banks are focused to innovative and retail clients oriented proBanks are focused to innovative and retai l cli ents oriented pro ducts and ducts and services and they strongly compete with each other. services and they strongly compete with each other. •• The signifi cant activiti es in i nvestment banking means for BankThe signi ficant activities in investment banking means for Banks greater s greater competition regarding funds source s and as a consequence new crecompetition regarding funds source s and as a consequence new cre dit di t acti vities (margin credits).activi ties (margin credits).•• Packages of products and se rvi ces are being introduced to the mPackages of products and se rvices are being introduced to the m arket.arket.

supervisory institutions• GDP at current prices and PPP : € 34 Billion• Inhabitants : 4.41 million• GDP per head : € 7 638• Economic growth rate : 4.8%• Consumer confidence indicator : -22• Unemployment rate : 12.0%• Consumer Price Index: 3.2%

• GDP at current prices and PPP : € 34 Billion• Inhabitants : 4.41 million• GDP per head : € 7 638• Economic growth rate : 4.8%• Consumer confidence indicator : -22• Unemployment rate : 12.0%• Consumer Price Index: 3.2%

• Banking staff: 19 096• Number of branches: 1 118• Number of ATMs: 2 649• Households savings ratio : 2.0%• Inflation rate : 3.2%• Interest rate for consumer credit: 9.5%• Interest rate for residential mortgage: 5.5%• Interest rate on long term bonds: 4.1%

• Banking staff: 19 096• Number of branches: 1 118• Number of ATMs: 2 649• Households savings ratio : 2.0%• Inflation rate : 3.2%• Interest rate for consumer credit: 9.5%• Interest rate for residential mortgage: 5.5%• Interest rate on long term bonds: 4.1%

Croatian National Bank (HNB)

Croatian Agency for Superv ision of

Financial Serv ices (HANFA))

Financial Agency(FINA)

Croatian Competi tion Agency (AZTN)

• Respon sible for competition control

• Central bank, respon sible for overall stabi lity of financial system

• Control of all banking activities

• Supervi sion of domestic payments system (clearing and RTGS)

• Respon sible for Central Account Register

Regulatory Organisations

Croatian Chamber of Economy (HGK) -

Financial Department

• Advisory body on poli cy and developments within the banking industry

• Data selection and processing from card management fi eld

• Supervi sion of banks, pension and investment funds, insurance companies, brokerage house s

Credit activities: In 2006 Banks granted credits to a total amount of EUR 25.6bn (both in HRK and in foreign currency); 23.6% increase compared with the previous year.

Deposits: Ban ks we re very active in deposi ts collection. T otal deposi ts increased to EUR 27.5bn or 18.2%.

New technologies, credit and debit card transactions: Croatian banks continue to invest in technology development i n order to increase the number and quality of financial products and services. Card transactions have become an increasingly important sphere of business for Croatian banks in the past few years, and bank clients have recognized the advantages of using cards.

Some new introduced products in 2006: Chip cards (EMV platform);Co-Branded Cards; E-ban king, m-Payments; Multiple types of mortgage loans; Dri ve-in ATMs; Enhanced ATM servi ces (e.g. recharge of the mobi le prepaid card, deposits, statement servi ce s); Share trading and high yield savings linked to bonds/investment funds; Consumer loans for house refurbishing and repairing; Product Packages

FINALPRICE_FIGURES WRBR08 V1.12.PPT 4

Source: Capgemini analysis, 2008.

101 €

136 €

197 €

104 €

122 €

45 €31 €

49 €

22 €35 €

79 €

52 €70 €75 € 74 €

0 €

50 €

100 €

150 €

200 €

250 €

Europe Eurozone Europe Non-eurozone North America Asia-Pacific Average

Figure 1.3 Average Local Profile PricesAnnual prices of core banking services by geographic area and usage pattern, 2008 (€)

Very Active User priceActive User priceLess Active User price

FINALSPOTLIGHT_FIGURESV7.2.PPT 5

Figure 2.3 Domestic Retail Banking: Growth of Revenue vs. Costs for Selected Banks, 2002-2006 (%)

Sources : Capgemini analysis, 2008 , and bank annual reports.Note: CIR before impairment losses.(1) CAGR calculation using 2007 currencies.

OperatingcostgrowthCAGR 02-06(1)

Revenuegrowth

CAGR 02-06 (1)

La Caixa

Citigroup

Wachovia

Mizuho

Sumitomo Mitsui

Dexia BNPP

Crédit Agricole

CM-CIC

SocGen

Deutsche Bank

SanpaoloUniCredit Banca

ABN AMRO

ING

BBVA

Nordea Barclays

Bank of America

Wells Fargo

RBSANZ

CBA

Westpac

Santander

Banques Pop

Caja Madrid

Caisse d'Epargne

Banca Intesa

-0,05

0

0,05

0,1

0,15

0,2

-0,15 -0,1 -0,05 0 0,05 0,1 0,15

HBOS

Resona

KBC

Dresdner Bank

HVB

LCLFortis

Rabobank


6

Agenda




Questions & Answers


7

World Retail Banking Report – Price Index Key Messages Summarized

Prices vary significantly across the globe while consumers pay an average of €70 a year for banking services

Influencing consumers seems to have been the main driver of banks’ pricing strategies from 2006 to 2008

Banks cut the price of sales influencers

Banks acted on prices of behaviour influencers according to their costs

Banks kept prices unchanged for unseen services

Prices were stable in Europe

European prices remained stable with a small 0.8% price increase across both the eurozone and non eurozone

With the advent of SEPA, prices of pan-European payments have stabilised in the eurozone, and (excluding Ireland) even decreased faster in Europe eurozone than in the rest of the world

Prices rose in North America (+5.7%) and dropped in Asia-Pacific (-11.1%)

North America’s price rose the most—averaging 5.7%—resulting primarily from higher prices for payments and cash utilisation; its price had declined during the three previous years due to fierce competition on account management fees.

Asia-Pacific’s price fell by 11.1% this year, essentially because of intensified competition in Australia and India, particularly in payments and account management.


8

While consumers pay an average of €70 a year for banking services, prices vary significantly across the regions of the globe

Average Local Profile Price (€)



9

While consumers pay an average of €70 a year for banking services, prices vary significantly across the 26 studied countries

13 24 1959

18 5812

136

54434233396166

32544758

4142

64 354534

124

167

278

243 215

112

185 159

105 98

210

114122117

113 95

85 99

74

72

95

1717

30

33

123

132

116 119

8695 90 85 84 60

82 7072

7059

68 5452

72

34

0

50

100

150

200

250

300

350

400

450

A B C D E F G H I J K L M N O P Q R S T U V W X

Very Active User PriceActive User Price

Less Active User Price


10

Influencing consumers seems to have been the main driver of banks’pricing strategies from 2006 to 2008

0,4%

1,9%

0,2%0,1%-1,6%

-1,2%

2%

-0,4%-0,3%

0,9%1,1%

0,3%0%-0,6%-2,3% -0,5%-1%-1,3%0%

Cur

rent

Acc

ount

Cre

dit C

ard

Deb

it C

ard

SALES INFLUENCERS ( -0,8%)

Cal

lC

entr

e

Onl

ine

Ban

king

Cas

h D

epos

it at

A

TM

With

draw

al a

t oth

er

bank

s’A

TM n

etw

ork

With

draw

al a

t ba

nks’

ATM

Dire

ct D

ebit

Exte

rnal

Tra

nsfe

r

Inte

rnal

Tra

nsfe

r

Stan

ding

Ord

er

BEHAVIOUR INFLUENCERS,Less costly ( -0,2%)

Cas

h de

posi

t at d

esk

With

draw

al a

t des

k

Che

que

Ban

ker’s

dra

ft

Che

que

Stop

Deb

it C

ard

Stop

Doc

umen

t Sea

rch

BEHAVIOUR INFLUENCERS,more costly ( -0,9%)

UNSEEN SERVICES ( 0%)


11

Prices were Stable in Europe Eurozone with a 0.8% (€0.6) rise only for local active users

Product and Service Price Variations vs. Last Year for the Local Active User in Europe Eurozone (€)


Sources of Fees for Core Banking in Europe Eurozone (%)



12

With the advent of SEPA, prices of pan-European payments have stabilised in the eurozone

Price of Pan-European Payments Means for the Local Active Profile (€)


A B C D E F G H I J K L M N O P Q R S T U V W X Y

Average Eurozone* €38 vs. €41 in 2007

Average Rest of the World €33 vs. €34 in 2007

*Note: For methodological reason one country has been taken off


13

Prices were Stable in Europe Non-eurozone with a 0.8% rise (€0.6) only for local active users


Sources of Fees for Core Banking Services in Europe Non-eurozone (%)

Product and Service Price Variations vs. Last Year for the Local Active User in Europe Non-Eurozone (€)



14

0,2%3%

-8%

-1%-3%

-22%

-0%

-44%

3%

-1%

15%

-4%-4%

-4%-4%

-3%-4% -3%

-14%

-1%

0%

-17%

-1%

-8%

-2%-5%

-2%

0%1%

13%

-5% -2%

7%

-11%

16%

0%

3% 0% -2%

37%

4%

-10%

-26%

-38%

12%

-17%

7%

-53%

-18%

-83%

-60%

14%25%

0%

-5%0%

-11%

14%

0% -2%

12%

-28%

-5% 13%

27%

-57%

12 3 4

5 6 7

8

9 10

11

12

13

-7%

13%

-10%

-25%

-13%

-25%

0%-1%

12%

18%

4%0%

-3%

1%4%

1%5%

-1%

Prices evolutions over the last three years do not show resilient policies at work

Country A

1 2 3 4

5 6

Country B

11%

0%

16%16%

0% 0%0%0%0%0,2%5%

29%

0% 0,2%

-2%

Country D

1 2 3 4 5

Country C

1

2 3 4 5

6

7

8

9

Var. 06/05Var. 07/06Var. 08/07


15

World Retail Banking Report – Price Index Key Messages Summarized

Prices vary significantly across the globe while consumers pay an average of €70 a year for banking services

Influencing consumers seems to have been the main driver of banks’ pricing strategies from 2006 to 2008

Banks cut the price of sales influencers

Banks acted on prices of behaviour influencers according to their costs

Banks kept prices unchanged for unseen services

Prices were stable in Europe

European prices remained stable with a small 0.8% price increase across both the eurozone and non eurozone

With the advent of SEPA, prices of pan-European payments have stabilised in the eurozone, and (excluding Ireland) even decreased faster in Europe eurozone than in the rest of the world

Prices rose in North America (+5.7%) and dropped in Asia-Pacific (-11.1%)

North America’s price rose the most—averaging 5.7%—resulting primarily from higher prices for payments and cash utilization; its price had declined during the three previous years due to fierce competition on account management fees.

Asia-Pacific’s price fell by 11.1% this year, essentially because of intensified competition in Australia and India, particularly in payments and account management.


16

Agenda




Questions & Answers


17

WRBR 2008 spotlight theme

The sub-prime crisis and forecast economic slow down has highlighted theimportance of growth in mature countries. We decided therefore to focus our 2008 analysis on :

Organic Growth in Domestic Markets

2007Transforming Operating Models in Retail Banking

2006The Rise of Remote

Channels: Building a New Client Relationship Model

2005Increasing Share of Wallet from High-Potential Clients

in Mature Markets

2004Pricing in a

Global Market


18

World Retail Banking Report – Spotlight Key Messages Summarized

Leading banks have well performed on their retail domestic operations over the last 5 years, steadily growing their revenue faster than their costs

Four pillars have supported their efforts to achieve profitable organic growth in their domestic markets

1. Combining fast time to market, innovation, and local client intimacy

2. Full multi-channel integration and optimisation

3. Increasing sales productivity through dynamic branch management

4. Leveraging a multi-brand portfolio to create attractive value propositions for each market segment.

Most banks however rely on these pillars to support very similar strategies: namely to build trust relationship with their clients in order to sell them a large number of financial products.

We believe that tougher regulations, more flexible technology, more demanding clients and new competitors will radically change retail banking

We simulated the effect of these structural changes on retail banking in 8 major European markets

Banks could lose 36% of their projected net income (and more than 50% in certain markets) within 10 years

To cope with this new environment, successful banks can use three distribution strategies to grow beyond the traditional retail banking business models

“Better sell”, to better fit diverse clients’ needs

“Larger offer”, extending the offering to non-financial products and services

“Indirect business”, selling through other distributors


19

Leading banks have well performed on their retail domestic operations over the last 5 years

Operating Costs Growth CAGR 02-06

0% 5% 10% 15%- 5%-10%-15%

Rev

enue

Gro

wth

CA

GR

02-

06

0%

5%

10%

15%

20%

- 5%


20



0% 5% 10% 15%- 5%-10%-15%

Rev

enue

Gro

wth

CA

GR

02-

06

0%

5%

10%

15%

20%

- 5%


21



0% 5% 10% 15%- 5%-10%-15%

Rev

enue

Gro

wth

CA

GR

02-

06

0%

5%

10%

15%

20%

- 5%

Resona

Citigroup

Mizuho

SumitomoMitsui

Bank Of America

Wachovia

Wells Fargo

+ JapanUSA


22



0% 5% 10% 15%- 5%-10%-15%

Rev

enue

Gro

wth

CA

GR

02-

06

0%

5%

10%

15%

20%

- 5%

Unicredit Sanpaolo

BBVA

DeutscheBank

Resona

Citigroup

Mizuho

BancaIntesa

DresdnerBank

La Caixa

SumitomoMitsui

Bank Of America

Wachovia

Caja MadridWells Fargo

Santander

+ Spain+ Italy


23



0% 5% 10% 15%- 5%-10%-15%

Rev

enue

Gro

wth

CA

GR

02-

06

0%

5%

10%

15%

20%

- 5%

Unicredit Sanpaolo

BBVAHVB

DeutscheBank

Resona

Citigroup

Mizuho

BancaIntesa

DresdnerBank

La Caixa

SumitomoMitsui

Bank Of America

Wachovia

Banques Populaires

CM-CICCaja Madrid

Wells FargoSantander

Caisses d’Epargne

BNPP

SocGen

LCL

Crédit Agricole

+ France+ Germany


24

ABNAMRO

Barclays



0% 5% 10% 15%- 5%-10%-15%

Rev

enue

Gro

wth

CA

GR

02-

06

0%

5%

10%

15%

20%

- 5%

Dexia

Unicredit Sanpaolo

BBVAHVB

DeutscheBank

Resona

Citigroup

Mizuho

BancaIntesa

DresdnerBank

La Caixa

SumitomoMitsui

Bank Of America

Wachovia

HBOS

ING

Rabobank

Banques Populaires

CM-CIC RBSCaja Madrid


Caisses d’Epargne

BNPP

SocGen

LCL

Crédit Agricole

+ UK+ Netherlands


25

ABNAMRO

Barclays



0% 5% 10% 15%- 5%-10%-15%

Rev

enue

Gro

wth

CA

GR

02-

06

0%

5%

10%

15%

20%

- 5%

Dexia

KBC

Unicredit Sanpaolo

BBVA

CBA

HVB

DeutscheBank

Resona

Citigroup

Mizuho

BancaIntesa

DresdnerBank

Fortis

La Caixa

SumitomoMitsui

Bank Of America

Wachovia

HBOS

ING

Rabobank

Banques Populaires

CM-CIC ANZ RBSCaja Madrid


Caisses d’Epargne

Westpac

BNPP

SocGen

LCL

Crédit Agricole

+ Australia+ Belgium


26

ABNAMRO

Barclays

4 best performers on their domestic markets have been identified


0% 5% 10% 15%- 5%-10%-15%

Rev

enue

Gro

wth

CA

GR

02-

06

0%

5%

10%

15%

20%

- 5%

Dexia

KBC

Unicredit Sanpaolo

BBVA

CBA

HVB

DeutscheBank

Resona

Citigroup

Mizuho

BancaIntesa

DresdnerBank

Fortis

La Caixa

SumitomoMitsui

Bank Of America

Wachovia

HBOS

ING

Nordea

Rabobank

Banques Populaires

CM-CIC ANZ RBSCaja Madrid


Caisses d’Epargne

Westpac

BNPP

SocGen

LCL

Crédit Agricole


27

Pillar 1: Fast time to market, innovation and local client intimacyCrédit Mutuel - CIC in France



28

Pillar 2: Ensuring full multi-channel integration and optimisation: ING in the Netherlands

Source: CBS (Dutch market) and company data (Postbank).


29

Pillar 3: Increasing sales productivity through dynamic branch managementLa Caixa in Spain

Source: La Caixa annual report, 2006.


30

Pillar 4: Leveraging a multi-brand portfolio to create attractive value propositions for each market segmentHBOS in UK

Source: Presentation at HBOS Retail Investors' Seminar, 2003.


31

Conjectural and structural changes in the market are putting banks revenue at risk and compelling them to adapt their strategies

Conjectural changes:

No longer financial market bubble

No longer real estate bubble

Slow economic growth in mature countries

Structural changes:

More constraining regulations

High leverage technologies

New customers’ behavior (risk averse, delegators…)

New entrants

More competitive marketsHarmonised national environmentsDown pressures on pricesMarket saturation to traditional value propositions


32

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

Belgium France Germany Italy Netherlands Nordic Spain UK

Simulation of the effect of this competitive pressure : Banks could loose 36% of NBI before 2017


- 55%

- 30%

- 57%

- 55% - 17%

- 50%

- 54%

+ 32%

A global 36% drop

NBI 2017F

Prices harmonization impact

Interest rate margin impact


33

Identification of three distribution strategies to go beyond the most rewarding traditional model

BET

TER

SEL

LLA

RG

ERO

FFER

IND

IREC

TB

USI

NES

S


34


BET

TER

SEL

LFinancial Advisor for

Mass Affluent Customer

Community Bank

Discount Bank

Taking care of the customer’sfinancial life as a financial advisor

Specialised service provider to aspecific community

The most economic withoutminimising security or quality

HSBC Premier

USAA

Société GénéraleBoursorama

LAR

GER

OFF

ERIN

DIR

ECT

BU

SIN

ESS


35


BET

TER

SEL

LLA

RG

ERO

FFER

Financial Advisor for Mass Affluent Customer

Community Bank

Discount Bank

Trust Operator




One-stop shopping forcustomers, including all kindsof personal or family services

HSBC Premier

USAA


Deutsche Bank Q110 branches

IND

IREC

TB

USI

NES

S


36


BET

TER

SEL

LLA

RG

ERO

FFER

IND

IREC

TB

USI

NES

S

Financial Advisor for Mass Affluent Customer

Community Bank

Discount Bank

Open Source Bank

General Broker

Trust Operator




One-stop shopping forcustomers, including all kindsof personal or family services

Easy access and time savingof highly automated operations

through the Internet,

The best products on the market,and independent advisory

Services to fit clients’ needs

HSBC Premier

USAA


Deutsche Bank Q110 branches

Zopa

Virgin Money


37

Most impacting for the retail banking industry

1

23

Discount Bank

General Broker

Open Source

Banker rated models according to their perceived likeliness and impact

Most likely to appearbefore 2010

123

Trust Operator

Discount BankGeneral

Broker

The future will be likely a combination of several models


38

The next challenge for retail bankers: re-assembling the building blocks to support a new retail banking business model of their own

New Banking Model

New

Relationship

Model

Larger Offer

Evolutive ta

rifs

Multichannel

Integration

New Branch

Flexible Production

Low Costs Structure

Innovation Brands

Strategy

Economic

ModelJob Culture Web 2.0 etSOAClients & communities

Competencies


39

World Retail Banking Report – Spotlight Key Messages Summarized

Leading banks have well performed on their retail domestic operations over the last 5 years, steadily growing their revenue faster than their costs

Four pillars have supported their efforts to achieve profitable organic growth in their domestic markets

1. Combining fast time to market, innovation, and local client intimacy

2. Full multi-channel integration and optimisation

3. Increasing sales productivity through dynamic branch management

4. Leveraging a multi-brand portfolio to create attractive value propositions for each market segment.

Most banks however rely on these pillars to support very similar strategies: namely to build trust relationship with their clients in order to sell them a large number of financial products.

We believe that tougher regulations, more flexible technology, more demanding clients and new competitors will radically change retail banking

We simulated the effect of these structural changes on retail banking in 8 major European markets

Banks could lose 36% of their projected net income (and more than 50% in certain markets) within 10 years

To cope with this new environment, successful banks can use three distribution strategies to grow beyond the traditional retail banking business models

“Better sell”, to better fit diverse clients’ needs

“Larger offer”, extending the offering to non-financial products and services

“Indirect business”, selling through other distributors


40

Agenda




Questions & Answers


41

Agenda




Questions & Answers