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. Implementing these initiatives is expected to improve efficiency in the respective units by about 25% and reduce the bank’s total costs by 4%. One way to avoid out-of-town travel is to utilize video- or audio-conferencing. But those NIGO applications were still a problem. In view of the depression in oil market, costs have been cut by most E&P companies and related services providers to levels no one would have imagined before. “Business as usual” within this bank included multiple back-office support functions which created positions dedicated solely to rework. Davidson. Cost cutting is a matter of commitment from the top management. This, in turn, helped them to focus their efforts on workforce performance and cost reduction in banking overall. Moving to less expensive marketing channels. The German lender’s latest cost-cutting measure signals the bank is willing to slash just about anything to save a few dollars. UMB Bank of Kansas City, Mo., for example, expects to reduce its branch staffing expenses by $1.9 million over three years by utilizing such a system to coordinate branch staffing, planning and forecasting, according to Meara. It was a tall order. 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. 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. In addition, some banks are opting to hire part-time employees instead of full-time in order to gain more flexibility in staffing models and to save on employee benefit costs. Refining and consolidating back office systems. Ms. Hoffman is a freelance writer based in Lawton, Okla. BAI © 2020 All rights reserved. Services. You might want to learn more about The Lab’s unique self-funding engagement model and money-back guarantee. “In other scenarios, we may consolidate on fewer systems to increase efficiency and consistency,” Dillon adds. Wells Fargo, as part of its Project Compass initiative, is consolidating disparate systems onto a single platform, such as with its customer information database, according to Scott Dillon, head of the bank’s technology infrastructure services. Deutsche Bank counts cost of job cutting with £2.8bn loss. Tellers will print out 8.5×11 sheets with current product listings and rates at a customer’s request, so they are assured the information is up-to-date and there’s no waste of paper, he adds. Bank … “I haven’t traveled to Little Rock in two months,” he says. Using standardization, the productivity variance of “in good order” applications plummeted to less than 15 percent. The reasons to do it are obvious: large-scale cost cutting to compensate for the dim earnings outlook, thanks to the pandemic-induced combination of rising loan losses, weak borrowing and collapsing net interest margin. BAI is Bank Administration Institute and BAI Center, Cost-Cutting Tips for Revenue-Squeezed Bankers. Ulster Bank had announced plans back in February to cut its costs, including a redundancy scheme for 100 managers as part of an earlier £250m group wide cost-cutting plan. Employee operating costs were cut by 16 percent. … Reducing internal use of paper and electricity. Numerous non-technology improvements were implemented to fix this problem. In some cases, a paperless initiative in the back office can lead to reducing the use of paper through delivery channels as well, Meara says. Tomasofsky says that banks are asking for better terms and pricing on these contracts “even if they’re not up for renewal.” One tactic is to offer to extend the contract terms in order to sweeten the deal for the vendor. The cost-cutting and efficiency agenda will vary among regions and from bank to bank. Impressively, nearly 90 percent of these improvements required no new technology investment. So was the backlog. 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). “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. Think about that: Half of the applications received were not in good order. This website uses cookies and third party services. Perhaps the story of your bank, tactfully disguised as this one was, might end up in these blogs, too. Cutting to spend on technology has been a thing for several years, but 2020 looks like the year it gets real lift. Consider: Productivity shot up 30 percent. 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. Cost cutting measures are typically implemented during times of financial distress for a company or during economic downturns. 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 … Here are some common tactics that banks, large and small, are utilizing in their efforts to improve operating efficiency: Realigning branch staff. 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. 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. Bank cost cutting: The final tally. 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. “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. Much of the cost-cutting burden is falling on the bank’s staff. The French bank said the jobs would go as it looks to strip out around €450m within its capital markets unit by 2023. They wanted to cut operational costs and improve efficiency and effectiveness in their back-office support groups. After the initial analysis and design phase of the assignment was complete, the implementation phase began. These were compounded by: These problems made themselves known in numerous KPIs, including processing cycle time, error rates, and backlog volumes. ➤Lack of historical data and high customer acquisition costs puts fintechs at a disadvantage in comparison to banks and technology companies. In the wake of coronavirus lockdowns, the world’s largest investment banks presented a united front in refusing to cut jobs. Not surprisingly, the rate for this KPI (key performance indicator) was significantly higher than that of the bank’s competitors. 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. Error rates were cut in half. For this initiative, retail branch support functions were analyzed for more than 500 employees across four different cities. In this bank, operating metrics were not consistently collected, employed, or understood. 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. 1. Cost-cutting makes sense, industry observers said. This was linked directly to the bank’s management team. They were being processed in an ad-hoc fashion, with a variance in productivity routinely exceeding 70 percent. Our previous article discussed ways to increase operational efficiency in the banking sector. On the other hand, many banks in the Asia-Pacific region are pursuing a broader efficiency agenda focused Here are some common tactics that banks, large and small, are utilizing in their efforts to improve operating efficiency: 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. Faced with a slow-growth economy and shrinking revenues, bank managers are pulling the only lever they have left: expense control. Handsomely. This prevented a focus on a lean, customer-centric experience while applications were being processed. While other banks are pushing the pause button on pre-Covid job cuts and digital transformation projects, Deutsche Bank is pressing ahead with plans laid down in 2019…and seizing the opportunity to make further costs savings from home working and video-conferencing. 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. “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. And the work paid off. 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 … 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. This bank’s Caribbean operations presented a tremendous improvement opportunity. Goldman Sachs CFO confident bank can hit cost-cutting targets. Published November 9, 2020 Updated November 9, 2020 . It’s just one of countless others we’ve delivered for clients for more than 25 years. Error rates dropped by an amazing 35 percent. But investors rewarded the bank for announcing the new cost-cutting target and sent the stock up 3.3% to $14.11. ... PwC has identified a bank of over 100 Cost Reduction Initiatives and Techniques. While RBS is priming its people for what the Financial Times describes as, ' a fresh strategy and cost-cutting plan in the new year,' other banks are doing the same and jettisoning ballast as they go. In this one, we’re going to dive into a cost-cutting case study with big results—and great takeaways for you. By Simon Gompertz Personal finance correspondent, BBC News They can also be enacted if … 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. A few months on and cracks are beginning to show. 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 … 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. 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. Over the course of two months, more than 125 individual-improvement and cost-cutting opportunities were identified. And they wanted to improve the overall customer experience in the process. The German lender says it had already given notice to or "eliminated" 900 employees as part of a shake-up announced two weeks ago. Remember: a million clients across 17 countries. The results of this lean effort, implemented in concert with the bank’s management team and internal change-management organization, are incredible. 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. 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. Bob Meara, senior analyst for Boston’s Celent, part of the Oliver Wyman Group, says that more banks are using teller management software to help them staff their branches more effectively, based on when customers are most likely to come in and what they need at various times. 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