Bertrand LavayssièRe Capgemini

30th Efma Convention:
Leadership in retail finance
13 p.m. & 14 March 2008 - Paris

Bertrand Lavayssière
Managing Director, Global Financial Services
Capgemini
WRBR08_ CONVENTION_EFMA_ENGLISH
1

Press conference
Amsterdam, March 12th 2008

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

3

Agenda

Presentation of the World Retail Banking Report
Pricing Indexes – Key Findings
Organic Growth in Domestic Markets – Key Findings
Questions & Answers

4

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

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

Index of prices for product and
250 €

Pricing
197 €
200 € Very Active User price
Active User price
Less Active User price

services based on their 150 €

100 €
101 €
136 €

104 €
122 €

indexes
79 €

frequencies of use, and updated
75 € 74 € 70 €
52 €
50 €
45 € 49 €
31 € 35 €
22 €
0€

yearly
Europe Eurozone Europe Non-eurozone North America Asia-Pacific Average
Source: Capgemini analysis, 2008.

FINALPRICE_FIGURES WRBR08 V1.12.PPT 4

Figure 2.3 Domestic Retail Banking: Growth of Revenue vs. Costs for

“Organic Growth in Domestic
Selected Banks, 2002-2006 (%)
0,2
Revenue
growth
CAGR 02-06 (1)

2008
Bank of America

Markets” 0,15

0,1
La Caixa

Sumitomo Mitsui
KBC

HBOS
Wachovia

The spotlight is based on case
Banques Pop
CBA CM-CIC RBS
ANZ Caja Madrid

Spotlight
ING Wells Fargo
Banca Intesa BBVA Dexia BNPP
Santander
0,05 ABN AMRO HVB
Citigroup SocGen Crédit Agricole
Mizuho Barclays Nordea Caisse d'Epargne

studies, quantitative analysis
UniCredit Banca Sanpaolo
Rabobank
Fortis
Westpac
LCL
0

Dresdner Bank
Deutsche Bank
Resona
Operating

and interviews with 52 banks
cost
growth
-0,05 CAGR 02-06(1)
-0,15 -0,1 -0,05 0 0,05 0,1 0,15

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

FINALSPOTLIGHT_FIGURESV7.
5
2.PPT

Overview based on Macro economic indicators (2006)
Macro economic indicators (2006)

•• GDP at current prices and PPP :: 229 billion Billion
€ 34 Billion
GDP at current prices and PPP 229 billionHRK •• Banking staff: 24000 19 096
Croatia Dashboard WRBR2008

Retail banking environment
Retail banking environment
Regulatory Organisations supervisory institutions

macroeconomic data and on
€ 34 HRK Banking staff: 24000 19 096
Croatian Agency f or
Inhabitants :4.44 million
•• Population ::: 4.44 million
Population
Inhabitants 4.41 million
4.41 million •• Number of branches: 1114
Number of branches: 1114 1 118
1 118 Croatian National Superv ision of Croatian Competi tion Financial Agency Croatian Chamber of
Economy (HGK) -
•• GDP per head ::51560 HRK
GDP per head 51560 HRK € 7 638
€ 7 638 •• Number of ATM: 2307
Number ofATMs: 2307
ATMs:
ATM: 2 649
2 649 Bank (H NB) Financial Serv ices Agency ( AZ TN) (FINA)
Financial Department
(HA NF A)
)
Economic growth rate :in GDP: n/a
Importanceof Banking
•• Importancegrowthrate :in GDP: n/a
Economic of Banking 4.8%
4.8% •• Households savings ratio ::1.9%
Households savings ratio 1.9% 2.0%
2.0%
•• Economic growth rate :indicator ::
Consumer confidence :indicator
Economic growth rate 4.3%
Consumer confidence 4.3% -22
-22 •• Inflation rate :: 3.3%
Inflation rate 3.3% 3.2%
3.2% • Central bank, • Supervi si on of banks, • Respon sibl e for
respon sible for overall pension and • Supervi si on of • Advisory body on poli cy
•• Unemployment rate :: indicator ::-26
Consumer confidence indicator -26
Unemployment rate
Consumer confidence 12.0%
12.0% •• Interest rate for consumer credit: 12% 9.5%
Interest rate for consumer credit: 12% 9.5% competition control
domestic payments and developments within
stabi lity of financi al investment funds,
•• Unemployment rate :: 12.7%
Consumer Price rate 12.7%
Consumer PriceIndex:
Unemployment Index: 3.2%
3.2% •• Interest rate for residential mortgage: 5%5.5%
Interest rate for residential mortgage: 5%5.5% system insurance companies, system (cleari ng and the banking industry
RT GS) • Data selecti on and
•• Interest rate on long term bonds:
Interest rate on long term bonds: 4.1%
4.1% • Control of all banking brokerage house s
• Respon si bl e for Central processing from card
activities
Account Register management fi eld
Taxation of xx on
Taxation of xx on
capital gains
capital gains

Dashboards
RETAIL BANKING MARKET

analyses of local evolutions in
Type and size of Players
Type and size of Players Products
Products Trends
Trends
Regulatory Changes
Regulatory Changes
Regul atory
In December 2006, HNB announced further tightening of regulation s.
In December 2006, HNB announced further ti ghteni ng of regulation s.
In December announced tightening of regul ati ons.
Effective from January 2007, the growth of the banks’ loan portfolios iss
’
Effecti ve from January 2007, the growth of the banks l oan portfolios i
from January banks’
restricted to 12 percent per annum. Any excess of the growth rat e must be
rest ricted to12 percent per annum.Any excess of the growth rat mustbe
rest ri cted 12 percent per Any the rate be
followed by mandatory purchase of llow-yielding HNB billls innthe amount of
followed by mandatory purchase of ow-yielding HNB bil s i the amount of
foll owed low-yi elding HNB bills the amount of
50% of the excess placement .
50% of the excess pl acement
50% of the excess placement.
Competition envi ronment
Competition environment
environment
• •Major Banks inn private foreign ownershipp have retained their dominant
MajorBanks i pri vate foreign ownership have retai ned their dominant
Banks forei gn ownershi have retai ned their dominant
positi ons in all business segments
posi tions i n all businesssegments
positions in all segments
• Increase of capi tal carried out, sharp competition and slowing ddownof the
•Increaseof capital carried out, sharp competititionand sl owing down of the
of capital carried out, sharp competi on and slowing own of the
net income growth showed the effects, Banks´ ROAE decrea sed to 12%
net i ncome growth showed the effects, Banks´ ROAE decrea sed to 12%
net showed effects, Banks´ ROAE to 12%
or 9%.
or9%.
9%.
• •Banks conti nue to compete with new products and services showinng
Banks continue to compete with new products and servi ces showi g
Banks continue to compete with products and services g
raise in fee income and income from other servi ces such a sscredi t tcards,
rai se in fee i incomeand income from other services such a credi cards,
raise in fee ncome and income from other services such cards,
investment banki ng.
i nvestment banking.
investment banking.
In meanwhile, two main sourcesof fundsfor Banks´ growth were more
• •In meanwhil e, two mai n sources of funds for Banks´ growth were more
In meanwhile, main of for Banks´ more
barely avail abl e: forei gn funds become more expensive due to HNB
barel y available: foreign funds become more expensi ve due to HNB
barely available: foreign funds become more expensive to

the retail banking sector
restricti ons and domestic funds (cliient deposi ts) were channeled into
rest rictions and domestic funds (cl ent deposits) were channel ed into
rest ri ctions domestic funds (client deposits) channeled i nto
investment funds and stock mar ket.
i nvestment funds and stockmarket.
investment funds mar ket.
• •Latest acquisitions: Hungarian OT P Group (Nova Banka ) end of 2005;
Latest acqui si tions: Hungarian OT P Group (Nova Banka end of 2005;
Hungari an Group (Nova Banka) end of 2005;
Soci éétéGé né rale (Spli tska Banka) iin 2006; Bayri sche Landesbank (Hypo
Soci té Générale (Splitska Banka) n 2006; Bayrische Landesbank (Hypo
é rale Splitska ) in 2006; Bayrische Landesbank
Alpe Adria Bank Group) iin 2007.
Al pe Adria Bank Group) n 2007.
Alpe Adria Bank Group) in 2007.
Customerss
Customer s
Customer
• •Customerssare becoming more demandi ng in terms of product offerings . .
Customer s are becoming more demanding in termsof productoffer ngs
Customer are becoming more demanding of i
offerings
• •At the end of 2006 IPO of INA iintroduced the signifi cant number of small
Atthe end of 2006 IPO of INA ntroduced the significant number of small
the end 2006 IPO of introduced the si gnificant number of
individual investors at the money market. T his moved the small private
i ndi vidual investors at the money market. T his moved the small pri vate
individual i nvestors market. hi s moved the small rivate
investors into different dimensi on, from non ririsky savings to taking certain
sky savi ngs
i nvestors i nto di fferentdi mension, from nonrisky savings to ta ki ng certain
investors into dimension, taking certain
ririsk for investments such aas securities (followed by IPO of HT iin Sep
risk for i nvestments such ass securiti es (foll owed by IPO of HT in Sep
sk for investments such (fol lowed by IPO Sep
Credit activities: In 2006 Banks granted credits to a total amount of EUR 25.6bn (both in HRK and in foreign
2007)
2007)
2007)
currency); 23.6% increase compared with the previous year. • •Loans to retail customers remain a key business, but most Banks have
Loans to retail customers remain a key business, but most Banks have
Loans to retail remain key business, but Banks
started to target SME busi nesse ssassan untapped revenue segment.
started totarget SMEbusinesse s aas an untapped revenue segment.
target businesse an untapped revenue segment.
Deposits: Ban ks we re very active in deposi ts collection. T otal deposi ts increased to EUR 27.5bn or 18.2%.
Product T rends
Product T rends
Product rends
New technologies, credit and debit card transactions: Croati an banks continue to invest in technology • •Most Banks offer cc redi tsin domestic HRK and EUR/CHF (value claause);
Most Banks offer credits in domesti c HRK and EUR/CH F (val ue cl use);
Most Banks offer redits in domestic and EUR/CHF
Consumer loans have become hi ghl y popular among the customers.
Consumer l oans havebecome highly popular among the customers.
become highly popular among customers.
development i n order to increase the number and quality of financial products and services.
• •Payments servi ce sssti ll l represent the highest revenues for core banking

Agenda

Questions & Answers

6

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.

7

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 (€)


8

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

450

400

350 278

Very Active User Price
300 243
215 Active User Price
210 Less Active User Price
250
167 185 159
132
200
105
116 119 112 98 122 113
114 95
150 117 124
85 99 72
123 90 60
95 85 84 59 74 95
100 86 82 70 72
70 68 54 30
72 34 45
64 66 61 52 34 35
50 58
47 54 43 54 33 17
42 41 39 42 59 12
32 33 36 8 17
24 19 1 18
13 5
0
A B C D E F G H I J K L M N O P Q R S T U V W X

9

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

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

1,9% 2%
BEHAVIOUR INFLUENCERS,
Less costly ( -0,2%) UNSEEN SERVICES ( 0%)

1,1% -1,2%
0,9%
SALES
INFLUENCERS ( -0,8%)
0,3% 0,4%
0,2%
0% -1,3% -1% -2,3% -0,6% 0% -0,5% -0,3%-0,4% 0,1%
-1,6%

Internal Transfer
Direct Debit

External Transfer

Document Search
Cash Deposit at
ATM

banks’ ATM network
Withdrawal at other

Banker’s draft
Current Account

Cheque

Cheque Stop
Withdrawal at desk
Standing Order

Cash deposit at desk
banks’ ATM
Withdrawal at
Online Banking
Debit Card
Credit Card

Debit Card Stop
Call
Centre

10

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

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

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



11

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 (€)

Average Eurozone*
€38 vs. €41 in 2007

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

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

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

12

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 (€)



13

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

Country A Country C
18%
13% 12% 15%

5 6 2 3 4 5 7 9
5% 4% 4%
1% 1% 3% 3%
0% -1% 0% 0% -4% -4% -8% 0,2%
-1% -0% -1%
-1% -2% -3% -2% -1% -1%
-3% -4% -3% -4% -3% -4%
1 2 3 4 -7% -5%
-8%
-10% 1 6 8
-13% -14%
-17%
-22%
-25% -25%

29%
Country B -44% Country D
1 37%
16% 16%
27% 2 3 4 25%
16% 11%
14% 12% 13% 14%12%
7% 9 10 7% 5%
3% 4%
0% -2% 0% 0% 1% 0% -5% -2% 0,2% 0% 0% 0,2% 0% 0%
0% 0% 0%
13% 0% -2%
0% -5% -5% -2%
-11% -10% -11% 13
-18% -17%
-26% 11 1 2 3 4 5
5 6 7 -28%
-38%
8
-53%
-57% -60%
12 Var. 06/05
-83% Var. 07/06
Var. 08/07

14

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.

15

Agenda

Questions & Answers

16

WRBR 2008 spotlight theme

2004 2005 2006 2007
Pricing in a Increasing Share of Wallet The Rise of Remote Transforming Operating
Global Market from High-Potential Clients Channels: Building a New Models in Retail Banking
in Mature Markets Client Relationship Model

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

Organic Growth in Domestic Markets

17

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

18

Leading banks have well performed on their retail domestic operations
over the last 5 years
20%

15%
Revenue Growth CAGR 02-06

10%

5%

0%

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

Operating Costs Growth CAGR 02-06

19

20%

15%

10%

5%

0%

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


20


20%
USA Bank Of
America
+ Japan

15%
Wachovia

Sumitomo
Mitsui
10%

Wells Fargo

5%
Citigroup
Mizuho

0%
Resona

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


21


20%
+ Italy Bank Of
America
+ Spain
La Caixa
15%
Wachovia

Sumitomo
Mitsui
10%

Caja Madrid
Banca BBVA Wells Fargo
Intesa Santander
5%
Citigroup
Sanpaolo
Mizuho Unicredit

0%
Deutsche Resona Dresdner
Bank
Bank

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


22

Bertrand LavayssièRe Capgemini

Bertrand LavayssièRe Capgemini

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