Canadian Banking 2012_v07

“ The conundrum facing most banks the world over is that, even as their customers
make less use of branches, the banks have yet to find an equally good way of
drawing new customers”
Canadian Banking 2012 – Overview
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Supply Chain Analysis and Optimization – Are you running a lean operation?
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Business Requirements – Translating for digital products?
Going Digital– Optimize ROI for digital transformation?
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“Understanding customer preferences and habits through trending real time
analytics, in addition to being technologically prepared for the advancements in
mobile and digital banking services will yield new revenue streams for all the major
players who wish to capitalize on emerging resources.”
Internal Objectives
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 EY Global - Consumer banking Survey 2012
 Deloitte - Top 5 trends in Retail Banking
 Deloitte - Mobile Banking, A Catalyst for improving bank performance
 KPMG Insights into Canadian Banking
 PwC - Perspectives in the Canadian Banking Industry
 PwC - Rebooting the Branch in a multi-channel global environment
Canadian Banking Consumers
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Canadian Banking Consumers – Facts and Figures
Source – Global Consumer Banking Survey 2012, EY
Customer Confidence
- 28% of Canadians report a decrease in confidence
Multi-Banking
- 35% of customers multi-bank to obtain the best rates and fees for varied products
Finding information on banking products and services
- 67% turn to discussions with family and friends
- 21% gather information from social networks
Drivers of attrition
- 54% of those who have switched banks cite high fees as the main cause
- 37% cite poor branch experience

Canadian Banking Consumers – Facts and Figures
Source – Global Consumer Banking Survey 2012, EY
Personalization
- 73% of customers would be willing to share personal information to receive better
service from their bank
Improve Customer Satisfaction
- 33% of respondents want their bank to improve its fees and charging structures
Loyalty Program Appetite
- 35% have enrolled in a bank loyalty program (+16% since 2011)
- 42% would value cash back on CC or DC transactions

Key Takeaways – Stats and Solutions
 Globally, 50% of respondents cite dissatisfaction
with high fees as the most important driver of
attrition
 35% of customers have enrolled in a bank loyalty
program. A 16% increase since 2011.
 Attrition rates in Canada have increased from
38% to 45% in the past year
 Give Customers more flexibility
 Help Customers Shape their experience
 Shape Business Models around customer needs
Reports and Industry Analysis Sources
Global Consumer Banking Survey 2012

Key Takeaways – Market Dynamics
 Recent years have shown increase in
numbers of new entrants.
 New entrants are mostly Canadian branches
and subsidiaries of foreign owned banks and
newly created banks controlled by non
financial service groups
 i.e. ING Direct (recently acquired by Scotia for
$3.1B)
 i.e. PC Financial, Walmart Banking Services,
Rogers applies for Bank Licence
Global Consumer Banking Survey 2012

Global Consumer Banking Survey 2012 - Ernst and Young
Conclusions

The TOP 5 trends in Retail Banking - Deloitte
Key Takeaways
 The ROI for an advisory discussion with an
individual retail banking client exceeds 100%
 With regards to NFC (Near Field
Communications) in Canada mobile adoption
has increased 10 fold since 2008
 Canada has the worlds heaviest social media
usage per capita
 To win with client analytics and increase ROI
focus on multi channel strategies through offer
content, offer timing, and offer channel

Key Takeaways – Industry Analysis
 The most recent financial crisis has spurred
changes in regulatory provisions in banking
communities worldwide
 Knowledge and data is most valuable when it
describes customer behavior
 In the evolving world of mobile banking,
customer loyalty will be congruent with the
most secure applications
 Legacy IT systems need to be updated to
handle the real time streaming influx of data
Insights into Canadian Banking - KPMG

Insights into Canadian Banking - KPMG
Key Takeaways – Customer Analysis for
effective product development
 Banks must discover and assess customer
needs and then apply the knowledge to
product development decisions
 What? Do our customers need?
 What? Products or Services should we offer?
 How? Do we effectively market our offerings
to meet needs?
 Which? Customers should we focus on?
 Which? Customers are most profitable?
Alignment of the channels
 The bank to customer relationship needs a
360 degree 3 dimensional approach
across all channels

Price Waterhouse Coopers – Canadian Banks 2012
Regulatory Operational Risks
 Evaluate the operational risk of regulatory
compliance
 New capital and liquidity demands will be a
key factor in determining business plans,
changing the cost profile of banking products
 Basel III
 OFSI Office of the Superintendent
of Financial Institutions
 Volcker Rule
 FACTA – Foreign Account Tax
Compliant Act (USA)
 Dodd-Frank (USA)

Consumer Lending Survey 2012 - Key Takeaways
 59% are comfortable with their debt levels

Total Revenue Net Income ROR
RBC $23,100,000,000 $4,850,000,000 21.00%
TD $20,130,000,000 $5,890,000,000 29.26%
BNS $17,290,000,000 $5,180,000,000 29.96%
BMO $13,720,000,000 $3,270,000,000 23.83%
CIBC $11,410,000,000 $3,080,000,000 26.99%
NBC $4,470,000,000 $1,210,000,000 27.07%
$90,120,000,000 $23,480,000,000 26.05%

Big 6 Total Revenue distribution 2011
26%
22%
13%
19%
15%
5%
RBC TD BNS BMO CIBC NBC
Big 6 Net Income distribution 2011
21%
25%
13%
22%
14%
5%
21.00%
ROR
29.26% 29.96%
23.83%
26.99% 27.07%
35%
30%
25%
20%
15%
10%
5%
0%

 Mergers, Acquisitions, Divestitures
Big 6 – Key Corporate Events
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Top 6 – Key Corporate Events
 RBC pulling back on US retail operations
 sold its US regional banking retail operations to PNC Financial for $3.6B
 Completed acquisition of Blue Bay Asset Management for $1.5B
 Completed divestiture of Liberity Life Ins. to Athene holdings for $628M
 Launched a new trading floor in Hong Kong
 European and Caribbean operations face challenges
 European debt crisis
 Caribbean slowdown in tourism revenue

Top 6 - Key Corporate Events
 TD bank has the largest US retail arm of all the Canadian banks
 Operates more than 1200 stores
 Dodd Frank will have a significant impact on US operations
 Owns 45% of online brokerage TD AmeriTrade
 Acquired 100% of Chrysler Financial for $6.4B
 Acquired South Financial Group
 Acquired MBNA credit card portfolio for $7.8B

 Scotiabank is Canada’s most international Bank
 Operates in 55 countries worldwide
 35% of Net Income is generated from foreign sources
 Concentrates in high growth emerging markets
 Mexico, Caribbean, Asia
 Central, Latin, and South America
 Assets under management increased to $103B from $54B
 Significant transactions in 2011
 19.99% interest in China’s bank of Guangzhou
 51% interest in Colombia’s Banco Colpatria
 Acquired Dresdner Bank in Brazil
 Acquired Nuevo Banco Comercial SA in Uruguay
 Acquired Dundee Wealth
 Making it second largest mutual fund provider in Canada

Top 6 - Key Corporate Events
 BMO
 The largest P&C banking operating group of Big 6
 Completed the acquisition of Marshall & Ilsley for $4B
 Gives BMO a significant market presence in the Midwest across 8 states
 Purchase of Hong Kong based portfolio manager Llyod George
 US branches more than doubles from 312 to 679
 Increase managed assets to over $530B
 Anticipates increased regulatory compliance costs

 CIBC is mostly focused on domestic activities
 Purchased a 41% interest in American Century Investments
 A US asset management company
 Opened a new wholesale banking office in London, Eng.
 Opened a new Corporate Credit products office in Houston, TX

 NBC operations primarily focused in Quebec
 70% of revenue obtained from Quebec operations
 27% of revenue is from the rest of Canada (looking to extend)
 3% of revenue derived from international operations
 P&C activity represent nearly half of all NBC operations
 Acquired Wellington West Holdings for $280M
 Agreed with HSBC Canada to acquire HSBC securities
70% 27% 3%

“More people across the planet now take home new iPhone’s every day (402,000 units per day),
than take home human babies (300,000 human births per day). - January 2012
The New Digital Tipping Point - PwC
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Reports and Industry Analysis
Facts and Figures – Explosive Growth
 Payments and transfers processed by Monitise now over $25bn annually,
versus $1bn a year ago
 More than 18m customers now registered to Monitise Mobile Money
services, compared with 5.5m in December 2011.
 The group has a pipeline of more than 100 financial institutions via its
partners and direct sales teams looking to adopt mobile banking, payments
and commerce applications developed by Monitise.
 Further to the recently announced global alliance with information technology
business Cognizant, Monitise is also in talks with a number of major
technology businesses interested in partnering with Monitise, reselling the
Group’s banking, payments and commerce solutions and collaborating on
mobile technology innovations.
Partners

The Digital Tipping Point - Price Waterhouse Coopers
Digital Integration in an forward evolving industry
 Generation Y (1980-1990) deciding primary banking relationships
 Quality of the digital offering is an important factor in decision process
 Banks need to act now to lock in the future value of this segment
 Banks digital strategies need to move beyond cost reduction objectives
 The wide availability of information about financial products on the internet
 Digital Banking is evolving into a new set of offerings
 User experience
 Mobile hardware device and networks
 Social Media and Collaboration
 Customer Analytics
 Channel Integration
 Wide availability of information about financial products on the internet
 Exposes the gap between price and value for banking products to consumers
 Banks now need to demonstrate intrinsic value to their customers

 Research
 Reveals that digital engagement and share of wallet are directly correlated
 Digitally active customers tend to have the largest product holdings
 Primacy in a banking relationship drives increased share of wallet
 Leads to higher revenue generation from the customer pool
 Future will incorporate location based offers and interactive applications
 Digital feature sets will override traditionally important criteria like branch location and
brand

 The battle amongst banks for customer relationship primacy
 Embrace Change and serve customers in a way the customer wants
 Partner with innovators from technology and telecommunications industries
 Develop a vision and a central strategy with the customer as the fulcrum
 Achieve First Mover advantage by partnering with innovative technologies

 New digital services may become new sources of revenue for banks
 Consumers are willing to pay for innovative readily available digital services

2 out of 5 mobile banking users in Canada use iPhones

Reports and Industry Analysis – Source, Vancom Mobile Consulting
Mobile Banking benefits:
 Cash is King:
Mobile banking can make a fast contribution to the bottom line. A bank with 100
branches and 250 ATMs could save $5M annually by converting 20% of
transactions to mobile
 Innovation Drives differentiation:
Early investments in mobile banking can drive competitive advantage and attract
new customers. Having a mobile presence will drive loyalty and promote buy in to
your brand.

Reports and Industry Analysis – Source, Vancom Mobile Consulting
 Focus on growing revenue:
Mobility means greater volume of transactions, monetizing customer data, faster
access to services, marketing based on new knowledge of consumers
 Cost savings:
The cost of processing a mobile transaction can be as much as 10 times lower than
at an ATM

Reports and Industry Analysis – Source, The Economist
Mobile Payments – A Wealth of Wallets

 Bank Assets – TOP 25
 Net Income Segments
 Key Factors impacting earnings
 Data Analytics Sources
 Industry News Sources
Appendix
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Top 6 – Results by Business Segments

Top 6 – Key Criteria

Data Analytics Partnerships - Click logo to Link Source
APT Video

News and Industry Insights – Click Logo to Link Source

“Little more than a decade ago most retail banks feared the internet. Then they
decided largely to ignore it. Now it is becoming ever clearer that the future belongs to
those that are nimble and far-sighted enough to embrace it.”
END
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Canadian Banking 2012_v07

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Canadian Banking 2012_v07