Getting Big Results from Small Data Analytics

Transcription

1 Getting Big Results from Small Data Analytics Claude A. Hanley, Partner 2017 AMIfs Annual Conference Financial Performance & Risk Management April 26-28, 2017

2 CAPITAL PERFORMANCE GROUP, LLC Management Consulting Focus on Strategy Financial Services Specialization Experienced Bankers Analytical and Practical For 20 years, CPG has worked with the ABA Banking Journal and American Banker to evaluate the nation s top performing banks. 1

3 NO SHORTAGE OF DATA IN BANKING 2

4 Data is one thing. Actionable data is THE thing. 3

5 STRATEGIC FOCUS AREAS 1. Building stronger brand positions and value propositions for targeted segments. 2. Focusing on higher margin business lines and higher growth markets. 3. Deepening customer relationships. 4. Continuing transformation of the distribution system. 5. Developing a high performance culture. 6. Continuing to improve operational efficiencies. 7. Building fee-based businesses and income streams. 4

6 EXAMPLES OF ANALYTICS IN STRATEGIC FOCUS AREAS Higher growth markets, and deeper customer relationships Customer and Market Analytics Transformation of the Distribution System Branch Network Rationalization Sales Force Productivity Analytics Improve Operational Efficiency Credit Process Analytics Technology Payback 5

7 Customer and Market Analytics 6

8 CUSTOMER ANALYTICS Perform cross-sell analysis for consumer and business customers to quantify opportunities within the customer base Total Consumer Customers 32,500 Total Consumer Customers 23,800 Percent Using Consumer Checking 73.2% Products per Consumer Checking Customers 1.6 Single-Product Customer Checking Customers 12,100 Percent of Consumer Checking Customers 50.8% The bank has a total of 23,800 consumer checking customers. Of these customers, 50 percent are single service customers representing a priority % 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Deposit Product Use: Businesses Checking Savings MMDA CDs Sweep The percentage of business households using deposit products at the bank is low especially among Small Business households. Small Business Commercial 7

9 CUSTOMER ANALYTICS Deposit Stratification Consumer Checking Deposit Stratification Accounts Balances Balance Tier (#) % of Total Cumulative % Balances ($000) % of Total Cumulative % Average Balance ($) $0.01 to $499 2, % 51.1% % 2.5% 134 $500 to $1,499 1, % 72.4% 1, % 9.7% 908 $1,500 to $2, % 80.9% % 15.9% 1,939 $2,500 to $4, % 89.9% 1, % 27.6% 3,508 $5,000 to $9, % 94.7% 1, % 40.3% 7,012 $10,000 to $24, % 98.2% 2, % 59.7% 14,785 $25,000 to $49, % 99.4% 2, % 74.6% 35,097 $50,000 to $99, % 99.8% 1, % 87.6% 82,717 > $100, % 100.0% 1, % 100.0% 156,963 Total 5, % 100.0% 15, % 100.0% 2,684 Stratify deposit accounts by balance to identify opportunities to reprice 8

10 CUSTOMER ANALYTICS Mobile Banking and Online banking usage How does our percentage of active users compare to industry standards? Industry M etric Bank M edian Perc entile XY Z 75th Enrolled online banking users as a % of retail checking accounts 50.0% 46.0% 62.0% Active online banking users as a % of total enrolled 75.0% 85.0% 98.0% Enrolled bill pay users as a % of retail checking accounts 12.0% 16.0% 24.0% Active bill pay users as a % of total enrolled 55.0% 75.0% 97.0% Enrolled mobile banking users as a % of retail checking accounts 12.6% 8.0% 16.0% Active mobile users as a % of total enrolled 55.0% 70.0% 99.0% 9

11 CUSTOMER ANALYTICS Share of Wallet Emerging Affluent Segment CREDIT CARD TOTAL BANK 59,614 # With Product 54,766 # With Product at BANK 24,398 Product Hhld Share 45% $ Total Per Hhld $7,220 $ Total at BANK $1,838 BANK $ Share 25% Calculate share of market households with the product and the product balance. 10

12 MARKET ANALYTICS Concentration, competitors, customer segments Market 1 Market 2 Market 3 STRATEGIC CONSIDERATIONS Total Households 1,109, , ,439 Projected Growth, 2009 to % 0.6% 1.7% Mass Affluent Households 389, , ,064 % of Total Households 35.1% 31.4% 30.1% Number of Small Businesses 138,531 48,082 40,929 Concentration of Target Industries 52.0% 50.6% 48.9% Key Large Bank Competitor Presence Share of Total Market Branches 46.3% 18.2% 28.5% Share of Total Market Deposits 55.9% 18.8% 49.2% Key Community Bank Competitor Presence Share of Total Market Branches 13.4% 12.8% 11.0% Share of Total Market Deposits 9.6% 11.1% 11.0% Market 1 stands out: 3x larger Greater concentrations of Mass Affluent HH and Target Industry establishments Dominated by targeted competitors 11

13 MARKET ANALYTICS HOT SPOT Use analytics to: Prioritize branch network rationalization/transformation activities Identify concentrations of target customers to inform expansion/resource allocation Data is available at various levels (e.g., block group, census track, county) Opportunity can be defined by: Households Product usage Balances Growth Segment size 12

14 MARKET & CUSTOMER ANALYTICS Index bank customers households to the market households to identify areas of under penetration Consumer Number of Customer HHs % of Total Customer HHs Total Market HH % of Total Market HH Index to Market 1 Total Consumer Households 5, % 11, % 100 Deposit Accounts Checking Accounts 4, % 10, % 90 Money Market Accounts % 2, % 65 Savings Accounts 3, % 8, % 88 IRA Accounts 1, % 2, % 150 Certificate of Deposit Accounts 1, % 2, % 122 Credit Accounts Mortgage Loans 1, % 4, % 45 Credit Cards 3, % 8, % 93 Personal Line of Credit 1, % 2, % 105 HELOC % 2, % 35 Other Products Safe Deposit Box % 1, % 112 Debit Cards 2, % 10, % 61 13

15 Distribution Analytics 14

16 NETWORK OPTIMIZATION: EVALUATING MARKET OPPORTUNITY Category Consumer Attractiveness Business Attractiveness Total consumer households Workplace population Weighted Variables Projected 5-year HH growth Current median HH income % of Mass Affluent HH Total core deposit market balances Total market loan balances Total investment & insurance balances Households per branch Total businesses < $5MM Total businesses > $5MM Businesses per branch Market Opportunity Score 15

17 NETWORK OPTIMIZATION: EVALUATING BRANCH PERFORMANCE Category Service Sales Financials Growth Productivity Weighted Variables Net advocacy rating Overall satisfaction score Cons. & bus. DDA attrition DDA cross-sell ratio Loan cross-sell ratio Mortgage referrals per FTE Non-mort referrals per FTE Services per household Core deposit mix Cost of funds Fee income per FTE Expense per FTE Pretax income per FTE Average deposit balance Total household growth Deposit growth ($) Deposit growth (%) Loan incentive volume Change in total bus. cust. Change in total cons. cust. Deposit sales per FTE Loan sales per FTE Teller transactions per FTE ATM transactions per FTE Branch Performance versus Goal Score 16

18 MARKET OPPORTUNITY NETWORK OPTIMIZATION: EVALUATING BRANCH PERFORMANCE A Strategic Resource Allocation Model can help Determine Focal Points for Branch-Specific Strategies Drive Better Results branches Invest & Protect branches Are branches in high potential markets, but with low branch performance ratings Drive Better Results Invest & Protect Are strong performing branches in high potential markets that exhibit best practices Target Efficiencies branches Are located in low potential markets and have low branch performance ratings Target Efficiencies BRANCH PERFORMANCE Maintain & Retain Maintain & Retain branches Are branches that perform well despite being in a low potential market so customer retention is key 17

19 Operational Efficiency Analytics 18

20 SALES FORCE PRODUCTIVITY Compare production to industry or internal standards Calculate the lift in production assuming the bottom quartile of producers reached the median production Alternatively, calculate cost savings from right-sizing Number of Relationships Portfolio Outstandings (in $mill) Annual Production (in $mill) Type of Lending C&I Small Business <$250K* Small Business >$250K < $2.5M Middle Market>$2.5M CRE

21 CREDIT PROCESS ANALYTICS Stratification of the loan portfolio will help to frame opportunities to institute differentiated credit process by loan exposure. # of Relatio nships Credit Exposure ($MMs) Relationship Tier ($000s) % of Total Cumulative % of Total % of Total Cumulative % of Total <$100 3, $100-$ $250-$1, $1,000-$2, >$2, Total 5, , percent of relationships are less than $250 in total credit exposure. 20

22 CREDIT PROCESS ANALYTICS Scorecard Volume, Turn time, and Productivity Performance Metric Number of New Loan Applications (#) Number of New Loans Closed (#) Average Turnaround Time (from application to loan approval) (days) Industry Standard Bank XYZ 5 7 Average Turnaround Time (for loan closing post-approval) (days) 5 8 Average Portfolio balances per Commercial Loan Officer ($000) 30,000 15,000 Average Customer Relationships per Commercial Loan Officer (#) Commercial Doc Packages per Commercial Doc Prep FTE/mo. (#) New Commercial Loans Boarded Monthly per Commercial Boarding FTE (#)

23 TECHNOLOGY PAYBACK Business Case & Financial Lookback. Video Tellers Annual Equipment Expense for 11 Video Teller Machines Net Reduction of FTE Estimated Salary Reduction $457, ($744,000) 22

24 KEY TAKEAWAYS 1. Most effective analytics follow the KISS principle 2. To be effective, analytics generate insights to inform decisions, enable fast action 3. Finance can either take the lead or partner with departments to perform the analytics 4. There is no excuse for not running the numbers 23

25 STRATEGY, DELIVERY, MARKETING AND RISK MANAGEMENT