Midwest banking and financial services organization

Branch Analytics and Profitability Review

Client Profile

Midwest banking and financial services organization covering 15 counties with $6 bil+ in assets, 100+ branches, conducting business in Commercial Banking, Consumer Banking, Insurance, and Wealth Management product lines.

Situation

After participating in the Nolan Bank Performance Study (BPS), this organization recognized that their total retail branch efficiency ratio (expenses / Income) was significantly higher than the benchmark for comparable institutions. There was a perception that “several branches  were costing us money.”  In order to get a clear picture of individual branch profitability, performance needed to be analyzed well beyond traditional branch metrics.  The client’s goal was to identify and implement short and long-term actions that would improve profitability.

Nolan Engagement

Having previously addressed branch teller and platform costs for the client, Nolan was engaged to gather and complete a branch analytics and profitability review which involved developing individual branch profiles based on multiple factors that impact current and future performance.  These factors included transaction volumes, customer demographics and patterns, physical locations, financials, and various market factors.  Nolan then created benchmarks to compare the branches and quantify improvement opportunity.  BPS results were leveraged and key performance factors assessed for 17 branches perceived to have questionable current and future profitability.  Nolan deployed resources with deep expertise and experience in banking to:

  • Document detailed branch profiles in order to identify and analyze projected financial impacts to the organization
  • Study and analyze customer patterns, physical locations and other market factors for short and long-term growth potential
  • Quantify findings, review with Executive Committee members and create final recommendations based on 5 action categories: consolidation, modification, closing, remaining open, or open new location

The ten-week collaborative process was completed and a comprehensive set of recommendations and financial projections delivered.

Business Results

While short-term actions resulted in significant immediate expense reduction, a key benefit was that the analysis prevented a “gut-feel” reaction that could have resulted in decisions that could have reduced net income.  In some cases, branches perceived to be unprofitable, were profitable and vice versa.  Over time, additional expense savings are expected, along with improved revenue growth, customer retention, market share, and an overall positive impact on the bank’s efficiency ratio.