Joe Krakoviak
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March 13, 2006
Retail Banks Globally Very Optimistic About Growth Prospects, Accenture Study Finds

Banks’ Focus Shifting from Cost Reduction to Growth; Many Say They Expect To Grow Faster Than the Overall Retail Banking Sector in Their Home Markets

NEW YORK; March 13, 2006 – Four out of five retail banks project annual growth of more than 5 percent over the next few years, in many cases outpacing projected growth for the retail banking segment in their home markets, according to results of an Accenture study released today.

The study is based on a survey of more than 100 retail-bank executives in the United States, Europe and Asia/Pacific designed to shed light on their strategies for achieving growth in the coming years and to analyze how they will differentiate themselves in an ever-more-competitive retail banking market.

Among the survey’s main findings: Optimism reigns. For example, 42 percent of the respondents said they expect their retail business to grow annually by more than 10 percent over the next three to five years, and another 42 percent of respondents say they expect annual revenues to increase 5-10 percent.

The survey also highlighted a significant transformation in retail bankers’ strategic focus, with a majority (56 percent) of the respondents saying that their focus is shifting from cost reduction to growth. When asked to identify their top priorities, the greatest number of respondents — 87 percent — selected “increasing revenues,” followed by 69 percent who selected “reducing costs.” When asked to identify the strongest motives behind the drive for revenues, the two cited most often were investor expectations of profitable growth and the need to achieve cost-efficient scale, selected by 89 percent and 73 percent of respondents, respectively.

Many bankers said they expect their retail business to grow even faster than their home markets. While fewer than 1 in 10 respondents said they believe that annual growth in their home markets will exceed 15 percent over the next three to five years, more than 20 percent said they believe their banks’ growth will exceed that amount.

From a geographic perspective, bankers in the Asia/Pacific region are most optimistic about their future growth prospects, with nearly two-thirds (64 percent) projecting annual growth in excess of 10 percent over the next three to five years, compared with 48 percent of respondents in the United States and 32 percent in Europe.

“These aggressive growth expectations are quite striking and global,” said Piercarlo Gera, a managing director in Accenture’s Financial Services practice. “This will set up a challenging market that rewards those banks with thoughtful and differentiating strategies, critical investments in people and systems, and a laser-beam focus on attracting and retaining customers.”

When contemplating growth in their home markets, nearly three out of four respondents (73 percent) said they prefer organic growth -- generated internally, rather than externally through mergers and acquisitions. However, while nearly all respondents in Asia/Pacific (92 percent) and most in Europe (79 percent) said they plan to primarily grow organically in their home markets, only 44 percent of U.S. respondents said they plan to grow primarily organically, with another 44 percent of U.S. respondents saying they expect growth to be split fairly evenly between organic means and merger and acquisition activity.

“Clearly, organic growth is the strategy of choice,” Gera said. “But these high expectations are going to create winners and losers. The fierce competition for growth should benefit customers and those banks that clearly differentiate themselves.”

Growth strategies
Many survey respondents appeared to disagree with the conventional wisdom that retaining and developing existing customers is more profitable than attracting new ones. More than two-thirds (69 percent) of respondents said they were focusing equally on both categories, while only about one-fifth (22 percent) said they were concentrating on existing customers and 7 percent said they were largely targeting new customers.

“This seems to be another indication that growth targets may be too aggressive,” Gera said. “It’s more expensive to attract new customers. On the other hand, retaining and developing them typically requires investments in systems, employees and processes that bankers emerging from expense management strategies may not yet be comfortable with.”

More than three-quarters (79 percent) of respondents said they believe that strengthening their cross-selling capabilities is a key element to support growth. In their efforts to improve cross-selling, surveyed banks want to focus internally on improvements to advisory and selling capabilities, data mining, workflow and central marketing capability. For example, 79 percent said they must improve personnel training, 75 percent said they must collect data more systematically, and 72 percent said they need to improve internal workflow of data connecting insight capabilities with salesforce workstations.

Other strategies to drive growth include:

The survey was designed and analyzed by Accenture and executed via face-to-face and telephone interviews with 118 marketing and distribution senior executives in the largest retail banks in the United States, Europe, and the Asia/Pacific region (China, Japan and Australia) from April to July 2005 to identify growth opportunities and strategies for the near future.

About Accenture
Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills and technologies to help clients improve their performance. With more than 126,000 people in 48 countries, the company generated net revenues of US$15.55 billion for the fiscal year ended Aug. 31, 2005. Its home page is