U.S. regional bank opens more than 100 branches in key developing markets
Challenge
A large U.S. regional bank, with more than $100 billion in assets and a significant retail presence with more than 1,000 branches, turned to McKinsey to help develop a comprehensive network optimization plan that enhanced near-term profitability.
The client had consistent earnings with an above-average cost structure and flat revenue growth. A stable overall branch presence over three years had limited growth in rapidly growing areas.
Discovery
The McKinsey team focused on four key areas. First, it developed a branch strategy that outlined key markets for expansion and rationalization, as well as actionable tactics to reduce breakeven time for de novo branches.
It determined tactical actions, such as lifecycle-based re-staffing, to lift in-store profitability. After considering customer-servicing value, a lack of profitability after several years of operation marked stores for shut down.
The team identified more than 5 percent of the ATM network that was unprofitable and could be eliminated or improved by renegotiating rent.
It determined the role of each channel for the client and its key competitors, focusing on such things as the sales or service for different products. This process helped highlight opportunities to improve sales, deliver superior service and reduce the cost of servicing customers.
Impact
To drive sales, the client added over 100 branches in key, growing markets. To fund expansion, it rationalized branches in less attractive, sub-scale areas. The client boosted emphasis on remote channels and adopted McKinsey's toolkit to improve the economics of branches in their early years and reduce the breakeven time.