Achieving Sustainable Growth through Strategic Cost Management

Key findings
Figure 1. Strategic cost management survey: comparative cost reduction achieved
Current situation for North American banking institutions:
How much has your organization reduced its costs in the last 12 months?
50%
40%
30%
20%
10%
0%
1%
Costs
increased
Source: Accenture, January 2010
11%
This report details the survey findings
as they relate to the North American
banking industry.
For most banks, return on equity in
recent years has fallen from 25 percent
to less than five percent. Institutions
are now under severe liquidity pressures
due to loan losses, often anemic organic
growth, a tight credit environment and
generally weak economy. High cost bases
and inflexible, redundant operations
are no longer acceptable.
To restore profitability as the economy
rebounds, many banks recognize the
need to be strategic with cost reduction
efforts—and aggressive. By balancing
short-term, tactical cost reduction
initiatives with longer-term, sustainable
cost management programs, most banks
can work to achieve cost reductions of
20 percent to 40 percent.
39%
40%
Current realities
49%
Key Message
Nearly half of North
American banking executives
indicated their cost
reduction efforts through
late last year at least
equaled or even exceeded
the global average for
banking and other
industries (11%)
0% 1% -5% 6% -10% 11% -20% 21% -30% >30%
Costs decreased
6%
3%
Bankers around the world have already
shown their resolve to face the current
global financial challenges using
aggressive cost reduction initiatives.
Banking executives indicated in the
survey that their industry has already
been pursuing significant cost
reductions (Figure 1) and that these
efforts will continue at a pace exceeding
most other industries going forward.
But—and this may be one of the most
significant findings for the banking
industry—many executives also suggested
that their current approach to cost
cutting might not be sustainable or
have the desired long-term effect.
All Industries
Insurance
Capital Markets
Banking
In particular, executives were uncertain
whether their banks are prepared
to meet increasing expectations for
sustainable growth as they continue to
cope with the challenges of the global
economic environment. We will return
to this topic later in the report, but
first a few more findings on what has
recently happened.
For most banks, return on equity
in recent years has fallen from 25
percent to less than fi ve percent.
High cost bases and infl exible,
redundant operations are no
longer acceptable.
3