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Changing strategy

Changing strategy. Lars M ø rch CEO, Danske Bank Sweden. 24 April 2012. Content. Change Management. Our bank and position – at a glance The environment – macro and competitors Our strategy 2010 – Status – hard and soft Lessons learned. Our bank and position – at a glance.

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Changing strategy

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  1. Changing strategy Lars Mørch CEO, Danske Bank Sweden 24 April 2012

  2. Content Change Management • Our bank and position – at a glance • The environment – macro and competitors • Our strategy 2010 – • Status – hard and soft • Lessons learned

  3. Our bank and position – at a glance HistoryFounded by a bishop in 1837 – accelerated by Danske Bank in 1997 Selected milestones 1837 ÖstgötaEnskilda Bank founded by bishop Johan Jacob Hedrén 1920 Office in Stockholm 1994 Acquisition of Bohusbanken in Gothenburg and opening of the first provincial banks in Halmstad, Örebro and Karlstad 1997 ÖstgötaEnskilda is acquired by Danske Bank Utilising the idea of provincial banks with high level of decision power and local “boards” as a differentiator 2004 HQ moved to Stockholm • 2011 Full-service bank with a solid platform • Single brand - All provincial banks rebranded to Danske Bank

  4. Whydowechange? Our bank and position – at a glance • The world is changing • Weak and uncertaineconomcrecovery • New regulations • Customer behavior is changing • Big potential • Improveprofitability • Improve the waywe work • Growing with improved business mix

  5. Our bank and position – at a glance History and positioningStronger and weaker = different and new possibilities Situation Lending volumes (SEKbn) C/I ratio: 2007-2011 Pre crisis - GROWTH • Strong growth • Vision: “Double the bank” • Branch mangers: “The power hub” • Top customer satisfaction and most satisfied employees • Low profitability and business mix not in balance During crisis - ADJUSTMENT • Bottom-up model ineffective • Declining employee and customer satisfaction (08 and 09) • Reduced lending (SEK 255 bn to SEK 228 bn) • Profitability in line with competitors 2008 2009 2010 2011 Danske Bank Sweden incl CIB Danske Bank Sweden incl CIB

  6. Our bank and position – at a glance History and positioningStronger and weaker = different and new possibilities Situation Lending volumes (SEKbn) C/I ratio: 2007-2011 Pre crisis - GROWTH • Strong growth • Vision: “Double the bank” • Branch mangers: “The power hub” • Top customer satisfaction and most satisfied employees • Low profitability and business mix not in balance During crisis - ADJUSTMENT • Bottom-up model ineffective • Declining employee and customer satisfaction (08 and 09) • Reduced lending (SEK 255 bn to SEK 228 bn) • Profitability in line with competitors Post crisis - DEVELOPMENT • Better financial results than ever – also on a comparative basis • More customers, higher volumes than prior to crisis (2007) • High customer satisfaction in priority segments • Stronger platform than ever (branding, product and integration) • Funding limits possibilities • Less attractive “contract” for some employees and customers than before crisis: Less local “freedom” on some matters, e.g. price and processes. However, no loss of key people and EOS again significantly above industry 2008 2009 2010 2011 Danske Bank Sweden incl CIB Danske Bank Sweden incl CIB

  7. The environment – macro and competitors Competitive landscape Many banks, four dominate and only one full scale challenger Lending – 4 banks with 76% market share Deposits – 4 banks with 74% market share Other Other 6% 24% 16% 20% 14% 18% 16% 5% 21% 20% 22% 20% Media Lending to the public, 1998-2011 (SEK bn) • Swedbank and SEB in serious trouble during 2008-2009. However, criticism has almost totally disappeared during 2010 • Nordea now being heavily criticised for ROE target (15%) • Late 2011 banks again heavily criticised: “greedy” 2011 1998 2002 2006 Source: SCB

  8. The environment – macro and competitors Competitive landscapeSuccessful “new” entrants – agile and popular, but with limitations Othercompetitors – market share of 20% (lending) and 21 % (deposits) Selected “international” competitors Lending SEK bn Deposits SEK bn Selected local competitors 129 244

  9. Our strategy 2010 - Some key challengesAddressed in 2010 strategy Lending/deposit ratio – challenge for Swedish banks Customer satisfaction advantage continuously eaten up Relative to peers – 3-year moving average (SKI) SHB RBS Nordea DBSE Swedb SEB UniCredit BNP Barclays Santander Commerzb HSBC Credit S UBS Deutsche Portfolio can tilt towards real estate – easily Allocated capital and economic profit per segment BASE SEKbn Utilised volumes, excluding LCC, as of 31 December 2010 Funding, cost and availability

  10. Our strategy 2010 - Three imperatives in 2010-2014 strategy Implementation in progress • Getting the result up • Change in key focus: From quantity to quality • On credits • On customer service • Rewire the platform to enable new growth and improved results • New attractive and efficient customer service concepts tailored for most attractive (bigger and stronger) customers – build on group platform • New vision – “number one for our customers” (=cross selling and customer satisfaction) • Rebrand for efficiency in multichannel setup and attractiveness for “right customers” • Clear premium brand positioning • Organisational model: customer perspective and channel integration • Improved funding position Customer and value dimensions Premium Value proposition Basic Low segments Customer size High segments Potential to position ourselves as a premium bank and to focus our marketing efforts etc on the higher value segment

  11. Our strategy 2010 - • Vision: Number 1 for our customers • Goal:Balanced growth • Strategy:Targeted customer concepts • Position: Premium Bank • Motto: Ambition welcome

  12. Our strategy 2010 - A shared vision for all employees 1 for ourcustomers Nr • ”Nr 1” means: • The Bank whereourcustomersdomost of their business • The Bank that ourcustomers like most • ”for ourcustomers” means • Existingcustomers • Customers that wewant • How? • Our employees' expertise and commitment to our customers • The ability to do the right skills available • Commitment to deliver the small but very valuable, additional • Focus on customers who want premium quality - regardless of channel

  13. Our strategy 2010 - Strategy implementation according to planVision and position set to be fully achieved by 2014 2009 2010 2011- 2012 2014 Communication - Mgt Conference Communication – Road shows Communication - Headlines Communication – Management info • Visiting branches and Finance centres to gather information • Establish working groups – management team at the wheel • Decision on New Strategy • Internal launch of new Vision and Strategy • Performance management optimised • New customer concepts • Incentive programme • Slimming of branches • Positioning • Name change • Governance • Changes in management • New management forums from four to two • Organisational Change • Shift to segment structure • All positions appointed • Deliveries of concepts • All customer concepts implemented • Vision accomplished ANALYSIS STRATEGY STRUCTURE AND IMPLEMENTATION ACCOUNTABILITY

  14. Our strategy 2010 - New Strategy - owned by Management - open for organisation • Strategy assessment in Brand Ex Co • Intensive meeting schedule (branches, shared entities etc) • Road show Nr 1 for our customers __________ Premium position

  15. Our strategy 2010 - Launch • Approved by Advisory Board (May 2010) • Communicated at Management Conference (Sep 2010) • Strategy Book • Road Show • First implications

  16. Our strategy 2010 - Organisational change - People, structure and implementation • Russell Reynolds: “The recent hires have significantly strengthened the management team, bringing a fresh perspective, new competences and a high level of professionalism.”

  17. Our strategy 2010 - Organisation, 1 January 2012 CEOLars Mørch** Internal Audit (vacant) Business Development Lars Sjögren ** Group Functions OperationsJohan Löfgren * Danske Markets*CIB* Danica* Danske Capital* SkandiaMäklarna Private BankingJonas Predikaka** Personal Banking Liza Nyberg ** FinanceCarina Jahn** CreditsJan Enmark** LegalArne Peterson* CommunicationHeléne Wernstedt* HRIng-Marie Frithiof* Business Banking Ann Krumlinde**Stf Anders Rex** Wealth Management Personal Banking Branches Business Banking Branches Private Banking onFinance Center Contact Centers Customer Service Finance CenterMid Market Danske Direct Personal Danske Direct Business Danske Bocenter Other units Two Management Teams: ** Country Management: All Heads of Danske Bank Business entitles and Heads of Resource and control areas* Executive Management: Executive management team of the retail bank

  18. Our strategy 2010 - Raising awareness and profile

  19. Our strategy 2010 - Implementation - project in place • Customer concept • Results etc • Vision accomplished

  20. Status– hard and soft • History and developmentRapid growth, now earning more than the acquisition price once a year • Branches and Finance centres • Profit and employees • Volumes SEKbn SEKm/# # 3,267 1,332 (#) 2 1 2011 1996 Including parent company ÖstgötaEnskilda Bank and subsidiaries Consensus Fondkommission AB and ÖstgötaEnskildaFastighetsbolag AB Danske Bank A/S, Danmark, Sweden branch (Retail, CIB and Danske Markets).

  21. Status– hard and soft Better, relative to peers than ever (Banking Activities Sweden) RoE* RoE* - Q1-Q2 2011 Deposits/Lending 2011 (average) * Profit after credit losses/risk-weighted, Basel I *8% Profit before credit losses index 2011/ 2008 C/I - 2011 Source: Company data, BASE+CIB

  22. Status– hard and soft Increased cross sales on corporate and personal customersCash Management penetration key to cross sales Cross sales – Business advisory Cross sales – Personal advisory VIP/Premium VIP/Premium/Favör

  23. Status– hard and soft Customer development – positive trendLost corporate customers mainly in commercial property business Customer development – Business advisory1 Customer development – Personal advisory2 +3,000 business customers since Q4 20083 +8,000 personal customers since Q4 20084 2009 2011 2010 2010 2011 2009 1. VIP(49) and Kärn (39). 2. VIP (03) and Premium (09). 3. All business customers. 4. All personal customers.

  24. Status– hard and soft Customer satisfactionOnly bank to improve on both corporate and personal (Swedish Quality Index) Business advisory1 Personal – all customers 1. VIP(49) and Kärn (39). Internalsurveys. Greenwich Midcorp SEB Danske Nordea Handelsbanken Swedbank • Swedish Quality Index • 2nd place in 2011 • (-with margin) • Private Banking • Mystery shopping • 2010: 9/9 • 2011: 4/9 • (Nordea only large bank ahead) • Swedish Quality Index • 2nd place in 2011 • (-just) • Relative to peers: • Improved customer service and image. Satisfaction with prices develops negatively.

  25. Status– hard and soft Our people: highly educated, loyal and happy by local standards... Main Score Explanatory factors 54% with academic degree – 38% women in management

  26. Lessons learned • Background analysis is crucial • Communication is key for success • Recurring information to staff • Think ahead and plan stages - not all can be done at the same time • Find ambassadors in the organisation Communication is key for success Enough time Find ambassadors

  27. Deliveries and must wins Deliveries Essential releases Focus • Regularly meetings are held to discuss different solutions • Suggestions on solutions must always be approved by the Sponsors • Deliveries are made monthly to gather all information from the projects to facilitate for the receivers (account managers) • Communication is responsible for all information regarding deliveries in the projects • Role descriptions, staffing and education are the corner stones for adapting the new way of working • It is central to build a platform for solutions required from all or several sub projects. • Cooperation agreement between concept and special & business supporting units. • Accomplish the transfer of customers – start with customers to the Direct concepts. • Role descriptions and staffing • Platform for business process – first up is Premium Banking • Cooperation agreements – first up is Mid Market • Packaging of products – first up is Premium Banking

  28. Many benefits has already been seen, with expectation on more to come We see Resulting in • A strengthened management team • A flatter organisation • A clearer focus on implementation of • customer concepts • A clearer structure - one bank • Less bureaucracy – from 4 to 2 • management forums • All staff functions to be shared • Quicker time to market • Improved customer satisfaction • Enhanced platform to attract new customers • Increasing profit in all segments

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