Managing Director & Partner
Related Expertise: Wholesale Banking, Financial Institutions, Sales Channel Strategy
Ongoing pressure in global markets is prompting a number of corporate and investment banks (CIBs) to examine the strength of their sales organizations. While many feature top-flight sales talent, issues such as structural misalignment, widespread process inefficiencies, and entrenched cultural barriers have resulted in chronic underperformance.
Those weaknesses are heaping salt on the wounds of CIB markets divisions, which are already suffering from stagnating margins. Wallet share is also declining, a trend that has been exacerbated by growing competition from fintechs and by the success of bulge bracket banks in the US, whose ability to maintain share has come largely at the expense of European players.
Through our work with CIBs, BCG has found that some of the heaviest drags on banks’ performance are related less to outside forces than to self-inflicted problems such as fragmented practices, outdated technologies, and a lack of cohesion around priorities, metrics, and methods. Left on their current course, banks’ markets businesses will continue to be disproportionately affected. The good news, however, is that these issues are addressable.
By leaning on their core relationship lending strengths, reinterpreting revenue data to focus on the right clients, and changing how markets, lending, and other bank divisions work together, CIBs can repurpose their markets divisions to better align with the strengths of the institution as a whole. In our experience, CIBs that take these steps can significantly improve wallet share and uncover new sources of revenue.
While there is no question that CIBs face challenging external conditions, deeply rooted internal issues increase their effect. Disconnects between the lending and markets divisions can cause them to chase revenue from within their own silos, leaving bigger, cross-bank opportunities overlooked. Client targets are often ranked solely on the basis of the revenue they’ve produced in the past, without taking into account their anticipated growth, cost to serve, and profitability. Operational constraints, including misaligned incentives and a resistance to change, can also scuttle attempts to improve performance and cooperation between divisions.
Our work with CIBs reveals that in most cases, salespeople are compromised by a similar set of structural, cultural, and operational impediments.
For many CIBs, these findings won’t come as a surprise. A number of institutions have attempted to address performance problems on several occasions only to be hamstrung by resource constraints or by a lack of organizational willpower to effect change. Each unsuccessful attempt comes at a cost, raising fresh skepticism across the bank about the markets division’s ability to reinvent itself. At institutions where repeated internal initiatives to boost markets revenues have not yielded the desired results, shareholders and executive boards are losing patience—both with their CIB’s attempts to generate a higher return on lending capital and with the markets division’s inability to increase wallet share and client revenue. While bank leaders generally appreciate the leverage that lending capital gives them in the pursuit of ancillary revenue with key clients, they often fail to bring all parties together to monetize those opportunities.
Inaction is not an option. CIBs that do nothing will see their already reduced share of the global markets wallet shrink further. That slide could put the future viability of the business into question, prompting bank executives to slice costs significantly or even shut down the division to stem the drag on shareholder returns.
Yet CIBs can avoid this fate. By increasing revenue in the near term and eliminating key operational barriers, CIBs can reverse the negative cycle of underperformance and turn their markets businesses into a source of significant long-term value.
Through our client work, we have found that CIBs can achieve powerful results by embracing a parallel effort focused on delivering near-term revenue growth while laying the groundwork for lasting productivity improvements. By applying rigorous analytics, targeting high-value clients, and working within specific agile client teams, CIBs can increase top-line client revenue by as much as 10% within 12 months. At the same time, a program focused on removing structural and cultural impediments to revenue growth and hardwiring process efficiencies can generate a 20% improvement in overall productivity.
Accelerate Near-Term Wallet Share Growth
With the right data, teaming, and performance management practices in place, CIBs can generate rapid performance improvements. Doing so requires that they take the following steps:
Deliver Long-Term Productivity Gains
To ensure sustainable revenue growth, CIBs need to overhaul their client segmentation and coverage models, automate core processes, and realign their performance management systems. Our clients have been able to substantially improve efficiency and sales productivity in the following ways:
As CIB leaders evaluate the challenges facing their businesses, the following questions can be a useful starting point in weighing the strength of a bank’s existing revenue and sales processes:
If the answer to any of these questions is no, then executives need to re-engineer their sales approach. Repurposing a markets business to bring CIB divisions together, modernize institutional ways of working, and align clients, products, and services with the core strengths of the bank is a serious undertaking. Yet the ability to achieve potential double-digit revenue and productivity improvements makes it a journey well worth taking.