Chief Operating Officer
Bank of Queensland drives efficiencies and improves ratios
The Bank of Queensland (BOQ) traces its origins back to 1874 when it was established as The Brisbane Permanent Benefit Building and Investment Society, the first such society in the state. Branches began opening elsewhere in Queensland in the 1980s, and the network is now Australia-wide with more than 260 branches, and growing. The country's largest regional bank with assets under management of AUD$38.8 billion, BOQ's continuing success is derived from its unique owner-managed branch model and "your own personal bank" mantra.
... our ratio was 64 percent before the global financial crisis and the regional banks were generally in the high 60s to mid-70s. We are now below 46 percent, in line with the major banks.
This model – in which experienced bankers set themselves up as franchised small business owners – sees BOQ's Head Office supplying branches with information drawn from a unified database of knowledge driven by SAS. As BOQ Chief Operating Officer Ram Kangatharan explains, "The owner managers control the customer experience while their balance sheets are part of the bank's overall balance sheet. All decisions in respect of product, pricing, credit and compliance are controlled by Head Office".
Branch owner managers are provided with reporting facilities in respect of their performance – lending, deposits growth, cross sales and managing arrears. Kangatharan says, "Having the robust data source and the means to provide key metrics at the branch level helps strengthen the branch manager's bond with the customer, and this gives us an advantage over other banks".
The SAS data warehouse supported the bank's strategic review of its overall structure at the time of the global financial crisis (GFC) when businesses everywhere were concerned about costs and profitability and were looking for new efficiencies.
Implementing the SAS data warehouse provides a common trusted source of data across retail and commercial banking. Prior to the strategic restructure, the bank's retail and commercial banking divisions and the contact centre channel were standalone. "Segregations had built up over time based on the organisational structure, resulting in duplication of activities and a high cost to serve. Restructuring the organisation and moving to a lower cost to serve it was necessary to move to a common terminology and standard business process for similar things. The SAS data warehouse with its common trusted source of data assisted to view everything as one; one data map to a common hierarchy and a single business profile view based on reality instead of on structural definitions," says Kangatharan.
Assisted by the view provided by a unified data environment, BOQ saw that 40 per cent of what had been regarded as commercial was made up of small businesses where, typically, the proprietor used the family home as security for a small business loan.
Realising that there was more in common across the different operations, Kangatharan said BOQ was able to make substantial savings. "No longer was it necessary to maintain two separate management teams and two lots of overheads for functions that can now be conducted through a single channel with a unified structure. At the customer-facing level, the similarity between residential mortgage lending and lending to small business was such that our branch owner managers – with their long personal association with their customers – were ideally placed to diversify into SME matters."
The restructure in which the SAS data warehouse has played an important part was also a contributing factor in BOQ's financial results, as normalised cash profit after tax for FY11, AUD$197.1 million, was 5 per cent up on the previous year. Wryly reflecting on the drive for new efficiencies at the time of the GFC with the comment, "You should never waste a crisis", Kangatharan noted that, "The cost-minimising restructure assisted by the SAS data warehouse has also contributed to a very competitive cost-to-income ratio. Whereas, our ratio was 64 per cent before the global financial crisis and other regional banks were generally in the high 60s to mid-70s, we are now below 46 per cent, along with the major banks."
Separate banking businesses – with disparate information silos and no common data labelling policy – frustrated restructuring to address GFC pressures.
Rationalisation of retail and commercial banking operations under one cost and management structure: cost-to-income ratio improved in line with major banks.