To revamp its costs-to-income profile, French bank BNP is seeking to cut costs by 20% by 2019, while also increasing revenues. To bring its ambition to reality, the bank hired consultancies Oliver Wyman and the Boston Consulting Group. Already set into motion plans include unit mergers, expansion and automation.
In recent years, banks have been under considerable pressure from a variety of regulatory conditions following the fallout from the financial crisis. Much of the regulation was brought in to tighten the rules around risk and capital, with as a consequence a reduction in the profitability of trade. Many corporate banking sections across the world have already suffered considerable decreases in activity. Research by the Boston Consulting Group shows that the European average is still well below the pre-tax hurdle rate.
To improve its competitiveness, French BNP, one of the largest debt underwriters in Europe, is transforming its operations. The aim of the transformation is a reduction in costs by as much as 20% in its corporate and investment bank by 2019, while at the same time increasing revenue.
To find possible savings and meet its own ambitious targets, the bank hired two external advisors: Oliver Wyman and BCG.
Some of the actions the bank has already done to streamline operations for its next year’s target have been disclosed. One of which is the appointment of Yann Gerardin, who went immediately to work on merging the bank’s fixed income and equity derivatives operations into a single unit. The merger resulted in job 100 job losses in London, as well as an expansion in a number of areas. The bank invested €300 million in the development of an investment bank in North America and Asia to increase revenues. In addition, it also invested in cash-management and trade-finance services and building up electronic trading platforms, with the introduction of automation set to further reduce costs.