Nbg group coo navigating the crisis_september_2015 v public

Navigating the Crisis:A COO perspective on (digital) transformation and the road ahead

Athens, September 2015

Damianos Charalampidis, Group COONational Bank of Greece

2D. Charalampidis, Group COO, National Bank of Greece

A. A Bank transformation while in crisis

Radical reorganization and enhancing of IT services

Customer service improvement through process redesign

Substantial cost reduction

Seamless integration of 2 banks

A new regulatory framework

B. Managing Capital Controls: Facing a new reality

“Forced digitization” of the customer base

Absorbing extraordinary workloads

Adjusting processes “on the fly”

C. The opportunity ahead in the post capital controls era

Can capital controls also lead to a positive long-term effect on NBG’s operations?

Insights from the telco world: Where banking needs to go

A COO perspective on (digital) transformation during the crisis


Core of the Ops transformation has been a radical reorganization and redesign of IT services

A

Organizational redesign to resolve chronic issues

• Establishment of a Group IT Governance Division

• Establishment of Business Analysis Division

• Establishment of CISO role

• Integration of “Ethnodata” in the IT organizational structure

• Creation of a Project Management Office (PMO)

Setting up a PMO to align IT with business targets

• Priorities setting• Approval of new

projects• Monitoring of progress

IT UnitsProject

Managment Office (PMO)

Units of the Bank

New requests Implementation

Request document-

tation

• Priorities suggestions• Progress reports

Projectsizing

Project approval

committee

Executive Committee

• Decision making• Monitoring of

strategic projectsThe reality coming in

• ~1.000 requests per semester, unorganized, with no prioritization

• Endless project implementation times


Visible and sustained results: (Over-)doubling of IT productivity since 2013 with >75% of requests fulfilled

Double IT productivity vs. 2013 (despite VRS-based reduction of personnel by ~20%)…

2013 Total Projects*

2015 (Ε)

2014

+ 104%

+ 7%

…representing ~75% of total request submitted(Summary of submitted requests, Jan 2013 - Dec 2014)

Total requests submitted

Requests fulfilled

Requests in process

Requests under

investigation/ stand by

The implementation of minor projects is done without further approvals (FIFO logic)

2.776

341

3.601

484

A

* IT projects over 10 mandays, potentially bundling multiple requests


A major process redesign journey was also embarked: Increasing efficiency while improving customer service

Key challenges identified (and indicative processing times)

31%24% 24%

9%5% 7%

Average time: 10 days

0-3 days

4-7 days

8-14 days

15-21 days

22-28 days

>28 days

• Focus on 12 basic roles and14 key processes (teller transactions, lending, restructuring)

• A larger number of standardized and repetitive tasks , control checks and back-office functions that are carried out by the branches

• Partial process automation and need to access multiple systems for task processing

• Identified complicated procedures and fragmentation of roles and responsibilities between headquarters and branches resulting to time-consuming costumer service

• Housing loans restructuring (end-to-end): average time 28 days

• Consumer loans restructuring (end-to-end): average time 17 days

The time required for the control check is more than the 3 day set threshold in 70% of

the cases

Indicative customer service: Required completion time distribution for technical and legal checks for mortgages

A

59 proposals

for improve-

ment

Quick Wins ΙΤ

Require Systemic Change

Pure process redesign

Centralization

NumberTime estimate

Impact estimate

Of which

6 months 12 months

Summary status

18 • Completed

55• 18 implemented• 23 in process• 14 under investigation

6 • 2 implemented • 2 in progress• 2 in design

4

Small

Medium

Large

Small• 1 completed• 3 in process

Summary of defined process improvement initiatives


SG& A costs (Total G&A, IFRS, Bank, Greece)

Key actions to cut costs

• Renegotiation of procurement contracts (IT maintenance, Buildings’ maintenance and cleaning)

• Rents’ renegotiation• Demand needs optimization and process redesign (post &

telecom, cash management, cash-in-transit)• Cost cutting (advertising, sponsorships, subscriptions, 3rd party

services)

• Further cuts in telecom costs

• Cut in postage expenses

• MPS implementation in branches (1st phase)

• Spatial redesign and consolidation of centralized services in own buildings

• Rationalization of energy consumption

• Redesign of mass printing and card personalization

• Expansion of MPS to more branches

20112010 2014E

-15%

2012 2013

A In parallel substantial cost reduction has already been achieved with the effort further continuing…

Extra costs from absorption of FBB and Probank

In addition significant effort put in increasing energy efficiency via targeted Capex investments with long term effect, also reducing the Bank’s energy footprint


Creation of model document digitization center in the same facilities in order to:

• Stop physical distribution of files

• Servicing of all document recall needs via the digitization and electronic distribution process

…while improving operations through digital doc management and creation of physical archiving/digitization infrastructure

• State of the art archiving system with special shelves/decks, very narrow corridors and semi-automatic collection machines

• Cooperation of the It and archiving infrastructure at all stages leveraging RF technology

• Minimization of archiving and recovering time

• Realization of practically zero error service level

A

Collection of the physical archive in the ΠΑΕΓΑΕ facilities

• Loan files

• Teller transactions’ documentation

• Customer identification documents

• Central services archive (e.g., Legal, HR)

• Other archive


2 Banks were seamlessly integrated (in less than 4 months for both cases)

FBB (May-June 2013)

Probank (August-December 2013)

• 70.000– 23.000 new

customers– 47.000 common

with NBG

Customers• 510.000

– 140.000 new customers

– 370.000 common with NBG

Loans• € 0,6 bln.• 3,5k loan

accounts

• € 2,4 bln.• 33k loan accounts

Deposits• € 1,1 bln. • 70k deposit

accounts

• € 2,4 bln.• 430k deposit

accounts

Branches• 19 • 112

Personnel• 220 employees • 1.100 employees

Σεπ Οκτ Νοε

Operational integration implementation

Integration design

26/07

Imme-diate actions

Mapping of current status

Overview of integrated banks Timeline of Probank integration

A

Transi-tion

(7-

8/12)

SpecsDetailed activity plan

2nd test(30/11-01/12)

1st test(23-

24/11)

Business decisions

Key mile-stones


New regulatory framework posing unique challenges through the period

Key highlights

A

• EU Digicomp “commitments” leading to the need of the creation of new policies and respective process, IT infrastructure and reporting

• 5 year Restructuring Plan with quarterly monitoring, non-adherence to which could result in the NBG losing its private character

• 2 Asset Quality Reviews (AQR) with heavy reporting requirements

• SSM in place as of November 2014 effectively, among others, formalizing AQR reporting and leading to annual repeat


Pre- and post-capital controls: A radical change of the Bank’s everyday reality within a month

Extraordinary increase of transactions across all channels… … and a rapid “forced digitization” of all customer base

Branch Network

+ 14%

ATM/PoS

+ 62%

Internet Banking Logons

Internet Banking

+ 52%

+ 36%

B

• Issuance of 500k debit cards (out of 3 million) in 2 months

• Doubled acquiring revenue from 7.5 to 15 € million/day

• PoS: 100 applications/day vs. 10 per day in a ‘business as usual day’


Important process and functionality changes were required immediately, while we had to firefight extraordinary loads with intuitive (and not so much) adjustments “on the fly”

Abnormal loads…

…leading to adjustments “on the fly”

July-AugustBefore capital controlsCall center facts

B

Key immediate requirements

Implementation of capital controls• Central management of withdrawal

thresholds for cash and ‘plastic’ money

• Monitoring of fund transfers• Transaction management per

Branch type (standard vs. special purpose branches)

• Management of new/free funds/capital

Infrastructure optimization to tackle increased transaction volumes• PoS• ATM• Internet Banking• Contact Center

• Call center supported via leveraging ~230 FTEs from Collections• New application for debit card PINs to be sent via SMS• PIN activation calls rerouted to external call center• Rerouting of specific transactions (e.g., internet banking activations) back

to branches

~5,500 ~21,000~4,100 ~12,000~3 min ~20-25 min

• 50% of total 1100 daily import/export transactions previously not recorded (executed online “manually”) doubling the load at central services/branches with much heavier process (due to approval need)

• ATM refills min twice to three times per day

• Average wait

• Answered calls/day

• Incoming calls/day

• Revert of Trade Finance centralization• New application for requests & approvals of transactions process

• Created ~150 new reconciliation cashier transactions


The Road Ahead: From a short-term strain to a mid/long-term opportunity

Short-term impact Potential Mid/long-term impact

▪ Operational disruption from rapid customer shift to alternative channels

Financial sector

▪ Strain on Banks’ liquidity from deposit leakage and ELA limitation

▪ Collapse of trust/customer confidence in Banking system

▪ Rise of NPLs in all segments

Positive effect

Negative effect

▪ Potential reduction of operating cost and increase in transaction fees in case of sustained shift to alternative channels

▪ Imminent need for further re-capitalization (3rd in three years)

C

Business activity

▪ Barriers on trade flows (esp. imports) ▪ Potential increase of transparency and consequent state contributions from business activity (incl. payroll, transactions, turnover)

Consumer behavioral

▪ Potential increase of transparency and consequent tax evasion prevention via alternative channels

▪ Radical drop in consumption (especially cash based transactions) mainly towards small businesses

▪ Shift to direct transaction channels (including web-banking, plastic money, ATM)


Banking vs. Telecoms: The similarities…

• Service based businesses

• Heavy on Retail

• Heavy on Regulation, posing similar challenges and obstacles

• Both requiring excellence in Ops to win over the customer journey

C Lessons (to be) learned from the telecoms world: Heading towards a digital era

Banking vs. Telecoms: …and the differences

• Telecoms (esp. mobile) a much “fresher” business (e.g., Vodafone Group with 24 years or operations vs. NBG’s 174 years since founded)

• Telecoms industry assimilating and spearheading technology and innovation much faster

• Banking carrying much more legacy (e.g, in terms of systems) while telecoms having higher flexibility and executing easier transformations (e.g. first On-line system in Greece by NBG fully tailor made)

• Regulatory constraints higher for Banking

The bet ahead for Banking:

Follow telecom’s example of moving very fast to CRM

• Enabling full and detailed view of the customer journey’s across channels

• Understanding the customer base and its behavior

• Having a seamless experience and interface across channels

Presentations & Public Speaking

Nbg group coo navigating the crisis_september_2015 v public