The news that one in 25 bank workers could lose their jobs in Australia this year has taken the spotlight away from last week’s ANZ news of 700 job cuts.
But put that against the Reuters estimate that banks across the world will slash 125,000 jobs and it gives you a sense of the challenge facing banks with global ambitions.
In 2007, ANZ boss Mike Smith set a target of having the Asia, Pacific, Europe and America (APEA) division delivering 20 per cent of earnings by 2012. Last year it was more like 15 per cent, and while Smith has given himself the full year to reach his goal, he’s also moved the goal posts, with a new target to increase Asia-Pacific's contribution to group profit to 25-30 per cent by 2017.
ANZ missed out on a couple of Asian acquisitions last year, including Korea’s Exchange Bank. It didn’t fit with the story analysts love to hear – of the well-capitalised Australian bank cashing in on the fire-sales of its struggling international peers.
However, Smith now has a much bigger issue on his hands – cost. And for every struggling peer in Europe, there’s a rapidly growing, faster-moving bank with a stronger appetite for risk in Asia.
ANZ’s Asian investments may be self-funding, but unless the group can keep its expense to income ratio at a competitive level, it will be outperformed. The Asian strategy is expensive, but it’s always been a long-term one. The mission for Smith now is to ensure cost-cutting isn’t done poorly.
The challenge of cutting costs when up against Asian competitors is highlighted in Ovum’s latest predictions for global IT spending.
Spending in the Asia-Pacific retail banking IT market is forecast to increase by $US1.2 billion in 2012 and grow by more than five per cent every year for the next five years. In developing Asian economies Ovum expects that growth will be more like eight per cent.
As banks in emerging and more mature Asian economies seek revenue growth and differentiation, Ovum financial services analyst Jaroslaw Knapik says technologies that allow “smarter selling and servicing”, such as customer analytics and customer data management, are expected to remain hot.
But as Fran Foo explained on the back of viewing ANZ’s “Towards 2012” technology road map last year, the bank is years behind its regional competitors in the technology stakes, and will have to step things up quickly if it is to ever catch up.
ANZ has talked of delivering a global “single customer view” and a desire to offer customers “seamless transactions between their pan-Asian accounts”. But its strategy of acquiring Asian assets, including those of RBS Taiwan, Singapore, Indonesia and Hong Kong has left it with a variety of IT platforms at different stages of development.
ANZ chief information officer Anne Weatherston has a colossal task on her hands, one she is now attempting to accomplish in the face of many critics, both inside the bank and externally.
In November, 13 staff were pushed or jumped from Weatherston’s team. Buying into a long-term Asian IT strategy could have proved challenging for some, particularly given ANZ’s once bright but now lost reputation for innovation at home.
Before ANZ can succeed with its vision for a seamless Asian platform, it still has many cultural issues to overcome.
A spokesperson for ANZ told Technology Spectator that technology staff would not be lost as part of the bank’s latest round of job cuts. That’s good news for the Towards 2012 strategy, but the strategy does not include a new core banking platform, something that will be required as the bank continues its Asian expansion and looks to compete with more nimble Asian competitors.
Banks today are essentially technology companies. Aside from managing risk, it’s increasingly how a bank manages technology that determines its success or failure.
ANZ competitors Citibank and HSBC have already been at the pointy end of the European market crisis, but they are also ahead in delivering the technology required to run an efficient global operation.
In the type of market we’re about to face, catching up could be a leap too far for ANZ.