Cooperative banks – strategy

For several years now, the financial sector has been undergoing a transformation which no financial institution – regardless of its specific corporate strategy – can sidestep.

What challenges do cooperative banks need to overcome today to remain relevant for customers in the long term?

The years before the interest rate turnaround were characterized by phases of growth in deposits and loans. Despite persistently low interest rates, most banks managed to maintain their revenue levels by adjusting their earnings mix. However, many banks are currently facing a structural upheaval due to a macroeconomic turnaround involving high inflation rates and a decline in economic growth. Their on-balance sheet customer business is under pressure. At the same time, deposit structures are changing, which often has a negative impact on the present value (provisions for contingent losses, BFA 3).

At the same time, remaining relevant for certain customer groups is becoming more and more of a challenge for banks. Declining “main bank loyalty” and increased price sensitivity are new hallmarks of customer behavior.

Many banks generate most of their total earnings with only a few business areas or core products. Securing these profit pools or developing new ones can be quite a challenge for banks, as they often have to compete for them with specialized fintech companies.

Mega trends such as digitalization, sustainability and the shortage of skilled workers have an additional impact on banks’ business models.

Challenges that cooperative banks need to navigate today

Macroeconomic turnaround

Inflation and reduced economic growth Increasing competition for deposits as a source of funding.

Relevance and customer behavior

Declining “main bank loyalty” and increased price sensitivity; gradual loss of relevance.

Profit pools

Only few profitable business areas – securing existing and developing new profit pools

Mega trends

Impact of mega trends such as digitalization, sustainability and the shortage of skilled workers on the business model.

Questions that cooperative banks need to deal with today

How is the bank positioned in the current competitive environment? How good are customer reach and share of wallet and what is the contribution of individual business areas? Are strengths and weaknesses or opportunities and risks transparent?

What is the bank’s target picture for the next few years? And do its current activities suffice when it comes to leveraging their strengths in order to withstand ever more disruptive changes?

How can a bank secure its relevance in keeping with the values and the founding idea underlying the cooperative banking concept? And how can the cooperative core values be interpreted in a modern and future-oriented way?

How can the bank better exploit, meaningfully expand or supplement its core business areas?

How can it leverage individual price tolerances and optimize capital commitment?

How can the bank assess different options for action and their impact on key performance indicators in a scenario-specific context?

How can it derive measures with an impact on P&L, translate them into business and activity plans and systematically monitor their implementation?

How can the various stakeholders be meaningfully involved in a strategy and change process?

Preserving select elements of the past and shaping the future – fundamental decisions and measures for the bank of tomorrow

Understanding customers and the market

Analyzing trends and the environment
Analyzing customer structures and wallets

Developing strategies

Developing a USP
Assessing strategic options (stand-alone, merger)
Developing top-down strategies (target pictures, guidelines, core business areas and ambitions; performing simulations)
Translating target pictures into plans (earnings and capital requirements, levers and measures)

Optimizing profitability

Benchmarking (OU/functional benchmarking, non-personnel cost benchmarking)
Efficiency/Restructuring program with a clear P&L impact (cost management, capacity management)

Orchestrating measures