February, 2002

Financial Services Industry Newsletter

Strategies for Success

Improving Home Equity Profitability

Home Equity has become the core retail consumer loan -- for many institutions it is the major source of consumer lending .We studied current industry practices in Home Equity sourcing and identified leadership strategies for improving loan acquisition cost. This analysis is based on a survey of marketing directors and consumer loan business managers at leading regional and super-community banks, as well as programs developed on behalf of our clients. Our survey of best practice banks has identified several key strategies for improving sales, increasing revenue and reducing cost:

• Channel strategy best practice institutions have developed efficient sales and marketing channels outside of their retail branches and typically generate 30% greater volume than the average bank, which generates 70-80% of its home equity volume through the branch channel.

• Branch distribution it is not surprising that the most successful banks manage this channel with great care and have implemented strategies that generate significantly higher volume per branch than their peers.

• Back office productivity tight management of back office capacity not only reduces acquisition cost but also leads to faster processing times, improved customer satisfaction and higher closing rates.

• Pipeline management sometimes the greatest opportunity comes from closing more loans which have already been approved, rather than sourcing new applications. Our studies have shown that operational productivity can be improved up to 40% through better capacity management and pipeline management practices.

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