Nestled beneath the
neo-gothic facade of the Palazzo Salimbeni in Siena, Nicola Romito,
head of the retail division at MPS, Italy’s oldest bank, is well
underway in executing an ambitious business plan for the next 12
months. Romito tells Maryrose Fison the bank can grow customer
numbers by 200,000 per year.

 

Photograph of Nicola Romito, MPSWth origins
that trace back to 1472, Banca Monte dei Paschi di Siena (MPS) –
headquartered in the historic 14th Century building once occupied
by the Salimbeni family – boasts the longest track record of any
financial institution in the sun-drenched Mediterranean
country.

Over the past five centuries,
it has evolved from being a single bank providing loans to the
‘poor and needy’, to one of the nation’s largest and most
profitable banks. It has a growing suite of products, more than 6m
customers, 3,000 branches and a net profit worth €261.4m ($352m) at
the end of August this year.

This has been made possible
by a series of factors: ostensibly a well-timed reorganisation of
the bank’s traditional network and a series of high profile
mergers, acquisitions and strategic disposals over the past three
years.

Between 2008 and 2010, the
bank acquired two rival banks, Banca Antonveneta and Biverbanca. It
merged Banca Agricola Mantovana and Banca Toscana into its parent
company and, in September, implemented an asset disposal plan which
resulted in the departure of its Monegasque subsidiary and a €7.7m
increase in available capital.

With strong financial results
on its side, the bank is now preparing to reach out to more
customers than ever through an ambitious contact centre plan that
will see bancassurance products being offered to customers over the
telephone.

 

Talking
business

Table showing MPS targetsWhile pension
products, mortgages and asset management services are in high
demand, Nicola Romito, head of the bank’s retail division, believes
bancassurance sales could become one of MPS’ most profitable suite
of products in the months and years to come.

To capitalise on this
opportunity, he has implemented a strategy that aims to multiply
the number of live interactions the bank has with customers over
the coming months.

“We believe the most
efficient way to sell new bancassurance products through MPS’
distribution is through contact centres and this is one of the most
important projects that we are doing this year,” Romito
explains.

“Throughout September,
October and November we expect the contact centre staff to make
800,000 calls to sell bancassurance products.”

It is an ambitious target but
one which appears manageable when the volume of staff operating in
these contact centres is taken into account.

The bank presently has 76
members of staff operating its telephone banking service through
five separate third party contact centres and another 38 people
working in contact centres within branches. Over the past three
months, contact centres staff made approximately 375,000
calls.

Romito plans to more than
double this number with an additional 50 members of contact centre
staff and the freeing up of more time for front office staff. He
anticipates an upswing in sales of bancassurance products as a
result.

“Selling banking products
through contact centres has been proven to be successful,” he
says.

“Take sales of car insurance
conducted through contact centres. We sold insurance products for
cars in the last six months.

“We tested these products on
our clients and it’s incredible because the retention rates were
more than double the best performance of retention of car insurance
products in terms of standard performance in the world.

“We believe there is a very
strong opportunity in terms of the new bancassurance model to sell
these products through contact centres.”

Past financial results
indicate this business area has real potential. As of November
2010, MPS’ new gross production of bancassurance life policies
exceeded 47bn, representing an increase of 15%
year-on-year.

 

Growing the customer
base

As well as increasing sales of
bancassurance products, Romito wants to increase MPS’ 6m-strong
customer base. In the first half of this year, the bank registered
32,000 new customers.

He calculates that the yearly
increase has averaged at 100,000 in recent previous years and now
envisages attracting 200,000 new customers every year for the next
four to five years, raising the total customer base to around 7m
within half a decade.

Rather than hiring more staff
to work on bringing new customers on board, Romito is using the
skills of existing staff who have been moved to different
departments as part of the group’s recent organisational
restructure.

 

Maximising
efficiency

Bar chart showing MPS fees from banassuranceA
proportion of the bank’s staff who were originally based in the
company’s back offices are now operating in the company’s front
offices. This clever strategy has not only helped save valuable
money, it has made the ratio of staff working in different
divisions more efficient.

“The long-term strategy,
which we have been following for the past three years, and continue
to implement, involves moving more of our staff from the back
office to the front office,” Romito says.

“Over the past two years, we
have increased this ratio from 66% of total staff working in the
front office to 70%.

“This is an important point
so as to realign the productivity in our network and we believe it
will continue to generate good results.”

The organisational redesign
was completed at the end of June this year and resulted in the
creation of 100 local market units, 700 resource deployments from
head office to network units and more than 1,000 network internal
reallocations.

With this completed, Romito
is focussed on making the increased number of staff who are in
contact with customers more efficient in building and maintaining
relationships.

He estimates that the average
number of calls each customer-facing branch employee makes to a
customer is around 2.4 per day. But in MPS’ best performing branch,
this number is double this value at 5 contacts per day.

Romito says his goal is now
to make performance in the bank’s best performing branch the
benchmark for all staff.

“We have approximately 6m
clients and only a small percentage of these clients are contacted
by our employees in branches so it is very important to have a good
level of relations with our clients,” Romito says.

 

Remote
transactions

This opportunity for staff is
being enhanced by freeing up more front office employees’ time.
Over the past five years MPS has invested in developing an internet
platform for banking transactions and this is now paying
off.

“This is helping to reduce
the number of operations branch staff have to do physically,”
Romito says.

“We are thus increasing the
free-time for our employees and our employees will use this for
commercial purposes as opposed to conducting basic
transactions.

“We have reduced the number
of transactions conducted in branches by 10m each year for the past
three years.”

To put this into context, a
total of 198m transactions were undertaken on behalf of customers
in 2010, up 13m from the year before. While the number of banking
transactions went up, the proportion that were carried out by staff
in branches fell.

Of the 198m transactions
carried out, Romito calculates that 98m were done by staff,
compared to 105m a year earlier.

“The percentage of
transactions that take place remotely has risen from 76% in 2010 to
78% in 2011,” he reports.

 

Staff
retention

Underlying these goals is an
understanding that staff attitude and competence really matters.
Certainly, employee perceptions of the bank have improved in recent
years.

“For us, it is very important
to have a good relation with our employees,” Romito
says.

“This is a part of the
long-term culture of MPS. We continually develop the job training
available to staff and are moving more towards training staff on
how to realise commercial capabilities more than technical
capabilities.”

As well as investing in more
training for staff, it has also improved transparency around
financial incentives such as the annual bonus and
promotions.

“The annual bonus and
promotion system is based on merit evaluation. Now it is better
quantified and clear for employees,” Romito explains.

“The company is also in the
process of integrating pension schemes and we are also looking at
the possibility of extending medical policies for the family of our
employees.”

Set against the backdrop of
Italy’s dismal economic situation, the bank’s performance both in
terms of generating revenue, retaining and growing clients and
maintaining staff morale looks all the more impressive.

 

Thriving in difficult
conditions

Bar chart showing the number of remote banking customers at MPSItaly
has not been immune from the global financial crisis and was one of
the European countries that was hardest hit by the global
recession.

According to the Organisation
for Economic Cooperation and Development, its GDP is expected to
fall by 0.1% in the three months through September only to rise
0.1% in the fourth quarter.

In May, the European
Commission reduced its forecast for growth in Italy’s economy in
2011 to below 1% and it remains to be seen whether the government
will be able to balance the national budget in 2013.

If this didn’t already
present a challenging scenario for any retail bank, a raft of
regulations are expected to come into place across Europe for banks
over the next five years which will significantly change the way
retail banks can operate.

Basel III will begin
implementation in 2013, FATCA is expected to come into place
imminently and the European Commission is in the throes of
developing its Packaged Retail Investment Products
legislation.

Is Romito fazed by the
onslaught of regulations due to hit banks in Europe? To the
contrary.

“We consider this more an
opportunity than a problem,” he says, recalling how the bank rose
to the challenge of MiFID in years gone by.

Romito remains confident
consumer appetites will not dry up for retail banking products
among the Italian populace.

“Italian retail banking is
famous for being able to maintain a high level of trust and
confidence in terms of deposits,” he says.

“Pension products are also an
important focal point and of strong importance to our
clients.”

With a solid set of results posted for the first half of
this year, and a well-thought through business plan for the year
ahead, Italy’s oldest bank has proved itself more than equipped to
deal with the modern days ahead.