New Index Ranks American Express, Wachovia and Bank of America Among the Best Positioned Financial Institutions to Drive Organic Growth The A.T. Kearney Financial Institutions Organic Growth Index provides a customer-centric perspective of how well institutions are growing business from new and existing customer accounts CHICAGO, June 20 /PRNewswire/ -- As banks and investment management firms continue to struggle with ways to grow their retail business beyond M&A activity, a new index created by global management consulting firm A.T. Kearney reveals six institutions, among the 31 that were ranked, are in a strong position to drive organic growth in retail banking: American Express, A.G. Edwards, Wachovia, Charles Schwab, Bank of America and Washington Mutual. A.T. Kearney's Organic Growth Index, to be created annually, is based on a survey conducted by Harris Interactive(R) of more than 4,000 adult banking customers in the 20 largest U.S. metro markets. The index provides unique insight into which financial institutions have a strong hold on their customers and a significant portion of their customers' personal balance sheets. It measures "customer momentum" -- an institution's ability to attract and retain customers -- and "wallet momentum" -- an institution's ability to capture, retain and grow its share of customers' assets and liabilities. "Financial institutions cannot rely on M&A activity alone. They must grow organically; yet, most have unrealistic plans of 10 percent annual organic growth," said Andrew Green, vice president and leader of A.T. Kearney's Financial Services practice. "It is impossible to achieve strong, sustained organic growth without a mix of customer momentum and wallet momentum. Companies with high scores in our Organic Growth Index are in the best position to sustain above average organic growth rates and thus above average value growth." The Organic Growth Index connects customer attitudes and actions with their wallet allocation decisions and measures eight components that are critical for achieving organic growth. Results are compiled into two primary measurements to comprise the index -- customer momentum and wallet momentum. Customer momentum measures an institution's ability to forge long-lasting customer relationships and instill advocacy among their customers. Wallet momentum measures an institution's ability to expand the number of products and drive greater penetration per product with its customers. The Organic Growth Index ranks 31 financial institutions based on their ability to achieve both customer and wallet momentum. Retail banks and investment firms both performed well in the study, although no single type of financial institution -- retail bank, diversified institution or investment institution -- excelled in all drivers of organic growth. Retail banks achieved greater customer attraction and retention, while investment firms controlled a larger share of customer's wallets. Leading Institutions Each of the top six institutions were among the leading institutions in at least two of the index's components. American Express -- which customers identified as a top performer before the spin-off of its financial planning unit -- was particularly strong in customer intent to increase account value and customer advocacy (willingness to recommend institution). Bank of America, Wachovia and Washington Mutual were strong in service quality. Charles Schwab, A.G. Edwards and American Express controlled more than 60 percent of their customers financial balance sheet. Despite these strengths, however, each of the top six institutions also showed vulnerabilities in certain areas. A.G. Edwards and Wachovia, for example, were below average in customer advocacy. Bank of America and Washington Mutual both control relatively smaller shares of their customers' wallet compared to other top performers. American Express and Charles Schwab had below average scores on error rate. The study found that customers experiencing two service errors or account problems within one year were 35 percent more likely than the industry average to leave that financial institution. That attrition rate doubled after three errors in one year. The bottom six institutions ranked in the Organic Growth Index are among the largest financial institutions in the country: J.P. Morgan Chase, Citibank, U.S. Bank Corp., Bank One, Fleet and Sovereign Bank. The study found these firms have challenges with both customer and wallet momentum. Each of these institutions was among the poorest performers in at least two of the components according to customers surveyed. Many were particularly weak in customer momentum, a dimension along which most banking institutions in the study performed quite well. "The Organic Growth Index shows it is possible for any type of institution to grow organically, but in a dynamic market the strategies and approaches to growth will be different for each institution," said Rajnish Bharadwaj, a vice president in A.T. Kearney's Financial Services practice and co-leader of the study. "No one institution has achieved clear breakaway performance. A number of regional banks outperformed competitors in terms of customer momentum and have unexploited growth opportunity with respect to wallet momentum." Achieving Organic Growth The study suggests a number of actions financial institutions should consider to achieve better organic growth: * Institutions with leading customer momentum scores have opportunities to cross-sell new products and services, but they will have to break through their tendency to think in silos of products and instead look at products through the "lens of the customer." In the study, when asked to name their primary financial institution, customers cited a mix of retail banks, investment firms and diversified financial services firms. * Engaging the front line -- in the branches and in the contact centers -- remains one of the toughest challenges for financial institutions. Lessons can be learned from smaller retail banks, which as a group, outperformed the larger retail banks and most of the investment management firms in creating Customer Momentum. * Managing complexity -- at all levels -- as a means to improve service quality and the overall customer experience as well as improving the product cost/price relationship is another underexploited lever. Because complexity affects both service delivery and transaction effectiveness, it also increases the potential for errors. The survey reveals the heavy attrition penalty paid by institutions when customers experience more than one error or service problem. "Institutions will use both mergers and acquisitions and organic growth to grow, but indications are that those with strong organic growth make more successful acquirers," said Green. A copy of the Organic Growth Index is available from http://www.atkearney.com/main.taf?p=5,3,1,100. A.T. Kearney also plans to make the findings database available to qualified financial institutions. About the Study A.T. Kearney's Organic Growth Index is based on a survey conducted between December 8 and 30, 2004 among 4,817 adults (aged 20+) who hold accounts with financial institutions in the 20 largest U.S. metro markets. Data were collected online and weighted by Harris Interactive(R) on behalf of AT Kearney. Harris Interactive and AT Kearney collaborated on the survey design and analysis. AT Kearney is responsible for compiling and reporting the index. Sampling error for the overall results is plus or minus 1.4 percentage points. The survey asked financial service consumers a series of questions regarding their current and future wallet allocation, loyalty to their primary financial institutions, and criteria to select and stay with a financial institution. Based on the survey results, A.T. Kearney developed the Organic Growth Index, a weighted, composite score based on the following components and supporting elements: * Customer Momentum: advocacy, primary financial institution identification, propensity to switch institutions and lack or errors * Wallet Momentum: intention to add accounts, intention to increase equity account value, share of financial wallet with primary financial institution, average products per customer To determine overall, component, and supporting element performance, each institution received both an absolute rank and a performance categorization: one standard deviation above the mean (green), within one standard deviation of the mean, or one standard deviation below the mean (red). Results for the 31 institutions with statistically significant sample size are reported in the Organic Growth Study and include banks, diversified institutions and investment management firms. About A.T. Kearney A.T. Kearney (http://www.atkearney.com/) is one of the world's largest management consulting firms. With a global presence spanning major and emerging markets, A.T. Kearney provides strategic, operational, organizational and technology consulting and executive search services to the world's leading companies. A.T. Kearney is the management consulting subsidiary of leading global technology services company EDS. CONTACT: Douglas MacDonald - A.T. Kearney (+1) 312-223-6892 DATASOURCE: A.T. Kearney CONTACT: Douglas MacDonald of A.T. Kearney, +1-312-223-6892, Web site: http://www.atkearney.com/ http://www.eds.com/

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