Retail Banking Group Mobilization A&D

1. Retail Banking Group Mobilization A&D Financial Services Company Value Chain Analysis Value Chain Analysis 7/21/92

2. To identify and depict value-added functions To determine high-level allocation of resources To determine high cost areas To identify benefit areas OBJECTIVE

3. 1. All headcount figures are derived from RBG organizational charts 2. Both Relationship Managers (RMs) and Non-office Staff perform relationship management services and are counted in the "Customer/Relationship Management" link 3. There are 921 RMs located throughout the branches 80% (or 737) are dedicated to Consumer Banking relationships 20% (or 184) are dedicated to Commercial and Professional Banking relationships 4. There are 4,737 Non-office staff members located throughout the branches 50% (or 2,369) perform services that support relationship management (i.e. tellers, customer service reps) Of this 50%: 80% (or 1,895) support Consumer Banking relationships 20% (or 474) support Commercial and Professional Banking relationships ASSUMPTIONS (HEADCOUNT)

4. 5. Investment and Insurance services are handled by third parties. Thus, headcount is zero for most links in the chain for these services 6. Credit Services: For Consumer Banking, services are handled outside of the RBG by the National Consumer Asset Group. Thus, RBG headcount is zero. For Commercial and Professional Banking, figures are derived from the total staff headed by Credit Management. 7. Distribution and Treasury services are performed outside of RBG; thus, headcount is zero 8. Credit Controls figures are derived from total headcount inxxx's group 9. Staff Support figures are derived from the following groups: • Human Resources • Information Systems • Finance • Marketing • Product Mgt • Legal ASSUMPTIONS (HEADCOUNT) (cont'd.)

5. 1. Non-interest expenses in the value chain analysis are Salaries, Benefits, Occupancy, Equipment and Other, and Overhead Allocations 2. 80% of Total Salaries and Benefits are allocated to Consumer Banking; 20% are allocated to Commercial and Professional Banking Consumer Banking: 3. Salaries and Benefits are allocated as follows: Customer Acquisitions 15% Account Opening 15% Customer Relationship Mgt 35% Service 35% 4. Occupancy, Equipment and Other costs are allocated as follows: Customer Acquisitions 20% Customer/Relationship Mgt 20% Savings Services 20% Payment Services 15% Credit Services 15% Info/Advisory Services 10% ASSUMPTIONS - FINANCIAL SCALE

6. 5. Overhead expense is allocated as follows: Payment Services 36% Credit Services 30% Savings Products 34% Commercial and Professional Banking: 6. Total Commercial and Professional Banking salaries and benefits plus 20% of Consumer Banking salaries and benefits are allocated nearly equally across all areas 7. Occupancy expense is allocated as follows: Customer/Relationship Mgt 67% Credit Services 33% 8. Overhead is allocated nearly equally across all areas ASSUMPTIONS - FINANCIAL SCALE (cont'd)

7. RETAIL BANKING VALUE CHAIN - OWNERSHIP STRUCTURE NY Consumer Banking Customer/Relationship Management: Payment Services: Account Opening Transaction Processing Service Savings Services: Account Opening Service Investment Services: Investment Management Account Opening Service Insurance Services: Underwritings Service Account Opening Credit Approvals Pre- Qualifying Dis- Bursement Credit Services: Screening Service Collections Info & Advisory Services: Account Opening Investment Management Service Commercial & Professional Banking Customer/Relationship Management: Payment Services: Account Opening Transaction Processing Service Savings Services: Account Opening Service Investment Services: Investment Management Account Opening Service Insurance Services: Underwritings Service Account Opening Credit Approvals Pre- Qualifying Dis- Bursement Credit Services: Screening Service Collections Info & Advisory Services: Account Opening Service Delivery Channels: Distribution, etc. Consumer Banking Commercial Banking Treasury/Balance Sheet Management Tech and Ops Group Outside Vendors Credit Controls: Audits, Non-Credit Controls Geoserve National Consumer Asset Group Staff Support: HR,IS, Finance, Marketing, Legal, Product Management

8. 1. Consumer and Commercial Boundaries are not clearly defined 2. Simple business functions span multiple areas of ownership Excessive interface issues exist 3. There is no single point of contact for the customer Customers are passed: Function to function Executive to executive OWNERSHIP STRUCTURE IMPLICATIONS

9. RETAIL BANKING VALUE CHAIN NY Consumer Banking $113 14% Customer/Relationship Management: Payment Services: $23 3% $72 9% $28 14% Account Opening Transaction Processing Service Savings Services: $64 8% $72 9% Account Opening Service Investment Services: Investment Management $78 10% Account Opening Service Insurance Services: Underwritings Service Account Opening Credit Approvals $10 1% $10 1% Pre- Qualifying $10 1% Dis- Bursement $20 3% $35 4% $20 3% Credit Services: Screening Service Collections $11 1% $7 1% $22 3% Info & Advisory Services: Account Opening Investment Management Service Commercial & Professional Banking $35 4% Customer/Relationship Management: $12 2% $11 1% $11 1% Payment Services: Account Opening Transaction Processing Service $17 2% $17 2% Savings Services: Account Opening Service Investment Services: Investment Management Account Opening Service $34 4% Insurance Services: Underwritings Service Account Opening $5 1% $5 1% $5 1% $6 1% $6 1% $8 1% Credit Approvals Pre- Qualifying Dis- Bursement Credit Services: Screening Service Collections $14 2% $14 2% Info & Advisory Services: Account Opening Service Delivery Channels: Distribution, etc. Treasury/Balance Sheet Management Expenses ($million): 1. Salaries 2. Benefits 3. Occupancy 4. Equipment & Other 5. Overhead Allocations Credit Controls: Audits, Non-Credit Controls Staff Support: HR,IS, Finance, Marketing, Legal, Product Management

10. 1. There is substantial cost savings opportunity in the Consumer Bank The Consumer Bank is expected to lose approximately $100 million (1992) 75% of core RBG non-interest expense is associated with Consumer Banking 2. There is substantial cost savings opportunity in the customer acquisition and relationship management processes Approximately 33% of non-interest expense is dedicated to customer acquisition and relationship management processes 3. Streamlining transaction processing and back office operations constitutes a significant opportunity Transactions processing accounts for 12% of total costs in the consumer banking area FINANCIAL SCALE IMPLICATIONS

11. RETAIL BANKING VALUE CHAIN - HEADCOUNT ALLOCATION NY Consumer Banking 2,632 Customer/Relationship Management: Payment Services: 737 ? 2,632 Account Opening Transaction Processing Service Savings Services: 737 2,632 Account Opening Service Investment Services: 0 0 0 Investment Management Account Opening Service Insurance Services: 0 0 0 Underwritings Service Account Opening Credit Approvals Pre- Qualifying Dis- Bursement Credit Services: 0 0 0 ? 2,632 ? Screening Service Collections 737 0 2,632 Info & Advisory Services: Account Opening Investment Management Service Commercial & Professional Banking 719 Customer/Relationship Management: 719 184 ? Payment Services: Account Opening Transaction Processing Service 184 719 Savings Services: Account Opening Service Investment Services: 0 0 0 Investment Management Account Opening Service 0 Insurance Services: 0 0 Underwritings Service Account Opening Credit Approvals Pre- Qualifying Dis- Bursement 107 Credit Services: 107 107 ? ? ? Screening Service Collections 184 719 Info & Advisory Services: Account Opening Service 0 Delivery Channels: Distribution, etc. Treasury/Balance Sheet Management 0 Credit Controls: Audits, Non-Credit Controls 50 Staff Support: HR (92),IS (1,016), Finance (60), Marketing (49), Legal (0), Product Management (27)

12. Large headcount in Consumer Banking provides the opportunity to explore the effectiveness of people deployment The customer/relationship management function represents the area of greatest opportunity HEADCOUNT IMPLICATIONS

13. Constructed by: Reviewed by: VALUE CHAIN DEVELOPMENT