U.S. bank profitability in recent quarters has been driven by significant reductions in provisions for loan losses. With these provisions now returning to normalized rates, and with revenue growth anemic, many U.S. banks are turning their attention to reducing noninterest expenses. A number of banks now have branded cost-containment programs in place, including Project New BAC (Bank of America), Project Compass (Wells Fargo) and Keyvolution (KeyBank).
While some may see this as a cynical attempt by banks to put a gloss on an effort that ultimately result in lost jobs, from the banks’ perspectives, branding these programs serves to emphasize their commitment to cost containment with both external (investors and analysts) and internal (executives and other employees) stakeholders.
- For investors and analysts, this commitment is seen in having a named program in place, with overall saving goals, specified areas where savings can be attained, as well as regular progress reports
- For bank staff, the branding of such programs builds awareness, coordinates various cost-containment initiatives at the bank, as well as providing a forum for staff to submit cost-containment suggestions
Expect more banks to follow the lead of Bank of America, Wells Fargo and KeyBank.
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