Nicholas Watson in Prague -
If the financial crisis and the subsequent economic slowdown and sovereign debt crisis dealt a body blow to the banks, spare a thought for the consultancies that work within the financial services industry.
"What tends to happen right now with the liquidity crisis is that you can't get people's attention - they're much more concerned with staying alive than refining their business model," says Carl LoBue, chairman of LoBue Group, a US-based financial services consultancy that works in global emerging markets.
However, LoBue says that while the sovereign debt crisis that's spreading through Europe might not provide the best backdrop for expanding a business in emerging Europe, these types of crises also present opportunities for consultancies like his if the banks are willing to see past the immediate concerns. "Refining business models and being able to offer more credit to consumers is ultimately beneficial for the banks and the economies they operate in, as it will help grow these economies, which are never going to get out from under the public debt issue if they don't grow," he says.
Certainly, under normal circumstances emerging markets provide fertile soil for financial service consultancies like LoBue and competitors to grow in, unlike the more mature markets of the US and Western Europe, where financial products have been widely taken up and efficiency gains are harder to come by.
Over the past decade and a half, LoBue has worked extensively in lots of emerging countries, including the Middle East, North Africa, South Asia and the Pacific basin, and is now expanding into Central and Eastern Europe, where it believes there's still a lot of scope for banks there to evolve into more consumer-oriented businesses, which rather than just using consumers to gather liabilities, they become much more aggressive in providing credit and other products. "We do very well in those environments, because we've done a great deal of work in these economies that move from a high-touch, low-transaction environment to a very high-transaction, low-touch environment in order to meet mass market demand," LoBue says. "We help banks reengineer their branch networks and put in good call centre capabilities so consumers get a much higher quality service, either directly in the branch or through other channels like call centres or the internet."
LoBue typically targets the large state-owned or formerly state-owned banks, which are looking to move aggressively to improve their customer service and expand their consumer banking business. During the 1990s LoBue worked for several Turkish banks, helping them in the early stages of developing a good consumer business, a call centre and the consumer lending processes. These kinds of banks also provide the scale that makes LoBue's services good value for money.
In markets where there's huge pent-up demand for financial products and a traditional lack of customer service, the effects of using a consultancy like LoBue are rapid and can be financially explosive. "What typically happens is that we dramatically improve the turnaround time and customer service, and at the same time reduce costs," says LoBue.
This has an immediate effect on the bottom line. He cites the example of a large bank in Saudi Arabia that worked with LoBue to become a more consumer-oriented institution. At the time it was a privately owned bank and was thinking about doing an IPO. After competing the project, the bank's investment bank estimated that LoBue's work increased the potential value of the subsequent IPO by $900m.
"In the US, we worked with a finance company that was a provider of services to banks, for example ATM networks and merchant processing of credit card transactions. That was a turnaround situation of a public company and during the time we were there, about 18 months, we took about 9% out of their cost base and their stock price went from $8 to $22 - and that was without any topline growth," LoBue says. "That's our calling - helping people to become much more efficient and effective."
Of course, being a player in a region where tenders for contacts are often not transparent, insiders are rewarded and international owners rely on their own contacts presents its own set of difficulties. LoBue gives the example of where it found itself up against a consultancy that was partly owned by one of the bank's board members. "We didn't get that one," he sighs.
Still, given the size of the banking sector in the region, "the pie is plenty big enough," say LoBue.
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