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Regional banks to face investor pressure

Dubai, June 7, 2012

As the Middle East banking sector becomes increasingly competitive and consolidated, regional banks will face shareholder pressure to focus on value rather than revenue growth. However, a recent study shows how difficult this is to achieve.

The study conducted by Bain & Company said over the past decade, just one company in eight proved to be a sustained value creator, by registering 5.5 per cent annual sales and earnings growth and above-average total shareholder return.

'One key to sustainable value creation for regional banks is scale,' said the study by Bain  & Company which involved a wide range of industries in 12 countries.

'Among Saudi banks, for example, the largest players are also the most profitable. Given that scale, banks must focus on retaining their customers and capturing those of the competition through improving customer satisfaction.'

'Indeed, Bain studies have shown that sustained value creators enjoy customer satisfaction nearly 2.5 times higher than competitors,' it added.

'Despite the proven importance of customer satisfaction as a key factor in profitability and value creation, companies have a poor understanding of their customers' level of satisfaction,' explained Bain & Company Dubai-based partner Emmanuel Yoo.

'According to the study, 80 per cent of companies believe they provide a superior experience, while customers concur in only 8 per cent of cases.

'One big reason why a coherent customer experience is so difficult to achieve is that it is influenced by a wide range of variables, from hard inputs, such as products and pricing, to soft inputs, such as service delivery, brand image and convenience,' he stated.

'This broad range of inputs helps explain the absence of accurate customer satisfaction measurements within most organisations,' he said.

'While measuring financial profit has been well developed for more than a century, measuring customer loyalty is not as far advanced.

'Most customer loyalty measurements face several challenges, including limited track records, lack of standards, lack of focus throughout the organisation, and inconsistent and often improvised data gathering processes,' he said.-TradeArabia News Service




Tags: Middle East | Bank | pressure | investor |

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