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

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

ASSUMPTIONS (HEADCOUNT) 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) (cont'd.) 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 - FINANCIAL SCALE 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 (cont'd) 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

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: Account Opening Investment Management Service Insurance Services: Account Opening Underwritings Service Credit Services: Credit Approvals Screening Pre- Qualifying Dis- Bursement 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: Account Opening Investment Management Service Insurance Services: Account Opening Underwritings Service Credit Services: Credit Approvals Screening Pre- Qualifying Dis- Bursement 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

OWNERSHIP STRUCTURE IMPLICATIONS 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

RETAIL BANKING VALUE CHAIN $113 14% NY Consumer Banking Customer/Relationship Management: Payment Services: Account Opening $23 3% Transaction Processing $72 9% Service $28 14% Savings Services: Account Opening $64 8% Service $72 9% Investment Services: $78 10% Account Opening Investment Management Service Insurance Services: Account Opening Underwritings Service Credit Services: Credit Approvals $10 1% Screening $10 1% Pre- Qualifying $10 1% Dis- Bursement $20 3% Service $35 4% Collections $20 3% Info & Advisory Services: Account Opening $11 1% Investment Management $7 1% Service $22 3% $35 4% Commercial & Professional Banking Customer/Relationship Management: Payment Services: Account Opening $11 1% Transaction Processing $11 1% Service $12 2% Savings Services: Account Opening $17 2% Service $17 2% Investment Services: Account Opening Investment Management $34 4% Service Insurance Services: Account Opening Underwritings Service Credit Services: Credit Approvals $5 1% $5 1% Pre- Qualifying $5 1% Screening Dis- Bursement $6 1% $6 1% $8 1% Service Collections Info & Advisory Services: Account Opening $14 2% Service $14 2% Delivery Channels: Distribution, etc. Treasury/Balance Sheet Management Expenses ($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

FINANCIAL SCALE IMPLICATIONS 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

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

HEADCOUNT IMPLICATIONS 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

VALUE CHAIN DEVELOPMENT Constructed by: Reviewed by: