KPMG 2010 Banking Survey Report Brochure

Banking
Preserving Customer Confidence and Trust in a Rapidly Changing Industry
04
June 2010
2010 Banking Industry

Customer Satisfaction Survey
Banking Survey Contents

Foreword Scope and Methodology The Customer's Perspective Redefining Customer Value Conclusion 2 3 5 12 14
The views and opinions expressed in this survey report are those of the survey respondents and do not necessarily represent the views and opinions of KPMG Professional Services. Unless otherwise stated in this publication, we have not sought to establish the reliability of the information obtained from sources outside of KPMG. We therefore cannot provide any assurances or guarantees that the survey findings represent an accurate view of the banking industry. There may be material differences between the findings of the survey and the actual state of the industry. No one should act upon the survey results or other information contained in this publication without appropriate professional advice after a thorough examination of the particular situation. KPMG accepts no liability or responsibility from the reliance of any party on the contents of this publication.
2010 KPMG Professional Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in Nigeria.
Banking Survey Issue 4
1
"The customers perception is your reality - Kate Zabriskie
Foreword
The Nigerian banking industry is in a period of rapid and increasing change which has been sparked off on the one hand by the recent banking industry reforms instituted by the Central Bank of Nigeria (CBN), and on the other hand by external global/ macro-economic pressures; an outcome of the world-wide financial crises. The regulatory - led reforms in the Nigerian banking industry have been aimed at upgrading the current practice and standard of banking within the country. The changes have included the adoption of a common year-end regime for Nigerian Banks, implementation of tenure limits for CEOs and non-executive directors, and the industry wide audit of all banks to verify and validate their financial health. It is envisaged that a more robust and healthy financial system will emerge after the implementation of these reforms. While Banks struggle with these changes and try to unearth solutions that will ensure continued relevance and ultimately preserve shareholder value, it will be interesting to learn how these changes may have affected the unintended victims the Customers. In this year's survey, we attempt to delve into the psyche of bank customers as we seek answers to such queries as: Is 'financial stability' still a critical basis for establishing and maintaining banking relationships? Has the recent industry turmoil/shake-up affected perceived service delivery to customers? How confident and trusting are customers in their banks? We again expanded the range of respondents across all customer segments and locations to ascertain the impact of these changes on customer trust, banking decisions and satisfaction levels. Overall, we surveyed about 8,000, 1,100 and 400 retail, SME and commercial/corporate respondents respectively across nine (9) locations nationwide. Results of this year's survey present a mix of surprises as well as some expected developments. While some dominant players from previous years maintain dominance of key segments and sectors, we see the emergence of new leaders in other market segments. In addition, while the overall customer satisfaction (CS) level for the corporate banking segment grew marginally, a decline was witnessed in the CS level for the retail and SME segments. Do these changes suggest a possible lack of consistency in addressing customer needs or are they reflective of the effort required by banks to effectively capture and deliver value to customers? This year's survey attempts to provide answers to these questions and more. Happy reading
Adebisi Lamikanra Partner, Business Performance Services
2
Figure 1: Retail Respondent Demographics - Analysis by Occupational Category
Civil/Public Servant 17% Others 3% Private Sector Employee 31% Student 19% Self-Employed 30%
Scope and Methodology

The scope of this year's survey was consistent with that of the previous (2009) edition, covering the retail, small and medium-scale enterprises (SMEs) and the commercial/corporate banking customer segments. Overall, the survey covered about 9,500 respondents, broken down as follows: 8,000 retail customers, 1,100 SME customers and 400 commercial/corporate customers. In determining the respondent sampling and survey locations for the retail and SME segments, the following factors were considered: concentration of commercial activity, density of bank branches and the potential number of bank customers at the locations. On the basis of the above, the following nine (9) locations across the country were targeted as follows: Aba, Abuja, Benin, Ibadan, Kaduna, Kano, Lagos, Onitsha and Port-Harcourt. In each of these locations, effort was made to ensure that retail/SME respondents were randomly selected from high density/traffic areas such as shopping malls, markets, university campuses, residential areas, state and federal secretariat complexes, business offices, etc. For the corporate/commercial segment, respondent selection was driven by the need to ensure the inclusion of the leading companies in each of the major business sectors. Sampling was based on KPMG's internal database of formal business establishments as well as the most recent copy of the Top 500 Companies in Nigeria (Goldstar Publications).
Figure 2: SME Respondent Demographics - Analysis by Establishment Type

Non-Governmental Organization 4.7% Limited Liability Partnership 5.9%
Others 0.5%
Figure 4: Corporate Respondent Demographics: Analysis by Industry

Oil and Gas Manufacturing Limited Liability Company 29.6% ICT and Telecoms Non-Bank Financial Services Institutions Logistics and Automobiles Service Real Estate and Construction Airlines and Hospitality Media and Publishing Healthcare and Pharmaceuticals Food, Beverage and Tobacco N5b-N10b 9% Conglomerates Engineering Educational Institutions Greater than N10b 15% Embassies/Multilaterals/Foundations/NGOs Agriculture Others 0 7 6 10 10 9 15 22 22 22 19 19 17 33 38 37 50 56
Sole Proprietorship 59.3%
Figure 3: Corporate/Commercial Respondent Demographics: Analysis by Turnover
N250m-N1b 23%
10
20
30
40
50
60
Frequency Ratings
N1b-N5b 29%
Less than N250m 24%
Like prior years, feedback from the corporate/commercial respondents was solicited from key personnel managing the organisation's banking relationships.
Page four
These individuals were excluded in the retail banking survey so as not to introduce a bias to the survey results. The overall methodology adopted in calculating the customer satisfaction index (CSI) remains the same as with the previous editions of the survey and is as depicted in the diagram below.
Figure 5: Methodology for Computing Customer Satisfaction Index CSI
Customer Service Factors

Customer Care
Measures interaction of bank staff with customers
Ratings Satisfaction (S) & Importance (I)
Weighted Score
Product/Service Offering
Measures product range & appropriateness to customers needs
S I
(S x I)/ I
Transaction Methods & Systems

Measures customer support processes/ systems & turnaround time
Convenience
Measures accessibility & quality of service from delivery channels
Perceived Value
Pricing
Measures fees, charges and rates on product
Overall Score
CSI
Page six
3
GTBank Maintains Dominance in Retail Banking
Figure 6: Most Customer Focused Bank by Location: Retail
The Customer's Perspective

The banking industry in Nigeria has been faced with several changes over the last twelve months. On the one hand, market pressures have resulted in the capital market crash leading to huge exposure to margin loans and also the exposure to the downstream oil and gas sector. On the other hand, recent regulator-led reforms are pushing banks to refocus their business on banking and its critical enablers - governance, risk management, and reporting. This section analyses customer responses/views in the light of the industry changes over the past year. How confident are the customers in their banks (may be reflected in CSI ratings)? What factors are guiding customers in maintaining banking relationships? Has the recent shake-up in the industry affected customers' perception of service delivery? Although all banks were rated during the survey, not all the banks were ranked eventually, because the survey targeted a minimum sample size of respondents for each of the 24 banks. Banks excluded from the retail and corporate/ commercial analysis numbered two (2) and three (3) banks respectively. These exclusions were necessary to avoid drawing inferences that may not be representative of the actual customer experience in such banks. GTBank Sets a 3- Year Record in Retail Banking For the 3rd consecutive year, GTBank clinched the top position. With a CSI of 77 .21, GTBank out performed all the other banks to maintain its position as the leading retail bank. Following closely behind and maintaining last year's position is Zenith Bank with a CSI rating of 75.81. Access Bank moved up two positions, coming 3rd with a CSI rating of 74.85..
Location
Aba Abuja Benin Ibadan Kaduna Kano Lagos Onitsha Port Harcourt
Bank
GT Bank Zenith Bank GT Bank
Figure 7: Top 10 Most Customer Focused Banks-Retail Intercontinental Bank Zenith Bank Zenith Bank GT Bank Fidelity Bank Access Bank
GTBank Zenith Bank Access Bank Diamond Bank Intercontinental Bank FCMB Fidelity Bank Oceanic Bank Bank PHB Stanbic-IBTC
70 72 71.91 74
Customer Satisfaction Index (%)
76
78
Page six
Skye Bank which featured in last year's top ten most customer focused banks did not make the list this year, and Bank PHB, which exited from the top ten last year re-emerged within the top ten. In addition, the positioning of the other top-ten players changed in comparison with last year's performance. Stanbic IBTC dropped six places from the 4th position in 2009 to the 10th position this year, while Fidelity Bank moved up two notches from the 9th position (last year) to the 7th position (this year). Overall, this year's survey result shows a general decline in aggregate customer satisfaction levels from 75.88 (in 2009) to 71.91 this year. Though GTBank is leading the pack, it's overall CSI dropped by 6.35 from the 2009 position. The same with Zenith Bank and Access Bank with a CSI decline of 4.64 and 3.39 respectively. What is however most instructive, and contrary to general expectations within the industry, is the continued feature of some banks impacted by the Central Bank's recent banking audits. Whilst Intercontinental Bank and Oceanic Bank are not new to the top ten ranking (ranking 3rd and 7th respectively in 2009), their continued presence in the top ten in spite of poor audit reports (and negative press) may be reflective of the efforts of the management team at managing customer service and maintaining public confidence, as well as pronouncements by the Central Bank of Nigeria regarding customer interest protection/safeguards, in these banks. Analysis of customer comments shows that while financial stability remains a key consideration for transacting businesses with banks, and regardless of concerns on the banks financial position, customers continue to maintain a relationship with these banks, and value the robustness of their product and service suite, as well as the proximity of their branches.
GTBank Maintains its Dominance across Major Service Areas
Industry Service Leaders In line with our usual practice, retail customers assessed satisfaction levels with their banks along five key service areas. The positioning of the banks varied across the five customer service areas. GTBank came tops in all the customer service areas except product/service offering where Access Bank led the pack.
Figure 8: Ranking of Bank Performance by Customer Service Areas - Retail

Customer Service Areas (Retail) Customer Care Product/Service Offering Transaction Methods & Systems Convenience Pricing Ranking 1 GT Bank Access Bank GT Bank GT Bank GT Bank 2 Diamond Bank Zenith Bank Zenith Bank Zenith Bank EquItorial Trust Bank 3 Zenith Bank GT Bank Stanbic -IBTC Intercontinental Bank Sterling Bank
Service Delivery Channel Champions In evaluating the customer satisfaction level with banks' service delivery channels for the retail segment, three key channels were assessed namely: ATM, Branch
Page seven
and Internet Banking. The assessment covered the proximity, accessibility, availability and quality of service delivery by these channels amongst other factors. GTBank led in channel performance, managing to clinch the 1st position in ATM Banking with a CSI rating of 79.57 and Internet Banking with a CSI score of 74.59. Zenith Bank came tops in Branch banking with a CSI of 81.56.
Figure 9: Ranking of Bank Performance by Service Delivery Channels - Retail
Channels (Retail) ATM Branch Internet Banking
Ranking 1
GTBank Zenith Bank GTBank
2
Zenith Bank GT Bank Zenith Bank
3
Intercontinental Bank Intercontinental Bank Diamond Bank
2010 SME Focused Banks About 1,100 SME banking customers were sampled across the nine (9) locations. Unlike the prior year where there were no market leaders, GTBank and Zenith Bank have emerged as the clear leaders in this industry segment.
Industry leaders begin to emerge in the SME segment
Figure 10: Ranking of Bank Performance by Customer Service Areas - SME

Customer Service Areas (SME) Customer Care Product/Service Offering Transaction Methods & Systems Convenience Pricing Ranking 1 GT Bank Zenith Bank 2 Zenith Bank GT Bank 3 Diamond Bank Diamond Bank
Zenith Bank GT Bank
GT Bank Zenith Bank Skye Bank
Diamond Bank Intercontinental Bank Zenith Zenith Bank
GT Bank
GTBank also leads the way in the Corporate Banking Segment For the first time in the history of this survey, Zenith Bank's leadership in the corporate banking segment was challenged. GTBank emerged the most customer focused bank with a CSI of 80.08. Zenith Bank took the 2nd position with a CSI of 78.26, while FCMB (displacing Skye Bank from last year's 3rd position and moving up four notches) took the 3rd position with a CSI rating of 77 .26. Citibank and Bank PHB showed major improvements in their performance this year with Citibank climbing 5 places to claim the 4th position and Bank PHB emerging among the top ten for the first time. The industry wide CSI grew marginally at 33% (against 21% in 2009) of Nigerian banks having a CSI of 75 and above. This may imply improving levels of customer satisfaction within the corporate segment and suggests that more banks may be focusing on customer satisfaction as a key differentiating factor.
GTBank beats Zenith to emerge as Most Customer Focused Bank in Corporate
Page eight
Figure 11: Top 10 Most Customer Focused Banks - Corporate

GTBank Zenith Bank FCMB Citibank Skye Bank Access Bank Intercontinental Bank Bank PHB Diamond Bank First Bank 72 74 75.18 76 78 80 82
Customer Satisfaction Index (%)
GTBank and Zenith dominate in all Customer Service Areas for Corporate Customers GTBank was the leading bank in the rankings across the five customer service st areas. The bank achieved the 1 position in the areas of customer care (84.08), convenience (82.55), transaction methods & systems (86.51), products & service offering (75.48) and pricing (72.69). Zenith Bank also demonstrated a good showing nd as it took the 2 position in four key areas including customer care (82.16), convenience (81.57), transaction methods & systems (84.29) and products & nd service offering (74.07). Sterling Bank clinched the 2 position for pricing.
Figure 12: Ranking of Bank Performance by Customer Service Areas - Corporate

Customer Service Areas (Corporate) Ranking 1 GT Bank GT Bank GT Bank GT Bank GT Bank 2 Zenith Bank Zenith Bank Zenith Bank Zenith Bank Sterling Bank 3 Citibank Sterling Bank Access Bank Skye Bank Fidelity Bank
Customer Care Product/Service Offering Transaction Methods & Systems Convenience Pricing
Reasons for Maintaining Banking Relationships
Financial Stability and Excellent customer Service as key reasons for maintaining banking relations in corporate and retail segments, respectively.
This year's survey reveals that the predominant rationale for customers maintaining banking relationship with their respective banks remains unchanged. In the corporate segment, "Financial Stability" still flags as the most important reason for maintaining relationship with banks while "Excellent Customer Service" retains its position as the most important reason for retail customers.
Page nine
Figure 13: Rationale for Maintaining Banking Relationship: Corporate
Figure 14: Rationale for Maintaining Banking Relationship: Retail
Financial Stability Excellent Customer Service Image and Reputation Proximity/ Accessibility to Branch Network Access to Credit Provision of Full Range Financial Services Pricing/ Cost of Products and Services Availability of Alternate Banking Channels Parent Company/ Affiliate requirement 5% 9.93% 9.84%
17 .24% 16.06% 13.39%
Excellent Customer Service Financial Stability Image and Reputation Proximity and Accessibility of Branch Network Employer's Requirement (Salary Accounts)
16.25% 15.87% 15.25% 13.59% 11.53% 11.13% 8.45% 7 .93% 5% 10% 15% 20%
8.85% 8.42% 8.20% 8.08% 10% 15% 20% Access to Alternate Delivery Channels Pricing/Cost of Product and Services Access to Credit
Rating Frequency
Rating Frequency
Service Expectation The survey also revealed the key service expectations for all the segments covered in the survey. Banks will need to pay attention to these key buyer values to better delight and increase the satisfaction levels of their customers. The analyses show that retail customers value banks with speedy transaction processing, while SME and corporate customers, on the other hand, are cost conscious and therefore value competitive rates, fees and other charges.
Figure 15: Top 3 Customer Buyer Values by Segment

Customer Segment Key Buyer Values 1st Minimal transaction wait Competitiveness of interest rates, fees and charges Competitiveness of interest rates, fees and charges 2nd Improved ATM Services 3rd Minimal system downtime
Retail
SME
Reduction in wait times
Access to Credit Efficient & effective complaints/ feedback resolution system
Corporate
Improved relationship management
Ratings per Bank The frequency of ratings per bank is an indication of the bank's market focus or target customer segment. It may also be an indication of the bank's 'share of mind' of the customer. While GTBank is the most rated bank by the retail and corporate segments, Zenith Bank was the most rated bank by the SME segment.
Figure 16: Top 10 Rated Banks: Retail
Figure 17: Top 10 Rated Banks: SME
GTBank UBA Oceanic Bank 1076 1016 997 661 658 565 521 359
200 400 600 800
1443 1361
Zenith Bank GTBank UBA Oceanic Bank First Bank Intercontinental Bank Skye Bank Diamond Bank Bank PHB Eco Bank 55
50 70 90 110
210 197 190 183 177 132 93 92 78

130 150 170 190 210 230
GTBank and Zenith Bank emerge as the most frequently rated banks
Intercontinental Bank First Bank Skye Bank Bank PHB Diamond Bank Zenith Bank Fidelity Bank
1000 1200 1400 1600
Rating Frequency
Rating Frequency
Figure 18: Top 10 Rated Banks: Corporate
GTBank Zenith Bank First Bank UBA Diamond Bank Intercontinental Bank Oceanic Bank Access Bank Ecobank Skye Bank
40
190 187 169 142 81 79 73 69 67 56

90 140 190 240
Rating Frequency
4
Today, banks that will win must be able to continuously reassess and redefine what constitutes value to their customers and deliver each and every time.
Redefining Customer Value in a rapidly changing world:

The Key to Sustaining Customer Confidence Redefining customer value is going beyond planning, to delivering good customer satisfaction levels across all the customer segments. It involves assessing customers' perceived values and their relative importance and determining how best a bank should position itself to deliver services that match customers' perceived value in order to gain a competitive edge. To redefine customer value, a bank needs to: Profile Customers: Careful profiling and need analysis of the banks customers' base will reveal certain customer idiosyncrasies, behavioural patterns or life style choices, which may prove invaluable towards the development of specific products and services as well as target marketing. Identify Value Elements: Good market insight and a clear understanding of customers' value elements will enable a bank to define the value elements which will be the basis of the offering to each customer or market segment. Spot High Value Customers: Understanding the needs of customer will assist the bank to rethink its assessment of the most profitable customer segments. A balanced view of the customer needs, attraction and retention cost, value elements and satisfaction drivers will reveal the most valuable customer segments and set direction for formulating strategies for specific customers or customer segments. Develop Delivery Strategies: Strategies will need to be defined in detail to deliver higher satisfaction levels on the identified value elements and customer needs. Value elements may vary significantly across locations and the bank should be mindful of these often marked differences when developing products and new ways of providing customer service. Conclusion As the Nigerian economy slowly recovers from the effects of the economic downturn, customer attitudes and behaviours will continue to change thus implying shifting needs and values. Banks that rely on old customer service delivery models and assumptions may suddenly realise that they are competing in a market that has evolved beyond their reach. On the other hand, banks that continuously realign their business strategies in line with the emerging customer needs may not only retain their existing customers, but also gain unique competitive advantages in the industry.
5
Beyond Financial Stability, Service Delivery is Key
Conclusion
Beyond Financial Stability, banks must continue to deliver value Again, this year's edition of the BICSS indicates that customers value financial stability and excellent customer service above all other factors when making informed decisions on their banking relationships. These two factors represent building blocks for banks to continually explore avenues of sustaining and improving the satisfaction levels of their customers. This requires banks to constantly redefine their service delivery strategies to enhance the value of satisfaction factors relevant to their customer base. Pricing, the surprise for the SME and corporate segment Surprisingly, whilst pricing as a factor on its own does not determine overall/ absolute customer satisfaction, it has featured very prominently as a critical buyer value for the SME and Corporate segments in this year's study. Customers across these segments are asking for more competitive rates in interest, fees and the other changes, beyond any other value. Who will lead the Pack The survey findings over the past 4 years, reveal opportunities for Nigerian banks to identify and create sources of competitive advantage. Banks that will break out as leaders in each segment, i.e. retail, corporate or SME, must develop new strategies aimed at far surpassing or improving current levels of satisfaction.
The key to success
Moving Customers to Centre Stage
Service Delivery a competitive advantage.

The changing nature of the customer and the impact of an unpredictable business environment converge to produce a platform of constant change that banks need to be aware of, monitor and respond to with dynamic marketing strategies. It is now more important for banks to focus on product innovation as they increase their customer centricity, and reposition their services to deliver what they believe the market wants as opposed to what they can produce. The results of our 2010 Customer Satisfaction Survey confirm again that service delivery is the most important factor that customers look for to build a lasting relationship with any bank. Customer service is critical to building competitive advantage in the industry, achieving lasting profitability in an up market and retaining market share in a down economy.

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Banking

Preserving Customer Confidence and Trust in a Rapidly Changing Industry

2010 Banking Industry

Banking Survey Contents

Banking Survey Issue 4

Adebisi Lamikanra Partner, Business Performance Services

Scope and Methodology

Figure 2: SME Respondent Demographics - Analysis by Establishment Type

Figure 4: Corporate Respondent Demographics: Analysis by Industry

Sole Proprietorship 59.3%

Figure 3: Corporate/Commercial Respondent Demographics: Analysis by Turnover

Less than N250m 24%

Banking Survey Issue 4

Figure 5: Methodology for Computing Customer Satisfaction Index CSI

Customer Service Factors

Ratings Satisfaction (S) & Importance (I)

Transaction Methods & Systems

The Customer's Perspective

Banking Survey Issue 4

GTBank Maintains its Dominance across Major Service Areas

Figure 8: Ranking of Bank Performance by Customer Service Areas - Retail

Banking Survey Issue 4

Figure 9: Ranking of Bank Performance by Service Delivery Channels - Retail

Channels (Retail) ATM Branch Internet Banking

Industry leaders begin to emerge in the SME segment

Figure 10: Ranking of Bank Performance by Customer Service Areas - SME

Zenith Bank GT Bank

GT Bank Zenith Bank Skye Bank

Diamond Bank Intercontinental Bank Zenith Zenith Bank

GTBank beats Zenith to emerge as Most Customer Focused Bank in Corporate

Banking Survey Issue 4

Figure 11: Top 10 Most Customer Focused Banks - Corporate

Customer Satisfaction Index (%)

Figure 12: Ranking of Bank Performance by Customer Service Areas - Corporate

Reasons for Maintaining Banking Relationships

Banking Survey Issue 4

Figure 13: Rationale for Maintaining Banking Relationship: Corporate

Figure 14: Rationale for Maintaining Banking Relationship: Retail

17 .24% 16.06% 13.39%

Figure 15: Top 3 Customer Buyer Values by Segment

Reduction in wait times

Access to Credit Efficient & effective complaints/ feedback resolution system

Improved relationship management

Figure 16: Top 10 Rated Banks: Retail

Figure 17: Top 10 Rated Banks: SME

210 197 190 183 177 132 93 92 78

1000 1200 1400 1600

Figure 18: Top 10 Rated Banks: Corporate

190 187 169 142 81 79 73 69 67 56

Redefining Customer Value in a rapidly changing world:

The key to success

Moving Customers to Centre Stage

Service Delivery a competitive advantage.

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