Banc One Corporation is a bank
holding company that provides a full range of consumer and
commercial banking related financial services. At December 31,
1997, the Corporation operated banking offices in Arizona,
Colorado, Illinois, Indiana, Kentucky, Louisiana, Ohio,
Oklahoma, Texas, Utah, West Virginia and Wisconsin and had
facilities in 33 states. Banc One also engages in credit card
and merchant processing, consumer and education finance,
mortgage banking, insurance, venture capital, investment and
merchant banking, trust, brokerage, investment management,
equipment leasing and data processing. (Banc One Annual
Report, 1997)
Although Banc One had deposits
exceeding $77 billion in 1997, up 4.3 percent from 1996, their
net income was down 21.9 percent to $1.3 billion in 1997 from
$1.6 billion in 1996. Charge-offs and delinquencies on loans
increased from 1996 to 1997. Total expenses also increased
from 1996 to 1997, up nearly 20 percent. (Strategic
Management, Fred R. David, 1999)
Macro Environment:
Economic growth accelerated in
1997, 3.8 percent versus 2.8 percent in 1996. Inflation
remains low but the recent turmoil in Asia could have a
softening effect on U.S. growth. S&P’s Economics
Department currently is predicting real GDP growth of 3.2
percent in 1998, down from 3.8 percent in 1997.
Financial services modernization
reform could allow banks, insurance companies, and security
firms to merge. The reform would give the U.S. financial firms
a better ability to compete internationally. Most foreign
banks can already own insurance and brokerage firms.
There have been many advances in
technology in the recent years. ATM networks have grown, the
Internet is playing more of a roll in financial services, and
computers are cheaper and more powerful today than they were
just a few years ago.
ATM’s allow banks to customers to
make deposits, withdraws, and transfers at locations other
than the banks themselves. ATM’s are in shopping malls, gas
stations, and on college campuses around the nation.
The Internet is changing the way
banking can be done. Some banks, such as Telebank, do most of
their business on the Internet or over the phone, allowing
them to reach customers anywhere in the nation from one
branch.
Lower computer prices may allow
companies to replace old, outdated computers with new, higher
speed PC’s. More powerful PC’s will allow banks to revitalized
and streamline their operations by allowing data to flow
quicker and more efficiently between branches and ATM’s
located in different states.
Industry
Environment:
Banc One has many substitutes,
from other banks, such as City National or Bank of America, to
brokerage firms such as Etrade or Charles Schwab. All of these
firms are fighting for a limited number of people. To maintain
and attract new customers, Banc One must offer services that
people want and need.
Banc One has a lot of
competitors. Credit Unions, other banks, brokerage firms,
insurance companies, mortgage companies, and trust companies
are all competitors of Banc One.
The financial services sector has
a relatively low barrier to entry. In the last three or for
years, with the development of the Internet, a lot of
financial services companies have appeared. Eloan, which
offers loan applications and approvals over the Internet, is
one of the latest companies to take advantage of the Internet.
Another company that uses the Internet to reach their
customers is Etrade. Etrade is an online brokerage firm and
they do most of their business over the Internet. These, and
other companies that are using the power of the Internet,
could pose a serious threat to Banc One.
In the financial services sector,
buyers have a lot of power. Since there are so many firms
offering financial services, buyers basically have a choice
about which ones they use. Buyers basically look for
convenience, type of services offered, and the price to do
business.
Suppliers have a lot of power
too. The suppliers in the financial services sector are people
and corporations that deposit money in the banks, brokerage
firms, etc., and the Fed, which controls Federal Reserve
requirements.
Banc One Corporate
Profile:
Banc One is the nation's
fourth-largest bank holding company, with assets of more than
$260 billion and offers a full range of financial services to
commercial and business customers, and consumers. It is the
world's second largest Visa/MasterCard issuer, the
third-largest bank lender to small businesses, a leading
national automotive lender, and one of the top 25 managers of
mutual funds. Bank One operates more than 1,800 banking
centers and a nationwide network of ATMs. (http://www.bancone.com/about/profile/description/
, 1999)
Banc One's philosophy is to hold the
number one, two or three market position in the major markets
it serves. The Corporation continues to expand its market
share by offering a range of innovative, high-quality products
to its diverse customer base. Bank One also has a list of core
values that they follow. The core values are customers,
extraordinary performance, teamwork, ethics and integrity,
people, and speed and simplicity. The core values further
explained in Exhibit 1. (Banc One Annual Report,
1997)
The Banc One vision is "We will settle
for nothing less than to be a national leader in providing
financial services to the people and businesses of America. We
are committed to the relentless pursuit of ideas that enable
those we serve to prosper and achieve their goals." (Banc One
Annual Report, 1997) To help accomplish their vision, Banc One
is divided into four strategic business units. The units are
Banc One commercial banking group, Banc One retail group,
Finance One group, and Banc One capital holdings group. The
four strategic business units are explained in more detail in
Exhibit 2.
SWOT Analysis:
Banc One has several strengths. Their
total managed assets, deposits, and managed loans and leases
where all higher from 1996 to 1997 and has been increasing
year to year since 1993 with the exception of deposits, which
slightly decreased between 1994 and 1995. Total gross revenue
has also increased steadily year to year from 1993 to 1997.
Another strength at Banc One is their focus on new technology.
They allocate 3 percent of annual profits to technology
research and development.
Some of the weaknesses include credit
quality and charge-offs. In 1997, there where a total of $559
million in severely problematic loans which was up from $484
million in 1996. Net charge-offs to average loans and leases
have been steadily increasing from 1994 to 1997. Net income is
down 21.9 percent from $1.6 million in 1996 to $1.3 million in
1997. (Banc One Annual Report, 1997)
Opportunities exist for Banc One. They
could take advantage of the Internet and allow customers to do
online banking, such as funds transfers or filling out
applications for loans. They could also expand into areas
where they don’t have branch offices to try and increase their
customer base.
Banc One’s biggest threat are other
financial services companies that have services customers want
or need but are not available at Banc One. Also, the larger
banks have more extensive ATM networks, more customers, and
more money to invest in new technologies.
Conclusion:
Banc One needs to take more advantage of
the Internet. If they could do more business over the
Internet, such as taking loan applications and approving or
denying the loan, they could reach more customers. With more
customers comes more revenue from interest on the
loans.
Banc One also needs to improve their
decision-making technique in the loan approval process. Net
charge-offs continue to rise, which cuts into profit. By
making loan requirements a little stricter, they could
possibly reduce the number of charge-offs per year.
Banc One also needs to try and reduce
expenses. One option is to locate branches that have been
loosing money over the past three or four years and close them
or sell them off to other banks.
Another option to help increase revenue
is to expand into a growing area or areas of the country. They
could identify where most people are moving to and open
branches there. People usually move to where jobs are, so Banc
One could capitalize not only on the people, but new companies
in the area too.
Exhibit 1
Bank One Core
Values:
Customers
We value our customers. We are always
friendly and courteous and listen to them so we can better
meet their needs. We provide them with world-class financial
solutions.
Extraordinary Performance
We are committed to be the best in all
that we do. Our aim is to achieve or exceed our goals by
taking ownership of the jobs that we do and the results that
come from them. We take prudent risks and look for creative
solutions to the challenges we face.
Teamwork
We work together as a unified team by
actively listening to each other and openly sharing helpful
information that will produce the best results for the
company.
Ethics and Integrity
We are honest and forthright in all of our
business activities. We take personal accountability for our
actions and the results that come from them.
People
We bring out the best in people by showing
respect for each other and the things that make our
contributions unique. We openly appreciate and reward
exceptional performance and support each other's desire to
learn and progress.
Speed and Simplicity
We act with a sense of urgency. We make it easy
to do business with us. We continuously streamline our
processes, systems and procedures so we can do our jobs
better, faster and more easily.
(Banc One Annual Report,
1997)
Exhibit 2
Banc One’s Strategic
Business Units:
Banc One Commercial Banking
Group
The Banc One Commercial Banking Group
provides a full range of financial services to more than
29,000 middle-market businesses, developers and affluent
individuals, and is a national leader in a wide range of
services.
Banc One Retail Group
The Banc One Retail Group’s mission is
to be the premier national retailer of financial services to
consumers and business banking customers in the United States.
The goal is to keep customers for life by pro-viding
outstanding products and services.
Finance One Group
The Finance One Group is one of the
nation’s largest and most profitable finance companies,
managing almost $28 billion in assets. Success is based on
focusing on customers’ goals.
Banc One Capital Holdings
Group
The investment management, investment
and merchant banking, and insurance subsidiaries merged into
one business group, Banc One Capital Holdings Group.
