Focus Groups Helped Bank of Boston Refocus Treasury

Article excerpt

Before Bank of Boston Corp. set out to reengineer its treasury department in the early 1990s, it wanted to hear what its customers had to say.

The $43 billion-asset banking company, the second largest in New England, met individually and in focus groups with customers to find out what they expected -- and wanted -- from the treasury area, which focuses on foreign exchange, derivatives, and fixed-income trading.


  Headquarters     Boston
        Assets     $44.3 billion

     Employees     18,600

     Return on     0.99%(*)

average assets

     Return on     15.44%(*)

average equity

(*)Nine months ended Sept. 30, 1994.

What it heard was that customers, primarily corporations and other financial institutions, wanted Bank of Boston to focus more on helping them with risk management.

With that in mind, the bank embarked on a program to build to its existing customer relationships, rebuild technology on its trading floor, and put greater emphasis on providing solutions to customer needs like risk management.

With the reorganization now firmly in place, the treasury department expects to see substantial returns.

Bradford Warner, group executive of the treasury department, said revenues from the trading operation -- now about $30 million a year -- are projected to double in two years and reach more than $100 million within four years.

With a streamlined operation and more efficient technology, profits are expected to grow at an even faster rate. "Of every three dollars we generate, roughly two will drop to the bottom line," said Mr. Warner. "We will need only one dollar to cover our operating expenses."

Gerard Cassidy, a securities analyst at Hancock Institutional Equity Services in Portland, Maine, said time will tell whether the bank achieves its goals. But he noted that the potential in Latin American markets could make it happen.

"The current situation in Mexico notwithstanding, Latin America has enormous potential to offer rich revenue, and Bank of Boston is the premier bank in the region," he said. "Nationally, it is recognized as a player with a solid reputation that allows them to compete against Citi, Chase, and First Chicago as well, which may also help them reach their goals."

The treasury department's goals emerged after about six month of talking to customers and conducting surveys.

"For the most part, we found that our customers do not look to the bank for lending functions but rather risk management products and services," said Mr. Warner.

Bank of Boston also visited nonbank corporations to get ideas for its reengineering.

"We are benchmarking our approach to the future off of what the nations' industrial concerns have done," Mr. Warner said. "We went out and met with companies to see, hands on, how they were getting things done and tried to copy their initiatives."

By the spring of 1994, the bank had finished most of the strategic planning.

"We sat down and said that our strategy should focus on those three areas: solution orientation, risk management, and a leveraging of our international operation," said Mr. …