Journal Detail

Journal 17 – Growth

September 2006

This issue of the journal focuses on how financial executives have turned their attention from managing the bottom line to improving the top line. The articles in this issue highlight how growth can be stimulated, even within those divisions that were once cost centres, and what frictions still exist within the system that need to be overcome in order that the potentially sustainable profitability compression facing the banking industry can be mitigated.

The last six years or so have become synonymous with efforts by financial institutions to reduce costs and improve the efficiency of their operations. Having slashed costs to acceptable levels, financial institutions are now turning their attention to increasing revenues and growing the business, something most of their management are better suited to; after all, the cost-cutting exercises of most financial institutions in response to the collapse of the equity markets do not provide best-practice case studies of how such activities should be undertaken. By contrast, increasing revenues is something that comes naturally to most financial executives, and if the recent record-breaking figures are anything to go by, they seem to have become even better at it.

However, the articles in this issue highlight two important issues that might have been overlooked in all the attention received by the industry’s record-breaking figures. Firstly, it seems that some, and by no means all, financial institutions are recognizing that their huge investments in operations and technology can actually be used to help grow the business, and that may be they can even be turned into successful businesses in their own right. Of course, making a cost center into a profitable organization is no easy task, but there is a growing number of precedents to prove that it can certainly be done. The other important issue is that the U.S. banking industry is in fact in the early stages of a sustainable profitability compression, and that despite the huge strides taken in improving the efficiency of the industry more needs to be done in order to avoid what seems to be an industry-wide problem.

This issue of the Journal is focused on an area that most financial executives are interested in, namely growth. The articles in this issue of the journal aim to help financial executives better prepare for growth and avoid the potential profitability compression that is being predicted. We are grateful to all the authors who contributed to this issue.