Value and Capital Management: A Handbook for the Finance and Risk Functions of Financial Institutions

Chapter 11Achieving Profitable Growth

Profitable growth is one of the five KPIs driving the franchise value of the firm (as illustrated in Figure 11.1). Joseph Strumpf of Wells Fargo says (Strumpf, 2012) that revenue growth is “…the most important measure of service, sales and customer satisfaction. It's the vote our customers cast every day with their pocketbooks. When they rave about our service, they'll give us more of their business, increasing revenue. They'll refer new customers to us. They'll stay with us for life.”

Figure 11.1 Growth as a key driver of franchise value. Reproduced by permission of Allianz SE.

This chapter describes the “rules of the game” for generating profitable growth, highlighting the importance of long-term growth opportunities in addition to excellence in day-to-day sales and distribution activities in the current business footprint.

Rules of the Game and KPIs

Bankers measure it in terms of revenues or net interest income; insurers in terms of premium or new business value; asset managers in terms of net new in-flows or AUM. Although each segment uses a different metric, everyone is talking a lot about growth. This is not surprising since profitable growth is one of the key drivers of a bank or insurer's valuation multiple.

Top- or Bottom-line Growth?

Before discussing growth strategies and metrics, it is important to agree on the type of growth ...