The birth of a new division
In January 2006, all of the Bank’s service units, which until then had been assigned to the Chief Operating Officer (COO) or the business segments, were grouped together under the COO. As a result of this move, HVB now has an integrated corporate centre at its disposal in line with the UniCredit Group’s global concept.
Broad range of services
The services it provides range from IT application development and operations, purchasing, organisation, logistics and facility management, and cost management through to back-office functions for loans, accounts, payments, securities handling as well as foreign exchange, money market and derivatives back offices. GBS is an independent division at corporate level.
PRO: programmes continued
The Process Redesign and Optimisation (PRO) programme launched in 2005 to boost efficiency was successfully continued in 2006. Costs have been cut by simplifying steering tasks and processes in both back offices and the corporate centre. With only a few more measures outstanding in 2007, the project is expected to completely achieve the goals set.
Cost management: systematic cost management yields sustained cost cuts
The cost management system rolled out at the start of 2006 is an important part of the value-based development of HVB. This new function is tasked with constantly streamlining banking processes and boosting efficiency in the use of resources. Under the cost management programme we managed to reduce non-personnel costs by more than €60 million in 2006. These cost reductions were based on over 40 individual initiatives. They range from consolidating the relevant consumables and improving standards and guidelines through to sustainably optimising the advertising budget. At the same time, HVB has also benefited from the bundling of volumes within the UniCredit Group and the systematic exchange and implementation of best practice methods to cut back costs. In 2007, a number of further cost-cutting measures throughout all major cost categories will achieve additional reductions.
Back office consolidation
All back office units were consolidated under one responsible unit with effect from November 1, 2006. This step created clear structures and responsibilities, forming what is in effect a back office factory.
On the payments side, HVB Payment and Services (PAS), the subsidiary entrusted with the task of handling payments, was sold to the Postbank subsidiary Betriebscenter für Banken (BCB) with effect from January 1, 2007. This will enable us to reduce costs even further whilst maintaining the same standard of quality and performance. Moreover, we started to adjust the relevant products, processes and IT systems to prepare for the introduction of the Single European Payments Area (SEPA). In all back office functions, the key element was focusing on core competencies.
In securities services, we paved the way for our strategic re-orientation and further optimised our operational efficiency in 2006. In line with corporate strategy, a project was launched to transfer the securities handling for retail, private banking and corporate customers to ITS (International Transaction Services GmbH). Moreover, talks were held on co-operation with potential partners for the transfer of the clearing and custody business.
The measures initiated under the PRO project to streamline back office processes for our branch network and real estate financing were continued as planned and implemented in 2006. Finally, in our operations supporting foreign branches, 2006 was marked by the consolidation of back offices at all locations where UCI and HVB both have a presence. Appropriate measures already yielded significant synergies in 2006.
Information technology: pooling strengths under Group-adjusted IT governance processes
IT spending was reduced in 2006 compared to the previous year. Particularly in corporate centres and in banking operations, we managed to achieve significant cost reductions, some of which benefited the business segments.
Consolidation was continued in the Retail division by implementing automatic processes for retail operations, and the course was set for customer growth by optimising existing products and introducing new ones. Besides realigning its commercial operations, the Wealth Management division focused on expanding an advisory service and portfolio management platform. Pressing ahead with the roll-out of SEPA was the principle topic in the Corporates & Commercial Real Estate Financing division. The main element on the IT side for the Markets & Investment Banking division involved expanding innovative capital market products such as structured products and cross-asset derivatives.
Another important step in 2006 was the Group-wide consolidation of IT platforms. In this regard, the emphasis was placed on analysing possible areas of use and the need for the development of a cross-border core bank system aimed at realising further synergy potential in the coming years.
Within the framework of Group-adjusted corporate management, uniform IT governance processes involving central IT management were introduced and successfully implemented for HVB. The strengths of our two IT subsidiaries, HVB Info and HVB Systems, were pooled when the companies merged in April 2006. Considerable synergy effects were generated by optimising processes and reducing interfaces. In addition to IT operations and services, the merged IT provider also offers application development and expert advisory services regarding the business processes of IT customers and the IT system environment.
Re-organisation of Logistics & Facility Management (CLF)
A concept for the new CLF organisation uniting facility management under one roof for the first time was drawn up in the third quarter of 2006. The timetable calls for this organisation to be rolled out during 2007:
- Corporate Real Estate Asset Management. This unit is tasked with providing the best possible standardised workstations and appropriate facilities for the core business and administrative units. It is also expected to preserve the value of the Bank’s real estate portfolio by applying defined investment criteria aimed at securing strategic management over the medium and long term.
- Corporate Facility Management and Logistics Services. The challenge for this unit is to provide the best possible local management of buildings used by the Bank in its day-to-day operations. This involves constantly reducing the cost of occupancy whilst maintaining the same high level of quality and providing all bank logistics services (cash and forms, mail, printing, vehicle pool, insurance, telephones, bookkeeping and travel expense reports, catering) and the corporate security for the HVB sub-group (strong focus on business continuity management in 2006).
- Real Estate Development & Planning. This unit looks to combine non-strategic property holdings (buildings and land not required for commercial operations) with the aim of liquidating them as rapidly as possible. In implementing this strategy of disposing of operations which are not considered a core competence, a non-strategic portfolio of 88 office properties located in Germany was sold as a package to a U.S. investor in December 2006 following an international tender procedure.
