Zions Bancorp: From Spreadsheet to Business Intelligence SoftwareBy Bob Violino | Posted 2006-11-21 Email Print
The bank needed a better way to track financial results, while operating eight independent units.
Zions Bancorp wants to get big, yet act small.
It has grown into a company with total assets of about $45 billion, 470 full-service banking offices and more than 10,000 employees. And it has taken aim at high-growth metropolitan regions in the West.
Last year, it acquired Houston-based Amegy Bancorp and its 80-plus offices for $1.5 billion, and it launched a bank in Portland, Ore., called the Commerce Bank of Oregon. As it expands, Zions still runs its businesses under eight independently operated subsidiarieseach with its own chief executive officer, charter and name such as Zions First National Bank based in Utah and Idaho and California Bank & Trust.
While this structure is intended to strengthen local brands and decision-making, it came with at least one challenge: It had been difficult to immediately assess the performance of the subsidiaries, says Walter Young, senior vice president and manager of corporate finance for Zions.
That's because the company relied on hundreds of disconnected, manually updated Excel spreadsheets to collect financial data from each of the subsidiaries. Soon enough, company executives realized they needed a better way to collect financial and other informationand eventually turned to business intelligence software and dumped the ad hoc spreadsheets.
"Although spreadsheets are an essential business tool, their uncontrolled exponential growth makes it difficult for organizations to guarantee the lineage, integrity and security of data," says Dan Everett, research director of business intelligence at Ventana Research in San Mateo, Calif. The consultancy, he says, contends that companies investing in technology such as business intelligence software, and centralizing fragmented data from financial systems and spreadsheets, will realize a positive return on investment due to reduced business risks, increased data quality and lower information-technology costs.
Previously, when Zions reported financial results to Wall Street every three months, the chief financial officer and the chairman could only discuss basics, such as net interest income margins, due to a lack of details or analysis. Net interest income, the bank's largest source of revenue, is defined as the difference between the total interest income generated by earning assets and the total interest cost of the funds used to finance assets. The margin is a measure of the company's ability to generate net interest income; it is computed by expressing net interest income as a percentage of earnings assets.
Preparing the annual budget was also a headache. It took the Zions staff six months to create a budget, relying on information that was often outdated and inaccurate by the time the budget was completed. "The lack of access to real-time data and the elongated budgeting cycle not only jeopardized timeliness and accuracy, but hindered our strategic planning efforts," Young says.
In January 2004, senior managers set as goals: slash the budgeting cycle from six months to one, consolidate margins in a few hours instead of three days, and begin developing a strategic financial and capital plan that would boost Zions' financial performance and ultimately increase shareholder value, Young says.
Employees from the information-technology and finance departments worked together to identify an application that would enable access to the information Zions needed. After looking at products from Hyperion, SAS, Oracle and INEA, Zions in April 2004 selected business intelligence software from SRC Software (since acquired by Business Objects), called Planning for Financial Institutions. SRC was picked, according to Young, because the company was run and managed by bankers who understood banking and bank performance measurement.
By August 2004, Zions integrated the SRC software with Zions' existing Oracle general ledger platform, collecting financial information from each bank and department cost center.
Data is downloaded each morning from the general ledger into the business intelligence application, which includes features that allow Zion employees to easily request reports that draw from financial and other business information.
Since using the application, Zions reduced its corporate budgeting and reporting cycle by five monthsfrom six months to just one, according to Young. The company has also seen improvements in the consolidating and reporting of financial results. And it takes a few hours each month instead of three days to consolidate margins, Young says.
Because the Business Objects software provides customizable views of information such as margin spreads or asset and liability cash-flow models, Zions can present detailed statistics to managers that help them make loan pricing decisions at each branch.
Using the forecasting capability of the business intelligence application, managers can access cash-flow information such as historical runoff rates and balances from Zions' asset and liability system, to plan for projected business volumes at the appropriate spread for future balance-sheet growth.
The budget plan Zions created in 2005, using the Business Objects application, was part of the supporting documentation the company used for its acquisition of Amegy Bank. The plan, Young explains, enabled the company to minimize the cost of debt needed to finance the merger.
Using the software's modeling feature, Young structured Amegy Bank's balance sheet so that the bank became asset-sensitive instead of liability-sensitive. The reason: assets reprice quicker than liabilities, thus, interest income goes up faster than interest expense and earnings go up faster as rates rise.
As a result, Zions obtained lower finance costs for the acquisition. Young estimates this will save the bank nearly $30 million over the next 10 years, based on savings of $3 million per year.
Next up for Zions: rolling out the business intelligence tool for new projects. Young estimates that by next year, the business intelligence application will be accessible to as many as 200 workers within Zions' banks. Projects planned include a pilot program to gather customer and household data from existing and prospective customers, with the goal of improving product offerings and cross-selling financial services.