A management consultant,
Mr Adrian Harkin, has advised the nation’s commercial banks to embark on operating cost management strategy as a means of leveraging earnings.
Harkin gave the advice at the “Financial Service Industry (FSI) Cost Optimisation” seminar in Lagos.
He said that cost optimisation had remained a global issue for banks, regardless of their locations.
Harkin, a partner with KPMG, a UK based financial consulting company, also said that financial regulators globally were demanding increasing risk management strategy.
He said that cost optimisation became necessary as Nigeria became affluent with mobile payment and reduction in banks charges which could impact negatively on banks’ return on equity.
Harkin also urged banks to embark on strategic plans that met their operational needs to engender effective cost optimisation.
He said that one of the characteristics of cost optimisation was reduction of workforce, stressing that “it was an investment banking culture”.
According to Harkin, contrary to other opinions in the banking industry, outsourcing of staff could impair cost optimisation, due to its huge cost implication.
The consultant identified accelerated alignment, a rigorous process and sustainable lifestyle as the three categorised phases needed to be considered by banks before embarking on cost optimisation approach.
He commended Nigerian banks, stressing that they could compete favourably with their counterparts in the developed countries, in spite of their difficult operating environment.
Also speaking, Partner and Head, Management Consulting, Advisory Services, Mrs Bisi Lamikanra,  said that banks were already aware of the positive implication of cost optimisation.
She said that the challenges confronting the banks were how to reduce cost in a disciplined and sustainable way.
Lamikanra said that professional procurement was important to cost optimisation which most banks had not identified.
She said that there was need for convergence on cost optimisation, which she said, would become a serious issue in a few years.
The consultant, however, said that increasing regulation was expected to have an impact on bank’s profitability.
She said that consumer protection would also be an agenda but needed a stricter measure to ensure good service deliveries.
Lamikanra said that there would be an increased competition from other non-bank financial service providers, saying that this could lead to intense and new sources of competition.
She added that mobile payment could be a major agent which might not be in favour of the banks.