The Bankwatch

Tracking the consumer evolution of financial services

“Even though we were in and looking you still couldn’t see [where the bottom was]” | KKR

Listening to this interview is interesting and sobering for banks. The highlighted quote below tells all.

Henry Kravis and George Roberts (KKR) | FT Interview

FT: How do you see the opportunities that have been thrown up by this incredible dislocation? Is the government a good partner for KKR?

HK: We looked at quite a few of the banks over time and we turned them down because we couldn’t see what was in the banks. Even though we were in and looking you still couldn’t see [where the bottom was]. I think there may be some programmes where it will be appropriate for us to partner with the government. One area in particular that is a very big need and an area where we will have opportunities to participate in is infrastructure.

This goes to the core of what transparency means, and to the business model of banks. i have long maintained that one fundamental negative for many banks remains their lack of investment in effective IT over a sustained period to support their growth in product diversity and merger activity.

The result is that many banks to this day, rely in Excel spreadsheets or locally managed offline databases to analyse and interpret their customer information. And worse … the assessment of holistic customer information is jeapordised because customers can show up in multiple product systems with mutiple information designs making is impossible to fully determine how many products any one customer has with that financial institution.

Relevance to Bankwatch:

it is one thing for KKR to suggest that they are not sure “where the bottom is” in the context of an economy that may be worsening and that may impact on the value of the bank product portfolio. It is quite something else to have doubts based on the value of the information offerred by the banks, and I suspect that is largely what the above quote highlights.

Written by Colin Henderson

May 22, 2009 at 12:24

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