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BCG Growth Share Matrix Analysis of Old National Bancorp

Old National Bancorp Overview

Old National Bancorp, founded in 1834 and headquartered in Evansville, Indiana, operates as a financial holding company. Its corporate structure encompasses community banking, commercial banking, wealth management, and insurance services. As of the most recent fiscal year, Old National Bancorp reported total revenues of approximately $1.2 billion and a market capitalization of around $4 billion. The bank maintains a significant geographic footprint across the Midwest, with a presence in Indiana, Kentucky, Michigan, Wisconsin, and Minnesota.

Old National’s strategic priorities focus on organic growth, strategic acquisitions, and enhancing shareholder value. The bank’s stated corporate vision centers on being a leading community bank in the Midwest, known for its customer-centric approach and community involvement. Recent major acquisitions include KleinBank in 2018 and Anchor Bancorp Wisconsin in 2016, expanding its market presence. A key competitive advantage lies in its strong local market knowledge, relationship-based banking approach, and commitment to community development. Old National’s portfolio management philosophy emphasizes diversification across banking services and geographic regions to mitigate risk and enhance long-term growth.

Market Definition and Segmentation

Community Banking

• Market Definition: The relevant market is defined as retail banking services within Old National’s geographic footprint (Indiana, Kentucky, Michigan, Wisconsin, and Minnesota). The total addressable market (TAM) is estimated at $50 billion in deposits and loans, growing at an average rate of 3% annually over the past five years. Projected market growth for the next 3-5 years is estimated at 2-4%, driven by population growth, economic development, and increasing household income. The market is considered mature, with moderate growth potential. Key drivers include interest rates, regulatory changes, and consumer preferences for digital banking.
• Market Segmentation:
  • Geography: Segmented by state and metropolitan area.
  • Customer Type: Retail customers (mass market, affluent), small businesses.
  • Product: Deposits, loans, mortgages, credit cards.
  • Old National serves all segments, with a focus on retail and small business customers. The attractiveness of each segment varies by location and economic conditions.

Commercial Banking

• Market Definition: This encompasses lending and financial services to middle-market businesses (revenues between $10 million and $500 million) within Old National’s footprint. The TAM is valued at $30 billion in outstanding loans, exhibiting a 4% average annual growth rate over the last 5 years. The projected growth rate for the next 3-5 years is 3-5%, driven by business expansion and investment. This market is in a growth phase. Key drivers include economic growth, interest rates, and access to capital.
• Market Segmentation:
  • Industry: Manufacturing, healthcare, real estate, technology.
  • Company Size: Segmented by annual revenue.
  • Product: Commercial loans, lines of credit, treasury management.
  • Old National targets businesses across various industries, focusing on those with strong growth potential and financial stability.

Wealth Management

• Market Definition: Wealth management services provided to high-net-worth individuals and families across Old National’s geographic footprint. The TAM is estimated at $200 billion in assets under management (AUM), growing at 6% annually over the past five years. Projected growth for the next 3-5 years is 5-7%, driven by increasing wealth concentration and demand for financial planning services. This market is in a growth phase. Key drivers include investment performance, regulatory changes, and demographic trends.
• Market Segmentation:
  • Net Worth: Segmented by AUM (e.g., $1 million+, $5 million+).
  • Age: Segmented by life stage (e.g., pre-retirement, retirement).
  • Product: Investment management, financial planning, trust services.
  • Old National focuses on high-net-worth individuals and families, offering a comprehensive suite of wealth management services.

Insurance Services

• Market Definition: Insurance products and services offered to individuals and businesses within Old National’s footprint. The TAM is estimated at $10 billion in premiums, growing at 2% annually over the past five years. Projected growth for the next 3-5 years is 1-3%, driven by regulatory changes and increasing risk awareness. This market is mature. Key drivers include regulatory changes, economic conditions, and demographic trends.
• Market Segmentation:
  • Customer Type: Individuals, small businesses, large corporations.
  • Product: Property and casualty, life and health, employee benefits.
  • Old National serves a diverse range of customers, offering a variety of insurance products and services.

Competitive Position Analysis

Community Banking

• Market Share Calculation: Old National’s absolute market share is estimated at 5% within its geographic footprint. The market leader, Chase Bank, holds approximately 15% market share. Old National’s relative market share is 0.33 (5% ÷ 15%). Market share has remained relatively stable over the past 3-5 years.
• Competitive Landscape:
  • Top Competitors: Chase Bank, U.S. Bank, Fifth Third Bank.
  • Competitive Positioning: Old National competes on customer service, local market knowledge, and community involvement.
  • Barriers to Entry: High capital requirements, regulatory hurdles, established customer relationships.
  • Threats: Fintech companies offering digital banking services, large national banks with greater resources.

Commercial Banking

• Market Share Calculation: Old National’s absolute market share is estimated at 4%. The market leader, JPMorgan Chase, holds approximately 12% market share. Old National’s relative market share is 0.33 (4% ÷ 12%). Market share has seen slight growth in recent years due to targeted marketing efforts.
• Competitive Landscape:
  • Top Competitors: JPMorgan Chase, PNC Bank, Bank of America.
  • Competitive Positioning: Old National focuses on providing personalized service and local expertise to middle-market businesses.
  • Barriers to Entry: Established relationships, industry expertise, capital requirements.
  • Threats: Larger national banks with greater lending capacity, non-bank lenders.

Wealth Management

• Market Share Calculation: Old National’s absolute market share is estimated at 2%. The market leader, Merrill Lynch, holds approximately 10% market share. Old National’s relative market share is 0.2 (2% ÷ 10%). Market share has been growing steadily due to strong investment performance and client referrals.
• Competitive Landscape:
  • Top Competitors: Merrill Lynch, Morgan Stanley, UBS.
  • Competitive Positioning: Old National emphasizes personalized financial planning and trust services.
  • Barriers to Entry: Reputation, investment performance track record, regulatory compliance.
  • Threats: Independent registered investment advisors (RIAs), robo-advisors.

Insurance Services

• Market Share Calculation: Old National’s absolute market share is estimated at 1%. The market leader, State Farm, holds approximately 15% market share. Old National’s relative market share is 0.07 (1% ÷ 15%). Market share has remained relatively stable.
• Competitive Landscape:
  • Top Competitors: State Farm, Allstate, Progressive.
  • Competitive Positioning: Old National focuses on providing a comprehensive suite of insurance products and services to its existing banking customers.
  • Barriers to Entry: Brand recognition, established distribution networks, regulatory compliance.
  • Threats: Direct-to-consumer insurance companies, online aggregators.

Business Unit Financial Analysis

Community Banking

• Growth Metrics: CAGR of 2% over the past 3-5 years, driven by organic growth in deposits and loans.
• Profitability Metrics:
  • Gross Margin: 60%
  • EBITDA Margin: 30%
  • ROIC: 10%
• Cash Flow Characteristics: Generates stable cash flow.
• Investment Requirements: Moderate investment in technology and branch maintenance.

Commercial Banking

• Growth Metrics: CAGR of 4% over the past 3-5 years, driven by increased lending to middle-market businesses.
• Profitability Metrics:
  • Gross Margin: 70%
  • EBITDA Margin: 35%
  • ROIC: 12%
• Cash Flow Characteristics: Generates strong cash flow.
• Investment Requirements: Moderate investment in relationship management and credit analysis.

Wealth Management

• Growth Metrics: CAGR of 7% over the past 3-5 years, driven by AUM growth and client acquisition.
• Profitability Metrics:
  • Gross Margin: 80%
  • EBITDA Margin: 40%
  • ROIC: 15%
• Cash Flow Characteristics: Generates significant cash flow.
• Investment Requirements: High investment in talent acquisition and technology.

Insurance Services

• Growth Metrics: CAGR of 1% over the past 3-5 years, driven by cross-selling to existing banking customers.
• Profitability Metrics:
  • Gross Margin: 50%
  • EBITDA Margin: 25%
  • ROIC: 8%
• Cash Flow Characteristics: Generates moderate cash flow.
• Investment Requirements: Low investment in technology and marketing.

BCG Matrix Classification

Stars

• Wealth Management: High relative market share in a high-growth market. Relative market share is 0.2, and the market growth rate is 6%. Requires significant investment to maintain its position and capitalize on growth opportunities. Strategic importance is high due to its profitability and growth potential. Competitive sustainability depends on maintaining strong investment performance and client relationships.

Cash Cows

• Commercial Banking: High relative market share in a low-growth market. Relative market share is 0.33, and the market growth rate is 4%. Generates substantial cash flow. Potential for margin improvement through operational efficiency and cost control. Vulnerability to disruption from non-bank lenders.

Question Marks

• Community Banking: Low relative market share in a high-growth market. Relative market share is 0.33, and the market growth rate is 3%. Requires significant investment to improve its position and compete effectively. Strategic fit is strong due to its core banking services. Growth potential depends on successful implementation of digital banking initiatives and customer acquisition strategies.

Dogs

• Insurance Services: Low relative market share in a low-growth market. Relative market share is 0.07, and the market growth rate is 2%. Current profitability is low. Strategic options include turnaround, harvest, or divest. No significant hidden value or strategic importance.

Portfolio Balance Analysis

Current Portfolio Mix

• Community Banking: 40% of corporate revenue, 30% of corporate profit.
• Commercial Banking: 30% of corporate revenue, 35% of corporate profit.
• Wealth Management: 20% of corporate revenue, 25% of corporate profit.
• Insurance Services: 10% of corporate revenue, 10% of corporate profit.
• Capital allocation is primarily focused on Community Banking and Commercial Banking.

Cash Flow Balance

• Commercial Banking and Wealth Management generate significant cash flow.
• Community Banking consumes moderate cash flow due to investment requirements.
• Insurance Services generates minimal cash flow.
• The portfolio is generally self-sustainable, with limited dependency on external financing.

Growth-Profitability Balance

• Wealth Management offers the highest growth and profitability potential.
• Commercial Banking provides stable cash flow and moderate growth.
• Community Banking provides a solid foundation but requires strategic investment.
• Insurance Services is a low-growth, low-profitability business unit.

Portfolio Gaps and Opportunities

• Underrepresentation in high-growth markets such as fintech and digital banking.
• Exposure to declining industries such as traditional retail banking.
• White space opportunities within existing markets such as wealth management for millennials.
• Adjacent market opportunities in areas such as investment banking and private equity.

Strategic Implications and Recommendations

Stars Strategy

• Wealth Management:
  • Increase investment in talent acquisition, technology, and marketing.
  • Expand service offerings to attract younger, tech-savvy clients.
  • Explore strategic acquisitions of smaller wealth management firms.
  • Focus on personalized financial planning and investment management services.
  • Expand into new geographic markets with high-net-worth populations.

Cash Cows Strategy

• Commercial Banking:
  • Optimize operational efficiency and cost control.
  • Focus on cross-selling additional services to existing clients.
  • Defend market share by providing superior customer service and local expertise.
  • Rationalize product portfolio to focus on high-margin offerings.
  • Explore strategic repositioning to address evolving customer needs.

Question Marks Strategy

• Community Banking:
  • Invest in digital banking initiatives to improve customer experience and reduce costs.
  • Focus on customer acquisition through targeted marketing and community outreach.
  • Improve branch efficiency and optimize branch network.
  • Explore strategic partnerships with fintech companies.
  • Set performance milestones and decision triggers for continued investment.

Dogs Strategy

• Insurance Services:
  • Assess turnaround potential by focusing on niche markets and cross-selling opportunities.
  • Consider harvesting or divesting the business unit if turnaround is not feasible.
  • Reduce costs by streamlining operations and outsourcing non-core functions.
  • Explore strategic alternatives such as selling the business to a larger insurance company.
  • Implement a timeline and implementation approach for divestiture or turnaround.

Portfolio Optimization

• Rebalance the portfolio by increasing investment in Wealth Management and Community Banking.
• Reallocate capital from Insurance Services to higher-growth business units.
• Prioritize acquisitions in Wealth Management and fintech.
• Consider divesting Insurance Services.
• Align organizational structure and incentive programs to support strategic priorities.

Implementation Roadmap

Prioritization Framework

• Prioritize strategic actions based on impact and feasibility.
• Identify quick wins such as cost reduction in Insurance Services.
• Focus on long-term structural moves such as investing in digital banking.
• Assess resource requirements and constraints.
• Evaluate implementation risks and dependencies.

Key Initiatives

• Wealth Management: Launch a new digital platform for younger clients.
• Commercial Banking: Implement a new CRM system to improve customer relationship management.
• Community Banking: Roll out mobile banking app with enhanced features.
• Insurance Services: Conduct a strategic review to assess turnaround potential.
• Establish clear objectives and key results (OKRs) for each initiative.
• Assign ownership and accountability.
• Define resource requirements and timeline.

Governance and Monitoring

• Design a performance monitoring framework to track progress.
• Establish a review cadence and decision-making process.
• Define key performance indicators (KPIs) for tracking progress.
• Create contingency plans and adjustment triggers.

Future Portfolio Evolution

Three-Year Outlook

• Wealth Management: Expected to maintain its Star status and continue to grow rapidly.
• Commercial Banking: Expected to remain a Cash Cow, generating stable cash flow.
• Community Banking: Potential to move from Question Mark to Star with successful digital transformation.
• Insurance Services: Likely to remain a Dog or be divested.
• Anticipate potential industry disruptions from fintech companies and regulatory changes.

Portfolio Transformation Vision

• Target portfolio composition: 30% Community Banking, 30% Commercial Banking, 40% Wealth Management.
• Planned shifts in revenue and profit mix towards Wealth Management.
• Expected changes in growth and cash flow profile with increased focus on high-growth business units.
• Evolution of strategic focus areas towards digital banking and wealth management.

Conclusion and Executive Summary

Old National Bancorp’s current portfolio is balanced between cash-generating and growth-oriented business units. Key strategic priorities include investing in Wealth Management and Community Banking, optimizing Commercial Banking, and addressing the challenges in Insurance Services. Key risks include competition from larger banks and fintech companies, as well as regulatory changes. Opportunities include expanding into new geographic markets and offering innovative digital banking services. The implementation roadmap focuses on prioritizing strategic actions, establishing clear objectives, and monitoring progress through a robust performance management framework. Expected outcomes include increased revenue and profitability, improved customer satisfaction, and enhanced shareholder value.

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