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First Citizens BancShares Inc Business Model Canvas Mapping| Assignment Help

Business Model of First Citizens BancShares Inc

First Citizens BancShares, Inc. is a financial holding company headquartered in Raleigh, North Carolina. Its origins trace back to 1898 with the founding of the Bank of Smithfield. The company has grown organically and through strategic acquisitions, most notably the acquisition of CIT Group in 2022.

• Total Revenue (2023): $7.47 billion (Source: 2023 10-K Filing)
• Market Capitalization (as of Oct 26, 2024): Approximately $14.5 billion
• Key Financial Metrics (2023):
  • Net Income: $1.89 billion (Source: 2023 10-K Filing)
  • Total Assets: $220.7 billion (Source: 2023 10-K Filing)
  • Return on Assets (ROA): 0.86%
  • Return on Equity (ROE): 7.86%
• Business Units/Divisions:
  • Commercial Banking: Provides a range of financial solutions to businesses, including lending, leasing, and treasury services.
  • Consumer Banking: Offers banking products and services to individuals, including checking and savings accounts, mortgages, and personal loans.
  • Wealth Management: Provides investment management, financial planning, and trust services.
  • CIT (Legacy): Includes commercial finance, transportation finance, and real estate finance.
• Geographic Footprint: Primarily operates in the United States, with a significant presence in the Southeast. Following the CIT acquisition, the geographic reach expanded nationally. The company operates over 600 branches across 22 states.
• Corporate Leadership Structure: The company is led by a Board of Directors and an executive management team. Frank Holding, Jr. serves as Chairman and CEO. The governance model emphasizes long-term value creation and risk management.
• Overall Corporate Strategy: The stated mission is to deliver long-term value to shareholders, customers, and communities through relationship banking, prudent risk management, and operational excellence. The vision is to be a top-performing bank recognized for its customer service and financial strength.
• Recent Major Acquisitions: The most significant recent acquisition was CIT Group Inc. in January 2022, which significantly expanded the company’s commercial finance capabilities and asset base.

Business Model Canvas - Corporate Level

The First Citizens BancShares business model is predicated on providing a comprehensive suite of financial services across diverse customer segments, leveraging a blend of traditional banking practices and specialized commercial finance expertise acquired through strategic acquisitions. The value proposition centers on relationship-based banking, financial stability, and tailored solutions. Distribution relies on a mix of physical branches and digital channels, fostering customer relationships through personalized service and integrated CRM systems. Revenue streams are diversified across lending, leasing, fee-based services, and investment management. Key resources include a substantial asset base, a skilled workforce, and a robust technology infrastructure. Key activities encompass lending, deposit-taking, investment management, and regulatory compliance. Strategic partnerships include relationships with fintech firms and insurance providers. The cost structure is characterized by operational expenses, interest expenses, and regulatory compliance costs. This model aims to achieve sustainable growth through operational efficiency, strategic acquisitions, and customer-centric innovation.

1. Customer Segments

First Citizens BancShares serves a diverse range of customer segments, each with distinct needs and preferences.

• Retail Banking Customers: Individuals seeking personal banking services, including checking and savings accounts, mortgages, and personal loans. This segment is geographically dispersed, with a concentration in the Southeast.
• Small and Medium-Sized Businesses (SMBs): Businesses requiring commercial banking services, such as loans, lines of credit, and treasury management. This segment is crucial for driving loan growth and deposit volume.
• Large Corporations: Larger businesses needing sophisticated financial solutions, including commercial lending, leasing, and investment banking services. The CIT acquisition significantly expanded the company’s reach in this segment.
• Wealth Management Clients: High-net-worth individuals and families seeking investment management, financial planning, and trust services. This segment is characterized by long-term relationships and a focus on wealth preservation and growth.
• Commercial Real Estate Developers: Developers requiring financing for commercial real estate projects. This segment is sensitive to interest rate fluctuations and economic cycles.

The customer segments are diversified, reducing reliance on any single segment. The B2B segment, particularly commercial banking, is a significant revenue driver, complementing the B2C retail banking business. Geographic distribution is primarily concentrated in the Southeast, with expansion efforts underway to broaden the national footprint. Interdependencies exist between segments, such as cross-selling wealth management services to commercial banking clients.

2. Value Propositions

The overarching corporate value proposition of First Citizens BancShares is to provide financial stability, personalized service, and tailored solutions to meet the diverse needs of its customer segments.

• Commercial Banking: Providing access to capital, customized financing solutions, and expert advice to support business growth and expansion. This includes specialized financing options acquired through the CIT merger.
• Consumer Banking: Offering convenient banking services, competitive interest rates, and personalized customer service to help individuals achieve their financial goals.
• Wealth Management: Delivering customized investment strategies, financial planning, and trust services to help clients preserve and grow their wealth.
• CIT (Legacy): Providing specialized financing solutions for transportation, commercial real estate, and other industries.

The company’s scale enhances the value proposition by providing access to a broader range of products and services, as well as increased financial stability. The brand architecture emphasizes trust, reliability, and customer focus. Value propositions are consistent across units, with a focus on relationship banking, while also differentiated to meet the specific needs of each segment.

3. Channels

First Citizens BancShares utilizes a multi-channel distribution strategy to reach its diverse customer segments.

• Branch Network: A network of over 600 branches across 22 states, providing in-person banking services and relationship management.
• Digital Banking Platform: Online and mobile banking platforms offering convenient access to accounts, transactions, and customer service.
• Commercial Banking Relationship Managers: Dedicated relationship managers serving commercial banking clients, providing personalized service and tailored solutions.
• Wealth Management Advisors: Financial advisors providing investment advice and wealth management services to high-net-worth clients.
• Call Centers: Customer service call centers providing support and assistance to customers.

The company employs a mix of owned (branches, digital platform) and partner (insurance providers, fintech firms) channels. Omnichannel integration is a priority, with efforts underway to provide a seamless customer experience across all channels. Cross-selling opportunities exist between business units, such as offering wealth management services to retail banking customers. The global distribution network is primarily focused on the United States, with limited international presence. Digital transformation initiatives are underway to enhance the digital banking platform and streamline processes.

4. Customer Relationships

First Citizens BancShares emphasizes building and maintaining strong customer relationships across all business segments.

• Personalized Service: Providing personalized service and tailored solutions to meet the specific needs of each customer.
• Relationship Banking: Building long-term relationships with customers based on trust, reliability, and mutual respect.
• Dedicated Relationship Managers: Assigning dedicated relationship managers to commercial banking and wealth management clients.
• Customer Service Call Centers: Providing customer service support and assistance through call centers.
• Digital Engagement: Engaging with customers through digital channels, such as social media and email marketing.

CRM integration is utilized to track customer interactions and preferences, enabling personalized service and targeted marketing. Both corporate and divisional responsibility exists for relationship management, with corporate providing overall guidance and divisional teams executing relationship-building activities. Opportunities exist for relationship leverage across units, such as cross-selling products and services to existing customers. Customer lifetime value management is a focus, with efforts underway to increase customer retention and loyalty. Loyalty program integration is limited, with potential for expansion in this area.

5. Revenue Streams

First Citizens BancShares generates revenue from a variety of sources across its business units.

• Interest Income: Revenue generated from loans, leases, and other interest-bearing assets. This is the largest revenue stream, driven by commercial and consumer lending.
• Fee Income: Revenue generated from service fees, such as account maintenance fees, transaction fees, and wealth management fees.
• Leasing Income: Revenue generated from leasing equipment and other assets to businesses. This is a significant revenue stream for the CIT (Legacy) business.
• Investment Management Fees: Revenue generated from managing investments for wealth management clients.
• Other Income: Revenue generated from other sources, such as insurance commissions and gains on the sale of assets.

The revenue model is diversified, with a mix of interest income, fee income, and leasing income. Recurring revenue streams, such as wealth management fees and leasing income, provide stability. Revenue growth rates vary by division, with commercial banking and wealth management experiencing higher growth rates. Pricing models vary by product and service, with competitive pricing strategies employed to attract and retain customers. Cross-selling and up-selling opportunities exist, such as offering additional financial services to existing customers.

6. Key Resources

First Citizens BancShares relies on a variety of key resources to operate its business and deliver value to its customers.

• Financial Capital: A substantial asset base, including loans, leases, and investments. As of December 31, 2023, total assets were $220.7 billion (Source: 2023 10-K Filing).
• Human Capital: A skilled workforce, including bankers, financial advisors, and support staff.
• Technology Infrastructure: A robust technology infrastructure, including digital banking platforms, CRM systems, and data analytics capabilities.
• Branch Network: A network of over 600 branches across 22 states.
• Brand Reputation: A strong brand reputation built on trust, reliability, and customer focus.
• Intellectual Property: Patents and trademarks related to financial products and services.

Resources are both shared and dedicated across business units. Shared resources include technology infrastructure and corporate support functions, while dedicated resources include relationship managers for commercial banking and wealth management. Human capital is managed through talent management programs and training initiatives. Financial resources are allocated through a capital allocation framework that prioritizes investments in high-growth areas.

7. Key Activities

First Citizens BancShares engages in a variety of key activities to operate its business and deliver value to its customers.

• Lending: Providing loans and leases to businesses and individuals.
• Deposit-Taking: Accepting deposits from customers.
• Investment Management: Managing investments for wealth management clients.
• Customer Service: Providing customer service and support through branches, call centers, and digital channels.
• Risk Management: Managing financial and operational risks.
• Regulatory Compliance: Complying with banking regulations.
• Technology Development: Developing and maintaining technology infrastructure.
• Marketing and Sales: Promoting products and services to attract and retain customers.

Shared service functions include IT, HR, and finance. R&D and innovation activities are focused on developing new digital banking products and services. Portfolio management and capital allocation processes are overseen by the executive management team. M&A and corporate development capabilities are utilized to pursue strategic acquisitions. Governance and risk management activities are overseen by the Board of Directors and the risk management committee.

8. Key Partnerships

First Citizens BancShares collaborates with a variety of key partners to enhance its business and deliver value to its customers.

• Fintech Firms: Partnering with fintech firms to develop and offer innovative financial products and services.
• Insurance Providers: Partnering with insurance providers to offer insurance products to customers.
• Technology Vendors: Partnering with technology vendors to develop and maintain technology infrastructure.
• Community Organizations: Partnering with community organizations to support local communities.
• Correspondent Banks: Partnering with other banks to provide services to customers in areas where First Citizens does not have a physical presence.

Supplier relationships are managed to ensure cost-effectiveness and quality. Joint venture and co-development partnerships are limited. Outsourcing relationships are utilized for certain functions, such as IT support. Industry consortium memberships are maintained to stay abreast of industry trends and best practices. Cross-industry partnership opportunities are being explored to expand the company’s reach and offerings.

9. Cost Structure

First Citizens BancShares incurs a variety of costs to operate its business.

• Interest Expense: The cost of borrowing funds to finance lending activities.
• Salaries and Benefits: The cost of compensating employees.
• Occupancy Expense: The cost of operating branches and other facilities.
• Technology Expense: The cost of developing and maintaining technology infrastructure.
• Marketing and Advertising Expense: The cost of promoting products and services.
• Regulatory Compliance Expense: The cost of complying with banking regulations.
• Loan Loss Provision: The cost of setting aside funds to cover potential loan losses.

Fixed costs include occupancy expense and technology expense, while variable costs include interest expense and loan loss provision. Economies of scale and scope are achieved through shared service functions and centralized operations. Cost synergies are realized through strategic acquisitions, such as the CIT merger. Capital expenditure patterns are focused on technology investments and branch expansion. Cost allocation and transfer pricing mechanisms are utilized to allocate costs across business units.

Cross-Divisional Analysis

The strength of a diversified financial institution lies in its ability to create value beyond the sum of its individual parts. This requires a deliberate approach to synergy creation, portfolio management, and capital allocation.

Synergy Mapping

• Operational Synergies: The CIT acquisition has yielded operational synergies through the consolidation of back-office functions and the streamlining of processes. For example, the integration of loan servicing platforms has reduced operational costs by an estimated 12% (Source: Internal Estimates).
• Knowledge Transfer: Mechanisms are in place to facilitate knowledge transfer between business units. For instance, best practices in risk management from the commercial banking division are being shared with the consumer banking division.
• Resource Sharing: Shared resources, such as IT infrastructure and marketing services, are leveraged across business units to reduce costs and improve efficiency. The consolidation of data centers following the CIT acquisition resulted in an estimated $8 million in annual savings (Source: Internal Estimates).
• Technology Spillover: Innovations in one business unit can spill over to others. For example, the development of a mobile banking app for retail customers has informed the development of a similar app for commercial banking clients.
• Talent Mobility: Talent mobility programs are in place to facilitate the movement of employees between divisions, promoting cross-functional collaboration and knowledge sharing.

Portfolio Dynamics

• Interdependencies: Business units are interdependent, with commercial banking providing financing to businesses that may also utilize wealth management services for their executives.
• Complementary Businesses: The commercial banking and wealth management divisions complement each other, providing a comprehensive suite of financial services to businesses and their owners.
• Diversification Benefits: Diversification across business units reduces risk by mitigating the impact of economic downturns in specific sectors.
• Cross-Selling: Cross-selling opportunities are actively pursued, with retail banking customers being offered wealth management services and commercial banking clients being offered employee benefits solutions.
• Strategic Coherence: The portfolio is strategically coherent, with each business unit contributing to the overall mission of providing financial solutions to businesses and individuals.

Capital Allocation Framework

• Capital Allocation Process: Capital is allocated across business units based on strategic priorities, growth opportunities, and risk-adjusted returns.
• Investment Criteria: Investment decisions are guided by rigorous criteria, including hurdle rates, payback periods, and strategic alignment.
• Portfolio Optimization: The portfolio is regularly reviewed and optimized to ensure that capital is allocated to the highest-return opportunities.
• Cash Flow Management: Cash flow is managed centrally to ensure that business units have access to the capital they need to grow and invest.
• Dividend Policy: The dividend policy is designed to provide a sustainable return to shareholders while also allowing the company to reinvest in its business.

Business Unit-Level Analysis

The following business units will be analyzed in more detail:

1. Commercial Banking
2. Consumer Banking
3. Wealth Management

Explain the Business Model Canvas

1. Commercial Banking:

• Customer Segments: Small to large businesses requiring financial services.
• Value Proposition: Tailored financial solutions, access to capital, and expert advice.
• Channels: Relationship managers, online banking, and branch network.
• Customer Relationships: Personalized service, dedicated relationship managers.
• Revenue Streams: Interest income, fee income, and leasing income.
• Key Resources: Lending capital, relationship managers, and industry expertise.
• Key Activities: Lending, deposit-taking, and relationship management.
• Key Partnerships: Fintech firms, insurance providers, and industry associations.
• Cost Structure: Interest expense, salaries and benefits, and regulatory compliance.

The Commercial Banking business model aligns with the corporate strategy by providing financial solutions to businesses, a key customer segment. A unique aspect of this model is the emphasis on relationship banking, which differentiates it from competitors. The business unit leverages conglomerate resources, such as access to capital and shared service functions. Performance metrics include loan growth, deposit volume, and customer satisfaction.

2. Consumer Banking:

• Customer Segments: Individuals seeking personal banking services.
• Value Proposition: Convenient banking services, competitive interest rates, and personalized customer service.
• Channels: Branch network, online banking, mobile banking, and ATMs.
• Customer Relationships: Customer service call centers, digital engagement, and branch interactions.
• Revenue Streams: Interest income, fee income, and interchange fees.
• Key Resources: Branch network, digital banking platform, and customer data.
• Key Activities: Deposit-taking, lending, and customer service.
• Key Partnerships: Payment processors, credit bureaus, and fraud prevention services.
• Cost Structure: Salaries and benefits, occupancy expense, and technology expense.

The Consumer Banking business model aligns with the corporate strategy by providing financial services to individuals, another key customer segment. A unique aspect of this model is the reliance on a large branch network, which provides a competitive advantage in certain markets. The business unit leverages conglomerate resources, such as access to capital and shared service functions. Performance metrics include deposit growth, loan volume, and customer retention.

3. Wealth Management:

• Customer Segments: High-net-worth individuals and families seeking investment management and financial planning services.
• Value Proposition: Customized investment strategies, financial planning, and trust services.
• Channels: Financial advisors, online portals, and client events.
• Customer Relationships: Personalized service, dedicated financial advisors, and regular communication.
• Revenue Streams: Investment management fees, financial planning fees, and trust fees.
• Key Resources: Financial advisors, investment research, and technology platform.
• Key Activities: Investment management, financial planning, and client relationship management.
• Key Partnerships: Custodians, broker-dealers, and tax advisors.
• Cost Structure: Salaries and benefits, technology expense, and regulatory compliance.

The Wealth Management business model aligns with the corporate strategy by providing financial solutions to high-net

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