Problem Definition
NorthBridge Bank is a mid-size U.S. retail bank with $45 billion in assets, $32 billion in deposits, and a network of 400 branches concentrated in the Midwest and Mid-Atlantic regions. The bank employs 8,200 people and serves approximately 1.6 million retail and small-business customers.
Over the past two years, NorthBridge's net profit has fallen 28%. The primary driver is a compression of the bank's net interest margin (NIM) from 3.6% to 2.9%, as interest rate cuts reduced asset yields faster than the bank could reprice its deposit costs downward. Simultaneously, digital-only competitor banks (neobanks) have entered the market with aggressive savings rates, attracting younger depositors and forcing NorthBridge to raise its own deposit pricing. The bank's deposit cost has risen from 1.8% to 2.2%, while its average loan yield has dropped from 5.8% to 5.1%.
Beyond margin pressure, the bank's cost structure is a concern. Its branch cost-to-income ratio stands at 68%, well above the 55% industry benchmark. While 60% of transactions now occur through digital channels, only 15% of new accounts are opened online, suggesting the branch network remains critical for customer acquisition but may be oversized for day-to-day servicing. The CEO has engaged your consulting firm to diagnose the root causes of the profitability decline and recommend a set of actions to restore margins within 18 months.
What is driving NorthBridge's profitability decline, and what should the bank do to restore margins within 18 months?
Exhibit 1Net Interest Margin Trend (2023-2026)
| Year | NorthBridge | Regional Peers | Top-10 National Banks | Digital-Only Banks |
|---|---|---|---|---|
| 2023 | 3.6% | 3.4% | 3.1% | 2.0% |
| 2024 | 3.3% | 3.2% | 3.0% | 1.8% |
| 2025 | 3.0% | 3.1% | 2.9% | 1.6% |
| 2026 YTD | 2.9% | 3.0% | 2.8% | 1.4% |
NorthBridge NIM declined 70bp over the period versus 40bp for regional peers. NorthBridge was above peer average in 2023 and is now below it.
Source: NorthBridge Bank case file
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If asked, please share that:
- Of the $32B in deposits, 12% ($3.84B) is considered "rate-sensitive" and at immediate flight risk to neobank competitors
- The loan portfolio totals $28B with an average yield of 5.1%
- Non-interest income (fees, wealth management, cards) is $380M annually and has been relatively stable
- Digital customer acquisition cost is $45 versus $240 through branches
- The bank has not undertaken a significant branch rationalization in over a decade
- NorthBridge's credit quality remains strong; the profit decline is not driven by loan losses
Question 1Structuring
How would you approach diagnosing the profitability decline at NorthBridge Bank?
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
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- Share the overall profit decline figure (28% over two years) and NIM compression (3.6% to 2.9%)
- If candidate asks, provide deposit cost increase (1.8% to 2.2%) and loan yield decline (5.8% to 5.1%)
- Share cost-to-income ratio (68% vs. 55% benchmark) if the candidate explores the cost side
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A strong framework would decompose NorthBridge's profitability along the following lines:
1. Revenue Diagnosis
a) Net Interest Income (NIM compression)
- Asset yield decline: Why did loan yields fall 70bp? Is it portfolio mix, competitive repricing, or rate environment?
- Deposit cost increase: Why did deposit costs rise 40bp when rates were cut? Is it defensive pricing against neobanks, or a structural shift in deposit mix?
- Net effect: 70bp combined NIM compression on earning assets
b) Non-Interest Income
- Fee income trends (stable at $380M, but is it growing or flat?)
- Cross-sell and product penetration rates
- Wealth management contribution
2. Cost Diagnosis
a) Branch Network
- 400 branches at 68% cost-to-income vs. 55% benchmark
- Distribution of profitability across branches (are some deeply unprofitable?)
- Transaction migration to digital (60%) vs. account opening still branch-heavy (85%)
b) Operating Efficiency
- 8,200 FTEs at $85K average cost = $697M in personnel costs
- Technology and digital investment levels
- Back-office and shared services efficiency
3. Competitive & Strategic Context
a) Neobank Threat
- $3.84B in rate-sensitive deposits at flight risk
- Customer demographics shifting younger / more digital
- NorthBridge's digital value proposition vs. neobank offering
b) Market Position
- NIM trend relative to regional peers and national banks
- Share of wallet and customer lifetime value by channel
What the interviewer is looking forShow guidanceHide guidance
A good candidate will break profitability into a revenue tree and a cost tree, covering both interest and non-interest components. A strong candidate will also identify the competitive dynamics (neobanks) and structural issues (branch network sizing). An excellent candidate will frame the diagnosis around three lenses: margin compression, cost inefficiency, and competitive positioning, and will prioritize which lever matters most.
Push the candidate to be specific about which branches of their framework are most likely to yield actionable findings given the information provided. If the candidate only focuses on revenue, prompt them on costs, and vice versa.
Question 2Numeracy
Using the data in Exhibit 2, calculate the annual profit impact of closing the bottom 25% of branches and successfully migrating 70% of those customers to digital channels or nearby branches.
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
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Share Exhibit 2 and the following assumptions:
- Each bottom-quartile branch serves an average of 5,000 customers
- 70% of customers from closed branches will migrate to digital or nearby branches; 30% will attrite
- Revenue from migrated customers is fully retained (served at minimal incremental cost through existing digital infrastructure and remaining branches with spare capacity)
- Of the employees at closed branches, 40% can be redeployed to remaining branches or digital roles
- Separated employees receive severance equal to 6 months of average compensation ($85K annual)
- Lease termination and branch wind-down costs average $120,000 per branch
Exhibit 2Branch Profitability Distribution
| Quartile | Branches | Avg Revenue ($M) | Avg Operating Cost ($M) | Avg Profit ($M) | Avg FTEs per Branch |
|---|---|---|---|---|---|
| Top 25% | 100 | 6.5 | 2.4 | 4.1 | 18 |
| Second 25% | 100 | 4.8 | 2.7 | 2.1 | 20 |
| Third 25% | 100 | 3.4 | 2.9 | 0.5 | 21 |
| Bottom 25% | 100 | 1.8 | 3.2 | -1.4 | 23 |
| Total / Avg | 400 | 4.1 | 2.8 | 1.3 | 20.5 |
Network total revenue: $1,650M. Network total cost: $1,120M. Branch cost-to-income ratio: 68%.
Source: NorthBridge Bank case file
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Step 1: Annual Cost Savings
- Bottom-quartile branches: 100 branches
- Average operating cost per branch: $3.2M (from Exhibit 2)
- Total annual cost eliminated: 100 x $3.2M = $320M
Step 2: Revenue Impact
- Average revenue per bottom-quartile branch: $1.8M (from Exhibit 2)
- Total revenue at risk: 100 x $1.8M = $180M
- Revenue retained (70% of customers migrate): $180M x 70% = $126M
- Revenue lost (30% customer attrition): $180M x 30% = $54M
Step 3: Net Annual Profit Improvement
- Cost savings: $320M
- Less revenue lost: $54M
- Net annual improvement: $266M
(Note: The $126M in retained revenue is served through existing digital and branch infrastructure at minimal marginal cost, so no incremental cost offset is required.)
Step 4: One-Time Restructuring Costs
- Total employees affected: 100 branches x 23 FTEs = 2,300
- Redeployed (40%): 920 employees (no severance)
- Separated (60%): 1,380 employees
- Severance cost: 1,380 x ($85,000 / 2) = 1,380 x $42,500 = $58.7M
- Lease termination: 100 x $120,000 = $12.0M
- Total one-time cost: $70.7M (approximately $71M)
Step 5: Payback Period
- Monthly net savings: $266M / 12 = $22.2M per month
- Payback: $71M / $22.2M = 3.2 months
Summary
| Metric | Value |
|---|---|
| Net annual profit improvement | $266M |
| One-time restructuring cost | $71M |
| Year 1 net impact | $195M |
| Year 2+ annual impact | $266M |
| Payback period | ~3 months |
What the interviewer is looking forShow guidanceHide guidance
This question tests the candidate's ability to structure a multi-step calculation, handle one-time vs. recurring impacts, and identify the payback period. A good candidate will arrive at the correct annual savings. A strong candidate will separately calculate recurring and one-time impacts. An excellent candidate will note key assumptions and risks (e.g., the 70% migration rate is optimistic or pessimistic, revenue per migrated customer may differ from branch average, some branches may have valuable lease positions).
Let the candidate drive the structure. If they get stuck, suggest starting with annual cost savings, then revenue impact, then one-time costs.
Question 3Judgement & Insights
Looking at Exhibit 2, not all underperforming branches are the same. Beyond the bottom quartile, how would you decide which branches to close outright versus transform into a different format? What factors would drive that decision?
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
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Share Exhibit 2 along with the following context about branch characteristics:
Within the bottom quartile (100 branches, avg. profit -$1.4M):
- 40 branches are in areas with declining population and limited commercial activity
- 35 branches are within 5 miles of another NorthBridge branch (geographic overlap)
- 25 branches are in growing metro areas but face intense neobank competition among younger demographics
Within the third quartile (100 branches, avg. profit +$0.5M):
- 30 branches generate strong wealth management referral revenue (avg. $1.2M in WM fees)
- 45 branches are in stable suburban markets with aging customer bases
- 25 branches are in urban areas near universities or tech hubs with potential for format change
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The decision should be driven by a matrix of two dimensions: current financial performance and strategic market value. Branches should be segmented into three action categories:
1. Close (estimated 60-75 of bottom-quartile branches)
- Declining-population branches (40): No structural path to growth. Close and migrate customers digitally.
- Overlapping branches (20-35 of the 35): Where two branches serve the same catchment area, consolidate into the stronger location. Retain the one with better lease terms, accessibility, or customer volume.
- Criteria: negative profit, no growth thesis, overlap with nearby branch, or population below a critical threshold.
2. Transform to Lean Format (estimated 25-40 branches)
- Remaining bottom-quartile branches in growing metros (25): Convert to advisory-only or digital-first formats with 3-5 staff instead of 23. Focus on relationship banking, wealth referrals, and complex product sales. Eliminate cash handling and routine transactions.
- Marginal third-quartile urban branches (25): Reformat as community hubs or co-located with partner businesses to reduce occupancy costs. Target the younger demographic with digital-first but human-assisted service.
- Expected cost reduction per transformed branch: 50-60% (from $3.0M+ down to $1.2-1.5M).
3. Protect and Invest (third-quartile wealth management branches + top two quartiles)
- The 30 third-quartile branches with strong wealth management revenue should not be touched. Their $1.2M WM fee contribution means true profitability is higher than the branch P&L suggests once cross-referral value is counted.
- The 45 suburban branches require a succession plan: as customers age, these branches must develop digital onboarding pathways to capture the next generation or they will naturally decline into the bottom quartile within 5-7 years.
Key Insight: The branch network should not be viewed as a uniform asset. The optimal strategy is a barbell: invest in high-value advisory locations at one end, scale low-cost digital servicing at the other end, and eliminate the expensive middle that does neither well.
What the interviewer is looking forShow guidanceHide guidance
This question tests judgment and the ability to go beyond a simple quantitative cut. A good candidate will recognize that profitability alone is insufficient and will propose additional segmentation criteria. A strong candidate will identify 2-3 distinct branch archetypes and recommend different strategies for each. An excellent candidate will connect branch decisions to the broader strategic question of how the bank competes against neobanks and where physical presence creates differentiated value.
Push back if the candidate suggests closing all unprofitable branches without considering market positioning or customer relationships.
Apply the "So What?" cascade when evaluating answers:
- Level 1 (surface): "Bottom quartile branches lose $1.4M on average" — this is reading the data, not analysis
- Level 2 (implication): "The branch network has a bimodal distribution; the bottom half subsidizes itself" — this shows pattern recognition
- Level 3 (actionable): "Different branch archetypes require different interventions — close, transform, or invest — and the decision criteria go beyond current P&L" — this demonstrates strategic judgment
Question 4Creativity
Based on everything we have discussed, what should the CEO's 18-month turnaround plan look like? Please provide a concrete recommendation with priorities, sequencing, and expected impact.
Hint · Creativity
Brainstorm in buckets (e.g. internal vs external, short vs long term) so ideas stay structured and you can see gaps.
Additional InformationAsk for more dataHide data
- If needed, remind the candidate of key figures: $266M annual savings from branch closures, 70bp NIM compression, $3.84B in rate-sensitive deposits, $45 digital CAC vs. $240 branch CAC
- Share Exhibit 3 if not already discussed, to prompt thinking about channel strategy
Exhibit 3Customer Acquisition Channel Comparison
| Metric | Branch Channel | Digital Channel | Neobank Benchmark |
|---|---|---|---|
| Cost per acquisition | $240 | $45 | $28 |
| Avg deposits at 12 months | $42,000 | $8,500 | $5,200 |
| Products per customer | 3.2 | 1.4 | 1.1 |
| Annual revenue per customer | $1,850 | $420 | $280 |
| 3-year retention rate | 92% | 76% | 62% |
| Average customer age | 54 | 36 | 29 |
| Time to profitability | 4 months | 2 months | 8 months |
| Estimated 5-year LTV | $7,800 | $1,400 | $680 |
Branch-acquired customers generate 4.4x the revenue and have 5.6x the LTV of digital-acquired customers, but cost 5.3x more to acquire.
Source: NorthBridge Bank case file
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Recommended 18-Month Turnaround Plan: "Lean, Digital, Deep"
Phase 1: Stabilize (Months 1-6) — Stop the Bleeding
| Action | Impact |
|---|---|
| Close 75 bottom-quartile branches (declining markets + overlaps) | ~$200M annual cost savings |
| Launch digital deposit product at competitive rate (3.0%) for rate-sensitive customers to prevent $3.84B flight | Retain $2.5-3.0B in deposits |
| Freeze non-essential hiring; redeploy 40% of displaced branch staff | Immediate personnel cost control |
| Renegotiate vendor contracts and consolidate back-office operations | $20-30M in quick-win savings |
Phase 1 expected impact: $220-230M in annualized savings, deposit stabilization.
Phase 2: Transform (Months 6-12) — Reshape the Model
| Action | Impact |
|---|---|
| Convert 25 bottom-quartile branches to lean advisory format (3-5 FTEs, no cash handling) | $40M additional savings, preserves market presence |
| Launch digital account opening platform to shift new account mix from 15% to 40% online | Reduce blended acquisition cost by ~$50M/year |
| Introduce tiered deposit pricing: reward relationship depth, not rate shopping | Shift deposit cost mix, protect NIM on core deposits |
| Expand wealth management to 15 high-potential third-quartile branches | $15-20M incremental fee income |
Phase 2 expected impact: $80-90M incremental benefit, digital capability step-change.
Phase 3: Grow (Months 12-18) — Play Offense
| Action | Impact |
|---|---|
| Launch digital-only sub-brand targeting 25-40 demographic with neobank-style UX but backed by NorthBridge's balance sheet and FDIC coverage | Acquire 50,000-100,000 new customers at $45 CAC |
| Introduce fee-based advisory services at transformed branches (financial planning, small business) | New non-interest income stream |
| Deploy data analytics for personalized cross-sell across digital and branch channels | Improve products per customer from 1.4 (digital) toward 2.5 |
| Evaluate acquisition of a small neobank for technology and younger customer base | Strategic optionality |
Quantified 18-Month Target
| Metric | Current | 18-Month Target | Driver |
|---|---|---|---|
| Net annual cost savings | — | $260-280M | Branch closures + transformation |
| NIM | 2.9% | 3.1-3.2% | Deposit repricing + mix shift |
| Branch cost-to-income | 68% | 56-58% | Network rationalization |
| Digital account opening | 15% | 40%+ | Platform launch |
| Non-interest income | $380M | $410-420M | Wealth expansion + advisory fees |
Key Risks and Mitigants
- Customer attrition exceeds 30%: Mitigate with proactive outreach, dedicated migration team, and incentives for digital adoption
- Regulatory scrutiny of branch closures in underserved communities: Conduct CRA (Community Reinvestment Act) analysis before closure list is finalized; invest in digital access programs
- Employee morale and talent flight: Communicate early, offer redeployment and reskilling, protect top performers with retention packages
Contributed by CaseDrill practice community
What the interviewer is looking forShow guidanceHide guidance
This is a synthesis question. A good candidate will propose a phased plan addressing both costs and revenue. A strong candidate will quantify expected impact and identify risks. An excellent candidate will connect operational changes to the bank's competitive positioning against neobanks and articulate how the bank wins in 3 years, not just survives 18 months. Look for creative ideas beyond "cut branches and go digital" — such as deposit product redesign, neobank partnership or acquisition, wealth management expansion, or targeted retention of rate-sensitive customers.