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Echo Partners Community Bank Blog

    Aggregate vs instrument specific deposit profitability?

    [fa icon="clock-o"]} [fa icon="user"] Howard Lothrop [fa icon="folder-open'] deposit profitability, analytics

    Business man pointing to transparent board with text Why?.jpegAggregate vs instrument specific deposit profitability…What’s the “Big Deal”?

    Bankers have been using aggregate measures (like balances) to evaluate deposits for a long time. So why should we change now?

    There are really 3 reasons to change now.

    • Instrument specific measurement is way more accurate.

    If you’re ignoring delivery channel and transaction costs you’re getting a very misleading picture of your deposit profitability. Transactions cost money.

    • Modern computing techniques have made it practical to do this, even in smaller banks.

    Until recently you just didn’t have the raw analytic power & algorithms needed to make it work.

    • Without instrument specific deposit profitability you’re making poor decisions.

    Because it’s more accurate (and practical) you can improve your decision making now.

    Just think about the transition from aggregate interest rate risk measurement to instrument specific. Was it more accurate? Yes. Did you need improved technology to make it work? Yes. And did it allow you to make better IRR decisions? Yes.

    All of these reasons end up boosting your profits.

    So the real reason to change is simple…You’ll significantly boost your #DepositProfitability.

    How much could you save?

    Do you want to grow your bank profits with little to no risk? Click Here to  Discover How
    Howard Lothrop

    Written by Howard Lothrop

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