Deposit profitability: What’s next?
So once you’ve calculated instrument-specific, transaction level deposit profitability P&L statements for each and every account what’s your next step? You could segment your accounts, refine your profit targets, or revisit your underlying deposit account type structure.
Actually all of these answers are correct. And they all have a shared commonality and bias towards action. Deposit profitability is meant to deliver action steps for improving the quality of your deposits while simultaneously growing your profits. It’s not meant to be just another report gathering dust on your shelf.
One quick win comes from identifying the extremes in your deposit profitability results. Identify the top (and bottom) 10% of your customers by profitability.
We all know how to handle the top 10%. Give them lots of time and attention. Make them feel special and appreciated. They’re the crown jewels of your bank and it’s never too early to work on retaining them.
But what about the bottom 10%? Your least profitable accounts will likely have a few surprisingly large accounts in it. You must drill down into why they’re unprofitable. Often surprisingly simple and easy changes can deliver outsized profit improvements…If you take the time to look.