The 4 levels of deposit profitability
When you run the numbers you’ll find 4 levels of deposit profitability. They are:
- Unprofitable. These accounts actually lose money for the bank. I believe all accounts can be made profitable, but if not these accounts are candidates to be replaced with wholesale funding. Typically you’ll find about 50% of your accounts in the unprofitable category.
- Breakeven. As the name implies these accounts just about cover their costs. They might make or lose $1 or $2. With a targeted effort you should have great success improving the profit profile of your breakeven accounts.
- Marginally Profitable. Your marginally profitable accounts should deliver +/- $10 per account in monthly profits. Usually one small change is all that’s needed to grow profit here. The basics are in place just waiting for you to grow their profitability.
- Normal Profitability. Normal profitability for the run-of-the-mill, average ordinary deposit account is about $20 - $30 per account monthly. Most deposit profit targets will be set in this range. This is what you’re shooting for.
Imagine earning $20 - $30 more profit from 50% of your accounts…Each and every month. Do the math for your bank. It’s not flashy but this grit and grind foundation adds up to big money.