Why you don’t have deposit profitability.
Deposit profitability can add 30-50bps (or more) to your annual profits year after year. But if deposit profitability is such a great idea why don’t you already have it at your bank?
There are 3 main reasons.
- Deposit profitability is a big bank project. Big banks engaged big consulting firms with big data experience to custom craft deposit profitability solutions. Until recently you just didn’t have the computing horsepower, algorithms and expertise to measure instrument-specific individual account profitability. Now community banks can have these same powerful and profitable insights.
- Legacy core systems held you back. All the data you need to calculate instrument-specific P&L statements for each and every account is tucked away deep within your core system. Core providers could have made this readily available for you but chose not to. Now we have templates that give a road map to the exact data needed.
- Deposit profitability is a new concept. We think we already know everything about deposits. It’s hard to shift from trusted aggregate measures (like balances) to a new instrument-specific focus on profits. We’ve successfully done it before with IRR models. Now we need to make the instrument-specific shift with deposits.