Have You Properly Armed your Lenders?
Financial management is the weakest area in
banking. Specifically, most banks do not have a
good loan and deposit pricing process. Evaluate
your own processes with the following questions.
- Do your lenders know the profitability
of each loan or loan type?
- Do your lenders know how low a rate they
can offer an “A” credit and achieve your
profitability target?
- Does your bank have a method for
determining how much to increase the rate on
a small loan?
- Do you have a process for determining
the appropriate rate differential between a
variable and fixed rate loan?
- Does your bank have an easy way to
calculate the value of deposits to a lending
relationship?
- Do you have a practical approach to
pricing for credit risk?
Would you like to answer YES to these and
other important questions?
Do Community Bankers Really Need Help with
Loan and Deposit Pricing?
- 97% of Community Bank Presidents and
Chief Lending Officers can’t answer more
than three of the six preceding questions.
- Many large banks have sophisticated
pricing models – most community banks rely
on seat of the pants pricing.
- Lenders have had hundreds of hours of
training on credit risk and loan
administration but almost no training on
pricing
Do You Want To Reduce Your Cost Of Funds?
- Does your bank have the right
information to price your deposits
effectively?
- Do you know the profitability of each
major deposit category?
- Do you know how high a rate you can pay
your best customer and achieve your
profitability target?
- Do you have an effective method for
tiering deposit rates?
- Do you have strategies for increasing
your deposit growth without increasing your
cost of funds?
- Do you have a practical approach for
competing effectively against both rational
and irrational competitors?
Do you really want to increase net interest
income and expand your core customer base?
|
