Assessing progress on 2019 goals?
Survey indicates opportunity in profitability analysis

In a continuing environment of tight margins and economic uncertainty, financial institution leaders need to
truly understand what drives profitability and embrace every opportunity for gains.

Infographic explaining the state of profitability in 2019 for financial institutions

 

Few financial institutions understand profitability and embrace opportunities for gains, according to our 2019 survey of more than 110 senior finance professionals in U.S. banks, credit unions, and other financial services organizations. The survey found:

  • 91% believe their institutions should be doing more to leverage profitability analysis to inform strategic decisions
  • Fewer than 1 in 10 have a clear understanding of profitability driver

Inability to objectively analyze and understand what drives profitability prevents financial institutions from maximizing profits.

  • Lack of data (45%) and analysis tools (55%) are the top impediments to relationship profitability analysis
  • Just 22% of institutions have a pricing tool that can immediately evaluate how a new account affects the profitability of an existing relationship
  • 94% of respondents say it’s important to monitor customer relationship profitability, yet 66% don’t currently do so

What can institutions do to empower profitability improvement? Kaufman Hall and the Financial Managers Society (FMS) recommend:

  1. Providing education on profitability drivers and analysis
  2. Prioritizing improvement of your institution’s data analytics and profitability/pricing tools
  3. Managing the full scope of relationships, including integrating relationship data into pricing decisions

Download 2019 Profitability Perspectives: 10 Findings Reveal the Need for Specific Leadership Action to see the complete survey analysis and get 6 more actionable tips from the experts at Kaufman Hall and FMS.

Survey respondents included: 81% VP or higher roles, with 43% serving institutions with less than $1 billion in assets, 45% with $1-$10 billion in assets, and 12% with more than $11 billion. Detailed information on survey respondents is available in the full report.