Magazine article American Banker

Industry Lacking in Performance Measurements, Poll Finds

Magazine article American Banker

Industry Lacking in Performance Measurements, Poll Finds

Article excerpt

One-fifth of private bankers do not calculate their department's profitability, according to a recent poll.

And for those who do, almost half don't fully include overhead in their calculations.

Private bankers who participated in the American Bankers Association's 1993 private banking survey said they want all that to change.

They want to develop systems to calculate division profitability that also delve into the profitability of specific business segments.

Snapshot of the Industry

The survey of 45 bankers from 21 states provides a snapshot of the private banking business today, as well as private bankers' views of the future.

The surveyed bankers had different definitions of private banking: 52% said the label covered any products marketed to the affluent, 39% said it covered retail credit and deposit products, and 23% used the term to describe trust and investment products.

Measuring profitability is a top priority.

"It's a very critical measurement, not only in normal times but also today with the emphasis on profitability," said David Ross Palmer, a New-York based private banking consultant.

Those without performance measurements should be developing them now, he said.

Helpful Measurements

Private bankers surveyed said they would like to be able to calculate the profitability of products, accounts, relationships, and their staffs. They also want to measure the costs of winning new customers.

With those data, they would like to compare their institutions with other private banks -- especially those considered highly profitable.

Those who do calculate division profitability lack confidence in their ability to maintain current profitability, according to the study.

The average private bank, as developed from survey responses, has 4,950 accounts. Each relationship officer had an average of 75 clients. …

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