How Would You Describe the Ideal Profitability Management System for Your Bank?

American Banker, February 14, 1994 | Go to article overview

How Would You Describe the Ideal Profitability Management System for Your Bank?


FRED L. CULLEN Chief financial officer Bank One Corp. Columbus, Ohio

WE'RE NOT ABANDONING LINE OF business or overall bank profitability, but we are expanding it by drilling down through the organization to understand nuances of different products, different branches. We want to look at profitability by product, by branch, by household, and by account. We really plan to turn our profitability reporting system into a management Information tool to help us better manage the business.

We want to turn financial information into management information and allow individuals to understand the behavioral characteristics that change the financial results. We want to use the financial results. We want to use the financial data and change them into market data. For example, using the same branch profitability model for all branches is not right. We know there are differences between urban and rural branches. So, we have to marry financial data with demographic data and ultimately develop a marketing tool.

KEVIN T. THOMPSON Senior vice president First of America Bank Corp. Kalamazoo, Mich.

UNDERSTANDING CUSTOMERS AND products is the goal of any goal business.

We have a matrix of customers, delivery systems, products, and branches in different geographic markets. So, the ideal profitability management system should be a system that would cut through any of these breakouts.

We're getting closer to this goal every day. We've acquired the Hogan Earnings Analysis System and are developing that system. It's a system with dynamic potential, and we plan to have it ready by mid-1994. At that point, we'll be two-thirds of the way to where we're going.

Once we're there, I think it will give us a better understanding of our business and will help us make decisions on how to allocate capital, marketing dollars, and other resources. It will help us to be more successful in accomplishing our overall business goal.

SUSAN BIES Chief financial officer First Tennessee National Corp. Memphis

AS A WE LOOK FORWARD INTO THE next decade and see slower revenue growth, we want to understand how our resources - processes, products, and people - create costs. Understanding costs is the key to understanding profitability.

We also want to tie it into our marketing efforts. That's the most exciting thing that's happening. These systems are not just financial systems anymore. Now we're getting information into the hands of the sales force so they can make pricing and product decisions. It's just a more consistent way for the organization to understand what drives profitability. It will help us make tactical, strategic decisions: where to grow, where to expand.

For bankers, it will help us understand not only how we compete against other banks, but also nonbanks. That will help our corporate development team make strategic acquisitions to make us even more competitive.

SUSAN SMITH Vice president Keycorp Albany, N. …

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