Profitability Analysis

Planning

In a competitive market, it is vital for banks to understand how customers and market sectors contribute towards profitability, and to what extent relationships with particular customers are profitable.

Equation’s standard profitability analysis tools are:

Income Analysis, which allows the bank to enquire and report on income from a range of transactions with a selected customer;
Transfer Pricing, which automatically applies benchmark rates to individual assets, liabilities and foreign exchange deals.

The difference between these rates and the contractual rates identifies the profit contribution per transaction.

With Income Analysis, the bank can set up its own product categories and income can be analysed into interest, charges, commissions and FX-related profit. Users can compare information across time periods, helping them to spot trends at a high level, and drill down to the underlying transactions. Transfer Pricing provides comparative pricing data associated with daily banking activities. Reference rates are set for bank-defined pools of assets, liabilities and foreign exchange deals. Banks can therefore set internal lending and borrowing rates to all accounts and internal exchange rates for use in FX deals.