Pricing & Profitability Optimization
The ability to optimally price loans and control the profitability of each lending relationship is a cornerstone of a bank’s ability to be competitive and, in a downturn, have a stronger balance sheet than its peers.
In order to get there, a bank needs a model that measures all components of pricing and profitability, is sensitive to stronger transaction terms and additional fee income and yields results that are generally in line with market and competitive pricing.
In addition, the bank needs to be able to use these models in a framework that balances the necessary tradeoffs that must be made between returns, risk and growth.
SunGard can help. SunGard’s Ambit Risk Consulting provides an objective framework to quantify the income from each product and relationship and the expenses associated with that income, including fully allocated overhead and the risk costs (i.e., both expected and unexpected losses).
Features
- Identify the strongest and weakest relationships by their risk-adjusted return on capital (RAROC)
- Assists the bank with pricing for maximum RAROC in the context of the bank’s net interest margin, charge-offs and growth goals
- Provides the technology to implement an enterprise software solution built around highly customized models in order to efficiently deploy analytics throughout the organization
Benefits
- Understand the nuances of all of the bank’s business units, products and loan portfolios
- Allows quick and clear quantification and rank-order the value of banking relationships
- Make the appropriate decisions that optimize return on capital, NIM, NCO and growth goals
