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Profitability Solutions Knowledge Center
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Did you know?
  • 53% of consumers would not consider banking at an institution that does not have a physical branch they could go to.1
  • Net interest margin accounts for 80% of a typical financial institution’s profit. 
  • In most financial institutions, 70 to 80% of their clients are either break-even or unprofitable. 

Considering these statistics, it’s essential that you know the profitability of your branches, products, and clients.  And how can knowing this information help your institution improve ROE?

  1. Evaluating and modeling your branches is critical to discovering profitability.  Understanding branch profitability information can help you determine which branches are profitable and which ones aren’t.  You’ll also be able to reward branch managers based on performance, not just growth or transaction counts.
  2. By forecasting or modeling at the product level, you’ll be able to see how possible pricing changes would affect different areas of the income statement and balance sheet. You can also compare similar product groups to see changes in non-interest income and expense allocations, both direct and indirect.
  3. Effectively setting pricing to enhance net interest margin is key for profitability.  Using client profitability and pricing tools, you can understand the impact of rate, balance, and risk rating changes to ensure you are effectively setting prices.  Additionally, discovering how low you can go for your most valuable clients is only possible with profitability data.
Amid a challenging economy, increased competition, and heightened pressures all around, there’s never been a better time to care about – and master – profitability. We invite you to take a look around this knowledge center, which is designed to provide you information that will be helpful in meeting your institution’s profitability goals.
1Novarica Study 2013