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Measurement of Financial Institutions’ Profitability Goes Beyond Funds Transfer Pricing

 

July 30 - Axiom EPM, a provider of financial planning and performance management software for enterprises, has released a whitepaper on creating profitability measurement frameworks in banks and credit unions. The white paper reviews the concepts of profitability and acknowledges that while the key driver in a financial institution’s profitability is funds transfer pricing, allocating an institution’s net interest margin to individual instruments is not the only factor to consider in determining profitability. Other contributing factors include the attribution of certain income and operating expenses; the assignment of capital; and a robust, multi-dimensional reporting and analysis framework, which must all be in place to leverage profitability data in an actionable manner.

Axiom EPM’s white paper, “Financial Institution Profitability Measurement and Reporting,” reviews the components of financial institutions’ profitability and outlines the benefits, challenges and requirements of creating an actionable profitability framework.

In today’s global economic climate and regulatory environment, determining profitability drivers is critical, as profitability is the foundation of any financial institution’s long and short-term strategy. With compressed margins and increasing competition, it is imperative for financial institutions to understand how customers, branches, channels, officers and products contribute to its bottom line net income. The paper presents a guide to creating an actionable profitability framework, including:

“As financial institutions seek to understand the full contribution of customers, segments and products and which of these areas drive the greatest value, implementing all the components of a profitability framework has become essential,” said Kenneth Levey, vice president of financial institution solutions for Axiom EPM. “Financial institutions that embrace profitability measurement will have a strategic advantage over other institutions that solely focus on volume-drive growth with no regard to contribution.”

To access the full paper, “Financial Institution Profitability Measurement and Reporting,” visit http://info.axiomepm.com/web_wp_profitability.html.

About Axiom EPM
Founded by industry leaders with over two decades of experience in enterprise planning and reporting, Axiom EPM delivers performance management solutions for mid-sized and large banks and credit unions around the world. Solutions for budgeting & forecasting, reporting & analytics, strategy management, capital planning, profitability & cost management are delivered on a single unified platform. Axiom EPM embraces and extends familiar Microsoft Excel functionality, allowing finance professionals to manage data in a familiar environment – while providing unmatched modeling flexibility and enterprise performance. www.axiomepm.com

 

 


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