Examining branch profitability
There’s value in ascertaining the funds transfer rate across all business units.
When we discuss profitability, we often examine individual product types and their return on investment. For example, a specific loan’s profitability would be measured by adjusting its yield to include non-interest income, less applicable loan losses and cost of funds. A product profitability analysis heightens awareness of the true revenue potential of each earning asset and can help identify those underperforming within your balance sheet.
When examining branch or cost center profitability, the method is similar, but on a much larger scale. Branch budgeting and profitability include a variety of contributors, from deposit-gathering branches to lending offices, as well departments, such as investments and operations.
Develop the Business Unit/Branch Budget
To begin, you’ll need a process or model for developing a business unit/branch budget. This scale of plan development may look something like this:
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