Numerous financial institutions find it challenging to set prices amidst fluctuating interest rates. This challenge stems from a lack of comprehension regarding the integration of interest rate and liquidity risk costs into their pricing strategies. Moreover, the challenge of determining origination and servicing costs further exacerbates this issue. These issues can be addressed by applying Kohl's Strategic Pricing Framework. The model sets a maximum deposit price required to meet the strategic capital objectives by using your deposit data, funding rates that incorporate interest & liquidity risks, and Kohl's operational cost data.


Deposit Details
Input Fields
*Input 0 (zero) if not applicable
i
Total Interest Earned on All Interest Earning Assets
i
Total Non-Interest Revenue from All Assets
 
i
Interest Revenue + Non-Interest Revenue
i
Current Capital divided by Current Assets
i
Expected Asset Growth Rate
 
i
Capital needs to grow at the same rate as the institution. Therefore, multiplying desired capital ratio by the expected growth rate provides the proper ROA for pricing.
i
Deposit Term in Months
 
i
WAL is not applied to Non-Maturity Deposits. For CDs, the weighted average life is based on the term. For more information, See Kohl's Resources Page for a detailed explanation of Weighted Average Life.
 
Amount Percentage
 
 
i
For CDs, the rate is retrieved from the Federal Home Loan Bank of Des Moines equating to the term of the CD. For non-maturity deposits, a constant spread is applied related to how the rate on the deposit correlates to Fed Funds.
 
 
i
The common amount of fees and other revenue not related to the interest rates by product from Kohl's database. This amount is divided by the input balance to determine the percentage.
 
 
i
Deposit Total Revenue
 
 
i
Input balance times input deposit rate for all deposit types.
 
 
i
The amount is by product from Kohl's database. The percentage is the amount divided by the deposit balance.
 
 
i
The amount is by product from Kohl's database. The percentage is the amount divided by the deposit balance.
 
 
i
The amount is by product from Kohl's database. The percentage is the amount divided by the deposit balance.
 
 
i
The amount is by product from Kohl's database. The percentage is the amount divided by the deposit balance.
 
 
i
Deposit Total Expense
FTP Pricing Method
Deposit Rate
 
i
Total Deposit Revenue from above
 
i
Total Deposit Expense less Interest Expense
 
i
Total Deposit Revenue less Deposit operating Expense (Excl. Int. Exp.)
 
i
Calculated above (Based on Institution Capital Ratio & Anticipated Annual Growth Rate)
 
i
Net Income plus Capital Optimized ROA. This is the maximum rate one should provide based upon this methodology.
Net Asset Yield Pricing Method
Product Rate
 
i
Calculated above (Based on Asset Portfolio Yield rate plus Asset Other Revenue rate)
 
i
Non-Interest Expense for Assets as provided by Kohl's database
 
i
Total Deposit Expense minus Interest Expense
 
i
Net Asset Revenue less Asset Operational Costs less Deposit Operating Expense (Excl. Int. Exp)
 
i
Calculated Above (Based on Institution Captial Ratio & Anticipated Annual Growth Rate)
 
i
Net Operating Costs less Target ROA. This number represents the maximum deposit rate that could be paid that would still cover operational costs & meet the ROA target to maintain captial.
 
i
Difference between the Max product rate of the FTP Pricing method & Net Asset Yield pricing method. It represents the difference between the match funded FTP price that can have a duration mismatch with assets compared to a duration matching method.

Warning: The cost data provided in the calculator is not specific to your institution. To obtain your institutions specific cost data, please schedule time to speak with Kohl. In the meantime, check out our available resources.

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