From time to time, Kohl is asked to do "comparison audits" for companies with existing internal profitability solutions whether commercially purchased or homegrown. The differences that are most common and the most dramatic usually occur when looking at how people costs are attributed to different products. This paper shows just one example of how wrong some systems can be.
WAL is one of the more useful analytic tools one can calculate. That is because it is not only how many years it will take to receive half the amount of the outstanding principal, but also it is the ratio of fees and costs to balances on a percentage basis plus more.
Creating value for stakeholders should be the strategic objective of the board and executive team, yet this goal is not always strictly about making more money. In not for profit entities, such as credit unions, the real objective is to maximize membership value in the form of better service, lower fees and loan rates or higher deposit rates. These objectives need to be balanced by targeting a return on assets (ROA) and capital level which enables growth and sustains the credit union through good times and bad.
Financial Institutions have been offering rewards transaction products for some time. The rewards credit card is offered by many CU’s with different perks designed to drive member transactions to their product. Our clients are often surprised by the performance of those card programs. Both good and bad.
Many credit unions struggle with the concept of profitability analytics. As not-for-profit entities, many believe profitability should not be the objective. They also mistakenly think profitability analytics is only about maximizing profitability. Both concepts are simply wrong. For credit unions, profitability analytics is about managing profitability to appropriate levels, not maximizing it. But what is the appropriate level of profitability?
Many credit unions continue to use their internal cost of funds rate as the implied funding rate for new lending activities. On the surface that sounds reasonable, but after just a little bit of deeper thinking that mindset doesn’t make a lot of sense.