Profitability is measured before the balance sheet cost
Revenue is attributed cleanly and funding and capital are not, so products that consume the balance sheet look better than they are.
Banking and markets
Product and client profitability after funding and capital
Front-office, treasury and finance data joined, so profitability is known after the cost of funding and capital rather than before it.
Banks measure revenue precisely and allocate cost approximately, which makes client and product profitability a matter of opinion. Funds transfer pricing, capital consumption and operational cost each sit with a different function. We join them so a desk, a product and a client can each be judged on what they return after the balance sheet they consume, using the same data that feeds the regulatory reporting.
Discuss your operationWhat we usually find
The problems that come up in almost every one of these businesses.
Regulatory and management numbers come from different places
Two pipelines built for two audiences produce two answers, and reconciling them consumes the reporting window every quarter.
Client profitability stops at the product
Relationships spanning several products are reported product by product, so nobody can say what a client is worth in the round.
Where we start
What the first engagement usually covers.
Scope depends on the state of your systems. These are the pieces that recur in this sector.
Funds transfer pricing
Funding cost attributed to the product and tenor that consumed it, on a basis treasury and the front office both accept.
Capital and RWA attribution
Regulatory capital consumption pushed down to the desk and client level, so returns are stated on capital employed.
Client-level profitability
Revenue, funding, capital and operational cost joined across products for the whole relationship.
One reporting spine
Regulatory submissions and management reporting built on the same reconciled data, so they stop disagreeing.
What changes
What is different afterwards.
You own all of it: the code, the written definitions and documentation aimed at whoever maintains this after us.
- Profitability after funding and capital cost
- RWA and capital attributed to desk and client
- Whole-relationship client profitability
- Regulatory and management reporting from one spine
The builds behind it
Sector knowledge decides the order. The builds are the same four.
Single source of truth
Your finance, customer and operational records joined into one dataset, with each figure defined once and traceable back to the system it came from.
Analytics layer
Reporting built on top of the joined data, aimed at the few revenue and cost drivers that actually change the result.
Workflows
One defined task, automated inside a process that already exists, measured against whatever it replaced.
Financial modelling
Driver-based models built on the same definitions as your reporting, so the forecast and the actuals stop disagreeing.
Worth asking
Questions this tends to answer.
- Which products earn their capital?
- What is this client worth across every product?
- Why do the regulatory and management numbers differ?
- Where is the balance sheet being consumed for no return?