March 2009

Activity Based Costing in Banks

Since activity based costing (ABC) was first propounded in 1987, many consulting firms have advertised their specialist services and experiences in the implementation of ABC in the banking sector.

But the dearth of available data, published or otherwise, suggests that ABC is not as widely understood and practiced in the financial services sector as one may be led to believe.
Two reasons account for this: firstly, banks find it difficult to define their products and secondly, the banks think that the dififculty may not warrant the cost.

Is customer profitability analysis applicable for lending bankers?

The profitability of any given relationship to the bank can be reflected in the customer profitability analysis.

The financial statement analysis can only make an evaluation of the financial strengths and wekaness of the borrowing client and have little to do whether the customer is profitable to the bank.

While the customer is profitable in their own financial statments. But in its dealings with the bank the bank's cost of servicing the customer may far exceed the revenues derived from the customer.

It is therefore important to compute customer profitability in lending operations.

Marketing for Bankers - Introduction

From the library of The Leadership Corporation Australia:

  1. How marketing enables banks to offer superior value to their customers?

Lessons from Asian Financial Crisis 1990s: Indonesia and Thailand bear the brunt

In March 1997, at a banking conference in Thailand, the authors identified two major Thai banks that were showing signs of distress.
The following day, the Bangkok Post reported that one of the two banks identified was downgraded by Moodys. That was the start of what is now known as the tom-yam effect. In this article the authors used their EAGLES benchmark to anlayse the performance of the banking sector and in three Asian countries.
Vong, J. et al (1997). Indonesia and Thailand bear the brunt: what went wrong? Bankers Journal Malaysia. No. 104 Dec - Jan 1998 pp 4-7.

How many people are needed to change a light bulb?

How many people are needed to change a light bulb? In some companies its 5 people and some others it may require only 1 or 2.

Why are 5 people needed to change a light bulb?
It takes 1 person to hold the ladder, while another is to climb the ladder and screw on the light bulb. The other 3 persons lift the one who is holding the light bulb, and turns him to screw on the bulb.

What about the 1 person? Well, it takes one person to climb the ladder, balance himself or herself on the ladder, and screw on the light bulb with one hand while the other holding on to the ladder.