Customer Profitability Analysis

The customer profitability application is a loan portfolio management tool which allows the credit officers to better manage the quantity and quality of the loans that are placed into the portfolio.

With the customer profitability application, the pricing of the loan is made within seconds. Literally with a click of the mouse the loan officer can be looking at the risk-adjusted return of each loan and the risk-adjusted return to the total customer relationship.

The customer profitability application is a relationship management tool that calculates the risk adjusted return on capital (RAROC) or the risk adjusted return on asset (RAROA) of each new loan and each existing facility to a selected customer, along with the return and annual income of the total customer relationship. The objective is to manage the risk and return of the total customer relationship as opposed to the risk and return of each individual loan. A single loan to a customer may be unprofitable, but the total customer relationship may be very profitable.