First Union Corp. raised the curtain this week on what may well be its biggest achievement yet in getting a handle on customer profitability: a system that analyzes the costs and profits of customers in every business unit.
The Charlotte, N.C., banking company said Tuesday that it has fully implemented a system to apply consistent standards of profitability and account reporting to each business line, including capital markets, capital management, and the retail bank.
The comprehensiveness of the system is a key attribute. It will gather financial information from sources throughout First Union, "and the single platform will provide consistent methodology and information throughout the organization," said Beth Gibson, senior vice president and director of profitability measurement and design.
Beginning with its first-quarter earnings report, the new profitability system will let First Union give economic and profit indicators by segment in its quarterly reports, Ms. Gibson said. She came to First Union three years ago from Chase Manhattan Bank to design, develop, and implement a profitability system that would help the bank make strategic decisions.
The next step is to begin devising and executing strategies for making customers more profitable, based on the information produced by the system, known as Compas, for "cost measurement and profitability analysis system."
"I don't think I or my group came here only to build a financial information platform," Ms. Gibson said. "The really exciting part is to employ it."
The system, which replaces multiple platforms and vendors, took about 24 months to implement, she said.
Although technology was not a problem during the integration, communication was. "One of the challenges you are faced with in a large organization is communication," Ms. Gibson said.
To overcome the communication obstacles, First Union created a steering community composed of the chief financial officers of all of the business units. They were charged with communicating the new methodology to their respective units.
First Union built the profitability system on top of Oracle Corp.'s financial services application for analyzing profitability, which includes a performance analyzer and a price transfer feature to calculate margins for individual accounts.
Redwood Shores, Calif.-based Oracle said its financial services application is deployed all over the world and most institutions are using it throughout the bank. Sales of the Oracle system have increased, said Tony Fernicola, vice president of Oracle financial services.