Private bankers may soon be able to compare the productivity and profitability of their units against their peers.
The American Bankers Association is resurrecting a system designed for it three years ago by Financial Service Associates Inc. of Michigan.
The revised system would draw on a survey of private bankers to identify performance benchmarks. Currently, experts say, no such standards are available to private bankers who want to know how they stack up against their competitors.
More-Quantified Data Sought
The private banking committee asked that the so-called PAR system (for profitability analysis report) be revised to meet the needs identified by private bankers in a recent poll.
"The feedback from the 40-plus institutions - is that they were looking for more-quantified data," said Maribeth Rahe, chairwoman of the ABA's private banking unit and department executive of Harris Trust and Savings Bank's Personal Financial Services Department.
The poll, conducted by KPMG Peat Marwick, also found that fully one-fifth of the private bankers surveyed could not measure the profitability of their own operations.
Comparing profitability and productivity is more difficult than in other bank businesses because private banking activities typically reach into many areas of the bank, said David Hall, president of Financial Service Associates.
The revised system will address the data-gathering difficulties by being less detail-oriented, Mr. Hall said.
Ms. Rahe said the original version would have required hours of data gathering by financial officers. The revised one will focus more on key measures of profitability and productivity.
KPMG Peat Marwick will work with Financial Services to add "creative juices" to the project, Ms. Rahe said.
Mr. Hall expects more than 75 private banks to ultimately use the profitability analysis system.
In 1990, Financial Service Associates ran a test in which 15 private banks supplied financial data that was compiled into composite comparisons. The results made a strong case for private banking, Mr. Hall said.
By "any measure you might use, the private bank was a better part of the bank than the rest of the bank," he said. That included such measures as return on equity, return on assets, and loan volumes.
But plans were scrapped three years ago by joint agreement between the ABA and Financial Services because private bankers were preoccupied with other issues, Mr. Hall said.
"Unfortunately, the year that we picked to do the pilot was the year that credit quality took on meaning to private bankers," he said. In 1991 bankers were in what was a siege mentality."
"As a consequence, the response was underwhelming," he said.
Things are different today and interest is high, he said. A new pilot - using 1993 data - will be started this fall.