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Loan Profitability and Pricing

Improve asset allocation, improve profitability

Accolade's newest addition to its loan analytics platform provides insights into your portfolio's profitability and pricing needs. You can leverage the data to make informed lending decisions that benefit both your members and your institution. 

Register for the webinar to learn more

Wednesday, May 29, 2024 at 12:00 pm EST

A recording will be available if you are not able to attend




How do I know where to focus my lending efforts? 

There are inherent costs in lending that should be used to assess profitability. Credit risk, servicing expenses, cost of funds, and other expenses must be quantified to measure a net return. In many cases, lending costs will vary by product type and borrower risk profile, such as credit tier. 

Return on Loan = Weighted Average Rate – Credit Risk – Servicing Expense – Cost of Funds – Other Costs 

Are we better off making an investment or offer a loan? 

Management should compare the projected return on a loan to the net return offered from investments. If a loan is priced to bring a lower net return than investments, management can use this information to inform pricing decisions or to measure the value of the member relationship. We can choose to make a loan at a lower return, but we had better know why we are doing it. 

Beyond Interest Rates 

A rapidly changing interest rate environment has significantly impacted credit union cost of funds and pricing strategies. Loan rates should be updated at least monthly to account for changes in credit performance, cost of funds, and available investment alternatives. Accolade’s Dynamic Loan Pricing Workbooks can help you team quickly assess projected lending costs when setting new loan rates, and our loan analytics model offers a forward-looking view of credit risk. 

Holistic Balance Sheet Consulting 

Loan profitability and pricing must be assessed as part of your larger balance sheet and investment strategies. Accolade's team of dedicated advisers can help interpret your results and drive conversations toward the decisions that best support your credit union's mission and align with your strategy.