He came up with four methods that will achieve great results for your company. Lie Dharma Putra, CPA wrote an excellent article on Qualitative Forecasting Methods and Techniques that can be utilized by banks. Will that be in the form of selling incentives to your employees, direct marketing dollars on radio advertising, acquiring a predictive analytics tool to figure what product to offer what customer at what time? If I pay my employees more, will you attract better talent that can service and sell to your customers? There are key levers that if pulled will result in better outcomes. If you plan to increase your loan and deposit production, you will need to spend some money on marketing efforts. If you are in the business of making home loans, how are home sales tracking in you market? What is the Federal Reserve saying about the future of interest rates? If they go up, how will your bank react? If the local manufacturing plant decides to close, what impact will that have on your nonperforming loans? You forecast needs to take into account external factors and events that will impact your bank’s performance. Where are they in comparison to their goals, peers, last year’s numbers, and more? The use of indicator models Such measures and keys might be net interest margin, revenues per FTE, customer satisfaction surveys, and your customer cross-sell ratio. This involves the use of Corporate Performance Management (CPM) and Key Performance Indictor’s (KPI’s) of your bank. Let’s review some of them: Assessing the current situation According to Organisation for Economic Co-operation and Development ( OECD ) there are a few simple but sound forecasting methods for banks and other institutions that can be utilized for best results. Are there Budget Forecasting Techniques for Banks that I can use?ĭoctoral theses and AICPA definitions sound so complicated. Believe me, Bank of America has a laundry list of action items in order for them to achieve their EPS forecast. It is the result of management’s plan of attack that will result in financial outcomes.
A financial forecast is not a passive event. Probably the most important piece of this definition is the most likely course of action taken by management. … an estimate of the most probable financial position, results of operations, and changes in financial position for one or more future periods…based on management’s judgment of the most likely set of conditions and most likely course of action.
Or if I told you that they called three different gas stations for their price of gas for their research, you would say that the information was irrelevant.Īccording to Gary Giroux’s doctoral thesis entitled “ Financial Forecasting in Commercial Banks – an Industry Survey ,” the AICPA defines financial forecasting as: How did they come up with these numbers? If I told you that an analyst for Nasdaq went to the corner fortune teller and asked them to divine the numbers, you would laugh at me. According to Nasdaq, the consensus Earnings per Share (EPS) forecast for Bank of America for the years 2017, 2018, and 2019 is $1.73, $2.03, and $2.19 respectively.
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