BANK DEPOSIT PROJECTIONS
 

 

 

 

 

 

 

 

 

 

 

 

For the existing operations of the bank, past data were utilized to produce a 10-year set of deposit balances. These deposit projections were added to those of new branches. Turning to other figures, certain line items on the income state- ment could be attributed directly to checking accounts, others to savings accounts. The remaining figures were related to the total of account balances. For this model, ratios of income and expense items to appropriate deposit balances were predicted by a least-squares regression on historical data. This was not considered the most satisfactory method because some changing patterns of incurring income and expenses were not taken into account. However, more sophisticated forecasting techniques, such as exponential smoothing and BoxJenkins, were rejected because of the potential management misunderstanding they could generate.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Once the ratio matrix was developed, income statements could be generated by simply multiplying the ratios by the proper account balance projection to arrive at the 10-year projection for income statement line items. These income statements, in conjunction with the bank’s policy on dividends and capitalization, were then used to generate a 10-year balance sheet projection. The net results were presented to the bank’s senior executive committee to be reviewed and modified. After incorporating executive judgment, final 10-year income Strategy Selection Strategy Selection statements and balance sheets were obtained, indicating the bank’s momentum into the future. Gap Analysis In the banking example, momentum was extrapolated from historical data. Little attention was given to either internal or external environmental considerations in developing the momentum. However, for a realistic projection of future outcomes, careful analysis of the overall marketing environment as well as the product/market environment is necessary. As a part of gap analysis, therefore, the momentum should be examined and adjusted with reference to environmental assumptions. The industry, the market, and the competitive environment should be analyzed to identify important threats and opportunities. This analysis should be combined with a careful eval- uation of product/market competitive strengths and weaknesses. On the basis of this information, the momentum should be evaluated and refined.