Bank industry CFOs are being expected to hone their skills in data analytics to deploy capital more efficiently and manage costs, according to a report from the Deloitte Center for Financial Services. The report identified CFOs’ use of data analytics to improve capital allocation decisions as one of several areas of focus for banks as they seek growth and competitive advantage.

Regulations from Basel III and new leverage rules are requiring banks to reserve a greater amount of capital and maintain a strong focus on tangible common equity. “To generate growth and higher return on equity in this re-regulated world, banks will need to be especially agile to capitalize on growth opportunities,” says Bob Contri, vice chairman, U.S. Financial Services leader and U.S. Banking and Securities leader at Deloitte LLP.

“As banks continue to face earnings pressures, CFOs and their knowledge of data analytics are going to be central to banks’ efforts to raise shareholder value and reposition for growth,” he adds.

“Despite some progress, banks have yet to fully utilize the sophisticated finance and analytical tools that are available. We anticipate CFOs will need to leverage data and analytics on a greater scale to help drive profitability and capital allocation decisions,” says Jim Eckenrode, executive director, Deloitte Center for Financial Services, Deloitte Services LP.

“For example, in the event of interest rate volatility, CFOs could be challenged to manage costs in the lending portfolio. Broader utilization of analytics could help them manage such costs more closely,” Mr. Eckenrode observes.

Bank CFOs looking to create advantages also should consider integrating capital efficiency tools at the business level. Real-time capital allocation tools and advanced scenario planning at the transaction level may enable more informed risk-and-return decisions.

Source: deloitte.wsj.com