Research On Improvement For Corporate Customer Profitability Model Of Chinese Mercantile Bank Shenzhen Branch

In recent years, facing the accelerated process of interest rate liberalization, higher regulatory requirements for risk management, as well as the pressure from internal assessment of profits, competition has become increasingly fierce among China’s commercial banks. Commercial banks have come to realize the importance of customer profitability, and begun to research the customers’ value contribution to banks. Traditional accounting profit cannot meet the banks’ requirements for analysis of customer value contribution due to the impossibility of cost accounting and allocation. Therefore, analysis and research on customer profitability which are based on internal transfer pricing and takes comprehensive consideration of costs and capital apportionment have gradually been valued by commercial banks. Based on such background, this paper carries out analytical research taking Chinese Mercantile Bank’s customer profitability model as the research subject.As a small foreign-funded bank, Chinese Mercantile Bank Shenzhen Branch primarily serves corporate customers. In order to seek development in the competition, it must capture the strategic customers, provide targeted and differentiated services, and meet the corporate customers’ business needs. Finding strategic customers which contribute highly to the bank through customer profitability analysis is the foundation for achieving precise scientific management. Given that the original corporate customer profitability model can no longer satisfy the requirements, suggestions for the improvements of corporate customer profitability model are proposed in three aspects, namely application of internal funds transfer pricing, collection and apportionment of costs and measurement of economic capital costs proceeding from the actual situation of Chinese Mercantile Bank Shenzhen Branch taking internal funds transfer pricing (FTP) theory, economic value added (EVA) theory and activity-based costing (ABC) theory as the theoretical bases. And a new customer profitability model is built. It’s more effective and suitable for the current development situation of Chinese Mercantile Bank Shenzhen Branch.Finally, the modified customer profitability model is applied on Evaluation of corporate customers of Chinese Mercantile Bank Shenzhen Branch, differences in customer profitability are obtained by computational results, and analysis of differences is performed to demonstrate the application effect of the model.During the early application of the model, some difficulties will be encountered, and the model also needs gradual improvement during use.Nevertheless, the modified customer profitability model will be of great significance to the enhancement of Chinese Mercantile Bank’s operation management.