Rick Spitler of Novantas is Featured at Chicago Fed Conference on Bank Structure and Competition

May 5, 2005

CHICAGO, IL – Middle-market commercial lenders have made good progress in incorporating production costs and risk into loan pricing, but to make the most of their business "they also must learn to evaluate market demand," said Rick Spitler at the Federal Reserve Bank of Chicago's annual conference. A Managing Director at Novantas LLC, Spitler was a guest speaker at the Chicago Fed's Conference on Bank Structure and Competition, which brings together several hundred financial institution executives, regulators and academics to examine current policy issues.

Banks have made great strides on supply-side pricing perspectives, such as recouping distribution cost and realizing product profitability and RAROC objectives, Spitler said, but "demand-side perspectives also are needed to address critical questions on realizing distribution value, relationship pricing and distribution profitability, and achieving portfolio/market objectives."

Spitler's remarks were part of a presentation on "The Science of Pricing," which provided an in-depth look at the evolution of commercial loan pricing and highlighted the expanding role of marketing sciences in that business.

Spitler made suggestions on how banks can manage more sophisticated loan pricing strategies and discussed new tools and information. He recommends establishing a dedicated pricing team of three to five people that will be included in sales management. This team will be responsible for maintaining RAROC models and pricing guidelines, and also will establish a comparables database that includes pricing breakouts by risk grade, industry and region. Banks can consider this information to set optimal "sticker prices" that support portfolio strategy, he said.

The Federal Reserve Bank of Chicago's Conference on Bank Structure and Competition has encouraged an ongoing dialogue and debate on current public policy issues affecting the financial services industry since its inception.

Novantas is the acknowledged leader in customer science and revenue strategy in the financial services industry. The Firm specializes in investigating and interpreting customer needs, attitudes and behaviors in ways that help companies to refine marketing decisions, customer strategies, and sales and service activities.