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17 Key Performance Indicators Every Bank Should Track
For large financial institutions and small, local banks alike, these KPIs provide important insights into everything from finances to operations.
If you’re a banking institution, how can you really put your finger on performance? Or be sure you’re compliant with federal regulations? You’ve got to know your numbers. More specifically, those numbers that are key performance indicators (KPIs) for the banking industry.
A multitude of KPIs can be implemented to measure every type of transaction and service in a bank to accurately evaluate performance, profit, customer service, and more. It can be hard to choose which measures to focus on, so here’s a list of bank KPIs you should track, organized by category. These metrics are applicable to banks of all sizes and cover the most important aspects of operations and management:
17 KPIs Every Bank Should Track
- Revenue: All incoming cash flow. For banks, you might break down your total revenue by deposit interest, loan interest, service fees, and transaction fees.
- Expenses: All costs incurred during bank operations. Expenses are usually tracked separately in two categories: interest and noninterest.
- Operating Profit: Money earned from core business operations, excluding deductions of interest and taxes. In its simplest form, this figure is obtained by subtracting expenses from revenue.
*Note: The three bank KPIs listed above are the holy trinity. Your stakeholders (such as investors and board) will focus on these metrics more than any others—if nothing else, your bank should track these critical KPIs.
- Operating Expenses As A Percentage Of Assets: Total operating expenses divided by the total dollar amount of owned assets, shown as a percentage.
- Assets Under Management (AUM): The total dollar value of assets being managed by the bank. This KPI can be tracked by various accounting timeframes, such as quarterly.
- Percentage Of AUM Above Benchmark: How your bank’s AUM ranks compared to competitors, shown as a percentage. This banking KPI helps evaluate your performance in the industry.
- Return On Equity: Total income the bank generates divided by the total equity owned by shareholders, shown as a percentage.
- Return On Assets (ROA): The total dollar amount of net income generated by the bank divided by the total assets, shown as a percentage.
- Client Survey Score: Bank performance as measured by customer feedback. Many banks send out client surveys to gather performance-related feedback; tracking these responses with some type of internal scorecard is helpful. You can even create categories for response types (e.g. employee communication, variety of products/offers, speed of service, etc.) and track them individually, as well as your overall customer satisfaction score.
- Average Time To Close Issues: Length of time from when a problem is identified to when it is solved. Issues may originate internally (operations, technology, etc.) or externally (customers).
- New Account Setup Error Rate: The total number of new customer accounts created containing an error (e.g. typo or incorrect address, name, account type, etc.) divided by the total number of new customer accounts set up at the same point in time, shown as a percentage. This metric will ultimately link to the previous “Average Time To Close Issues” KPI.
- Accounts Opened With Insufficient Documentation: The total number of new accounts opened with insufficient documentation divided by the total number of new accounts opened over the same period of time, shown as a percentage. This is similar to the previous KPI for banks, but in this case, the information is missing versus incorrect.
Productivity By Team Or Individual
- Total Volume Of Accounts: The total number of accounts managed by your bank, tracked by financial timeframes. There are many types of accounts you can track, such as deposit or money market accounts.
- AUM Per Employee: The total dollar value of assets being managed by the bank divided by the number of employees. This is an HR-related measure that helps analyze workload.
- Operating Profit Per Employee: The total dollar amount of operating profits divided by the total number of employees. This is a high-level bank KPI that, in the simplest sense, helps you compare money earned to money spent on staff.
- Sales Per Branch: The total dollar amount of sales generated through a single branch divided by the total number of branch locations. This KPI helps management assess which branches are the highest- and lowest-performing.
- Number Of Workflow Processes Implemented: Counting the processes that the bank has created or revised to improve workflows and better operations. This metric takes a more introspective approach to KPI tracking.
Why Track Key Performance Indicators For Banks
Why go to all the trouble of monitoring KPIs? Because these metrics provide important insights into how your bank and its employees perform. You’ll know what’s contributing to your profit and what’s not, so you can make strategic decisions on everything from hiring to resource allocation. Ultimately, KPIs evaluate the success of your bank and quantify its performance in tangible ways for your leadership and stakeholders.