Business units within a financial institution can deliver unsatisfactory results for a variety of reasons. Sometimes the under-performance is due to costs.

The business processes of large financial institutions are often complex, resulting in a high cost base. Sometimes, the costs are high due to shortcomings in IT and systems development.

There is a tendency to focus on costs to improve a business’s return, but often the key problem lies on the revenue side. Corporate and commercial lending is frequently a prime candidate.

As a result of shortcomings in the pricing approach and loan concentrations, the business unit can find itself consuming excessive economic capital and delivering less than desirable risk-adjusted returns.