Essay HBR CASE CHEMICAL BANK EXECUTIVE SUMMARY

CHEMICAL BANK
- Allocation of Profits

EXECUTIVE SUMMARY

The overall profitability of Chemical Bank has been negatively affected by a decrease in profit contribution from Due Bills. There is an external threat of reduced interest rates and internal threats in the form of misalignment between involved divisions.
The following suggestions aim to counteract this development
1. Increasing sales volumes of Due Bills
a. Allocate 100% of profits from customer fees to Metro
b. Aligning Metro’s branch managers’ Point System with increasing sales
i. Incorporate Due Bills in the Point System
1. when all fee profits from Due Bills are allocated to Metro, they fall under “Direct Fees” ii. Increase the point value for “Direct Fees” …show more content…
4. There is a lack of a co-operation and communication structure for Treasury and Metro, where more synergistic opportunities might be missed. Evidence of this has been given in statements from the divisions involved.
PROPOSED SOLUTION
Increasing sales volumes of Due Bills is of highest priority to increase overall profits. Incentives for Metro branches to sell Due Bills include allocation of all fee revenues to Metro, and making Due Bills part of the Point System. Better cost control can be achieved by transferring administrative tasks from T&I to Treasury. Metro should carry its own processing costs. Treasury’s costs associated with Due Bills are shared on a percentage basis that is constantly open for negotiation between Treasury and Metro, as part of a new project aiming towards improved communication and co-operation between the two with synergistic effects that can increase the sale of other Treasury products and further Metro’s strategic goal of offering superior product packages to its customers. 100% of profits from NII and Trading should be allocated to Treasury to keep incentivizing the traders to make skillful trading decisions.
The proposed solution aims to increase sales of Due Bills, improve NII and trading profits, and reduce costs as well as achieving other long-term synergistic positive outcomes for Treasury and Metro.
CONCLUSION
1. 100% of revenues from customer fees should be allocated to

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