Rnbd Essay

993 Words Oct 24th, 2015 4 Pages
Executive Summary
The Republic National Bank of Dallas is the leading lending institutes in the Dallas area and in all of Texas. In 1977 the current marketing director for RNBD was asked to assess the effect of offering a new type of account, an interesting paying account that allows for negotiable orders of withdrawal called a NOW account. The NOW account originated in the New England states in 1972 and have grown to be a sizable amount of all accounts held in the that area. With 50 months of data available to see how the NOW accounts have influence banking and the traditional checking accounts in the area, it was time for RNDB, a leader and innovator in retail bank accounts in the Dallas area, to consider the potential of offering
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Better than what occurs at 100% cannibalization, but still not attractive to RNBD.

Understand that RNBD is in a lost position on some of its Under $200 and $200 to $499 accounts.

Table 3: Analysis of Revenue by Account Size for Checking accounts.

Another strategy would be to determine a breakeven point on NOW accounts and set a minimum level for an account. Using the same chart as above, but adding in a decrease interest revenue by 5% (for the pay out of interest) yields the table below and shows that break even occurs in the $1,000-$4,999 account level.
Table 4: Analysis of Revenue by Account Size for NOW accounts.

To get to a more precise number we would utilize the following formula.

0$ (zero profit) = account interest rev. (0.075-0.5=0.025) x account amount (X) + handling/service charge – acct cost.
44.16 = 0.025X

An account with a minimum of $1,766.40 balance would yield a breakeven point for NOW accounts.

Recommendation and Contingency
The Republic National Bank of Dallas is the largest bank in the Dallas area and in Texas. RNBD has a sizeable presence in the retail market, and is viewed as a leader and innovator in the retail market product offering. NOW accounts are coming, regardless of what anyone wants so a decision must be made on how to handle them.

Based on the information provided, it would be my recommendation that RBBD do the following;

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