Nomis Solutions Unveils the Nomis Index™ to help Estimate Impact of Fed-Funds Rate Increases on Savings Portfolios

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Free online modeler leverages pricing science and actual bank data to estimate the impact of rate hikes on a bank’s profitability and growth

See how changes to the Fed Funds Rate can impact your portfolio's volume, interest costs and profitability.

See the impact of Fed Rate hike on your portfolio

Many bank executives, who have never operated in a rising rate environment, may be unsure of which pricing strategy to pursue and are vulnerable to making a wrong decision.

Nomis Solutions today announced the launch of the Nomis Index™ an interactive informational tool to model how changes in the target Fed-funds rate as well as a bank’s chosen strategy could impact a bank’s deposit balances, margins, and expenses. Nomis Index™ generates a number of profitability scenarios depending on the pricing response chosen by the bank and its competitors. It is the first conceptual portfolio risk analysis tool available at no charge to bank executives.

“Today’s rate rise will be only the second rate increase in ten years,” said Frank Rohde, president and CEO of Nomis Solutions. “Many bank executives, who have never operated in a rising rate environment, may be unsure of which pricing strategy to pursue and are vulnerable to making a wrong decision. Is the course of no-action better than the alternative? What impact will a lag pricing strategy have on my portfolio? These are questions they need answered.”

According to Rohde, the banking environment today is dramatically different compared to the years between 2004 and 2006, when the benchmark federal-funds rate increased 425 basis points. Banks today face increased competition from direct banks, Fintechs and neo-banks. Empowered consumers shaped by a continuous flow of web, mobile, and social information regarding their personal finances, have more choices and higher demands than in the past. In this unforgiving environment, a bad decision in response to rising rates can be costly given how fast consumers and competitors can react. Advanced modeling and deep analytics can help banks respond faster and more intelligently.

The Nomis Index™ enables bank executives to leverage pricing science and actual numbers from their own portfolios, to test their pricing strategies under different scenarios and easily see the impact. For example, using the simulator a bank executive can choose to respond to a Fed-fund rate hike of 0.25% with a lag, match, or lead pricing strategy. The simulator will automatically analyze the impact on that specific bank’s portfolio balance, profitability and interest costs.

The Nomis Index™ leverages publicly available data and Nomis’ proprietary pricing science developed from more than 80 implementations to provide a high-level estimate of risks and rewards of pricing decisions for a savings portfolio. It should not be used to replace or inform a business or pricing strategy, but rather serve to demonstrate the power of this technique. For more accurate and timely insights on the susceptibility of a savings portfolio to attrition, the amount of portfolio balances that are at-risk and which customers are likely flight risks, a customized portfolio analysis with Nomis deposits experts is recommended.

Key features of the Nomis Index™ include:

  • Simulates the impact of various pricing decisions in response to a target Fed-funds rate increase on portfolio balances, net interest margins, and interest expense costs as it pertains to non-transactional liquid deposits (e.g. savings and money market deposit accounts)
  • Allows bank executives to further customize the following key parameters: the portfolio size of non-transactional liquid deposits, interest expense and interest spread
  • Leverages Nomis Solutions’ generic deposit model library and expertise

The Nomis Index™ is available via this link and launches with customized data specifically for the top 150 deposit holding US retail banks, with additional banks planned in the coming weeks.

Note: The Nomis Index™ makes a number of modeling assumptions. Please visit the Caveats & Assumptions page to learn more about what is included in the underlying model for this conceptual tool.

About Nomis
Nomis is a fast-growing Fintech software company that combines cutting-edge Silicon Valley approaches to big data, advanced modeling, and deep analytics into the industry-leading price optimization SaaS software platform. We help large and medium-sized retail banks better understand their customers and grow their businesses. We help these banks deliver win-win products and pricing in an environment that is increasingly competitive and highly disruptive. With experience in over 80 implementations, Nomis optimizes over $1 trillion in banking transactions annually and returns more than $300 million to its customers every year. To learn more about Nomis, please visit http://www.nomissolutions.com

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Michael Gin

Josie Lee
@nomis_solutions
since: 08/2011
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