Large regional bank EF firm seeks understanding of its pricing processes

SITUATION

A bank owned equipment leasing company funds its operations via the bank’s treasury department. Executive management believed that its cost of funds (“COF”) was not competitive with other leasing companies of similar size and debt ratings. Leadership asked The Alta Group to obtain competitive intelligence around how other bank-owned leasing organizations approach funding with particular attention to transfer pricing practices.

SOLUTION

Alta designed and executed a double-blind industry benchmarking survey targeted to similarly situated equipment finance companies. One-on-one interviews delved into treasury practices, cost of funds determination, transfer pricing and deal pricing methodology. We compared the clients pricing methodology and data to available industry composite information and determined where they were in line with and where they differed by product type and tenor. A gap analysis outlined differences in treasury COF transfer pricing, debt to equity leverage levels, and deal pricing methodologies with recommendations on pricing practice changes to improve competitiveness.