Consider these best practices for profitability

Profitability remains one of the most pressing challenges for banks. While each institution shares the goal of sustainable, predictable returns, the journey to get there rarely looks the same twice..While it would be nice to have a magic formula for profitability, such a recipe simply does not exist. Every bank is so different that there cannot be a one-size-fits-all approach. What drives profitability for one bank may not work for another.To stay competitive, banks must move away from “mega-management” and embrace a mindset of micro-adjustments of small, data-driven refinements that align strategy with their specific market realities.Data is the foundationBanks have so much data at their disposal. It holds the answers to critical questions: Which products generate the highest margins? Which customer segments are most loyal and profitable? Where are resources being wasted? Although the path to profitability differs for every bank, each bank’s data holds the answers and insights they need.Instead of relying on intuition and tradition, data empowers bankers with facts that help inform decisions that directly impact their bottom line. With data insights, banks can fine-tune their offerings, allocate resources more efficiently, and develop new products that align with profitable opportunities. The result is an institution that can adapt continuously while maintaining a focus on sustainable growth.Understanding the ideal customerNot all customers contribute equally to a bank’s profitability. The most successful banks are those that continually refine their understanding of who their most valuable customers are and how their preferences evolve. This begins with understanding their customer base by demographics, behaviors, needs, and value to the organization.Different customer segments bank differently. Younger, more tech-savvy customers may favor digital services and low-fee products, while established professionals might seek wealth management or business loans.Data reveals not only who’s profitable, but why. For example, deposits that flow out immediately might signal unmet needs or competitive weaknesses. The data not only shows there are outflows, but also shows where those deposits are going. Micro-adjustments — product tweaks, improved relationship management, better targeting — can turn leakage into loyalty.By using data to understand customers, banks can identify the profiles most likely to drive revenue and long-term relationships — and which are not. This enables highly targeted marketing, tailored product development, and more meaningful customer engagement, which can be key ingredients in boosting profitability.Data can dispel many misconceptions about what the ideal customer looks like. Banks may think they already know, but often the data tells a wildly different story. The key is to keep listening, testing and adjusting.Bigger isn’t always betterIt’s also a common misconception that bigger is better when it comes to bank deposits and balance sheets. In reality, high deposit volumes do not automatically translate to higher profitability. The true measure of success is how well a bank balances risk and revenue generation.Some banks face liquidity challenges and genuinely require large deposit volumes to ensure stability and regulatory compliance. Others may boast impressive deposit totals but lack a strong pipeline of loans or fee-generating products, which, of course, results in low returns.Focusing solely on volume metrics can be misleading and, in some cases, detrimental to strategic decision-making. By analyzing the composition and performance of deposits, banks can make nuanced adjustments: Where to grow, where to rebalance, and where to prune. The goal isn’t just growth; it’s profitable growth.Three steps for sustainabilityIt’s worth repeating that a “best practice” will vary from bank to bank, but several core principles consistently underpin sustainable profitability.First, understand your unique customer base and market, then tailor strategies to fit. Stop relying on what has worked in the past or for other banks. Leverage your own data to craft approaches that align with your strengths and opportunities.Next, balance risk and revenue generation. Monitor the ratio of deposits to loans and ensure that asset growth supports, not undermines, profitability. Data will help do this.Finally, continuously review and adjust your approach. Looking at the data once does not make you a data-driven institution. There will always be changes to adjust for, and what works today may not work tomorrow. Establish regular checkpoints to assess performance and refine strategies.Sustainable profitability isn’t about grand strategies or sweeping transformations. It’s about a steady rhythm of micro-adjustments guided by data and tailored to your institution’s unique DNA.By treating data as a living, strategic asset, banks can evolve faster, make smarter decisions, and build profitability that lasts.Ashley Fiore is chief business intelligence officer at KlariVis, a performance intelligence platform built for financial institutions.