coolidge sr

8/10/2019 Coolidge Sr

1/12

COOLIDGE BANK & TRUST COMPANY

By: Group No. 02

Abhijeet Nayak (10P002)

Amar Rajagopal (10P007)Nipun Goyal (10P035)

Pratyaksh Mehra (10P039)

Saksham Agarwal (10P047)


2/12

About the Company Established in Dec 1960 by 12 merchants &

businessmen Headed by Mr. Milton Adess with no prior

financial exposure - who considered money to

be a product which has to be sold at thelowest possible price and the best possible

quality

At end of 4 yrs their total deposits - $10.2 mn& after No Service Charge scheme it grew

manifolds to $61.2 mn by 1970


3/12

Innovations @ Coolidge

We Close

Sundays

XMas

Interest

We give

business a

break

Were

Loners

F N S C P C AWe pick up

& Deliver

No money

down

We love

MBAs

Whats the

new Gen

coming to

Coolidge

bank comes

to Kendall

We give you

credit for

being

successful

Growth

Gaurantee


4/12

Case Analysis

Coolidge Bank is a young and innovative

commercial bank in the Boston area

Debating introduction of NOW accounts

offered by both thrift banks & commercial

banks With a substantial number of thrift banks

offering NOW accounts and the concept

starting to grow among commercial banks inMassachusetts, Coolidge Bank has to decide

its strategy


5/12

Introduction to NOW Account

Withdrawal by negotiable instrument, i.e. Check

Interest received @ 5%

Per transaction cost to the bank approx 10cents

100% deposits can be re-invested

No overdraft facility available

Any number of transactions possible

Offered by commercial banks & other NBFCsNote: Keeping a NOW account will not improve our

profits but not keeping a NOW account shall only

lead to huge losses.


6/12

Reasons to introduce NOW account

Gains

Prevent migration of our present accounts to

competitors NOW accounts

Earn interest on 15% more deposits in hand

Greater ease of usage. Can be traded

No cap on number of transactions

Loss Interest out-flow on deposits

Substantial operating costs


7/12

Reasons to introduce NOW account(contd)

Many a/c holders changing to other banks due tonon availability of NOW a/c with Coolidge

Most Commercial Banks were not advertising NOW

accounts

Primary purpose was to maintain the deposits in

another form

Year 1972 1973

Interest on reinvestment 6210930 7952215

Interest paid on deposits 1790298 2471277

Demand Deposits 57722105 60944902

Time Deposits 36186015 52576676

Loans 78335088 89803957


8/12

Product offered

Interest Provided 5%

No charges up to 10 transactions per month

Transaction Charges as per following details:

Balance less than 500 : 20cents

Balance more than 500 : 10 cents for first 10 nos15 cents for further nos


9/12

Cost Analysis (contd)

% of changing Balance %of changing Balance

20.00 0-250$ 10.00 0-250$40.00 250-1000$ 25.00 250-1000$

60.00 >1000$ 50.00 >1000$

% of changing Balance Deposits Deposits transferred interest to be paid % of changing Balance Deposits

20.00 0-250$ 4191216.62 838243.32 42974.64 10.00 0-250$ 4191216.62

40.00 250-1000$ 9356448.37 3742579.35 191872.67 25.00 250-1000$ 9356448.37

60.00 >1000$ 15967945.01 9580767.01 491181.94 50.00 >1000$ 15967945.01

Total 726029.25

% of changing Balance Deposits Deposits transferred interest income foreg % of changing Balance Deposits

20.00 0-250$ 4191216.62 838243.32 83193.62 10.00 0-250$ 4191216.62

40.00 250-1000$ 9356448.37 3742579.35 371441.96 25.00 250-1000$ 9356448.37

60.00 >1000$ 15967945.01 9580767.01 950867.98 50.00 >1000$ 15967945.01

Total 1405503.56

% of changing Balance Deposits Deposits transferred interest income foreg % of changing Balance Deposits

20.00 0-250$ 272451.78 54490.36 5408.04 10.00 0-250$ 272451.78

40.00 250-1000$ 18145288.55 7258115.42 720350.42 25.00 250-1000$ 18145288.55

60.00 >1000$ 8827437.67 5296462.60 525661.12 50.00 >1000$ 8827437.67

Total 1251419.57

Checking Account Balance Situation-1 (If funds migrated to NOW Account) Checking Balance Situation Case-2 (If funds migratedto NOW accou

% of changing Balance Deposits Deposits transferred Extra funds avlbl for reextra interest income % of changing Balance Deposits

20.00 0-250$ 4191216.62 838243.32 125736.50 12479.04 10.00 0-250$ 4191216.62

40.00 250-1000$ 9356448.37 3742579.35 561386.90 55716.29 25.00 250-1000$ 9356448.37

60.00 >1000$ 15967945.01 9580767.01 1437115.05 142630.20 50.00 >1000$ 15967945.01

Total 1405503.56

Grand Total 4062426.70

Net Gain 3336397.45

Che ck in g Accou nt Balance Si tu at ion-1 ( Cost In curre d d ue to Intere st Ou tf low) Ch ecking Accoun t Che ck ing Accoun t Balan ce Si tu ation -2 ( Cos t Incu rre d d ue to Intere s

Sav ings Account Bal ance Si tuati on- 1 (Cost Incurre d due to Inte re st Outf low) Savi ngs Account Savi ngs Account Bal ance Si tuati on- 2 ( Cost Incurre d due to Inte rest

Sav ings Account Bal ance Si tuati on- 1 (I f f unds mi grate d to othe r banks) Sav ings Account Savi ngs Bal ance Si tuati on Case -2 ( If funds mi grate dto othe r banks)

Che cki ng A ccount Bal ance Si tuati on- 1 ( If funds mi grate d to othe r banks) Che cki ng A ccount Checki ng Bal ance Si tuati on Case- 2 ( If f unds mi gratedto other banks


10/12

Competitor AnalysisCoolidge Bank Offering Commerci

al Banks

Mutual

Savings Banks

Savings & Loans

Co-op Banks

Interest Rate paid 5% (=) (=) (=)Basis of calculation of

interest rates

Day of Deposit to

Withdrawal(=) (=) (=)

Frequency of

compoundingDaily (+) (+) (+)

Charge per Draft

20 Cents($500 or less

accounts)

10 Cents for 10 Drafts

($1000 or more accounts)

(-)

(+)

(=)

(-)

(+)

(-)

(-)

(+)

(-)

Frequency of

Compounding

Interest

Quarterly

(Effective Interest

Rate)

Monthly (Effective

Interest Rate)

Daily(Effective Interest

Rate)

4% 1.0406 1.0407 1.408

5% 1.05109 1.05116 1.0512


11/12

Trends Data suggests mass switching to NOW a/c in future

Operational costs for NOW a/c transactions to fallgradually due to restructuring

More than 95% of Check-in a/c holders have savings

a/c as well

As people are not averse to having more than one

type of a/c they will shift to NOW as well

Major reason for a/c shifting prior to NOW was

convenience

Customers moving towards companies offering

more convenience & flexibility


12/12

Thank You!!!

coolidge sr

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