Forecasting In the Banking Industry
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The banking industry operates globally. In every economy, banks are very significant for its growth and development. For the banks to effectively meet their targets and continue operating efficiently, they need to have a good forecast of their targets. In forecasting, there are various variables that are used by the banks. First there is the customer base. Customers that are served by any bank are the ones who determine its operations and the profits it records. Any bank needs to understand its current number of customers and the possibility of their growth. This is because the customer base of any bank is what determines its level of profits on the services it renders. Customer base also largely determines the number of employees that are to be employed in order to have timely and effective service delivery. (Rapach, 2008)
Secondly, there is the level of interest rates prevailing in the economy. Banks largely depend on the interests that they charge their customers for the services rendered. Finances received from the interests charged are used to meet various expenses incurred by the bank, such as advertising expenses and commissions. Therefore, the level of interest rates is a very important variable that any banking institution needs to effectively predict so as to avoid unexpected fluctuations. (Rapach, 2008) The third variable is the general salary levels of its employees. All employees working for any bank are paid certain amount of salaries at the end of the month. These salaries are the largest cost that any institution incurs among its expenses and there are never fixed. They are determined by the general economy levels and the laws governing compensation. Therefore, for effective existence in the future, the banks need to effectively predict the