COOLIDGE BANK & TRUST COMPANY

By: Group No. 02

Abhijeet Nayak (10P002)
Amar Rajagopal (10P007)
Nipun Goyal (10P035)
Pratyaksh Mehra (10P039)
Saksham Agarwal (10P047)

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 the
lowest 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

Innovations @ Coolidge
We Close
Sundays

XMas
Interest

We give
business a
break

Were
Loners

FNSCPCA

We 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

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 in
Massachusetts, Coolidge Bank has to decide
its strategy

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 NBFCs

Note: Keeping a NOW account will not improve our

profits but not keeping a NOW account shall only
lead to huge losses.

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

Reasons to introduce NOW account

(contd)

Many a/c holders changing to other banks due to

non 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
Interest on reinvestment

1972
6210930

1973
7952215

Interest paid on deposits

Demand Deposits
Time Deposits
Loans

1790298
57722105
36186015
78335088

2471277
60944902
52576676
89803957

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 nos
15 cents for further nos

Cost Analysis (contd)

% of changing

Balance
20.00 0-250$
40.00 250-1000$
60.00 >1000$

%of changing

Checking Account Balance Situation-1 (Cost Incurred due to Interest Outflow) Checking Account
% of changing

Balance
20.00 0-250$
40.00 250-1000$
60.00 >1000$

Deposits
4191216.62
9356448.37
15967945.01

Deposits transferred
838243.32
3742579.35
9580767.01
Total

Balance
10.00 0-250$
25.00 250-1000$
50.00 >1000$

Checking Account Balance Situation-2 (Cost Incurred due to Interest Outflow) Checking Ac
interest to be paid
% of changing
42974.64
191872.67
491181.94
726029.25

Balance
10.00 0-250$
25.00 250-1000$
50.00 >1000$

Deposits
4191216.62
9356448.37
15967945.01

Savings Account Balance Situation-1 (Cost Incurred due to Interest Outflow) Savings Account

Savings Account Balance Situation-2 (Cost Incurred due to Interest Outflow) Savings Accou

Checking Account Balance Situation-1 (If funds migrated to other banks) Checking Account

Checking Balance Situation Case-2 (If funds migratedto other banks) Checking Account

% of changing

Balance
20.00 0-250$
40.00 250-1000$
60.00 >1000$

Deposits
4191216.62
9356448.37
15967945.01

Deposits transferred
838243.32
3742579.35
9580767.01
Total

interest income foregone

% of changing
83193.62
371441.96
950867.98
1405503.56

Savings Account Balance Situation-1 (If funds migrated to other banks) Savings Account
% of changing

Balance
20.00 0-250$
40.00 250-1000$
60.00 >1000$

Deposits
272451.78
18145288.55
8827437.67

Deposits transferred
54490.36
7258115.42
5296462.60

interest income foregone

% of changing
5408.04
720350.42
525661.12
1251419.57

Checking Account Balance Situation-1 (If funds migrated to NOW Account)

Balance
20.00 0-250$
40.00 250-1000$
60.00 >1000$

Deposits
4191216.62
9356448.37
15967945.01

Deposits
4191216.62
9356448.37
15967945.01

Savings Balance Situation Case-2 (If funds migratedto other banks) Savings Account

Total

% of changing

Balance
10.00 0-250$
25.00 250-1000$
50.00 >1000$

Balance
10.00 0-250$
25.00 250-1000$
50.00 >1000$

Deposits
272451.78
18145288.55
8827437.67

Checking Balance Situation Case-2 (If funds migratedto NOW account)

Deposits transferred Extra funds avlbl for reinvestment

extra interest income % of changing
838243.32
125736.50
12479.04
3742579.35
561386.90
55716.29
9580767.01
1437115.05
142630.20
Total
1405503.56
Grand Total
4062426.70
Net Gain

3336397.45

Balance
10.00 0-250$
25.00 250-1000$
50.00 >1000$

Deposits
4191216.62
9356448.37
15967945.01

Competitor Analysis
Coolidge Bank Offering

Commerci
al Banks

Mutual
Savings Banks

Savings & Loans

Co-op Banks

Interest Rate paid

5%

(=)

(=)

(=)

Basis of calculation of
interest rates
Frequency of
compounding

Day of Deposit to
Withdrawal

(=)

(=)

(=)

Daily

(+)

(+)

(+)

20 Cents ($500 or less

accounts)

(-)

(-)

(-)

(+)

(+)

(+)

(=)

(-)

(-)

Charge per Draft

10 Cents for <= 10

Drafts($1000 or more
accounts)
15 Cents for > 10 Drafts
($1000 or more accounts)

Frequency of
Compounding

Interest

4%
5%

Quarterly
(Effective Interest
Rate)
1.0406
1.05109

Monthly (Effective
Interest Rate)

Daily(Effective Interest
Rate)

1.0407
1.05116

1.408
1.0512

Trends
Data suggests mass switching to NOW a/c in future
Operational costs for NOW a/c transactions to fall
gradually 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

Thank You!!!