Are my ROE Targets Set Appropriately?

ROE targets act as a guiding light for lenders engaged in active negotiations.  Read on to learn how to ensure your targets are aligned with the banks overall strategy. 

You can set a target ROE for each of your products in the Administration section. While it's possible to set your ROE to be the same for all products, we recommend instead tailoring your target ROE on a per-product basis. These targets are not designed to be a concrete hurdle; instead, their purpose is to act as a guiding light for lenders engaged in active negotiations. After these targets are established, as a best practice, we recommend that you re-evaluate on no less than an annual basis.

An analysis of the opportunities priced within PrecisionLender over the past 12 months can enhance your understanding of the return profiles and the attributes of those opportunities. We’ve made an Excel template available to help begin that discussion.  Within the link below, you will find step-by-step instructions to begin such an analysis, as well as examples for ways to adjust the data to your advantage. We encourage you to modify the analysis as you see fit.

How To Guide

Excel Template

Once completed, you should have a better understanding of your team’s pricing decisions, relative to the targets that are currently in place.  The example below shows 3 products that have struggled to achieve their targets. 

Product View Count # Loan Amount ROE Target ROE
Operating Line of Credit 3 $3,035,000 12.2% 17.3%
Commercial Construction 6 $7,700,000 14.6% 21.0%
Commercial Installment 23 $18,725,000 11.2% 15.9%


Each product’s target should be a good indicator of managements’ expectations.  Results such as these merit further discussion.  They might indicate a market that has become more competitive over time. Or this might be the result bankers who have developed poor habits. There are several potential causes for the shortfall identified above.  Further investigation is needed.

Results that are in line with your targets suggest that Andi has been, and will continue to be, positioned to support your lenders with insightful suggestions and meaningful recommendations. 

Armed with market conditions and bank goals, the setting of the ROE targets becomes an informed exercise. Calibrating your targets to reflect a realistic goal, based on market conditions across your product set, increases Andi’s effectiveness for your lenders. Then, refining those product level targets to adjust for the bank’s appetite for growth will ultimately align your pricing discipline with the bank’s overall strategy.