Customer Valuation under Systematic and Idiosyncratic Risk: Evidence from a Private Bank in Brazil

This study investigates how integrating finance-based measures of systematic and idiosyncratic risk into customer valuation deepens the understanding of client heterogeneity in private banking and enhances the managerial interpretation of financial performance. We hypothesize that decomposing and jointly analyzing both risk dimensions reveals interaction effects that materially influence Customer Lifetime Value (CLV) and aggregate Customer Equity (CE), providing a stronger analytical basis for service differentiation, pricing, and advisory efforts. Using a proprietary and rare longitudinal dataset of high-net-worth clients from a major Brazilian private bank, we reconstruct monthly margins, estimate volatility and beta relative to a benchmark, and project cash flows through deterministic and nonparametric methods. The results show that incorporating combined client-specific risk measures significantly alters CLV and CE relative to uniform discounting, improving balance and highlighting the managerial relevance of risk-based segmentation. The framework connects asset-pricing logic with service management, enabling more tailored, transparent, and financially grounded customer strategies. Â JEL classification numbers: G21, L84, G12, C63.