Transforming portfolio management
Article Abstract:
More and more banks are discarding the traditional fixed loan origination model in favor of a new business system that splits loan origination and portfolio management into two separate areas of responsibility. The new approach allows a centralized group of portfolio managers to make buy, sell and hedge decisions that ultimately affect the composition and risk profile of the credit portfolio. The function of these managers is similar to that of asset managers since they also optimize the risk/return performance of the loan assets. Furthermore, this model allows banks to enter the secondary loan markets while capitalizing on other advances. However, this transition from the buy-and-hold model involves several challenges including the issue of how to structure various portfolios under the new business system and whether to centralize responsibilities.
Publication Name: Banking Strategies
Subject: Business
ISSN: 1091-6385
Year: 1998
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Credit quality nirvana?
Article Abstract:
The banking industry is experiencing a record improvement in credit quality even as underwriting standards and loan pricing continue falling. According to the Federal Deposit Insurance Corp, the ratio of nonperforming loans to total loans, used as the measure of credit quality, has steadily declined from 1991 to 1997. Even net chargeoffs have fallen by historical standards. However, these positive trends have been accompanied by an increase in consumer loan delinquencies, particularly indirect automobile and credit card loans. Some regulators and bankers are warning that banks are relaxing their underwriting standards and pricing for commercial loans. Nevertheless, most bank credit executives are optimistic about the current standing of the industry as business conditions remain strong.
Publication Name: Banking Strategies
Subject: Business
ISSN: 1091-6385
Year: 1998
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Harnessing the team
Article Abstract:
Direct marketing is now considered a standard operating procedure at most major banks. In the past, this strategy was used only occasionally in launching specific promotions to target customers. Banks are now using direct marketing channels to make savvy sales pitches to attract their rivals' most profitable customers. To succeed in this area, bank managers must develop the necessary skills, such as data analysis to generate leads and promote the development of new products and services, and marketing through telephone or direct mail. The challenge facing bank managers is to improve their direct marketing efforts by creating teamwork. There must be greater coordination among data analysts, product developers and sales personnel.
Publication Name: Banking Strategies
Subject: Business
ISSN: 1091-6385
Year: 1998
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