You can ignore data when underwriting, but that would be a mistake as sometimes the differences are stark. Our best example comes from fresh data from the office supply sector. Normally, industry probabilities of defaults (“POD”) move by about 7% per year. In 2014 certain industries, like banks and retail office supply stores, moved with large rates of change and even multiple rates of change. While banks are moving in a positive direction and risk is being reduced, retail office supplies are moving in the opposite direction.
Banker To Banker
What if there were a set of three easy to distinguish factors that, if all present, could predict the future performance of your customer and reduce the probability of default to half that of their respective industry? Would you do anything differently? Would you price lower? Would you extend more credit? Would you change your sales or marketing process at all to go after those accounts?
Ever think of designing your own customized app to solve a problem, create a new product or just generate fee income? Every banker understands banking is going mobile, but many assume it is the realm of big banks. Few banks understand what it takes to build an app from scratch, but it is not as hard as many believe. Maybe you won’t create the next Candy Crush or Uber, but there are dozens of ideas available that can set your bank apart, lower your operating cost and get you more engaged with the customer.
2013 property cash flows are starting to come in at many lenders and we have been taking a look at the data to see what insights can be gleaned that could give us an advantage. Combining bank data with data from the public markets, we can get a statistically valid sample size of over $130B worth of properties in almost all major metro and suburban markets (about 14% of the total CRE market). The below data may help banks when pricing and will give a clearer view of the risk profile when underwriting.
By: Hamid Mehran and Anjan Thakor
One of the things we have been experimenting with is inputting loan credit information using voice recognition. So far, it is equal to typing in terms of effort and speed, but that will change in the next year when it will become faster to use voice. As mobile and desktop computers become quicker and recognition algorithms become more accurate, speaking commands will become easier than typing for more complicated tasks.
If you think your business model is challenging now, just wait until The Millennials or Generation Y get to prime banking age. The front end of the 80+ million cohort turns 24 this year which is significant for community banks as that is about two years away from the average Millennial-owned account becoming profitable. If you are a bank like ours, who has a customer base that already skews older, the Echo Boom is going to present a unique set of challenges.
Lots of bankers are confused between the difference of marketing and branding. The distinction is important. If your bank has a strategic goal to increase brand, and it ends up marketing, then branding is never accomplished. Where marketing is the process of telling the public about your bank, branding is the message that the public has about your bank. In other words, marketing is you telling a customer that your bank has great service, while branding is the customer telling you that you have great service.
While bankers are a conservative bunch, we are not without humor and wit. Below are some classic office pranks provided for inspiration that will be sure to have you owning April Fool's day.
1. The Human Chair
2. The Airhorn Behind The Door Prank For the CIO