Chris Nichols

Credit Risk in the Time of COVID-19 and the Fed

Pandemic Credit Management

The Fed did more than cut rates on Sunday; they pumped a massive amount of liquidity in the system, sending a signal to banks to level up. Far behind the health of employees and customers in the COVID-19 pandemic, comes the economic impact. Unlike the recession of 2008, where the economic impact came over many months, this pandemic impacted businesses in weeks providing much less time to prepare and adjust. The result is likely to be bad for the economy and bad for banks. If your bank is treating this as businesses as usual, then you are putting your survival at risk.

The COVID-19 Bank Playbook

Leadership for COVID-19

When we talk about unforeseen Black Swan events, the COVID-19 virus fits the profile. It has come out of nowhere, taken lives, disrupted public health, altered our daily lives, causing financial market volatility, caused more than five standard deviations of movement in interest rates and likely to have a material impact on credit markets. This isn’t business as usual and for this uncharted territory, you might find this playbook helpful.

 

Licking Your Online Applications

More Effective Digital Transformation

Here is the funny thing about the tongue-brain connection - your brain can project, with a very high degree of certainty, what it will feel like if you lick any given object such as your desk, your shirt, car hood, a stucco wall, computer keyboard - you name it. This is despite the fact that you are likely to have zero experience in licking any of those objects in the past. The wiring in your brain is designed to project forward that tongue-licking feeling based on other sensory input, and it does it with amazing accuracy.

How Commercial Prepayment Speeds Are Making Your Margins Worse [Get Our Model]

LENDING PORTFOLIO MANAGEMENT
LENDING PORTFOLIO MANAGEMENT

There has been substantial research on how prepayment speeds of residential mortgages affect the profitability of individual loans and portfolios.  Because of the homogenous nature of residential mortgages, many firms have developed highly predictive models to calculate prepayment speeds based on past behavior, portfolio makeup, and macroeconomic variables.  However, very little research is available on prepayment speeds of commercial mortgages – this is understandable because of the uniqueness of each commercial loan.  Even sophisticated loan risk-adjusted return on capital (RAROC) models

How Banks Are Paid For Interest Rate Risk

PROTECTING BANK MARGINS
PROTECTING BANK MARGINS

We have written numerous blogs about why banks should reconsider the risk-for-yield business model when it comes to credit or interest rate risk. The return on equity (ROE) in risk-for-yield businesses is low, and the business outcomes during downturns are adverse.  Instead, banks should construct an advisory business where taking risk may be just one element in delivering a customer-centric solution.

Using The Content Blender To Expand Your Marketing Budget By 5x

THE BANK CONTENT MARKETING HACK
THE BANK CONTENT MARKETING HACK

Banks that complain about not doing enough in marketing or not having a big enough budget may just not be taking the right approach. We rarely see a bank fully utilize their content. If done right, you can get at least five times the conversions for almost the same expense as you spend now. What bank wouldn’t want five times the loans, deposits, or fees?  In this article, we explore our approach to content marketing and how to “Relate, Repurpose, and Recycle” and how to use the “Content Blender.”

 

Using Floors On Commercial Loans

Profitability Management

In our last blog, we reviewed ZIRP (zero interest rate policy) strategies deployed by various central banks.  We discussed how ZIRP strategies had been deemed by many economists to be ineffective over the long-term to stimulate economic growth and stoke inflation. We considered forecasts by economists, the forward interest rate market, and FOMC policy member’s future rate path expectations - all point to a low probability of decreasing interest rates. However, one loud voice has been a champion of lowering rates to zero or even negative – the President of the United States. 

 

Why Banks Need To Develop Their Own Customer-Facing Technology

Controlling your tech future - picture of a mobile phone
CONTROLLING YOUR TECH FUTURE

The build or buy decision should be a constant question in most bank’s decision making, and unfortunately, most banks default to the “buy.” In some cases, this is appropriate, but in many, it is not. In this article, we look at the two major overriding reasons of why your bank may want to hire and build out a development team in order to deliver a more customized banking experience to your customers. If you think your bank is too small, then read on.

 

One Reason To Develop Your Own Customer Interface

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