How will the profitability of commercial loans at banks be affected in the years to come?
The commercial loan market went through a lot in recent years. That it hit the bottom during the 2008 global economic recession and improved considerably over the past few years is a clear illustration of this very fact. However, there is a lot of uncertainty about what lies ahead for the players of this i...
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Why Are Bank Regulators looking at loan profitability?
Why Are Bank Regulators looking at loan profitability and the capacity to repay
The Federal Deposit Insurance Corporation and the FDIC said in their 2014 bank-lending summary “In many cases, examiners question the borrower capacity to repay newly underwritten loans if economic conditions deteriorated or if interest rates rose to historical norms.” This is quite strong language, and there is m...
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Commercial mortgage lending is expected to grow this year
Commercial mortgage lending is expected to grow this year
A report published by the Mortgage Bankers Association reveals that commercial mortgage lending is anticipated to increase this year. This is because commercial mortgage lenders are planning to distribute more funds to meet the growing demand for this category of financing. The association surveyed the major players of the commercial mortg...
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Social Banking and CRM System Useage in Banks
Social Banking and CRM System Useage in Banks
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The operating environment for banks is experiencing change. For example, each year 45% of customers stop at their local branch less than 5 times. In the 18-29 age group, 92% use social media. Surprisingly, the 65+ group is the fastest growing segment and 38% already partake in social media. Visits to social networking sites by financ...
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Which top banks were sued for discrimination over a loan pricing issue?
Which top banks were sued for discrimination over a loan pricing issue?
Everyone knows that qualifying for a loan can sometimes be hard depending on credit market conditions. While loan applications are usually reviewed based on a number of factors such as the ability of the borrower to repay, some large-sized financial institutions look at other things such as race, and often in a very negativ...
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State of SBA loans: The demand for some commercial loans is declining
State of SBA loans: The demand for some commercial loans is declining
Last month, the American Banker Index of Banking Activity dropped to its lowest level since January 2014. The reading, which signals the state of banking activity, indicates that the banking sector is displaying signs of sluggishness. This article discusses the potential reasons for the notable decrease observed in the index of...
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Are banks softening their commercial loan pricing standards?
Are banks softening their commercial loan pricing standards?
Commercial Loan Pricing update
Over the past few years, financial regulators have tightened their monitoring of banks to ensure that the mistakes that led to the 2007 financial crisis are never made again. For instance, they required large banks to separate their investment branch from their retail one to prevent excessive risk...
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Trends in small business lending for 2015
Trends in small business lending for 2015
Last month, the Fed published a report about the trends in small business lending stating that lenders should expect to receive a larger number of loan applications in 2015 compared to 2014. This would mark a fourth consecutive year of increase since that number was 53,848 in 2012, 54,016 in 2013, and 58,000 this year.
However, it’s important to note...
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3 Components of an Effective Commercial Loan Pricing Model
3 Components of an Effective Commercial Loan Pricing Model
Beyond using loan-pricing models to price loans, banks benefit from using models to differentiate the poorly priced loans from the well-priced loans offered in the marketplace. An effective Commercial loan pricing model requires three components:
The bank should maintain pertinent data on fees, origination and cost of servicing thei...
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What Is A Risk Rating?
What Is A Risk Rating?
More and more loans are being granted every day. Before approving the next loan, ask yourself: is the risk worth the ROI? Where is the line between reaching portfolio goals and knowing when to walk away?
Studies have been conducted to educate and encourage financial institutions to implement loan pricing models. These models are designed to incorporate the analytics req...
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