Will rising unemployment impact losses?
Unemployment is at an all-time high and experts suggest that we have not yet reached the peak. With stimulus, deferments, and PPP, the true impact of bad debts has been artificially suppressed, and lenders are concerned that losses will spike in the months to come. To minimize surprises, executives, directors, and board members should be asking the following:
- Can we align data management with unemployment and other leading indicators of loss?
- Are we tracking and evaluating clients with PPP and deferments?
- Are we evaluating go-forward concerns surrounding vulnerable lines of business and/or business concentrations within our portfolio?
- Do we have updated and current collateral information? What about DSC, liquidity?
- Are we projecting COVID-19 impacts to susceptible borrowers’ revenues and EBITDA, and comparing to pre-COVID numbers?
- Do these borrowers have loans at other financial institutions that would limit their ability to service our loans?
While the current pandemic is straining the US and world economies, it does provide an opportunity to evaluate how such a significant event will impact our portfolios, offering invaluable data and analytics for years to come. To deliver satisfactory answers to the questions above (and others), proper data capture, tracking, and management will be essential.
While the ValuCast platform explicitly offers tools and solutions for M&A, CECL, Stress Testing, Income Recognition, and Exit Pricing, its key underlying value is data management. ValuCast is integrated into your core and other banking systems and serves as a data warehouse that can be leveraged to generate analytics that answers questions such as those presented above.
More comprehensive analytics that can drill down to loan-level and span over many years of historical periods will be paramount and cannot be accomplished in your core platform.
- Can you easily access, analyze, and report on data from a single integrated system?
- Can you access historical loan-level data? Can you segregate historical data from your legacy institution versus portfolios you may have acquired?
- Can you apply stress and other internal and external metrics to correlate and contrast possible economic scenarios?
- Can you easily slice and segment your data to analyze new loan types that may have different characteristics than your traditional portfolios? Think PPP loans, COVID deferrals, etc.
Need report examples or more information, contact us.