Top U.S. Lenders Answer Five Easy Questions: Learn to Dance in the Rain
Unemployment, natural and geopolitical disasters, unstable energy costs, and shaky automobile and real estate markets have caused U.S. consumers to stop spending and borrowing, and sometimes to stop paying creditors. This, along with regulatory interventions (CARD Act and SAFRA, and so on) resulted in a U.S. $500-billion-dollar drop in consumer loan balances in just two years. And even though the immediate recessionary crisis has abated, continuing high unemployment, soft demand for credit, and concern over embedded risk in mortgage portfolios are strong indicators that loan balances will continue to shrink.
This is not good news for retail lenders, which are used to contributing (through interest income earned) to their institutions’ overall financial returns, or for the vendors that supply all manner of credit and risk-related technologies to the industry. In the way of all businesses during tough times, lending budgets have been cut back, cost justification has become inherently more difficult, and compliance has been prioritized over new technology initiatives. Despite all this, there remains a large volume of existing loans to be managed, and evidence of activity by lenders looking to secure technologies in order to manage risk, improve workflows, and launch new credit products; in short, lenders are looking to grow their retail loan portfolios.
During Q1 2011, Aite Group embarked on a project to gather and analyze information on how this emergence from crisis into an unknown landscape is influencing decision-makers engaged in refining and defining their institution’s near-term and long-range strategic plans for retail credit. Twenty-one senior lending executives from the top 50 U.S. banks, thrifts, credit unions, and finance companies with roles in risk, operations, IT, products, and marketing participated. Interviews were conducted in a conversational format (rather than telephone survey format) with participants from the following:
• 16 banks, including seven of the top 10 U.S. lenders
• Three manufacturer-owned U.S. auto finance companies (captives)
• Two of the top 10 U.S. credit unions
Read the full Top U.S. Lenders Answer Five Easy Questions Impact Note.