bank_management(e)_chapter10.ppt

Overview of Credit Policy and Loan Characteristics 1Recent Trends in Loan Growth and Quality Trends in loan growth Wholesale v.s. retail 2Trends in competition for loan business 3The Credit Process Business Development and Credit Analysis Credit Execution and Administration Credit Review 4 Characteristics of different types of loans 贷款风险分类指导原则 贷款损失准备计提指引 1 Trends in Loan Growth For most customers, bank credit is the primary source of available debt financing. For banks, good loans are the most profitable assets. On average 50 to 70 percent of total assets are loans. As with any investment, making loans involves taking risks to earn high returns. Returns come in the form of loan interest, fee income, and investment income from new deposits. Banks also use loans to cross sell other fee-generating services. Recent trends in loan growth and quality Commercial Bank Loans as a Percentage of Total Assets, December 2004 Loan Composition: Static Comparison Loan composition varies between banks depending on size, location, trade area, and lending expertise. The ratio of loans to assets generally increases with bank size. 61% to 66% Real estate loans represent the largest single loan category for all banks and is highest for savings banks. 50%~87% Commercial and industrial loans represent the second highest concentration of loans. 25% Banks invest from 7 to 11 percent of their loans to finance consumer expenditures. Trends in loan growth Loan volume, problem loans and loan losses vary with the business cycle. Recent regulation Increased the importance of lending Loan/asset ratio has been increasing Increased the competition from other lenders Increased the income from other sources Widespread use of credit scoring, securitization of loans, and internet puts additional pressure on interest rates. Credit risk diversificationconsumer versus commercial borrowers Relative importance of loans, investment securities and cash assets Relative Importance of Lo