Through unparalleled market data and deep industry expertise, Market Insights delivers comprehensive guidance on spreads, fees, and cross-sell opportunities. Leveraging the power of Andi’s real-time coaching, Market Insights empowers your entire deal team to closely evaluate your competitive positioning and uncover key areas of opportunity through insights tailored to your institution. This allows for more informed decisions and drives improved relationship profitability.
In this article, we’ll dive deep into the key aspects of Market Insights including the factors used to define, assess and compare your portfolio.
Note
Market Insights is a premium service for clients. If you are interested in adding Market Insights for your organization, please reach out to our support team at support@precisionlender.com.
In this Article
- How does Market Insights work?
- How is my Market defined?
- What is Andi telling me?
- How are similar credits and relationships defined?
How does Market Insights work?
With access to credit, deposit and cross-sell information from over 150 banks and other financial institutions in the United States, PrecisionLender is in a unique position to deliver actionable, realistic guidance to help bankers maximize relationship profitability given market realities, through Market Insights.
Market Insights surfaces data on all of the key levers your RMs have available to them in deal negotiations – spreads, loan fees, commercial deposits and cross-sell. From a spread perspective, Market Insights includes both market averages and quartiles, reflective of the price-inefficient commercial banking market. PrecisionLender’s digital enterprise coach, Andi, coaches bankers at reasonable increments – set by your institution – to close or narrow the gap to the next quartile. In addition to the market intelligence, Andi provides insights into recently closed deals at your institution, instilling confidence that the recommended pricing is achievable.
Loan fee guidance includes recommendations on origination fees, renewal fees and unused line fees. Similar to the spread coaching, your institution can cap the fee coaching at a reasonable level and can also configure the specific products on which unused fee recommendations would be presented. Internal comparables are also surfaced, showing RMs the success their colleagues have achieved in negotiating fees on similar deals.
Market intelligence on non-credit opportunities – commercial deposits and ancillary services – show your bankers the types and levels of business similar customers have with their financial institutions. While this data cannot pinpoint what any specific prospect can bring to the table, it triggers RMs to ask the right questions and engage with the right product partners.
How is my Market defined?
Geography
PrecisionLender maintains a mapping between U.S. zip codes and county. During the Market Insights implementation process, PrecisionLender builds a geographic mapping from county to your institution’s regional hierarchy. This approach ensures that Market Insights aligns with your institution’s regional footprint and market segmentation.
Although the market guidance is based on customer location rather than RM location, given the high correlation between these locations, PrecisionLender allows you to set up default zip codes for each of your home regions. If the RM ties the opportunity to an existing relationship, the zip code of that relationship will be used and on a new relationship the default would be triggered. In both cases, the RM can easily change the location by clicking on the hyperlink in the Andi window to change the location, or by using the “Pricing Region” dropdown.
Borrower Sales
Annual sales figures are typically obtained through the Relationship Awareness (RA) data feeds your institution sends to PrecisionLender. When tying an opportunity to an existing relationship, Market Insights pulls the sales information from the relationship.
When pricing a new opportunity to a prospect which does not exist in the RA feeds, PrecisionLender uses the aggregate credit relationship size to estimate sales. Credit relationship size and sales size are highly correlated, allowing for the estimation of sales where the data is unavailable. Andi will always alert the RM to any assumptions made about sales and provide an opportunity to adjust the figure.
Risk
Market Insights uses both the customer risk (Probability of Default) and facility risk (Loss Given Default) in deriving market pricing. Each institution’s PD and LGD rating scales are aligned with those of other PrecisionLender clients in conducting this analysis.
Industry
Industry data is typically obtained through the RA data feeds. When pricing an opportunity to an existing relationship, PrecisionLender pulls the NAICS code from the Relationship to determine market pricing. When pricing a new opportunity to a prospect which does not exist in the RA feeds, PrecisionLender uses the default NAICS code configured by your institution, which may be set at an aggregate level or by home region. Andi will always alert the RM to any assumptions made about industry and provide an opportunity to adjust the value.
For RMs whose cost center does not fall within a geographic region, such as those in the specialty business units, there are defaults assigned to ensure they have relevant guidance.
Index
Separate matrices are maintained for Fixed Rate, Prime-based and SOFR-based credits. If other indices, such as BSBY or Ameribor, are configured in your instance of PrecisionLender, the SOFR matrices can be adjusted to reflect spreads over those indices.
What is Andi telling me?
If your proposed spread or fee falls below the market guidance, Andi offers suggestions to incrementally improve pricing while remaining competitive. The maximum recommended increase is set by your institution.
For spreads, maximum increases vary by quartile and are usually most pronounced where the proposed spread falls in the bottom quartile of the market, with more moderate suggestions for proposals in the second and third quartiles. No suggestions are provided on top-quartile credits. In other words, Market Insights will not coach your RMs to reduce pricing in cases where they have established that higher pricing can be negotiated. For fees, Andi will coach to the market average subject to the maximum increases set by your institution. The specific fee types on which market guidance is presented vary by product. Andi is also able to show you a visual representation of where the opportunity fits relative to the overall market. This detail is available by clicking on the Learn More link in the Andi summary window. Your institution’s internal comps may be viewed by mousing over the hyperlinks shown below.
Market Insights also surfaces information on the typical non-credit relationship for similar customers, including average deposit balances and fee-based revenue. Clicking on the Learn More link provides additional detail on the specific mix of products and services most commonly seen with similar customers.
How are similar credits and relationships defined?
Comparisons of similar credits and relationships are defined by a combination of geography, industry, sales size, credit relationship size, product, PD and LGD. PrecisionLender uses slightly broader cuts of the data for purposes of pulling the internal comps relative to the criteria used for determining market pricing, deposits and cross-sell. For further details, please contact Customer Support.