Through tailored portfolio analyses, comparison mapping, real-time coaching, and comprehensive guidance on spreads, fees, and cross-sell opportunities, Market Insights empowers your entire deal team to closely evaluate your competitive positioning and uncover key areas of growth through insights tailored to each portfolio. This allows for more informed decisions, quicker turnarounds, and improved profitability.
In this article, we’ll dive deep into the key aspects of Market Insights including the key 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 loans defined?
How does Market Insights work?
With access to loan information from over 150 banks and more than 15% of all Commercial loans in the United States, PrecisionLender is in a unique position to deliver actionable, realistic guidance - not just market “averages” - through Market Insights.
In addition to providing market averages, PrecisionLender data includes market quartile pricing levels, reflective of the commercial banking market. PrecisionLender’s digital enterprise coach, Andi, coaches bankers at reasonable increments in order to set realistic, achievable goals to maximize risk-adjusted profitability given market realities. In addition to the market intelligence, Andi provides insight into recent deals that closed to instill confidence in their pricing as they enter into negotiations with customers.
How is my Market defined?
Geography
The PrecisionLender market data has a pre defined geographic mapping for borrowers and their metrics. Each bank’s regions are then analyzed and mapped to the PrecisionLender geographies, typically using the borrowers zip codes.
Although the market matrices are based on borrower location rather than banker location, given the high correlation between these locations, PrecisionLender uses the home region of the bank’s RM to identify geography. If you are pricing a customer outside of your home region, just choose the appropriate region from the “Pricing Region” dropdown menu and the market data will be adjusted.
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.
Borrower Sales
Annual sales figures are typically obtained through the RA data feeds. When pricing an opportunity to an existing relationship, PrecisionLender pulls the sales information 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 aggregate credit relationship size in order to estimate sales. Credit relationship size and sales size are highly correlated and either one can normally be used to determine market pricing. However, for anomalies such as a small commitment to a large customer, RMs may input the sales size themselves. Andi will always alert the RM to any assumptions made about borrower sales and provide an opportunity to adjust the figure.
Assumptions
To ensure that the market matrices and comparisons are relevant, there are some generic assumptions that are applied in addition to having specific configurations that apply to the bank’s portfolio. The bank portfolio specific configurations are made during the implementation of Market Insights.
- PD Grade – PrecisionLender aligns the bank's risk rating scale to the ratings of other banks based on Probability of Default ranges.
- Industry – In the case that industry is a factor used in building the matrices, PrecisionLender will use the NAICS code supplied in the RA data to identify the industry. Note that to a large degree, industry risk is already captured through a combination of PD grade and borrower location.
- Base Rate – Separate matrices are maintained for Fixed Rate, Prime-based and SOFR-based credits. Given that the commercial banking market has not fully transitioned to SOFR, PrecisionLender includes LIBOR-based credits in the SOFR matrices using the market standard 11 bp adjustment factor.
What is Andi telling me?
Andi offers a suggestion for a rate/spread change to move you up in your market. This suggestion is based on how the current loan you are pricing compares with the market.
In the diagram shown above, the blue curve is the distribution of spreads for the market of the loan you are pricing based on its unique characteristics. If the red marker is your current spread, Andi's first suggestion will be to increase the spread to the closest percentile bucket with moderate recommendations on increase. This suggestion provides an achievable change in spread. From there, Andi will continue to keep you informed of your pricing relative to the market, next suggesting an increase in spread to move to the next percentile bucket in nominal increments.
Andi is also able to show you a visual representation of where the opportunity fits relative to the overall market.
Andi will only offer you a suggestion if there is enough relevant market data and you are below the top quartile of the market.
How are similar loans defined?
Comparisons of similar loans are defined by a combination of geography, industry and sales size. These configurations are done during the implementation phase of the Market Insights product. For further details, please contact Customer Support.
