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Strategic Loan Pricing

Webinar: ID# 1006078
Date: Recorded
Strategic Loan Pricing
About This Course:
With intense competition to capture loans, now more than ever it is important to have a strategic approach to loan pricing. This includes adequately covering your bank's costs and meeting profit objectives.

It also includes differentiating loan interest rates to reflect relative risk, plus knowing that you CAN win the borrower's business on a basis other than the lowest price.

This webinar covers two big issues and three smaller issues that influence pricing, including how to measure loan profitability and calculate the required rate of return on a loan.

We'll also discuss getting premiums for taking risk and for adding value to the customer relationship, and ways to compete with a lower rate for volume or when you are able to mitigate risk better than your competitor can.

Covered Topics:
  • Issues with risk-based pricing:

    • Using odd-decimal pricing
    • Differentiating on all risk metrics
    • Recognizing economies of scale on larger loans
    • Comparing relative loan pricing within your portfolio
    • Watching out for loans that are typically under-priced

  • Steps for linking asset/liability tools to structure and price, including:

    • Setting fixed rates on average life, not full maturity
    • Creative ways to use funding sources to support loans
    • Avoiding prime spreads for rates fixed over one year
    • Recognizing proper indexes and spreads for setting fixed rates

  • Consistently giving your customer pricing options
  • Considering proportional pricing for floating rates
  • Using performance pricing tied to the customer's financial performance and/or loan covenants.
About Your Presenter

Richard Hamm has been training bankers for 25 years, designing and delivering courses specializing in commercial lending and credit, including portfolio and risk management, commercial real estate (CRE) and appraisals, plus selling and negotiating skills, and director training.

Richard is based in Huntsville, AL and has owned/operated Advantage Consulting & Training for 11 years, after a 22-year banking career including senior positions in lending and credit, plus president through formation and acquisition of a community bank. He has BS and MBA degrees from the University of Alabama.


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