The Risk Management Association and Automated Financial Systems' Risk Analysis Service Metrics Indicate that Deterioration in Bank Asset Quality Eased in the Fourth Quarter 2009
February 23, 2010
Nonperforming and classified levels rose moderately after two years of double digit growth: Business Banking credit quality worse than other loan classesPhiladelphia, PA (February 23, 2010) -- The Risk Management Association (RMA), in alliance with Automated Financial Systems, Inc. (AFS), today released fourth-quarter 2009 Risk Analysis Service (RAS) data. The industry's only comprehensive credit risk benchmark, RAS results reflect portfolio data for commercial lending exposure provided by 17 top-tier participating institutions. "The leveling off of the deterioration of commercial asset quality from the third to fourth quarter is a positive indicator that the economy is showing signs of recovery," said William F. Githens, RMA president and CEO. "However, the business banking sector continues to be a concern and is substantially underperforming the middle market and large corporate lines of business." The percentage of commercial loans on nonaccrual has been rising every quarter for three years and now resides at 3.5% of total outstanding balances, representing an increase of 150% from one year ago. However, the 10% increase from third quarter 2009 levels reflects the smallest increase in 2 years. Key industries continuing to reflect above-average default rates include manufacturers of wood, paper, and plastics (3.7%); manufacturers of fabricated metals, transportation equipment, and furniture (4.1%); agriculture (5.2%); and information (5.7%), especially sub-sectors related to publishing, broadcasting, and wired telecommunications carriers. Short-term delinquencies have leveled off over the last 3 quarters and represented 1.0% of total outstanding balances as of December 31, 2009. Business banking credit quality continues to show greater weakness than other commercial asset classes represented in RAS data. Nonaccrual business banking loans represent 4.6.% of total outstanding balances, compared to 3.4% for middle market loans and 2.4% for large corporate loans. Short-term delinquencies (30 to 89 days) were also higher for business banking credit (1.7%), compared to 0.9% and 0.3% for middle market and large corporate, respectively. About RAS
The RMA/AFS Risk Analysis Service serves as global banking's only comprehensive, industry-standard credit risk benchmark. An industry-led consortium, RAS members perform actionable comparisons of their own data and that of the industry and peer banks for meaningful segments of the portfolio. Consistent with its "global reach, local markets" approach, RAS current coverage includes U.S. Commercial and Industrial, U.S. Commercial Real Estate, and European segments. Through multiple offerings, RAS allows participants to gain real-time insights into changing credit quality and portfolio concentrations, answering "How do we compare?" which is especially important in these turbulent times. Subscribers to the U.S. Commercial & Industrial lending service can view data along three distinct lines of business: large corporate, middle market, and business banking loans. RAS members also receive an expanded set of risk-rating metrics. Participating institutions are able to segment their portfolios by measures of default probability, loss given default, and expected loss, risk parameters mandated by the international Basel II rules. About RMA
Founded in 1914, The Risk Management Association is a not-for-profit, member-driven professional association whose sole purpose is to advance the use of sound risk principles in the financial services industry. RMA promotes an enterprise-wide approach to risk management that focuses on credit risk, market risk, and operational risk. Headquartered in Philadelphia, Pennsylvania, RMA has approximately 3,000 institutional members that include banks of all sizes as well as nonbank financial institutions. They are represented in the Association by 18,000 risk management professionals who are chapter members in financial centers throughout North America, Europe, and Asia/Pacific. Visit RMA on the Web at www.rmahq.org. About Automated Financial Systems, Inc.
Automated Financial Systems, Inc. (AFS) is the global leader in providing
commercial lending solutions to top-tier financial institutions. AFS works with the world's 50 largest financial institutions to build lending processes based on a straight-through model and on-demand technology and services. In doing so, AFS partners with client banks to understand their strategic goals and works proactively to achieve their business and technology objectives. AFS is headquartered in Exton, Pennsylvania, a suburb of Philadelphia; its European subsidiary, Automated Financial Systems GmbH, is based in Vienna, Austria. For further information, visit www.afsvision.com. Contacts:
Suzanne Wharton, RMA
Director
swharton@rmahq.org
+1 (215) 446-4089 Doug Skinner, AFS
Director
dskinner@afsvision.com
+1 (484) 875-1562 The Risk Management Association
1801 Market Street, Suite 300
Philadelphia, PA 19103
PH: 215-446-4095
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