As the bank base rate approaches zero, Canadian banks are under immense pressure to maintain net interest spreads in their mortgage portfolios
San Bruno, CA (PRWEB) March 17, 2009
Nomis Solutions, the leading provider of best-in-class Pricing and Profitability Management for financial services companies, today announced the availability of the Nomis Mortgage Portfolio OptimizerTM solution suite for the Canadian banking market. Canadian banks need to replace 25% of their mortgage portfolio assets lost each year through early payouts and capital repayments. Improving this replacement ratio is the quickest route to profitable portfolio growth in 2009.
The suite enables Canadian banks to address this issue and take a more proactive and profitable approach to driving growth in their mortgage portfolios. It optimizes income from the mortgage portfolio in two steps. First, classifying borrowers into detailed profiles based on payout propensity and response to product features, pricing levels, and brand benefits. Second, developing product and contact strategies designed to improve retention and profitability by optimizing three key questions: Who to contact? When to contact them? What product to offer them?
Most Canadian banks are using a reactive approach to managing their mortgage business by contacting all borrowers at the point of maturity, thereby missing the opportunity to selectively reach out at an earlier stage to anticipate mid-term payouts. As a result, some borrowers pay out early and leave, which leads to unnecessary mid-term asset attrition. The borrowers who stay to maturity negotiate unmanaged discretionary discounts, leading to unnecessary margin compression. The cost of this missed opportunity to manage portfolio growth more scientifically is estimated between C$1.5-2.1 million in annual income per C$ billion at risk.
"As the bank base rate approaches zero, Canadian banks are under immense pressure to maintain net interest spreads in their mortgage portfolios," said TowerGroup's Senior Research Director of the Consumer Lending Practice, Craig Focardi, who is a residential mortgage lending expert. "At the same time, portfolio assets are under attack as rock bottom mortgage rates are driving borrowers with high fixed rates to switch to other banks that are offering to pay their mortgage prepayment penalty charges. These two issues mean that banks need new tools to analyze and segment borrower behavior to improve net interest and other income contribution from mortgages."
"The Nomis Mortgage Portfolio Optimizer solution suite enables Mortgage executives to drive profit and return on capital by differentiating customers who respond well to proactive repricing from those who don't," said Nomis Solutions' Director of Mortgage Solutions, Nick Young. "Through deep customer insight, leading-edge predictive analytics, and best-in-class practices and processes, the suite helps Mortgage executives understand the profiles and behaviour of segments within the portfolio, make decisions about which customers to proactively contact and when, and configure the optimal offer or discretionary discount structure to optimize the profitability of each customer."
With Nomis Solutions software, Mortgage executives gain financial, operational and strategic benefits quickly. They can increase net income contribution, market share, and net interest margin. A closed-loop contact strategy ensures their operational processes are aligned to retain borrowers and optimize net income. A more efficient and effective renewal and retention process reduces operational complexity and focuses expert resources on high value segments. In terms of strategic benefits, Mortgage executives can drive profitable gains in market share through asset growth and retention. They can reverse margin compression by better controlling price discretion and increase customer retention and satisfaction by better understanding customer behaviour.
Based on recent Mortgage Portfolio Optimization experience at a Top 5 bank in Canada as well as access to up-to-date consumer research, Nomis Solutions' Mortgage team has deep knowledge of the Canadian Mortgage market. The team also has five years experience implementing proven Mortgage Portfolio Optimization solutions in the UK market and implementing the company's award-winning Nomis Price OptimizerTM software in other lines of business in Canada, the United Kingdom and the United States.
About Nomis Solutions
Nomis Solutions enables best-in-class Pricing and Profitability Management for financial services companies. Through a combination of advanced analytics, innovative technology, and tailored business processes, the Pricing and Profitability ManagementTM Suite delivers quick time-to-benefit, and improves financial and operational performance throughout the customer acquisition and portfolio management processes.
The Pricing and Profitability ManagementTM Suite of business solutions includes the award-winning Nomis Price OptimizerTM, the Nomis Offer OptimizerTM, the Nomis Mortgage Portfolio OptimizerTM Suite, and the Nomis NavigatorTM. These solutions are designed to meet the specific requirements of auto finance, home equity lending, personal lending, mortgage, and deposits executives. Select customers include Abbey (part of the Santander Group), AmeriCredit, Bank of Montreal, Chase/WaMu, Chrysler Financial, HBOS plc (part of the Lloyds Banking Group), Nationwide Building Society, Royal Bank of Canada, Skipton Building Society and Yorkshire Building Society. Headquartered in San Bruno, CA, Nomis Solutions also has offices in London, United Kingdom. Visit http://www.nomissolutions.com or contact us at 1-650-588-9800 or +44 0207-189-8327.