Portfolio Analysis Case Study: Large Commercial Bank Leverages Javelin Whole Loan (JWL) Platform for Portfolio Analysis

Client’s Challenge

  • A large commercial bank was looking to enhance their consumer loan portfolio analytic capabilities.
  • Ideally it wanted to be able to use one application to conduct credit and prepayment analysis of multiple consumer asset types.

Our Solution

  • Working with the bank’s portfolio risk management team, FBA risk analytics experts guided the team’s use of JWL to evaluate credit and prepayment performance on a monthly basis.
  • Using the suite of statisticallybased consumer risk models in JWL, the bank was able to understand credit and prepayment migration patterns over time across loan statuses.
  • JWL was used as the primary tool for runoff, delinquency and loss forecasting for financial planning and analysis.
  • The bank leveraged the JWL reporting engine for management reporting as well as for periodic ad hoc analysis.
  • The client needed the ability to manipulate the loans in their portfolio to forecast different price and yield scenarios.  The client users had the ability to forecast price and yield results at the loan level for their portfolio.In addition, JWL’s “What If” analysis tool allows users to customedit pricing inputs for individual loans and forecast what effect these overrides will have on forecasted price and yield.
  • The client also needed the ability to run their portfolio through simulated scenarios to see the effects on their portfolio value.  JWL offers the power to create custom scenarios to use in cash flow and price/yield forecasting.

Outcome

  • The bank improved the accuracy of its loss and prepayment forecasts while generating timely reports and analysis to various internal and external constituents.
  • Since their implementation of JWL, the bank has expanded its use in the bank’s annual stress test exercise as well as in developing estimates of economic capital and credit valueatrisk (VaR).