Portfolio & growth
Test the growth plan before committing the balance sheet.
Can we grow profitably without creating a funding or concentration problem?
Connect new lending with portfolio runoff, credit losses, operating costs, funding and capital. Examine when a constraint appears, which assumption drives it and what an alternative growth path changes.
THE BUSINESS CHALLENGE
What the headline
can miss.
Loan-book growth can consume cash before it produces earnings. More borrowers do not necessarily mean more diversification. A strong average return can conceal a concentrated downside.
DECISIONS IT SUPPORTS
What you can examine.
- Compare growth plans and product mixes on consistent assumptions.
- Inspect liquidity and capital by period, not only at the end.
- Challenge concentration, recovery and economic scenarios before relying on a ranking.
EXAMPLE / A BUSINESS DECISION
Compare the existing plan with faster origination. Inspect funding maturities, repayment timing and a coherent downside. If a gap appears, compare slower growth or a changed mix without assuming funding will automatically be available.
Start with the evidence.
A reconciled opening book and balance sheet, loan cash flows, funding terms, costs, model inputs and explicit scenarios. Keep observed records distinct from management assumptions.
Understand the data process →Keep the decision yours.
Use the analysis alongside your credit policy. Your team sets eligibility, decides when further review is needed and records exceptions. See where information is incomplete and how much the answer changes when assumptions change.
See how review works →Explore the relevant models
Loss given default
If a loan defaults, how much might actually be lost?
Use, data and diagram →M07Exposure at default
How much could be at risk when default happens?
Use, data and diagram →M08Timing & prepayment
When might repayment, early closure or default occur?
Use, data and diagram →M09Loan profitability
Is the proposed lending worth doing after costs and risk?
Use, data and diagram →M10Credit-cycle adjustment
How could a different economic environment change risk?
Use, data and diagram →M11Risk migration & SICR
How much has credit risk changed since origination?
Use, data and diagram →M12Expected credit loss
What loss estimate follows from the portfolio and scenarios?
Use, data and diagram →M13Portfolio loss & capital
How large could portfolio losses become when risks move together?
Use, data and diagram →M14Risk-adjusted return
Which opportunities earn an adequate return on the capital they use?
Use, data and diagram →M15Stress & growth planning
Can the business fund its growth and withstand a downside?
Use, data and diagram →M16Model uncertainty
Would the decision change if the estimate were less certain?
Use, data and diagram →