By Daryl Moore, Chief Credit Executive and Senior EVP at Old National Bank
Since its founding in Evansville in 1834, Old National Bank has focused on community banking by building long-term, highly valued partnerships and keeping our clients at the center of all we do. This is an approach that we call The ONB Way and it has never been more important given the ongoing challenges being presented by COVID-19.
I have personally been in banking for several decades and this is the sixth recession I have been through, but the events of the last year are like nothing I have experienced before. In the future, there will no doubt be more recessions and other unprecedented events, and it is likely that they too will be very different to anything we have seen or experienced before. We also might not be fortunate enough for it to take another 100 years like it did with the Spanish Flu of 1918, so we need to ensure we are future-proofed and that we are not relying on the “old ways” of doing things. This is particularly true when it comes to commercial credit risk.
The pandemic demonstrated the strengths of our approach to commercial lending, but also highlighted areas for investment
At Old National, we have always had a strong credit culture at the individual credit level, and the pandemic has demonstrated the strengths of our approach to underwriting, but it is also highlighted areas where we should continue to make investment to further improve our credit analysis and monitoring.
When the pandemic hit, we knew we needed to determine where our highest risk was in our commercial loan portfolio and how to address it - and it became clear to me very quickly that Old National’s process was too manual and that we needed to get our data organized. It was this that catalyzed a conversation we had been having with an interesting fintech from the UK that we had been introduced to several months earlier – OakNorth. As we began to speak with OakNorth about its product, the ON Credit Intelligence Suite, we realized that if we had had this software in place before the pandemic struck, we could have been much more strategic in addressing the risk in our portfolio. Instead of manually going through our loan book from largest exposure to the smallest and spending a lot of time on credits that did not end up presenting a lot of immediate risk, we could have started with the riskiest and moved through those.
As bankers, we know the clients you support in the tough times and during the cycles like we are in currently, often become your most loyal. So, OakNorth’s ability to help us gain clarity on the challenges our clients are facing and what level of support they need and when, will be critical for our business over the next 18-24 months.
Building better client relationships with deeper credit risk insights
I was a Relationship Manager for 15 years, and one of the hardest things I had to do was tell a client that we did not have the ability to retain them as a client anymore because we did not understand the credit risks applicable to them early enough in the relationship. At Old National, we have dedicated ourselves to knowing and understanding the risks facing each of our borrowers so that we can effectively address them, provision for them, and continue to effectively serve those customers.
We have grown our loan book since March 2020, so it is imperative to know which industries have the highest risk on a go forward basis and which of those industries we can lend into. OakNorth’s software will enable us to do that through better analyzing and stress testing our portfolio at speed in a consistent, objective fashion. Through the continuous monitoring of active credits, OakNorth’s software will also enable us to turn monitoring into a real-time process. This in turn will mean we can build deeper and more meaningful relationships with clients – having a consultative relationship with our borrowers – as well as ensuring our Relationship Managers have more time and better insights to originate new deals.
Commercial lending is changing, and COVID-19 has accelerated this change. This is forcing banks to look at their existing data, processes, approach to credit risk, and technology, and determine where investments should be made to further enhance these. Having gone through this process at Old National, we are excited to partner with OakNorth to deliver the future of commercial lending to our clients.