Credit Risk & Return Analysis

The credit risk & return software application calculates and aggregates portfolio and sub-portfolio risk and risk-adjusted returns. The management of a loan portfolio is similar to the management of an investment portfolio. The objective is to build and maintain an efficient portfolio.

The application compiles numerous portfolio reports which includes: percent volume, volume, probability of default (PD) risk, loss given default (LGD) risk, non-accrual rate, past due rate and loss rate, annual risk-adjusted return, annual income, and economic income. The portfolio and sub-portfolio risk and return information is archived and trended within the application.

The application allocates fixed and variable costs by loan type and loan size, along with PD and LGD risk. The risk-adjusted return of every loan is calculated and aggregated at the customer level. Customer reports are be created to identify unprofitable relationships. Once identified, appropriate action can be taken to improve the overall portfolio return.