Strategic Information Technology Success Story
General Bank
Driving Automotive Loan Volume and Quality
“We will pay more for the
right type of business. Having
the latest loan intelligence
A 25% compounded annual growth rate. An asset base that’s
approaching $500 million. Achieving profitability in only 14 months.
By any measure, General Bank of Canada has been an outstanding
Canadian banking success story since opening its doors in 2005.
data at hand helps us to
make those loan funding
decisions with confidence.”
Gord Mooney, Chief Operating
Officer for General Bank
“Armed with real time results from our Portfolio Plus software platform,
we’re able to grow our loan volumes with confidence,” says Gord
Mooney, Chief Operating Officer for General Bank. “That’s because
we’re very specific about the type of business we will and won’t
accept. Our message to our sales force is simple: we will pay more for
the right type of business. Having the latest loan intelligence data at
hand helps us to make those loan funding decisions with confidence.”
Today, over 1,000 automobile dealers are now authorized to request
loans from General Bank, and loan funding is expected to top 1 billion
dollars by the end of 2012.
The Turning Point: Analytics Becomes Mission Critical in 2008
In 2008, at the height of the financial crisis, General Bank installed
Portfolio Plus Prospector. After building a set of standard reports, it was
able to identify and reengineer the way it managed its credit risk.
“Today we’re very sensitive to all of the trends visible in our portfolio,”
says Mooney. “We regularly review default characteristics, loan
duration, risk grade performance, and more. But that wasn’t always
the case. 2008 was a real turning point. Once we dove into our data,
“Once we dove into our data,
the results were clear and
actionable. We immediately
the results were clear and actionable. We immediately improved our
credit performance and lowered our credit losses—easily the most
critical elements in managing a loan book.”
improved our credit
performance and lowered
our credit losses—easily
the most critical elements
in managing a loan book.”
Gord Mooney, Chief Operating
Officer for General Bank
“We can raise several million
dollars in a single day, at
the push of a button.”
Gord Mooney, Chief Operating
Officer for General Bank
Loan Funding Sources as a Competitive Advantage
The 2008 global financial crisis created a liquidity challenge for all
deposit taking institutions. General Bank found itself paying more
for deposits, and competing against non-traditional players in the
brokered deposit channel. It was clear that the bank needed to
diversify its funding sources in order to stay competitive.
“In the beginning, we raised funds solely from independent deposit
brokers,” says Mooney. “These brokers remain an important source
of funding, but since signing on to the CANNEX Financial Network
we’ve been able to access a much larger pool of funds, typically at
lower rates of interest and with substantially less effort. We can raise
several million dollars in a single day, at the push of a button. Saving
time and effort and reducing our overall cost of funds is helping to
make us more competitive in the loan market place.”
The CANNEX Financial Network has become an increasingly
important source for raising funds for Canadian financial institutions.
In 2012, the CANNEX Financial Network processed over $42 billion in
term deposits with over 52 term deposit issuers, many of which are
Portfolio Plus users.
Spotting Troublesome Business
Using Portfolio Plus Prospector, General Bank was able to spot
problematic business with loans that were paying out early. Loans
that pay out early in their life are very costly, due to the up-front cost
associated with acquiring the business.
“Analytics helped us identify a couple of dealerships that would
sign up a customer for a loan, get the commission for that loan, and
then have the customer pay off the loan right away,” says Mooney.
“Without our analytics it would have been much harder to spot this
pattern. The result was that we could have a constructive conversation
with the dealer, and agree that going forward the business we
obtained had to be a win for the dealer, the consumer, and the General
Bank.”
“Analytics helped us identify
a couple of dealerships that
would sign up a customer for
a loan, get the commission
for that loan, and then
have the customer pay off
the loan right away.”
Interest Rate Risk Management
An auto loan portfolio behaves differently than a mortgage book in that
many auto loans are paid off before reaching full maturity. People trade
their vehicle in or sell them before their loan term is up. Data produced
from Prospector helped the General Bank identify the precise portion of
the loan book that was paying out early, allowing the bank to re-price
its loan book more quickly than a regular amortization.
“Getting at our cashflow data helps us to know how much to raise in
deposits and under what terms,” says Mooney. “As an example, let’s
say we have a $1 million loan book and we are expecting 16% to pay
back in year one, 19% in year two, and so on. Traditional interest rate
risk management means that we would go out and raise deposits to
match the expected pay down of the loan book. But because we know
the percentage of loans that we expect to pay out early, we are able
to adjust our deposit raising activity to more accurately reflect how
the book actually behaves. What that means is that some of the 5 year
loans will never have to be matched. Instead, the amount paid out
moves into the year in which payout occurred, allowing us to match
with lower cost, shorter term deposits.”
“If we didn’t have easy access to the right cashflow data, we’d be
over-raising 3, 4, and 5 year deposits, which would cost us much more
in the long run,” Mooney says. “So, for example, instead of raising
$150,000 in year 5, we only need to raise $50,000. The savings amount
to as much as 70 basis points on the amount that shifted from 5 years
to the shorter terms.”
Gord Mooney, Chief Operating
Officer for General Bank
“If we didn’t have easy
access to the right cashflow
data, we’d be over-raising
3, 4, and 5 year deposits,
which would cost us much
General Bank: The Outlook
Currently, General Bank is implementing a Portfolio Plus interface
to Dealer Track’s Dealer Management System in the expectation of
being able to significantly raise loan origination volumes with the
same staffing levels.
more in the long run.”
Gord Mooney, Chief Operating
Officer for General Bank
“As we continue to grow, it is critical that we look at ways to become
more efficient through the effective use of technology,” says Mooney.
“We think the Dealer Track interface will do for us on the loan side
what the CANNEX interface did for us with deposits.”
“We look forward to continue to expand our territory coverage,” says
Gord Mooney. “But we’re in no rush to do so. We want to ensure that
we continue to do the right type of business for the right price.
Having timely, actionable information will help our business strategy.”
About General Bank
About SIT
In April, 2005, General Bank of Canada became Canada’s twentieth Schedule
1 chartered bank. Its automotive experience provides the basis for GBC’s
dedication to customer satisfaction. Through an extensive network of automotive
dealerships across Canada, GBC provides new and used car buyers with the very
best rates possible, and its commitment to customer service is demonstrated by
quick and competitive credit decisions and settlement.
SIT, formed in 1988, develops and markets Portfolio Plus, an extensible banking
system that enables customers to plug in new functionality as required. This is
accomplished via SIT’s unique Plug-In BankingTM architecture, Financial Services
BusTM, and Open Banking InterfaceTM that combine to extend Portfolio Plus
GBC provides competitive Guaranteed Investment Certificates to investors
across Canada through a network of independent deposit brokers and select
investment and securities dealers. GBC is also a member of the Canadian
Deposit Insurance Corporation.
Whether applying for purchasing a vehicle or investing in a GIC, General Bank
of Canada is committed to help provide you and your family with the financial
security you deserve.
functionality to other applications. SIT’s banking software enables credit unions,
banks, trust companies and building societies to offer web banking, loans, loan
securitization, investments, term deposits, wealth management, retail, ATM/POS
switch interfaces for debit cards, and credit bureau interfaces. Portfolio Plus can
also be tailored, on request, to meet specific customer requirements.
SIT can be reached at www.stratinfotech.com or by phone at 905-640-0808.
Portfolio Plus, Plug-In Banking, the Financial Services Bus, and Open Banking
Interface are trademarks or registered trademarks of SIT in the U.S., Canada and
other countries. Any other trademarks or service marks contained herein are the
property of their respective owners.
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Tel: 905-640-0808 • Fax: 905-640-0809 • www.stratinfotech.com
Portfolio Plus is a trademark of Strategic Information Technology Ltd. Other product names are the property of their respective owners.