This document discusses practical applications of risk assessment tools in retail lending. It covers scoring, use of credit bureaus, risk-based pricing, and strategies for dealing with distressed assets. Scoring is presented as an ongoing process of improvement to predict risk and drive desired business outcomes. Credit bureaus provide valuable customer data when used appropriately. Risk-based pricing links interest rates to predicted risk levels to balance customer retention, revenue growth, and risk costs. Distressed asset portfolios require individual evaluation using techniques like discounted cash flow analysis and consideration of collateral value, sales costs, and bankruptcy procedures.

1. Практическое применение инструментов
оценки рисков при розничном кредитовании:

2. SUK001BJ1 v2
Agenda
Is Delta Bank a good example?
Scoring
Credit Bureau
Risk Based Pricing
Disstressed Assets Acquisition
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3. SUK001BJ1 v2
Is Delta Bank a good example?
WAS (1Q2010) IS (08/2012)
 #30 in the system - $820mio  #8 in the system -$4bn in Assets
in Assets  $58,7mio Net Profit
 $1mio Net profit  127 branches
 97 branches
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4. SUK001BJ1 v2
Scoring
Scoring is not a one time investment
Scoring is not a universal cure
Scoring requires of sustainable improvement
Key questions
What we want to predict
At what stage we want to predict
What we want to achieve
Approval rate
Time To Yes
White / Grey Zones
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5. SUK001BJ1 v2
Scoring at Delta
Application scorecards
1st generation in 2007 – expert scorecard calibrated on bank’s data
Crisis period learnings
Currently 5 statistical scorecards and 1 expert
Forecasting PD in next 12 months, PD = DPD 60+ (will be 90+)
Behavioural scorecards
Used for X-Sell, limits up/down sell
Currently 2 statistical scorecards
Forecasting PD in next 12 months, PD = DPD 60+ (will be 90+)
More predictive
All models unified (calibrated) into one master Rating System
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6. SUK001BJ1 v2
Scorecard implementation results
Portfolio Delinquency Ratio,
% of issued loans, evaluated on the date
Expected decline of quality of
issuance related to dramatic
devaluation and unemployment
Operating scoring card Analysis of the major crisis Implementation of the new scoring card
(2nd generation) threats, implementation of amendments to the loan (3rd generation), rising the number of
issuance policy, reduction of the issuance volume issuances
Source: Internal MIS
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7. SUK001BJ1 v2
Credit Bureau
Credit Bureau IS NOT a black list
Credit Bureau shows the „dark side of the moon”
Used in a simple way helps:
Assess the willingness to pay
Assess the repayment culture
Calculate the debt burden
Advanced bureau products
Score (application/behavioural)
Used instead of internal score
Used in matrix together with internal score
Used as a internal score characteristic
Data verification products – checks and cross-checksarnings
CREDIT BUREAU SHOULD NOT BE A NON-COMPETITION ZONE
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8. SUK001BJ1 v2
Credit Bureau & Delta
4 mio credit histories handed over to IBCH (MBKI).... and counting
We use reports for products where we are not considered as leaders /
key players
Working on automation in the core segment (consumer finance and
credit cards)
Risk Based Pricing + automated interpretation of bureau history = no
human factor in credit decision
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9. Risk Based Pricing
RBP (Risk Based Pricing) – applying price related to the predicted risk of
given customer (group of customers)
APR Rating Score Risk Costs
Risc costs AAA >=780 0,01% Low (base) price to
Equity costs AA [740;780) 0,15% retain customers in
(unexpected A [700;740) the portfolio
BBB [660;700)
losses +
BB [620;660) … + additional price for
operational risks) risk to increase
B [580;620)
Prepayment Risk CCC [540;580) revenue
costs CC [500;540) 5,60%
Unit costs C <500 8,20% Acquiring new
Funding costs customers
(previously rejected)

10. RBP Expectations
If the sales volumes remain stable
Credit Card: Cash:
14000 applications in „black 2200 applications in „black
zone”(Acc=80%, +11000 loans); zone”(Acc=90%, +2000 loans);
4500 applications in „grey 1600 applications in „grey
zone”(Acc=60%, -1800 loans); zone”(Acc=70%, -500 loans);

11. SUK001BJ1 v2
Disstressed Assets
Individual attitude to each portfolio
Retail portfolios appraisal
Discounted cash flow prediction
Based on observations in the appraised portfolio
Adjusted by behaviour of similar bank’s portfolio (if available)
Collateral sales
Discount to current market value
Discount to cost of sales procedure
Discount to acceptable period of sales
Restructuring schemes
SME portfolios appraisal similar to the retail with a significant factor –
bankrupcy procedure
Corporate portfolio apprisal – case by case attitude with industry /
customer / competition / market share / collateral being taken into
account ZONE
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12. SUK001BJ1 v2
Questions?
Marcin Figlus,
Deputy Chairman of the Board of
Directors
Ph. 38 044 391-51-00
E-mail: m.figlus@deltabank.com.ua
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