Strategic Loan Pricing

With intense competition to capture loans, now more than ever it is important to have a strategic approach to loan pricing. This includes adequately covering your bank's costs and meeting profit objectives. It also includes differentiating loan interest rates to reflect relative risk, plus knowing that you CAN win the borrower's business on a basis other than the lowest price.

This session will cover seven strategic concepts. Along the way, we will demonstrate how to measure loan profitability and calculate the required rate of return on a loan. We'll discuss how to use the components of most loan pricing models to understand where you have a competitive advantage – and also where your bank does not have an advantage. Another important concept is getting premiums for taking risk and for adding value to the customer relationship, and ways to compete with a lower rate for volume or when you are able to mitigate risk better than your competitor can.

Covered Topics

  • Using odd-decimal pricing
  • Using the drivers of loan profitability to “scout" your competition
  • Differentiating the rate on all risk metrics
  • Recognizing economies of scale on larger loans
  • Comparing relative loan pricing within your portfolio
  • Watching out for loans that are typically under-priced
  • Giving the customer pricing options, even if not requested
  • Using “grid" or performance pricing

Who Should Attend?

Small business lenders, commercial lenders, community bankers, private bankers and others involved in the lending process.