Reducing Commercial Charge-Offs in 1992

Abstract

This paper examines important factors that should contribute to First of America Bank-Michigan success in 1992 with respect to commercial loan quality and profitability. Over the last 5 years reviewed, commercial loan income consistently contributed over 30% of the bank's total revenue. For this reason, and for the purpose of avoiding a complex analysis, the focus in this paper is on commercial loan income holding all other income sources constant. In 1992, commercial lenders and commercial credit analysts look to four significant factors that are crucial to the departments success. First, they plan to increase their loan loss recovery efforts in order to attain a low net charge-off ratio. Secondly, they plan to monitor commercial loans more frequently and more strictly. Thirdly, they plan to modify the bank's lending zone in an effort to increase commercial loans. Finally, they will assess the bank's profit and loan potential based on a 1992 industry forecast for their top 8 lending industries. Section I presents information about the commercial loan department with respect to 1991 financial highlights; the 1991 lending policy; the loan portfolio diversification in 1991; and also information about the economic strength in the Midwest. Thereafter, management's 1992 plans concerning the loan loss recovery department, lending policy, and delineation are presented. Section II and Ill discuss the internship part the S.I.P. and how it has enhanced my knowledge about business.