A group of seasoned credit risk professionals recently shared their thoughts on the current state of affairs with Equipment Leasing & Finance magazine, settling on a general consensus that the outlook was positive.
For Sarah Palmer, Key Equipment Finance Senior Vice President of Credit Underwriting, the question that remains is not if the cycle will turn, but when. "The slow growth in the economy has been continuing for a long time," she says, "and today we're wondering when the other shoe is going to drop."
Monitoring for change
Palmer also is keeping an eye on political events, and global and economic trends.
“Growing political risks, trade friction with China and increased debt costs in the form of higher interest rates are concerns for many credit professionals," she says in the article. "These things add uncertainty because of the downstream effect they can have on credit quality.”
In terms of industry trends, she notes, "It’s worth mentioning that we experience continued pressure for more relaxed underwriting and looser documentation, and this is happening amid increased competition."
As far as portfolio performance for 2019, Palmer doesn't expect significant shifts.
"My expectation is this will stay more or less the same as long as people in our industry maintain discipline and diversity in managing their portfolios,” she says.
Prudent credit managers will want to ask themselves how well diversified their portfolios are and how prepared they are for any kind of slowdown. They will also want to consider what kind of threat higher interest rates would pose on consumers, and the outcome. Skilled credit professionals can find ways to turn those challenges into opportunities, Palmer says.
Innovation for efficiency
The Key Equipment Finance quantitative analytics group is growing, Palmer says, "and we are looking to reduce the time spent processing credit decisions. In addition, we’re looking at ways to improve our customers’ experience through the use of technology by offering self-serve options for their leases and loans. As an industry, if we’re going to compete with Fintech and other alternative loan sources, we need to offer more digital-friendly options.”