Bank mergers and acquisitions are on the rise. One key reason is because M&A can help financial institutions reach new customers and markets. “Banking and capital markets organizations that have been deferring M&A moves may be more willing to engage in dealmaking as they look for new pathways to profitable growth in a reshaped, increasingly competitive financial services industry.”
As part of a corporate merger or acquisition, banks must integrate their commercial lending businesses including products, policies, and loan portfolios. An important first step is to evaluate each bank’s system of documents, processes and workflow to make them more efficient.
M&A: an opportunity to gain efficiencies in commercial lending
A merger or acquisition is the perfect time to capture operational efficiencies that simplify, streamline and scale your commercial lending business. This can enhance the customer and employee experience, as well as increase productivity, improve accuracy, and reduce risk.
So you’re having a merger – tips for evaluating your loan management needs
If possible, start by understanding key business fundamentals, such as the blended bank’s commercial lending strategy, current volume and future targets. Then become familiar with each bank’s current system – including how it handles customer documents, credit analysis and reviews, monitoring, pipeline volume and other essential components such as compliance.
Explore by asking questions, such as:
- What was the system designed to accomplish (e.g., portfolio management)? Is that still the most important focus for you?
- How well does the system manage current demand? Can it easily support increased volume?
- What is the cost to operate it – both in time and money?
- How easy or difficult is it to use – for customers? employees? managers? regulators?
- Does it enable a consistent and logical workflow? To which roles is work being pushed?
- Does the system integrate with the core? With the CRM?
- If there’s a vendor, how accessible are they for customization, problem-solving, training, and user support?
Is it time to invest in a modern loan system?
If both banks have been relying on Excel and Word documents, or if they are using older systems, the post-merger bank can gain tremendous efficiencies and improve accuracy. A modern commercial loan system eliminates the need for bankers to manually re-enter information each time it’s requested. Customers can also send their financial statements and other documentation to a secure link and safely upload them (instead of scanning documents, providing them to bankers, and having the documents printed and placed in a paper file).
Many banks struggle with getting an up-to-the-moment view into their commercial loan pipeline. What they need is a loan origination system that provides a snapshot of all deals as they move through the process, allowing staff across multiple departments to see a unified view of what’s happening at every stage. Bankers and managers should be able to update and view the current pipeline online and generate regular reports for senior management. Look for a loan pipeline process that fits the planned go-forward workflows. For example, Bank Point’s Loan Pipeline Management process is completely customizable.
Commercial lending is a team sport. To save time and close more loans in the newly merged bank, the last thing you want to do is hunt for data. Instead, you want a user-friendly system where lenders and administrators can make changes that are visible to all. Lenders can complete and save their analyses online. Credit administrators can easily view credit analyses and client financials. Monitoring can be done online, including covenant tracking and reporting. You will have to assess your bank’s specific needs, but there’s no need to settle for anything less than end to end loan management in a single system.
Which way to go? Luxury or economy model?
There are a range of commercial loan systems in the marketplace. How can you decide which one is right for you?
- If you start with the luxury model that does everything, it may take years until implementation due to its complexity.
- By starting with a less complex option, your system will be available sooner. And many systems are modular, allowing you to add capabilities as you need them.
An automated commercial loan system can help the new entity by enabling multiple users in the merged organizations to:
- See all deals as they move through the approval process.
- More easily view and update loan status and documents.
Set yourself up for success
Mergers and acquisitions can provide new products, markets, customers and growth opportunities. By reviewing how each bank handles its commercial loan business, you can enhance that growth trajectory with improved processes and workflow that better suit all stakeholders and provide gains in efficiencies and cost savings.
Enjoyed this blog? You may also want to view Seven signs you need a bank management system.
- 2021 banking and capital markets M&A outlook, Deloitte
- Bank MA revival market disruption warning venture capital funding soars, S&P Global https://www.spglobal.com/marketintelligence/en/news-insights/blog/bank-ma-revival-market-disruption-warning-venture-capital-funding-soars