nbs non performing loans

8/4/2019 NBS Non Performing Loans

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A SYSTEMIC VIEW OF NBSS NON

PERFORMING LOANS

Greg Zuccarini - Systems Theories &

Practice

MOMS 2001


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CONTENTS Telling The Story

Empirical Behavior over time GraphsIntuitive Behavior over time Graphs

A Focusing Statement:

Identifying The Structure: Adaptation & usage ofapplicable systemic archetypes:

Shifting the Burden & The Quick Fix

Key Systemic Area Evaluation (Going Deeper): Planning An Intervention:


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Telling The Story

Empirical Behavior over time

Graphs


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Comparison Of Total Book Versus Bad Debts Over

Time

R-

R200,000,000

R400,000,000

R600,000,000

R800,000,000

R1,000,000,000

R1,200,000,000

R1,400,000,000

R1,600,000,000

Sep-98

Nov-98

Jan-99

Mar-99

May-99

Jul-99

Sep-99

Nov-99

Jan-00

Mar-00

May-00

Jul-00

Sep-00

Nov-00

Jan-01

Mar-01

Non

Per

form

ing

Loans

To

tal

R -

R 2,000,000,000

R 4,000,000,000

R 6,000,000,000

R 8,000,000,000

R 10,000,000,000

R 12,000,000,000

R 14,000,000,000

R 16,000,000,000

R 18,000,000,000

R 20,000,000,000

To

talBook

ResidentialOtherDevelopmentCommercialDev BalOther BalResid BalComm BalBook Bal


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0%6%4%

90%

NO ARREARS + 2MONTHS

PIPs

SERVCON BOOK R60-R120,000


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R 000, 000 s R120,000NO ARREARS + < 2 MONTHSR 2,468 R 1,846 R 5,888

ARREARS > 2 MONTHSR 119 R 73 R 440

PIPs R 524 R 117 R 641

TOTAL R 3,112 R 2,036 R 6,968ARREARS & PIPs - %OF TOTAL 20.68% 9.34% 15.51%

SERVCON BOOKR 30 R 4 R 1

SERVCON BOOK- %OF TOTAL 0.99% 0.22% 0.02%

SEGMENTS %OF RESID. BOOK25.68% 16.80% 57.52%


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Comparison Of Total NPL: Book Versus PrimeRate

0.00%

5.00%

10.00%

15.00%20.00%

25.00%

30.00%

Sep-9

8

Nov-9

8

Jan-9

9

Mar-9

9

May-9

9

Jul-9

9

Sep-9

9

Nov-9

9

Jan-0

0

Mar-0

0

May-0

0

Jul-0

0

Sep-0

0

Nov-0

0

Jan-0

1

Mar-0

1

TotalNPL:Book

%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

PrimeRate

%

Prime Rate

Total NPL/Book Bal


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Intuitive Behaviour over time

Graphs

Telling The NPL Story


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Past Now Future Past Now Future

Past Now FuturePast Now Future

Past Now Future


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Past Now Future Past Now Future Past Now Future



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Past Now Future Past Now Future Past Now Futur


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Past Now FuturePast Now Future Past Now Future


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Past Now FuturePast Now Future Past Now Futur


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Past Now Future Past Now FuturePast Now Future


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Past Now Future

Past Now Future

Past Now Future

Past Now Future

Past Now Future


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Past Now Future

Past Now Future

Past Now Future

Past Now Future

Past Now Future


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Past Now Future


Past Now Future

Higher

Parity

Lower


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Past Now Future


Past Now Future


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A Focusing Statement:

Why does increasingly

strict asset based lendingcriteria not reduce the

growth in Bad Debt?


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Identifying The Structure:

Adaptation & usage ofapplicable systemic archetypes:

Shifting the Burden & The

Quick Fix

D


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Symptomatic

Solution:

Problem Solution:

Fundermental Solution:

B1

B2

R1

Side Effect:

-

+

+

+

Unintended

Consequence:

DELAY

+

R2

+

-

Problem:

- +B3 -

DELAY


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Symptomatic

Solution:

Problem

Solution:

FundermentalSolution:

B1

B2

R1Side Effect:

+

+

+

UnintendedConsequence:

DELAY

R2

+

-

+

B3

ProblemSymptom:

The Actual

Problem

The FundamentalProblem Symptom

+

-

The Fundamental

Problem

+

-

-

-+

-B4

+

+

+

+

B5

R3

R4


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Symptomatic

Solution:Sell PIP's at Lowest

Discount

Problem Solution:-First World Credit Appraisal Systems

-Focus on Moral Vs Asset Risk

-Real Time Risk Assessment @ POS

-Risk Based Pricing

-Continous staff training & development

-Moral of credit staff


-Re-assessment of an exclusionary dedicated low cost model in a services industrylike banking.-Creating a key competency in innovation and learning in the organisation.-Move away from the factory or channel dominance to that of market segment and clientloyalty domination.

-Creating the right systems and processes that are centralised and provide a basis

for a holistic client view accross the BoE Group.

B1

B2

R1

Side Effect:-Diminished need toinvest/plan in

fundamentalsolution.

-Encouragementoflinear reductionist

thinking.

-

+

+

+DE

LAY

UnintendedConsequence:

- Reduction In Overall

Lending Margin- Hard-core PIP's may

remain

DELAY

+

R2

+

-

-

+

Investor/Owner Support

-

R3

B3-

DELAY

-

Problem:

Exponential PIP Associated Cost

Lowers NBS Contribution

To Group

+


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B1

DELAY

Expediency

Culture

Use Of Coping

Strategies

+

Focus On

SymptomaticSolutions

Justification Of

Resource Allocation

To Short-term Solutions

+

+

+

R1

Quick-win's/

Fix's

+

R2

+

Effectiveness & Efficiency Of

Sustainable/Fundamental

Solution Programme s

-

Attraction & Reward Of Staff

With Ability To diagnose & De alWith Fundamental Structural

Problems

+

Multiple

PerspectivesRequired

For Significant

Problem

Diagnosis

--Competency To Derive &

Implement

Holistic & Fundamental

Solutions -

Stress

-

+

Single Year/Short-term

Financial & Individual

Performance Metrics

Orientation

-

-

B2

Risk Aversiveness

Through Incremental

Optimization

+


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B1

DELAY

Expediency

Culture

Use Of Coping

Strategies

+

Focus On

Symptomatic

Solutions

Justification Of

Resource Allocation

To Short-term Solutions

+

+

+

R1

Quick-win's/

Fix's

+

R2

Effectiveness & Efficiency Of

Sustainable/Fundamental

Solution Programmes

-

Attraction & Reward Of Staff

With Ability To diagnose & Deal

With Fundamental Structural

Problems

+

Multiple

Perspectives

Required

For Significant

Problem

Diagnosis

--Competency To Derive &

Implement

Holistic & Fundamental

Solutions -

Stress

-+

Single Year/Short-term

Financial & Individual

Performance Metrics

Orientation

-

-

B2Risk AversivenessThrough Incremental

Optimization

+

Investor/OwnerSupport

R3

Symptom

atic

Solution:

ProblemSolution:


B1

B2

R1

SideEffect:

-

+

+

+

Unintended

Consequence:

DELAY

+

R2

+

-

Problem:

-

+

B3

-

DELAY

-+

+

-


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Gap

Adjustment

ActualState

Desired State

'Planned'Financials

B

+-

+

+


28/28

Tota

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Past Now Future

Str ic

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Credit

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Past Now Future

NBS

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Int er

actio

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Past Now

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anks

Past Now Future

NBSCre

ditMng

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Relative

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Past Now Future

NBS/Bo

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ostVs

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Focus

Past Now Future

NBS

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NBS

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Qua

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Number

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nbs non performing loans

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