FOUR STEPS TO ADDRESSING

COMMERCIAL LENDING
PRODUCTIVITY CHALLENGES

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INTRODUCTION
Growing loans continues to be the primary means for bank executives to improve
revenue. While commercial loans offer the greatest opportunity for growth, commercial
lending processes can hinder growth if their execution creates inefficiencies and
redundancies. This eBook reviews the importance of lending revenue and offers
strategies for improving the processes supporting the commercial lending business in
financial institutions.

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BANKING INDUSTRY CHALLENGES

Bank executives are anxiously scrambling to grow their lending business.

FIS 2015 SURVEY
The findings of a recent FIS survey of financial institution CEOs highlights this
TOP ISSUES FACING CEOS
priority: The CEOs indicated their primary concern is growing loans, followed
very closely by compliance and risk management challenges and controlling IMPORTANT OR
ISSUE
costs. Given the intense competition for these loans, banks must differentiate VERY IMPORTANT
themselves by delivering outstanding service while also managing the expenses
Growing Loans 93%
that come with growth.

Within lending, the commercial market offers the most opportunity for new Compliance and Risk Management Challenges 91%
growth and additional revenue. According to recent survey on revenue growth
from Bank Director, the majority of banks plan to grow through originating Manage Costs 89%
more loans. Banks believe the greatest organic loan growth potential lies in
commercial real estate, with 85 percent of respondents indicating that was Improve Lending Margins 85%
an area of focus. Commercial and Industrial loans came in second with 56
percent of respondents focusing on that area1. Increasing Noninterest Income 85%

Commercial lending appears simple: Lenders collect information about Improve Customer/Member Service 84%
a prospective business, analyze that information and make an informed
judgement regarding the loan amount and interest rate. Things become Improve Solutions to Attract New Customers 84%
complicated with the complexity of the deal, the depth of the financial
information gathered, a bank’s risk and credit management policies, the Implement New Systems and Technologies 73%
perfection of the collateral and the servicing of the loan. Commercial lending
is a source of great opportunity but is also a potential area of great inefficiency. Increase Core Deposits and Customer Acquisition 69%

Growing efficiency in the commercial lending team work can be accelerated Respond to Potential Changes in Capital Requirements 50%
by working with external lending and technology experts. These experts provide
skills in building consensus, implementing new technology and managing Minimize Impact of Nontraditional Competitors 50%
change. The next section of this eBook addresses an approach to achieving
profitable, commercial loan growth. Consolidate Acquisitions and/or Operations 36%

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Bank Director, 2015 Revenue Growth Strategy Survey 3
LENDING BUSINESS PROCESS IMPROVEMENT
Improving commercial lending business processes while maximizing enabling
technologies is best done in a logical progression, starting with origination and
progressing through post-closing. The following steps can serve as a guide for a
commercial lending transformation initiative.

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UNDERSTAND THE CURRENT
COMMERCIAL LENDING ENVIRONMENT
When it comes to process design and automation, the commercial lending workflow has received
less attention than other simpler workflows because of the complexities of commercial lending
process. Further, commercial lenders tend to be change-averse. Very likely, the bank has not
optimized its commercial lending business processes. Experts in lending, with the unbiased eyes of
neutral observers, are often in the best position to assess a bank’s commercial lending operation.

These outside experts first must fully understand the commercial lending processes and then
document relevant workflows. Consideration should be given to workflow variations due to
relationship size, size of the request, complexity, collateral and whether or not the loan is made to
an officer or board member. This understanding creates a fact and knowledge-based foundation
from which to lay the groundwork for meaningful change and improvement.

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 EXAMINE PROCESSES CLOSELY,
LOOKING FOR IMPROVEMENT OPPORTUNITIES
On completion of the thorough review of existing processes, an action team should examine
each workflow and process closely, looking for opportunities for improvement. Introducing
new technology to support commercial lending processes can initiate the change needed to
reach productivity improvements in commercial lending. Origination systems are available to
handle the nuances of commercial lending.

Substituting technology for manual inputs improves productivity. The application of emerging
technologies and the optimization of technology platforms – such as origination, imaging and
servicing – remain important for the improvement of productivity and reduction of paper
processing. Additionally, vendor solutions in commercial lending can help spread the mounting
compliance investment across multiple financial institutions.

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COMMUNICATE
THOROUGHLY
As opportunities for improvement are identified, documented and implemented, a critical
activity to build consensus and support for the transformation of commercial lending is
frequent and detailed communication. Change is never easy, but communication can help
all individuals in the commercial lending area understand what the plan is for improving their
organization. Consistent written and verbal communication that supports and explains the
changes in business processes ease fear and uncertainty.

Many banks have established a temporary newsletter for the life of a lending transformation
initiative. With the unique branding and management participation, these can go a long way
to gaining employee buy-in.

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 ADJUST
AS NEEDED
Lending transformations are iterative endeavors. Once changes are implemented, the outside
experts will need to assess their impact and effectiveness going forward. Processes will need
refinement or, in some cases, may need to be completely redesigned. Technology must fit the
newly optimized business processes, not the other way around.

Continuous improvement should be the goal even after the outside experts have left the
transformation project. With the right mindset and management support, the groundwork
established in the original effort should help employees seek ways to further optimize workflows
and lending operations as a whole.

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SUMMARY
Commercial lending offers financial institutions significant opportunities for both
revenue growth and efficiency improvements. Done correctly, a commercial lending
business process improvement effort can achieve both goals.

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©2016 FIS and/or its subsidiaries. All Rights Reserved.
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