Old National Bancorp in Evansville, Ind., is adding technology to help it assess the creditworthiness of existing and potential clients.
The $23 billion-asset company is the latest bank to deploy a credit intelligence suite offered by the British fintech OakNorth. Customers Bancorp in Wyomissing, Pa., Modern Bank in New York and PNC Financial Services Group in Pittsburgh are OakNorth's other U.S. customers. PNC
Old National did not disclose how much it paid for the technology.
Old National began evaluating the OakNorth platform early in 2020. It took the coronavirus pandemic to persuade the company to finalize a deal.
With the crisis in full swing and plans to automate its lending system on ice, Old National last spring embarked on a deep-dive review of its loan book using in-house methodology, a process that Daryl Moore, the company's chief credit executive, said was “too manual” for the times.
“As we identified vulnerable industries and then started looking at clients with those vulnerable industries, we attacked it really by highest exposure,” Moore said in an interview. “As we began talking to the OakNorth folks about their platform, it became very apparent to me that if we had had this in place, we could have been much more strategic addressing risk in our portfolio."
Old National will start to evaluate loans based on underlying risk rather than going "highest to lowest" in terms of outstanding balances, Moore added.
Though Old National's credit quality remains "relatively benign," Chairman and CEO James Ryan said during a recent earnings conference call, “credit metrics could worsen and losses … ultimately materialize after any stimulus and deferral programs run their course.”
In that kind of scenario, Old National is counting on the OakNorth software to get advance warnings that would help bankers quickly engage borrowers before problems get out of hand, Moore said.
“We want to address the risk as early as we possibly can to try to retain those clients and try to make sure their businesses survive,” Moore said. “I was a relationship manager for 25 years. Some of the hardest things I’ve had to do was go back to some of my clients and tell them we didn’t have the ability to retain them because we didn’t understand the risk early on.”
OakNorth designed its software to let banks monitor and analyze their middle-market portfolios on a loan-by-loan basis.
“That’s one of the things that attracted me to OakNorth, the ability to look forward,” said Bruce Richards, who joined OakNorth’s advisory board in November.
“For that segment of the market, it’s unusual," added Richards, a former managing director at UBS and Chase Manhattan and former senior vice president at the New York Fed. “It’s a product I wish I had when I was a lender, and I wish more banks had when I was a supervisor.”
OakNorth, which operates a bank in the United Kingdom and has used its credit intelligence suite since 2015, has lent about $7 billion without reporting a credit loss.
