Canadian banks lose 25% of mortgage portfolio assets each year. These funds need to be replaced, and an optimized replacement ratio is the quickest route to profitable growth in 2009.

Most Canadian banks rely on a reactive approach to manage their mortgage business. They contact all borrowers at the point of maturity, thereby missing the opportunity to selectively reach out at an earlier stage to anticipate mid-term payouts.

As a result, some borrowers pay out early and leave, which leads to unnecessary mid-term asset attrition. The borrowers who stay to maturity negotiate unmanaged discretionary discounts, which leads to unnecessary margin compression.

The cost of this missed opportunity is estimated between C$1.5-2.1 million in annual income per C$ billion at risk.

With a best-in-class Pricing and Profitability Management approach, enabled by the Nomis Mortgage Portfolio Optimizer™ solution suite, Mortgage executives can optimize the income from their mortgage portfolio and avoid these losses.  The process requires two steps:

First, classifying borrowers into detailed profiles based on payout propensity and response to product features, pricing levels, and brand benefits. Second, developing product and contact strategies designed to improve retention and profitability by optimizing:

• Who to contact?
• When to contact them?
• What product to offer them?
  

The Nomis Mortgage Portfolio Optimizer Solution Suite
The Nomis Mortgage Portfolio Optimizer solution suite enables Mortgage executives to manage their portfolios for profit and return on capital by differentiating customers who respond well to proactive repricing from those who don’t.

Through deep customer insight, leading-edge predictive analytics, and best-in-class practices and processes, the solution helps Mortgage executives understand the profiles and behaviour of segments within their portfolio.

It also helps them make decisions about which customers to proactively contact and when, and configure the optimal offer or discretionary discount structure to optimize the profitability of each customer.

Financial Benefits

• Increase net income contribution (C$10–20 million 5-year Net Present Value per C$ billion at risk)
• Increase market share by 15 - 25bps year over year vs. business as usual
• Increase net interest margin through widening average spreads by 5 – 10 bps

Operational benefits

• Use a closed-loop contact strategy to ensure operational processes are aligned to retain borrowers and optimize net income
• Reduce operational complexity and focus expert resources on high value segments
• Adopt a more efficient and effective renewal and retention process

Strategic Benefits

• Drive profitable gains in market share through asset growth / retention
• Reverse margin compression via better control of price discretion
• Increase customer retention and satisfaction by better understanding customer behaviour

Why Nomis Solutions?
Based on recent Mortgage Portfolio Optimization experience at a Top 5 bank in Canada as well as access to up-to-date consumer research, Nomis Solutions’ Mortgage team has deep knowledge of the Canadian Mortgage market. The team also has five years experience implementing proven Mortgage Portfolio Optimization solutions in the UK market and implementing the company’s award-winning Nomis Price Optimizer™ software in other lines of business in Canada, the United Kingdom and the United States.

To learn more, read the press release Nomis Solutions Enables Canadian Banks to More Profitably Drive
Mortgage Portfolio Growth.

Contact us to learn how we can help your Mortgages business achieve similar results.