Covid Impact Modeling
For a Bank in Jordan
CLIENT & PROBLEM STATEMENT
- The Bank is one of the leading Private sector in Jordan, They have a large Lending portfolio comprising Retail and Corporate.
- The Bank wanted to predict the impact of Covid on futuristic PIT Probabilities of Defaults (PDs) for their portfolio considering the current environment for this year and subsequent years.
- Portfolio included Vehicles, Credit card, Mortgage, PL, SME & Corporate loans.
APPROACH
- Macroeconomic factors of Jordan like GDP growth rate, Inflation rate, Unemployment, Interest rate, Real estate price index for the prediction of PDs were used.
- We linked historic PDs (quarterly) for each risk segments with economic variables and performed Logistic regression.
- Based on statistical analysis different variables were used for modeling of each product.
- We projected macro-factors using economic forecasts and statistical modeling.
- Using the model and macro-economic projections, we projected forward looking segment wise defaults and PIT PDs.
- Projected PDs Product-wise, Rating wise and DPD Bucket-wise.
SOLUTION & OUTPUT
- We provided the projected quarterly PDs and annual PDs.
- PDs are being used by the bank for their analysis and IFRS accounting.
- Factored U-shaped and V-shaped recovery over next five years.
