Case Study 22: Covid Impact Modeling

For a Bank in Jordan

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  • 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.
  • 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.
  • We provided the projected quarterly PDs and annual PDs.
  • 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.
  • PDs are being used by the bank for their analysis and IFRS accounting.
  • Factored U-shaped and V-shaped recovery over next five years.
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