With 2011 drawing to a close, it's the ideal time to take stock of where our economy is headed; look at how banks and other financial institutions are faring; and how we transitioned to a multi-faceted firm that is well positioned to meet the demands of today's market dynamics.
For much of 2011, the economy remained sluggish, with GDP growing only 0.4% in the first quarter and 1.3% in the second. Although Q3 saw GDP jump to 2.5%-well ahead of analysts' expectations-4% to 5% expansion is ideal following a recession. GDP aside, there are a number of additional challenges that have derailed growth, including volatile employment (the jobless rate is still stuck at around 9%) and the continued weak performance of the housing sector.
However, high unemployment and a lackluster housing market are not the only components that have slowed overall economic growth. The commercial and industrial markets have also had their fair share of problems. Although most banks and financial institutions now know which of their loans flatlined and recognize that the underlying assets are potentially deteriorating, one of their most pressing issues is whether other types of still-solid loans could become nonperforming.
So how does one succeed in such an uncertain marketplace? In short: by adapting. The players who will come out on top are those that recognize the paradigm shift early and develop partnerships and creative solutions to deal with the unprecedented distressed market conditions.
Simply having a platform is not enough, as we saw during the dot-com boom in the late 1990s and early 2000s. At that time, a number of companies that had the technology to sell loans and other assets went into business, but what they failed to understand is that you need a good deal more than a platform to trade debt successfully. A platform is but one tool necessary to unlock value in loan sales. In addition, you need to provide accurate loan valuations, sound legal framework, qualified bidders, intense buyer interaction and sound back-end processes to support the entire transaction.
Along that vein, First Financial Network has shifted from a pure loan sale advisory firm to being regularly tapped to provide due diligence and valuation services for clients seeking to acquire banks or determine critical balance-sheet issues necessary for raising capital.
Technology also aided in our move to a more agile firm ideal to meet the demands of current market dynamics. Speaking specifically to loan sales, it plays a major part in maximizing the value of assets, especially given the constantly changing regulatory demands. For sellers and buyers, designing and implementing new technologies that better serve their requirements is imperative in today's market. One of our major initiatives is staying ahead of technological advances in the industry. In August, we launched our customized Loan Sale Network designed to assist financial institutions and individual investors around the world in marketing and acquiring large portfolios or individual loans. The platform allows any number of loans to be sold in any combination or as a one-off trade. It also includes a secure virtual data room for the online dissemination and review of indexed loan documentation and data. Authorized potential purchasers can search for specific loans based on defined criteria, perform due diligence, ask questions, search and annotate loan documentation, receive portfolio updates, review legal documents and place bids.
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