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Promethion Limited

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London EC3R 8HL


+44 20 3795 2330

Home Financial Strategy Fintech & Emerging Technologies Credit, Risk & Process Efficiency Case Studies Team

Launch of a credit asset manager: strategic planning, financial modelling and detailed knowledge of BIS regulations.

Problem

The client was a team of credit specialists with a strong track record who wanted to move out of a banking environment and establish a credit manager to capitalise on the rapid expansion of the market.

The team wished to retain a degree of independence but needed a corporate partner to seed their initial funds and provide working capital for their business plan.

They needed to adapt their existing banking business model to an advisory managed account which would generate sufficient returns to cover the cost base in the initial development phase and meet the corporate partner's ROE targets within the BIS capital adequacy framework.

This framework would give them some income certainty while they developed the third party funds whose revenue would be shared with their institutional partner.

The portfolio had to be structured as a rule-based regulatory product so that it could be replicated.

Solution

Promethion wrote the financial model which generated the asset composition for the portfolio, the hurdle returns and the payout to the corporate sponsor and the partnership.

The model included all cashflows over 5 years and a detailed breakdown of the target portfolio with all return on equity figures and capital usage related to the BIS I standard. The model was subsequently migrated onto the BIS II standard when the new regulations were implemented.

Promethion helped negotiate the partnership document and completed the initial €100 million capital raising which was linked to the 5 year plan.

Financial Impact

The launch of the asset management company created a new business line for the bank sponsor including credit funds, a diversified investment portfolio and a trading book.

The new business generated a return on equity of 35% by year 3 of the plan.


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