Originally Posted by
winner69
From that conference call ……a lesson how to do ‘proactive provisioning’
Question: First of all, the $8 million economic overlay, how did you calculate that, the science behind that?
Drumm: Thanks,. So what we did to calculate that as we look to the impact downside scenario on the portfolios that Jeff mentioned, being a business relationship and asset finance in particular. So what would a downflow scenario look like to those portfolios. And during the bottom up now sort of losses computed with model losses yielded a number and that informed the size of the overlay.
Question follow up - I guess how aggressive did you get in terms of I guess, economic conditions, I mean, what was sort of the assumptions behind it?
Drumm - I think -- look, there are a number of assumptions behind that. The problem, it's difficult to model losses, right? So -- what we did is looked at what we thought the impact could be on us by reference to our book and our individual exposures rather than using a sort of a more sophisticated model approach.
So lots of words showing how clever you can be in saying a ‘calculated guess’ ……..but a cynic / realist would say it’s really what was required to bring full year normalised npat to $96.1m …now that’s being proactive.