Assessment of Unsecured Retail Credit Risk in Light of Cross Sell and Up Sell Strategy

Consolidation of the banking sector, as well as the presence of well recognized banking brands in the retail banking market brought innovation and a proactive approach in relation between bank and client This trend accompanied with an aggressive strategy initially caused the growth of the deposit base and then followed by cross sales and up sell strategies that led to a restructuring of the retail banking market and increase the confidence of the population to commercial banks.
Cross sell and up sell as comprehensive strategies brought a remarkable changes in retail lending market. This dynamic of change that began in the middle of the past decade continued with rapid growth until the appearance of the global financial crisis, to slow down thereafter and continue with a moderate growth pace. This period of rapid growth of the so-called "boom” period by commercial banks, restructured retail lending markets and brought tremendous change in debt to citizens ratio, where for short period of time the indebtedness of Macedonia citizens to commercial banks achieved 650 EUR per capita. In the meantime, the rapid indebtedness period of the citizens followed by economic instability so-called “BUST” period that caused serious problems and consequences on the quality of retail portfolio as well as in personal finances of clients.
Purpose - The aim of this dissertation was to apply the scoring model card built by four blocks of factors: socio-demographic factors, microeconomic, macroeconomic and relationship bank-client to determine the factors that affect the deterioration of performing unsecured retail loans and assess loans into categories none risk, low risk, medium risk and high risk.
Design – A structured questionnaire was developed from the scoring model map and was distributed to the users of unsecured retail loans delivered by commercial banks in Macedonia.
Findings – From the analysis carried out, it was found out that push strategy for market penetration applied by Cross Sell approach in the context of volatile economy have reached on pointer 2, an indicator that shows that commercial banks had managed to deliver at least two credit products to their clients. However another side of coins is not so bright in the figures, the results shows the existence of strong relationship between sales-risk, i.e. selling additional banking products has led to increased credit risk and has increased the level of loans classified with average risk and high risk.
The results shows that Up Sell approach used for credit card market penetration has not yet reached pointer 2. Even though number of credit cards issued by commercial banks has reached 287,523 at the end of October 2012, the number of credit cards in clients’ wallet still does not have two credit cards. On the other hand, the results show that holders of two or more than two credit cards have increased tendency of failure in a medium-term period. Multinomial regression and Correlation analysis with SPSS 17.0 were used to administrate this research study.