When ABL is the Family Business: TD Bank’s Nemia Looks Back at 35 Years in the ABL Industry
Over the course of his 35-year career, TD Bank Executive Vice President and Head of Asset-Based Lending Joseph Nemia has worked at some of the most storied companies in the business — Chase Manhattan, CIT and GE Commercial Finance, among others. He shares his perspective on today’s ABL world and offers a look back at the days when interest rates spiked at 20% and inflation ran wild.
Throughout history, a family business or trade was a legacy passed from generation to generation. In finance, the Morgans, the Rockefellers and the Drexels built great houses that transferred from father to son. A few storied businesses live on — Steinway and Sons, Russ and Daughters — but, for the most part, family businesses are on the decline. It seems as if every week a 50- or 100-year old family firm is closing because owners are aging, and the latest generations prefer to establish their own legacies.
There are still a few family holdouts, and if your name is Joseph Nemia, ABL is your destiny.
Nemia, executive vice president and head of Asset-Based Lending at TD Bank, has spent more than 35 years in the industry. Unlike other financial executives who found their way into asset-based lending after starting out in other areas, Nemia followed in his father’s footsteps when he began working as a field examiner for Chase Manhattan Commercial Finance.
“My dad had been in the business for many years, and I learned a little from him, enough not to completely scare me away,” Nemia says with a laugh.
“After receiving my accounting degree from Pace University, I knew I didn’t want to go into public accounting, and ABL seemed like a way to use my degree to see the world and learn about a variety of industries through auditing.”
Turbulent Times in Finance
Those were turbulent years — in many ways the very opposite of today’s turbulence. “The economy at the time had runaway inflation and a record number of bankruptcies. Interest rates were at an all-time high with prime rate at or near 20% and most loans priced between 3% and 5% over prime. I think the usury rate in New York at the time was 25%,” Nemia recalls.
Those early years at Chase provided a strong foundation for development in asset-based lending. “My first office at the time was located at 1411 Broadway in the heart of New York City’s garment center. ABL played a significant role in the capital structure of the textile and apparel companies and our clients were within 10 city blocks of our office,” he says.
Nemia liked dealing with people as well as numbers and satisfied these inclinations in ABL. “When lending to middle-market companies and small businesses, you deal directly with the key decision makers in a company — it could be the CFO or the business owner,” he says. “This allowed me to understand how a successful business is operated, as opposed to one that was not.”
“Many of my early days in field examination were spent either in a bankruptcy court or being on-site at a company that was going through a liquidation via an auction process,” he adds.
Nemia learned other key life lessons during his early days in ABL. “One of the most helpful aspects of being a field examiner in a distressed economy was recognition of how not only the borrower’s business and collateral performed, but also how the business owner and account manager would react to a situation — especially if there was an alleged fraud or potential for a loan loss,” he says. “It was fascinating to say the least.”
Nemia spent three years at Chase before moving on to assist a start-up ABL division at Bank of New York. Seven years later, he moved on to GE Capital, which became his home for 14 years. Once more, he played a major role in starting an ABL business.
Creating GE’s ABL Division
“It was an energizing time at GE Capital,” he says. “The company decided to restart and re-establish GE Commercial Finance, which was a business venture with very few assets. By the time I left in 2006, the business had grown significantly in assets and people, serving many different segments of the financial services market.”
At that point in his career, Nemia was looking for an opportunity to use his talent and was “agnostic” about working for a bank or a non-bank lender. He took the position of CIT Commercial and Industrial president, which — similar to GE Capital — was looking to re-energize its commercial finance business. “I thought it was a great opportunity to build on my experiences and really move the needle there,” he says. Nemia spent two years at CIT.
“Around 2007, 2008, about the time that Bear Stearns went away, CIT also began to have problems. I was then recruited by RBS Citizens’ president, the late Jim Connolly, to run three of their business lines — the asset-based business, the equipment leasing business and their dealer floorplan business.”
Four months into his term at RBS, the financial crisis hit and as Nemia says, “The world changed.” Lehman Brothers closed its doors, swept under by the failure of subprime mortgages, which proved to be the tip of the iceberg. Soon the country was submerged in the Great Recession, and the ABL world was rocked with the rest of the economy. “Liquidity and capital were at a premium. Whether it was a mortgage or not really didn’t matter,” Nemia points out.
The UK government responded to the financial crisis by taking over RBS. “This was a significant decision. At that point, it was clear that it was going to take some time for RBS to find its way back to where it was earlier and resume public ownership,” says Nemia, who moved to TD Bank in 2011.
In 2008 TD exploded into the U.S. market by acquiring Cherry Hill, NJ-based Commerce Bank, which billed itself as “America’s Most Convenient Bank.” TD continued the services Commerce pioneered — seven-day banking, no-fee ATM machines and 24/7 phone service — all before the internet opened up more options. TD acquired a devoted customer base along with the bank’s financial assets.
“What was important to me when joining TD was the strength of the TD brand and balance sheet,” Nemia says. “With both RBS and CIT, I learned a lesson about liquidity. And TD had the most appeal of any of the institutions that I was considering. It was AAA-rated when I joined and was one of a few banks which remained that strong through the financial crisis. What I found to be the most impressive was TD’s ability to navigate through the financial crisis and be in a position to strategically operate the lending business. Where other banks were looking to shed their assets, TD was in growth mode.”
TD in Growth Mode
Now in his fifth year at TD, Nemia acknowledges that 2016 has not been a banner year for ABL, but says TD has remained successful in this environment. “TD ABL is consistent in attracting new customers, and we’ve done a great job in growing and retaining new and existing customer relationships. We remain true to the TD risk culture as we take on more prominent roles with our customers either as a direct lender or as an active member of a bank group. The TD ABL team of experienced professionals provides deep thought leadership to both existing and prospective clients.
“We are committed to provide our customers with solutions and products that fit their needs and contribute to their business success,” he says. “The team has done a good job growing our presence in a choppy market.”
Looking ahead to 2017, Nemia says, “From an ABL business leader perspective, I think that across the board, when it comes to our competitors, we are all facing many of the same issues. There will continue to be a focus on the return on capital, a key metric to shareholders. Improving productivity, examining existing processes, looking for new ways to leverage technology and increasing the scale of our business will be a large part of 2017 focus for sure.”
Will we start to see business expansion? “If M&A activity picks up, we will see an active ABL market,” he says. “As far as active growth in the markets that we serve, I see measured growth with no obvious dynamics or fundamentals that are going to be a game changer.”
Despite what appears to be status quo on the business front, Nemia exudes great optimism stemming from his belief in TD, its customers and his team.
“This is a great industry that we’re in. I work for a terrific bank that has a balance sheet and a willingness to understand what ABL lending is. Our senior leadership continues to be very supportive given the strength and deep domain expertise of the ABL team. When you work with smart people and you have a clear message for your customers and employees, it’s meaningful. It gets you out of bed in the morning and keeps you energized.”
While many in the industry seem concerned that young people are not rushing through the doors, Nemia sees a different picture. “We have been successful in recruiting a bright group of business analysts that were eager to join our business — most have been out of school less than three years. We recruit from business schools or undergrad programs. They have a great opportunity to learn from our experienced team how to be successful in ABL.”
Although one of those newer industry recruits is working at PNC, not TD, Nemia is proud that Joseph Nemia III has chosen to enter the family business.
“If you’re born with the name Joseph Nemia, you have to be in ABL,” quips Nemia Sr.
They may not have a shingle that proclaims “Nemia and Son,” but in an era of constant disruption, it is heartening to see a family tradition continue.