Alex Overstrom, who is head of aviation finance for PNC, seems to have inherited a penchant for a career in finance. His late father, Gunnar S. Overstrom, Jr., was vice chairman of FleetBoston Financial and the former president and COO of Shawmut National Corporation. His older brother, Gunnar Overstrom III, runs a hedge fund.
Alex Overstrom received his A.B. in public policy from Duke University and then joined Goldman Sachs, where he spent eight years, including 2008, when the market meltdown occurred. He joined PNC in 2014 and assumed his current position in January 2017. Prior to that, he was the firm’s COO of corporate and institutional banking with responsibility for data infrastructure and data quality, CRM and sales reporting, analytics and strategy, business communications, environmental and social risk management, and client and employee experience.
PNC has more than 500 aircraft in its portfolio and Overstrom is optimistic about the future of business aviation and related financing. “We have made more business aircraft loans than any other firm each year since 2009,” he says. “We think there is room to grow our market share, given the strength of our platform.”
Overstrom doesn’t believe the bizav market is likely to return to the fat days of the mid-2000s anytime soon, however. He says that airframers are still “in a tough spot, as [used aircraft] price declines have made new aircraft less competitive with preowned.” He adds, though, “that we are still financing a decent number of new aircraft, particularly with large corporate clients, who are often leasing. I expect that the used-aircraft market will remain robust while new aircraft will be challenged over the next 12 to 24 months. As used-aircraft inventory declines and prices rise, and OEMs bring production to lower levels, [the industry] should begin to get back closer to an equilibrium state.”
Your father was a very accomplished business and community leader. What did he teach you?
I was incredibly lucky to grow up in an amazing and loving family, but I had only 17 years with my dad. It was enough, however, to see two things that have stuck with me. First, people deserve to be treated honestly, decently, and with at least an initial presumption that they mean well. Second, integrity and your values are ultimately what matter. They’re what define you.
You studied public policy at Duke as opposed to business. Why?
I wanted to improve my decision-making skills. Duke’s public-policy program was grounded in decision theory: how analysis can and should lead to change. It combined political science, economics, and policy into something that felt tangible to me. It also involved lots of reading and writing, which I enjoyed. I don’t think people in finance appreciate this, but the ability to write well is important. Finally, I thought—given my interests and what my dad and brother did—that I’d end up working in finance, so I wanted to do something different first.
What are some of the most important books you’ve read?
Innovator’s Dilemma, by Clayton Christensen, is one I return to often as a way to force myself out of the practice of viewing ideas and opportunities through the lens of a large financial institution. Basically, to not look at new or different opportunities simply against our current customers, product sets, or financial performance, but instead try—and it can be hard and unnatural—to think about them in terms of what might be, whether that be entirely new markets, new clients, or new business architectures.
One book I read recently is Principles, by Ray Dalio, who runs the largest hedge fund in the world, Bridgewater. The book gives good insight into a corporate culture that is very different from most—one designed around truly embracing reality and being what Dalio describes as “radically transparent.” Some of it is fairly extreme and probably works only in the small, tightly designed culture that Dalio has created at Bridgewater, but the essence of it resonates with me: if you don’t embrace reality—the good things and, more importantly, the things that aren’t so good—you can’t grow or get past them. Most people fight reality when it’s not what they want it to be, but that is the biggest impediment to growing, and that applies to us individually as well as to our businesses.
You were at Goldman Sachs through the 2008 financial crash. What did that experience teach you about financial markets?
I was 25. It was a stark way to start my career. It taught me a lot about the cyclicality of markets and the economy, the need to remember that no matter how good or bad things may feel at a particular point, it’s a cycle and it will turn. Perhaps the most dangerous phrase in the English lexicon is “this time is different.”
Over the last decade, there has obviously been some tightening in loan qualification requirements. But has there also been a leap in the data that lenders track on underwritten assets and are they quicker to pull the trigger when things look askew?
Data is important. And we are increasingly using it in ways that benefit us and our clients. Think about consumer loans: these typically have been underwritten looking at FICO, but that can leave some borrowers underbanked. So we’re working on using data and analysis of payment flows and deposits to look beyond FICO and expand our lending pool. Within our business, we look at our portfolio’s performance constantly—and we look at trends to understand what’s driving performance or underperformance from a credit and asset perspective. We’re always looking for ways to improve, but we’re also out talking to clients, because that’s just as important.
Conversely, you spend a lot of time and resources hosting industry events and relationship building. In today’s banking environment, is there any place for judgment and intuition, or are decisions always solely data-driven?
Our whole philosophy is to build meaningful, longstanding relationships with our clients and partners. For our partners, whether those are the leading broker dealers, the OEMs, or other players, we have the opportunity to help them deliver for their clients. And those relationships are incredibly important to us. So we spend a lot of time with those partners, understanding their needs and helping them understand our model and how we evaluate risk and return.
The stock markets have been on a tear this year, but new-aircraft sales aren’t as robust as one might expect in this economy.
It’s a classic case of supply and demand. There has been a glut of aircraft in the market for a long time—we’re just now beginning to normalize—and that has driven down prices on preowned aircraft to the point where buying a lightly used plane can be a very rational decision versus buying a new plane. As the market heats up, buyers are taking the better-priced and better-vintage used aircraft off the market and driving up prices, which eventually will make the decision to go preowned less attractive.
What major changes have there been in aviation finance over the last few years?
The market has become more competitive. We’re seeing new entrants—banks as well as less-regulated institutions. Leasing has gotten a bit more attractive, as some of the firms that had been bigger players in the leasing space have pulled back after taking residual losses. That’s created a bit more rationality in the market, and as a result we’ve done more tax leases this year than ever before. Also, asset-based lending products, which require limited or no recourse or disclosure, continue to be attractive to customers, and as the only bank offering the product, we’ve seen significant demand for that form of financing from borrowers with complex financials—think hedge-fund owners, real estate developers, and those that really value their privacy. It’s also a loan that we can execute in as little as two weeks.
When you joined PNC Aviation Finance, what was your immediate goal and what strategy have you executed to attain it?
This already was a phenomenal business, so the question for me was, how do we take it to the next level? One goal was to grow our share of large-cabin transactions as our asset-based product has historically skewed towards the mid-cabin space. Also, build on the excellence of our asset-based platform, which allows us to lend up to 80 percent loan-to-value on a limited or non-recourse basis, with limited financial disclosure. What’s great about this product is its flexibility, and also how quickly we can close and fund for our clients.
NAME: Alexander Overstrom
POSITION: Head of Aviation Finance, PNC, 2017–
PREVIOUS POSITIONS: COO, Corporate & Institutional Banking, PNC, 2014–2016; investment banking and firmwide strategy roles, Goldman Sachs, 2006–2014
EDUCATION: A.B., public policy, Duke University, 2006
PERSONAL: Married with four-year-old daughter and two-year-old son. Lives in Pittsburgh, Pennsylvania. Enjoys tennis.