Intensive Bank Analysis
The overall goal of this three-day course is to provide participants with a structured approach to analyzing the credit risk of developed market, commercial and universal banks and the skills to make an independent assessment of the strengths and weaknesses of a bank.
Live Online Training
Since 2003, Fitch Learning’s industry experts have been delivering world-renowned virtual training programs to learners across the globe. Benefits include:
- World-class video conferencing technology
- Fully interactive, engage and network with peers using break out rooms, quizzes and polls
- On-hand technical support team throughout
- Attend from anywhere, across four time zones
- Save time and costs on travel
Suitability - Who should attend?
This is an intermediate level course for credit risk management, fixed income, origination and regulatory professionals. The two-day Fundamentals of Bank Financial Statement Analysis is designed as a preparation for those with limited accounting and banking experience.
Outcome / Qualification etc.
Credits: 24 CPD pts.
Key Learning Outcomes:
- Use a structured approach to the analysis of banks, incorporating the CAMELS framework within the wider context of the operating environment
- Identify strong and weak performers using a detailed analysis of financial statements within the context of local and international accounting and business norms
- Identify financial, qualitative and market early warning signals of credit risk and migration
- Stress test bank capital and ability to withstand credit, market and liquidity risk
- Evaluate strategy and risk management capabilities within the context of the current global pandemic and future economic climate focusing on implications of COVID-19 and changing competitive, political and regulatory conditions, including Basel III capital and liquidity requirements
Training Course Content
This section provides a structured framework of analysis including the use of market indicators.
- Overview of the framework and tools of bank analysis: operating environment, financial fundamentals, management and support
- Purpose and payback model: a structured approach to credit analysis
- Key issues in exposures to banks: exposure profile, seniority, safeguards, pricing
- Rating agency approaches: issuer ratings, individual / financial strength and support ratings
- CAMELS (capital, assets, management, earnings, liquidity, sensitivity to market risk)
- Market perspective on credit: equity indicators, credit default swap and bond market indicators
- Exercise: understanding and applying the purpose payback model and demonstrate the typical borrowing needs and repayment capacity of a commercial bank
This section focuses on the impact of external factors on the banking systems, including the economic environment, competitive environment and regulatory and supervisory pressures.
Macro - economic and systemic issues
- Impact of macro - economic variables on performance, especially with the global recession caused by the COVID-19 pandemic
- Bank systemic risk: macro prudential indicators
- Macro prudential indicators of risk; credit growth, equity and property prices and FX
- Competitive and structural issues of the banking system
Regulation and supervision
- Changing roles of the regulator and supervisor
- Key regulations: purpose and implementation
- Quality of regulation
- Considering the impact on bank profitability of the operating environment in various countries
- Consider and quantify the impact on bank capital adequacy ratios of the implementation of Basel III
This section covers how to measure and evaluate bank performance, distinguish strong and weak performance and appreciate the limitations of the figures.
- Relating business mix to financial statements
- Accounting policies and disclosure: IFRS and local GAAP; fair valuation - securities, derivatives, own debt
- Exercise: understanding how the business model of a financial institution impacts its financial statements
- Loan portfolio analysis: uncovering the risk profile; key differences between types of bank
- Loan quality: impaired loans and reserve adequacy
- Off balance sheet exposures: lending commitments, SIVs, conduits and other special purpose vehicles
- Trading risk: assessing securities and derivatives portfolios, use of value at risk (VaR) models and stress testing
- Investment risk: valuation and accounting policies, hidden reserve or black hole
- The capital base and profitability of a bank may be influenced by their provisioning policies
- Identify the risks prevalent in the trading operations of a commercial or investment bank
Financial Fundamentals (continued)
- Market risk for the banking book
- Main illustration case study: Assessing business risk, incorporating loan portfolio quality, trading portfolio and other credit and market risks
Performance risk – earnings
- Balancing the risk/return profile: Strategy and risk appetite
- Income stability and diversity: Earnings at risk
- Control of expenses: Targets and peer comparisons
- Main illustration case study: Assessing performance of a bank, incorporating overall returns, income diversity and stability and cost control
Financial risk – liquidity
- Funding risk: Stability and variety of funding sources, contingency funding
- Liquidity of assets: Identifying truly liquid assets, stable funding of illiquid assets
- Liquidity of liabilities: Stability of deposit base, dependence on short-term wholesale funding, inter-bank market, key challenges of repo and CP funding
- Gap management: Using the tenor and interest rate mismatch tables to better understand refinancing risk
- Basel III liquidity guidelines: liquidity coverage ratio and stable funding ratio
- Securitization vehicles: Accounting and credit implications
Financial risk – solvency
- Capital: Size, quality and adequacy of capital base under Basel I, II and III
- Types of capital: Common equity vs. Additional Tier 1 and Tier 2
Financial Fundamentals (continued)
Financial risk – solvency (continued)
- Standardized and advanced approaches for credit, market and operational risk
- Leverage ratios: Benchmarks and challenges
- Capital adequacy: Measuring size, quality and adequacy of capital base; regulatory capital ratios and assessing regulatory capital for non-deposit takers
- Bail in waterfall
- Internal capital adequacy assessment process (ICAAP)
- Stress-testing capital for market and credit write-downs
- Main illustration case study: Assessing financial risk including solvency, funding strategy and liquidity in the light of the risk profile of the business model
Early warning signals
This section considers a variety of early warning signals which may indicate financial stress at a bank.
- Financial and non-financial indicators of distress
- Market indicators: Equity, CDS and bond indicators
- Exercise: Distinguishing strong and weak players
Why choose Fitch Learning
9 in 10 would recommend us to a colleague
Over 1,300 clients worldwide
The cost of this course includes a light breakfast, lunch and two additional refreshment breaks during each day of the course.
Fitch Learning can also deliver this course as in-house training for your company, anywhere in the world. Tailored courses by Fitch Learning are designed to reflect your goals at both a corporate and a team level and help meet your specific training requirements.
This course is recommended as a preparation for our advanced level courses:
- Early Warning Signals in Banks
- Advanced Bank Analysis
- Risk Management in Banks and the Capital and Regulatory Requirements
The Emerging Market Bank Analysis course is an additional course which covers a similar analytic approach to this Intensive Bank Analysis course but with a focus on emerging market specific issues.
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Live Online Training Since 2003, Fitch Learning’s industry experts have been delivering world-renowned virtual training programs to learners across the globe. Benefits include: World-class video conferencing technology Fully interactive, engage and network with peers using break out rooms, quizzes and...
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