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Fundamentals of Bank Financial Statement Analysis

A two-day workshop covering the basics of financial statement analysis for banks using the CAMELS framework. Designed for analysts with limited accounting background and/or new to the analysis of financial institutions.

This course was previously called "Introduction to Bank Financial Statements".
Course content has NOT been changed.

Course Objectives

Specifically, participants will be equipped to:

  • Distinguish the risks in the different business lines and products offered by financial institutions and recognise how they are reflected in the financial statements
  • Understand the components of bank financial statements and key ratios used in bank analysis
  • Recognise the impact of differing accounting standards and policies (e.g. provisioning, asset valuation, securitization etc.) on the financial statements
  • Use the CAMELS framework (capital, asset quality, management, earnings, liquidity and sensitivity to market risk) and key ratios to make a preliminary assessment of the performance and financial health of a bank.

Target Audience

This programme is designed for analysts who have limited or no experience in the analysis of financial statements for financial institutions. The workshop leads into the following intermediate level seminars: Intensive Bank Analysis, Emerging Market Bank Analysis and Non-Bank Financial Institutions.

Content

ANALYTIC OVERVIEW
  • Structured approach to analysis
  • Defining CAMELS within the context of overall bank analysis
Types of financial institution
  • Key activities and products of financial institutions: credit products, trading and investing, services and funding
  • Business models and key drivers of performance
  • Relating the business to the balance sheet and income statement: differences between balance sheets of different types of bank and non-bank financial institution
  • Major balance sheet and income statement components
  • Exercise: building a balance sheet for banks and non-bank financial institutions.
BUSINESS RISK
Asset quality
  • Statement logic and accounting: types of credit risk, on and off balance sheet, accounting for problem impaired loans
  • Loan quality: portfolio analysis, impaired/problem loans (past due, non accrual and restructured loans)
  • Reserve adequacy: provisioning levels, allowance, charge offs and recoveries
  • Trading and investments: securities and derivatives portfolios
  • Local and international benchmarks for key ratios and performance indicators
  • Exercises:
    • problem loan definitions
    • matching asset quality ratios
Illustration case study

Asset quality ratio analysis.

Sensitivity to market risk
  • Statement logic and accounting: valuation techniques for investments and derivatives - fair value through income statement, available for sale, held to maturity; SFAS 157 disclosures
  • Risk in the securities and derivatives portfolios
  • Value at risk and other measures of market risk: advantages and disadvantages
Illustration case study

Market risk disclosure.

Earnings
  • Statement logic and accounting: types of income and expense, impact of earnings accrual and asset impairment policies, core and non-core earnings
  • Key drivers of earnings: net interest margin, fees and commissions, trading
  • Ratios to measure quality and diversity of income, cost control, provision burden
  • Local and international benchmarks for key performance indicators
  • Exercise: matching earnings ratios
Illustration case study

Performance risk ratio analysis.

Management
  • Key indicators of risk appetite: growth, underwriting standards, risk profile
  • Franchise: distinguishing features permitting an institution to generate high risk adjusted returns.
Illustration case study

Assessing management.

FINANCIAL RISK
Liquidity and funding
  • Statement logic and accounting: funding sources, on and off balance sheet treatment for securitisation
  • Funding stability and different sources: deposits, commercial paper, repos, inter-bank lines, senior and subordinated bonds, common and preferred stock
  • Key drivers of liquidity: volatility of liabilities, quality and liquidity of assets, contingency funding needs
  • Local and international benchmarks for key liquidity and performance indicators
  • Exercise: matching liquidity ratios
Capital adequacy
  • Statement logic and accounting: types of capital, reported book equity, adjusted common equity and hybrid capital
  • Key drivers of capital: earnings, asset valuation, capital raising
  • International and local capital regulation: Basel I and II; Basel III changes
  • Risk weighted assets: Basel I vs. Basel II approach
  • Key ratios: tier one and total capital ratios, leverage, core capital and other measures
  • Local and international benchmarks for key performance indicators
  • Exercise: financial statement analysis.
Illustration case study

Assessing financial risk.

Workshop Times

Typical timings for our courses; upon registration we shall advise you if these have changed.
Breakfast: 8.30am
Course Start: 9.00am
Course End: Between 5.00pm and 5.30pm
Lunch: Starts between 12.30pm and 1.00pm, and lasts no longer than 1 hour
Short breaks: 10-15 minutes are taken mid morning and mid afternoon.
Please make your course selection
Dubai -
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Frankfurt - £1,495 + 19% VAT
3 - 4 June, 13
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14 - 15 October, 13
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Hong Kong - US$2,200
23 - 24 September, 13
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London - £1,495 + 20% VAT
1 - 2 July, 13
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16 - 17 September, 13
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2 - 3 December, 13
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New York - US$2,200
24 - 25 June, 13
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21 - 22 October, 13
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Sao Paulo - US$2,200
17 - 18 June, 13
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Singapore - US$2,200
24 - 25 June, 13
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28 - 29 October, 13
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Stockholm - £1,495 + 25% VAT
11 - 12 November, 13
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Toronto -
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Washington, DC -
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The majority of Fitch Training programmes are offered at an intermediate and advanced level. There are no specific prerequisite courses to attend our programmes, however some topic knowledge maybe required. Please refer to the target audience on the course page for more details.

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