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Advanced Bank Analysis

Evaluating Complex Financial Statements

A two-day advanced case study based workshop which drills down into the financial statements of banks and securities companies in order to identify and quantify the risks of more complex business lines.

Course Objectives

The objective of this two-day advanced case study based workshop is to drill down into the financial statements of banks in order to identify and quantify the risks of more complex business lines.

Participants will be equipped to:

  • Recognise how and the extent to which more complex banking businesses are reflected in the balance sheet and how the risk profile is evidenced in the income statement
  • Identify and quantify exposures where all or part of the exposure is off-balance sheet, including derivatives and structured finance vehicles
  • Understand how the new accounting and reporting conventions under both US GAAP and IFRS impact differently the financial statements of banks and investment banks
  • Use the information provided to evaluate the bank's risk profile and appetite
  • Recognise best practice in financial reporting, including new GAAP / IFRS requirements and Basel II Pillar III disclosures.

Target Audience

Experienced analysts, regulators, risk and fixed income professionals with a good understanding of the analysis of financial institutions. This workshop is a follow-on from our intermediary level workshops: Intensive Bank Analysis, Emerging Market Bank Analysis and Non-Bank Financial Institutions. Other complementary workshops include Risk Management in Banks & the Capital Implications and Early Warning Signals in Banks.

Content

ANALYTIC OVERVIEW
The goal of this section is to recognise when it is necessary to go beyond traditional ratio analysis for a bank and focus on the risk profile of more complex activities.
Analytic issues
  • Complex banking activities: business models and risk profiles
  • Analytic challenges – ratio analysis
Case study:

Review of core analysis using basic ratios; identifying the need to drill down further behind the numbers.

LENDING ACTIVITIES
The goal of this section is to review the risk profile, accounting and financial analysis of more complex lending exposures, in particular commitments, loans at fair value and credit derivatives.
Product risk overview
  • Loan and loan commitments; contingent liabilities
  • Best practice: need for global systems (limits and outstandings), models that accommodate correlated variables; Credit VaR, Portfolio Management.
Financial statement analysis and accounting
  • Fair valuation and cost plus impairment techniques; banks who use a mix of fair value and cost accounting
  • Using the financial statements to assess credit risk: insights and limitations of traditional impaired loans and provisioning ratios
  • Using Pillar III disclosures to analyse risk
Case studies:

Assessing lending, contingent and structured credit risk in large complex banks.

SECURITIES AND DERIVATIVES ACTIVITIES
The goal of this section is to review the risk profile, accounting and financial analysis of securities and derivatives exposures and the use of models and stress tests to evaluate them.
Product risk overview

Long and short positions in equities, bonds and commodities

  • Impact of derivatives on banking book credit risk: credit derivatives used for hedging
  • Quantifying counterparty risk: current and potential future exposure (PFE) calculations
  • Relating market risks to the success of the business model: key sensitivities to different markets.
Financial statement analysis and accounting
  • Treatments of trading and hedging transactions under FAS 133 and IAS 39
  • Using the financial statements to assess trading and market risk
  • Reliance on, and volatility of, trading profits
  • Measuring VaR levels: benchmarking performance against peers
  • Other disclosures about market risk: back testing, stress testing, other risk measures
  • Assessing derivatives counterparty exposure:
    • how the risk should be measured
    • disclosures to expect and how to use them
Case study:

Assessing market risk and counterparty risk in derivatives.

STRUCTURED FINANCE TRANSACTIONS
The goal of this section is to review the risk profile, accounting and financial analysis of structured finance transactions, used in the trading and investment portfolio, as a funding vehicle or as a vehicle for managing third party assets.
Product risk overview
  • Types of transaction: securitisation, other structured credit products, other off-balance sheet vehicles e.g. SIVs, ABCP
  • Different risk profiles: what went wrong?
  • Role of investment banks in the originating, securitising, trading and investing in RMBS liquid and non-liquid (equity) tranches.
Financial statement analysis and accounting
  • When and where structured finance assets and liabilities will come on-balance sheet
  • Quantifying exposure to CDO’s, MBS, and SIV’s
  • Valuing securities marked to model when market values can not be established
Case study:

Assessing the risk in structured finance on and off balance sheet.

FINANCING ACTIVITIES
The goal of this section is to review the risk profile, accounting and financial analysis of more complex funding sources, in particular repos, stock lending, client balances and different sources of capital. The section will include an update on Basel III capital and liquidity regulations.
Product risk overview
  • Financing transactions: stock borrowing and lending, repos and reverse repos, repo 105
  • Re-hypothecation of client balances - liquidity challenges
  • Relating transaction flows to liquidity
  • Legal structure: implications of double leverage
  • Capital: impact of key accounting issues e.g. deferred tax, unrealised gains and losses etc.
  • Acquisition accounting: impact of negative goodwill on earnings and capital
Financial statement analysis and accounting
  • Using the balance sheet to assess liquidity risk and capital adequacy
  • Off-balance sheet exposures and their implications; window dressing
  • Liquidity regulations: impact on disclosure
  • Capital adequacy: core and hybrid capital in Basel II and Basel III
  • Ratios: what they mean and how they should be used
Case studies:

Analysing liquidity risks and assessing quality of capital.

Workshop Times

Below are 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 of 10 - 15 minutes are taken mid morning and mid afternoon.

Please make your course selection
Frankfurt - £2,800 + 19% VAT
8 - 9 October, 12
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London - £1,850 + 20% VAT
22 - 23 May, 12
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14 - 15 November, 12
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New York - US$2,800
21 - 22 June, 12
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29 - 30 October, 12
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Toronto - US$2,800
4 - 5 December, 12
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Date to be confirmed
Register Interest
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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NASBA

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 to see what level of prior knowledge is required for a specific course.

The pre-course reading materials will be sent to each participant in preparation for their attendance on the course.

Client Comments
"Very professional, had a practical accent and sufficiently integrated accounting, banking business model and Basel regulatory changes. Very useful in helping decipher risk disclosures."
- Vincent Papa
- CFA Institute
Previous Step Training
People often attend:

Emerging Market Bank Analysis

Intensive Bank Analysis
Alternative Courses
This is only for those who analyse large complex banks. We also run Early Warning Signals in Banks course which looks at recent cases of failures and what the warning signs might have been.
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