Analysing Banks' Financial Statements

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Course overview The global financial crisis, the collapse of major financial institutions and an unprecedented volatility in the credit and financial markets have highlighted the importance of bank balance sheet analysis. This course provides professionals and managers who are involved in the accounting, controlling or analysis of financial statements of banks, a comprehensive overview of the most important trends and developments in banking reporting. The course covers the latest developments in accounting and IFRS, as well as the key issues of valuing financial assets and liabilities, loans, derivatives and hedges, with a particular emphasis on Basel III equity requirements. The methodolog…

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Course overview The global financial crisis, the collapse of major financial institutions and an unprecedented volatility in the credit and financial markets have highlighted the importance of bank balance sheet analysis. This course provides professionals and managers who are involved in the accounting, controlling or analysis of financial statements of banks, a comprehensive overview of the most important trends and developments in banking reporting. The course covers the latest developments in accounting and IFRS, as well as the key issues of valuing financial assets and liabilities, loans, derivatives and hedges, with a particular emphasis on Basel III equity requirements. The methodologies of book accounting and fair value principle are explained. The key value drivers for banks are highlighted and transformed in valuation methodologies for financial institutions. Summary of course content Analyse the P/L margin and trading income Identify the most important performance ratios Understand the impact of IFRS accounting Forecast provisions for the different asset classes Apply balance sheet analysis with fair value and accrued income accounting Understand the new equity rules under Basel III Use derivative and hedge accounting Assess the liquidity of your institution and calculate the new liquidity ratios Methodology The course is taught through lectures, case studies, practical exercises and class room discussions, using real life case studies and examples to develop delegates' understanding of all aspects of wholesale, retail and asset management banking valuation. You will learn to apply various methodologies of valuing banks, the ability to understand their results and their application to real life situations. Who should attend? Analysts in banks, investment funds or private equity houses M&A and advisory specialists active in the banking industry Portfolio managers and investment analysts Managers in the accounting, controlling and finance departments in banks Professionals in accounting, consultancy and law firms Supporting publication:
DAY ONE: Analysing the bank’s profit and loss statement Understanding bank strategies The Banking industry after the financial crisis Regulatory requirements under Basel III Recent developments in mature and emerging markets Assessing the strategic position of a financial institution Understanding the value drivers in Corporate banking Retail banking Investment banking Workshop: SWOT analysis of an emerging market bank IFRS rules for disclosure of banks The application of rules Accounting policies under IFRS General rules and principals Presentation of bank’s financial statements Balance sheet Profit & loss statement Cash flow statements Disclosures requirements Classification of financial assets and liabilities Maturities of assets and liabilities Hedging assets/liability mismatch and derivatives Off-balance sheet items Other disclosures Deficiencies and proposed changes Workshop: Analysing key components of a bank’s financial statement Analysing the asset side Understanding the asset side of banks Introduction to book value, accrual accounting and fair market value Different classifications for financial assets and liabilities FVtPL, AfS, Loans and receivables, held to maturity Differences in accounting treatments Reclassification of financial assets The economic outcome Understanding fair value Determining fair value Application and risk in fair value Level I-III assets Treatment of financial instruments Derivatives Categories of investment securities Hedge accounting Fair value hedges Cash flow hedges Case study: Applying hedge accounting Case study: Different categories for securities – a practical guide DAY TWO: Analysing the balance sheet Analysis of loans and advances General principles Types of loans and advances Book and fair market value implications Calculating expected losses on loans Forecasting the provisioning level Assessing the appropriate NPL level Determining write-offs The loan coverage ratio Valuing collateral and derivatives Write-offs and loan loss reserves Determining general and special provisions Retail portfolio Workshop: Charting provisions for different asset classes Market valuation of assets Introduction to the concept of cash flow valuation Catching interest rate risk Determining the cash flow Coupon vs. discount rate Time to maturity Different types of loans Term loans Instalment loans Adjustable-rate loans Leasing The appropriate discount rate Case study: Comparing book accounting with cash flow valuation Other assets and off-balance sheet items Investment in subsidiaries Property, plant and equipment Intangible assets incl. the treatment of goodwill Pledged assets Other assets Analysing the liability side General accounting rules The new liquidity ratios under Basel III LCR NSFR Short-term and long-term funding Inter banking Retail deposits Depositors Bonds and other securities The market value of long-term bonds Derivative and contingent liabilities Deferred tax liabilities Other liabilities Workshop: Valuation of long-term liabilities under IFRS The importance of equity The new equity requirements under Basel III Different layers of tier 1 equity Core tier 1 equity Retained earnings Additional tier 1 Regulations for Sifis The new regulations for tier 2 equity General reserves Provisions The diminishing importance of revaluation reserves (OCI) Fair market valuation Hedge accounting Other tier 2 instruments The new importance of equity derivatives Loss protection Risk mitigating The diminishing importance of OCI equity Case study: Analysis of revaluation reserves DAY THREE: Analysing the profit & loss statement Understanding net interest income, fees and provisions Introduction to P&L accounting General rules and principles Analysing net interest income Margin income Interest expenses Understanding the margin contribution Understanding mismatches and GAP analysis The outcome of cash flow hedges Forecasting non interest income Fee income Trading income The importance of VaR Assessing risk in the trading portfolio Other operating income Case study: Calculating an interest mismatch Case study: Understanding ALM management Determining expenses Operating expenses Compensation and benefits Amortisation and depreciation Impairment of intangible assets Other expenses Extraordinary items Bad debt charges assessment Individually vs. collectively provisions Case study: Analysis of financial ratios for the P/L Day 4: Identifying value drivers Calculating equity cash flow The rationale for equity cash flow Composition of equity cash flow Operating cash flow Changes in assets Changes in liabilities Non operating income Applying cash flow in the bank analysis Case study: Calculating equity cash flow and comparing key value drivers Using financial ratios Introduction Identifying a peer group Decomposing the bank’s performance Ratio analysis Profitability Liquidity Solvency Asset quality Decomposing RoA and RoE Case study: Calculating equity cash flow and comparing the different performance ratios The valuation of banks Rationale for valuation Why are bank valuations different? Different methodologies Discounting equity cash flow Dividend discount model Market multiples Performance ratios Case study: Bank valuation using equity cash flow and financial ratios Recap and summary
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There are no frequently asked questions yet. Send an Email to info@springest.co.uk