Analysing Banks Financial Statements

A comprehensive 4-day course for banking experts that will help you to:

Understand the principles of IFRS accounting
Identify the most important performance ratios
Analyse the P/L, margin, and trading income
Forecast provisions for the different asset classes
Apply the 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 situation and calculate the new liquidity ratios
Understand the importance of mismatches

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 a comprehensive overview of the most important trends and developments in bank reporting.

The programme starts with an introduction to the key principles of IAS/ IFRS accounting principles and policies; the major disclosure requirements and most recent developments will be discussed. The difference between book valuation, accrual accounting and the fair value methodology will be described.

In the second part, an in depth understanding of the asset side of the balance sheet will be developed. Particular emphasis will be laid on the treatment of financial instruments, securities, loans and hedge accounting. Delegates will learn how to apply and forecast the credit cycle and the related provisions for credit losses.

The discussion of the liability side will focus the accounting principles regarding long- term liabilities, derivatives and the different equity positions under the new Basel III guidelines. The difference between nominal shareholder funds, regulatory and economic equity will be explained and key items as “Revaluation reserves” are interpreted.

On the third day, the major elements of the P& L statement are introduced with a particular emphasize on interest income, understanding gap analysis and mismatches, forecasting fee income. Delegates will learn how to treat trading income and forecast appropriate provision levels for the different asset classes. The different expense categories will be described. Finally, the cash flow statement will be developed out of the operating, non- operating income and the changes in assets and liabilities.

On the last day, delegates will translate their accounting knowledge into financial ratio analysis in order to assess the strength and weaknesses of a financial institution. They will apply their knowledge to the principal valuation techniques for banks

The programme features

The course applies to professionals and managers who are involved in the accounting, controlling or analysis of financial statements of banks.
They are introduced to the latest developments in accounting and representing financial statements in accordance with IFRS principles.
The key issues of valuing financial assets and liabilities, loans, derivatives and hedges are discussed in examples.
A particular emphasis is given to the new 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.
Participants will learn to apply various methodologies of valuing banks, understand their different results and their successful application to real life situations.

Day 1

Analysing the bank’s profit and loss statement

Welcome and introduction
Programme overview
Delegates’ expectations

Understanding bank strategies

The Banking industry after the financial crisis
New 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
  - Swaps, options, futures, forwards
Categories of investment securities
Hedge accounting
- Fair value hedges
- Cash flow hedges
Case studies: 1. Applying hedge accounting 2. 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
- 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 1equity
- 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 3

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 studies: 1. Calculating an interest mismatch 2. 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

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Kami memberikan alternatif Fasilitas atas Investasi anda dalam Program ini, diantaranya :

Sertifikat, Peralatan Training, USB, Souvenir, Lunch, Coffe Break, City Tour
Running minimal 2 Orang (Semarang, Jogja, Solo), Running minimal 3 Orang (Bandung, Jakarta), Running 4 Orang diperuntukan untuk daerah (Bali, Lombok, Manado, Balikpapan)
Kami menyediakan transportasi antar Jemput dari Stasiun/Bandara ke Tempat Pelatihan(Hotel) bagi perusahaan yang Running minim 2 Orang
Harga dilampirkan di Brosur Penawaran

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Analysing Banks Financial Statements