Course dates
Attending this event will help you:
- Make better business decisions
- Conduct due diligence more accurately
- Extract the key data for bank valuation
- Apply pertinent rules and regulations to banks’ financial statements
- Forecast trends and development
- Understand the principles of IAS/ IFRS accounting
- Analyse the P/L and balance sheet
- Apply ratio analysis to identify risk and chances
- Understand the convergence of IFRS with US – GAAP
Who should attend
- Managers in the accounting, controlling and finance departments
- Professionals in accounting firms
- Analysts in banks, investment funds or private equity houses
- M&A and advisory specialists active in the banking industry
- Portfolio managers and investment analysts
- Banking and strategy consultants
- Lawyers and accountants
Day 1 starts with an introduction to the key principles of IAS/ IFRS accounting principles and policies, discussing the most recent developments and the major disclosure requirements. We will describe differences between book valuation, accrual accounting and the fair value methodology.
On day 2, you will develop an in-depth understanding of the asset side of the balance sheet. The emphasis will be on the treatment of financial instruments, securities, loans and hedge accounting. You will learn how to apply and forecast the credit cycle, along with the related provisions for credit losses.
Discussion of the liability side will focus the accounting principles regarding long-term liabilities, derivatives and differing equity positions. We will study differences between nominal shareholder funds, regulatory and economic equity.
Day 3 features the major elements of the P&L statement, focusing on interest income, understanding gap analysis and mismatches, forecasting fee income and appropriate provision levels, and the different expense categories. We will develop the cash flow statement from changes in assets and liabilities, and operating and non-operating income.
On day 4, you will translate your accounting knowledge into financial ratio analysis to assess the strength and weaknesses of a financial institution. You will apply their knowledge to the principal valuation techniques for banks.
Day 1
Analysing the bank’s profit and loss statement
Welcome and introduction
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Programme overview
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Delegates’ expectations
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Understanding bank strategies
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The Banking industry after the financial crisis
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An updated outlook of the word economy
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New regulatory requirements
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Recent developments in mature and emerging markets
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Assessing the strategic position of a financial institution
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Understanding the value drivers in
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Corporate banking
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Retail banking
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Investment banking
Workshop: SWOT analysis of an emerging market bank
IAS/ IFRS rules for disclosure of banks
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The application of rules
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Accounting policies under IAS/ IFRS
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General rules and principals
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Presentation of bank’s financial statements
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Balance sheet
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Profit and loss statement
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Cash flow statements
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Disclosures requirements
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Maturities of assets and liabilities
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Hedging assets/ liability mismatch
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Derivatives
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Off-balance sheet items
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Losses on loans and advances
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Other disclosures
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Deficiencies and proposed changes
Workshops:
1. Analysing key components of a bank’sfinancial statement.
2. Differences between IAS/ IFRS and US- GAAP
Analysing the asset side
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Understanding the asset side of banks
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Introduction to book value, accrual accounting and fair market value
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Determining market value
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Level I-III assets
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Cash and cash equivalents
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Financial instruments
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Treasury bills and other short-term instruments
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Repos and trading securities
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Derivatives
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Swaps, options, futures, forwards
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Categories of investment securities
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Hedge accounting: Fair value hedges and Cash flow hedges
Case studies:
1. Applying hedge accounting.
2. Different categories for securities: a practical guide
Day 2
Analysing the balance sheet
Analysis of loans and advances
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General principles
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Types of loans and advances
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Book and fair market value implications
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Calculating expected losses on loans
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Forecasting the credit cycle
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Valuing collateral and derivatives
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Write-offs and loan loss reserves
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Determining general provisions
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Retail portfolio
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The treatment of non- accrual loans
Workshop: Charting provisions for different asset classes
Market Valuation of Assets
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Introduction to the concept of cash flow valuation
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Catching interest rate risk
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Determining the cash flow
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Coupon vs. discount rate
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Time to maturity
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Different types of loans
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Term loans
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Installment loans
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Adjustable – rate loans
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Leasing
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The appropriate discount rate
Case study: Comparing book accounting with cash flow valuation
Other assets and off- balance sheet items
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Investment in subsidiaries
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Property, plant and equipment
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Intangible assets
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The treatment of goodwill
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Pledged assets
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Other assets
Analysing the liability side
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General accounting rules
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Short-term funding
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Inter banking
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Retail deposits
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Long-term funding
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From depositors
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Bonds and other securities
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The market value of long-term bonds
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Derivative and contingent liabilities
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Retirement and pension obligations
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Deferred tax liabilities
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Other liabilities
Workshop: Valuation of long-term liabilities under IFRS and US-GAAP
The importance of equity
Case studies:
1. The difference between regulatory and economic capital
2. Analysis of revaluation reserves
Day 3
Analysing the profit & loss statement
Understanding net interest income, fees and provisions
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Introduction to P&L accounting
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General rules and principles
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Analysing net interest income
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Margin income
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Interest expenses
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Understanding the margin contribution
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Understanding mismatches and GAP analysis
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Forecasting non interest income
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Fee income / trading income
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Other operating income
Case studies:
1. Calculating an interest mismatch
2. Understanding ALM management
Determining expenses
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Operating expenses
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Compensation and benefits
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Amortisation and depreciation
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Impairment of intangible assets
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Other expenses
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Extraordinary items
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Bad debt charges assessment
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Individually vs. collectively
Case study: Analysis of financial ratios for the P/L
Day 4
Identifying value drivers
Calculating equity cash flow
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The rationale for equity cash flow
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Composition of equity cash flow
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Operating cash flow
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Changes in assets
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Changes in liabilities
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Non operating income
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Applying cash flow in the bank analysis
Case study: Calculating equity cash flow and comparing key value drivers
Using financial ratios
Case study: Calculating equity cash flow and comparing the different performance ratios
The valuation of banks
Case study: Bank valuation using equity cash flow and financial ratios
Prague Hotel, Prague, Czech Republic
This programme takes place on a non-residential basis at a local hotel in Prague. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation.
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Clive Wykes
Born in Belgium of British nationality, Clive Wykes was raised and educated both in England and Belgium, where he graduated from the University of Louvain (UCL) with a Masters in Applied Economic Sciences.
From 1973 to 1991 he developed his career in banking with American Express and Chase Manhattan Bank. During those years he covered many areas of banking: credit and marketing, risk management, product development and management, budgeting / MIS and strategic planning as well as general management. He was exposed to local and international markets in retail, SMEs, large global corporations and institutions. He a wealth of experience in tactical and strategic Risk Management and Corporate Finance, and successfully applied this to the development of new products and markets.
In 1991, he founded a Management Consultancy firm, and developed his business with financial institutions including BIL, Crédit Agricole, ING, San Paolo IMI, First Rand Group and many other local and foreign institutions. His consulting firm collaborates with other organisations, consultants, and solution vendors, to offer a full range of services in training and in management consultancy.
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