Bank Valuation Course Objectives:
- Get an overview of financial statement analysis for banks, including the banking book, financial instruments and the reporting and valuation of derivatives
- Have explained to them the fundamentals of regulatory capital
- Gain an understanding of the regulatory framework, Basel requirements and the key capital, liquidity and funding ratios.
- Learn about calculating risk weighted assets (RWAs): credit risk RWA, counterparty risk, market risk and operating risk and the latest Basel IV updates
- Have an overview on the forecasting and modelling of banks based on their financial statements and publicly available regulatory information of Barclays, participants forecast its financial performance based on its historical statements
- Be taught about other techniques of bank valuation, including the dividend discount model and key multiples of Barclays.
Bank Valuation Course Content:
Financial Statement Analysis for Banks
The aim of this session is to provide participants with an understanding of the financial statements of a bank. The focus is on the banking book and financial instruments. The reporting and valuation of derivatives is also discussed.
- Banks’ financial statements overview
- Accounting for loans
- Non-performing loans
- Understanding impairments vs. write-off
- Incurred losses (IAS 39) has been replaced by expected losses (IFRS 9)
- Accounting for financial instruments
- Lastest IFRS 9 implications: Amortised cost, FVTPL and FVTOCI
- Level 1, 2 and 3 valuations
- Impairments of financial instruments
- Accounting for derivatives
- Hedge accounting: fair value, cash flow and net investment
- Netting derivative assets and liabilities
Case study: Barclays Financial Statements
Fundamentals of Regulatory Capital
Throughout this module, participants review the current regulatory requirements, in particular Tier I and Tier II capital ratios and understand detailed computations.
- Overview of regulatory framework
- Overview of Basel I, II and III and latest Basel IV updates
- Overview of calculating available and required capital
- Common Equity Tier 1 (CET1), Tier 1, Tier 2 and Total capital
- Key reconciliation items from IFRS Book Equity to CET1: minority interests, deferred tax, changes to investment portfolio, etc.
- Overview of calculating risk weighted assets (RWAs): credit risk RWA, counterparty risk, market risk and operating risk with the latest Basel IV requirements
- Overview of key capital, liquidity and funding ratios
- Tier 1 and total capital ratios
- Leverage ratios
- Liquidity coverage ratios (LCR) and Net stable funding ratios (NSFR)
Case study: Barclays Regulatory Ratios Review
Forecasting and Modelling Banks
Based on the financial statements and publicly available regulatory information of Barclays, participants forecast its financial performance based on its historical statements.
- Modelling and forecasting the balance sheet: deposit or loan-driven?
- The loan and trading book
- Funing requirements and mix: deposit vs. wholesale funding
- Growth in funds under management
- Modelling and forecasting the income statement
- Understanding the income statement drivers
- Net interest income and margin
- Non-interest income
- Forecasting loan impairment through the credit cycle
- Operating costs
- Modelling and forecasting regulatory capital
- Risk weighted assets
- Required and available capital under Basel I, II or III
- Liquidity requirements and stable funding requirements
- Forecasting dividends (payout ratio and/or minimum capital requirement)
- Ratio analysis and key performance ratios
Case study: Financial Modelling of Barclays on Excel
Following the forecasting of the bank’s performance, this session focuses on the Dividend Discount Model (“DDM”) and key multiples of Barclays.
- Free cash flow to equity mode
- Present value of future dividends
- Cost of equity for banks
- Terminal value: review of potential approaches (key parameters or RoE)
- Sensitivity analysis
- Banking trading multiple
- P/BV and adjustment to BV explained
- P/E, dividend yield
Case study: DDM and Multiples of Barclays on Excel
This Bank Valuation Course allows participants to build a structured approach to the analysis and valuation of banks. Specifically, through a mix of lecture, case studies and Excel modelling of Barclays, the workshop will equip participants to:
- Review the accounting and valuation of banks’ financial statements including the loan book, financial instruments and derivatives used for hedging purposes;
- Further advance participants’ understanding of the latest Basel III developments including MREL, counterparty credit risk and the latest leverage and liquidity ratios (LCR and NSFR);
- Understanding the key metrics to value a bank, including performing all the steps of a Dividend Discount Model (DDM) and Multiples Analysis using Excel.
Background of the Trainer:
The trainer has 15 years of experience in accounting and investment banking at leading firms and is an experienced financial trainer who has delivered courses for financial institutions in the City of London and around the world, in the areas of Corporate Finance, Valuation (Industrials and Banks), Financial Modelling, M&A, LBO, Financial Accounting, Capital Markets, Bank Regulatory Capital, Financial Risks, both in English and French.
What Redcliffe’s Clients are saying about the course:
“Perfect pace, slow enough to keep up with the materials and the rest of the class but agile enough to be entertained and interested”
— M&A Associate, Alantra Corporate Finance
“Thorough modelling and relevant information covered”
— Loan Syndications, SEB Corporate Finance
“Relevant for my current role, comprehensive approach to valuation, gives a good structure on all steps required end to end”
–Corporate Development Associate, Royal Bank of Scotland
“Good background in bank regulation, capital etc.”