a framework for credit analysis加拿大著名咨询公司在建设银行的讲座

1、Credit Analysis,1,A Framework for Credit Analysis,I. Risk Assessment II. The Clients Funding Needs III. Loan Structuring IV. Loan Management,Credit Analysis,2,I. Risk Assessment,Monitoring the Economic Environment Analyzing Industry Conditions Assessing a Clients Marketing Management Appraising the

2、Clients Operations Management Evaluating Management Capabilities and Character Analyzing the Borrowers Financial Management,Credit Analysis,3,Monitoring the Economic Environment,Much of the risk associated with a loan is due to broad economic forces as shown on the next slide Lender must manage its

3、exposure to certain types of businesses Lender may have to curtail lending, even to businesses with a good track record, in periods of economic adversity Necessary to monitor the current and forecasted economic environment,Credit Analysis,4,The Economic Environment - Cont.,Key elements of the econom

4、y Economic growth - the business cycle Inflation rates Interest rates - the level, term structure and risk structure Government - political trends and current fiscal and monetary policies International relationships - balance of payments, currency value, international markets,Credit Analysis,5,The E

5、conomic Environment - Cont.,It is important for the lending officer to keep on top of broad economic conditions because of their potential impact on the banks clients and the quality of the officers loan portfolio,Credit Analysis,6,Analyzing Industry Conditions,A borrowers financial performance depe

6、nds on: Current conditions and prospects for its industry How well the company is positioned relative to the competition? It is necessary to understand both the risks and opportunities for the major industry sectors in the banks market Determine two factors: Are the industrys prospects attractive? W

7、hich types of firms are most likely to succeed in the industry?,Credit Analysis,7,Analyzing Industry Conditions,Banks now create portfolio management groups Monitor industry concentrations in the banks loan portfolio Determine future prospects for key industries Set limits on the maximum exposure th

8、e bank will permit for an industry or specific borrower Risk classification systems - used to assign a numeric risk rating to all borrowers or loan requests. Industry conditions form part of this risk rating.,Credit Analysis,8,Factors affecting Industry Conditions,Michael Porters Model Ease of Entry

9、 Availability of Substitute Products Bargaining power of buyers and suppliers Competitive rivalry. Rivalry tends to be greatest when there are numerous companies producing largely undifferentiated products or services. Dependence on other industries,Credit Analysis,9,Assessing a Clients Marketing,Ma

10、rketing is a critical factor for most borrowers, especially “start-ups”, those entering a new business or facing tough competition Firm should have a plan which covers: Product Policies Price Policies Promotion Personal Selling Activities Distribution Policies,Credit Analysis,10,Appraising the Clien

11、ts Operations Management,Operations management - the set of activities required to transform inputs such as raw material and labour into the final product. Major components of operations include: Quality - value for money Process Design - technology, plant layout Facilities Planning and Scheduling I

12、nventory Management - how much is necessary to carry? Employee management,Credit Analysis,11,Evaluating Management Capabilities and Character,Determine the experience and skills of key principals This includes technical knowledge, contacts, resources in marketing, operations and finance plus skill i

13、n managing and motivating others Assess managements character: integrity, financial conservatism and respect for creditors,Credit Analysis,12,Analyzing the Borrowers Financial Management,Strong financial management is an essential ingredient for success Financial capacity is the composite of managem

14、ent policies and practices in several areas: Is there adequate liquidity? The firms relationships with trade creditors, lenders and investors The equity capital contributed by the owners The extent of the owners withdrawals,Credit Analysis,13,Borrowers Financial Management contd,Calculate key financ

15、ial ratios 1. Profitability ratios 2. Asset utilization ratios 3. Financial capacity tests Which ratios to calculate will vary with the the industry and type of business (example - service or manufacturing),Credit Analysis,14,Profitability Ratios,Profit Margin: Net profit after tax/net sales. Gross

16、Profit margin: The portion of revenues remaining after the cost of sales. (Net Sales - Cost of Sales)/ Net Sales Sales Growth: Measured over time. Usually expressed as a % growth per year. Return on Assets: Net Profit/Total Assets. This may be distorted due to the age of the firms assets.,Credit Ana

17、lysis,15,Profitability Ratios,Return on Equity = Net Profit/Total Equity This measures the rate of return on the capital provided by equity investors. Equity includes common stock, retained earnings, and minority shareholders interest Banks normally require an agreement from the owners that equity f

18、unds will not be withdrawn without the banks prior permission,Credit Analysis,16,Asset Management Ratios,Turnover of Current Assets. Days of inventory = Inventory/(Cost of Sales365 days). This shows how carefully management is controlling its investment in inventory. Cost of sales is used to ensure

19、that both goods sold and inventories are compared on the same basis, namely at the cost of purchase or production.,Credit Analysis,17,Asset Management Ratios,Collection period for Receivables = Accounts Receivable/(Net Credit sales365) Tells us how quickly Accounts Receivables are collected In addit

20、ion, the lender should obtain an aging schedule which classifies Accounts Receivable by how long they have been outstanding For example, if the business sells on net 30 days then most receivables should be no longer than 30 days,Credit Analysis,18,Typical Aged Accounts Receivable Schedule,0-30 days

21、31-60 61-90 90+ Grade A Company Inc 12,000 A Good Bet operating, revolving or term Advances and Conditions Precedent Purpose Term Interest Rate,Credit Analysis,54,Designing loan agreements and loan covenants,Loan Agreements (continued) Repayment Schedule Collateral Security Representation and Warran

22、ties - statements of fact about the client which the bank has assumed to be true when making the loan offer. For example, the existence of certain contracts. Covenants - guidelines which the borrower promises to follow in the future operation of the business Event of default - the events which lead

23、to a default of the agreement Costs and Pricing,Credit Analysis,55,Designing loan agreements and loan covenants,Important Covenants may include: Submission of financial statements - interim monthly statements and final annual statements Submission of other data - for example, monthly accounts receiv

24、able reports Maintenance of liquidity - maintain certain levels of working capital and ratios Maintenance of assets - maintain assets in good condition Maintenance of management and ownership without prior notification to the financial institution,Credit Analysis,56,Designing loan agreements and loa

25、n covenants,Insurance Coverage - eg. fire and theft insurance over company assets Maintenance of a certain net worth or the ratio of equity to debt Negative Covenants - prevent the client from taking actions unacceptable to the bank. Some example include: Limit on debt Restrictions on disposal of as

26、sets without prior notification to the bank Restrictions on changes in the nature of the business including acquisitions and mergers.,Credit Analysis,57,Designing loan agreements and loan covenants,Negative Covenants continued Restriction on asset purchase or investments Limit on salaries and divide

27、nds Guidelines in Setting Covenants All banks provide their lending officers with a specimen loan agreement which outlines the most common terms and covenants. The banker must then tailor the loan agreement to the needs and risks of his client.,Credit Analysis,58,Part IV. Loan Management,Monitoring

28、the Loan Managing Problem Loans,Credit Analysis,59,Monitoring the Loan,Monitoring involves a set of activities aimed at ensuring that an outstanding loan is being repaid as scheduled, the clients ability to repay is not deteriorating and the collateral security is being maintained. What should be mo

29、nitored? Day to day operations - cash flows The acquisition and sale of assets The taking on or repayment of liabilities,Credit Analysis,60,Monitoring the Loan,Monitor Cash Flows - regular financial statements, client meetings and following economic events which may influence the clients business Mo

30、nitor the Clients Assets - financial statements, accounts receivable 1. Identifying problem loans 2. Working out the loan 3. Ending the relationship Problem loans are statistically inevitable All risk cannot be eliminated, rather it must be managed A Problem Loan is one where the borrower is unable

31、or unwilling to repay the obligation and there is potential for partial or total loss to the bank,Credit Analysis,64,Managing Problem Loans,Early Warning Signals Delinquent Loan Payments Delayed financial information Change in deposit patterns, excesses and returned cheques Major differences in plan

32、ned results versus actual Loss of borrower rapport - poor communication Adverse information from the borrowers competitors/customers Increase in inquiries from trade creditors Unusual business activities,Credit Analysis,65,Managing Problem Loans,Warning Signs continued Changes in Management Breaches of covenants Determine if these are