A three-day intensive, case study based, workshop offering an in depth view of the main non-bank financial institutions: finance and leasing companies, securities companies and regulated funds and fund managers.
Course Objectives
Participants will be equipped to:
- Distinguish the key business and financial risks by sector, market and product line
- Use quantitative and qualitative analysis and market indicators to identify strong and weak performers and detect early signals of changing credit quality
- Evaluate financial statements to uncover key credit issues and the impact of differing accounting policies.
Target Audience
An intermediate credit course for experienced fixed income, commercial and investment banking professionals responsible for fixed income investment, sales/trading, credit risk management or origination. Participants with less experience in the analysis of financial statements may wish first to attend the two day Introduction to Bank Financial Statements, which leads into this workshop.
The majority of Fitch Training programmes are offered at an intermediate and advanced level. There are no specific prerequisite courses to attend our programmes, however some topic knowledge maybe required. Please refer to the target audience to see what level of prior knowledge is required for a specific course.
Content
ANALYTIC OVERVIEW
- Purpose payback model - a structured approach to credit analysis
- Key risks - operating environment, financials, management and support
- Exposure structures - key risks and mitigants by sector
- Statement logic: using the business cycle to anticipate balance sheet structures
FINANCE AND LEASING COMPANIES
Operating environment
- Key risks and competitive issues by sub-sector - sales finance, direct finance, equipment finance, credit cards and mortgages etc.
- Impact of minimal regulation and supervision; legal framework of secured lending
Management, franchise and ownership
- Franchise - assessing the validity of the business model, residual marketing
- Critical management issues for finance and leasing companies - processes and systems, market knowledge, strategy etc.
- Shareholders - quality of financial and business support; risks and benefits of cross subsidies
Financial fundamentals
- Statement logic; accounting policies for income, receivables, delinquencies and leases (finance versus capital leases etc.)
- Business risk - use of financial tools to assess quality of lease and loan book; reserve adequacy, owned versus managed book; residual risk
- Funding risk - stability and variety of wholesale funding sources, gap management, availability of contingency funding, liquidity and capital adequacy
- Securitization - benefits and risk of off balance sheet funding vehicles; residual risk, mortgage servicing rights and gain on sale accounting
- Performance risk - balancing risk and return; income stability and expense control
- Early warning signals - lessons learned from a failed finance company
SECURITIES COMPANIES
Operating environment
- Understanding the risks in the different securities markets
- Key competitive issues by sub-sector - investment banks, wholesale brokers, specialists, prime brokers, retail brokers etc.
- Regulation and supervision - focal points; impact on strategy and credit standing
Management, franchise and ownership
- Critical management issues for securities companies - strategy, risk management (VaR and other models), corporate governance and key man issues
- Shareholders - quality of financial and business support
- Double leverage and other group or conglomerate risks
- Franchise - maintaining advantage in a competitive market
Financial fundamentals
- Statement logic - key accounting policies and risk of window dressing
- Performance risk - earnings volatility and cost control
- Business risk - risk profile of securities company products and businesses
- Market risk / asset quality - key accounting issues, securities haircuts, off balance sheet exposures etc.
- Financial risk - managing funding stability and liquidity risk
- Capital adequacy - regulatory and analytic tools to assess the strength of capital and the risks of leverage
- Early warning signals - lessons learned from a failed securities company
FUNDS AND FUND MANAGERS
Fund Orientation
- Types of fund - regulated (mutual and pension funds), less or un-regulated (hedge funds, fund of funds etc.)
- Fund objectives, policies and practices - assessing the risk profile
- Structure and legal status of funds
- Key parties - fund manager, custodian, prime broker etc.
- Regulation and supervision
Financial fundamentals
- Market risk - evaluating fund objectives and practices and the degree of market volatility and liquidity risk involved
- Performance - benchmarking performance against indices and evaluating past performance; Sharpe and other performance measures
- Size - reviewing size, diversification and market position of fund
- Liquidity - redemption risk and benefits of capital locks, back-up credit lines
- Asset quality - assessing the risks in the asset composition, haircut analysis and NAV calculations
- Leverage - current and maximum leverage, use of hybrid capital
Fund manager
- Role and relevance of the fund manager; experience
- Size, breadth and depth of client base; diversity of funds
- Performance risk - earnings diversity and stability; control of expenses
- Business risk - cash management, investments in funds, management controls, cash-flow analysis
- Financial risk - leverage, liquidity and earnings stability.
Workshop Times
Below are typical timings for our courses; upon registration we shall advise you if these have changed.
Breakfast: 8.30am
Course Start: 9.00am
Course End: Between 5.00pm and 5.30pm
Lunch starts between 12.30pm and 1.00pm, and lasts no longer than 1 hour.
Short breaks of 10 - 15 minutes are taken mid morning and mid afternoon.