bank_management(e)_chapter11_part1.pptVIP

1. Fundamental Credit Issues 2. Evaluating Credit Request: A Four-Part Process Overview of Management, Operations, and the Firms Industry Common Size and Financial Ratio Analysis Cash Flow Analysis Financial Projections 3. Risk-Classification Scheme 4. 商业银行授信工作尽职指引 1. Fundamental credit issues The basic issue in credit analysis is to determine whether a borrower has the commitment and ability to repay a loan in line with the terms of the agreement Five key questions/issues: What is the character of the borrower and the quality of information provided? What are the loan proceeds going to be used for? How much does the customer need to borrow? What is the primary source of repayment and when? What collateral is available ? (Secondary source of repayment) Character and quality of data An individual’s honesty, integrity, and work ethic typically evidence commitment. For a business, commitment is evidenced by the owners and senior management. Whenever there is deception or a lack of credibility, a bank should not do business with the borrower. It is often difficult to identify dishonest borrowers. The best indicators are the borrower’s financial history and personal references. Audited financial data. 2. Evaluating credit requests: A four-part process The purpose of credit analysis is to identify and define the lender’s risk in making a loan. Four-part process: Overview of management, operations, and the firm’s industry Common size and financial ratio analysis Analysis of cash flow Projections and analysis of the borrower’s financial condition Step 1: Overview of management, operations and industry Background information on the firm’s operations Organizational and business structure Products or services provided Competitive position in the marketplace Business and industry outlook report Management character and quality The nature of the borrower’s loan request and the quality of the financial data provided. Step 2: Common size and financial ratio analysis Common s