Mastering Corporate Banking and Financial Analysis

Banks help corporations fund operations and investments by turning deposits into loans, while offering cash management, treasury services, and cross-sell products as a relationship institution beyond lending.

Strengthen corporate relationships by preparing for meetings, uncovering needs, and presenting tailored banking solutions; the relationship manager, as the bank's representative, uses client insights to spot credit and cross-selling opportunities.

Understand how bank deposits, particularly site deposits, fund liquidity by channeling funds to assets as credits, a transformation feature that affects pricing and corporate banking decisions.

Explore how term deposits price Euribor-based costs, explain breakage fees, and show how banks manage liquidity by using term and side deposits to finance operations.

Explore hybrid deposits that blend term and sight features, with pricing driven by tenure and amount under a EURIBOR framework, reflecting practical contract requirements and banking practice.

Understand the loan approval process from indicative memorandum to disbursement, including non-binding offers, credit applications, financial and risk analysis, contract negotiations, and timing of each stage.

This lecture outlines the indicative memorandum as the first phase of proposing a loan deal, highlighting the client’s financial standing, net debt to EBITDA, EBITDA margin, and credit ratings.

Master the loan approval process by crafting compelling credit applications and a synopsis that highlights the client's strengths, deal profitability, key ratios, and industry outlook.

Showcases a €30 million investment loan for X Industrial Holding Company to fund a new factory and expansion, highlighting diversified activities, a single bilateral agreement, and liquidity above 100%.

Detail credit transaction by identifying the borrower and subsidiary, loan amount and currency, pricing (six-month Libor), fees, covenants, and collateral or guarantors (including suretyship) for a 30 million USD loan.

Assess the borrower's management and owner for credit approval, focusing on governance and compliance. Avoid politically exposed persons and embargoed or blacklisted country relations to prevent conflicts and compliance risk.

In the credit application, note the ownership at 50% private owner and 25% each for two funds, with sanctions risk; collaborate with compliance and legal to discontinue operations there.

Describe a borrower's company in a credit application by detailing department structure, supply chain integration, non-financial figures, and potential future investment plans to inform the risk department.

Highlight a dispersed industrial holding operating in 17 countries across Europe and the US, with Boston headquarters and Paris operations, showcasing diversified, resilient profile with steel tubes and combustion engines.

Learn how credit pricing works in the credit application phase, including base rate, reference rate, and margin, and how to transparently decompose pricing for clients using tools or Excel models.

Analyze six month USD Libor plus 5% as credit pricing, showing margins rise with longer tenors and ratings from AAA, AA, A, B to C.

Explore how to estimate loan profitability in a credit application, using internal reporting systems to compute direct income, margins, fees, and risk-adjusted return on capital under Basel requirements.

Discover how profitability in a credit application sums income from margin times loan amount with upfront and commitment fees, plus an ex-ante rerack of 12% driving a high risk-adjusted return.

Master Swat analytics within the credit application phase by identifying strengths, weaknesses, opportunities, and threats to convincingly present a realistic client view to management and decision makers.

Navigate the financial analytics in credit applications, defend against the credit risk manager's downgrades or upgrades, and analyze liquidity and short-term obligations with the Excel model.

Analyze the balance sheet of an industrial holding company by identifying current and fixed assets, cash, receivables, real estate, and the financing mix of equity and long-term debt.

Analyze the cash flow statement's three sections: operating, investing, and financing, explaining how changes in accounts receivable, inventories, and accounts payable, along with depreciation, and investments, drive free cash flow.

Assess profitability and management effectiveness for the industrial holding corporation using ROE, ROA, net income, net sales, total assets, total equity, and EBITDA margin to gauge core operations.

The company demonstrates strong liquidity with large current assets and cash, a current ratio near ten and a cash ratio well above one, despite indebtedness and favorable credit committee review.

Analyze the indebtedness and leverage of an industrial holding company by examining current liabilities, long-term obligations, and the balance sheet total, highlighting red flag and credit risk.

The lecture explains net debt to EBITDA and the debt service coverage ratio, showing how cash reduces net debt and influences lending decisions.

Analyze accounts receivable, accounts payable, and inventory days using AR to net sales, AP to COGS, and inventory to COGS, all multiplied by 360 for cash-flow insight.

Present a binding credit offer after approval, detailing the amount and pricing, such as 30 million USD at six-month Euribor plus 5%, and explain pricing objectively.

The final steps in loan approval include client and bank decisions, contract negotiations and signing, and disbursement with two-week drawdown notice, noting cross-border considerations and LMA standards.

Pricing a loan compensates the bank for capital through base rates and credit margins in a standardized, transparent process that reflects client risk, with large corporates paying less than SMEs.

Explore how base rates drive credit pricing and how central bank decisions, through the cost of funds and transmission mechanisms, influence Euribor, interbank rates, and loan pricing.

Assess how banks price credit by adding the credit margin above the base rate, with the margin equal to base margin plus risk premium, rising with tenor and rating.

Explore how liquidity risk premia interact with cross-currency swaps and drive prices when currencies move. Depreciation of the Hungarian forint against the euro raises swap fees and euro-based credit prices.

Explore upfront fees and commitment fees, key elements of credit pricing, and how overdraft lines and amortizing loans affect charges, including non-German amount and a €100 million example at 5%.

Explore bonds as tradable credit instruments within the debt capital market, covering issuance steps, information memoranda, roadshows, primary and secondary markets, coupon, tenor, no collateral, and risk.

Learn how to price bonds by discounting future cash flows to present value, using coupon and discount bonds, with a four-year face value example.

Explain bond yields with a practical excel model, covering auction yield, coupon payments, and the secondary market. Show a 300 face-value example yielding 15% overall.

Explore bond duration concepts, including Macaulay and modified duration, and learn how duration drives bond price sensitivity to interest rate changes.

Build a universal cash flow model for bonds and fixed income. Track face value, coupon payments, and capital repayments across 60 periods using embedded formulas, monthly discount rates.

Model the bond’s cash flows to compute its net present value with the Excel mpv/npv formula and a monthly discount rate.

Discover how refinance loans and state subsidized funding provide cheap capital to banks, enabling them to lend to corporations and boost liquidity for SMEs during COVID-19.

Examine how refinance loans work, comparing non-subsidized and state-subsidized cases, including margins, base rates, fees, and how banks earn up to 11% while clients pay as little as 4%.

Explore two common refinance loan structures: funding by external parties and bank debt issuance, showing how governments and institutions subsidize loans to lower client rates.

Explore green finance, including green loans and bonds, sustainability linked debt, and the pivotal role of banks in driving the green transformation of the economy.

Monitor post-disbursement credit risk by analyzing client financials, tracking covenants and collateral values, including FX risk, and explaining deterioration in net sales and EBITDA to stakeholders.

Explore how foreign exchange risk affects credit monitoring when a euro loan is collateralized in Hungarian forint, and learn to manage collateral risk with an Excel model.

Explore foreign exchange risk in credit monitoring, focusing on collateral ratio dynamics, the euro and Hungarian forint rates, and how depreciation or appreciation affects cash calls and risk controls.

Develop credit monitoring by leveraging news watch, Bloomberg and Reuters, and regular client news analysis; assess fx, commodity, and regulatory risks to proactively manage portfolio exposure.

Spot potential deal risks, inform the relevant bodies, and renegotiate terms to protect profitability; when serious, involve the workout department to restructure or, if needed, sell collateral and exit.

Analyze quarterly net sales, gross margin, operating expenses, ebitda, and net income to assess profitability and debt service capability; illustrate liquidity and seasonality in an industrial holding company.

Learn interest rate modeling in Excel by building a two-part rate (reference and margin) using a rating and tenure matrix, data validation, and index-match to compute interest payable.

Apply credit annuity cash flow modeling in Excel to construct an amortizing schedule with fixed repayments, using IPMT, PPMT, and PMT formulas to separate interest and principal.

Explore how net debt to ebitda measures indebtedness against ebitda and informs covenants in credit contracts; learn to compute, monitor, and graph this ratio in Excel to assess borrower risk.

Discover how corporate lending operates within a regulated banking world and why measuring and managing operational and financial risk is essential to prosper in your career and private life.