
Forecast an Islamic bank using Sharia principles, deriving revenue and costs, and building a full banking model with balance sheet, cash flow, income statement, ratios, and valuation.
Learn how Islamic banks model financing versus conventional lending, explore murabaha, musharakah, ishana, and mudaraba, and forecast bank balance sheets and PNL with shariah-compliant considerations.
Explain why banks segregate net financing income from non financing income to highlight core revenue, top line, and non core income, alongside operating and non operating items.
Forecast balance sheet items under Islamic financial modeling, forecasting share capital, reserves, non-controlling interest, and proposed cash dividends using payout ratios, and project profit sharing and additions or disposals.
Analyze financing income in Islamic banking by treating profit on financing and deposits as a backdoor interest. Forecast average financing earning assets and average financing bearing liabilities to model returns.
Forecast provisions and impairments in Islamic financial modeling by showing gradual asset-quality improvement and a lower non-performing loan rate. Adjust assumptions to align income statement, balance sheet, and cash flow.
Master noncontrolling interest, dividend, and reserves in a Sharia-compliant financial model. Link adjustments through cash flow and retained earnings, avoiding double counting and clarifying transfers to retained earnings.
Forecast and link balance sheet, cash flow, and income statement under Islamic finance, incorporating retained earnings, reserves, zakat, and proposed dividends. Apply valuations like DCF, DDM, and price-to-book for banks.
Analyze liquidity using net loans to customer deposits and deposits to banks. Forecast non-performing loans and loan loss reserves, assess coverage and capital adequacy with equity to total assets ratio.
Compute valuation ratios using shares outstanding, excluding treasury shares, and market price in fils to derive earnings per share, book value per share, and dividend per share, and dividend yield.
Compute the cost of equity using the risk-free rate and market risk premium, then value banks with dividend discount model and price-to-book methods, weighted 80/20.
Introduction: Welcome to the Financial Modeling for Islamic Banking course, an immersive journey into the unique landscape of financial modeling tailored for Sharia-compliant institutions. This course provides a comprehensive foundation for participants to navigate the intricacies of Islamic banking practices, emphasizing the principles and methodologies that set it apart from conventional finance.
Throughout this course, you will be introduced to key concepts, principles, and practices specific to Islamic banking, offering you a specialized skill set in financial modeling within this distinctive framework. Whether you are a finance professional seeking specialization or a student looking to broaden your understanding, this course is designed to equip you with the knowledge and skills essential for effective financial modeling in Islamic banking contexts. We will be learning the followings:
Section 1: Introduction This section serves as a foundational overview of the Financial Modeling course for Islamic Banking. It introduces learners to the key concepts and structures specific to financial modeling in the context of Islamic banking practices.
Section 2: Punching Balance Sheet In this section, participants delve into the practicalities of constructing a balance sheet tailored to Islamic Banking principles. Key emphasis is placed on accurately representing financial positions while adhering to Sharia-compliant standards.
Section 3: Punching Cash Flow Participants will gain insights into crafting cash flow statements aligned with Islamic Banking principles. The section covers the unique considerations and nuances associated with cash flow in the context of Sharia-compliant financial institutions.
Section 4: Assumptions This section explores the critical assumptions integral to financial modeling for Islamic Banking. Learners will understand how to factor in various assumptions that play a pivotal role in the accuracy and reliability of financial models.
Section 5: Linking Balance Sheet The art of linking different elements within an Islamic Banking balance sheet is the focus of this section. Participants will learn how to establish meaningful connections between various financial components for a holistic representation.
Section 6: Ratio Analysis With a focus on Islamic Banking metrics, this section guides learners through the process of conducting ratio analysis. Participants will understand how to interpret and analyze ratios specific to Sharia-compliant financial institutions.
Section 7: Valuation The concluding section of the course delves into valuation methods within the context of Islamic Banking. Participants will gain a comprehensive understanding of valuation techniques and their application to Sharia-compliant financial entities.
Conclusion: Congratulations on completing the Financial Modeling for Islamic Banking course! You've successfully navigated the intricacies of constructing Sharia-compliant financial models, gaining a nuanced understanding of balance sheets, cash flows, assumptions, linking financial components, ratio analysis, and valuation within the context of Islamic banking principles.
This course has provided you with a unique skill set, allowing you to approach financial modeling challenges in the Islamic banking sector with confidence and precision. As you embark on applying these skills in your professional or academic pursuits, remember that the knowledge gained here serves as a solid foundation for contributing to the evolving landscape of Islamic finance.
Wishing you continued success in your journey within the realm of Islamic banking and financial modeling!