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"Attending AMT's financial modeling courses has helped strengthen my financial skills and enhanced my technical ability. Some of the new Excel skills I learnt will certainly help in my new senior role."
~ associate, global investment bank
Who should attend the course?
Experienced Finance Professionals
Working for a leading financial institution means you will be working in a highly competitive environment. In order to stay ahead you will need to keep pace with your colleagues. AMT’s public courses ensure that you maintain and enhance the knowledge and skills you need to continuously deliver a professional level of service to your clients. Hence becoming more effective in the workplace and helping advance your career. Learn or refresh your skills in financial statement analysis, financial modeling and valuation, and stay ahead of the curve.
What courses complement this one?
To get a comprehensive understanding of M&A/LBO Modeling, study over 3 days:
Book all 3 courses
This session begins with an overview and recap of bank's financial statements. After understanding the basics, the principles of both accounting for loans and financial instruments are explained. Finally, the differences between US GAAP and IFRS are considered.
- Banks’ financial statements
- Key items - balance sheet and income statement
- Loans, investments, deposits, non-deposit funding, equity and capital
- Net interest and non-interest income, operating costs, profits
- Accounting for loans
- Expected realizable value
- Non-performing loans
- Understanding impairments vs. write-offs
- Accounting for Financial Instruments
- Fair value and amortized cost accounting
- Held to maturity, available for sale and trading financial instruments
- Accounting for derivatives
- Impairments and write-downs of financial instruments
- Level 1,2 and 3 assets
- Minimum capital ratios: from Basel II to Basel III
- Minimum and buffers above minimum: conservation and counter cyclical buffers and buffer for systemically important banks
- Impact of Basel III: phasing in of Basel III requirements
Bank Regulatory Capital Fundamentals
The aim of this session is to provide participants (particularly those who have no prior knowledge of regulatory capital) with an introduction to bank regulation. The regulatory environment is explained, and the key Basel accords are introduced.
- Overview of regulatory framework
- Role of BIS, EU directives and national implementation
- Role of the regulator
- Introduction to available and required capital and risk weighted assets calculation
- Overview of Basel I, II and III
Commercial Bank Modeling
Delegates will learn how to model and integrate the balance sheet, income statement and regulatory requirements of a real life commercial bank using Excel. In addition to learning the steps necessary to build a bank financial model, participants will also cover how to build models accurately and efficiently through a series of best practice modeling rules. Delegates also learn how to stress-test the assumptions used, to check their work efficiently and to document it.
- Modeling banks’ performance
- The balance sheet drives the income statement
- Forecasting the loan book
- Forecasting the trading book
- Forecasting funding need and mix: deposit vs. wholesale funding
- Growth in funds under management
- Net interest income and margin: impact of asset liability mismatch and of the yield curve on net interest income margin
- Non-interest income
- Earnings quality and earnings sustainability
- Forecasting loan impairment through the credit cycle
- Operating costs
- Forecasting dividends using a payout ratio and/or minimum capital requirements
- Linking income statement items to the balance sheet
- Completing the model
- Reality check of forecasts
- Key performance ratios
The session focuses on valuing a case bank. A dividend discount valuation is derived from an existing forecast model, and the results are sensitized within Excel. Multiples are calculated on both a historical and forecasted basis and delegates will assess the value of the case company based on a given set of comparables. Public information books ('PIBs') are used throughout the session.
- Valuing a real case bank
- Review of Gordon growth model
- Banking trading multiples: P/BV, P/E, dividend yield
- Dividend discount model vs. cash flow to equity model
- Cost of equity for banks
- Terminal value: review of potential approaches, limits and benefits
- Straight perpetuity formula and sensitivity to growth rate
- Sensitivity analysis
- Basel II vs. Basel III scenario analysis
Bank M&A Fundamentals
This session covers the basic steps of analyzing an acquisition within the bank industry – covering the impact of a deal on the financial statements with a particular focus on EPS, PE and contribution analysis. By the end of the session, the class builds an accretion/dilution model using EPS forecasts and acquisition assumptions, proforma capital ratios and a proforma balance sheet.
- Big picture: what is the transaction impact on acquirer and target shareholders?
- Preparing key acquisition data
- Building a flexible funding structure
- Modeling acquisition adjustments
- Calculating the accretion/dilution effects of the deal
- Understanding the significance of relative P/Es
- Ownership issues
- Income statement contribution
- Capital ratios
- Synergies and synergies needed to break even
- Proforma balance sheet
- Sensitivity and scenario analysis
During this session, delegates build a fully integrated merger model which combines financial statement forecasts for the acquirer bank and the target bank. Practical consolidation issues are addressed. The deal analysis focuses on the pricing, earnings and capital impact and value creation.
- The advantages of a full-blown merger model
- Preparing the stand-alone data for acquirer and target
- Preparing key deal data
- Building a flexible funding structure using sources and uses of funds table
- Calculating goodwill
- Dealing with fair value adjustments to the target's net assets
- Modeling fees (advisory, debt-issuance and equity-issuance)
- Consolidating the financial statements of acquirer and target
- Purchase accounting and the mechanics of full consolidation
- Modeling the completion balance sheet and consolidated financial statements post-deal
- Creating a non-controlling interest at acquisition date
- Equity accounting for the acquisition of a small stake in a target
- Synergies from banking deals
- Revenue vs. cost synergies
- Restructuring costs
- Earnings accretion/dilution and relative P/E analysis
- Impact of a transaction on the capital ratios of bidder
- Analysis at various prices (AVP)
- Value added from a banking combination: net present value of synergies versus control premium
What will you receive on the course?
While this is a face to face training course, a blended learning approach is taken and delegates will be provided with access to AMT Online. Our study materials contain both the knowledge and practice materials required to assist with the learning process and help you in your job role. Course materials include:
- printed course binder with copy of the slides
- laminated summary sheets
- 24/7 access to AMT Online (AMTO)
- class recordings
- course notes
- electronic homework/study files