Credit Analysis & Credit Process

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Credit Analysis & Credit Process

The Credit Analysis course focuses on the impact of leverage on a business. Two different instances of leverage are considered– one financial, one operational.

These are used to calculate degrees of operational leverage. The focus in the Credit Analysis part of the course is on the borrowing decision of an entity. The Credit Process course on the other hand focuses on the lending side of the equation.

Topics covered:

  1. Credit Analysis – First Course
  • Why leverage is important?
  • Fixed and Variable costs and their impact on leverage
  • Relevant range of production
  • Breakeven analysis and Margin of Safety
  • Operating and financial leverage
  • Degrees of operating and financial leverage
  • The downside of operating and financial leverage
  • Combining financial and operating leverage
  1. Credit Process
  • Credit process mindset (including assessing applicant’s intent, underwriting, pricing of credit offering and fit to customer profile of the bank)
  • Understanding the language
  • Reasons for borrowing
  • Repayment sources
  • Types of lending products
  • Credit Analysis Process
  • Credit culture of the bank
  • Information gathering processes including need analysis, risk, repayment sources, industry profile, management, track record
  • Information processing including pre-processing and preparation of credit memorandum
  • The Credit Decision including accept/ reject decision, terms of lending and loan pricing
  • Compliance and documentation
  • Credit Decision factors including industry and business analysis, ratings of credit rating agencies, cash flow analysis, cash flow statements.
  • Examples of cash flow statement analysis
  1. Credit Analysis – Financial Institute

Sample peer group and banking sector analysis (with supporting excel file)