Corporate Credit Portfolio Management Course

This course will provide participants with an opportunity to enhance their knowledge of risk and return issues for both individual corporate credit exposures as well as a corporate credit portfolio, and also some of the techniques of active credit portfolio management. The emphasis of the course is on risk and return issues for large corporate exposures, although there will be some coverage of Structured Debt Finance.

Whilst the course will include some quantitative elements, the focus of the course is not on building credit risk models and best practice in financial modeling, or the interpretation of the model, but a financial model will be used to illustrate risk and return issues as a basis for evaluating and managing a corporate credit portfolio.

Methodology

The course will be in 3 parts

Part 1 will look at 2 or 3 examples of large corporates credit exposures where participants will develop a proposal for building the relationship and assessing the returns from the relationship. The results will then be discussed with a view to assessing how returns from the relationship might be improved

Part 2  will build on Part 1 by looking at developments in the Bank Capital Adequacy Rules and typical methods for measuring bank performance and then discussing the key features of RAROC and corporate credit risk measurement

Part 3  will look at techniques for managing the credit portfolio to enhance returns.

There will be a mixture of presentations and exercises to illustrate risk and return issues on credit portfolio management, and to discuss potential implications of proposed changes in the Basle Capital Adequacy Rules.

Part 1:

Risk and return for a single corporate banking relationship

Introduction: Developing a corporate credit portfolio – key elements

  • How much risk are you prepared to assume?
  • What rate of return do you expect?
  • What options are there for enhancing risk vs return?
  • Exercise: assessing risk and return in 3 examples of credit portfolios

Developing a strategy to develop a banking relationship for a large corporate

During this session participants will develop their objectives for developing a relationship with a large corporate that will meet, from a bank’s perspective, an acceptable balance between risk and return whilst meeting the needs of the company. In developing the strategy participants should consider the following issues

  • Understanding a company and its strategic goals – what are the financing implications?
    • What are the core activities of the company; where does it trade?
    • What is its market position?
    • Organic growth vs acquisitions vs divestments
    • Competitive position and dynamics of the industry sector
  • What are the key financial risks facing the company – how might this impact on banking requirements?
  • What are the key costs in the business – can they be managed?
  • How companies and financial investors measure performance and financial objectives – how will this influence the company?
    • Accounting based measures: ROE, ROCE
    • Other measures: CFROI and EVA
    • How these measures link with Cost of Capital
    • IRR objectives for financial sponsors in projects and how this is intended to be achieved
  • What is the company’s financial risk profile?
    • What is the structure of the debt – maturity structure; currency composition
    • Is the company using a range of debt financing instruments – loans vs bonds; use of Structured Finance
    • What are some of the potential benefits / limitations of various debt products?
    • Other financial risk exposures – off balance sheet financings, liabilities and commitments
    • Rating objectives
    • Debt vs equity decisions – principles of corporate valuation
    • What is the anticipated development of the company’s financing needs

Presentation by the participants of their strategy and group discussion

Part 2:

Risk and return and Basle Capital Adequacy rules as they relate to corporate credit risk

Measuring risk in a corporate credit portfolio

  • Traditional  accounting based methods of bank performance measurement and potential limitations
    • ROE
    • ROA
    • Exercise : Comparison of returns on selected corporate credit portfolios
  • Relating the traditional methods of bank performance measurement with equity    performance measures
    • Looking at net earnings in terms of earnings per share
    • Assessing returns on a corporate credit
    • Exercise : evaluation of returns on a corporate credit portfolio
  • Risk adjusted returns –the Basle Capital Adequacy rules for corporate credit exposures
  • Development of the Basle Capital Adequacy Rules for corporate credit exposures
  • Standardised approach vs internal rating based models
  • Corporate credit vs retail finance
  • Unsecured vs secured transactions- impact of collateral
  • Exercise: Evaluating how changes in underlying assumptions in a credit portfolio model impacts risk and return – stress testing a corporate credit portfolio model

Part 3:

Managing the portfolio

Managing a corporate credit portfolio – how a bank views portfolio management and how this compares with techniques used by fund managers

  • Traditional measures – portfolio diversification, how this might relate to assessment of bank credit portfolios in terms of risks in the portfolio
  • Review of a corporate loan securitisation to illustrate issues relating to portfolio composition
  • How investment managers view portfolio management and how some of the practices might be adopted in loan portfolio management
    • Different investment management styles
    • Use of benchmarks for measuring returns
    • How investors assess the performance of fund managers

Active corporate credit portfolio management

  • Options for more active corporate credit portfolio management in a bank
    • Changing the risk profile of the portfolio
    • Boosting ancillary income from the relationship
    • Reducing the amount of capital needed to support the portfolio – book value of capital vs regulatory capital vs economic capital
    • Use of securitisation and how it works ; Securitisation and Basle Capital Adequacy
  • Exercise : participants review and sensitise a sample portfolio to assess how portfolio returns can be maximised

Participant profile

This course will be relevant to personnel dealing with the risks inherent in large corporate credit exposures and the management of credit risk including the following;

  • Corporate Banking Relationship Managers
  • Corporate credit analysts
  • Credit Portfolio Managers
  • Asset and Liability Managers

It will be assumed that participants will already have strong corporate credit analysis skills and familiarity with the fundamental principles of Basle Capital Adequacy Rules.

Malcolm

Malcolm  Sullivan 

Malcolm Sullivan started his career with National Westminster Bank (now part of RBS) before moving to Mellon Bank NA, a major regional US bank (now part of Bank of New York Mellon).

At Mellon Bank, Malcolm held several credit analysis and account management positions in London, focusing on large UK corporates and UK subsidiaries of US corporations.  He also had two extended work assignments in the USA, on the second occasion as an account officer responsible for a group of US subsidiaries of non-US multinationals.

Since 1992 Malcolm has been primarily focused on training in the areas of Corporate Credit Analysis, Financial Restructuring, Project and Structured Debt Finance, such as Real Estate Finance and Asset Securitisation.

He has designed and delivered tailored courses in more than 55 countries. In these areas he has worked with a wide range of corporate and investment banking firms; Development Finance Institutions; public sector organisations; Export Credit Agencies; and a number of major corporations.

Note:  His full professional Biography is available on request.

Venue:

Holiday Inn Hotel, Sandton – Johannesburg

Dates:

28th – 30th June 2017

Course Prices and Discounts can be viewed after registration.

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