Instructor
Title
Tel
Email
Office
: Siew Tong FOCK
: Professor of Finance (Practice)
: 6828 0760
: stfock@smu.edu.sg
: LKCSB #5034
This course is structured to provide participants with a conceptual foundation of bank financing and to apply the principles and techniques specifically to corporate lending decisions in financial institutions. The loan portfolio is generally the major asset category on a commercial bank’s balance sheet. The establishment and management of this asset require the understanding and application of appropriate techniques to achieve good loan quality, control, monitoring and management of credit risk factors to achieve loan repayment. Given the severe negative impact of the most recent global financial crisis, a good understanding of the nature, scope and impact of credit risk in the financial industry and economy at large is of paramount importance. The course aims to give you a foundation for making good lending decisions if you are interested in pursuing a career in the banking industry and specifically in corporate banking.
By the end of the course, students will be able to:
 Apply the theories and techniques of corporate lending to lending practices in banks
 Explain the different dynamic market forces that impact the corporate lending business
 Apply the different financial analytical processes involved in the practice of lending
 Discuss how the different lending rationales can be applied in the consideration of any lending proposal
 Identify the psyche of bank lenders and what they look for from potential borrowers in the recommendation of loans
 Identify the nuances and practicalities as well as apply the techniques of problem loan workouts
Please refer to the Course Catalogue on OASIS for the most updated list of pre-requisites / co-requisites for this particular course. Do note that if this course has a co-requisite, it means that the course has to be taken together with another course. Dropping one course during BOSS bidding would result in both courses being dropped at the same time.
Class discussion and participation in case discussions in class: 20% (throughout the term)
Mid-term quiz (Week 7): 20%
Group project assignment/presentation (Weeks 11 & 12): 30%
Final quiz (Week 13):
Total:
30%
100%
1

All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication, facilitation of acts of academic dishonesty by others, unauthorized possession of exam questions, or tampering with the academic work of other students) are serious offences.
All work (whether oral or written) submitted for purposes of assessment must be the student’s own work.
Penalties for violation of the policy range from zero marks for the component assessment to expulsion, depending on the nature of the offence.
When in doubt, students should consult the course instructor. Details on the SMU Code of Academic
Integrity may be accessed at http://www.smuscd.org/resources.html
.
 Interactive class seminars
 Readings of current financial news
 Case studies
 Group project presentation
 Mid-Term Quiz
 Final Quiz
Class participation: Participants will be graded on quality of participation in class and engagement in the course.
Participants are strongly encouraged to read ahead of the session and to read widely on current financial news as the course encompasses wide coverage of banking and finance. Participants are expected to comment and share their thoughts on current financial news impacting the business of bank lending at the beginning of each class session. Participants are expected to prepare for and participate actively in class case discussions.
Project: Group Assignment/Presentation aims to provide participants with the opportunity to learn by doing
(internalization of concepts) in groups of up to five. The assignment involves a thorough study and analysis of a lending case or actual financial event. The deliverable will be the PowerPoint slides. Presentations will be strictly limited to 20 minutes (excluding 5 minutes of Q&A). The group size will be taken into account when grading (group sizes should be between two and five).
Mid-term quiz allows participants to measure what they have learned, and internalized regarding concepts taught in class. Participants will be assessed on their ability to synthesize, analyse, and apply concepts.
Final quiz: The format will be written analysis and conclusions related to an assigned case. It will be an open book quiz.
Credit Analysis – A Complete Guide by Roger H. Hale (RHH)
Publisher: John Wiley & Sons, Inc
ISBN: 0-471-88725-0
2

Week #
(Week
Commencing)
Topic / Assignments
Importance of credit, lending to banks and introduction of financial concepts and techniques
1 & 2
(  )
3
(  )
Introductions and course administration
 Context of what it means to be a bank lender compared to a pawnbroker and money lender
 Context of bank financing in universal banking and commercial banking practice
 Bank financing and the BIG picture of major global market forces and their impact on the bank lending activities
 Impact of global financial crisis on bank lending
 Attributes of a good corporate lender
 Answers to fundamental issues and questions in bank financing
 Overview of importance of bank financing to banks and to the economy
 Understanding key financial and credit concepts, and principles of lending;-
a) Use of financial statement logic
b) financial analysis
c) sources and uses of cash
d) credit analysis
 Introduction to basic lending rationales :- i) Asset conversion lending ii) Cash flow lending iii) Asset protection lending
Short term lending to businesses and application of asset conversion lending and asset protection lending rationales
 Reasons for banks to extend short term loans
 Users of banks’ short term loans
 Usage of banks’ short term loans and its relationship to nature of operations of borrowers
 Understanding borrower’s asset conversion cycle of business
 How the steps in the asset conversion cycle of business is financed by short term loans
 Risk analysis of borrower’s ability to complete its asset conversion cycle
 Important principles of short term lending
Readings
RHH Chapters 1, 2, &
12
Seminar Outline Notes
RHH Chapters 5 - 7
Seminar Outline Notes
Butler Lumber Case
Preparation
3

(
(
4
(  )
5

6

)
)
 Unsecured versus secured short term lending : rationales and considerations
 Differentiation of business risk and financial risk to the bank lender
Basic Financial & Credit Analysis
 Techniques of good credit assessment
 Financial analysis of accounting statements, interpretation of accounts, financial ratio analysis, profitability analysis and cash flow analysis
 Evaluating qualitative factors in lending situations
 Full blown case teaching and discussion on Butler
Lumber Case in Week 5 to apply the financial and credit analytical process in loan consideration by bank lenders.
Long term lending to businesses and application of cash flow lending rationale
 Nature and purpose of term loans
 Purpose of term loans
 Structure of term loan agreements
 Sources of repayment for term loans
 Factors considered by banks in term lending
 Cash flow projections
Full blown case teaching and discussion on Bodie
Industrial Supply Inc. Butler Lumber Case in Week 6 to apply the financial and credit analytical process in loan consideration by bank lenders.
Credit Control & Loan Management
 Bank’s credit policy
 Bank’s credit administration requirements
 Credit rating of loan portfolio
 Credit loan review and recommendation
 Loan review recommendations and presentations
RHH Chapter 5 and
Note on Introduction to Financial Ratios and
Financial Statement
Analysis
Butler Lumber
Case Class
Discussion
Seminar Outline Notes
Seminar Outline Notes
Bodie Industrial
Supply Inc. Case
Preparation.
RHH Chapters 3 & 9
Bodie Industrial
Supply Inc. Case
Class Discussion
RHH Chapter 11
Seminar Outline Notes
4

12
(  )
13
(  )
(
(
(
(
7

8

)
)
9

10

)
)
11
(  )
Problem Loans and Loan Workouts
 Causes and signs of problem loans
 Analysis of problem loans
 Problem loan administration
 Loan workout strategies
Mid-Term quiz to be administered during class session (20% of the total grade)
Term Break
Meetings with All Groups on the Group Projects
Ethical and Professional Standards of Bank Lenders
 Fundamental understanding of business ethical issues
 Relationships with and responsibilities to the banking profession/employer
 Relationships with and responsibilities to clients and prospects
Screening of movie : The Inside Job
Discussion and comments on major themes related to ethics and banking in the movie
Recap of Whole Course / Industry Practitioner’s Sharing in
Class
Group project presentations (30% of the total grade)
The deadline for submission of the SOFT COPY of slides used in the presentations in Weeks 11 & 12 to be emailed to instructor on Sunday of Week 10 latest at 2300 hrs. To be equitable, no changes to the slides will be entertained thereafter
Seminar Outline Notes
Seminar Outline Notes
Group project presentations
F
Final quiz (30% of the total grade) 3 hours (during scheduled class session)
5