OVERVIEW
This assessment requires you to develop a comprehensive lending submission for a chosen company, on behalf of a hypothetical financial institution, and present your findings to the class as a group presentation. Through this assessment you will demonstrate your ability to prepare a lending submission that adheres to specifications, critically review the lending activities of financial institutions and assess the various risks (financial, industry, security) associated with these activities, and analyse the
oader issues involved in managing risk. You will also demonstrate your ability to communicate to others using various presentation methods (written, oral) and to work as part of a team. Refer to the assessment details, criteria and supporting attachments for further information.
DETAILS
In groups of 4 - 6, you will need to develop a comprehensive lending submission for a company of your choice. The request for funding is hypothetical, although your lending submission is based on a real company. The predominant source of information for your lending submission will come from the company’s website. However, teams are expected to obtain relevant information from other sources when providing an analysis of the operations of the company in question. You will also need to present and justify your lending submission as part of a 10 minute recorded presentation in Session 9.
Ensure you refer to the Lending Submission Project Brief document for further information.
COMPANIES TO REVIEW CAN BE SELECTED FROM THE LIST BELOW (ONE AUSTRALIAN COMPANY PER GROUP)
1. ZEBIT (ZBT)
2. NOUMI (NOU)
3. OSPREY MEDICAL (OSP)
4. SELF WEALTH (SWF)
5. BILL IDENTITY (BID)
It is helpful to select your company during Week 1 and latest Week 2, Session 4. If any group does not select from the above listing, a company will be chosen and allocated to the group. CAPITAL RAISING: $10 MILLION
Lending submission:
1. Use Harvard academic referencing style
2. Use the company's cu
ent Annual Report and the latest three years of historical financial data to inform your analysis (refer to the Lending Submission Project Brief document for further information)
3. You will be assessed on your ability to address key aspects of the submission (bo
ower context and key issues; analysis - including financial analysis, use of tables, charts and pricing models; recommendations and academic style), refer to the assessment criteria and assessment ru
ic (below) for more information.
Assessment Criteria
· Overview of bo
ower and key issues
· Analysis
· Recommendations
· Structure and academic style
· Oral presentation
BAO3404 CREDIT AND LENDING DECISIONS
Assessment 3: Group lending submission and presentation
LENDING SUBMISSION PROJECT BRIEF
Section A: Background
You are an employee of Advance Bank, a major financial institution. Cu
ently employed in Advance Bank’s corporate banking division you are part of a small team responsible for managing the bank’s relationships with major corporations. Such relationships can include providing lending facilities, trade finance, money market and foreign exchange services, transaction facilities including payroll and electronic banking services for the corporation’s client relationships. From interest income and fees for service the institutional banking division is able to generate a healthy contribution to Advance Bank‘s annual profit. Advance Bank is keen to expand its presence in the corporate banking sector of the financial system, and has been actively seeking new corporate clients.
While it seeks to win new business, Advance Bank executives have determined that its traditional conservative approach to accepting risk will not be compromised. Accordingly, any facility approved outside Advance Bank lending policy must contain a clear rationale for acceptance of the business including all aspects outlined in Section B. Approval for such facilities can only be given by the Advance Bank Credit Committee, comprising the Chairman and 3 other non-executive board members.
Section B: Project Brief
Corporate Lending Teams at Advance Bank have been given responsibility for reviewing and assessing the new lending applications recently received. Recently, your team has been asked to provide the lending submission for your chosen company. Your recommendations in the written lending submission will go to the Directors Credit Committee for approval or rejection. Advance Bank uses a standard format for the lending submissions (see below).
Background details
What is the name of the bo
ower?
What is their address?
Who are the major shareholders/unit holders
eneficiaries?
Overview of the bo
owe
What are the cu
ent bo
owings (if an existing bo
ower)?
What is the history of this bo
ower?
If the bo
ower is not an individual, then who are the individuals behind the bo
ower? What does the bo
ower do to generate income?
What are some of the key characteristics of the business (number of employees, products, location, number of competitors, management, marketing and so on)?
How has the business changed over time?
Industry analysis
A commentary on the industry, ending with a statement about the key success (strength) factors and key sensitivities (risks) of this industry.
The nature and extent of competitiveness in the industry.
In this section you can also provide commentary on the state of the economy (domestic and international) and how it will affect the bo
owing company, identifying the risks that these conditions present.
A discussion of ways of mitigating the identified risks should be provided.
Financial analysis
Analysis of the historical financial (statements of financial position, statement of financial performance and cash flow statement). This analysis should always focus on the ultimate identification of risks (rather than on detailed quoting of numbers).
Comments on the statement of financial position and statement of financial performance should be made under the
oad headings of ‘short-term liquidity’, ‘longer-term solvency’ and ‘business performance’.
A cash flow statement, if not provided by the customer, may be generated by the lender and discussed here.
Security
Identification of the key credit issues that come out of the existing security structure.
Details should be given as to the different items of security and the lending margin that is available overall on this security.
A concluding comment should be made about the strength of the second way out (security).
Recommendation
A clearly justified recommendation, including a list of relevant covenants and the strength of both the first and second ways out for the proposed bo
owings should be clearly noted as either a strength or weakness. A discussion of the proposed facility structure and proposed pricing is also wa
anted.
Section C: Prospective Client – Submission received for Analysis
Name of the company: To be determined
Website: To be announced
Lending request: To be determined.
Section D: Further Information
The request for funding is hypothetical, although your lending submission is based on a real company. The predominant source of information for your lending submission will come from the company’s website. However, teams are expected to obtain relevant information from other sources when providing an analysis of the operations of the company in question. Reference to industry association reports and commentary about industry analysis provided by other reputable sources is an expectation of the Credit Committee of Advance Bank.
Use the 2021 ANNUAL REPORT for your lending submission.
When analysing the historical financials, the Credit Committee requires the use of data from the last THREE years (2021, 2020 and 2019).
Information in excess of the word limit will be gathered, but your team must present a clear, concise and focused analysis of this information. The use of tables, charts and diagrams is an essential component of these submissions. You may use any pricing model to determine the interest rate on the proposed funding.
Various pricing models will be discussed in class. Central to your team’s report is risk assessment and ways your team can mitigate these risks. You will be required to provide detailed financial analysis. The Credit Committee pays particular attention to the quality of analysis and especially looks for examination of trends and changes that have occu
ed.
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