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The operations of a company can be understood as a cycle: every company invests cash to buy raw materials. It adds value in the manufacturing process to convert raw materials into finished goods.

1. The balance sheet When a credit analyst has to make a credit decision, the first thing he or she will have to analyse is a firm’s balance sheet. The balance sheet analysis alone may often not be sufficient to assess a firm’s creditworthiness, and other factors have to be taken into consideration.

Only products or services that can finally be sold in the market contribute to a company’s operating income. This may sound obvious and simple, but all too often companies produce rather what they like, and not what the market really wants.

Next, a credit analyst has to identify and give priority to the particular strengths and weaknesses of a corporate client and compare them with those of other players in the same industry. What we need to find out is how the company responds to the threats and opportunities of its industry.

1. Threats and opportunities of an industry A sound lending decision can only be made if the credit officer knows and understands his corporate client’s industry and business. Balance sheets can only be interpreted correctly if one knows industry-specific ratios.

1. Legal and regulatory framework Western civil and trade laws require every corporation to exercise proper care in their business transactions. Banks are regulated in more specific and detailed ways because they operate with other people’s money.

1. Credit Risks: Only one Category of Risks a Bank has to cope with All this shows that commercial banking is much more than «only» taking deposits and handing out loans. In view of the enormous financing needs of the banks target groups, however, lending will remain one of the most important business sectors of […]

1. Customer orientation The banks have a clear answer to this question: As many other industries, they have rediscovered the client as their sole raison d’etre. «Customer Orientation» is the catchword of the day, and, indeed, both small and medium-sized enterprises as well as multinational corporations can profit considerably from the services a bank can […]

Things have changed for the better at most banks in 1995. According to the German business magazine «Capital», Deutsche Bank’s corporate banking division made a solid risk adjusted performance of 845 million DM, 1.4 billion DM more than in 1994. Its lending volume with companies has risen to 190 billion DM worldwide.

Corporate clients are of an outstanding significance to most commercial banks. The proportions of business volume and profits raised by dealing with corporates often have the largest impact on a bank’s balance sheet. On the other hand, the same can be said about the risks associated especially with lending. So analyzing and assessing the risks […]