Description

Lending is one of the most important functions of any lending institution and, if not managed properly, it can lead to credit quality problems that potentially threaten the very existence of the financial institution. To manage the lending function properly and mitigate credit quality problems, staff adequately trained in risk assessment and management are required.

Credit Analysis and Lending Management, Fifth Edition is a comprehensive and complete textbook on credit risk analysis and lending management. It is intended to be a key resource in the training of staff in the financial sector.

The book is divided into six parts, including 17 chapters. Parts I & II present a framework for assessing and managing credit risk. Parts III & IV include chapters that deal with special types of lending: consumer lending, corporate lending, small business lending and international lending. Part V details credit risk management and measurement techniques, and problem loan management. Part VI then looks at other forms of finance: microfinance, agricultural finance, quantitative finance and financial technology (FinTech). FinTech is a new addition to the book and recognizes the ever-changing financial environment.

Throughout this text, learning objectives are clearly indicated at the beginning of each chapter, and the chapter content then directly addresses these objectives. Additionally, new concepts are developed in a brick-by- brick manner and supplemented by clear and useful examples.

This Fifth edition has been fully revised and updated to address issues from COVID-19 and the global financial crisis (GFC), including changes to the prudential standards.

Additional information

AUTHORS

Authors

Milind Sathye & James Bartle

ABOUT THE BOOK

Edition	4
ISBN	978-1-925716-19-1
Format	Soft cover
Pages	592
Table of Contents	Credit Analysis and Lending Managements – Table of Contents About the authors xi Milind Sathye xi James Bartle xi Preface xiii Part 1 - Overview 1 Chapter 1: The principles of lending and lending basics3 Introduction4 The principles of good lending5 Industry insight13 A framework for credit and lending decisions16 The lending process19 Industry insight22 Characteristics of different types of advance25 Different types of borrower29 Structuring of loans and advances33 Credit culture35 Industry insight36 Designing a loans and advances portfolio37 Summary37 Discussion question39 References and further reading39 Part 2: Analysis and Interpretation of Credit Risk41 Chapter 2: Financial statements analysis 43 Introduction 44 Why do lenders analyze financial statements?45 Analysis of financial statements47 Techniques of analysis used in project finance62 Step-by-step approach to financial statements analysis69 Detecting window dressing, frauds and errors73 Industry insight76 Use of financial ratios by loan officers78 Industry insight81 Limitations of financial statements analysis84 Summary85 Discussion questions86 References and further reading87 Chapter 3: Credit scoring techniques89 Introduction90 An example of a credit application scorecard91 Industry insight93 Background information on credit scoring97 How to build a credit application scorecard104 Moving beyond credit application scorecards107 The future of credit scoring109 Summary110 Discussion questions111 References and further reading 111 Chapter 4: Credit risk analysis: An introduction113 Introduction114 What is credit risk?114 How do we analyze credit risk?116 Putting it all together132 Industry insight137 Industry insight138 Artificial Intelligence139 Summary140 Discussion questions141 References and further reading142 Part 3: Consumer Lending143 Chapter 5: Consumer lending 145 Introduction146 Types of consumer loan147 Industry insight150 Evaluating consumer loan applications155 Example of a consumer loan application161 Precautions to be taken in granting consumer loans163 Credit scoring consumer loan applications165 A day in the life of…168 Legal aspects of consumer credit170 The National Credit Code170 Trends in consumer credit172 Trends in personal lending173 Trends in credit card lending174 Industry insight177 Pricing and structuring of consumer loans181 Summary185 Discussion questions186 References and further reading188 Chapter 6: Real estate lending191 Introduction192 Industry insight192 Evaluating real estate loan applications193 Industry insight199 A day in the life of…202 Example of a real estate loan application204 Precautions in granting real estate loans206 Trends in real estate credit207 Industry insight207 Pricing and structuring of real estate loans209 Industry insight213 Industry insight216 Summary220 Discussion questions221 References and further reading223 Chapter 7: Security, consumer credit legislation and legal aspects of lending225 Introduction226 Overview of the legal framework for consumer and real estate loans227 Anti-Money Laundering and Counter Terrorism Financing Act 2006232 Loan documentation236 Special rights of lending bankers242 Legal requirements specific to home loans243 Other relevant legal requirements in lending246 Industry insight249 Industry insight251 Industry insight252 Checklist for lending officers255 A day in the life of…256 Summary259 Discussion questions260 References and further reading261 Part 4: Corporate and Business Lending263 Chapter 8: Corporate lending265 Introduction266 An overview of corporate lending266 The purpose of corporate lending267 The principles of corporate lending268 Credit rating agencies277 Skills required of the loan officer278 The importance of financial statements279 Managing the loan portfolio280 Project finance – putting together some issues286 Summary288 Discussion questions289 References and further reading290 Chapter 9: Small business lending291 Introduction292 Industry insight304 The political importance of small businesses and small business lending306 Industry insight307 A day in the life of…309 A theoretical basis for understanding lending to small businesses313 Lending technologies and small businesses316 Main economic and operational constraints faced by small businesses318 Risks associated with small business319 Two approaches to small business lending326 Implications for Australia339 Summary339 Discussion questions340 References and further reading341 Chapter 10: International lending345 Introduction346 Structure of international financial system346 Principles that underpin international lending351 Products used in international lending354 Risks in international trade transactions361 Post-shipment finance362 Industry insight364 Special types of credit facilities367 Uniform customs and practice for documentary credits368 International exposure of Australian banks369 Global financial markets policy responses to COVID-19369 Summary369 Discussion questions370 References and further reading371 Part 5: Assessment and Management of Risk373 Chapter 11: Credit risk measurement and management of the loan portfolio375 Introduction376 Credit risk measurement377 Altman’s Z score378 Credit Portfolio view387 Portfolio management387 Managing the portfolio396 A day in the life of…401 Industry insight403 Loan pricing405 An example of loan pricing…408 A day in the life of…411 Summary413 Discussion questions414 References and further reading41 Chapter 12: Credit risk from the regulator’s perspective417 Introduction418 Capital adequacy419 Large credit exposures427 Securitisation427 Credit derivatives429 Developments in regulation430 Industry insight434 Summary438 Discussion questions439 References and further reading440 Chapter 13: Chapter 13: Problem loan management441 Introduction442 Causes of default442 The extent of problem loans443 Industry insight444 The business cycle444 Problem loans, provisions and regulatory issues446 Other considerations with problem loans446 Industry insight447 Through the cycle provisions – Expected credit loss449 Dealing with defaults449 Industry insight454 Examples from the law456 A final word457 Summary457 Discussion questions458 References and further reading459 Part 6: Other Forms of Finance461 Chapter : Chapter 14: Microfinance463 Introduction464 What is microfinance?464 Industry insight470 Microfinance institutions and their performance473 Industry insight476 Microfinance in Australia478 Industry insight481 Summary482 Discussion questions483 References and further reading483 Chapter 15: Agricultural finance485 Introduction486 Classifying broadacre farming487 Broadacre farming and water489 Other aspects of broadacre agriculture491 Broadacre farming as a production process494 Broadacre farming and people498 Lending to farmers501 Some concluding remarks518 Summary518 Discussion questions519 References and further reading520 Chapter 16: Quantitative finance521 Introduction522 Concentration risk523 Expected losses524 Probability of default526 Loss given default528 Transformation regressions529 Decision trees and neural networks529 Prepayment risk530 Concluding remarks531 Summary531 Discussion questions532 References and further reading533 Chapter 17: FinTech535 Introduction536 Financial intermediation537 Products539 Risk546 Regulation548 A day in the life of…549 Crypto lending550 Summary551 Discussion questions552 References and further reading552 Index553
Trim	250 x 200 mm

About the authors

Author 1

Milind Sathye is Professor of Banking and Finance and Head: Accounting, Banking and Finance Discipline at the University of Canberra. His research focus is on efficiency and productivity, AMLCTF, e-ba

Author 2

James Bartle

James Bartle has over twenty years of experience in the finance industry and has worked in various credit and treasury positions in the Commonwealth Bank of Australia, KPMG Management Consultants and Bancorp Australia. James’s consulting experience has given him exposure to Australian banks, government and corporates. He has completed assignments in New Zealand, Malaysia and Indonesia.

SKU

056

Weight

1.3 kg

Dimensions

200 × 250 cm

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