CFA related to Bank Analysis

Hey Guys,

Just a quick question. I am currently doing M&A work for a small bank, and part of my job is to assess the quality of other banks’ balance sheets and cash flows. I am also a level 2 candidate, and I’ve noticed that most of the CFA material covers analyses for other industries outside banks. For instance, does Dupont apply to finance firms? If not, what are some very strong ratios to use to track fraud in Finance companies? and profitability?


For a bank, a dupont analysis would be a breakdown of ROE = ROA * Leverage. Then both of those nodes would break down further.

I imagine banking is one of the hardest industries to “spot fraud” given the assets and liabilities are so opaque. What country are you in?

Don’t know that I could answer the fraud question…Profitability I’ve spent a little more time on - I’m in a similar role to you it sounds doobie.

If you’re in the US, there are endless disclosures and schedules related to risk management and asset quality in 10K’s, but I haven’t spent a lot of time on it.

As far as profitability, during a past project I spent some time diagraming out a fishbone of the build-up of ROE for my bank and our competitors, which was very helpful in structuring my thinking around bank profitability and grasping the business model of a peer institution/target pretty quickly.

I’d be happy to exchange some thoughts if you wanna shoot a pm.

Do you have SNL Financial? Can be very useful when looking into banks

Yup, very helpful – love the excel add-in, too.

Though for most of the stuff that is going to executives or our board we pull the 10K/earnings supplement schedules manually.