This course requires good accounting skills, and that you can and want to analyze financial statements.

Overview

Co-taught with Professor Stephen Ryan

Fall 2024: Full semester course starting Wednesday, September 18, 2024, from 6-9 PM. We will teach this course in person.

This course analyzes financial statements of financial institutions from the perspective of investors, bankers, and consultants. It provides a framework to identify, understand, and analyze key performance metrics of banks.

Takeaways

Prerequisites

Core course in Financial Accounting

Materials

We will not require a textbook. We will distribute materials in class. We will go through several financial statements in class. Some of the key companies are listed below:

Attendance and penalty for missing classes

Requiring attendance is necessary for several reasons. First, you cannot assume that you can catch up on a missed class by watching a recording (if available). Videos do not engage your brain as much as a live class. Second, less than 20% of you watch the recording (if available). You are then lost in class, which provides wrong signals to me as an instructor. Third, your absence hurts class discussions. Fourth, you miss out on feedback if you do not work through the questions I pose in class. Fifth, I lose the feedback since there are fewer questions.

The policy below will be in effect only after the add/drop period.

Without mandatory attendance, attendance is often below 50%. Therefore, though I dislike doing this, I penalize absences. If you anticipate being absent for good reasons, please email me well in advance. Please enter "Excused" on the attendance sheet described below to avoid the penalty if I approve. If you miss a class due to emergencies and cannot tell me in advance, do not panic. Take care of the emergency first, and then email me. I will permit you to change the "Absent" to "Excused." But, if you miss a class without a valid reason, there is a penalty, as stated below.

For sections meeting in 150-190 minute sessions, you will lose one grade (A to A-, A- to B+, B+ to B, B to B-, and so on) for EVERY missed session unless you were explicitly excused via email. Thus, if you miss two class sessions, you will lose two grades, and so on.

For sections meeting in 75-80 minute sessions, you will lose one grade (A to A-, A- to B+, B+ to B, B to B-, and so on) for EVERY TWO missed sessions unless you were explicitly excused via email. Thus, if you miss four class sessions, you will lose two grades, and so on.

Please sit in the same seat in every class and display your name tags. For Zoom classes, you must keep your video on AT ALL TIMES. You must also have a good working headset or mic, as it is extremely rude to be inaudible and force me to ask you to repeat yourself. After entering the class, please mark yourself present in the first 20 minutes on the OneDrive sheet (link posted on Brightspace). You will be marked absent if you are more than 20 minutes late unless it is because of factors beyond your control (traffic, subway, interviews running late). You will also be marked absent if you leave the class early unless you have my permission or get it afterward. You will get an F in the course if you are caught cheating on the attendance sheet.

Exams and Grading

There are no in-class quizzes or midterms. There is a final exam.

System Requirements

Help and Office

Assignments

Topics

Topic 1: An introduction to banks

Core functions of a bank

Unique aspects of a bank's business model

Topic 2: Simple transactions for a bank

Topic 3: Building simple models for a bank and valuation metrics

Unconstrained equity models

Constrained equity models

Topic 4: Key valuation metrics

Topic 5: Interest-bearing assets and liabilities

Amortization tables

Amortized costs versus fair values

Topic 6: Interest rate and exchange rate risks

Interest rate risk

Inflation and exchange rates

Topic 7: Credit risk

Balance sheet classification

Credit loss measurements

Topic 8: Debt securities

Debt securities

Topic 9: Balance sheets of Wells Fargo and Silicon Valley Bank

Key assets

Key liabilities

Key equity accounts

Topic 10: Flow statements of Wells Fargo and Silicon Valley Bank

Income statements

Other comprehensive income

Cash flow statements

Topic 11: Key metrics for Wells Fargo and Silicon Valley Bank

Balance sheet metrics

Income statement metrics

ROI and valuation metrics

Topic 12: Structured transactions and off-balance-sheet financing

Special purpose entities

Securitization

Derivatives