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The
companies dedicated for financial activities such as resource
management, acquisition and investment to make business are
called finance companies. The financial activities help customer/public
to grow in their respective lines. The financing companies
provide a financial strength to grow up to the public. The
finance companies are centralized. They have corporate
center, branches and franchise outlets. They make the business
in structured method to make the operation easy. The policy
related to money and market, formed by the corporate is common
for franchisee or owner. They deal with commercial, banking,
credit risk management, sales/trading etc.
The
financers Analysis
The
analysis of financial statements is an introduction to Bank
Financial Statements, which leads into this business. Financial
services are worked locally, close to the customer, to ensure
a high service level quick response times and tailor made
solutions.
There
are analysts who have experience in the analysis of financial
statements. They lead Intensive Bank Analysis, Bank Analysis,
Emerging Market Banks & Sovereigns and Non Bank Financial
Institutions. Perspective on finance and leasing companies:
rating agencies, debt and equity investors’ analysis are associated
with the followings:
•
Purpose payback model - dependence of finance
companies on debt capital markets for refinance
•
Risks to repayment: sector- and finance
companies-specific analysis
•
Structure: Protecting lender's interests: warehouse and borrowing
base facilities and other structural issues
Company
Operation
finance
companies operate with the key risks and competitive
issues by sub-sector such as sales finance, direct finance,
equipment finance, credit cards and mortgages etc. The impact
of minimal regulation and supervision; legal framework of
secured lending are reflected in a good operation.
Direct
Management, Franchise and Ownership
The
centralized organization runs three major types of management:
Direct Management, Franchise and Ownership. In Direct Management
the critical management issues such as, strategy, risk appetite,
processes and systems, market knowledge to be solved centrally.
Franchise model assesses the validity of the business model,
residual marketing and reliance on parent company, where relevant.
The shareholders to be managed on quality of financial and
business support; risks and benefits of cross subsidies. They
are the part owner of the financial business.
Financial
Fundamentals
The
financial business stands and runs on the strong fundamentals
not to cross beyond certain limitations:
•
Statement logic; accounting policies for income, receivables,
delinquencies and leases (finance versus capital leases etc.)
•
Business risk: use of financial tools to assess quality of
lease and loan book; reserve adequacy, owned versus managed
book; residual risk
•
Funding risk: stability and variety of wholesale funding sources,
gap management, availability of contingency funding, liquidity
and capital adequacy
•
Securitization: benefits and risk of off balance sheet funding
vehicles; residual risk, mortgage servicing rights and gain
on sale accounting
•
Performance risk: balancing risk and return; income stability
and expense control
•
Early warning signals: lessons learned from failed finance
companies.
Financing
Process
In
finance companies, the processes are done perfectly and well
planned. There are distinguished risks in the different business
lines and products offered by banks and recognize how they
are reflected in the financial statements. Understanding of
the components of a bank's balance sheet and income statement
is very important process to be performed perfectly. The impact
of different accounting standards and policies on the financial
statements are to be recognized well. The calculation and
application of the ratios to quantify an institution's performance
is also very important in the process.
Types
of financial institution
The
financial institutions are formed based the business to the
balance sheet and income statement for various models.
Infrastructure
development Finance: Finance for construction of
Road, Dam, Bridge, Building, and Tunnel Tap our Global Bidding
Network etc. Obviously, the finance is required for a community,
so the processing is easier than other types. If the infrastructure
is commercial such as industrial establishment, them it differs
in processing of course.
Agriculture
and Rural Development Finance: The Funding Corporation
issues a variety of Federal Farm Credit Banks Consolidated
System wide Debt Securities (Farm Credit Debt Securities)
on behalf of the Farm Credit System Banks with a broad range
of maturities and structures. The finance includes: minor
irrigation, irrigation and water management, area development,
forestry, horticulture and other plantations, sericulture,
dairy, cattle development, poultry, fishery, aquaculture,
agro-industries, agricultural marketing, and storage, agricultural
credit, rural/village industries, handicrafts and rural energy
sources including social sector like women and child development,
rural infrastructure development and participatory management.
House
finance: The house finances are provided to different
needs such as for purchasing a house, house construction,
modification and development. There are number of finance
programs obtained by different finance companies. The types
of house loans are: Fixed rate mortgage loans, Adjustable
rate mortgages, Interest-only loans, First-time homebuyer
programs, No closing cost loans, and Debt consolidation loans.
World
Finance: The World Bank Group is a global financer,
offers loans, advice, and an array of customized resources
to more than 100 developing countries. International finance
Corporation (IFC): This is a member financer of the World
Bank Group, head quarter in Washington, DC. It finances and
provides advice for private sector ventures and projects in
developing countries in partnership.
Industrial
finance: This finance is structured for a solution
to the commercial and industrial marketplace. Industrial Finance
Program (IFP) helps the customers to manage their wastes,
control pollution, build and improve drinking water, waste
water and solid waste facilities, and complies with environmental
regulations.
Automobile
Finance:
This is also called Automotive Loan. The finance is sanctioned
under certain criteria like monthly repayment capacity, margin
money deposited, and purpose of buying a vehicle (commercial
or personal) etc.
Business
finance: Firms that lend money primarily to businesses.
A secured business loan in which the borrower pledges as collateral
any assets used in the conduct of his/her business, also called
commercial finance or asset-based finance.
Personal
Finance:
This finance or loan is meant for personal use such as career
development, remodeling your home, college expenses or consolidating
debt. The cost of loans of this type is fairly high. This
is due to the added risk taken on by the lender when issuing
un-secured loans. This is a customized loan available with
competitive rates and flexible terms; so that you can choose
the loan to fit your lifestyle, needs and budget.
The
Products and Key activities
Finance
companies introduce the products and keep on the certain activities
to market those products. Products are:
Credit
products: performing and non performing loans, provisioning
and write offs, leases, trade finance and guarantees
Trading products: long and short securities portfolios,
derivatives, repurchase agreements and securities lending
Activities:
Hedging: credit, interest rate and FX derivatives
used for hedging purposes
Investments: consolidation methods and investment
valuation; accounting for goodwill and minority interests.
Funding: deposits, commercial paper, bank lines,
senior and subordinated bonds, ordinary and preference share
capital
Securitization: use and impact of off balance sheet
funding vehicles
Sources and quality of disclosure and impact of differing
accounting policies
Companies’
Business Risk
The
Asset Quality in the financing activities follows:
•
Types of loan and loan portfolio analysis
•
Non performing loans: definitions, reserving and accounting
policies
•
Ratios used to quantify the risk profile of the loan and lease
book
•
Analyzing trading, derivative and investment risks: value
at risk, income volatility and other disclosure
•
Securitization assets: residual risk, servicing rights
Earnings
against the risk come:
•
Types of quality of income: net interest, trading, fees, commissions,
gain on sale etc.
•
Impact of earnings accrual and asset impairment policies (loan
losses, mark to market, write downs and etc)
•
Ratios used to measure performance, cost control and provision
burden
Companies’
Financial Risk
The
financial risks are different types as per the funding sources
required.
•
Asset and liability management
•
Securitization: understanding the impact on earnings, assets
and capital of off balance sheet funding vehicles
Capital
adequacy
•
Types of capital: ordinary and preference shares, subordinated
debt; BIS regulations for banks
•
Ratios to measure capital adequacy.
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