What a lender's credit analysis generally includes

The credit analysis of a lender generally includes both credit risk assessment and financial analysis.

Credit analysis is a systematic investigation and study conducted by commercial banks on the repayment ability of borrowers. The purpose is to prevent risks that the bank may encounter in the process of granting loans and to ensure the safety and timely return of the bank's operating funds. It mainly includes two aspects:

1. Credit risk assessment. That is, through a systematic analysis of the borrower's quality, business talent, the purpose of the loan, the amount of the loan, the source of funds to repay the loan, the time to repay the loan, the quality of the collateral, etc., to decide to lend or not to lend, how much to lend and the conditions of the loan, and accordingly control the entire bank's loan scale and its structure.

2, financial analysis. That is, through the borrower's balance sheet, income statement, statement of changes in financial position (or cash flow statement) and other schedules of the analysis, accurately grasp the borrower's liquidity ratios (including current ratio, quick ratio, cash ratio, receivables turnover, deposit and loan turnover), bar rate (including debt-capital ratios, interest cost yield, fixed cost yield, net fixed assets and net capital), the ratio of dividend payment ratio, etc.). ratio, dividend payment ratio, etc.), profitability ratio (including sales growth rate, return on assets ratio, return on shareholders, etc.), and based on which we prepare forecasts of its financial statements, predict its possible financial position and business risks, specifically assess the size of its credit risk, and then determine the amount of the loan and the repayment schedule.

1. Contents of financial analysis

1) Analyzing future sources of repayment or collateral, defining the ownership of assets and determining the value, stability and liquidity of the assets, and determining the customer's income through the information on the individual tax return.

2) Analyze liabilities and expenses, determine the accuracy and completeness of the content of financial statements, and define the client's repayment options.

3) Comprehensive analysis: use the information obtained from the financial statements to comprehensively evaluate the client's liquidity position.

2, the pricing of credit derivatives is a difficult issue in the field of credit risk management research. There are three main types of pricing credit derivatives in academia and practice: pricing based on insurance theory, pricing based on replication techniques and pricing based on stochastic models. In the insurance theory-based pricing method, the insurance company assumes the credit risk of the policyholder and thus must be compensated with a certain premium. This pricing method is a statistical method based on the insurance company's historical default database, which has a narrow scope of application and can only provide insurance for credit derivatives for which historical default data exists. And the pricing based on replication technique needs to determine the value of all positions in the portfolio one by one, which is difficult to realize for credit derivative products with complex structure. Pricing based on stochastic models is the mainstream direction, in which intensity models and hybrid models are widely used.