Learning Objectives:

  • Understand the importance of asset quality in bank analysis.

  • Analyse loan portfolio composition and credit risk concentration.

  • Assess reserve adequacy and provisioning.

6.1 The Importance of Asset Quality

The GICP course aims to help analysts “consider the asset quality of a bank and use key ratios to understand a bank’s business risk” . Asset quality is a primary driver of bank financial health and a key focus of regulatory supervision.

6.2 Loan Portfolio Analysis

Key elements include :

  • Portfolio Composition: Analysing types of loans to understand risk profile.

  • Impaired/Problem Loans: Loans that are past due, non-accrual, or restructured.

  • Reserve Adequacy: Assessing loan loss reserve levels.

6.3 Trading and Investment Portfolio Risk

The GICP course also covers “risk in the securities and derivatives portfolios” . Investment portfolios are analysed for credit risk, market risk, and fair value measurements.

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