Banking

* 1. M.C.B GROUP 1CASE PRESENTATIONRISK MANAGEMENT AT WELLFLEET BANK: “MEGADEALS” 109 Ghanshyam Gupta 301 Balagopal Padmakumar 302 Harbir Singh Banga 402 Rishi Bajaj 503 Anirwan Bhattacharya 1

* 2. WELLFLEET BANK• Founded in London in 1847• Expanded over the years• In 2007: Presence in 55 countries, Total Assets of $329 billion and market cap of $51 billion• The bank had presence in about 78 nations by 2008 on account of several acquisitions it had undertaken. 2

* 3. • Wellfleet main competitor was Global Bank. • Corporate Banking (58% of PAT) and Consumer Banking (42% of PAT) were the two main businesses • The bank focused more on the syndicated and leveraged loans segment. • Syndicated loans were provided to a borrower through combined activities of several banks12/16/2012 3

* 4. • Members in consortium could reduce their overall exposure, each bearing only a part of any loss• Syndicated loans help small banks to participate in large transactions• Leveraged loans were extended to companies that already had considerable amount of debt• As these loans carry a higher risk of default, the lender usually charged a higher interest rate 4

* 5. • Corporate Banking division worked as an Investment Bank• Hired several employees from IBs• Provided a risk perspective to Wellfleet• Between 2004 and 2006, the bank took around 40 deals in range of $500 - $750.• Net profit in 2006 – $2278m 5

* 6. QUESTION 1 What kind of risk does Wellfleet Bank face? 6

* 7. WELLFLEET BANK ORGANIZATIONALSTRUCTURE 7

* 8. KEY RISK FOR WELLFLEET BANK• Wellfleet Bank strategic intent was to pursue large scale transformational deals through its corporate banking segment. “If a billion dollar deal went wrong it could sink the ship”• Group Credit Committee - Group Chief Credit Officer, Deputy Group Chief Risk Officer & Group Head of Client Relationships• There is no Risk Appetite Statement which defines the tolerance level 8

* 9. KEY RISK FOR WELLFLEET BANK• Risk of...