Case One
Interview: A Foreigner
Case:
Suppose a bank has three units which serve large corporate, small corporate business and individual business. For this bank, 90% profit comes from loan business, so you are going to find more details about the loan business of the unit of bank that caters to the large corporate business. You are going to provide the P&L analysis with detailed figures, given that the total loan is 100billion USD. Me: In order to estimate the profit, that is the revenue minus cost of capital, I would like to know about the term structure of the bank..
Interviewer: Please use concrete figure.
Me: So how many customers are there of our client?
Interviewer: It's up to you. How do you think with the 100 billion USD? Me: Then suppose we have 10 clients with 10 billion each. Then I'd like to suppose the term structure. Let's say 50% of the loans are long-term with average year to maturity of 10 years, 30% middle term with YTM 5 years, and 20% short term with YTM 1 year. How do you say to that?
Interview: Fine.Me: Suppose the interest rate of long term is 8%, middle 6%, and short 4%, so the average is 6.4%. So each year we have interest revenue of 6.4 billion USD.
Interview: What about the cost. You don't have to estimate in detail of the cost.
Me: So just suppose an average 4% of interest rate.
…….
If the market is mature and the bank's market share remains constant. What
might bring down the profit?
Key: Non-performing loans.
Case II: What's the population in year 3000?
Case III: If a US bank is going to set up a headquarter in Asia, what do
you choose? Singapore, HK, SH or BJ ? Why?