Reference no: EM133913018
Background
The bank is considering the establishment of a new syndication desk agent role to diversity its service offerings and potentially generate additional revenue. This role would be responsible for providing facility agent, collateral agent, and administrative agent services to support the bank's syndicated lending activities.
To assess the financial viability of this new function, a comprehensive analysis must be conducted, including the development of 5-year income forecast, a cost-benefit analysis and the calculation of key financial metrics such as Return on capital (ROC) and Return on investment (ROI). Get top-rated assignment help now.
This is a proposal for the management to approve allocating a budget to operate the new function.
The assumptions:
Assuming that the bank secures a mandate with total annual fees of $38k and targets to secure 1 new mandate each year.
The bank intends to recruit two staff to handle the desk (one in business and another in back-office operations) each with monthly salary of $1.425k 2% increase in the annual fees from agency role mandate and 3% mandatory salary increase which is mandatory
Requirements:
What should be the budget allocated to operate this desk
Possible other revenue generating possibility other than the annual fees, for example if the bank is appointed as an account bank, then average cashflow of call account $5mn is possible and annual payout of 3.6% on the deposited amount.
Benefits from forex exchange accounts sell and buy rate (market rate +1.2%)
What assumptions can be changed to generate positive return on capital and return on investment? Demonstrate the entire analysis in excel.
The analysis should highlight trade-off between the initial investment required and the long-term potential for the syndication desk role to generate positive return.
The financial metrics should indicate that the role can become profitable and generate better return on capital over time, even if the initial investment may pose a challenge in the short term.
To enhance the financial viability assessment, mention other additional revenue-generating opportunities, optimizing cost structure, and potentially extending evaluation period (if necessary) to capture the long-term benefits.
The paper should also include continuous monitoring and performance evaluation, and strategic adjustments to ensure success of this new function.