expert
Expert with best answer

Francesco

100% Recommendation Rate

2,839 Meetings

4,868 Q&A Upvotes

USD 349 / Coaching

4

Methodologically analyzing a balance sheet

Hello,

I've recently had my first round interviews with Oliver Wyman which unfortunately did not go well. My question is how to methodologically analyze a balance sheet? In one of the cases, interviewer presented me with balance sheet of a bank and ask me to identify issues and propose solutions to solve them. Although I found and tackled a few issues, the case felt pretty unstructured for me and I sometimes felt lost. Do you have any recommendations?

Thanks in advance

Hello,

I've recently had my first round interviews with Oliver Wyman which unfortunately did not go well. My question is how to methodologically analyze a balance sheet? In one of the cases, interviewer presented me with balance sheet of a bank and ask me to identify issues and propose solutions to solve them. Although I found and tackled a few issues, the case felt pretty unstructured for me and I sometimes felt lost. Do you have any recommendations?

Thanks in advance

(edited)

4 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Book a coaching with Francesco

100% Recommendation Rate

2,839 Meetings

4,868 Q&A Upvotes

USD 349 / Coaching

Hi Serdar,

a possible structure to analyze a balance sheet to identify problems and possible solutions could be the following:

  1. Clarify the goal of the bank. The analysis of a balance sheet could be different according to the fact that the company is worried about revenues, costs or profits
  2. Structure some macroareas of the balance sheet relevant for the goal. Guennael provided an example of such methodology with a division in assets and liabilities and long and short term - you may use others so far that your are MECE in your analysis
  3. Structure possible reasons for problems in the different macroareas and formulate a hypothesis on which is the actual cause. Let's say you notice a lack of deposits. You may investigate the reason for the problem as potentially external (eg economic trend) or internal (eg lack of marketing for the products). Then you can formulate a hypothesis on which is the actual cause for it
  4. Ask for information related to the hypothesis you formulated to verify it. Keeping our previous example, if your hypothesis is that there is an internal problem, ask if we have any information on any change that happened on the bank proposal for short-term deposits to its clients. If you verify this is indeed the cause, move to provide a solution, otherwise update your hypothesis.
  5. Provide a solution to the identified problem. According to the specific issue you have found, you can lay down a solution structure (eg increase the number of customers for deposits or the amount per deposit).

Hope this helps,

Francesco

Hi Serdar,

a possible structure to analyze a balance sheet to identify problems and possible solutions could be the following:

  1. Clarify the goal of the bank. The analysis of a balance sheet could be different according to the fact that the company is worried about revenues, costs or profits
  2. Structure some macroareas of the balance sheet relevant for the goal. Guennael provided an example of such methodology with a division in assets and liabilities and long and short term - you may use others so far that your are MECE in your analysis
  3. Structure possible reasons for problems in the different macroareas and formulate a hypothesis on which is the actual cause. Let's say you notice a lack of deposits. You may investigate the reason for the problem as potentially external (eg economic trend) or internal (eg lack of marketing for the products). Then you can formulate a hypothesis on which is the actual cause for it
  4. Ask for information related to the hypothesis you formulated to verify it. Keeping our previous example, if your hypothesis is that there is an internal problem, ask if we have any information on any change that happened on the bank proposal for short-term deposits to its clients. If you verify this is indeed the cause, move to provide a solution, otherwise update your hypothesis.
  5. Provide a solution to the identified problem. According to the specific issue you have found, you can lay down a solution structure (eg increase the number of customers for deposits or the amount per deposit).

Hope this helps,

Francesco

Book a coaching with Guennael

99% Recommendation Rate

266 Meetings

1,300 Q&A Upvotes

USD 269 / Coaching

You were asked to be methodical? Why not say "first Assets, then Liabilities; in the Assets, I will first look at Short Term Assets, then Long Term, then Off balance; once I am done with the Assets, I will go on the Liabilities side and follow the same structure; last but not least, I will compare the duration to ensure we have the right short term assets to match short term / maturing liabilities and not be opened to a liquidity event"

You were asked to be methodical? Why not say "first Assets, then Liabilities; in the Assets, I will first look at Short Term Assets, then Long Term, then Off balance; once I am done with the Assets, I will go on the Liabilities side and follow the same structure; last but not least, I will compare the duration to ensure we have the right short term assets to match short term / maturing liabilities and not be opened to a liquidity event"

Book a coaching with Vlad

97% Recommendation Rate

388 Meetings

6,915 Q&A Upvotes

USD 189 / Coaching

Hi,

This question is quite specific for Oliver Wyman and I doubt that you will have anything similar at any other company. So just forget about this.

If you are really interested in analyzing a balance sheet you can google tons of resources.

Best

Hi,

This question is quite specific for Oliver Wyman and I doubt that you will have anything similar at any other company. So just forget about this.

If you are really interested in analyzing a balance sheet you can google tons of resources.

Best

Seconding Vlad's opinion here - Bank balance sheets are a totally different beast than any other balance sheet. So unless you have specifically trained those, you will always struggle.

Seconding Vlad's opinion here - Bank balance sheets are a totally different beast than any other balance sheet. So unless you have specifically trained those, you will always struggle.

Related BootCamp article(s)

Balance Sheet

A balance sheet, also known as financial position statement, depicts the financial balance in terms of assets and liabilities/ equity. It can be seen as a snapshot of the company’s financial situation at a specific point in time.

Profitability Case

Learn to crack Profitability Framework Consulting Cases, which are the number 1 reason for real consulting projects and hence are an important case type.

1 Q&A Quiz

Which companies are currently using written tests ?

All major firms like McKinsey, BCG and Bain use tests to assess a candidate's analytical skills. However the design of those tests can differ a lot.

Related case(s)

Oliver Wyman case: Full Electrons Ahead

Solved 78.0k times
Oliver Wyman case: Full Electrons Ahead Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below the expected numbers. The management has engaged you to support them in understanding the reasons and advise them on how to adjust the product offering.
4.6 5 5601
| Rating: (4.6 / 5.0)

Your client, large automotive OEM WyCar, has developed its first fully electric vehicle (EV) and introduced it as a pilot on the Austrian market last year. However, sales have been far below the expected numbers. The management has engaged you to support them in understanding the reasons and advise ... Open whole case

DHL Consulting case: Bike Shop

Solved 47.6k times
DHL Consulting case: Bike Shop You have been hired to support the owner of a bike-shop as a business consultant. The bike-shop has suffered a significant revenue decline during the last year, and now the owner would like you to assess the situation and options for the way forward. They want to know last year’s profit, i.e. how it was affected by the revenue decline, and what the priority actions are to survive the next year. (short term) In addition they would like to understand the strategic competitive position of the shop better and how to increase revenues again mid- to long-term.
4.3 5 11157
| Rating: (4.3 / 5.0)

You have been hired to support the owner of a bike-shop as a business consultant. The bike-shop has suffered a significant revenue decline during the last year, and now the owner would like you to assess the situation and options for the way forward. They want to know last year’s profit, i.e. how i ... Open whole case

Oliver Wyman Case: Setting up a Wine Cellar

Solved 45.2k times
Oliver Wyman Case: Setting up a Wine Cellar I’m thinking about setting up a wine cellar in my basement. The way I see it, shelf space would be divided into two sections: (1) a “drinking” section where I store bottles for my own consumption and (2) an “investment” section where I store bottles that I intend to sell at a profit after they appreciate in value several years down the line. The idea is to earn enough money with the “investment” section of the cellar in order to subsidize whatever I consume in the “drinking” section over time.   I'm obviously constrained by several things: the amount of money I am able to spend, the amount of wine I can (or want to) drink, the space available for the cellar, and so on.
4.3 5 3414
| Rating: (4.3 / 5.0)

I’m thinking about setting up a wine cellar in my basement. The way I see it, shelf space would be divided into two sections: (1) a “drinking” section where I store bottles for my own consumption and (2) an “investment” section where I store bottles that I intend to sell at a profit after they appre ... Open whole case

Oliver Wyman case: On the Right Track

Solved 39.8k times
Oliver Wyman case: On the Right Track TrainCo is a manufacturer of rolling stock, or trains, with production sites in three European countries. The company has seen declining profitability over the past years; however, they are currently in a very good position to bid for and win a big contract for regional trains for a Swiss national rail company. They have asked you advise to them on whether they should place a bid for the contract.
4.6 5 4293
| Rating: (4.6 / 5.0)

TrainCo is a manufacturer of rolling stock, or trains, with production sites in three European countries. The company has seen declining profitability over the past years; however, they are currently in a very good position to bid for and win a big contract for regional trains for a Swiss national r ... Open whole case

zeb case: Private Bank Anytown

Solved 22.8k times
zeb case: Private Bank Anytown Private Bank Anytown disposes total assets of approx. EUR 3 bn on December 31, 2014. The growth strategy of the institution determined at the end of 2010, however, has a higher impact on the cost side than on the income side. Aggregated to the return on equity as defined central parameter of the bank, the negative result of EUR -640 k in 2014 resulted in a key figure of -0.3%. Thus, the bank is miles away from the target parameter of 20% ROE defined by the supervisory board. Since no improvement is in sight for 2014, the board of directors of Private Bank is asking you for help.
3.9 5 5054
| Rating: (3.9 / 5.0)

Private Bank Anytown disposes total assets of approx. EUR 3 bn on December 31, 2014. The growth strategy of the institution determined at the end of 2010, however, has a higher impact on the cost side than on the income side. Aggregated to the return on equity as defined central parameter of the ba ... Open whole case