PART A · QUESTION 1
You have your first meeting with a listed company's treasurer next week. Three other banks already lend to it.
// EXAM HALL23 QUESTIONS · 30 MINUTES
Corporate Coverage Banker Practice Test
Fewer clients, larger and slower: a listed company's debt, what the relationship really earns, and one vote in a four-bank club.
BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A corporate coverage banker practice test asks whether you can hold a whole institution's economics in view and still say what you would do on Monday. This paper has three parts: club facilities and group structures; one listed client's leverage, liquidity and return on capital, set on an exhibit, with a treasurer's request on the table; and calls on club votes, inside information, coordinating the bank and losing a deal. Every question is original, and none comes from any bank's test. Sit it against a thirty-minute clock, or take it as practice.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
// HOW TO SIT IT
Answer below as practice, and each read opens as you go. Or sit it as a test: 30 minutes, with every read held back until you finish.
PART A
The structure
How a large company's debt is put together, and what that does to your bank's position.
PART A · QUESTION 2
A colleague from commercial banking asks how a club facility differs from the bilateral loans they are used to.
What matters most for your work?
PART A · QUESTION 3
A bank lends to a holding company whose only assets are shares in three operating subsidiaries. The subsidiaries have their own bank debt and trade creditors.
Where does the bank stand if a subsidiary fails?
PART A · QUESTION 4
A group's consolidated accounts show US$15m of cash. US$11m of it sits in a 60%-owned overseas subsidiary, whose minority shareholders must approve any dividend.
Signal or noise?
PART A · QUESTION 5
Two borrowers each carry debt of three times EBITDA. One sells software on three-year contracts; the other builds new houses for sale.
Is three times the same risk for both?
PART B
The client page
One client, nine questions. Read the debt and the income before you read the treasurer's request.
EXHIBIT AH · THE CLIENT PAGE
A listed building materials group, one of your bank's largest clients. Investment grade at the lowest notch, outlook negative. Its leverage covenant is net debt of no more than 3.5 times EBITDA.
Four banks share its club facility equally. The treasurer asks to extend it by two years, remove the leverage covenant and take 10 basis points off the margin.
| US$m | |
|---|---|
| Revenue | 1,600 |
| EBITDA | 200 |
| Drawn on the US$400m club, due in three years | 160 |
| Bonds due in 14 months | 250 |
| Bonds due in six years | 150 |
| Cash | 40 |
| US$000 | |
|---|---|
| Margin of 1.50% on US$40m drawn | 600 |
| Fee of 0.50% on US$60m undrawn | 300 |
| FX and rate hedging | 450 |
| Trade guarantees | 150 |
| Payments and cash (with another bank) | 0 |
| Income | 1,500 |
| Costs to serve | 400 |
| Expected loss | 200 |
Capital held against the client is US$10m, and the bank's target is 12% before tax. Removing the covenant needs two-thirds of commitments; changing the margin or the maturity needs every lender. In confidence, the treasurer mentions a US$200m purchase, not yet public, to be paid for with debt and adding US$30m of EBITDA.
PART B · QUESTION 6
From Exhibit AH.
What is leverage on the covenant's measure?
PART B · QUESTION 7
From Exhibit AH, with the purchase.
About where does leverage go?
PART B · QUESTION 8
From Exhibit AH. Suppose the purchase is drawn from the club.
How much cash and undrawn facility is left to meet the bond due in 14 months?
PART B · QUESTION 9
From Exhibit AH.
What is the relationship's return on capital, before tax?
PART B · QUESTION 10
From Exhibit AH: your head of coverage asks where the bank actually makes its money on this client.
What do you say?
PART B · QUESTION 11
From Exhibit AH: take the 10 basis points the treasurer wants off the margin, on today's drawings.
How much more income would the bank then need to reach its target?
PART B · QUESTION 12
From Exhibit AH: removing the covenant needs two-thirds of commitments, and the four banks hold equal shares.
How many banks have to agree to remove it?
PART B · QUESTION 13
In Exhibit AH, the treasurer says: 'The other three banks are fine with all of it. You are the last one.'
What do you do?
PART B · QUESTION 14
Back from Exhibit AH's meeting, a colleague on the markets desk asks: 'Anything going on there? I am about to pitch them a hedge.' The purchase is not public.
What do you do?
PART C
The calls
People who do not report to you, in front of a treasurer who has other banks.
PART C · QUESTION 15
A club member pulling out of the country is leaving a strong client's facility. The treasurer asks your bank to take up another US$25m on the same terms. Credit is comfortable, there is room under the limit, and the return is above target.
What do you do?
PART C · QUESTION 16
Two weeks before results, a listed client's treasurer stops answering your questions on trading. They were talkative a month ago, and they are still taking your calls on the facility.
Signal or noise?
PART C · QUESTION 17
You are assembling a refinancing. The transaction banking lead, who does not report to you, has missed the agreed date for the cash management pricing. The treasurer is waiting.
What do you do?
PART C · QUESTION 18
After a fair pitch, a treasurer gives the bond mandate to a rival. Your product head wants you to ring the chief financial officer and have it reversed.
What do you do?
PART C · QUESTION 19
A credit paper for a large corporate says: 'Investment grade, listed, and too big to fail. Minimal risk.' The exposure is the largest on the regional book.
What does the committee ask?
PART C · QUESTION 20
Before the market opens, a headline says a regulator has shut a large client's main plant. The treasurer has not called. You are due to see your head of credit at nine.
What do you do first?
PART C · QUESTION 21
A treasurer asks you directly: 'I have three banks. Why would I need a fourth?'
What is the best answer?
PART C · QUESTION 22
A listed client at the lowest investment-grade notch, outlook negative, wants its leverage covenant removed, with a debt-funded purchase ahead. The treasurer says: 'Our peers do not have one.'
What do you take to credit?
PART C · QUESTION 23
A long-standing client asks for a small US$300k equipment loan. Priced on its own, the margin barely covers your cost. The client also keeps US$4m on deposit and uses a trade finance line with the bank.
How do you price it?
0 OF 23 ANSWERED · 0 WITH THE SENIOR READ · 0 STANDS UP · 0 OFF THE LINE
// THE REST OF THE ROUND
Every question here is original; none is any bank's real test. Written for: Corporate coverage banker.
- Corporate coverage banker: the interview questions, against a two-minute clock.
- Situational judgement, for any seat.
- The assessment centre: a whole case in forty-five minutes.
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