Semester 2, 2020
CORPFIN 2501- FINANCIAL INSTITUTIONS MANAGEMENT II
SMALL GROUP DISCOVERY EXPERIENCE
Group Assignment
This assignment is to be done in a group of maximum four students. Group members can be
from different tutorial classes. The maximum word limit is 4500 words. Appendices (including,
for example calculations) can be attached and will not be counted in the word limit. All of the
sources you have cited in your assignment must be included in a reference list, which is placed at the end
of your report before the appendices.
The assignment should be submitted electronically via the Turnitin Assignment tool on MyUni by
one member for the whole group by 11.59pm on Friday, Oct 30th (week 12) The link for the
Turnitin Assignment tool has been created under the Assignment page entitled “SGDE Group
Assignment- Turnitin Submission” on the MyUni site. You can upload your assignment directly
y following the prompts.
A bonus of 2.5 marks (or 12.5% of the possible maximum mark allocated for the assignment) is
applied for early submission of the assignment (by 11.59pm on Tuesday,Oct 27th ). If the
assignment is submitted later than this time, then the bonus is not applied.
A late assignment submission will be penalised by a 1 mark reduction (or 5% of the possible
maximum mark for the assignment) for each day that it is late.
The main objective of this assignment is to understand banks’ activities and risks and to analyse
the impact of the financial crisis on the banks’ activities, financial performance and risks.
You are required to use 2 banks (commercial and/or investment banks) ; one Australian bank
and one US bank. You can choose to use the same type or different types of banks.
The time period of analysis is from 2007 to 2010 (inclusive) to capture the impact of Global
Financial Crisis that developed in late 2008.
This assignment requires an in-depth analysis on the financial statements of the banks you have
selected. The information required (financial reports, market and industry analysis etc.) can be
downloaded from the banks’ websites and other sources.
Financial Institutions Management II - Semester 2 2020
2
Part I: Asset and Liability Composition XXXXXXXXXX50% of marks)
Present a clear and concise analysis on fund (capital) raising activities (liability + equity
composition) and asset portfolio allocation (asset composition) of the banks reflected in the
anks’ balance sheets.
In your analysis you have to clearly explain the major differences of the banks’ asset and liability
compositions and the impacts of the 2008 global financial crisis on the banks’ asset and liability
+equity compositions.
Assessment details:
a. Explain the motivation for choosing the banks
Why did you think the banks you chose would make an interesting comparison?
Possible reasons might be size, location, areas of operation, or core activities.
. Compare and discuss changes in asset and liability compositions of the banks over the
sample period :
Examine the compositions of the assets and liabilities from 2007 to 2010 for
each bank. You may want to focus on four types of assets and four types of
liabilities (i.e three largest types of assets and liabilities, and include the other
smaller types in one group).
Compare and explain how the asset and liability compositions have changed
over the sample period, especially during the crisis periods. Explain how you
think the global financial crisis affected the asset and liability compositions.
c. Explain potential risks faced by the banks due to the asset and liability compositions and
their changes.
Hint: You should not only be noting the quantitative change of assets and liabilities, but also
possible reasons as to why the change occu
ed e.g. market conditions, changes in cost of
funds, changes in needs of the bank. For example, assignments that state ‘liability A changed
y X%, as the cost of funds increased’ would get a significantly better mark compared to,
‘liability A changed by X%’. You do not need to do this for every asset or liability, nor do you
need to go into extreme depth, but you should make an attempt to understand why a change
has occu
ed. The notes of financial statements can be useful for this!
Financial Institutions Management II - Semester 2 2020
3
Part II: Financial Performance Analysis XXXXXXXXXX% of marks)
Critically analyse financial performance of the banks and discuss the impacts of the global
financial crisis and the European debt crisis on the performance of the banks.
In undertaking the performance analysis, you are required to use the Return on Equity (ROE)
decomposition model discussed in topic 2. This model provides a starting point for examining a
financial institution’s performance by decomposing its financial ratios.
In order to obtain a better understanding about the banks’ performances, not only do you need to
analyse key performance indicators, but also identify trends in those indicators.
Assessment details:
a. Discuss changes in ROEs and the sources of the changes in ROEs for each bank over the
sample period :
o How has the profitability (ROE) for each bank changed over the sample period?
o What have been the reasons of the changes in ROEs ?
Decompose the ROE into the main components: ROA and EM to identify
the driving factors (strengths and weaknesses) of the ROE.
Analyse further the sources of ROA by
eaking down the ROA into its
components: Asset Utilisation and Profit Margin ratios.
Identify the sources of the changes in Asset Utilisation and Profit Margin
atios by looking into the components of asset utilisation (i.e the income
atios) and profit margin (i.e the expense ratios) in more detail.
. Explain how the global financial crisis affected the banks’ profitability.
Note:
Information about ROE items is available in Consolidated Income Statements
(Statement of Earnings/Income) and Balance sheets in financial reports.
Additional readings for this part: (Topic2_App2A(Lange3e) from Lange, Saunders and
Cornett, 3rd edition and Topic 2_App7A(Saunders) from Saunders 7th ed ) are available
in the “Readings” folder within Modules on MyUni.
Similarly to part I, when you are discussing ratios or multiples do not just state the
quantitative change. It is important to try to understand why the change occu
ed.
Simply stating ‘The ROE for 2008 is X and the ROE for 2009 is Y, this is a big
change!’ is not useful analysis. Should you wish to move into a finance related role,
comparing companies using multiples is a fairly common task for interns & graduates,
so this is good practice!
--End of Assignment--
Slide 1
Commonwealth Bank of Australia ACN XXXXXXXXXX
Results Presentation
For the half year ended 31 December 2009
10 Fe
uary
2010
2
Disclaime
The material that follows is a presentation of general background information
about the Group’s activities cu
ent at the date of the presentation,
9 Fe
uary 2011. It is information given in summary form and does not
purport to be complete. It is not intended to be relied upon as advice to
investors or potential investors and does not take into account the
investment objectives, financial situation or needs of any particular investor.
These should be considered, with or without professional advice when
deciding if an investment is appropriate.
3
Agenda
Ralph No
is, CEO – Company Update and Outlook
David Craig, CFO – Financial Overview
Questions and Answers
4
Notes
5
Overview
Another solid financial result
Challenging operating environment
Disciplined strategy execution continuing to delive
Investing for the future
Cautiously optimistic for calendar 2011
6
Snapshot – 1H11 Results*
Cash earnings ($m) 3,335 +13%
ROE (Cash) 19.2% +70bpts
Cash EPS ($ XXXXXXXXXX%
DPS ($ XXXXXXXXXX%
Cost-to-Income 45.4% 70bpts
NIM 2.12% (6bpts)
RBS ($m) 2,227 +2%
IB&M ($m XXXXXXXXXX%)
BPB ($m XXXXXXXXXX%
Bankwest ($m XXXXXXXXXX%
Wealth Management ($m XXXXXXXXXX%
NZ (NZD $m XXXXXXXXXX%
Total Assets ($bn XXXXXXXXXX%
Total Liabilities ($bn XXXXXXXXXX%
FUA ($bn XXXXXXXXXX%
RWAs ($bn XXXXXXXXXX%)
Provisions to Credit RWAs 2.25% +21bpts
Tier 1 Capital 9.71% +61bpts
Tier 1 – UK FSA 13.5% +110bpts
WAM – New Issuance (yrs) 4.4 -
Deposit Funding (%) 60% +4%
Liquid Assets ($bn) 93 +4%
* All movements on prior comparative period.
Financial
Strong balance sheet Capital & Funding
Operating Performance by Division
7
Dec 10 vs Dec 09
Cash NPAT ($m) 3,335 13%
Statutory NPAT ($m) 3,052 5%
ROE 19.2% 70bpts
Cash EPS ($ XXXXXXXXXX%
Dividend per Share ($ XXXXXXXXXX%
Another solid financial result
8
Return on Equity (Cash)
18.8%
21.5% 21.7%
20.4%
15.8%
18.7% 19.2%
XXXXXXXXXX XXXXXXXXXX1H11
9
Return on Assets
Cash NPAT ($bn)
Assets ($bn)
352
383
440
488
620
646 650
3.5
4.1
4.5
4.7
4.4
6.1
3.3
-
0
0
1
1
1
1
1
2
2
0
100
200
300
400
500
600
700
XXXXXXXXXX XXXXXXXXXX1H11
Half Yea
Group ROA (%)
1.1%
1.0%
Banking
ROA
0.9%
10
A clear, focussed strategy
Australia’s finest
financial services
organisation
Customer
Satisfaction
Business
Banking
Trust and
Team Spirit
Technology and
Operational
Excellence
Profitable
Growth
11
Strategy continues to delive
1, 2, 3, 4 - Refer note slide at back of presentation for source information
Business Customer Satisfaction 3
Products per customer 2
CBA Ranking*
Total Market Equal 1st
Large (>$50m) 1st
Medium ($5m to $50m) Equal 1st
Small ($1m to $5m) Equal 2nd
Micro (<$1m) Equal 3rd
FirstChoice Satisfaction 4
CBA Peers
2.64
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