Anyone has the answer for the following 4 questions ? This is related to my Banking & Finance module.

Bank performance analysis assignment.

Minicase 7 Bank Performance Analysis CONCEPTS IN THIS CASE balance sheet liquidity management asset management liability management return on assets (ROA) return on equity (ROE) operating income operating expenses net interest margin (NIM) Your supervisor has recently promoted you to a financial analysis position in the bank. The chief financial officer (your supervisor's boss) is concerned about the bank's financial position in comparison with past trends and recent positions of similar banks in the region. To analyze the firm, you have been assigned the task of producing a bank performance analysis. You have done this type of report in your money and banking classes, and you know that the first step is to collect financial data on your bank and similar banks in order to make the necessary comparisons and suggestions for performance improvements. You collect the data in Table 1 and Table 2 from internal annual reports and government publications. Using balance sheet and income statement data, create a bank analysis and performance report for your supervisor that addresses the following issues: 1. Using the balance sheet for each year, a. Create a balance sheet showing all assets as a percentage of total assets and liabilities as a percentage of total liabilities. Which assets on your bank's balance sheet increased over the last three years? Which assets on your bank's balance sheet declined over the last three years? b. Examine the liquidity management practices of your bank over the last three years. How has the liquidity position of the bank changed over time? How does the liquidity position of your bank compare to the regional banks in year 3? Would your bank have sufficient reserves if deposits increased 40% in year 4? (Assume that the desired reserve ratio is 8% on all deposits.) c. Calculate the equity multiplier ratio for each year. How has the equity multiplier of your bank changed over time? How does the equity multiplier of your bank compare to the regional banks in year 3? 2. Using the income statement for each year, a. Create an income statement with operating income items expressed as a percentage of total operating income. Which items improved over the last three years? Which trends need to be reversed? How does your bank compare to the regional banks? b. Create an income statement with operating expenses expressed as a percentage of total operating expenses. Which items improved over the last three years? Which trends need to be reversed? How does your bank compare to the regional banks? 3. Analyze the performance of the bank for each year. a. Calculate the return on assets (ROA) for each year. How has the ROA trend changed over the last three years? How does your bank compare to the regional banks? b. Calculate the return on equity (ROE) for each year. How has the ROE trend changed over the last three years? How does your bank compare to the regional banks? 4. Identify the strengths and weaknesses of your bank relative to trends over time and in year 3 for all regional banks. What is the relationship between your bank trends and the year 3 comparison with the region? Table 1 Balance Sheet Data ($ millions) Your Bank, Year 3 Assets (Use of Funds) Reserves Your Bank, Year 2 Your Bank, Year 1 Banks in Your Region, Year 3 892 648 558 12,184 Cash items in process of collection 369 236 169 6,513 Deposits at other banks 246 124 179 4,242 2,062 739 2,243 673 1,694 538 40,020 13,026 1,970 2,708 1,846 348 267 1,795 2,467 1,682 318 243 1,436 1,974 1,346 254 194 34,736 47,762 32,565 6,143 4,712 862 785 628 15,197 12,309 11,214 8,970 217,100 2,954 2,691 2,152 52,104 2,585 1,723 1,855 1,570 1,884 1,256 45,591 30,394 1,354 1,234 987 23,881 2,954 2,691 2,153 41,104 739 1,173 538 24,026 12,309 11,214 8,970 217,100 Securities Federal government Provincial and local governments Loans Commercial and industrial Real estate Consumer Interbank Other Other assets Total Liabilities (Sources of Funds) Chequable deposits Nontransaction deposits Savings deposits Small-denomination time deposits Large-denomination time deposits Borrowings Bank capital Total Table 2 Income Statement Data ($ millions) Your Bank, Year 3 Operating Income Interest on loans Interest on securities Other interest Total interest income Your Bank, Year 2 Banks in Your Region, Year 3 Your Bank, Year 1 605 133 52 790 601 151 47 799 441 97 38 576 12,671 2,347 913 15,931 399 374 291 7,041 244 643 169 543 119 410 3,885 10,926 1,433 1,342 986 26,857 304 104 61 402 31 56 286 25 45 9,264 504 872 307 272 306 4,998 178 173 134 1,261 162 158 122 1,203 30 96 87 875 3,139 3,047 2,355 24,179 172 139 111 2,678 28 26 21 498 Gains (losses) on securities 7 7 16 128 Extraordinary items (net) 0 3 2 67 137 103 72 1,985 Service charges on deposit accounts Other noninterest income Total noninterest income Total operating income Operating Expenses Interest expenses On deposits On overnight funds and repos Other Noninterest expenses Salaries and employee benefits Premises and equipment Other Provisions for loan losses Total operating expenses Net Operating Income Income taxes Net income Income Statement Data ($ in Millions) Your Bank Year 3 Operating Income Interest on Lo 605 Interest on Sec 133 Other Interest 52 Interest Incom 790 Service Change 399 Other non inte 244 Noninterest i 643 Total Operati 1433 Entry Your Bank Year2 Your Bank Year 1 Banks in Your Region Year 3 601 151 47 799 374 169 543 1342 441 97 38 576 291 119 410 986 12671 2347 913 15931 7041 3885 10926 26857 Income Statement Data (as %'s) Entry Operating Income Interest on Loans Interest on Securities Other Interest Interest Income Service Change on Deposit Other non interest income Noninterest income Total Operating Income Operating Expense Interest Expenses Interest on Dep 304 Interest on Fe 104 Other 61 Noninterest Expenses Salaries and E 307 Premises and 178 Other 173 Provision for L 134 Total Operatin 1261 402 31 56 286 25 45 9264 504 872 272 162 158 122 1203 306 30 96 87 875 4998 3139 3047 2355 24179 Operating Expense Interest Expenses Interest on Deposits Interest on Fed Funds and Repos Other Noninterest Expenses Salaries and Employee Benefits Premises and Equipment Other Provision for Loan Losses Total Operating Expenses Net Operating Gains (Losses) Extraordinary Income Taxes 172 7 0 28 139 7 3 26 111 16 2 21 2678 128 67 498 Net Operating Income Gains (Losses) on Securities Extraordinary Items, Net Income Taxes Net Income 137 103 72 1985 Net Income Your Bank Year 3 Your Bank Year2 Your Bank Year 1 Banks in Your Region Year 3 42.22% 9.28% 3.63% 55.13% 27.84% 17.03% 44.87% 100.00% 44.78% 11.25% 3.50% 59.54% 27.87% 12.59% 40.46% 100.00% 44.73% 9.84% 3.85% 58.42% 29.51% 12.07% 41.58% 100.00% 47.18% 8.74% 3.40% 59.32% 26.22% 14.47% 40.68% 100.00% 304 104 61 402 31 56 286 25 45 9264 504 872 307 178 173 134 1261 272 162 158 122 1203 306 30 96 87 875 4998 3139 3047 2355 24179 172.00% 7 0 28 139 7 3 26 111 16 2 21 2678 128 67 498 137 103 72 1985 Which items improved over the last three years? Which trends need to be reversed? How does your bank compare to the regional banks? Improvements Interest on Securities Other Interest Other non interest income Reversals Needed Interest on Loans Service Change on Deposit Interest Income The bank needs to focus on making more interest on loans as it has been decreasing over the years and the loans represent a large section of their liabilities. In comparison to the other banks they are not generating enough income related to interest expenses overall, or on loans in particular. However the bank is doing a good job on beating the industry average on non interest income. Calculate the return on assets (ROA) for each year. How has the ROA trend changed over the last three years? How does your bank compare to the regional banks? ROA net profit after taxes/Assets Year 1 0.80% The ROA has increase year over year indicating a more efficient use of total assets. The year 3 ROA is high Year 2 0.92% than the regional banks indicating that it is doing a better job than their competition. Year 3 1.11% Regional Banks 0.91% Calculate the return on equity (ROE) for each year. How has the ROE trend changed over the last three years? How does your bank compare to the regional banks? ROE net profit/equity capital Year 1 13.38% Year 2 0.92% Year 3 1.11% Regional Banks 0.91% The ROW as decreased and then increase again over the years. Most importantly the bank is using equity in a more efficient manner compared against other banks in the regions. Identify the strengths and weaknesses of your bank relative to trends over time and in year 3 for all regional banks. What is the relationship between your bank's trends and the year 3 comparis The strengths of the bank include that they are using their assets and equity better than the region banks. The weaknesses include a decrease income from interest activities and a smaller bank capital, which indicates the bank is financed more through debt. They are also increasing the reserves as a % to total assets year over year, which can help in further years where deposits increase. The relationship that seems to becoming more apparent is that the bank is focusing more on generating less interest income and more non interest income, which is opposite of other industry banks. parison with the region? Balance Sheet Data (in $ Millions) Entry Assets Reserves Cash Items in Process of Collection Deposits at other Banks Securities US Government and Agency State and Local Government Loans Commercial and Industrial Real Estate Consumer Interbank Other Other Assets (Physical) Your Bank Year 3 Your Bank Year 2 Balance Sheet Data (as %'s) Your Bank in Bank Region Year 1 Year 3 Total 558 169 179 12184 6513 4242 2062 739 2243 673 1694 538 40020 13026 1970 2708 1846 348 267 862 1795 2467 1682 318 243 785 1436 1974 1346 254 194 628 34736 47762 32565 6143 4712 15197 11214 2954 2691 2152 52104 2585 1723 1354 2954 739 1855 1570 1234 2691 1173 1884 1256 987 2153 538 45591 30394 23881 41104 24026 12309 Liabilities Checkable Deposits Nontransaction Deposits Savings Deposits Small-Denomination time deposits Large-Denomination time deposits Borrowings Bank Capital 648 236 124 12309 Total 892 369 246 11214 8970 217100 8970 217100 Entry Assets Reserves Cash Items in Process of Collection Deposits at other Banks Securities US Government and Agency State and Local Government Loans Commercial and Industrial Real Estate Consumer Interbank Other Other Assets (Physical) Total Liabilities Checkable Deposits Nontransaction Deposits Savings Deposits Small-Denomination time deposits Large-Denomination time deposits Borrowings Bank Capital Total Your Bank Year 3 Your Bank Year 2 Your Bank Year 1 Bank in Region Year 3 7.25% 3.00% 2.00% 5.78% 2.10% 1.11% 6.22% 1.88% 2.00% 5.61% 3.00% 1.95% 16.75% 6.00% 20.00% 6.00% 18.89% 6.00% 18.43% 6.00% 16.00% 22.00% 15.00% 2.83% 2.17% 7.00% 16.01% 22.00% 15.00% 2.84% 2.17% 7.00% 16.01% 22.01% 15.01% 2.83% 2.16% 7.00% 16.00% 22.00% 15.00% 2.83% 2.17% 7.00% 100.00% 100.00% 100.00% 100.00% 24.00% 24.00% 23.99% 24.00% 21.00% 14.00% 11.00% 24.00% 6.00% 16.54% 14.00% 11.00% 24.00% 10.46% 21.00% 14.00% 11.00% 24.00% 6.00% 21.00% 14.00% 11.00% 18.93% 11.07% 100.00% 100.00% 100.00% 100.00% Create a balance sheet showing all assets as a percentage of total assets and all liabilities as a percentage of total liabilities. Which assets on your bank's balance sheet increased over the last three years? Which assets on your bank's balance sheet declined over the last three years? Assets That Increased Reserves Cash Items in Process of Collection Deposits at other Banks Assets that Decreased US Government and Agency All Loans stayed static Examine the liquidity management practices of your bank over the last three years. How has the liquidity position of the bank changed over time? How does the liquidity position of your bank compare to the regional banks in year 3? Would your bank have sufficient reserves if deposits increased 40% in year 3? (Assume that the reserve requirement is 8% on all deposits.) The liquid management practices over the years has shown that the bank has increased their assets at a higher % compared to their liabilities, which have help constant. This indicates that the bank is increasing is liquefy or ability to meet their short term obligations. In terms of the average the bank has a higher % or reserves and cash in process, which helps the bank become in a better liquid position. If the deposits increased 40% in year 3 the bank would not have enough reserves. The total deposits would be the checkable, savings, small and large denomination (2954+2585+1723+1354)*1.4 = 12062 and 8% of this = 965, which is higher than the current reserves of 892 Calculate the equity multiplier ratio for each year. How has the equity multiplier of your bank changed over time? How does the equity multiplier of your bank compare to the regional banks in year 3? Equity Multiple = Assets/Equity Capital EM Year 1 EM Year 2 EM Year 3 EM Bank Average 16.67 9.56 16.66 9.04 The equity multiplier has decreased and than increased again over the years. In comparison to the other industry banks we have a higher equity multiplier. Income Statement Data ($ in Millions) Your Bank Year 3 Operating Income Interest on Lo 605 Interest on Sec 133 Other Interest 52 Interest Incom 790 Service Change 399 Other non inte 244 Noninterest i 643 Total Operati 1433 Entry Your Bank Year2 Your Bank Year 1 Banks in Your Region Year 3 601 151 47 799 374 169 543 1342 441 97 38 576 291 119 410 986 12671 2347 913 15931 7041 3885 10926 26857 Income Statement Data (as %'s) Entry Operating Income Interest on Loans Interest on Securities Other Interest Interest Income Service Change on Deposit Other non interest income Noninterest income Total Operating Income Operating Expense Interest Expenses Interest on Dep 304 Interest on Fe 104 Other 61 Noninterest Expenses Salaries and E 307 Premises and 178 Other 173 Provision for L 134 Total Operatin 1261 402 31 56 286 25 45 9264 504 872 272 162 158 122 1203 306 30 96 87 875 4998 3139 3047 2355 24179 Operating Expense Interest Expenses Interest on Deposits Interest on Fed Funds and Repos Other Noninterest Expenses Salaries and Employee Benefits Premises and Equipment Other Provision for Loan Losses Total Operating Expenses Net Operating Gains (Losses) Extraordinary Income Taxes 172 7 0 28 139 7 3 26 111 16 2 21 2678 128 67 498 Net Operating Income Gains (Losses) on Securities Extraordinary Items, Net Income Taxes Net Income 137 103 72 1985 Net Income Your Bank Year 3 Your Bank Year2 Your Bank Year 1 Banks in Your Region Year 3 42.22% 9.28% 3.63% 55.13% 27.84% 17.03% 44.87% 100.00% 44.78% 11.25% 3.50% 59.54% 27.87% 12.59% 40.46% 100.00% 44.73% 9.84% 3.85% 58.42% 29.51% 12.07% 41.58% 100.00% 47.18% 8.74% 3.40% 59.32% 26.22% 14.47% 40.68% 100.00% 304 104 61 402 31 56 286 25 45 9264 504 872 307 178 173 134 1261 272 162 158 122 1203 306 30 96 87 875 4998 3139 3047 2355 24179 172.00% 7 0 28 139 7 3 26 111 16 2 21 2678 128 67 498 137 103 72 1985 Which items improved over the last three years? Which trends need to be reversed? How does your bank compare to the regional banks? Improvements Interest on Securities Other Interest Other non interest income Reversals Needed Interest on Loans Service Change on Deposit Interest Income The bank needs to focus on making more interest on loans as it has been decreasing over the years and the loans represent a large section of their liabilities. In comparison to the other banks they are not generating enough income related to interest expenses overall, or on loans in particular. However the bank is doing a good job on beating the industry average on non interest income. Calculate the return on assets (ROA) for each year. How has the ROA trend changed over the last three years? How does your bank compare to the regional banks? ROA net profit after taxes/Assets Year 1 0.80% The ROA has increase year over year indicating a more efficient use of total assets. The year 3 ROA is high Year 2 0.92% than the regional banks indicating that it is doing a better job than their competition. Year 3 1.11% Regional Banks 0.91% Calculate the return on equity (ROE) for each year. How has the ROE trend changed over the last three years? How does your bank compare to the regional banks? ROE net profit/equity capital Year 1 13.38% Year 2 0.92% Year 3 1.11% Regional Banks 0.91% The ROW as decreased and then increase again over the years. Most importantly the bank is using equity in a more efficient manner compared against other banks in the regions. Identify the strengths and weaknesses of your bank relative to trends over time and in year 3 for all regional banks. What is the relationship between your bank's trends and the year 3 comparis The strengths of the bank include that they are using their assets and equity better than the region banks. The weaknesses include a decrease income from interest activities and a smaller bank capital, which indicates the bank is financed more through debt. They are also increasing the reserves as a % to total assets year over year, which can help in further years where deposits increase. The relationship that seems to becoming more apparent is that the bank is focusing more on generating less interest income and more non interest income, which is opposite of other industry banks. parison with the region? Balance Sheet Data (in $ Millions) Entry Assets Reserves Cash Items in Process of Collection Deposits at other Banks Securities US Government and Agency State and Local Government Loans Commercial and Industrial Real Estate Consumer Interbank Other Other Assets (Physical) Your Bank Year 3 Your Bank Year 2 Balance Sheet Data (as %'s) Your Bank in Bank Region Year 1 Year 3 Total 558 169 179 12184 6513 4242 2062 739 2243 673 1694 538 40020 13026 1970 2708 1846 348 267 862 1795 2467 1682 318 243 785 1436 1974 1346 254 194 628 34736 47762 32565 6143 4712 15197 11214 2954 2691 2152 52104 2585 1723 1354 2954 739 1855 1570 1234 2691 1173 1884 1256 987 2153 538 45591 30394 23881 41104 24026 12309 Liabilities Checkable Deposits Nontransaction Deposits Savings Deposits Small-Denomination time deposits Large-Denomination time deposits Borrowings Bank Capital 648 236 124 12309 Total 892 369 246 11214 8970 217100 8970 217100 Entry Assets Reserves Cash Items in Process of Collection Deposits at other Banks Securities US Government and Agency State and Local Government Loans Commercial and Industrial Real Estate Consumer Interbank Other Other Assets (Physical) Total Liabilities Checkable Deposits Nontransaction Deposits Savings Deposits Small-Denomination time deposits Large-Denomination time deposits Borrowings Bank Capital Total Your Bank Year 3 Your Bank Year 2 Your Bank Year 1 Bank in Region Year 3 7.25% 3.00% 2.00% 5.78% 2.10% 1.11% 6.22% 1.88% 2.00% 5.61% 3.00% 1.95% 16.75% 6.00% 20.00% 6.00% 18.89% 6.00% 18.43% 6.00% 16.00% 22.00% 15.00% 2.83% 2.17% 7.00% 16.01% 22.00% 15.00% 2.84% 2.17% 7.00% 16.01% 22.01% 15.01% 2.83% 2.16% 7.00% 16.00% 22.00% 15.00% 2.83% 2.17% 7.00% 100.00% 100.00% 100.00% 100.00% 24.00% 24.00% 23.99% 24.00% 21.00% 14.00% 11.00% 24.00% 6.00% 16.54% 14.00% 11.00% 24.00% 10.46% 21.00% 14.00% 11.00% 24.00% 6.00% 21.00% 14.00% 11.00% 18.93% 11.07% 100.00% 100.00% 100.00% 100.00% Create a balance sheet showing all assets as a percentage of total assets and all liabilities as a percentage of total liabilities. Which assets on your bank's balance sheet increased over the last three years? Which assets on your bank's balance sheet declined over the last three years? Assets That Increased Reserves Cash Items in Process of Collection Deposits at other Banks Assets that Decreased US Government and Agency All Loans stayed static Examine the liquidity management practices of your bank over the last three years. How has the liquidity position of the bank changed over time? How does the liquidity position of your bank compare to the regional banks in year 3? Would your bank have sufficient reserves if deposits increased 40% in year 3? (Assume that the reserve requirement is 8% on all deposits.) The liquid management practices over the years has shown that the bank has increased their assets at a higher % compared to their liabilities, which have help constant. This indicates that the bank is increasing is liquefy or ability to meet their short term obligations. In terms of the average the bank has a higher % or reserves and cash in process, which helps the bank become in a better liquid position. If the deposits increased 40% in year 3 the bank would not have enough reserves. The total deposits would be the checkable, savings, small and large denomination (2954+2585+1723+1354)*1.4 = 12062 and 8% of this = 965, which is higher than the current reserves of 892 Calculate the equity multiplier ratio for each year. How has the equity multiplier of your bank changed over time? How does the equity multiplier of your bank compare to the regional banks in year 3? Equity Multiple = Assets/Equity Capital EM Year 1 EM Year 2 EM Year 3 EM Bank Average 16.67 9.56 16.66 9.04 The equity multiplier has decreased and than increased again over the years. In comparison to the other industry banks we have a higher equity multiplier