Lecture 3s(2) - 2204AFE Financial Institutions Management...

2204AFE: Financial Institutions
Management
Topic 3: Analysing Bank Performance
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Where we are….
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Week Beginning Topic Lecture Content
Learning
Outcomes
Workshop
Topics
Readings Assessment
1 27 Feb 1
Why are Financial Institutions Special and
Depository Institutions
1, 2 Lange et al Chapter 1, 2
2 6 Mar 2 Other Types of FIs and Risks of FIs 1, 2 1 Lange et al Chapters 3, 4
3 13 Mar 3 Analysing Bank Performance 3 2 Supplementary on [email protected]
4 20 Mar 4 Interest Rate Risk: Duration Model 4, 6 3 Lange et al Chapter 6
5 27 Mar 5 Interest Rate Risk: Repricing Model and Off-BS 4 4 Lange et al Chapters 5, 7
6 3 Apr 6 Liquidity Risk 7 5 Lange et al Chapters 14 Assignment
10 Apr Mid Semester Break
7 17Apr Mid-semester test
Mid-semester
test
8 24Apr 7 Managing Liabilities and Liquidity 7, 8 6 Lange et al Chapters 15
9 1 May 8 Managing Credit Risk 5 7 Lange et al Chapters 10, 11
10 8 May 9 Managing Off-balance Sheet Activities 9 8 Lange et al Chapter 16
11 15 May 10 Managing Capital Risk 10 9 Lange et al Chapter 18
12 22 May Final Exam Review (Lecture) 10

In the News!
What’s in the news?
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Lecture Contents
3.1 Introduction
3.2 Commercial bank financial statements
3.3 Income statement
3.4 Balance sheet
3.5 What to analyse? How?
3.6 The ROE Model
3.7 Risk analysis
3.8 Evaluating bank performance: an application
3.9 Financial statement manipulation
3.10 Summary
3.11 Tutorial Qs
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3.1 Introduction
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Why analyse performance?
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How to analyse?
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Ratio analysis? Others?
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Interpretation
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3.2 Commercial bank financial statements
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Income statement : revenues & expenses
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Balance sheet : assets, liabilities, capital
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What are these?
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Please bring ANZ 2010/2011 financial statements to
class.
•
Please also bring Template for Ratio Analysis (the same
as for your assignment)
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Quiz #1
Banks generate their largest portion of income from :
a) loans
b) short-term investment
c) demand deposits
d) long-term investments
e) certificates of deposit
Answer:
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3.3 Income statement
Net interest income (NII) (Interest income-Interest expense)
- Burden (Non-interest income-Non-interest expense)
- Provision for loan losses (PLL)
+ Securities gains (SG)*
Net income before tax (NIbt)
- Taxes
Net income (NI)
- Dividends
Retained earnings (RE)
RE = NII-Burden-T-Div
*SG in Australia is not reported as a separate item, it is part of NonII
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Interest Income (II)
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Includes interest and fees from: explicit interest
–
Loans, deposits at other institutions, trading account securities,
etc.
Interest Expense (IE)
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Includes interest paid on all interest-bearing liabilities
Non-Interest Income (NonII – note, reading uses OI)
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Includes income from sources such as
–
fiduciary (trust) income, deposit service charges, trading
revenues, investment banking fees and commissions, insurance
commission fees and income, net servicing fees, net gains
(losses) on sales of loans, other net gains (losses)
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