Topic 3-Bank Perf_sv(3).pptx - 2204AFE Financial Institutions Management Topics 3 Analysing Bank Performance[Crucial for Group Assignment 1

Topic 3-Bank Perf_sv(3).pptx - 2204AFE Financial...

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2204AFE: Financial Institutions Management Topics 3: Analysing Bank Performance [Crucial for Group Assignment] 1
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Announcements Assessment #1 Form your Groups by 6 March Group Assignment, due 3 April , 5pm, 20% DO NOT sign up before you’ve formed a group of at least three
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In the News! Yammer 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 3
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3.1 Introduction What is the assignment? What needs to be done? Why analyse performance? How to analyse? Ratio analysis? Others? Interpretation 4
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3.2 Commercial bank financial statements Income statement : revenues & expenses Balance sheet : assets, liabilities, capital What are these? Brief review of IS and BS of PNC 5
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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 6
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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 (NIat) - Dividends Retained earnings (RE) RE = NII-Burden+SG-T-Div *In Australia, Securities Gain is not reported as a separate item but is part of NonII 7
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Interest Income (II) Includes interest and fees from: Loans, deposits at other institutions, trading account securities, etc. Interest Expense (IE) Includes interest paid on all interest-bearing liabilities Non-Interest Income (OI) 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) 8
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Quiz #2 Net interest income is the difference between : a) gross interest income and net interest expense. b) gross interest income and non-interest income.
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