BK11 - MANA130107 Bank Management 1 Lecture Eleven Assets

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Unformatted text preview: MANA130107 Bank Management 1 Lecture Eleven Assets Management—Business Lending (chap 16, 17 ) Topics in Commercial Bank Management MANA130107 Bank Management 2 Assets Management—Business Lending ¡ Topics covered in this lecture ¢ Lending Policies ¢ Lending Procedures ¢ Lending to Business ¢ Pricing Business Loans MANA130107 Bank Management 3 Making Loans “ If you owe the bank $100, that is your problem. If you owe the bank $100 million, that ’ s the bank ’ s problem. ” ¡ Making loans ¢ Principal reason for a bank to get charter ¢ Principal economic function ¢ One of the most important and riskiest services ¡ Loans ¢ Support consumption and investments ¢ Support economic growth and employment ¢ Provide information about borrower ’ s credit quality ¡ Lending process is subject to consistent monitoring of both inside and outside examiners. MANA130107 Bank Management 4 Types of Loans Made By Banks Banks make loans to a variety of customers for different purposes ¡ Grouped by purposes ¢ Real Estate Loans- secured by real property ¢ Financial Institution Loans- to financial peers ¢ Agriculture Loans ¢ Commercial and Industrial Loans ¢ Individuals Loans- directly or indirectly via retailer ¢ Miscellaneous Loans- other loans not listed above ¢ Lease Financing Receivables No 1, 50%+ No 2, 20% No 3, 17% MANA130107 Bank Management 5 Relative Importance of Loans 1935 – 2004 0% 10% 20% 30% 40% 50% 60% 1 9 3 5 1 9 3 8 1 9 4 1 1 9 4 4 1 9 4 7 1 9 5 1 9 5 3 1 9 5 6 1 9 5 9 1 9 6 2 1 9 6 5 1 9 6 8 1 9 7 1 1 9 7 4 1 9 7 7 1 9 8 1 9 8 3 1 9 8 6 1 9 8 9 1 9 9 2 1 9 9 5 1 9 9 8 2 1 2 4 Percent of Total Assets Cash as a Percent of Total Assets Investment Securities as a Percent of Total Assets Total Loans as a Percent of Total Assets 0% 10% 20% 30% 40% 50% 60% 1 9 3 5 1 9 3 8 1 9 4 1 1 9 4 4 1 9 4 7 1 9 5 1 9 5 3 1 9 5 6 1 9 5 9 1 9 6 2 1 9 6 5 1 9 6 8 1 9 7 1 1 9 7 4 1 9 7 7 1 9 8 1 9 8 3 1 9 8 6 1 9 8 9 1 9 9 2 1 9 9 5 1 9 9 8 2 1 2 4 Percent of Total Assets Cash as a Percent of Total Assets Investment Securities as a Percent of Total Assets Total Loans as a Percent of Total Assets 0% 10% 20% 30% 40% 50% 60% 1 9 3 5 1 9 3 8 1 9 4 1 1 9 4 4 1 9 4 7 1 9 5 1 9 5 3 1 9 5 6 1 9 5 9 1 9 6 2 1 9 6 5 1 9 6 8 1 9 7 1 1 9 7 4 1 9 7 7 1 9 8 1 9 8 3 1 9 8 6 1 9 8 9 1 9 9 2 1 9 9 5 1 9 9 8 2 1 2 4 Percent of Total Assets Cash as a Percent of Total Assets Investment Securities as a Percent of Total Assets Total Loans as a Percent of Total Assets MANA130107 Bank Management 6 A bank ’ s loan portfolio varies along mix, quality and yield. ¡ Market Area ¢ Customer characteristic matters ¢ Diversification arrangement may help ¡ Lender size – legal lending limit ¡ Experience and Expertise ¡ Lending Policy an Regulations ¡ Expected Yield ¢ Gross yields: credit card loans, installment loans ¢ Net yields: real estate and commercial loans ¡ Customer Size: risk and margin Factors Affecting Loan Portfolio Focus on the market where you are the most efficient producer !Focus on the market where you are the most efficient producer !...
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This note was uploaded on 10/17/2011 for the course FINANCE CFA 201 taught by Professor Leo during the Spring '09 term at Fudan University.

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BK11 - MANA130107 Bank Management 1 Lecture Eleven Assets

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