6LectureFSofbank1f

6LectureFSofbank1f - Profitability of Depository...

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1 Profitability of Depository Institution The Bank Financial Statements Objective of the Bank Profitability Valuation
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2 1. Balance Sheet Summary Liabilities Demand Deposits(Checking acct ) 5-10% Savings and Notice Deposits 10-15 Term Deposits (CD, GIC. .) 40-45 [Retail CD<100 K, whole sale≥100K] Non-Deposit Obligations 20-25 - CP, Discount Borrowing, Debenture, FF, Repo, BA Equity ( CE, PS, R/E) Regulation requires Banks to hold a minimum to act as a buffer against losses
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3 High Leverage Banks are highly leveraged compared to corporation because most liabilities are insured and banks can borrow as much as they can at the same rate .. But Corporations pay an increasing rate with higher leverage which limit their borrowing
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4 Assets Cash Reserves 5-10% - Vault Cash - Deposits with other banks - Deposits with BOC Securities 15-20 - Govt Sec, FF, Repo, MBS - Corporate Debt, Equities Net Loans 50-60 - Consumers, firms,Callable loans - Mortgages Other Assets: BA , fixed and other assets
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5 Off Balance Sheet Off B/S Accounts are those accounts recording contingent claims, such that, when a contingent event occurs occurs, this item movesto the on B/S accounts
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6 Credit Substitutes and Derivatives Credit Substitutes and others
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This note was uploaded on 02/28/2012 for the course FINE 442 taught by Professor Larbihammami during the Spring '12 term at McGill.

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6LectureFSofbank1f - Profitability of Depository...

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