Assignment Task:

Part A: National Corporation Analysis

Questions 1.

  • State certain things about the bank, 

  • provide evidence to show ROA is decent and quite high. 

  • Provide evidence to show that deposit is at a cheap cost. 

  •  Provide evidence to show that customers are good quality and write off is not high. 

  • Provide evidence of ROE is respectable. 

  • Provide evidence that there is a change in industry due to competition. Many institutions are going on assets based standing. 

  • Find evidence that they may need to engage some external expertise to engage in this business.

  • Provide evidence that is not in their line of fractions. The business relationship with the customer is very good. 

  • Make use of the data of the customer in order to offer something new to them.

Question 2.

ROE = ROWN

  • New business, a lot of competition. Require extra cost to outsource external expertise. Thus ROA/ROE will not improve. 

  • Find evidence of higher cost, IMM, net interest margin, credit risk. New business = Low volume.

  • How can ROA and ROE grow up? Talk about the volume.

Question 3:

Question 2 and 3 is linked

Look at the balance sheet and liabilities. Liabilities are their deposit, composition, and cost of liabilities. We should be able to see that there is a huge deposit base at a relatively low cost. if the cost of fund is Low, no pressure. The pressure is from outside the industry that is forcing them to do this. Get evidence from the deposit base.

Question 4:

  • Must have knowledge of the GFC, who are the people involved, how this GFC happens. Google/YouTube: Credit crisis visualize (11mins) 

  • Provide Some similarities and some differences.

    Same in what ways? Both involve collateral. In GFC properties housing loan is collateral. In FNC, look at the asset list, the bank asset is not only a housing loan. Provide those evidence, risk exposure is different. Bank got many assets.
    Bank collects a different kind of collateral. Give evidence.
    Another similarity is Bank in GFC faces a lower profit margin thus pressure to do securitization. FNC squeezes and threaten by Low-profit margins. Look at the data.
    How is it different? GFC died due to securitization. Bank does not have securitization. The bank goes in a traditional loan. Normal banking loan.
    GFC Impact everybody, bank, companies, public, job
    Bank impact shareholder, in-house.
    Another different, quality of customer
    FNC has very good quality (get evidence), customer
    GFC has the lousy quality customer (all subprime customer)
    Expertise:
    Are investor bank experts In securitization?

Part B: Edward Altman: Where are we in the Credit Cycle?

  • Talk about credit risk, using the financial statement. 

  • Can they give financing? 

  • Provide Vertical and horizontal analysis. 

  • Interpret Ratio analysis (leverage and liquidity) provide the consideration using data (Storytelling to provide on why the data is that way)

  • Input relevant info

  • Direct – Plain Recording

  • Indirect – Classification

  • Ability to pay a loan should come from operating cash flows

 

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  • Posted on : January 11th, 2019

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