A Report On The Bank's Roe

The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions

For net profit margins, ROE, and ROA, Star River experienced a declining trend of 1.22, 1.32, and 1.44 respectively from 1998 to 2001. This is due to an increase in cost of goods sold, particularly inventory, resulting in compressed margins. Star River’s inability to pay down its debt will cause EBIT and EBITDA to continue to show an increasing trend, until the company can control their Current Liabilities.

1. Decompose IBM’s ROE (by quarter) and discuss the factors (and trends) that contribute to

The following report is a brief comparative analysis of two of Australia’s largest deposit-taking financial institutions (FI), Australia and New Zealand Banking Group Ltd. (ANZ) and Westpac Banking Corporation (Westpac). This report seeks to identify which of the FIs has a greater aggregate return per dollar of equity and thus establish the highest performer, or most profitable, of the two. The Return on Equity Model (ROE) (Koch & MacDonald,

1. Decompose IBM’s ROE (by quarter) and discuss the factors (and trends) that contribute to

Since an ROE of 21.48% equals the product of 4.41% and 4.87 (ROA and Equity Multiplier), it indicates that the firm is able to achieve such high ROE only through a high financial leverage.

In the article, Bank of America ordered to pay $2.2 million to 1,000 black job seekers it discriminated against written by David Knowles there was a major issue regarding racism. This written piece discussed the court case against Bank of America and how this corporation was ordered to $2,181,593 in back wages and interest to 1,147 African Americans that were denied jobs. This bank’s office branch in Charlotte, NC had discriminated against blacks in 1993 and again between the years of 2002 and 2005. This case was first introduced in 1997 and settlements were not concluded until late 2013.

Return on Total Assets was 4.43% which is below five percent. That indicates that the company is not accurately converting its assets into profit. The total for Return on Stockholders’ Equity was 8.89%, however financial analysts prefer ROE to range between 15-20 %. The company’s low ROE indicates that the company is not generating profit with new investments. Lastly, Debt-to-Equity ratio for the company was 1.01 which indicates that investors and creditors are equally sharing assets. In the view of creditors, they see a high ratio as a risk factor because it can indicate that investors are not investing due to the company’s overall performance. The totals of these three ratios demonstrate that the company’s financial state is not as healthy as it should be.

These profitability ratios indicate a better result by taking up the new loan than staying with the old bank. By Dupont analysis (Please see exhibit___), the main drivers for the higher ROE for new loan is due to higher profit margin which offset the lower equity multiplier. The effect of the discount income has driven the profitability, which in turn reflected also in the ROE and ROA ratios.

Bay Street Bankcrop (BSB) is a highly successful and innovative minority-lending bank. The bank has just got an approval for the funding of $5 million from Fannie Mae for starting a new branch office in the inner city to extend its minority lending services to African American community. BSB has developed an aggressive $30 million lending plan offering long term, fixed rate mortgage financing to black owned business ventures. The plan would be financed through equity capital of $5 million for which approval has been received from Fannie Mae and an innovative savings deposit program which would raise $25 million. BSB offers mortgage to its customers at fixed rate for long term. Offering long-term

Reserve coverage ratio, despite the increase in loss reserves, is decreasing dramatically, from 213% in 2006 to 87% in June 2008, indicating an enormous increase in non-performing assets (NPA). The main reason on increase in NPAs the fact that high percentage (32.9%) of company’s total loans is Real Estate loans. This is the reason that company’s interest income has decreased despite the increase in loans made in 2008. Efficiency ratio is basically an operating expense margin measure, the lower the better. The above 60 percent efficiency ratio, 50 percent generally regarded as optimal, is an indicator of company's deteriorating performance.

As compared to its peers, such as Credit Suisse, JP Morgan, Deutsche Bank as well as compared to the market, we can see a clear over-performance of UBS before the crisis with a huge crash though when the crisis hit (larger than the one of its peers and the market), which is why the Swiss authorities had to intervene to support UBS as presented in section 2 above. Overall, UBS has had a larger beta (risk) in comparison with the market as well as its peers, as shown by its share price performance both in good (even booming) economic environment as well as in a bad one.

Dell’s ROE and ROA have different patterns through the life of the case. Dell’s ROA has ranged from a high 18.2% in 1999 then gradually drop to 9.2% in 2008. Dell’s ROE has ranged from 43.7% in 1999 to 61.2% in 2008. Both ROA and ROE dropped significant amount in 2001. Dell’s ROE and ROA are well above the Federal Nominal 10-year T bills rates in all yeas and exceed HP’s ROE and ROA in all years. In 2001, HP’s ROE and ROA drop to the lowest point through the life of the case, because HP acquired Compaq and almost doubled size of the company.

The banking sector has sound fundamentals. Banks are highly capitalized. As of July 2017, the BCRA reports that banks have a capital compliance rate (qualified capital/ risk-weighted assets) of 14.7%. This exceeds the requirements by 79%. Banks have been significantly over the capital requirements for the previous five years. Liquidity indicators are strong. The broad liquidity ratio in July was 45.4%, while the liquidity ratio excluding BCRA securities stood at 29.6%

The payout ratio is set at .30 from 2006 onwards. Notice that the long-term growth rate, which settles in between 2011 and 2012, is ROE × ( 1 – dividend payout ratio ) = .10 × (1 - .30) = .07.