Bank Treasury

1242 Words Jul 29th, 2012 5 Pages
There was a general increase in the Bank’s portfolio of both assets and liabilities for the year ending December 31, 2010 when compared to the previous comparative period. This was mainly attributed to increases in the Bank’s loans and advances, investment securities and customer deposits.
Assets for the year ending December 31, 2010 increased by $240,359 (29.22%) when compared to the previous year and this was primarily due to increases in Loans and Advance and Investment Securities which were $127,732 (29.41%) and $101,654 (39.97%) respectively. Although there was an increase in the Loans and Advance figure, General Loan Loss Reserve also increased by $1,261 (63.40%). Included in the Investment Securities are USD investments totaling
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Core capital is way above the obligatory 50% however there has been a decrease from 27.50% in 2009 to 25.06% in 2010. This position is still way within the required margin but ALCO should continue to monitor this on an ongoing basis.
Scenario 3 – March 9th, 2011
The Central Bank has just advised of that they will be floating a new 20 year bond (GOTT 2031 Fixed Rate, Coupon 6.25%) for the completion of the Solomon Hochoy highway extension project. Total issue size is TTD1 billion.
Suggestion
The Bank’s investment portfolio as at December 31, 2010 includes a 20 year gov’t fixed rate bond, coupon 5.875% that has 17 years remaining to maturity. This bond would have been purchased at a discount which means that the yield to maturity would be more than 5.875%. On March 09, 2011 the bond had a coupon rate of 6.60% and a market price of $106.92, therefore the market value of the portfolio would have been improved. Based on a comparison of the government yield curve, there was an upward trend, which suggests that return on the portfolio would be increased upon maturity. The new gov’t instrument had a coupon rate of 6.80% as at March 09, 2011 and given the upward rising of the yield curve, it appears that a 20 year tenor would also give an increased average market yield and therefore has the potential to increase the return on the total portfolio. Whilst the security is government and the instrument is
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