FINS3630 HBS Case Assignment
Dr Lixiong Guo
HBS case “Shenzhen Development Bank”
Investing in any business entails an in-depth analysis of the performance and risk of the target before the investment. When investing in FIs, since FIs hold very different assets than industrial firms and are subject to strict regulations, investors have to pay attention to some special issues and risks that are specific to FIs.
In this assignment, you are required to write an analysis of a proposed investment in Shenzhen
Development Bank (SDB) by Newbridge in 2002 and evaluate whether the 1.6 times book value that
Newbridge agrees to pay for its 18% stake in SDB is appropriate. The objective of the analysis is…show more content…
The report should be saved in a
You are required to submit two files through Moodle: a PDF file of your report and an Excel file showing your calculations. The Excel file should allow the marker to see how you calculated the numbers in your tables and figures. Both files should be named using the following format:
The deadline for submission is 11:59 pm on 3 September, 2014.
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An Outline of the Analysis
1. SDB’ financial performance
1) Asset quality
a. How does SDB’s NPL ratio compare with that of the industry peers? Do you think the NPL number SDB reported is likely to be too high or too low? Why?
b. How does SDB’s actual LLR levels compare with the would-be LLR levels implied by the industry average and by SDB’s own reserve ratio guidelines? What are the implications of this? How would this affect the capital adequacy of SDB?
2) Earnings capability
a. What are the time trends of SDB’s key earnings measures? How do they compare with that of its industry peers?
b. How does SDB’s overall financial performance compare with that of its industry peers? Which factors mainly drive these differences?
3) Capital adequacy
a. How has SDB’s capital ratios changed over time? What explain these changes?
b. Is SDB well capitalized? What are the implications of this for the value of the stake
Newbridge will have in SDB? How would this affect the price