Financial Analysis of Commercial Banks. Your Facilitator: Altaf Noor Ali Chartered Accountant. Day 1: Financial Analysis of Commercial Banks. Session scope Case study 1: Financial analysis of an international commercial bank - PowerPoint PPT Presentation
Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
Financial Analysis of Commercial Banks
Your Facilitator:
Altaf Noor Ali
Chartered Accountant
Each session divided in learning modules of 45-60 minutes each.
Target retention = 50%.
We will now go to Exercise 1…
Annual Report
Summary of past financials
Balance sheet
Profit and loss account
Cash flow statement
Statement of changes in equity
Notes to the account
Consolidated financial statements
Directors’ report
Company literature
All the sources mentioned in left panel are important.
Annual report is an official document that contains the information mentioned.
‘Summary of past financials’ provides some bare analysis. No where else you will find any further analysis.
Apart from ‘summary’ the data is there but not its analysis. You have to do it
An analyst skill is to translate data to information.
For example, balance sheet data may be entered in an Excel sheet and the difference in amount and percentage computed for every item of balance sheet.
Data may be easily be converted into ‘per share’ basis.
Steps to follow for preparing a 2-year analysis in Excel:
We will now refer to the excel sheet to explain it….
Steps to follow for preparing a multiple year analysis in Excel:
We will now refer to the excel sheet to explain it….
We will first consider cashflow statement of allied bank…and our conclusions are…
Can you verify these fact?
Basic fact: Segregation of ‘on balance sheet’ assets and liabilities as interest or non-interest based. Identify data, and conclude.
The most important disclosure in this table is that of ‘Effective Yield / Interest rate’. What it implies?
Other important terms to discuss:
On-balance sheet gap,
Total Yield / Interest Risk Sensitivity Gap’
Sub-ordinated loans:
There is an obvious mismatch here.
Identify and comment why a bank borrows at a rate lower than it advances.
Finally, what is the fun in borrowings at 8.23% and lending it to financial institutions at 9.56%?
The keyword in preparing this note is ‘liquidity risk’.
What are the key conclusions drawn? Advances and investments.
A key disclosure is missing in this note. Can you name it?
How much can we rely on the information in this statement?
How useful is the information provided?
Maturity of fixed assets: a closer look
Refer to administration expenses (n28p76)
The depreciation amortisation for 2007 was Rs. 341,656.
Assuming no additions to the fixed assets, the monthly charge will be Rs. 30,264 which for one year works out to be Rs. 363,168.
This brings us to the end of our presentation for today.
Hope you enjoyed and learned….
Thank you all.