banking industry
Download
Skip this Video
Download Presentation
Banking Industry

Loading in 2 Seconds...

play fullscreen
1 / 11

Banking Industry - PowerPoint PPT Presentation


  • 73 Views
  • Uploaded on

Banking Industry. Number of banks ~7 ,000 decreasing (result of consolidation, deregulation and failures) Number of branches ~ 90,000 increasing (result of relaxed geographical restrictions) About 4,000 are small banks (< $100 million in assets) Banks most commonly ranked by (1) assets.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Banking Industry' - kara


An Image/Link below is provided (as is) to download 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.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
banking industry
Banking Industry
  • Number of banks ~7,000 decreasing (result of consolidation, deregulation and failures)
  • Number of branches ~90,000 increasing (result of relaxed geographical restrictions)
  • About 4,000 are small banks (< $100 million in assets)
  • Banks most commonly ranked by (1) assets.
  • But sometimes ranked by (2) marketcap
balance sheet for a commercial bank
Balance Sheet for a Commercial Bank

Uses of Funds Sources of Funds

(Assets) (Liabilities + Capital)

Cash Assets (8%)Deposit Liabilities (69%)

FF sold/Rev repos (4%)Borrowed Funds (16%)

Investments (19%) Other Liabilities (3%)

Loans & Leases (55%) Subordinated Notes & Deben (1%)

Premises (1%) Capital Accounts (11%)

Other (13%)

(See pp. 417 & 411)

first three items on left
First Three Items on Left

Cash Assets (8%):

  • Vault cash (physical currency and coin)
  • Reserves at the Fed

Fed Funds Sold/Rev repos (4%):

  • Fed Funds sold
  • Reverse Repurchase Agreements

Investments (19%): cushion in case need more liquidity

  • U.S. Treasury securities
  • Agency securities
  • Municipal bonds
fourth item on left
Fourth Item on Left

Loans and Leases (55%)

Loans

  • commercial and industrial
  • real estate
  • agricultural
  • consumer

Leases

  • fast-growing line of business for the big banks
  • fleet assets (aircraft, ships,..), rolling stock (railroad cars, trucks,..), equipment (cranes, generators,..)
first two items on right
First Two Items on Right

Deposit Liabilities (69%):

  • Transaction Deposits
  • Savings Deposits
  • Time Deposits (retail and negotiable CDs)

Borrowed Funds (16%):

  • Fed Funds purchased
  • Repurchase Agreements
  • Eurodollars (dollars borrowed abroad)
  • Discount Window loans
last two items on right
Last Two Items on Right

Subordinated Notes and Debentures (1%)

  • Subordinated to claims of depositors

Capital Accounts (11%)

  • Paid-in capital (from sale of stock)
  • Retained earnings
capital adequacy
Capital Adequacy
  • Capital adequacy ratio:
  • Numerator is subordinated notes & bonds + capital stock + retained earnings
  • Denominator is a weighted average of assets
    • Riskfree, weight of 0
    • Very risky assets like CDOs, weight of 1
    • Everything else, weight in between
balance sheet for a commercial bank1
Balance Sheet for a Commercial Bank

Uses of Funds Sources of Funds

(Assets) (Liabilities + Capital)

Cash Assets (8%)Deposit Liabilities (69%)

FF sold/Rev repos (4%)Borrowed Funds (16%)

Investments (19%) Other Liabilities (3%)

Loans & Leases (55%) Subordinated Notes & Deben (1%)

Premises (1%) Capital Accounts (11%)

Other (13%)

base rate pricing
Base Rate Pricing
  • Markups to base rate include adjustments for default risk, term-to-maturity, and competitive factors.

rL = BR + DR + TM + CF

  • In this way, business loans can vary from customer to customer.
  • BR could be prime rate, Libor, or a T-bill rate.
  • Loan pricing is one of most important managerial decisions is banking.
five c s of credit
Five ‘C’s of Credit
  • Five “C”s of Credit:
    • Character (willingness to pay)
    • Capacity (cash flow)
    • Capital (wealth or net worth)
    • Collateral (security for the loan)
    • Conditions (economic conditions)
ad