• This assignment is to be done in groups of 3 to 5 students.
• Students are required to self-enrol in groups in the banks listed on UTS Online only by 14th August. Allocations are on a first come basis.
• This assignment is to be submitted in the tutorial of Week 8 (Thursday, 21 September 2017).
• A late submission will result in a 50% mark reduction after 24 hours and a 100% mark reduction after 48 hours (in relation to the marks received).
• Full student names and student numbers are to be provided on the cover sheet available on UTS online.
• The scope of this assignment is limited to 10 pages and must be typed in 12 font, single spaced, with page numbers and on A4 paper.
• All calculations must be shown and central assumptions stated.
• You may use the database resources which are available at the university
Financial Institutions to be analysed:
You will need to enrol yourself into one of the groups from one of the following financial institutions:
• ANZ Bank
• Bank of Queensland
• Bendigo and Adelaide Bank
• Commonwealth Bank
• Macquarie Group Limited
• ME Bank
• National Australia Bank
• Westpac Banking Corporation
It is your responsibility to ensure you are enrolled in a group.
Problem 1 [15 marks]:
Download the latest annual reports available for your bank.
a. Explain the business model of the financial institution you have chosen to analyse.
b. Analyse the profitability, total assets, liabilities, off balance sheet items as well as the book and market value of capital of the financial institution over the past five years. Make sure your analysis includes, but not only limited to the CAMEL factors using the key ratios in each category.
(you will not get marks for saying the ratio when up or down you must explain WHY)
c. Explain at least five risks to which the financial institution is exposed in your explanation you should give some indication of the ‘size’ (or dimension) of these risks and use at least two measures for each and comment thereon.
Problem 2 [5 marks]:
a. What is the bank’s interest rate gap using the repricing model identifying the repricing gaps and use them in measuring the interest rate risk?
(In your analysis use the maturity schedules of the latest annual report)
b. Use your answer in a.) to calculate the expected absolute change in the value of (i) net interest income to a 0.5% increase in interest rates,
c. Give four distinct reasons why the realised change in net interest income may be different from your answer in b.)