Pick a bank or financial services firm you would like to analyze. The bank should be publicly traded and have a minimum market capitalization of $20 billion. You may use many sources to verify the market cap, including but not limited to Yahoo or Google finance pages. Once you have your bank selected, you must also identify a competitor that is similar in size and operations. After you have picked your bank and your competitor, you will construct an Excel workbook with 5 sheets.
The five sheets should be:
1. Ratios
2. Your bank's balance sheet
3. Your bank's income statement
4. Your competitor's balance sheet
5. Your competitor's income statement
For all the balance sheets and income statement pages, you should download the actual statements from a financial website such as Google® or Yahoo® Finance. If you used Internet Explorer as your browser and Yahoo Finance as your website, you can simply right click on the statement and then click "Export to Excel." Your statements should have three years of data and look something like this:
Once completed, you will have four statements total. The next step is to create the ratio page. To do this, you will calculate the following ratios: Return on Equity Return on Assets Net Interest Margin Current Ratio P/E Ratio (Use the stock price that matches the statement date. This can be found using the historical prices link on both Yahoo and Google Finance). You will need to calculate the ratio for each of the last three years for each company. You should use cell referencing to calculate the ratios. For part two, you need to conduct an analysis of the ratios you calculated in part one. This can be done in three major parts.
First, look at the trends for your company. Are the ratios improving, staying constant, or getting worse? Discuss the reasons behind these movements or lack thereof.
Second, look at the trends for your competitor and compare them to your company.
Third, find the industry average for each ratio and discuss how both the bank you chose and the competitor you chose compare to the industry average.
The second part of this section will include an overview of your bank.
- Where do they do business?
- How big are they?
- Who are their key employees?
- How long have they been in business?
These questions are just a guide to get you started and not meant to be the extent of your overview. The bank's annual report would be a tremendous resource for this portion of the assignment. After the overview, discuss how your ratio analysis and overview would impact the bank's liquidity and its asset liability matching. Finally, discuss what you think are appropriate hedging and risk management techniques for your bank.
Assignment will be approximately 1500 words, typed, spell-checked, grammar-checked, submitted double-spaced, and prepared with references in proper academic format, using the American Psychological Association (APA) style.