Date post: | 08-Apr-2018 |
Category: |
Documents |
Upload: | cody-bailey |
View: | 238 times |
Download: | 0 times |
of 26
8/7/2019 Banking Industry (1)
1/26
Commercial Banking in theUS
Masha AustinCody BaileySara JosephJason Van OsdellGary Whittle
Agenda Industrysnapshot Financialanalysis
Externalanalysis
Internalanalysis
8/7/2019 Banking Industry (1)
2/26
K e y sta tistics
.$570 9bnRevenue
.$52 0bnProfits
- . %2 3-Growth 06 11
. %5 5-Annual growth 11
16
Industry snapshot
8/7/2019 Banking Industry (1)
3/26
The Big Four and everyone
else Bank of America . %11 8
& . Wells Fargo Co . %11 3
. .J P Morgan & .Chase Co . %7 7
.Citigroup Inc . %5 0
( , )Remaining banks 6 494 . %64 2
Industry snapshot
8/7/2019 Banking Industry (1)
4/26
Products and services Deposits %58
Mortgages %16
Business lending %15
Home equity loans %6
Other services %5
Industry snapshot
8/7/2019 Banking Industry (1)
5/26
Major market segments &Consumer retail %45 ,Small businesses ,corporations institutions %35 Government %15
Other %6
Industry snapshot
8/7/2019 Banking Industry (1)
6/26
The industry
Capital levels are at unusually high levels
-Growth in NIS has help offset drag of non
performing loans and lower outstandingloan balances
ROE hit historically record lows for the
-industry in 2007 2008 Falling efficiency ratios likely due to
.consolidation
Financial analysis
8/7/2019 Banking Industry (1)
7/26
Return on assets
Financial analysis
8/7/2019 Banking Industry (1)
8/26
Average BofA JP Morgan Citi Wells
NIS 2009 .3 47 .2 65 .2 81 .3 33 .4 80
2008 .3 18 .2 52 .2 51 .3 61 .4 57
2007 .3 29 .2 53 .2 21 .3 16 .4 43
2006 .3 31 .2 77 .1 89 .2 74 .4 58
Efficiency2009 .55 50 .50 41 .56 27 .60 83 .49 25
2008 .59 00 .54 41 .57 41 .76 91 .56 76
2007 .59 40 .59 14 .61 62 .73 78 .60 36
2006 .56 80 .50 40 .65 28 .61 72 .59 59
ROA 2009 .0 09 .0 30 .0 50 - .0 24 .1 29
2008 .0 08 .0 41 .0 68 - .0 50 .0 72
2007 .0 81 .0 93 .0 86 .0 20 .1 332006 .1 28 .1 32 .0 88 .0 97 .1 57
ROE 2009 .0 74 .2 94 .6 52 - .2 63 .14 46
2008 .0 35 .4 45 .8 99 - .6 71 .8 37
2007 .7 75 .10 69 .10 70 .2 71 .14 02
2006 .12 30 .14 30 .10 90 .12 09 .16 94
Financial analysis
Profitability measures
8/7/2019 Banking Industry (1)
9/26
-Net charge offs
Financial analysis
8/7/2019 Banking Industry (1)
10/26
Measures of Financial ConditionIndustry BofA JP Morgan Citi Wells
TotalCapitalRatio
2009 . %10 90 . %13 70 . %13 50 . %15 03 . %11 87
2008 . %11 00 . %11 58 . %12 33 . %15 18 . %10 71
2007 . %9 30 . %10 94 . %11 82 . %13 33 . %11 14
2006 > %10 . %11 11 . %11 44 . %12 39 . %12 05
DebtLeverage
2009 < %45 . %26 22 . %13 11 . %19 61 . %18 36
2008 < %45 . %18 84 . %12 44 . %18 55 . %16 92
2007 < %45 . %16 59 . %18 72 . %19 52 . %17 27
2006 < %45 . %13 94 . %16 18 . %15 31 . %18 08
Liquidity 2009 < %65 . %38 93 . %31 17 . %29 92 . %60 972008 < %65 . %49 40 . %34 25 . %34 28 . %64 43
2007 < %65 . %48 45 . %33 25 . %34 83 . %65 50
2006 < %65 . %44 48 . %35 75 . %35 57 . %65 43
Financial analysis
8/7/2019 Banking Industry (1)
11/26
How they stack up :JP Morgan and Bank of America trend closest to the
.industry averages Lower volatility and more.consistent returns
:Citi least efficient bank with lowest ROA and ROE.ratios Also highest non performing loans while
. ,having the most conservative portfolio Butgrade out well on long term measures such as
.liquidity and capital ratios
: Wells Fargo , %riskiest portfolio but lowest of- . ,non performing loans Highest ROA and ROE ratios
.but illiquid
Financial analysis
8/7/2019 Banking Industry (1)
12/26
General environment
External analysis
Economic Corporate profitsEmployment
Stock market Housing starts
Interest rates
Sociocultural 2008 crisis Fear Increasing savings rate Decreasing loan rate
Global Broad globalizationof business
EU crisis More uniform regulations
Technological Internet Mobile banking
/Political legal Regulation -Frank Dodd
Federal reserve FDIC
Demographic Aging population Population shifts
Population growth Racial shifts
Demands of young customers
8/7/2019 Banking Industry (1)
13/26
Economic drivers Corporate profits LEmploymentLDemandL Corporate profits qEmploymentqDemandq
DJIA LConsumer confidenceLDemandL DJIA qConsumer confidenceqDemandq
Interest rates qDemandL Interest rates LDemandq
External analysis
8/7/2019 Banking Industry (1)
14/26
Sociocultural drivers
-2008 Sub prime crisis Consumers changed
behavior
,Consumers saving morespending less Consumers spread their
money out Banks failed
Mergers and Acquisitions . %1 3 annual decrease
since 2008 Down from more than
,14 000 in 1980s
External analysis
$ .79 1bnThe big four s losses
8/7/2019 Banking Industry (1)
15/26
/Political legal
Federal intervention Toxic Asset Relief
( )Program TARP saved
many banks ,Increased revenues
growth
But comes with a cost
External analysis
$45bnBank of America
$45bnCitigroup
$25bn
JP Morgan Chase
$25bn Wells Fargo
8/7/2019 Banking Industry (1)
16/26
/Political legal drivers - ,Frank Dodd 2010
Increased transparency Fee reductions for interchange fees
Lowers limits on fees charged for debitcard transactions from and average of 44 to between 7 and 12
Expected to reduce related revenues by%57
Negative economic impact Lower profits Costs likely passed to consumers
External analysis
%12Profit losses
near 2016
8/7/2019 Banking Industry (1)
17/26
/Political legal Rising fees
Pilot programs to increase revenuesfrom fees
No free checking
: ;Chase $3 monthly debit card fee $15monthly checking
: ,BoA $6 $9 monthly checking fees : Wells Fargo $5 monthly fees
External analysis
8/7/2019 Banking Industry (1)
18/26
Technological drivers Online banking
Lowered costs Opened up new markets Increased new forms of competition
External analysis
Globalization
Low but increasing More uniform regulations lower entry
barriers
,Crisis shifted focus back to US willreverse
8/7/2019 Banking Industry (1)
19/26
General environment
External analysis
Regulation level HEAVY
Technological change MEDIUM
Globalization ,LOW RISING
Life cycle stage MATURE
Competition HIGH
Barriers to entry MEDIUM
8/7/2019 Banking Industry (1)
20/26
Porter s 5 forces
External analysis
8/7/2019 Banking Industry (1)
21/26
Value chain
Internal analysis
Regulatoryreporting and
compliance Deposit services Loan admin Treasuryoperations Item processing Payment processing
Branch network ATM networkInternet Telephone banking Mobile banking Call centers
Product mix ;BrandingAdvertising Account acquisition Deposit acquisitions Cross sales Fee revenuegeneration Community relations
Banking products Insurance products Investment products Business services Wealth management
Technology Development
Human Resources
Infrastructure and Procurement
/Strategic decisions Risk management
8/7/2019 Banking Industry (1)
22/26
. . & .J P Morgan Chase Co
Internal analysis
/Resource Capability V R I N O SCA?
Client Selection d d Competitive Parity
-Cross sellingCapabilities d d d TemporaryAdvantageContinuous
Investmentin Growth
d d d TemporaryAdvantage
Expense Management d d d Competitiv
e ParityManage Real Estateand Cyclical
Exposure
d d d TemporaryAdvantage
8/7/2019 Banking Industry (1)
23/26
Bank of America
Internal analysis
/Resource Capability V R I N O SCA?
Largest MarketShare
d d d d TemporaryAdvantage
-Cross sellingCapabilities d d Competitive ParityTechnological
Innovationd d d Temporary
Advantage
Corporate
Relationships
d d Competitiv
e Parity/Customer ServiceTransparency
d d Competitive Parity
8/7/2019 Banking Industry (1)
24/26
& . Wells Fargo Co
Internal analysis
/Resource Capability V R I N O SCA?
DiversifiedProducts
d d Competitive Parity
/Technology OnlineServices d d Competitive Parity#1 in CustomerService
d d d TemporaryAdvantage
Education
Internal andExternal
d d d Temporary
AdvantageConservative
Lending Principlesd d Competitiv
e Parity
8/7/2019 Banking Industry (1)
25/26
, .Citigroup Inc
Internal analysis
/Resource Capability V R I N O SCA?
Client selection d d Competitive Parity
Largest network d d d d TemporaryAdvantageModernized banking d d d Temporary
Advantage
Investor
perception
d d Competitiv
e Parity
8/7/2019 Banking Industry (1)
26/26
Commercial Banking in the US. .20 February 2011 :// . .http www ibisworld com. & Wells Fargo Company Profile. .20 February 2011
:// . . / / / .http subscriber hoovers com H home index html. .Citigroup Inc Profile. .20 February 2011:// . . / / / .http subscriber hoovers com H home index html.
& .JPMorgan Chase Co Profile. .20 February 2011 :// . . / / / .http subscriber hoovers com H home index html.
Bank of America Corporation Profile. .20 February 2011:// . . / / / .http subscriber hoovers com H home index html.
: :Industry Surveys Financial Services Diversified. &Standard Poor's Industry. , . .Surveys New York NY 3 June 2010 .Checking Isn t Free at More Branches , . . .Sidel Robin Wall Street Journal Feb
, .19 2011 . .www yahoofinance com . .www bankofamerica com . .www chase com
. .www wellsfargo com
Resources
http://www.ibisworld.com/http://www.ibisworld.com/http://www.ibisworld.com/http://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://www.yahoofinance.com/http://www.yahoofinance.com/http://www.bankofamerica.com/http://www.bankofamerica.com/http://www.chase.com/http://www.chase.com/http://www.wellsfargo.com/http://www.wellsfargo.com/http://www.wellsfargo.com/http://www.chase.com/http://www.bankofamerica.com/http://www.yahoofinance.com/http://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://www.ibisworld.com/