Reference no: EM13162433

The financial statement dataset used for ratio analysis is available in an excel file on blackboard. The dataset contains information on a banking industry of 20 banks in a country X for the period between 2005 and 2009. All values are in millions of dollars.

Students are required to perform ratio analysis and analyse the performance of the industry and its exposure to the different types of risk. Students are required to use time series analysis (over time) and comparison across size and ownership. The students should use appropriate ratios and analyse them using the appropriate resources, such as the literature on "performance of banks".

Since successful financial ratio analysis is as much an art as it is a science, students must use common sense and sound judgment throughout the analysis. The purpose of this assignment is to provide students with the opportunity to:

• Ensure having the required skills in bank financial analysis
• analyse the financial performance of banking firms;
• practice communication skills, both in writing (through word processing) and in speaking (through intra-group discussion);
• enhance teamwork skills;
• familiarise with library sources of bank financial ratio literature.

I have been asked in the past for some clarification on the outline for the ratio project.  There are a variety of ways to organise the narrative.  Here is a suggested (but not required) outline:

1. Use Excel in calculating the appropriate financial ratios. I expect that you report the ratios in the narrative. Use can support the table with graphs. I also expect you to use comparison analysis across time, size (large, medium and small) and ownership (government, foreign and private)

2. Introduce the project i.e. describe what you are going to do and why.

3. Start with a discussion of the profitability family of ratios and their general trajectory over time.  Only discuss individual ratios if their trajectory is different from the family to which you have assigned them.

4. Next you may wish to discuss (speculate on) how the banks got to the place they are in for the profitability family of ratios (retrospective analysis)

5. After you have done the retrospective analysis, you use the Dupont ROE model and the ratios proxying for the different types of risk and aspects of bank activities. This is where you discuss the potential determinants of the industry's profitability. You may evaluate the exposure of the industry to each type of risk using the appropriate financial ratios.

6. Conclude the report with the answer to the questions:

• Overall judgment of the general financial condition of the industry?
• Does size matter and how and why?
• Does ownership matter, how and why?

Essay

Choose to answer one of the following questions:

1 Examine the role of Bank of England's monetary policy instruments in dealing with the recent financial and economic crisis.

2 Discuss the role of capital in banking.

3 Discuss the relation between economic growth and financial development

Attachment:- Assignment-data.xlsx