Which bank has more liquidity risk

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Reference no: EM132005799

If FNBNA is expecting a $20 million net deposit drain and the bank wishes to fund the drain by borrowing more money, how much will pretax net income change if the borrowing cost is the same as on its existing borrowed funds?

Bank A has a loan-to-deposit ratio of 110 percent, core deposits equal 55 percent of total assets, and borrowed funds are 25 percent of assets. Bank B has a loan-to-deposit ratio of 80 percent. Core deposits are 65 percent of assets and borrowed funds are 5 percent of assets. Which bank has more liquidity risk? Ceteris paribus, which bank will probably be more profitable when interest rates are low?

Reference no: EM132005799

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