FINC603 Commercial Banking Group Bank Project Sem 1 Assignment Brief - 2025

Overview of FINC603 Group Project

The group project is an analysis of the structure, performance and conduct of TWO commercial banks (New Zealand domestic banks or international banks) across THREE consecutive years starting in year 2022 to 2024.

Measuring bank performance is a lot like measuring the performance of a traditional company. A bank's revenue is the return it makes from investments, and this income comes from interest or asset appreciation on investments, such as stocks or real estate. Banks must also consider the cost of the funds used to make these investments. Profits are ultimately made from the spread between the amount banks pay for the deposits and the amount they receive from borrowers and investments. The most commonly used measure of profit for a bank is referred to as net interest margin. However, banks are also one of the most heavily regulated financial institution, which affect their performance and growth.

FINC603 Learning Objectives

This project provides students with an opportunity to get some hands-on experience applying the theories and concepts learned in this course to analysing bank performance. In the process, students will get a chance to:

• discuss the structure, performance and conduct of bank in a regulated environment
• present a procedure for analysing bank performance using periodic balance sheet and income statement data 
• describe the components of financial statements, provide a framework for comparing the trade-offs between profitability and risk, and compare the performance of a bank with that of ot her banks 
• analyse bank stock prices post COVID-19 pandemic on the banking sector
• how to use Bloomberg database

Overview of FINC603 Commercial Banking:

1. Each group obtains THREE consecutive years of two major banks starting in year 2022of their financial statements. It can be domestic banks such as Westpac, ASB, BNZ, Kiwi bank, or international banks such as HSBC, Citi Bank, Bank of China, etc. Choose two banks for which plenty of information is publically available in Bloomberg database and the banks' webpage. Bloomberg will be the fastest, with the additional benefit of you learning how to learn to collect financial information from electronic sources if you don't know how.
2. Bloomberg trading lab is in the Commerce Foyer and operating hours are 9 am to 5 pm during weekdays. Students are not allowedto enter the Commerce Foyer during weekends or public holidays. Each group should have their selected group members and two banks approved by me (in person or by email) by April; 23, 2025. 
3. Each group member should (individually!) calculate the relevant performance (based on the banks' portfolios) and risk ratios for the assigned banks. Only one set of ratios will be turned in, but each member will need to know how to calculate the ratios to understand how bank performances are evaluated.
4. The group should meet regularly via Microsoft TEAMSto discuss why the performance and risk measures changed over time for the two assigned banks, with the goal of understanding the reasons for the differences. These should be in-depth "real-world"reasons (macroeconomic fundamentals such as interest rates, employment, GDP, etc.) why the bank's performance and risk differs over time, not simply that the numbers changed at different rates.

Instructions of FINC603:

1. Select two bankswhose performance your team want to evaluate and find key information about them. The primary things you need to find include the banks' official names, the country of incorporation (and thus their regulators), and the stock exchanges their shares are traded on. Bloomberg can help you answer your questions.
2. Access the banks' annual reports, which are available in Bloomberg. Read the reports, paying particular attention to the banks' assets, liabilities, and profits. Look at the performance of the banks' share prices, as they often are good indicators of how well the banks are doing. Use financial ratio analysis. The return on assets (RoA) and return to equity (RoE) are most commonly used for its simplicity and provides a snapshot measure of the risk and performance. It mainly captures the banks'ability to make returns from its services including net interest income. This data is easily accessible in the bank's audited balance sheet and income statement and very likely will have been already calculated. An industry comparison can guide you as to whether the figure is above par and hence the bank's overall performance is superior.
3. Look at the financial statements: the balance sheet, the income statement and the cash flow statement. Pay special attention to the customers'deposits, as they are a good indicator of how the bank is performing. The liabilities compared with the assets also provide great insight into the extent of risk the bank has undertaken.
4. Do a cross sectional analysis by comparing the financial statements of your assigned banks (if possible of similar market share size operating within the same economy). You can access the accounts in Bloomberg; copy and paste them on your Excel spreadsheet and match the items into different columns such as customer deposits, interest rate charged and interest earned. This will give you a clear indication of how your assigned banks are performing.
5. Summarise and make conclusions about your banks' performance. Put together pieces of information you have gathered about the banks' growth in assets, liabilities, share prices and profits, and compare this information with the financial press and business news agencies articles you found, and determine if this information confirms or denies the claims published from the banks' own corporate reports.