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Analysis on Size Effect to Commercial Banks Operation. —— Based on comparisons of Bank of China and Chongqing Rural Commercial Bank. VS. Asset structure of BOC. Asset structure of CRC. Total assets. 39.8%. 55.5%. >. ≈. 18.85%. 19.85%. investment securities. - PowerPoint PPT Presentation
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——Based on comparisons of Bank of China and Chongqing Rural Commer-cial Bank
Analysis on Size Effect to Commercial Banks
Operation
VS
Asset structure of BOC
Items 2012 2011 2010 Assets Amount Amount Amount avg
Loans, net 6,710,040 6,203,138 5,537,765 6150314.33
Investment securities 2,210,524 2,000,759 2,055,324 2088869
Balances with central banks 1,934,297 1,919,651 1,573,922 1809290
Due from banks andother fi nancial institutions 1,150,398 1,147,497 800,620 1032838.33
Other assets 675,356 558,744 492,234 575444.667
Total 12,680,615 11,829,789 10,459,865 11656756.3
Asset structure of CRC
avg % of Total
Loans and advances to customers, gross 146682.93 41.55
Allowances for impairment on loans and advances to customers -5499.37 -1.58
Loans and advances to customers, net 141183.57 39.97
Investment securities 70422.63 19.97
Investments in associates 33.33 0.01
Cash and balances with the central bank 48982.83 13.78
Deposits with banks and other financial institutions 13642.77 4.06
Placements with banks and other financial institutions 14403.2 3.63
Financial assets held under resale agreements 43739.97 12.4
Financial assets held for trading 1552.47 0.39
Financial assets designated as at fair value through profit or loss 13064.07 3.59
Goodwill 440.1 0.13
Other assets 7264.47 2.07
Total assets 384396.9 100
141183. 57 39. 80%
70422. 63 19. 85%33. 33
0. 01%
48982. 83 13. 81%
13642. 77 3. 85%
14403. 20 4. 06%
43739. 97 12. 33%
1552. 47 0. 44%
13064. 07 3. 68% 440. 10
0. 12%7264. 47 2. 05%
The Structure of AssetsLoans and advances to customers,net
I nvestment securi t i es(
I nvestments i n associ ates
Cash and bal ances wi th the centralbank
Deposi ts wi th banks and otherfi nanci al i nsti tuti ons
Pl acements wi th banks and otherfi nanci al i nsti tuti ons
Fi nanci al assets hel d under resal eagreements
Fi nanci al assets hel d f or tradi ng
Fi nanci al assets desi gnated as atfai r val ue through profi t or l oss
Goodwi l l
Other assets(3)
Total assets
55.5% 39.8%>
18.85% 19.85%≈investment securities
In conclusion, the net loans occupy a large proportion of asserts in banks of big size, however, the banks of small banks focus on diversifying assets not only the loans.
Liabilities structureLiabilities avg
Due to customers 8,575,164
Due to banks andother financial institutions and due to central banks 1,764,828
Other borrowed funds 193,730
Other liabilities 358,091
Total 10,891,813
Average % of Total
Due to customers 248738.3 76.39
nondeposit borrowing 29400.87 8.44
repurchase agreements 37053.9 11.52
Debt securities issued 2300 0.72
Other liabilities 9679.4 2.94
Total liabilities 327172.47 100
BOC
CRC
8, 575, 16478. 73%
1, 764, 82816. 20%
193, 7301. 78%
358, 0913. 29%
The Structureof Liabilities(BOC)
Due to customers
Due to banks andother fi nanci ali nsti tut i ons and due tocentral banksOther borrowed funds
Other l i abi l i t i es
76.39 %
8.44 %11.52 %
0.72 % 2.94 %
Due to customers
nondeposit borrowing
repurchase agreements
Debt securities issued
Other liabilities
We must realize that the rate of repurchase agreement is lower than the rate of due to banks in the same period, so the small bank can fiance with low cost.
In conclusion, Customer deposits are the main source of the liabilities of banks no matter big banks or small banks. However, the small banks make good use of repurchase agreements to satisfy the liquidity of short term fund.
Income structureItems avg
Net interest income 226,330
Non-interest income 97,334
Including: net fee andcommission income 63,023
Operating income 323,664
Operating expenses -141,082
Impairment losses on assets -17,245
Operating profit 165,337
Profit before income tax 166,056
Income tax expense -37,485
Profit for the year 128,572
Profi t attributable to equity holders ofthe Bank 122,709
averange
Net interest income 10366.33
Net fee and commission income 452.3
Net trading gain -3.27
Other operating income(losses), net 23.37
Operating income 10838.73
Operating expenses -4919.77
Impairment on assets -438.07
Net gain on disposal of available-for-sale financial assets 35.7
Net gain on disposal of debt securities classified as receivables 0.33
Profit before tax 5516.93
Income tax expense -1287.97
Net Profit 4228.97
BOC CRCChinese mainlandHong KongMacauTaiwan other countries.
128572 4228.9730.4
times
70%
30%
BOC
Net interest income Net non-interest income
96%
4%
CRC
The average net interest income amounts to RMB 226 330 million which accounts for 70% of the operating income of BOC. The average net interest income amounts to RMB 10366.33 million which accounts for 96% of the operating income of CRC.
the big banks make good use of big market to accelerate product innovation and further expand market , which continuously promote the diversification of income structure, perfect risk management and strictly control cost, leading to a continuous increase in the bank’ s profitability.
Loans structureDomestic RMB businesses AVG
Loans Corporate loans 2969336
Personal loans 1318393
Trade bills 122113
Total 4409842
Including: Medium and long term loans 3076081.333
Short term loans and others within 1 year 1333760.667
Average % of TotalCorporate loans 91791.17 62.68Short-term loans 14552.43 9.6Medium- and long-term loans 77238.73 53.08Retail loans 52079.1 35.46Residential mortgage and personal commercial property loans 30007.63 20.43
Personal business and re-employment loans 14819.23 10.01
Loans to farmers 2278.1 1.65Others 4974.13 3.37Discounted bills 2812.67 1.87
Loans and advances to customers, gross 146682.93 100
BOC CRC4409842 146682.93
30times
Since the big banks can satisfy the big demand of the borrower, so many corporations want to borrow money from them.
296933667. 33%
131839329. 90%
1221132. 77%
The Structure of Loans(BOC)[1]
Corporate l oans
Personal l oans
Trade bi l l s
62.68,%
35.46%
1.87%
Corporate loans(1)
Retail loans(2)
Discounted bills(3)
Corporations are the main targets of bank’ s loans no matter big banks or small banks. Medium and long term loans account for nearly 70% of BOC’ s loans and account for 84.68% of corporate loans of CRC’ s loans, which further explain that most of the loans are in the long term.
3076081. 33369. 75%
1333760. 66730. 25%
The Structure of Loans(BOC)[2]
Medi um and l ong terml oans
Short term l oans andothers wi thi n 1 year
Securities structureItems avg avg
Financial assets at fair value through profi t or loss 75,545 3.63%
Securities available for sale 632,152 30.22%
Securities held to maturity 1,098,861 52.59%
Securities classifi ed as loans and receivables 282,312 13.56%
Total 2,088,869 100.00%
Amount % of Total
Financial assets held for trading 1552.47 1.6Financial assets designated as at fair value through profit or loss 13064.07 14.98
Available-for-sale financial assets 2553.73 2.83Held-to-maturity investments 40906.37 48.86Debt securities classified as receivables 26962.53 31.73Total investments 85039.17 100
75, 5453. 62%
632, 15230. 26%
1, 098, 86152. 61%
282, 31213. 52%
The Structure of Securities(BOC)Fi nanci al assets atfai r val ue throughprofi t or l oss
Securi t i es avai l abl efor sal e
Securi t i es hel d tomaturi ty
Securi t i es cl assi fi edas l oans andrecei vabl es
1.60 %
14.98 % 2.83 %
48.86 %
31.73%
Financial assets held fortrading
Financial assets designatedas at fair value throughprofit or loss
Available-for-sale financialassets
Held-to-maturityinvestments
Debt securities classified asreceivables
securities available for sale
debt securities classified as receivables
prefer to satisfy the short-term liquidity and avoid bond devaluation loss.
prefer investing debt securities to earn continued income.
Deposits structureDue to customers avg Corporate demand deposits 1844861
Corporate time deposits 1525715.667
Personal demand deposits 916909.6667
Personal time deposits 1851138
Other 330199
Total 6468823.333
Average % of TotalCorporate deposits 63917.17 25.85Demand deposits 53052.8 21.34Time deposits 10864.37 4.5Retail deposits 180589.7 72.41Demand deposits 51474.5 20.74Time deposits 129115.2 51.67Pledged deposits 4152.17 1.72Other deposits 79.27 0.03Total due to customers 248738.3 100
184486128. 52%
1525715. 66723. 59%
916909. 666714. 17%
185113828. 62%
3301995. 10%
The Stracture of Deposite(BOC)Corporate demand deposi ts
Corporate t i me deposi ts
Personal demand deposi ts
Personal ti me deposi ts
Other
25.85%
72.41%
1.72%0.03%
Corporate deposits(1)
Retail deposits(2)
Pledged deposits(3)
Other deposits(4)
Corporate deposits
Retail deposits
52.11%
72.41%
ROA
The Tendency of ROA
0. 6
0. 8
1
1. 2
1. 4
2008 2009 2010 2011 2012
ROA(BOC)ROA(CRC)
BOC
CRC
increase from 2008 to 2012
increase from 2009 to 2012 and is even beyond the data of BOA since 2011
The big banks’ ROA have a bigger promotion space, which can be promoted to develop more intermediary business and offer small loans. Certainly, it must be on the premise of low risk and sufficient liquidity.
ROE
The Tendency of ROE
1015202530
2008 2009 2010 2011 2012
ROE(BOC)ROE(CRC)
BOC
CRC
increase from 2008 to 2010 and little decrease from 2010 to 2012
decrease from 2008 to 2010 and increase from 2010 to 2012
Though the return for the stockholders increases, the risk
caused by liabilities decreased. So we can conclude that
banks all pay attention on EM but small banks prefer lower EM than big
banks to reduce the risk.
NIM
1. 522. 533. 544. 555. 566. 57
2008 2009 2010 2011 2012
The Tendency of NIM
NI M(CRC)NI M(BOC)
BOC
CRC
increase from 2009 to 2012
increase from 2009 to 2012
With the development of liberalization of the interest rate, the banks face more fierce competition, which will bring the new change to the NIM no matter big banks or small banks.
NPL
The Tendency of NPL(percentage)
0123456789
10
2008 2009 2010 2011 2012
NPL(BOC)NPL(CRC)
BOC
CRC
decreased from 2008 to 2012
decreased from 2008 to 2012
Big banks should pay more attention to the scale of the loans and diversify it’s borrowing objects instead of aiways depending on the ediverstiture of non-performing assets to solve the problem, which can’ t solve the nature of the problem.
Loan- to- deposit ratio
The Tendency of Loan-to-Deposite Ratio(percentage)
505356596265687174
2008 2009 2010 2011 2012
Loan- to-Deposi tRati o(%)(BOC)
Loan- to-Deposi tRati o(%)(CRC)
a synchronous change of BOC and CRC from 2008 to 2012.BOC
CRCa tendency of increased from 2008 to 2009, a tendency of decreased from 2009 to 2011 and a tendency of increased in 2012
We also can conclude that big banks pay more attention on profit, however, small banks put more attention on security.
Average data of all indicators
ROA(%) ROE(%) NIM(%) ES NPL(%) Loan-to-Deposit Ratio(%)
BOC 1.12 17.216 2.202 2.01 1.444 69.702
CRC 1.134 18.142 3.334 5.12 3.472 61.916
With the development of liberalization of the interest rate, the banks face more fierce competition. The big banks pay more attention to the non interest income. Certainly, the spread will decline as competition increases, forcing small banks to try to find other ways (such as generating fee income from new services ) to make up for an eroding spread.
Qin JiaWu Qi Zhang WanruZhang Yanan
THANK U
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