QUESTION
Bank Case Assignment for Washington Trust Bank
Instructions are attached below. In addition must submit attached excel, if you don't understand something please ask.
To do the excel file do the following: The “Case requirements” document which describes what needs to be done and provides some guidance for an easier completion.
2) The Excel file “Bank Financial Analysis” which should be used to illustrate the financial data for the bank that you select.
3) A partial list of some commercial banks from which you can select a bank that you are interested in reviewing.
First, you need to decide on the bank that you will review. Each group must select a different bank, which needs to be approved by me to avoid duplications. In order to receive my approval, you will need to send me the name of the bank and its ID RSSD number.
To obtain the UBPR data for the bank that you want, you need to do the following:
Visit the http://www.ffiec.gov/ubpr.htm site.
In the fourth paragraph, in bold letters, you will see the statement:
“To obtain a UBPR for a bank or to view any of the other UBPR statistical reports simply select:
UBPR Reports”. Click on UBPR Reports.
In the “Select a report type” drop box, choose Uniform Bank Performance Report.
In the Unique Identifier/ID RSSD line type your bank’s number and then click on “Generate”. Alternatively, in the institution name area, type the name of the bank. Then click on the "Search Banks" button and your institution’s name.
Then click on "Generate Report" and you should get data for the last four years, or specifically for the following time periods:
12 mos – 12/31/2020
12 mos – 12/31/2019
12 mos – 12/31/2018
12 mos – 12/31/2017
You will need to input the data in the Excel file. You should not change the formulas or structure of the Excel file.
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| Subject | Business | Pages | 5 | Style | APA |
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Answer
Washinton Trust Bank
Part A
Liquidity Ratio
Liquidity ratios are used to evaluate the ability of the company to meet its short-term obligations as they fall due. A company that is able to meet its short-term obligations efficiently will have minimal liquidity risks, counted to be credit worthy and will not risk be being bankrupt. This is unlike a company that is not able to meet its short-term obligations (Tenney & Kalenkoski, 2019). A bank has many current and recurrent obligations, owing to the fact that their clients must withdraw money almost on a daily basis. In the event that a bank fails to meet its short-term obligations efficiently then people will fear to have an account with it, because such banks cab be declared bankrupt. In the case of Washington Trust Bank, the company does not have inventories. This therefore, makes its current ratio to be equal to its quick ratio.
From the calculations, in the past four years, the company has had a current and liquidity ratio of less than one, which is much lower than the industrial average. Based on this empirical evidence, it is factual to state that the company has not been able to meet its short-term obligations efficiently in the past four years. As such, Washinton Trust Bank is more exposed to liquidity risks, and would also be deemed as credit unworthy. Unless the Bank works toward reversing the current situation, it risks losing its clients, as many of them will perceive Washinton Trust Bank as a risky bank to have interest in. Calculations for the ratios in the past four years are attached in the excel sheet.
Availability of Liquidity Assets Readily Convertible to Cash
These also determine the liquidity position of a company. Washington Trust Bank has a high cash deposit of over $ 1 million. Besides, the total securities are over $ 5 million, while Federal Home Bank has a value of over $ 7 billion. This trend has been maintained in the past four years, reducing the bank’s liquidity risks.
Core Deposit/Asset Growth
Though the total assets for the company have consistently increased every year, the core deposit have not increased. This can be attributed to low liquidity ratio that the company has.
Diversification of Funding Sources
The company finances its activities through the borrowed finance, equity, leases and other short term external financing. This diversification therefore, reduces the probability of it being bankrupt, despite the low liquidity ratios.
External Forces
Washinton faces very stiff competition from other international banks. The bank has however, been in the market for a number of years, making it to master the trends in market forces. However, variation in the rate of interest and inflation rates usually reduces the company’s realizable profit. Due to good diplomatic relationship between the United States and other nations.
Part B
Sensitivity to Market Risk
Washington Trust Bank was incorporated in the year 1800, making it the oldest bank in the market (Washinton Trust Bank,2020). The bank has been able to trade in the various regimes, economic times and market challenges. Similarly, the bank has been able to constantly conduct market research, so as to come up with strategies of ensuring that sensitivity to market risk is within the accepted range. However. this has not made it immune to the challenges associated with variations in the market forces. Change in the foreign exchange makes the net profit for the company to drastically reduce. This is because the financial statements must be translated into United Stated Dollars. Equity and commodity prices however, do not have much negative effects. This because, Washington Trust Bank has been able to gain a goodwill which enables it to trend in the market despite the market fluctuations. The company manages commodity and equity risks through hedging and forward contacts (Washinton Trust Bank, 2020).
References
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Tenney, J. A., & Kalenkoski, C. M. (2019). Financial Ratios and Financial Satisfaction: Exploring Associations between Objective and Subjective Measures of Financial Well-Being among Older Americans. Journal of Financial Counseling and Planning, 30(2), 231–343. Washinton Trust Bank (2020). Annual report for the Period 31st December Ended 2020. Retrieved from: https://ir.washtrust.com/financial-info/annual-reports/default.aspx
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