current events citicorp announces loss citicorp announces loss $10billion loss slashed dividend ...
TRANSCRIPT
Current EventsCurrent Events Citicorp announces lossCiticorp announces loss
$10billion loss$10billion loss Slashed dividendSlashed dividend Foreign investors for cash investmentForeign investors for cash investment $18.1 billion write down in investments$18.1 billion write down in investments $4 billion write down in US consumer loans$4 billion write down in US consumer loans Stock down 7%Stock down 7% Cut 4200 jobs in Q4--In addition to 17,000 job Cut 4200 jobs in Q4--In addition to 17,000 job
cuts announced in springcuts announced in spring
Current EventsCurrent Events
Capital OneCapital One largest independent credit card issuer in largest independent credit card issuer in
USUS cut profit forecasts by 20% due to cut profit forecasts by 20% due to
ballooning loan lossesballooning loan losses $1.9B in loan loss provisions in 4Q$1.9B in loan loss provisions in 4Q
Current EventsCurrent Events
JPM ChaseJPM Chase 900 imaged ATMs--bulk check 900 imaged ATMs--bulk check
processing (up to 30 checks at a time)processing (up to 30 checks at a time) Transaction activity increased 50% in Transaction activity increased 50% in
test marketstest markets Once installed, the Bank also looks to Once installed, the Bank also looks to
extend their deposit deadline to 11pm extend their deposit deadline to 11pm ETET
Current EventsCurrent Events
WachoviaWachovia Rolled out its “Way2Save” program, Rolled out its “Way2Save” program,
which is similar to BofA’s “Keep the which is similar to BofA’s “Keep the Change.”Change.”
Program --5% interest rate and a 5% Program --5% interest rate and a 5% bonus for the 1st year, falling to 2% bonus for the 1st year, falling to 2% rate/2% bonus the 2nd yearrate/2% bonus the 2nd year
Expect to sign up 900k customers, 50% Expect to sign up 900k customers, 50% of which will be newof which will be new
Current EventsCurrent EventsBanking Products For Younger Banking Products For Younger
CustomersCustomers
Recent study--top 10 financial services Recent study--top 10 financial services used by 18 to 25Y olds:used by 18 to 25Y olds:checking accounts (94%)checking accounts (94%) debit cards (89%)debit cards (89%)
ATM card (81%)ATM card (81%) savings account savings account (80%),(80%),
health insurance (79%)health insurance (79%) credit card (69%)credit card (69%)
auto insurance (52%)auto insurance (52%) student loan (45%)student loan (45%)
life insurance (26%)life insurance (26%) investment investment accts (24%).accts (24%).
Basics of Sources and UsesBasics of Sources and Uses
S ( + ) U ( - )
A
L
A
L
Basics of Sources and UsesBasics of Sources and Uses
Key to managing bank profitabilityKey to managing bank profitability Evaluate accounts -- profitsEvaluate accounts -- profits Allocate your time to significant Allocate your time to significant
itemsitems Can’t controlCan’t control Too small to affect profitToo small to affect profit
Actual vs ForecastActual vs Forecast
ActualActual NNote actual changes in balance sheet ote actual changes in balance sheet
accounts from 1 period to the nextaccounts from 1 period to the next ForecastForecast
Determining how your decisions will Determining how your decisions will change specific balance sheet accounts change specific balance sheet accounts and how this will affect funding and and how this will affect funding and earningsearnings
Using S/U Form in The Using S/U Form in The GameGame
Use S/U form EACH quarterUse S/U form EACH quarter Use net change approachUse net change approach Where did the funds come from; Where did the funds come from;
where did the funds go towhere did the funds go to
2 Ways to Change2 Ways to Change
Net flow of funds—in or outNet flow of funds—in or out ““juggling” dollars within the bank; juggling” dollars within the bank;
restructuring; changing mixrestructuring; changing mix
Basics of Sources and UsesBasics of Sources and Uses
AssetsAssets LiabilitiesLiabilitiesEquityEquity
IncreaseIncrease UseUse SourceSource SourceSource
DecreaseDecrease SourceSource UseUse UseUse
Basics of Sources and UsesBasics of Sources and Uses
SourcesSources UsesUsesIncrease in demand depositsIncrease in demand deposits Increase in total Increase in total
loansloans
Increase in time depositsIncrease in time deposits
Increase in CD’sIncrease in CD’s
Increase in fed funds purchasedIncrease in fed funds purchased Increase in fed Increase in fed funds soldfunds sold
Increase in FRB borrowingIncrease in FRB borrowing
Maturing securitiesMaturing securities New securitiesNew securities
Basics of Sources and UsesBasics of Sources and Uses
OROR
SourcesSources UsesUsesDecrease in total loansDecrease in total loans Decrease in demand depositsDecrease in demand deposits
Decrease in time depositsDecrease in time deposits
Decrease in CD’sDecrease in CD’s
Decrease in fed funds soldDecrease in fed funds sold Decrease in fed funds Decrease in fed funds purchasedpurchased
Decrease in FRB borrowingDecrease in FRB borrowing
Sources and Uses:Sources and Uses:(Historical)(Historical)
Sources and UsesSources and Uses
Stmts Yr.3 Qtr. 3
Basics of Sources and UsesBasics of Sources and Uses
SourcesSources UsesUsesSell SecuritiesSell Securities Buy Securities Buy Securities
Loans RepaidLoans Repaid Make Loans Make Loans
Close BranchesClose Branches Build Branches Build Branches
Get DepositsGet Deposits Lose Deposits Lose Deposits
Issue CapitalIssue Capital Payoff capital Payoff capital
Historical Sources and Uses:Historical Sources and Uses:What Happened?What Happened?
Balance sheetBalance sheet This pereiod – last periodThis pereiod – last period Account by accountAccount by account
Sign Sources (+), Uses (-)Sign Sources (+), Uses (-) Catalog:Catalog:
Supply of Funds accounts (Deposits, Supply of Funds accounts (Deposits, Security Sales and Maturity, Loans by Security Sales and Maturity, Loans by Bank…)Bank…)
Usage of Funds accounts (Loans, Usage of Funds accounts (Loans, Investments, New Buildings)Investments, New Buildings)
Historical Sources and Uses:Historical Sources and Uses:What Happened?What Happened?
Catalog:Catalog: Supply of Funds accountsSupply of Funds accounts
DepositsDeposits Security Sales and maturitySecurity Sales and maturity Loans by Bank…Loans by Bank…
Usage of Funds accountsUsage of Funds accounts LoansLoans InvestmentsInvestments New BuildingsNew Buildings
Asset DifferencesAsset Differences
3.3 3.2 Change S/U
Cash 291.774 293.438 -1.664 +1.664
FF Sold .000 .000 0 0
T-Bills 77.652 31.361 46.291 -46.291
T-Notes 408.021 437.395 -29.374 +29.374
Muni's 449.970 451.389 -1.419 +1.419
Total securities 935.643 920.145 15.498 -15.498
Asset DifferencesAsset Differences
3.3 3.2 Change S/U
Loans 3776.098 3726.610 49.488 -49.488
Prov for LL 27.084 27.595 -0.511 -0.511***
Premises - Dep 33.050 32.059 0.991 -0.991
Other assets 8.603 8.765 -0.162 +0.162
Total resources 5018.083 4953.422 64.661 -64.661
Liab & O/E DifferencesLiab & O/E Differences3.3 3.2 Change S/U
Demand deposits 1336.740 1350.767 -14.027 -14.027
Time deposits 3210.205 3174.959 35.246 35.246
Total deposits 4546.945 4525.726 21.219 21.219
Federal funds purch’d 61.345 21.743 39.602 39.602
Funds from FRB .000 .000 0 0
Dividend payable 3.600 3.600 0 0
Accrued taxes 7.277 7.473 -0.196 -0.196
Other liabilities 42.563 42.651 -0.088 -0.088
Total liabilities 4661.729 4601.192 60.537 60.537
Liab & O/E DifferencesLiab & O/E Differences
3.3 3.2 Change S/U
Capital notes 34.115 34.735 -0.620 -0.620
Common stock 30.000 30.000 0 0
Surplus 48.519 48.519 0 0
Retained Earnings 243.719 238.975 4.744 4.744
Total equity * 322.238 317.494 4.744 4.744
Total Liab & Cap 5018.083 4953.422 64.661 64.661
Aggregated S&UAggregated S&U S (+) U ( - )
Actual Actual
QTR.#_3.3_ Results Results
Supply of Funds Usage of FundsNet Securities
Change -15.498
Deposits -14.027 Loans -49.488
Savings +35.246 Prov for LL -0.511
Subtotal +21.219 Subtotal -65.497
FF Purch +39.602 FF Sold +0.000
Dividend payable 0 Premises -0.991
Accrued taxes -0.196 Other Assets +0.162
Other liabilities -0.088 Cash +1.664
Capital Notes -0.620
Retained Earnings +4.744 Total +64.661 Total -64.662
Y3Q3 InterpretationY3Q3 Interpretation(Look for the BIG numbers!)(Look for the BIG numbers!)
Funds came fromFunds came from larger Savings increases over Demand larger Savings increases over Demand
Deposit lossesDeposit losses increases in Loans from other Banks (FF increases in Loans from other Banks (FF
Purch’d) and past EarningsPurch’d) and past Earnings Funds went toFunds went to
net increases in securities and Loans.net increases in securities and Loans.
Your AssignmentYour Assignment(Assignment #1)(Assignment #1)
Produce an Aggregated Sources and Produce an Aggregated Sources and Uses for Y3Q4Uses for Y3Q4 Bank1Y3Q4.pdf Bank1Y1Q3-Y3Q4.xls
(I/S, B/S Data 1.3-3.4 in Excel Spreadsheet!!!) Class Webpage; January 16th Entry
Write a short commentary Write a short commentary concerning where funds are coming concerning where funds are coming from and going to.from and going to.
Bank Team AssignmentBank Team Assignment BANK NAMEBANK NAME MANAGEMENT AREA ASSIGNMENTSMANAGEMENT AREA ASSIGNMENTS
List each team member and area of responsibilityList each team member and area of responsibility
COMMUNICATION PLANCOMMUNICATION PLAN BRIEF paragraph how your team is going to communicateBRIEF paragraph how your team is going to communicate
DECISION PROCESSDECISION PROCESS BRIEF paragraph how your team will reach decisions and BRIEF paragraph how your team will reach decisions and
complete input formscomplete input forms How will I contact your groupHow will I contact your group
(representing the board of directors and/or regulator; or input (representing the board of directors and/or regulator; or input implementer)implementer)
1 response from each Bank (include bank #)1 response from each Bank (include bank #) Due by Monday, January 21, 5:00pmDue by Monday, January 21, 5:00pm