Comparison of Banks

Running head: COMPARISON OF BANKS
Comparison of Banks
Name of the Student:
Name of the University:
Author Note:

COMPARISON OF BANKS1
Table of Contents
Introduction:...............................................................................................................................4
Discussion:.................................................................................................................................4
Decomposition of Return on Equity:.....................................................................................4
Analysis of ROE:...............................................................................................................5
Analysis of ROA:...............................................................................................................6
Analysis of Asset Turnover Ratio:.....................................................................................7
Analysis of Interest Income:..............................................................................................8
Analysis of Non-interest Income:......................................................................................9
Analysis of Equity Multiplier:.........................................................................................10
Measure of Credit Risk:.......................................................................................................10
Loan Reserve Ratio:.........................................................................................................11
Non-Performing Loans:...................................................................................................12
Risk of Liquidity:.................................................................................................................13
Current Ratio:...................................................................................................................13
Operational risk:...............................................................................................................14
Conclusion:..............................................................................................................................14
References:...............................................................................................................................17

COMPARISON OF BANKS2
Executive summary:
The following report consists of the analysis of two banks Bank of Queensland and the
Commonwealth bank of Australia. The report focuses on the decomposition of the return on
equity of the two banks and its comparison at the intricate level. The credit quality of the two
banks are also measured using data on the loans over a five year period to understand the
credit standing of the two banks. Along with this the banks liquidity and operational ratio are
analysed to understand the banks short term financial position. Thus the current situation of
the banks along with their trend are analysed over a five year time horizon in this report.

COMPARISON OF BANKS3
Introduction:
The Bank of Queensland was established in the year 1874 with the name of The
Brisbane Permanent Benefit Building and Investment Society. It was converted to a bank in
1887, and operated under the same name. In the year 1942 through a series of merger it
became a trading bank and in 1970 became the Bank of Queensland. It got listed in the
Australian Stock Exchange in 1971. Thus it had expanded exponentially in the following
years by various number of acquisition in the following years. The bank has currently 252
branches across Australia. The market capitalization of the bank currently is around 3.69
billion AUD and the current share price is AUD 9.09 per share. The bank provides savings
account facility, loans personal as well as home and car and credit facility to individual
consumers. The bank also provides business with services in aiding in business transaction
leading from domestic to international markets. It caters to all the personal and business
needs of an individual
(https://www.boq.com.au/content/dam/boq/files/shareholder-centre/financial-results/2018/
FY2018_Annual_Report.pdf.)
The aim of this report is to analyse the return on equity of the Bank of Queensland
and its peer comparable firm Commonwealth Bank of Australia. The banks credit quality is
also analysed along with its liquidity and operational ratio in this report.
Discussion:
Decomposition of Return on Equity:
The return on equity is a measure of return a company is earning for its investors
primarily the equity shareholders. The return on equity can be directly calculated by dividing