This report analyzes the financial report of National Australian Bank, the fourth largest financial institution in Australia, and examines the aspects of merger and acquisition. It discusses the company's market capitalization, yearly earnings, subsidiaries, and sustainability initiatives.
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Running head:CORPORATE ACCOUNTING Corporate Accounting Name of the student Name of the University Author Note
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1CORPORATE ACCOUNTING TO: The Board of Directors FROM: CC: DATE: SUBJECT: Corporate Accounting National Australian Bank is the fourth largest financial institutions in Australia. This is basically from the aspect market capitalization, yearly earnings of the bank and the account holders. Nab was ranked as the 21stlargest bank in the world. This is because of the market capitalization and the market dominations(Nab.com.au, 2019). This bank was ranked as the 50thlargest bank from all over the world in term of total assets of the bank. The bank has 1590 branches all over the world. The bank operates in Australia, New Zealand and in Asia. The bank has 35,063 employees all over the world. The bank is listed in the ASX stock exchange and earns revenue of A$ 19,101 billion yearly. The Net earnings of the company are A$ 5,554 billion. The company is thinking now for the consolidation, according to that the financial report of the company has been analysed and the other aspects of merger and acquisitionhasbeenexamined.Consolidatedfinancialstatementsmeansthefinancial statements of an entity with multiple divisions or subsidiaries. The report is being made with the parent company and its subsidiaries and is used by both the companies. According to the companies Act 2013 the companies including the unlisted, the companies having one or more subsidiaries or the associates and joint ventures have to prepare consolidated financial statements and it has become mandatory. Previously it was only for the listed companies. The companyhavegoodcorporategovernance.Thegovernmentpracticeofthecompany empowers and enables the operations of the company. The initiatives taken by the company in the year 2018 are that the company has launched comprehensive program for the requirement of banking executive regime by the 1 July 2018(Bugejaet al. 2017). The company also had a detailed self assessment of governance, accountability and cultural framework and practices. The company has some sustainable target to become the rank 1 bank from the net aspect to have decent work and environment growth. The company is also engaged in the employee engagement that is to behave properly with the employee and maintain a strong bond with them. The company also does financing for the environment for last ten years. The company has some group environmental operational targets such as Science based GHG emissions reduction, Energy use reduction, reduction of office paper, reduction of water, reduction of waste all these targets set by the company is quite achievable and has achieve it. The company follows gender equality in terms of employment. The company also does micro financing loans to many Australian people. As the company is thinking of the consolidation for this the company have to analyse some technical factors. The company at first had to look after the individual earning and asset size of the business. The first step of the consolidation is to acquire the shares of the subsidiary company which the acquiring company is thinking to acquire. The acquiring company provide the subsidiary company an exchange or swap ratio. This is ratio of acquiring the shares of the company. The acquiring company have to be a listed company. The company should be listed and
2CORPORATE ACCOUNTING communicate with a CA as due to lots of calculation of consolidation need to done after and before acquiring the shares. The acquiring company need to acquire more than 50% of the subsidiary company. The subsidiary company need to pay and clear out of all the debts that were been due. The company also have to look the profitability of the merger that will it be profitable for the company in acquiring the subsidiary company or not. The company generally looks for the profit as in this case the acquiring company is a bank then the company must look for any insurance company for acquiring purpose(Araújo,et al. 2018). This will be an advantage for the bank as well as for the subsidiary company. The acquiring company can operate both banking and the insurance sector. The company can provide insurance and loans at the same time to their customers. The consolidation is added advantage for both the holding and the subsidiary company(Williams,2016). This is because then the subsidiary which was not running well in the industry however the company has resources and assets, which the acquiring can utilize in return of shares and capital. The company had subsidiary companies such as Bank of New Zealand, BNZ international Funding Limited, MIC Investments Ltd and NULIS Nominees Australia Limited. NAB has full ownership of these companies(Munir and Terry, 2018). These companies have goodwill in the location and both the companies have benefitted by the merger and acquisition. Some of the companies are from Australia and rest if from New Zealand. The company NAB have full control over the entities from the date of acquisition. The external interest in the equity and the relevant results of the entities that are being managed by the company has been showed in controlled entities inn equity section of the balance sheet as no-controlling interest of the company(Roy, Devlin and Sekhon, 2015). The bank incurs a loss in amount receivable from the subsidiaries in the year 2018 of about $2405 million and incurs a profit for the year 2017 about $1562 million. This is because the net cash inflows from controlled entities were less. This is expected that in the next year the company will be profited again. According to the financial report of the company the key performance of the company is that 11.77% of cash return on equity(Steen, McGrath and Wong, 2016). The common equity tier of the companyis10.20%.Thecompany’soneofthesustainabilityinitiativeisemployee engagement and the score 54%. The statutory net profit of the company is $5.55 billion. The cash earnings of the company are $5.70 Billion. The value in the previous year this year the value gets reduced 14.2%(Nab.com.au, 2018). The dividend per share of the company is $1.98 and the bank assisted 18,315 customers those who are having financial crisis(Usman and Amran, 2015). The overall performance of the bank was good in the financial year 2018 in some of the issues the bank is lagging behind.The issue that the customers of the bank were having have not been solved entirely. The bank has failed in reaching the target of NPS set by the board of directors of the bank. The operating expense of the bank is more, the income tax expenses is also more form the previous year(SATHYE, Ariff and Viverita, 2016). The other income of the bank such as the net operating is more than the previous year. The key ratios such as the cash return on equity is 11.7%, Cash earnings per share is $202.4 million , cost to income ratio is 50%, total capital ratio is 14.12% and the Net interest margin is 1.85%. These are the financial figures which will determine the position of the company in front of the investors. The company and the group have performed well in some areas they were lagging behind. Which the company need to analysed. The company has an interest in acquiring subsidiaries and associates, however in this year company failed in earning from
3CORPORATE ACCOUNTING their also. NAB is a very popular bank and has the power to take them in a better position in the nearest future.
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4CORPORATE ACCOUNTING References Araújo, L.M.D., Silva, R.M., Silva, E.S. and Pereira, A., 2018. Mergers and Acquisitions in theContextofGlobalization.TheInternationalJournalof BusinessManagementand Technology,2. Bugeja, M., da Silva Rosa, R., Izan, H.Y. and Ngan, S., 2017. Choice of acquisition form in Australia and the post‐takeover employment of target firm directors on the acquiring firm board.Accounting&Finance. Munir, R. and Terry, C., 2018. The Ethics of profit in the banking sector: An Australian case study.JournalofInternationalBusinessEducation,13,pp.299-318. Nab.com.au, (2019). Personal. [online] Nab.com.au. Available at: https://www.nab.com.au/ [Accessed6Sep.2019]. Nab.com.au(2018).Annualreports.[online]Nab.com.au.Availableat: https://www.nab.com.au/about-us/shareholdercentre/financialdisclosuresandreporting/annual- reports-and-presentations[Accessed6Sep.2018]. Roy, S.K., Devlin, J.F. and Sekhon, H., 2015. The impact of fairness on trustworthiness and trust in banking. Journal of Marketing Management, 31(9-10), pp.996-1017. Steen, A., McGrath, D. and Wong, A., 2016. Market failure, regulation and education of financial advisors. Australasian Accounting, Business and Finance Journal, 10(1), pp.3-17. SATHYE, M., Ariff, M. and Viverita, N.A., 2016. The Impact of the Global Financial Crisis on Australian Banking Efficiency.International Journal of Banking and Finance, 12(2), pp.1- 22. Usman,A.B.andAmran,N.A.B.,2015.Corporatesocialresponsibilitypracticeand corporate financial performance: evidence from Nigeria companies. Social Responsibility Journal,11(4),pp.749-763. Williams, B., 2016. The impact of non-interest income on bank risk in Australia.Journal of Banking&Finance,73,pp.16-37.