Finance for Business: Analysis of Westpac Banking Corporation and Bank of Queensland

Running head: FINANCE FOR BUSINESS
Finance for Business
Name of the Student:
Name of the University:
Author’s Note:
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1FINANCE FOR BUSINESS
Executive Summary:
The current report has focused on the perspective of a foreign institutional investor planning to
invest in the Australian market. Therefore, the two organisations that have been selected for this
assignment operate in the banking sector of Australia. They include Westpac Banking
Corporation and Bank of Queensland. Westpac is observed to be placed in a better position in
terms of profitability position than the Bank of Queensland in the Australian market. In terms of
long-term liquidity or solvency, Westpac is placed in a favourable position in the Australian
banking sector compared to the Bank of Queensland. The composition of capital structure of
Westpac has changed over the three-year period, in which the depth exposure has fallen over the
three-year period, while there has been rise in exposure of equity. Therefore, the investor is
recommended to invest in the shares of Westpac Banking Corporation for maximising the overall
return on investment.

2FINANCE FOR BUSINESS
Table of Contents
Introduction:....................................................................................................................................3
1. Description of the chosen companies:.........................................................................................3
2. Calculation and comparison of selected performance ratios:......................................................4
3. Share price movement analysis:..................................................................................................8
4. Calculation and analysis of weighted average cost of capital (WACC):...................................10
5. Capital structure policy:.............................................................................................................12
6. Recommendation letter:.............................................................................................................12
Conclusion:....................................................................................................................................13
References and Bibliographies:.....................................................................................................15

3FINANCE FOR BUSINESS
Introduction:
The current report would focus from the perspective of a foreign institutional investor
planning to invest in the Australian market. Therefore, the two organisations that have been
selected for this assignment operate in the banking sector of Australia. They include Westpac
Banking Corporation and Bank of Queensland. The first section of the report would provide an
insight of the business operations of the two banks along with comparative advantages. The
second section would concentrate on analysing and contrasting the profitability and liquidity
positions of the two chosen banks for the past three years by extracting the financial information
from their published annual reports. The next part would emphasise on analysing the share price
movement analysis of the two banks to determine the volatility of their stock prices in the ASX
index. In addition, the weighted average cost of capital of the two companies has been analysed
as well as their capital structures. Based on all the above aspects, recommendation letter would
be provided to the concerned investor regarding the investment opportunities in the two banks.
1. Description of the chosen companies:
Westpac Banking Corporation is involved in providing different financial and banking
services in Australia, New Zealand, the Pacific region and global nations. The bank operates in
five divisions, which include Business Bank, Consumer Bank, Westpac Institutional Bank and
Westpac New Zealand. Moreover, the bank offers particular treasury and banking services,
telephone banking, ATMs, travel centre, margin lending and emergency cash. Furthermore, it is
involved in serving micro, small and medium enterprises, individuals, government customers and
others by providing fund management and capital advisory services, which are the main
comparative advantages of the bank. The bank has been established in 1817 with an employee
base of around 35,029 employees (Westpac.com.au 2019).
Bank of Queensland is one of the leading regional banks in Australia and the local
owner-managers run majority of its branches. The bank focuses on maintaining long-term
customer relationships, which are dependent on mutual understanding and respect. The bank has
above 180 branches in Australia and it has developed easy, simple and understandable banking
products for supporting the financial needs of its customers. These products and services are
rendered to the businesses as well as individuals. It falls under the top 100 Australian firms in