Finance for Masters: Analysis of Commonwealth Bank of Australia and Australia and New Zealand Bank of Australia

Running Head: FINANCE FOR MASTERS 0
Finance for Masters

FINANCE FOR MASTERS 1
Table of Contents
Introduction................................................................................................................................2
Description of operation and comparative advantages of the two chosen companies...............2
Commonwealth Bank of Australia.........................................................................................2
Australia and New Zealand of Australia................................................................................3
Calculation of the performance ratios........................................................................................3
Profitability ratios...................................................................................................................4
Capital structure (leverage) ratios..........................................................................................7
Liquidity ratios.......................................................................................................................9
Analysis of monthly share prices movements..........................................................................12
Commonwealth Bank of Australia.......................................................................................12
Significant factors which may have influenced the share price...............................................14
CBA......................................................................................................................................14
ANZ bank.............................................................................................................................15
Calculation of beta values and expected Rates of Return using the CAPM............................15
Dividend policies.....................................................................................................................17
Recommendation letter............................................................................................................17
Conclusion................................................................................................................................18
References................................................................................................................................19

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Introduction
The financial performance is the most efficient measure which is required by the investors as
well as the management of the company. This measure is basically used to identify the
position of the firm in terms of the financial decisions and the management aspect as well.
The report determines the analysis of the two Australian companies namely Commonwealth
Bank of Australia and Australia and New Zealand Bank of Australia (Australia and New
Zealand Bank of Australia, 2017). This report covers both the financial and non-financial
aspects of the position of the companies. Not only the ratio analysis is the measure that is
used for the purpose of the comparison but in addition to this, the share price movements
have also been placed as criteria for the past three years are compared with each other to give
the two way reflection. Later on the dividend policies are also analysed and at last a
recommendation letter has been provided which has answers to all the concerns of the
company and which company shall be selected from the given portfolio (Kimmel, Weygandt,
and Kieso, 2010).
Description of operation and comparative advantages of the two chosen companies
Commonwealth Bank of Australia
The Commonwealth Bank of Australia is one of the largest banks of Australia that is engaged
in the business of providing the services of the financial and the advisory services which will
help the client to deposit the amounts in the bank and earn interest. Apart from this the bank
is also involved with the other services such as management of funds, superannuation,
insurance, investment and the broking services (Krantz and Johnson, 2014). The company
reported a profit of A$9.881 billion in the financial year 2017 with the team of 51800
employees. The division is divided into the retail banking services, premium business

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services, wealth management and under the supervision of Matt Comyn. Further the company
has also introduced the online banking services through the Net bank. Net bank allows the
customers to transfer the funds and manage the accounts and promote the saving goals
(Commonwealth Bank of Australia, 2017).
Australia and New Zealand of Australia
It is the third largest bank in the Australia, after the Commonwealth Bank of Australia. The
ANZ also became the legal entity in the year 2000 and change to ANZ Bank in the year 2012.
Currently the ANZ bank is operating at profit of A$7.493 billion and the total revenue
reported by the company is A$21.071 billion. Moreover the ANZ also provides the technical
assistance in the areas of the risk management and retail and also enhances the business
banking. Further in the other segments the ANZ bank is involved in the international trade
facilities and also provides the flexible an d the competitive lending solutions. The bank is
also engaged in providing the corporate structure solutions (Australia and New Zealand Bank
of Australia, 2017).
The chosen companies are itself the biggest competitor of each other and therefore investing
the funds in one of the bank will ensure more benefits. If the performance is analysed of both
the companies than in recent financial year the Commonwealth bank of Australia has
reported an EBIT of 10686 and increased by 11% and on the contrary the ANZ bank has
reported an EBIT of 19% which is far better than the Commonwealth bank of Australia. The
ANZ banking is operating on heights and enjoying the benefits of the customer satisfaction
and the rate of interest set by the bank is high than the Commonwealth bank of Australia and
therefore it can be concluded that the ANZ bank is having an advantage over the
Commonwealth bank of Australia and potential investors as well as the shareholders can get
an ideas on which bank to invest in and for how much time period (Australia and New
Zealand Bank of Australia, 2017).