Australian Banking Sector Performance Analysis
Added on 2020-02-23
21 Pages4535 Words47 Views
FinancePolitical Science
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Running head:PRINCIPLES OF FINANCIAL MARKETSStudent NameUniversity NameAuthors’ Note
2PRINCIPLES OF FINANCIAL MARKETSExecutive SummaryThe entire background of the banking industry in Australia is also illustrated in this segment.A top down as well as bottom up analysis of corporations Westpac as well as CommonWealth Bank of Australia, functional in the Australian banking industry is analysed hereinthis study. Furthermore, the study also critically analyses the impact of Australian economyon both the companies functioning in the banking industry. Moving further, the current studyalso conducts a bottom up approach founded on significant financial ratio of both the selectedcorporation. Based on the findings of the study, the study proposes recommendations of thestudy.
3PRINCIPLES OF FINANCIAL MARKETSIntroduction In terms of business, it can be hereby mentioned that proper analysis of company as well asindustry is of utmost importance to investors before arriving at investment decisions.Fundamentally this study undertakes fundamental analysis on two corporations explicitly,Common Wealth Bank of Australia (CBA) as well as Westpac listed in the ASX. The topdown analysis presented current study can aid the financiers in presenting a macro view ofthe respective economy as well as industry. Again, the bottom up approach carried out in thepresent study can help in representing the micro-economic view of the respective corporation.Moving further, the current study also proposes recommendations based on the findings ofthe study. Analysis of Australian Banking industry As rightly indicated by Moradi-Motlagh and Babacan (2015), there are a large number oflicensed banks that are operating in the banking segment of the nation. However, a steadygrowth can be witnessed in the overall performance of the asset of the banks and this in turnhelps in the overall growth rate of the economy. Again, the stability of this particular segmentis maintained by the augmentation of the capital of the company in the recent quarters. Again,another significant factor covered by the segment of the nation includes greater emphasis onthe Liquidity Coverage Ratio or else the LCR (Moradi-Motlagh and Babacan 2015). TheBanking Act of 1959 helps in improvement of functioning of Australian bankingcorporations. Evaluation of the financial stability of the nation refers to the fact that high importance can beattached to the process of analysis of performance of asset of the Australian banks. Duringthe year 2016, an important step comprises of generation of business loans (Kpmg.com
4PRINCIPLES OF FINANCIAL MARKETS2017). However, competitive pressure as well as significant decisions undertaken by thenation that helps in analysis of growth as well as development of diverse cities. However, thetrend that can be witnessed in the banking segment in Australia consists of critical evaluationof the process of valuation of commercial property (Deloitte 2017). Again, the nature ofcompetition in the banking segment is essentially considered to be consistent. Particularly,this can be considered as the primary reason that has led to the development of this particularsector over the years. The free democracy of the banking segment consists of the significanceof presence of banks along with securitization. Besides this, the third alteration exists in theshare of resources. Finally, economy’s growth is founded on the decrease in the existence ofcredit unions, finance corporations as well as building societies (Clmr.unsw.edu.au 2017). Mission Statement of the corporationsCommonwealth Bank of Australia pronounces the mission statement. This declaration readsabout the intention to foster the amount of wealth of all the clientele. In essence, this can helpin making certain that the wishes of the customers are satisfied. Again, the vision statementof the bank states about the intention of enhancement of overall financial well being of theindividual. Essentially, this also takes account of retention of trust of clientele by securingboth the business as well as the community in which the business operates(Commbank.com.au 2017). The vision of the corporation Westpac is to aid the customers of the firm across the globe toattain growth and prosperity. The management of the corporation also intends to offerspecialised services to the consumers by supporting them in their process of growth.However, the mission of the bank Westpac also involves providing higher rate of return todifferent clientele, business professionals along with other investors. In addition to this, thecorporation also intends to the best place for the worker. In essence, the members of the staff
5PRINCIPLES OF FINANCIAL MARKETSof the firm also intend to thrive on their own style of management and institute a businessconcern that is effective in developing long term association (Westpac.com.au 2017).Top down analysisArjomandi et al. (2014) affirms that analysis of industry primarily starts with the top downanalysis. Essentially, the Australian economy is a developing nation. However, in the presentstate of affairs this industry has attained considerable amount of growth. The growth rate ofGDP is taken roughly 4.40% and on the basis of this growth rate the top down analysis can beundertaken. Figure: Representing Highlights of Australian Economy(Source Joshi et al. 2013)Based on the data presented in the figure, it can be hereby concluded that rate of growth ofnation Australia is on a rising trend and simultaneously the rate of unemployment also hasdeclined as compared to previous years. Furthermore, rate of inflation registered for the
6PRINCIPLES OF FINANCIAL MARKETSnation Australia has also escalated and present current account deficit has also widened.However, this can be regarded as a negative mark for the Australian economy, therefore,numerous steps are necessary from the government in a bid to minimize the overall rate ofgrowth (Paradi and Zhu 2013)Banking industry is one of the largest contributors towards the growth of the entire nation.Transformations have taken place as a whole in the proportion of GDP in FY 2015. Analysisof GDP of the nation divulges the fact that this particular indicator augmented by nearly 1%from the time of June, 2012 (Paradi and Zhu 2013). Besides this, the service segments suchas the banking industry, considerable growth of the country’s GDP has significantlycontributed by particularly the agriculture as well as mineral resources (Zander et al. 2015).Additionally, expenses also got amplified by roughly 2% in advanced economic state ofaffairs. Essentially, during 2016, it complete growth in GDP of the nation was observed to be1%, primarily driven by service segment. Majority of the renowned economists are of theview that the overall intensification of the Australian Dollar in the global market would besubstantial (Zander et al. 2015). Again, this will also comprise of the instability that has beendelivered by the market capitalization (Zander et al. 2015).
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