Fundamental Analysis of Banking Sector of Australia
Added on 2020-03-23
24 Pages3822 Words69 Views
Running head: PRINCIPLES OF FINANCIAL MARKETSPrinciples of financial marketsStudent Name:University Name:Author Note
2PRINCIPLES OF FINANCIAL MARKETSExecutive SummaryThe present report is prepared to conduct the fundamental analysis of banking sector of Australiausing top down approach and bottom up approach. Selected organization for conducting analysisis Common wealth bank and Westpac. Bottom up analysis has been done by considering themacro economic factors influencing the economy as well as banking sector. Performance ofbanking sector has significantly affected by various variables such as GDP, inflation andunemployment rate. Top down analysis of organization has been done by implementation of ratioanalysis tool. Later part of report depicts the recommendation to investors for investing in thechosen organizations.
3PRINCIPLES OF FINANCIAL MARKETSTable of ContentsIntroduction:....................................................................................................................................6Australian banking industry background:........................................................................................6Background of Organizations:.........................................................................................................7Top down analysis:..........................................................................................................................8Bottom up analysis of current financial situation of Westpac and Common wealth bank:...........13Summary and Recommendations:.................................................................................................22Reference:......................................................................................................................................24
4PRINCIPLES OF FINANCIAL MARKETSIntroduction: For the purpose of investment, investors are required to conduct in depth analysis of theindustrial sector in which they are seeking investment prior to making any investment. Changesin economic fundamentals and its impact on the performance of companies can be evaluate byconducting fundamental analysis. Value and share price of company is considerably affected bymicro and macro-economic factors. For presenting the picture of industry and economy at macrolevel, investors can perform top down analysis. Macro-economic picture of companies on otherhand is depicted by conducting bottom up analysis (Petty et al. 2016). Fundamental analysis oftwo organizations from banking industry listed on Australian stock exchange are conducted inpresent report. Two organizations are Westpac and Common Wealth Bank of Australia. Australian banking industry background:The banking sector of Australia has improved since the introduction of banking Act,1959. Overall growth in performance of banking has been attributable to the growth inperformance of assets. Compilation of industry information has be from various sources such asReserve Bank of Australia, Australian Brea of statistics and Australian prudential regulatoryauthority. Since the global financial crisis, there has been decline in the results of four majorAustralian banks. Performance of credit control has remained stable and upside has beenwitnessed in impairment theory. On the major agendas of banks, there is a continuous rise incash management. Since the proposal of government to nationalize the banking industry in late1940s, the sector has experienced the most intense issue of social political agenda. There hasbeen lower credit growth outlook for major banks. Major Banks in Australia is working hard forshaping new environment that helps in providing connected and more thoughtful experiences by
5PRINCIPLES OF FINANCIAL MARKETSengaging staffs and technology as key enablers. Banks are diverse and large organizationshaving long histories and changes in the banking sector is complex. Reframing the norms oforganizations along with resonant offerings, messages and contact points are need to be createdand that should be deeply embedded (Blondy et al. 2015).The performance of assets of major Australian banks is responsible for analysis offinancial stability. Development and growth of country is analyzed by important decisions andcompetitive positions of respective banks. There has been consistency in nature of growth ofcompetition in banking sector and evaluation of commercial property is trend of banking sector.Some of developments of banking sector involves securitization quintessence and presence ofbanks along with change in assets. Moreover, decline in growth has been in terms of falling anddeclining of finance companies, building societies and credit unions. Background of Organizations:Common wealth bank is multinational bank of Australia offering business in wide rangeof areas. The mission of organization is to provide valuable services to their customers and itwas established under Common wealth bank Act, 1911. Bank has a tremendous growth in itspeople and shareholder base. Westpac is one of the oldest bank of Australia that was established in year 1817. Thequality of portfolio of assets offered by bank was improved by low new problem facilities,stressed asserts and work out of impaired facilities. Commercial and institutional segments oforganization continued to perform well due to their protective balance sheets and cautiouscustomers. Adequate provisioning is maintained by organization that involves provision ofimpaired assets and collectively assessed provisions to weighted assets credit risks. During the
6PRINCIPLES OF FINANCIAL MARKETSfinancial year 2015, there were provisions relating to growth that is largely offset by impact ofstandard exposures and run off in watch list. Mission of organization is to provide sufficientreturns to shareholders, customer and business professionals (Banerjee 2015). Top down analysis:Investors for evaluating the performance of organization by looking the several macrofactors such as GDP growth rate, inflation, interest rate, unemployment rate, political factors andexchange rate use top down approach. An impressive economic progress has been recorded formore than 25 years that is unmarred by recession. There has been a robust entrepreneurdevelopment supported by well-functioning legal system, effective system of government andindependent bureaucracy. Banking and finance industry contributed $ 148.9 billion to $ 1.6 trillion of Australianeconomy for the year ending 2016. Value added for banking sector is highest on record. For theyear ending, growth in insurance and finance industry was recorded at 4.5%. For the past foryears, there has been consistent growth in banking sector between 3.8% and 4.5%. The contritionof banking industry to the national economic activity has reached a high of 9.5% (bankers.asn.au2017).
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Principles of Financial Markets | Banking Industrylg...
|24
|4544
|216
HA1022 Principals of Financial Markets Group Assignmentlg...
|21
|4535
|47
HA1022 Principals of Financial Markets | analysis of mineral industrylg...
|25
|3980
|125
Fundamental Analysis Report Of Azure Minerals And Oz Mineralslg...
|24
|4983
|36
Principles of Financial Marketslg...
|22
|4496
|451
Top Down and Bottom Up Analysis of the Energy Industry of Australialg...
|19
|3711
|112