Financial Analysis of Major Banks under Corporate Accounting Standards

This report provides a financial analysis of four major Australian banks (Common Wealth Bank of Australia, National Australian Bank, Westpac Bank, and Australia and New Zealand Bank) based on corporate accounting standards. The analysis focuses on key components of owner's equity, including share capital, reserves, and retained earnings, over a four-year period (2014-2017). It examines the debt-to-equity positions of each bank, revealing their financial leverage and cost of capital. The report highlights the increasing equity capital of each bank, analyzes the implications of high equity versus debt funding, and compares the debt portions in the capital structure of each bank. The findings indicate varying levels of financial leverage among the banks, with some carrying higher debt portions, potentially impacting their sustainability and ability to cover interest payments. The document is a student contribution available on Desklib, a platform offering study tools and solved assignments.

CORPORATE ACCOUNTING
Accounting Standards
Financial analysis
[Type the author name]

Table of Contents
Answer to question no-3............................................................................................................2
Ordinary Share capital................................................................................................................4
Other Equity Instruments and retained earning.........................................................................4
Reserves.....................................................................................................................................5
Retained profits..........................................................................................................................5
Answer to question no-4............................................................................................................5
Debt and equity position of the four firms that you have selected.............................................5
Comparative analysis.................................................................................................................6
References..................................................................................................................................7

Answer to question no-3
The owner’s equity is the invested capital by the owners in the business capital of
organization.
Common Wealth Bank of Australia
(AUD $ in Million)
2014 2015 2015 2017
Share capital 24591 25742 2687 34971
Reserve 1564 1687 1789 1869
Retained earning 25252 2589 2610 26330
The owner’s equity is the capital investment. It is analyzed that share capital of
Common Wealth Bank has increased to AUD $ 34971 million which is 21% higher. It
showcases that Common Wealth Bank of Australia has raised more capital by issue of shares
in market. The retained earning has also increased to AUD $ 26330 million which is way too
high and showcase that Common Wealth Bank could easily expand its business by using this
retained earnings. However, it might face issue of the high cost of capital due to the high
equity capital in its business (Weygandt, Kimmel, and Kieso, 2015).

National Australian Bank (AUD $ in
Million)
2014 2015 2015 2017
Share capital 48415 53096 58120 61288
Reserve 110 145 155 178
Accumulated earning 14255 15255 16454 17252
(National Australian Bank, 2017)
It is analyzed that share capital of National Australian Bank has increased by 27% and
resulted to AUD $ 61288 million. It has raised more capital by issue of shares and keeping
more funding from its accumulated earning. National Australian Bank has to lower down its
equity portion and should go for raising funds by using the debt funding (National Australian
Bank 2017).
Westpac Bank (AUD $ in million) 2014 2015 2015 2017
Share capital 29251 25254 30252 34627
Reserve 112 168 210 237
Retained earning 15442 15891 16422 16442
(Westpac Bank, (2018)
Westpac Bank has also increased its equity capital by 9% as compared to last four year data.
The retained earning has increased to AUD $ 16442 million which is 6% higher if it is
compared with the four year data Westpac Bank, (2018

(Australia and New Zealand Bank (AUD
$ in Million)
2014 2015 2015 2017
Share capital 28254 27845 31252 33544
Reserve 114 188 210 225
Retained earning 13442 1441 1551 16642
(Australian and New Zealand Bank, (2018). 2017)
The share capital of Australia and New Zealand Bank has increased its share capital to AUD
$ 33544 million which is 11% higher since last four year. The reserve of bank has also
increased to AUD $ 225 million. Nonetheless, retained earning has resulted to AUD $ 16642
million which is increased with the increase in tis overall turnover and profit throughout the
time (Australian and New Zealand Bank, 2017).
Ordinary Share capital
The ordinary share capital of common Wealth bank is lower than National Australian
bank. The highest ordinary share capital is AUD $61288 million which is kept by NAB in
2017(Weygandt, Kimmel, and Kieso, 2015).
Other Equity Instruments and retained earning
There are no other equity instruments such as share warrants and promissory notes
which have been issued by these four banks (Grant, 2016).
Reserves
The highest reserve is kept by Common Wealth Bank i.e. AUD $1869 million and
further followed by NAB at amounting to AUD $ 237 million
Retained profits
The Westpac Bank has kept AUD $ 17442 million retained earning which is way too
higher as compared to others (Weygandt, Kimmel, and Kieso, 2015).

Answer to question no-4
Debt and equity position of the four firms that you have selected
The debt to equity portion of the company reveals the financial leverage and cost of
capital of all these four banks (Howieson, 2017).
National Australian Bank
All amount AUD $ in
Million
2013-
09
2014-
09
2015-
09
2016-
09
2017-
09
TTM
Total stockholders' equity 46561 47891 55494 51292 51306 52525
Total liabilities 761807 835393 899539 726307 737008 787425
NAB has kept 43% debt portion in its capital structure which reveals high financial
leverage and low cost of capital in 2017. However, as compared to last four year data it is
way too low (Bhimani, Silvola, & Sivabalan, 2016).
Common Wealth Bank
AUD $ in million 2013-
09
2014-
09
2015-
09
2016-
09
2017-
09
TTM
Total stockholders' equity 42521 45521 45861 52521 52542 53542
Total liabilities 62122 67525 69521 70125 71245 78454
Common Wealth Bank has kept 63% debt portion in its capital structure. However, as
compared to last four year data it is low (Commonwealth Bank, (2018).
Westpac
AUD $ in million 2013-
09
2014-
09
2015-
09
2016-
09
2017-
09
TTM
Total stockholders' equity 35251 38451 39852 39925 42528 56565

Total liabilities 55251 56845 58754 62457 70241 78524
Westpac has kept 38% debt portion in 2017 which is 12% lower as compared to last
four year data. It has set up proper equilibrium between the cost and financial leverage
throughout the time.
Australian and New Zealand Bank
AUD $ in million 2013-
09
2014-
09
2015-
09
2016-
09
2017-
09
TTM
Total stockholders' equity 52521 56545 58765 62545 72542 78454
Total liabilities 65454 66457 68457 72414 75251 79458
The Australian New Zealand Bank has kept high financial leverage which reflects
64% higher debt portion in its debt to equity part (Australian and New Zealand Bank, (2018).
Comparative analysis
This analysis has shown that Australian New Zealand Bank has higher debt portion
which might advantage its business as higher debt portion will help it lower down the cost of
capital but at the time if in case due to the low profitability it might impact the business
sustainability as it would fail to cover its interest payment out of the available earnings before
interest and tax.

References
Australian and New Zealand Bank, (2018) Annual Report [online] Available from
http://shareholder.anz.com/pages/annual-report-archive., [Accessed on 28th September 2018]
Bhimani, A., Silvola, H., & Sivabalan, P. (2016). Voluntary corporate social responsibility
reporting: A study of early and late reporter motivations and outcomes. Journal of
Management Accounting Research, 28(2), 77-101.
Commonwealth Bank, (2018) Annual Report [online] Available from
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/annual-
reports/annual_report_2017_14_aug_2017.pdf [Accessed on 28th September 2018]
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. 2nd ed, Australia:
John Wiley & Sons.
Howieson, B. (2017). The Phoenix Rises: The Australian Accounting Standards Board and
IFRS Adoption. Journal of International Accounting Research, 16(2), 127-154.
National Australian Bank (2017)., Annual report., [Online]., Available from
https://www.nab.com.au/about-us/shareholder-centre/financial-disclosuresandreporting/
annual-reports-and-presentations., [Accessed 28th September, 2018].
Westpac Bank, (2018) Annual Report [online] Available from
https://www.google.co.in/search?ei=LEyjW-3hBs-
hyAOMp56oBA&q=wetpac+bank+annual+report&oq=wetpac+bank+annual+report&gs_l=p
sy-ab.3..0i13k1l3j0i13i30k1l2j0i22i30k1l5.2063.4535.0.4630.14.11.0.0.0.0.288.1327.2-
5.5.0....0...1.1.64.psy-ab..9.5.1320....0.3S0qMxJ0Rz0., [Accessed on 28th September 2018]
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting.
2nd ed, USA: John Wiley & Sons.