Financial Analysis Report: Intermediaries and ANZ Bank

This report presents a financial analysis focusing on the role and evolution of financial intermediaries, particularly in the context of the ANZ Bank. The analysis begins by defining financial intermediaries and their crucial function in channeling funds, managing risk, and reducing transaction costs within the financial system. It highlights their role in maturity, size, and risk transformation, emphasizing the importance of banks and other institutions in connecting lenders and borrowers. The report then explores the changing landscape of financial intermediation, discussing the rise of mutual funds and the assistance provided to companies during mergers and acquisitions. Furthermore, the report discusses the future of financial intermediaries in light of technological advancements and changing market dynamics. The second part of the report focuses on ANZ Bank, providing an overview of its operations and the private banking services it offers to high-net-worth individuals. It details services like proprietary products, emphasizing the bank's commitment to privacy, customized solutions, and one-on-one customer service. The report also considers the challenges and opportunities facing the financial sector, discussing how financial intermediaries can adapt and remain relevant in a competitive and evolving market.

Financial Analysis
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By student name
Professor
University
Date: Januray 30 , 2018.
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Contents
Part
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Part
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Part
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References.....
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Question 1
Financial intermediaries are a part of the financial system and plays a major role
in operation of the same. The help in channelizing the funds from areas that have
surplus funds to areas that are deficient in the same. They act as a link between the
lenders and the borrowers. They play a major role in connecting the ties between
the two that makes the entire process of money lending and rotation easy and
seamless. They are the ones who indulge in speculation activities and often advice
their clients on how they can make effective utilization of their funds. Till today
banks are the biggest intermediaries in the system and have been doing this
business of money lending and saving since ages (Abbott & Kantor, 2017). The main
role of the intermediaries is conversion of one kind of asset into another. Mainly
they are involved in three kinds of transformations –
 Transformation in terms of maturity – In case of these financial intermediaries
it is said that they match up the maturity of their liabilities with their assets
and mostly it is a case of mismatch, where traditional intermediaries like
banks matches long term longs with short term deposits so in this way they
can manipulate the maturity zones of their assets and end up making money
in between (Alexander, 2016).
 Transformation in terms of size – In case of these financial intermediaries
they often match long term loans with short term deposits so that leads to
larger amount wanted by the borrower and that is supplemented by smaller
amounts from the lenders. They collect smaller amounts from people who
want to deposit their money and in the end transfer them to people who want
large sum of money.
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 Risk transformation – This is by far the largest factor that governs this
business of lending and borrowing. The level of risk classifies these
intermediaries and by far banks are the largest risk bearers. People who have
these intermediaries as liability in cases where they lend their money, should
think of ways where they have protected themselves in cases of loss. There
are various ways in which these intermediaries manage the risk and that
alone makes them different from each other. There are several ways in which
banks does the same by diversifying the assets and investing the same in
different areas, by channelizing the risks to different portfolios, by minimizing
the level of risk involved based on individual transactions (Chariri, 2017).
The financial intermediaries help people in many other ways apart from
channelizing their funds through dedicated and secured routes and connecting
them to genuine lenders and buyers, they also help in reducing the overall
transaction cost that is involved with management of funds. They do the same
through several ways, by developing networks and information system, by using
secured and tested routes for fund transformation, by reducing the information
cost that might have been there in case of absence of these intermediaries.
Overall, they play a very important role in fund management and helps in the
growth of the equity by investing the same in different portfolios (Chron, 2017).
In recent times, there has been many such occasions in which these financial
intermediaries have played an important role in solving the issues faced by people
in arrangement of funds and providing them with necessary solution. Many
investment banks like world banks, RBI etc have played an important role in solving
the issues faced by companies and individuals and other banks and helped them in
seamless rotation of money, they act as lenders and depositories and made sure
that the money market was always liquid and there was a growth of marketable
securities.
Nowadays mutual funds have become a very popular way by which people can
invest in their money and avail many benefits. Few mutual fund issuers of the world
include, Oberweis China Opportunities Fund (OBCHX), Third Avenue Real Estate
Value Fund (TAREX), Matthews Pacific Tiger Fund (MAPTX) etc. These have been
actively providing mutual fund services to people in different corners of the world
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and have been generating a lot of revenue. Mutual funds basically pool in the
money deposited and invest them into different avenue through secured channels
and then the profit is distributed to the depositories after availing some commission
for the issuing agents. It is said to be more secure form of money transactions in
comparison to banks (Anon., 2017).
In cases where companies merge, demerge, amalgamate, these financial
intermediaries provides a lot of help by planning the overall process and providing
them with the necessary funds that they would require. So, in this way they act as
financial planners and solves the issues that might crop up in such situations. These
intermediaries have a lot of knowledge, about the areas where money should be
invested to get more returns and all the routes are already tested by them. Both in
national and international sector they have played a major role in changing the
ways people dealt with money lending and borrowing and has changed the entire
system making the same extremely easy for people to understand and follow.
People in villages who are not that educated and have less knowledge on how to
handle their finances, can avail banking services that are there specially for such
people. In this way they can save their money and make sure that there is no wrong
utilization of the same in the hands of the money lenders in such villages. So, this is
the reform that was very much required during those times to make sure that
people were getting their dues and were becoming more aware about how they can
manage their funds effectively (Maynard, 2017). In all these the financial
intermediaries have played a major role, the various banking regulations and rules
that have been formed have made the entire process very easy and secured.
But the point to be noted what is the future of these intermediaries in times to
come and how far are they successful in changing the functioning of the financial
market and helping the people who are involved in the same. Since the time they
have been operating there have been several changes and this has affected the
overall scope of these intermediaries. They are functioning well, but it is very dicey
on what the future holds given the advancement in technology and related aspects
(Chron, 2017).
Future of financial Intermediaries
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Over the period the relevance of financial intermediaries has declined a lot and
there are many factors responsible for the same. The decline in the financial assets
held by the banks is no indication of the decline in the banking industry, it just
indicates that people have directly started to invest their money in different sectors
and do not depend on these intermediaries to help them in any regard. There are
many aspect that is responsible for the success and failure of this theory.The most
important factors that have led to their decline are –
 Reduction in the total cost advantages in case of acquiring funds – The
people started to look for opportunities that would provide them with higher
interest rates rather than investing in banks and for the same they pooled out
their money from banks and started investing themselves. Also, there were a
lot of changes in the banking regulations that was responsible for such
changes and banks underwent a transformation, because of which many
users switched to different areas (Sikka & Willmott, 2010).
 Reduction in income advantage in using the funds- The growth in the
information technologies and development of multiple channels made it
easier for the banks to directly deploy the funds to the public, this reduced
the cost that they needed to pay off the intermediaries. It also favored the
process of securitization, where in they converted the liquid assets into
marketable securities, so in a way they reduced the bridges between the
people who wanted to invest their money and the ones who wanted to
borrow the money. Not only banks but many financial institutions were now
able to analyze the loan position, take decisions on where to invest their
money and which fields to follow and thus the banks lost their advantages.
So overall it can be seen that there were several factors that played an
important role in assessing the growth of the intermediaries and fall of the
same. Previously they had the knowledge which made them different from
others but as time passed and growth in different sectors occurs, people
started taking risks themselves, so banks were no more objectified as risk
reducing and managing bodies. So, all these led to a decrease in the overall
importance of banks (Vieira, et al., 2017).
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It can be said that as time will progress this gap between the borrowers and the
lenders will get narrowed and with advent in technology it would become easier for
people to invest their funds in different portfolios. The future of financial
intermediators, is not that dark given the fact that the amount of knowledge that
they possess in this filed is immense, but later as time will progress and days will
change and people will become more informative, they will prefer rotating their own
money rather than taking anybody’s help in the same. The financial intermediaries
should try to make sure that they upgrade their services and try to better of
themselves so that people feel good to avail their services and make the best of it.
Question 2
Introduction
Recently I got an opportunity to be appointed as a banker in one of the
biggest private banking corporations in Australia, The ANZ (Australia and New
Zealand banking group). The bank was founded in 1835 and have been in
operation since then, the bank has more than 46, 000 staff working for it and it is
headquarter in Sydney. The bank provides many banking and financial services to
corporates, retail sector, high net worth, small business groups, commercial,
institutional companies etc. It has been operating in more than 30 markets around
the world and has been said to generate a lot of revenue through its operations in
the banking sector. The total reported net assets of the bank in 2016 was US$726
billion, with a total income of US$4,106 million.
Analysis
In the private banking sector, the bank provides many services to its
customers. Private banking basically refers to banking and financial services that
banks provides to high net worth individuals or the ones that have huge amount of
investments to be done. It refers to providing services to the customers on a more
private and a personal basis, and there is more individual approach that is followed
in the same. It is a subset of wealth management and a large part of many banking
services that top banks provides to its customers. In case of ANZ there are few
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specific services that the bank provides to its high net worth customers through its
private banking department like –
Providing Proprietary Products – The bank provides such products to the customer
to make sure that competitors do not sell them similar products, these are
customized as per the needs of the people and helps in protecting the information
of these high net worth individuals (Dichev, 2017). Privacy is very important for
them and they are often subjected to many law suits given the kind of investments
that they do, hence keeping it confidential is very important for them. So ANZ
basically modifies the product as per the need of the individual and one to one
service is provided to them, so that more personal connect is developed with the
customer and their needs and demands can be easily acknowledged. So they
appoint private bankers that can handle the need of these high net worth customers
on one to one basis.
Discounted Services – Since these individuals brings in large amount of business for
the banks they often provide discounted services to the customers. Many services
like wealth management, tax calculation, tax management etc. are provided at a
lower cost than usual (White, et al., 2018).This is done basically to attract the
customers and keep them in. Many clients that deals in import and export will get
significant foreign exchange discount. So, for the customers it is very much
economical if they invest their funds through these private banking services. People
who are involved in real estate also get a lot of benefits as the bank process their
transaction easily in a less time and that helps them to save a lot of transaction cost
(Chiapello, 2017).
Consultancy Services – The bank provides consultancy services for individuals that
have high net worth, so that they get clear idea on how they can manage their
funds effectively and these consultancy services are provided on a more personal
basis, where one to one interactions occurs, consultants are given few customers
that they need to manage and they have all the details in regards to that
customers. In cases where the customers faces any issues they can directly contact
the consultant. In this way a personal relationship is developed and services that
are offered are more on an individual basis. The bank provides consultancy services
in many sectors like wealth management, risk aversion, cost anlsysis etc.
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Portfolio Management – These individuals have large amount of assets to manage
and that belongs to diversified sectors, so they avail services of such banks to help
them in the process of portfolio structuring and management. Banks provide such
services at a moderate fee and that is generally linked to the total amount of
portfolio. These portfolios are kept under continuous scrutiny and timely reviews
happens to find any discrepancies. Most of the management is done by investment
specialists who can draw upon the portfolio on a group level and provide accurate
advices to the individuals.
Risk Management – Fund generation and investment both has certain risk element
that is involved in it. Risk management is a part of portfolio management, where
the banks helps the clients in understanding the uncertainties that is involved with
funds and investments and provide them with the necessary help in management of
the same. This is the most important function of banks and they need to make sure
that the level of risk involved in the portfolios is as less as possible. This is also
important for individual securities that the level of risk involved must be as low as
possible.
Wealth Management – The banks need to provide necessary service for
management of the wealth and since these high net worth people have too much
wealth, they seek the services to these banks to provide them with effective
solutions on how they can channelize their resources into more meaningful
marketable securities. Bank employs experts who can handle the wealth and
provide necessary advice to the people on how they can manage their wealth and
generate ample amount of profit that would help in keeping the business running.
Generation of funds- the main aim of investment is to generate revenue and by
using the services of the banks the main aim would be to generate as much funds
as possible. Thus, the aim of the bank should to invest the money of the individuals
in such a manner that it would generate them maximum revenue. It can be done
through effective market research and taking help from experts so that flow of fund
is on a consistent basis and in times when changes are required the flow of funds
must be changed (Lane & Ferretti, 2017).
Few Innovative strategies that would help in attracting new clients for the business:
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Event marketing – Most of the banks depend on traditional methods of client
acquisition that includes referrals, as per which customers who are satisfied with
the services of the bank can refer them to other people. But this is a very basic
method of customer acquisition and bank can now try new methods like event
marketing, in which the bank can arrange for events at financial exhibitions and
banking exhibitions and can put forward their policies and services and can also
give discount to attract customers. People who come at these events will get
attracted if the banking projections are good enough (Grundy, et al., 2017).
Social media – Nowadays there has been huge growth in the use of social media
platforms for marketing and advertisements. Companies all around the world are
making use of these social media for brand promotion. Banks can also make use of
the same so that they can attract more customers, they can promote their business
on internet and people can avail their services through them. The reach of internet
is huge and it will be a great way of brand promotion and development.
Giving discounted services – In this competitive world, people are always looking for
options that can help them in getting the best services at as less cost as possible.
So in that case if the bank provides its premium services at a lower cost, customers
will automatically get attracted and that will help in increasing the overall business
of the company (Delone & Mclean, 2004). All this will help the bank in getting more
customers rather than the just traditional referral people who avail the banking
services through networks.
Conclusion
From the above analysis it can be said that there are several ways by which the
business can be made better and more clients can be attracted by using new
technologies and following new trends. All these help the banking sector in getting
more clients.
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References
Abbott, M. & Kantor, A., 2017. Fair Value Measurement and Mandated Accounting
Changes: The Case of the Victorian Rail Track Corporation. Australian accounting
Review.
Alexander, F., 2016. The Changing Face of Accountability. The Journal of Higher
Education, 71(4), pp. 411-431.
Anon., 2017. Explaining auditors’ propensity to issue going-concern opinions in
Australia after the global financial crisis. Accunting and Finance, pp.
Carson,E;Fargher,N;Zhang,Y;.
Chariri, A., 2017. FINANCIAL REPORTING PRACTICE AS A RITUAL: UNDERSTANDING
ACCOUNTING WITHIN INSTITUTIONAL FRAMEWORK. Journal of Economics, Business
and Accountancy, 14(1).
Chiapello, E., 2017. Critical accounting research and neoliberalism. Critical
Perspectives on Accounting, Volume 43, pp. 47-64.
Chron, 2017. five-common-features-internal-control-system-business. [Online]
Available at: http://smallbusiness.chron.com/five-common-features-internal-control-
system-business-430.html
Delone, W. & Mclean, E., 2004. Measuring e-Commerce Success: Applying the
DeLone & McLean Information Systems Success Model. International Journal of
Electronic Commerce, 9(1).
Dichev, I., 2017. On the conceptual foundations of financial reporting. Accounting
and Business Research, 47(6), pp. 617-632.
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