BF 101 Major Assignment 2013- Westpac

7/27/2019 BF 101 Major Assignment 2013- Westpac

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3. (i) Based on your study and analysis of their annual financial reports, identify and analyze the main

components of their balance sheet and income statements.

WESTPAC:

WESTPAC MAIN COMPONENTS OF BALANCE SHEET ($000)

ASSETS 2010 2011 2012

Total Assets 1280133 1407119 1437111

Loans (including advances to customers and similar facilities 896019 929544 1016491

% Of Total Assets (rounded off) 70% 66% 71%

Balance with the Reserve Bank of Fiji 219197 356504 305316

% Of Total Assets (rounded off) 17% 25% 21%

LIABILITIES 2010 2011 2012

Total Liabilities 1088639 1239145 1287105

Deposits and Borrowings 626976 852128 938035

% Of Total Liabilities (rounded off) 58% 69% 73%

Certificates Of Deposits 372089 334131 298037

% Of Total Liabilities (rounded off) 34% 27% 23%

EQUITY CAPITAL 2010 2011 2012

Total Equity Capital 191494 167974 150006

Retained Earnings 171205 148453 127294

% Of Total Equity Capital (rounded off) 89% 88% 85%

From the table above, we have broken down Westpacs Balance Sheet into the three main

sections (Assets, Liabilities and Equity Capital), in which we have identified and analyzed the

main components under each sections.

Assets: (Uses of Funds)

For the past three years, we have identified that the main components of their assets were

Loans, which included advances to customers and similar facilities, and Balance with the

Reserve Bank of Fiji. (Highlighted in yellow)

Loans made up an average of 69% of the Total Assets and Balance with the Reserve Bank of Fiji,

an average of 21% for the last three years. The remaining 10% were allocated to:

- Cash and Liquid Assets


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- Accrued receivables and other assets- Investment Securities- Receivable due from other financial institutions- Fixed assets

Liabilities: (Sources of Funds)

Main components of their liabilities section were Deposits and Borrowings and Certificates of

Deposits. (Highlighted in Blue)

Deposits and Borrowings made up an average of 67% of Total Liabilities for the last three years

and Certificates of Deposits, on the other hand, an average of 28%. The remaining 5% were

mainly from:

- Payables due to other financial institutions and- Other borrowed funds and liabilities.

Equity Capital:

Equity Capital for the bank was mainly from Retained Earnings which accounted for about 90%

of the Equity Section. (Highlighted in Green). Issued and Paid Up or Assigned Capital was

constant at 7% for the last three years and the remaining 3% was on General Reserves for credit

losses.

WESTPAC MAIN COMPONENTS OF INCOME STATEMENTS ($000)

INCOME 2010 2011 2012Interest Income 73363 71879 68463

Fees & Commission Revenue 18695 19153 21295

EXPENSE 2010 2011 2012

Other Operating Expense 39846 47315 47845

Interest Expense 31704 24308 15174

Bad & Doubtful Debts 8056 1470 4374

Similar to the analysis of their Balance Sheet, we have identified the main components of theirIncome Statement based on 2 sections: Income and Expense.

Income:

There were two main components under their Income section, and they were Interest Income

and Fees and Commission Revenue. (Highlighted in Purple)


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Expenses:

These were mainly made up of Other Operating Expenses, Interest Expense and Bad & Doubtful

Debts. (Highlighted in Blue)

(ii) Comment on the nature of the changes in these items over the last three years.

WESTPAC MAIN COMPONENTS OF BALANCE SHEET ( Changes over the last three years) ($000)

ASSETS 2009 2010 2011 201

Total Assets 1228975 1280133 1407119 143711

Loans (including advances to customers and similar facilities 921003 896019 929544 101649

Asset Loan Growth (common-sized ratio) -3% 4% 9%

Balance with the Reserve Bank of Fiji 176321 219197 356504 30531

Balance with RBF Growth 24% 63% -14%

Total Asset Growth 4.16% 9.92% 2.13%LIABILITIES 2009 2010 2011 201

Total Liabilities 1065780 1088639 1239145 128710

Deposits and Borrowings 623623 626976 852128 93803

D & B Growth 1% 36% 10%

Certificates Of Deposits 353789 372089 334131 29803

COD Growth 5% -10% -11%

Total Liability Growth 2% 14% 4%

EQUITY CAPITAL 2009 2010 2011 201

Total Equity Capital 163195 191494 167974 15000

Retained Earnings 142877 171205 148453 12729

Retained Earnings Growth 20% -13% -14%

Total Equity Growth 17% -12% -11%

Based on the table above are the analysis of the main changes in Westpacs Assets, Liabilities

and Equities over the last three years.

Using common-sized ratio to measure Asset Growth, we saw that from 2009 to 2010, total

assets has increased by 4.12% and from 2010 to 2011 it increased further by 9.92%. However,

there was a decline in total assets from 2011 to 2012 by 2.13%. This resulted from a decrease in

the amount of balance with the Reserve Bank of Fiji. (Figures highlighted in Blue)

For the Total Liabilities of the bank, we saw an increase from 2009 to 2010 by 2% as a result of

more borrowings and deposit accounts by customers. From 2010 to 2011 it had increased

significantly by 14% and there was a decrease from 2011 to 2012 by 4%.


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Equity grew by 17% from 2009 to 2010 however; it continued to decrease in 2011 and 2012 by

12% and 11% respectively. This resulted from the decrease in the Retained Earnings amount for

the two years.

Profitability

Westpac Bank's Operations in Fiji 2009 2010 2011 2012

Net Profit/(Loss) After Tax ($'000) 26518 36328 31177 37245

As % of Avg. Total Assets 2.23% 2.90% 2.34% 2.62%

Generated from the table above is the profitability of the bank for the last three years. It has

been fluctuating from 2010 to 2012 that is 2.9% profit in 2010 to 2.34% in 2011 and increases

again to 2.62% in 2012.

The table below shows the Capital Adequacy for Westpac Bank for the last three years.

Capital Adequacy

Westpac Bank's Operations in Fiji 2009 2010 2011 2012

Total Capital ($'000) 152624 183972 159749 143059

Capital Adequacy Ratio 15.98% 20.85% 18.37% 14.95%

Capital Adequacy indicates the sufficient level of Capital that Westpac Bank has to absorb all

losses and to continue as a going concern. As you can see from the table above, the Capital

Adequacy Ratio from 2009 to 2010 has increased substantially from 16% to 21%. This is a good

sign because the bank has no problem in meeting any loss incurred during the period. However,

the level of capital adequacy decreased in 2011 and 2012 from 18% to 15%. Although there is

still adequate capital available, the bank will need to consider maintaining the level of capital

adequacy at a certain level.

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BF 101 Major Assignment 2013- Westpac