Question 3. Capital management The table below is based on the annual financial statements of four...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Question 3. Capital management The table below is based on the annual financial statements of four major banks in Australia, ANZ Bank (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac Banking Corporation (WBC). 3.1. 3.2. 3.3. Common Equity Tier 1 (%) Tier 1 Capital (%) Tier 2 Capital (%) Total Regulatory Capital ratio (%) FY21 12.3 14.3 4.1 18.4 ANZ FY20 11.3 13.2 3.3 16.4 FY21 13.1 15.7 4.1 19.8 CBA FY20 11.6 13.9 3.6 17.5 FY21 13.0 14.6 4.3 18.9 NAB FY20 11.5 13.2 3.4 16.6 FY21 12.3 14.7 4.2 18.9 WBC FY20 11.1 13.2 3.2 16.4 Based on your own research, why have some major Australian banks been engaging in share buybacks in the past year? Your answer should explain the meaning of share buybacks and outline their rationale in terms of capital adequacy and bank profitability. [5 marks] Visit the websites of these banks and access the 2021 financial statements for each bank. Report the dollar values of the following for FY21: Common Equity Tier 1 (%) Tier 1 Capital (%) Tier 2 Capital (%) Looking at the figures you have provided and the table above, rank the banks from 1 (most likely) to 4 (least likely) in terms of your assessment of the banks being in a position to engage in a share buy-bank in 2022. Justify your reasoning based on your understanding of Basel III capital adequacy requirements. [5 marks] You are having a discussion with your classmates and one of them makes the following observation. "In the corporate finance studies we learnt that credit risk is measured by the leverage ratio. Why then do we bother in this course to use risk-adjusted capital measure instead of the leverage ratio?" Respond, fully justifying your answer with example(s). [5 marks] Question 3. Capital management The table below is based on the annual financial statements of four major banks in Australia, ANZ Bank (ANZ), Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac Banking Corporation (WBC). 3.1. 3.2. 3.3. Common Equity Tier 1 (%) Tier 1 Capital (%) Tier 2 Capital (%) Total Regulatory Capital ratio (%) FY21 12.3 14.3 4.1 18.4 ANZ FY20 11.3 13.2 3.3 16.4 FY21 13.1 15.7 4.1 19.8 CBA FY20 11.6 13.9 3.6 17.5 FY21 13.0 14.6 4.3 18.9 NAB FY20 11.5 13.2 3.4 16.6 FY21 12.3 14.7 4.2 18.9 WBC FY20 11.1 13.2 3.2 16.4 Based on your own research, why have some major Australian banks been engaging in share buybacks in the past year? Your answer should explain the meaning of share buybacks and outline their rationale in terms of capital adequacy and bank profitability. [5 marks] Visit the websites of these banks and access the 2021 financial statements for each bank. Report the dollar values of the following for FY21: Common Equity Tier 1 (%) Tier 1 Capital (%) Tier 2 Capital (%) Looking at the figures you have provided and the table above, rank the banks from 1 (most likely) to 4 (least likely) in terms of your assessment of the banks being in a position to engage in a share buy-bank in 2022. Justify your reasoning based on your understanding of Basel III capital adequacy requirements. [5 marks] You are having a discussion with your classmates and one of them makes the following observation. "In the corporate finance studies we learnt that credit risk is measured by the leverage ratio. Why then do we bother in this course to use risk-adjusted capital measure instead of the leverage ratio?" Respond, fully justifying your answer with example(s). [5 marks]
Expert Answer:
Related Book For
Auditing and Assurance services an integrated approach
ISBN: 978-0134065823
16th edition
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Posted Date:
Students also viewed these finance questions
-
According to an online source, the average shower in a country lasts 8.6 minutes. Assume that this is correct and assume the standard deviation of 3 minutes. Complete parts (a) through (c) below. a....
-
Essay Writing: DEtailed answer Watch the Canadian documentary The Corporation (2003). What kind of view does the documentary present of modern corporations and business practices? Was it a fair...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Supply the missing information in the following table for Greenwood Company: Sales.................................................................................... ?...
-
Prove that the voltage potential at node i due to a unit current source at node j is the same as the voltage potential at node j due to a unit current source at node i. Can you give a physical...
-
During a recent project update meeting, a functional manager requested a new feature be added to the current project. This feature request was rejected during the Planning performance domain. You...
-
Smith \& Sons reports interest expense of \(\$ 90,000\) on its income statement. The beginning and ending balances for interest payable reported on its balance sheet are \(\$ 15,000\) and \(\$...
-
Multiple-Choice questions: a. A companys current ratio is 2.2 to 1 and quick (acid-test) ratio is 1.0 to 1 at the beginning of the year. At the end of the year, the company has a current ratio of 2.5...
-
Could you explain the underlined "bias or motive" exception to the insurance evidence exclusion, using an example? Exception: Evidence of liability insurance is not admissible to prove fault or a...
-
Suppose Tritex Manufacturing lent $225,000 to Invivo Pharma. On December 31, 2015, Invivo paid back the $225,000 and also paid $10,000 interest to Tritex. Under U.S.GAAP, what would be the impact of...
-
An aspirin dose of 7.0mg per kg of body weight has beenprescribed to reduce the fever of an infant weighing 9.5 lbs. Howmany milligrams of aspirin should be administered. ( 1 kg = 2.2lbs)
-
Give the equation of the line with the following slope m = 5/7 and y-intercept (0,6)
-
Gilbert owns 255 shares of Pine Corporation common stock, purchased during the prior year: 125 shares on July 5, for $22,000; and 130 shares on October 15, for $26,000. When Gilbert sells 60 shares...
-
Laura invested $ 6 5 0 at the end of every month in an investment fund that was earning interest at a rate of 4 . 4 4 % compounded monthly. She stopped making regular deposits at the end of 5 years...
-
Sales for Furthur Bus Company are shown in the table below. wwwwww Sales November December January February March $9,500 $10,000 $11,000 $12,100 $13,310 All sales are for credit, with 80% collected...
-
After viewing the video Hacking the Supply Chain , apply some of the concepts Pete Russell describes regarding merchandise planning as they relate to a specific retailer that you have recently...
-
Following is the current balance sheet for a local partnership of doctors: The following questions represent independent situations: a. E is going to invest enough money in this partnership to...
-
What types of disciplinary action may be taken if a member has violated the AICPA Code of Professional Conduct?
-
Use AICPA (www.aicpa.org) and PCAOB (pcaobus.org) auditing standards to answer the following questions about audit evidence and audit documentation. Required a. According to PCAOB Auditing Standard 3...
-
Identify the traditionally segregated duties in IT systems.
-
Draw a project balance chart for Problem 17. Data From Problem 17: 17. Your company is looking at purchasing a dump truck at a cost of $65,000. The truck would have a useful life of five years. At...
-
Canfield Manufacturing, Inc., operates a plant that produces its own regionally marketed Spicy Steak Sauce. The sauce is produced in two processes, blending and bottling. In the Blending Department,...
-
Draw a project balance chart for Problem 18. Data From Problem 18: 18. Your company is looking at purchasing a loader at a cost of $125,000. The loader would have a useful life of
Study smarter with the SolutionInn App