Zbaraz Bank Ltd. (Zbaraz) lends money to borrowers around the world. The major areas of concern to management and stakeholders are what's called the loan loss provision (which is equivalent to the bad debt expense for non-banking companies) and the allowance for loan losses (which is equivalent to the allowance for uncollectible accounts for non-banking companies). You are provided with the following information about Zbaraz loan situation:

a. Calculate the loan loss provision for Zbaraz for 2015, 2016, and 2017.
b. Examine the information about Zbaraz’s loan losses and the loan loss provision you calculated in (a). Interpret and discuss any trends that you see in the data.
c. At the end of 2017, Zbaraz had a total of $1,002,666,000 of loans in its portfolio and reported on its balance sheet. The loan portfolio was broken down as follows:
Consumer loans.............. $ 444,654,000
Canadian commercial loans....... 386,820,000
International commercial loans...... 171,192,000
Total ................. $1,002,666,000
Which of the categories of loans is the most risky? Explain. Given the risk of that category, why does Zbaraz lend to this group?
d. The portfolio of loans could be further broken down in countries loaned to, industries, purpose of the consumer loan (car loan, home renovation loan, etc.), and so on. What additional information would you want about Zbaraz’s loan portfolio as a stakeholder in the bank? Explain your answer.

  • CreatedFebruary 26, 2015
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