This page is reserved for your bank's Income Stement. Please see directions for Question 4. BHC...
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This page is reserved for your bank's Income Stement. Please see directions for Question 4. BHC NAME: US Bank National Association BHC Mineapolis Minesota BHC ID#: 1119794 1 Number of institutions reporting Income and Expense 2 Total interest income 3 Total interest expense 4 Net interest income 5 Provision for credit losses * 6 Total noninterest income 7 Fiduciary activities 8 Service charges on deposit accounts 9 Trading account gains & fees 10 Additional noninterest income 11 Total noninterest expense 12 Salaries and employee benefits 13 Premises and equipment expense 14 Additional noninterest expense 15 Pre-tax net operating income 16 Securities gains (losses) 17 Applicable income taxes 18 Income before extraordinary items 19 Discontinued operations (Extraordinary gains - net)** 20 Net income attributable to bank and noncontrolling interests 21 Net income attributable to noncontrolling interests 22 Net income attributable to bank 23 Net charge-offs 24 Cash dividends 25 Sale, conversion, retirement of capital stock, net 26 Net operating income 31-Dec-19 31-Dec-06 000s USD % avg assets 000s USD % avg assets 1 1 17,374,890 4,110,884 13,264,006 1,500,502 9,428,914 1,372,163 1,338,670 163,743 6,554,338 12,510,932 7,349,093 1,108,359 4,053,480 8,681,486 73,214 1,741,217 7,013,483 0 7,013,483 37,774 6,975,709 1,453,932 7,100,000 6,954,912 3.68 % 12,142,751 0.87% 5,376,288 6,766,463 2.81% 0.32% 510,446 1.99% 6,332,169 0.29% 1,057,944 1,439,065 0.28% 0.03% 104,007 1.39% 3,731,153 2.65% 6,028,503 1.55% 2,815,966 0.23% 653,552 0.86% 2,558,985 1.84% 6,559,683 0.02% 10,417 0.37% 2,111,887 1.48% 4,458,213 0.00% 1.48% N/A 0.01% N/A 1.48% 4,458,213 0.31% 508,758 1.50% 3,915,000 0 1.47% 4,451,129 N/A N/A 5.71% 2.53% 3.18% 0.24% 2.98% 50.00% 68.00% 0.05% 1.75% 2.83% 1.32% 0.31% 1.20% 3.08% 0.00% 0.99% 2.09% 0.00% 2.09% 0.24% 1.84% 2.09% On March 3, 2020, the Board of Governors of the Federal Reserve System unexpectedly decided to cut interest rates (the Federal Funds Rate) by 50 basis points to a target range of 1-1.25%. At the same time, the stock price of many U.S. banks fell. For example, between February 28, 2020 and March 6, 2020, the stock price of Morgan Stanley (NYSE:MS) fell by 7% and the stock price of Bank of America (NYSE RAC) fell by 10%. Here are the ticker symbols for our BHCs: Large Regional US Bancorp Truist Ticker NYSE-USB NYSE TEC Small Regional First Busey. First Midwest Ticker NASDAQ BUSE NASDAQ EMBI a. [4] What was the stock price reaction of your bank and its peer bank in % terms? Do this for the February 28, 2020, to March 6, 2020, time frame¹. b. [4] What might these stock price reactions tell us about the relative interest rate risk exposures of your bank and its peer bank compared to each other? c. [4] An alternative explanation is that this surprise rate cut provided a signal about the economic impacts of COVID-19. What could these stock price reactions tell us about one other risk exposure of your bank as compared with its peer bank? Question 9 Based on the most recent end-of-year "Performance and Condition Ratios" data from the FDIC website, answer the following: a. [4] Provide your bank's return-on-equity (ROE) and return-on-assets (ROA). b. [2] What is the connection between these two ratios? Write down a formula and briefly explain the connection and its importance. c. [4] Provide ROE and ROA (a) for your peer bank. d. [2] Which of these two banks was more profitable in the past year? e. [6] Which bank's stock would you buy (ie... your bank or its peer)? Explain why. f. [8] What two additional pieces of information would you like before making your investment decision? Please explain. This page is reserved for your bank's Income Stement. Please see directions for Question 4. BHC NAME: US Bank National Association BHC Mineapolis Minesota BHC ID#: 1119794 1 Number of institutions reporting Income and Expense 2 Total interest income 3 Total interest expense 4 Net interest income 5 Provision for credit losses * 6 Total noninterest income 7 Fiduciary activities 8 Service charges on deposit accounts 9 Trading account gains & fees 10 Additional noninterest income 11 Total noninterest expense 12 Salaries and employee benefits 13 Premises and equipment expense 14 Additional noninterest expense 15 Pre-tax net operating income 16 Securities gains (losses) 17 Applicable income taxes 18 Income before extraordinary items 19 Discontinued operations (Extraordinary gains - net)** 20 Net income attributable to bank and noncontrolling interests 21 Net income attributable to noncontrolling interests 22 Net income attributable to bank 23 Net charge-offs 24 Cash dividends 25 Sale, conversion, retirement of capital stock, net 26 Net operating income 31-Dec-19 31-Dec-06 000s USD % avg assets 000s USD % avg assets 1 1 17,374,890 4,110,884 13,264,006 1,500,502 9,428,914 1,372,163 1,338,670 163,743 6,554,338 12,510,932 7,349,093 1,108,359 4,053,480 8,681,486 73,214 1,741,217 7,013,483 0 7,013,483 37,774 6,975,709 1,453,932 7,100,000 6,954,912 3.68 % 12,142,751 0.87% 5,376,288 6,766,463 2.81% 0.32% 510,446 1.99% 6,332,169 0.29% 1,057,944 1,439,065 0.28% 0.03% 104,007 1.39% 3,731,153 2.65% 6,028,503 1.55% 2,815,966 0.23% 653,552 0.86% 2,558,985 1.84% 6,559,683 0.02% 10,417 0.37% 2,111,887 1.48% 4,458,213 0.00% 1.48% N/A 0.01% N/A 1.48% 4,458,213 0.31% 508,758 1.50% 3,915,000 0 1.47% 4,451,129 N/A N/A 5.71% 2.53% 3.18% 0.24% 2.98% 50.00% 68.00% 0.05% 1.75% 2.83% 1.32% 0.31% 1.20% 3.08% 0.00% 0.99% 2.09% 0.00% 2.09% 0.24% 1.84% 2.09% On March 3, 2020, the Board of Governors of the Federal Reserve System unexpectedly decided to cut interest rates (the Federal Funds Rate) by 50 basis points to a target range of 1-1.25%. At the same time, the stock price of many U.S. banks fell. For example, between February 28, 2020 and March 6, 2020, the stock price of Morgan Stanley (NYSE:MS) fell by 7% and the stock price of Bank of America (NYSE RAC) fell by 10%. Here are the ticker symbols for our BHCs: Large Regional US Bancorp Truist Ticker NYSE-USB NYSE TEC Small Regional First Busey. First Midwest Ticker NASDAQ BUSE NASDAQ EMBI a. [4] What was the stock price reaction of your bank and its peer bank in % terms? Do this for the February 28, 2020, to March 6, 2020, time frame¹. b. [4] What might these stock price reactions tell us about the relative interest rate risk exposures of your bank and its peer bank compared to each other? c. [4] An alternative explanation is that this surprise rate cut provided a signal about the economic impacts of COVID-19. What could these stock price reactions tell us about one other risk exposure of your bank as compared with its peer bank? Question 9 Based on the most recent end-of-year "Performance and Condition Ratios" data from the FDIC website, answer the following: a. [4] Provide your bank's return-on-equity (ROE) and return-on-assets (ROA). b. [2] What is the connection between these two ratios? Write down a formula and briefly explain the connection and its importance. c. [4] Provide ROE and ROA (a) for your peer bank. d. [2] Which of these two banks was more profitable in the past year? e. [6] Which bank's stock would you buy (ie... your bank or its peer)? Explain why. f. [8] What two additional pieces of information would you like before making your investment decision? Please explain.
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Question 4 Stock Price Reaction and Interest Rate Risk a Stock Price Reaction US Bancorp USB 288 from 5547 to 5382 Truist TFC 357 from 4734 to 4558 b ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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