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Roe Model For Anz Bank And Racv

4620 words - 18 pages

Executive SummaryThe purpose of this report is to provide an analysis of the profitability of ANZ Bank and RACV using ROE Model, then compare the profitability of both firms which used ratios of ROE, leverage multiplier, asset utilization, net margin and net interest margin, and give some recommendations for the firm that is underperforming.The ANZ Bank is an Authorised Deposit-Taking Institution while RACV is a non-bank financial institution. This means they are in different industries. Therefore, there are some key factors that make them different in other, especially in their profitability. One of the key factors is the leverage multiplier which will be discussed furthermore in this report. Other issues that will be discussed are the risks that most of banks have taken, especially in this case is for ANZ Bank. Some risks that ANZ Bank has taken are liquidity risk, interest-rate risk, credit risk and capital risk.This report will also explain that RACV has performed better than ANZ Bank during year 2004 although it still has lower ROE than ANZ's ROE. Hence, it is assumed that RACV is underperforming. To increase performing RACV, there are some recommendations such as restructuring, merging, or hiring someone professional.1. Introduction1.1 PurposeGenerally, the purpose of this report is to analyze the profitability of bank and non-bank financial institution. Particularly, this report will discuss ANZ Bank's and RACV's profitability to be compared each other; also, discuss the risks that ANZ Bank has taken.1.2 BackgroundBank as a financial institution must be different from a non-bank financial institution in case of using their capital to compete in raising equity capital in the market. Hence, bank has its own strategy to compete while a non-bank financial institution has its own strategy as well.1.3 ScopeBecause the strategy that is used by a bank and a non-bank financial institution can be seen from many perspectives, this report will only discuss the differences of profitability of bank and non-bank financial institution and how they compete each other to raise equity capital in the market.1.4 MethodologyTypes of data that were collected for this report include some textbooks/ hard copy, journal articles and some information from internet.1.5 AssumptionThis report assumed that all data that have been collected were true at the time of this report being written or at the time when the sources of data being written.1.6 PlanThis report plans to construct the Return on Equity Model for ANZ Bank and RACV then provide the profitability of both firms; explain key factors that cause profitability to differ from one institution to other; discuss the risks that has been taken by ANZ Bank. Finally, choose the institution that has competitive strength in terms of raising equity capital in market economy and also provide recommendations for underperforming firm.2. Return on Equity Model and Profitability AnalysisFirst of all, in conducting the analysis,...

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