Comparative Study Of Bank Management And Financial Services

Background

Discuss about the Bank Management and Financial Services for Comparative Study. 

Managing the financial performance of an organization is quote crucial as it helped the stakeholders and the other parties of the company to make better decision about the performance of the company and compare among 2 or more companies to identify the performance of the company. Financial performance of an organization could be evaluated on the basis of the various financial items and the annual report of the company (Weston and Brigham, 2015).

United overseas bank limited is a Singapore bank which is listed in SGX. The company offers the financial services and investment banking services. The bank has been founded as United Chinese bank is 1935. The bank is among the third largest bank in the area of the south east (Home, 2018). The main services of the bank include corporate banking services, private banking services, personal financial services, management services, corporate finance etc.

Further, OCBC bank is also a public listen bank in Singapore stock exchange. The main products of the company includes corporate banking services, private banking services, personal financial services, management services, corporate finance etc. the main area of business of the bank is East Asia and south east Asia (Home, 2018). The main mission of the company is to grab more market to enhance the market base and revenues of the bank.

Major shareholders explain about those investors who has invested into the equity shares of the company and currently they are holding huge number of shares of the company. In case of UNITED OVERSEAS BANK LTD, it has been recognized that the major shareholder of the bank is Citibank Nominees Singapore pte limited which is holding around 18.72% in total stock of the company. The major share holder of the company are Citibank Nominees Singapore Pte Ltd and DBS Nominees (Private) Limited who are holding more than 15% in the total shares of the company.

Further, in case of OCBC, it has been recognized that the major shareholder of the bank is Citibank Nominees Singapore pte limited which is holding around 15.93% in total stock of the company. The major share holder of the company are Citibank Nominees Singapore Pte Ltd, Selat Pte Limited and DBS Nominees pte Limited who are holding more than 10% shares in the total shares of the company. 

The shareholder report of both the comapny explains that the performance and the ownership governance structure of the company is quite better and explains about better position of the company.

Major Shareholders

The annual report (2017) of UNITED OVERSEAS BANK LTD explains that the net interest income of the company is $ 5528 million as well as the non-interest income of the company is $ 1,162 million. The interest revenue and non interest revenue of the company has been improved from 11% and 2%. It explains about better position and performance of the company.

Further, the annual report (2017) of OVERSEA-CHINESE BANKING CORP LTD explains that the net interest income of the company is $ 5,423 million as well as the non-interest income of the company is $ 4,213 million. The interest revenue and non interest revenue of the company has been improved from 7% and 23%. It explains about better position and performance of the company.

In case of the performance of both the banks, it has been evaluated that the performance of both the banks have been improved as well as the revenue position has also been improved. 

Profitability ratio measures the total earnings after all the expenses of the company which has been generated by the company in the current year on the basis of the total available resources and the total revenue of the company (Weaver, Weston and Weaver, 2001). The profitability ratio of both the comapny are as follows:

Return on equity measures the total net profit of the company on the basis of the total equity of the company. It explains that the net profit of the company is $ 3288 million and total equity of the company is $ 36,850 million. It explains that the return on equity of UOB is 8.92%. 

Further, the net profit of the company is $ 4,103 million and total equity of the company is $ 39,009 million. It explains that the return on equity of OCBC is 10.52%.

It explains that the performance of OCBC is better than UOB. 

Return on assets measures the total net profit of the company on the basis of the total assets of the company. The below table explains that the return on assets of UOB and OCBC is 0.9% and 0.9%. It explains that the profitability position of both the banks is quite similar.

Further, net profit margin measures the total net profit of the company on the basis of the total revenues of the company. The below table explains that the net profit margin of UOB and OCBC is 36.22% and 45%. It explains that the profitability position of OCBC is way better than UOB (Higgins, 2012).

Bank’s Net Interest Income and Non-Interest Income

Credit risk ratio is calculated on the basis of the bank’s overall ability to repay the loan. It measures the total special allowances and non performing loan amount of the company on the basis of the total loan of the company (Lord, 2007). The credit risk ratio of both the comapny are as follows:

Non performing loan rate ratio explains that the risk factor of OCBC is higher than the UOB as the debtors of the company are not paying the debt amount to OCBC on time and it is enhancing the credit risk of the bank.

Specific allowance / average loan ratio explains that the risk factor of OCBC is lower than the UOB as the allowances and provisions of the company are quite higher in context with the specific allowances of the company.

(Hillier, Grinblatt and Titman, 2011)

It explains that the credit risk of OCBC is higher and the bank is required to prepare few new policies to manage the credit risk.

Liquidity risk ratio is calculated on the basis of the loan amount, liabilities and the customer’s deposit of the company to measure the liquid ability of the bank. It measures that whether the bank would be able to meet all the short term debt obligations (Lumby and Jones,  2007). The liquidity risk ratio of both the comapny are as follows:

Loan to deposit ratio measures about the total deposit and the loan amount of the company to measure the performance of the company. It explains that the liquidity position of UOB is better.

Further, the customer’s deposit and total liabilities of the comapny has been measured to identify the short term debt obligations off the bank and it has been found that the performance of UOB is better.

It explains that the liquidity risk position of UOB is better than OCBC and explains that the UOB is managing the liquidity position in better way.

Other position of both the banks has been evaluated on the basis of the other financial items of both the banks.

Efficiency ratio explains that the efficiency position of OCBC is better than UOB. Below table explains about all the financial items and the calculations. The average receivables of OCBC are higher than the UOB which has impacted on the total efficiency position of the company (Ward, 2012).

Leverage ratio explains that the efficiency position of OCBC is better than UOB. It briefs that the total debt of the OCBC is quite higher than the UOB as well as the equity amount is also higher which leads to higher leverage ratio of OCBC.

On the basis of the shareholder evaluation, income evaluation and various ratio analysis on both the banks, UOB and OCBC, it has been found that the financial policies and strategies of both the banks are enough strong. The revenues and the shareholder evaluation explain that performance of both the bank are strong, the revenue has been improved as well as the ownership governance structure of the company is also better.  

The profitability ratio analysis explains that the performance of OCBC is better. The bank has enjoyed more profits than the UOB in 2017. Further, the credit risk ratio explains that the performance of UOB is better in managing the risk position. In addition, the liquidity ratio explains that the policies of UOB is more competitive and lastly, the leverage ratio and efficiency ratio explains about OCBC’s better performance.

It concludes that both the banks are performing well. However, the position of OCBC is better than the UOB due to its strong policies and better market position. 

References:

Annual report. 2018. OCBC bank. [online]. Accessed on: https://www.ocbc.com/assets/pdf/annual%20reports/2017/ocbc_ar17_fullreport_english.pdf (available 30/5/2018).

Annual report. 2018. UOB group. [online]. Accessed on: https://www.uob.com.sg/AR2017/documents/Full-Annual-Report-2017.pdf (available 30/5/2018).

Higgins, R. C., 2012. Analysis for financial management. McGraw-Hill/Irwin.

Hillier, D., Grinblatt, M. and Titman, S., 2011. Financial markets and corporate strategy. McGraw Hill.

Home. 2018. OCBC bank. [online]. Accessed on: https://www.ocbc.com/group/group-home.html (available 30/5/2018).

Home. 2018. UOB group. [online]. Accessed on: https://www.uobgroup.com/ (available 30/5/2018).

Lord, B.R., 2007. Strategic management accounting. Issues in Management Accounting, 3.

Lumby,S and Jones,C,.2007. Corporate finance theory & practice, 7th edition, Thomson, London

Ward, K., 2012. Strategic management accounting. Australia: Routledge.

Weaver, S.C., Weston, J.F. and Weaver, S., 2001. Finance and accounting for nonfinancial managers. New York: McGraw-Hill.

Weston, J.F. and Brigham, E.F., 2015. Managerial finance. Hinsdale, IL: Dryden Press.