The Bank of New York Mellon
In group work, please select a bank that you want to learn more about. Download the financial statements of the bank (Report of Condition and Report of Income).
1. Describe the services the bank provides (commercial banking versus other services)
2. Provide an overview of the Balance Sheet and the Income Statement
a. Describe and analyze the components of both (may want to provide the data as percent of Assets)
3. Measure and evaluate the performance of your bank given the different profitability ratios we have learnt in the class.
4. Provide a breakdown equity returns and return on assets for closer analysis
a. What is the breakdown telling us?
The focus is on interest-rate risk management. Financial statements do NOT include any reports on interest sensitivity. Accordingly we will have to rely on the UBPR (https://cdr.ffiec.gov/public/ManageFacsimiles.aspx). Make sure to pick a bank such that its uniform bank performance report is available. Once you pick the bank, please do the following:
5. Calculate the Net interest margin over time. Discuss what is revealed in the variation of NII across time.
6. For a given time period, calculate the interest sensitivity ratio. Discuss the interest rate exposure for your bank. Is it asset or liability sensitive? What are the implications of the changes occurring across time? Discuss the effects if interest rates increase/decrease by 1 percentage point.
Dr. Mohsen Saad, CFA