ADB Limited - Performance Analysis - Case Study Example

COMPANY ANALYSIS STAGE TWO By Name Course Instructor Institution Location Date ADB LTD ANALYSIS Summary Business Description ADB operates in a competitive business markets. The company offers its reliable customers worldwide a range of competitive products and services as discussed by Bao (2017 pg 56). The company products and services includes, credit cards, insurance savings, transactions and deposit accounts. It offers banking and other financial services to small businesses mainly in Australia. Some of the common services includes personal banking e.g. savings account and check bank accounts. According to Haq et al (2016 pg 54) the product lend by the bank to customers includes home loans and personal loans. More so, the bank offers credit, debit and cash cards to customers. ADB offers its customers online access and support on products and services through online banking and also through a friendly bank contact Centre as argued by De & Sim (2016 pg 43). The investment services offered are fund management, insurance services such as health covers and commercial insurance. Foreign currency services are offered through telegraphic transfers. Over the years the bank enjoys a large customer base attributed to its affordable bank interests and a friendly and flexible staff. The online banking employed by the bank as shown by Nguyen & Cumming (2016 pg 32) allows for customer convenience and effectiveness in terms of service delivery. The online banking apps according to Schenkel (2017 pg 54) makes the company products such as home loans and insurance convenience to its large customer markets in its many subsidiaries across the globe. Schenkel (2017 pg57) further states that the bank enjoys a wide range of products and services as opposed to many banks in Australia and other parts of the world that may only major into bank deposits and loans. As opposed to other banks ADB offers financial and investment advice to customers to ensure an all informed and reliable customer segment. According to Seltzer (2017 pg 55-65) this has been successful because of the existence of competent, skilled and friendly workforce. Consultancy services are mainly offered via telephone. Company Products ADB offers retail banking services and products to a large customer base approximating to over 1.5 million retail customers. The services and products are offered through a network of more 400 subsidiaries and agencies globally as shown by Haq et al (2016 pg 32). The banks main focus on customer and community has given it a competitive advantage in the market. According to Dungey et al (2016 pg 43) the banks has enjoyed community involvement strategy for more than 100 years. Many scholars have argued that community participation strategy has been the major differentiation strategy employed by ADB and the unique strategy has generated customer acceptability and high profits for the bank as discussed by Du & Sim (2016 pg 41). The bank has emerged as the best in home loans at favorable interest rates and hence established itself in the market as a successful product innovator specializing in mortgage broker’s home loans and mortgage market manager (Haider & Tong 2016 pg 20). The bank has attracted many customers and today in Australia more than 34% of people source their loans through a mortgage manager and the banks suit for home loans therefore suits this customer segment as further purported by Haider & Tong (2016 pg 31). Management The bank operates on a joint merger with Bendigo bank group as shown by De Jong et al (2016 pg 42). The group of banks is managed by a thirteen member executives possessing a mixture of skills and talents gained while working with specific organizations. This include a six member’s representation from each bank and the group chief executive officer. The team of competent and skilled workers is reinforced by a group of eleven senior personnel drawn from both banks. Merging of two banks has ensured creation of a unique and differentiated group that is now days a banking market leader in Australia (De Jong et al 2016 pg 67). The bank operates on two main business stream i.e. wholesale bank and retail bank with support of five major corporate service divisions across Australia. The banks CEO is Mr. Mike Hirst who formerly was Bendigo chief operating officer. The bank has established the department of finance markets and treasury as discussed by Haq et al (2016 pg 50). The former managing director of ADB Mr. McPhee is the CEO of the wholesale bank and is supported by managers of wholesale mortgage, a general manager of portfolio and business partners and the general manager of wealth financing and product. Culture The bank has over the past decades aimed to become the best bank in Australia. It has established strategies and policies that aim at ensuring customer connection, competence and quality products and services to customers. As discussed by Seltzer (2017 pg 53) the company holds a shared value for customer through establishment of customer relations and customer communication channels aimed at utilization of feedback to better service and product delivery. The culture of the bank as further shown by Seltzer (2017 pg 45) establishes customers and communities in which the bank operates in as first priorities in meeting its goals. The values of the bank group reflects and informs on behaviors required of the staff in realizing the vision of the bank. The values include, i. Integrity- includes trustworthiness among employees, openness in delegation of duties, honest and fairness in serving customers. ii. Leadership- the bank requires its employees to lead by example, show initiative, empowers others and be accountable to all decision they take in the line of duty. iii. Performance – the bank seeks to ensure sustainable success through performance feedback and betterment of working environment. iv. Passion –the employees of the bank should be proud of what they do and be proud of the bank v. Engagement –workers are required to listen to, understand customers and deliver as required by the management. This also requires that the employees work in teams as it is believed the best success is success through others. Employees Benefits ADB Ltd The bank unlike other banks and financial institutions strives to keep its workforce for many years. The bank has many knowledge workers as a result of many years of engagement with the bank. Bao (2017 pg 45) argues that ADB has a retention strategy geared towards keeping the best talents and skills that can be taken by other competitive firms. To ensure this, the bank offers its workers many benefits ranging from monetary to nonmonetary. To start with, Schenkel (2017 pg 31) argues that ADB offers lucrative salaries to its workers which is comparatively higher than what other firms offers. It also ensures quality of working life through programs such as job sharing and provision of leaves (Du & Sim 2016 pg 28). The flexible work arrangement benefits both its male and female employees but female compatriots get it easy to work with the bank because they can be able to coordinate home affairs such as catering for young children and work. The recruitment and selection strategy of the firm can be connected to the firm’s customer service and product pride. The management stresses on recruitment of competent and hardworking labor force. This is ensured through a series of interviews and test performed during recruitment. The applicants in various positions are required to portray a range of culture adaptability skills mainly in language as suggested by Haq et al (2016 pg47). This is because the bank offers cross-cultural transfers and hence cultural flexibility is a crucial skill for the personnel. To ensure this, the bank offers trainings to its staff before sending to its subsidiaries and agencies. Dungey et al (2016 pg50) argues that employees with cultural competence can like working with the bank. The bank values bilingual workers as they the best in customer relations and company brand and product development. The attributes considered in recruiting personnel include ability to work under little supervision, integrity, teamwork, communication skills and leadership. In tapping the required potential, the firm conducts post recruitment procedures such as establishment assessment centers to gauge the skills and knowledge of workers before making decisions on promotion. Yearly income statement Annual Financials for Bendigo & Adelaide Bank Ltd. Assets Fiscal year is July-June. All values AUD millions. 2012 2013 2014 2015 2016 5-year trend Total Cash & Due from Banks 516.4M 383.8M 716.1M 981.6M 1.06B Cash & Due from Banks Growth - -25.68% 86.58% 37.08% 7.99% Investments - Total 5.37B 6.37B 8.22B 6.53B 7.18B Trading Account Securities 4.37B 5.47B 7.27B 5.56B 6.37B Federal Funds Sold & Securities Purchased - - - - - Federal Funds Sold - - - - - Securities Bought Under Resale Agreement - - - - - Treasury Securities - - - - - Federal Agency Securities - - - - - State & Municipal Securities - - - - - Mortgage Backed Securities 352.1M 426M 455.8M - - Other Securities 605.8M 450.9M 474.4M 902M 736.3M Other Investments 48.5M 31.9M 22.3M 63.8M 79M Investments Growth - 18.64% 28.93% -20.56% 10.04% Net Loans 48.71B 50.81B 52.93B 55.75B 57.47B Gross Loans - Net of Unearned Income 48.85B 50.94B 53.09B 55.92B 57.65B Commercial & Industrial Loans - - - - - Consumer & Installment Loans 41.07B 47.56B 50.28B 53.12B 54.83B Real Estate Mortgage Loans - - - - - Lease Financing Loans 472.1M 472.5M 460.9M 453.1M 487.9M Foreign Loans - - - - - Broker & Financial Institution Loans - - - - - Unspecified/Other Loans 7.37B 2.73B 2.46B 2.24B 2.22B Unearned Income (105.1M) (109M) (106.9M) (101.7M) (106.5M) Loan Loss Allowances (Reserves) (134.7M) (138.6M) (157.2M) (175.8M) (178.7M) Customer Liability on Acceptances - - - - - Loans - 1 Yr Growth Rate - 4.29% 4.19% 5.32% 3.10% Loans (Total) / Total Deposits - - - - - Loans (Total) / Total Assets - - - - - Net Property, Plant & Equipment 69M 63.4M 96.8M 98.8M 90.7M Other Assets (Including Intangibles) 1.88B 1.97B 2.38B 1.88B 1.9B Other Assets 331.8M 454.5M 873.6M 296.8M 269.1M Intangible Assets 1.55B 1.52B 1.5B 1.58B 1.63B Interest Receivables 203.3M 186.3M 175.5M 163.1M 158.8M Total Assets 57.24B 60.28B 65.06B 66.03B 68.59B Assets - Total Growth - 5.32% 7.93% 1.48% 3.87% Return On Average Assets - - - - 0.62% NA Liabilities & Shareholders' Equity 2012 2013 2014 2015 2016 5-year trend Total Deposits 44.7B 47.44B 52.36B 53.51B 57.05B Demand Deposits - 47.44B - - - Savings/Time Deposits - - - - - Foreign Office Deposits - - 52.36B 506.8M 639.1M Deposits Growth - 6.12% 10.37% 2.19% 6.63% Total Debt 7.05B 7.4B 6.54B 6.54B 5.5B ST Debt & Current Portion LT Debt 7.03B - 63M 9.5M - Current Portion of Long Term Debt 6.71B - - 9.5M - Short Term Debt 327.2M - 63M - - Long-Term Debt 12M 7.4B 6.47B 6.53B 5.5B LT Debt excl. Capitalized Leases 12M 7.4B 6.47B 6.53B 5.5B Capitalized Lease Obligations - - - - - Long Term Debt Growth - 61,594.17% -12.56% 0.89% -15.82% Total Debt / Total Assets 12.31% 12.28% 10.05% 9.91% 8.02% Other Liabilities 998.6M 834.2M 1.01B 814.6M 686.4M Other Liabilities (excl. Deferred Income) 956.9M 834.2M 1.01B 814.6M 686.4M Total Liabilities 52.93B 55.85B 60.09B 61.09B 63.47B Preferred Stock (Carrying Value) 278M 188.5M 188.5M - - Redeemable Preferred Stock 89.5M 188.5M 188.5M - - Non-Redeemable Preferred Stock 188.5M - - - - Common Equity (Total) 4.03B 4.25B 4.79B 4.94B 5.12B Common Stock Par/Carry Value 3.68B 3.76B 4.18B 4.22B 4.3B Additional Paid-In Capital/Capital Surplus - - - - - Retained Earnings 296.5M 398.1M 517.5M 623.1M 740.4M ESOP Debt Guarantee (21.3M) - - - - Cumulative Translation Adjustment/Unrealized For. Exch. Gain - - - - - Unrealized Gain/Loss Marketable Securities - - (34.9M) 2.2M 600,000 Revaluation Reserves 30.3M - 1.3M 1.3M 1.3M Other Appropriated Reserves (86.6M) 89.4M 118.5M (55.4M) (60.9M) Treasury Stock - - - - (10.2M) Common Equity / Total Assets 7.04% 7.04% 7.36% 7.48% 7.46% Total Shareholders' Equity 4.31B 4.43B 4.97B 4.94B 5.12B Total Shareholders' Equity / Total Assets 7.53% 7.36% 7.64% 7.48% 7.46% Return On Average Total Equity - - - - 8.26% NA Accumulated Minority Interest - - - - - Total Equity 4.31B 4.43B 4.97B 4.94B 5.12B Liabilities & Shareholders' Equity 57.24B 60.28B 65.06B 66.03B 68.59B The banks total assets has grown as shown by the 5 year trend. The growth rate between 2015 and 2016 amounted to 2.56 billion which shows that the bank has continuously invested its capital in investments. The total liabilities has also shot as per the trend. The increase in liabilities is attributed to an increase in bad debts and more financial borrowing by the money. The trend shows an increase in financial risk associated to writing off of bad debts. The increase in liabilities between 2015 and 2016 amount to an average of 2.38 billion. According to financial trend, the bank experienced a financial drop in 2013 recording total cash at bank of only 383.4m as opposed to 516.4m recorded in the previous year. The drop in cash at bank is attributed to more lending to customer on long basis. In 2014 cash at bank increased to 716.1m, which is 14.14% increase. Cash at bank further increased to 981.6m and 1.06 billion in 2015 and 2016 respectively. According to financial trend the bank has drastically improved on its investment and lending to its customers. The bank’s asset base surpasses its liabilities and hence the bank is realizing profits. List of references Bao, H., 2017. Evaluation of Pre and Post Demerger-Merger Performance: Using ABN AMRO Bank as an Example. International Journal of Economics and Finance, 9(2), p.196. De Jong, P., Choo, W. and Loudon, G., 2016. An Early Warning Tool for Measuring the Build-Up of Systemic Risks in Banks and Financial Systems. Du, K. and Sim, N., 2016. Mergers, acquisitions, and bank efficiency: Cross-country evidence from emerging markets. Research in International Business and Finance, 36, pp.499-510. Dungey, M., Matei, M., Luciani, M. and Veredas, D., 2016. Surfing through the GFC: Systemic risk in Australia. Economic Record. Haider, A. and Tang, S.S., 2016. Maximising Value through IT and Business Alignment: A Case of IT Governance Institutionalisation at a Thai Bank. International Journal of Technology Diffusion (IJTD), 7(3), pp.33-58. Haq, M., Avkiran, N.K. and Tarazi, A., 2016. Does market discipline impact bank charter value? The case for Australia and Canada. Accounting & Finance.. Nguyen, L.D. and Cummings, J.R., 2016. Impact of Higher Capital Requirements on Bank Funding Costs: Australian Evidence. Schenkel, A., 2017. Proportionality of Banking Regulation-Evidence from Germany. Seltzer, A.J., 2017. Implicit contracts and acquisitions: An econometric case study of the 19th century Australian banking industry. German Journal of Human Resource Management, p.2397002216682463. https://www.investing.com/equities/bendigo-bk-balance-sheet Read More