Commonwealth bank of Australia - Essay Example

It is approximately one century since this giant financial institution was formed by the Australian government. However it is currently owned by private investors owing to the move by the Australian government to privatize the bank in 1996. Commonwealth Bank of Australia has continued to expand its operations in various regions through acquisitions, joint partnership and takeover. Commonwealth Bank steady performance in the industry is attributed to a wide range of strategies that include customer satisfaction, business banking, technology and operational excellence, profitable growth as well as trust and team spirit1.

From the financial point of view it is evident that Commonwealth Bank has emerged strongly from a humble beginning to be a profitable banking institution in Australia. This clam can be justified by the fact that the Group’s net earnings after tax for the financial year ended 2011/12 hit $6,394 million which is 13% increase compared to the previous year. The Group recorded 18.4% and 411.2 cents on Return on equity and Earnings per share respectively. This was a 12% increase compared to prior financial year.

The Group declared a final dividend of $ 1.88 per share which was an 11% increase compared to previous financial year2. . re 10198 Home loans 335841 Construction 3199 Personal 17968 Asset financing 9584 Other commercial and industrial 106762 RATIO’s OF BANK EXAMPLE: RISK RATIO ANALYSIS FOR COMMONWEALTH BANK OF AUSTRALIA BANK OVER THE PERIOD 2010 TO 2010 Ratio Ratio formula Actual figures for Year ……(previous year) ($M) Ratio answer for Year…… (previous year) Actual figures for Year ……( current year) ($M) Ratio answer for Year…… (current year) Source of information in annual report Comments Interest margin Interest revenue – interest expenses Average earning assets 32,215 – 20,293 553,735 0.

02 37,304 – 24,697 576,369 0.02 Income statement p98 and note 2 page 119. The interest margin remain staeble over the two financial period owing to effective risk management strategies Net margin (after Tax) Operating profit after tax Interest income + non-interest income 5,680 32, 215+ 7,366 0.14 6,410 37,304 + 6,790 0.15 Income statement p98 and note 2 p119 The increase in net margin is as a result of Loans, bills discounted and other receivables Asset utilization Interest income + non-interest income Assets 32, 215+ 7,366 646,330 0.

06 37,304 + 6,790 667,899 0.07 Income statement p98 and balance sheet p100 The increase in asset utilization ration indicates that the groups management effectively utilized the groups assets . Return on assets Operating profit after tax Equity 5,680 35,570 0.16 6,410 37,287 0.17 Income statement p98 and balance sheet p100 The increase in the return on assets ratio is attributable to the significant increase in the groups long-term assets Leverage multiplier Assets Equity 646,330 35,570 18 667,899 37,287 17 Balance sheet p100 The reduction in the ratio indicates that the group has reduced the level of debt used to finance its capital structure