Finance Statement Analysis: Barclay’s
To this end, the industry is involved in 3 types of businesses broadly: wholesale or corporate banking, retail banking and investment banking. The industry has seen wild swings and earnings through boom and bust years of the economy and has to grapple with internal scandals, and heavy regulations. The late ass and the ass, were boom years for western banks punctuated in part by the stock market crisis of 1997, the Asian financial crisis of 1997, the dotcom crisis of 2001 and the great financial crisis of 2008, the last of which has signaled an end Of light regulation in the banking industry.
Barclay, HUSH and Standard Charted are all British banks, with both retail and corporate banking services. All three banks have had a high focus on investment banking, trading and corporate banking as in the industry, these are the highest fee based businesses. All three banks are British based banks, and were heavily impacted by the 2008 financial crisis which implicated American, British and European banks, of selling dubious mortgage-backed securities to investors with little knowledge of the underlying assets backing the products.
HUSH and Standard Charted escaped most of the financial hardship of the 008 turmoil, because of their predominance of their Asian and emerging market businesses. Founded in 1 865, HUSH is a multinational bank, headquartered in London. Currently, the bank operates with about 7200 branches across 85 countries with the total employee strength of 254,066 people. The bank deals in credit cards, corporate banking, investment banking, consumer banking, private banking, and mortgage and wealth management.
Headquartered in London, Standard Charted was founded in 1969, and currently operates with about 1700 branches across 70 countries with the total employee strength of 87,000 people. The bank deals in corporate and institutional banking, consumer banking and treasury services. Both HUSH and Standard Charted maintain Global headquarters in Hong Kong, with listings on the stock exchange of Hong Kong. Standard Charted bank also has significant business interest in India and lists Indian depositories receipts on both the Bombay Stock Exchange (BEES) and the National Stock Exchange (NOSE).
In addition to their geographic pivot in Asia, both banks have a large presence in other emerging markets as well. Standard Charted has significant business interests in a number of African entries, whereas HUSH is active in Latin America. HUSH further has positioned itself as a global leader and expert in all transactions involving rapidly expanding Chinese currency, the Remind. Although, most Asian banks have focused on expanding their Remind business, HUSH has made the currency and its internationalization a key business strategy.
Both HUSH and Standard Charted, have intensive retail presence in Asia and abroad along with large corporate and investment banking arms. Barclay, on the other hand, with its business focus in the west, suffered extreme withdrawal of investor and regulator confidence. Barclay currently operates with about 4750 branches across 50 countries with the total employee strength of 139,900 people. It deals in wealth and investment management, retail and business banking and corporate banking. It was in the market, for a EYE billion, the British government bailout in 2008, but later was able to raise E. Billion of new capital from private investors. It also acquired Lehman brothers investment banking and trading operations. It continues to have retail banking, commercial banking and investment Nanking operations. It was also involved in the investment management business through its global investor’s unit but it sold it to Black Rock in 2009. Furthermore, it bought INS Direct [J from the INS group in 2012. It also has stakes in South African financial services firm, the Abs group, and has a private and offshore banking arm, in the form of Barclay wealth.
It has retail- banking branches in over 50 countries. After the global financial crisis, banking regulation can be considered a major factor impacting bank profitability. All three banks are subject to international s well as local regulations in all the countries that they operate in. International banking regulations called Basel Ill has imposed greater capital costs on banks especially pertaining to capital deployed in risky security straightening business, to prevent banks from using customer deposits to make risky investment.
With the advent of Basil Ill and other global regulations which are binding on the EGG countries, the cost of capital has sky rocketed while the supply of liquid and investment grade securities has one down. This means liquidity, credit and operational risk management has become a major once and a defining factor for bank success in the coming few years. Not only must banks comply with the surge of regulations in every major country they operate in, but they must also manage liquidity and their capital efficiently enough to create a return for their investors.
At the same time public perceptions of banks following the crisis, as well as a large number of crisis that almost all banks have been implicated in has made it harder not just to raise new capital but also to find talented employees who are willing to work in the financial industry. 1. 1 Country Evaluation: 1. 1. 1. EGGCUP Growth GAP growth Of LIKE has seen lot of back and forth in past few years. In the recent quarter of 201 2, the GAP has been decreased by 0. 7% as construction sector has registered significant decline in the growth.
Apart from this GAP contracted due to the weakness of both service sector (including the banking sector) and production sector. The below figure 1 presented the GAP growth of UK in past three years by half yearly. Figure 1 – UK GAP Growth (Source – Trading Economics/elk Office of National Statistics) Service industry output has decreased by 0. 1 % in quarter 2, 2012 which has a rater impact on the GAP of K. 1. 1. 2. Exchange Rate: Exchange rate strengthens the financial position of the country and relatively strength of industry and companies operating.
The value of sterling pound has been strengthen and appreciated by 1. 06% during the last 30 days. Figure 2 – GAP versus USED exchange rate (Source -? Trading Economics/ELK Office of National Statistics) Since 1 972 until 201 2, the average exchange rate between GAP and USED was an average 1 . 7500 and reached to its peak in May 1972 at 2. 6200. Exchange rate specifies the strength of GAP against SCADS. The above figure 2 depicts the movement of GAP versus USED over past 7 years. Since last one year the exchange rate is stable which also shows the stability of UK economy. . 13. Balance of Trade: Balance of trade is the difference between Export and Import. If the different between Export and Import is negative then it is called trade deficit and if the difference in positive then it is called surplus. Trade deficit on UK trade in goods and services has been increased to GAP 4. 3 billion and GAP 1. 6 billion in May 2012. Lowering down the exports of oil, chemical and cars has fallen down exports of goods. The below figure 3 shows the balance of trade in ELK since past 7 years. Figure 3 -? UK balance obtrude 1. 1. 4.
Consumer Confidence: Consumer confidence signifies the confidence of consumers in performance Of country’s economy. Since 1982 until 201 2, the average Consumer confidence value is on average -9. 2. Higher the value, more the consumers have confidence in country performance. The below figure Figure 4 – Consumer Confidence (Source – Trading Economics/UK Office of National Statistics) 1. 1. 5. Business Confidence: Business confidence signifies the confidence business having in the reference of country. The business confidence has been declined in 201 2 at 12.
The below graph 5 shows the business confidence score in past 8 years. Business confidence was lower in 2009 and grown up in 2010 then decline in 201 1 to 1st quarter of 2012 due to the Euro crisis. Figure 5 – Business Confidence 1. 1. 6. Interest Rate: The interest rate signifies the monetary policy and overall economic strength in terms of monetary policy and fiscal policy and control the liquidity position of the country. Lower the interest rate, stronger the monetary and fiscal policy of the country. Interest rate benchmark in UK was reported at 0. 0% in 2012. The below figure 6 shows the interest rate movement in past 7 years. Figure 6 – UK Interest Rate 1. 1. 7. Employment Rate: The unemployment rate signifies the state of job opportunities and predicts the strength of economy. Further it shows the number of people looking for job as percentage of labor force. In June 2012, the unemployment rate was reported at 8%. The below figure 7 shows the employment rate movement in UK since 2007. In January 2012, the unemployment rate was highest at 8. 4%. Figure 7 – Unemployment Rate 1. 1. 8. Industrial Production
Industrial production rate provided the industrial sector and growth and its contribution in the GAP growth overall economic growth of the country. It is an important indicator to forecast the economic growth and measure the inflation pressure on industrial sector. According to the below figure 8, the industrial growth was significantly low at -13% in 2009 and it improved until January 2010. Industrial production rate is still low in 1st quarter 2012. Figure 8 – Industrial Production 1. 1. 9. Stock Market Stock market or exchange is a center of network of securities’ transaction and buyer meets with the seller at certain price.
Stock market is an economic indicator of overall business performance in the country. The UK stock market registered significant decline in 2009 due to the global financial crisis and then after it has improve significantly until 201 2 as presented in the below figure 9. Figure 9 – Stock Market 1. 2. UK Banking Industry Analysis: The UK banking industry analysis has been conducted using the PASTEL framework as it indicates the likely factors which can affect the industry players. These factors are uncontrollable in nature and impact of such factors cannot be eliminated but it can be reduced. 1. 1. PASTEL Framework: Political Factors: UK government has now tightening its eye on banking industry after the financial crisis happened in 2009. Politicians have greater influence on controlling the policies related the UK banking industry. Due to such influence, the UK government has imposed stricter regulations and lowers down the power of banking industry. The UK government is also thinking to get back the money of taxpayers invested in the financial institutions which is quite De-motivating for banks (Tragicomedies. Com, 2012) (Infringer, john and Asia, 2012). Environmental Factors:
Environment has lower impact on UK banking industry though banks in UK are actively participating into environment related corporate social responsibility initiative. Apart from this the UK government has initiated and asked all companies to minimize their carbon emission by taking more green initiatives in their business processes(Tragicomedies. Com, 2012) (Ferguson and Likeliest, 201 1). Socio-economic Factors: After the global financial crisis, consumers low confidence in investing banks. Rich population in the country such as high net worth individuals are continue to invest in banking products.
The tax rate of 50% has been imposed by deterring them. In 201 2, the banking industry has gained the confidence in general consumers as retail banking growth has been registered at 30% over the past year 2011 (Tragicomedies. Corn, 2012). Legal Factors: UK government has imposed strict regulations for banks both public and private banks. The legal conditions are imposed in every bank document to safeguard the shareholders interest. Economic Factors: UK has seen higher interest rate in 2007 and then after it is stable until 2012 referring to figure 6. Liquidity position in banks has been improved since
January 2011 however nothing is happening with the interbrain market. Presently the banks in UK are trying building the confidence and strengthening their balance sheet. Loans are offered by most Of the banks at interest rate of 22%. Stock market conditions and exchange rates are improving to strengthen the UK economy. In addition to this the overall economy has been improving after global financial crisis and Euro crisis (Tragicomedies. Com, 2012). Technology: The technology has been changing every point of time which needs huge investment for banks to improve their services.
This is bit challenging for anus to grow with the changing technology. On the other hand research & development has been forming up new form of investments. 1. 2. 2. Competition Analysis: In order to analyze the competition, Porter Five Forces model have been used. Buyers Power: In investment and relationship banking, businesses are the customers Of banks. There are several choices available in the market offering the investment and relationship banking services. Therefore buyer’s power is high. Suppliers power: Money is the major need of banks and Investors, lenders, shareholders and customers are the suppliers of banks.
There are several industry sectors available for investors, lenders and shareholders to invest and gain return on investments. Suppliers are not restricted to banking sector only. Therefore supplier’s power is high. Us bustiest: Banking products such as debit card, credit cards,saving account and checking account does not have any substitute available in the market though for investment service server other non banking institutions provide their offerings. Threat from New Entrant: In order to set up a new bank in UK huge capital is required. In addition there are several legal and regulatory challenges occurred.
Therefore threat from new entrant in the banking sector is low. Threat from Rivalry: There are approximately 1 5 large banks in UK offering a wide array Of service in both retail and business banking and all are well established and brand names. Therefore competition is very high in UK banking sector. 1. 3. Company Analysis: Standard Chartered is one of the large banks in UK with average annual revenue of GAP 11 billion in 201 1. The bank registered GAP 4 billion profit before tax in 2011 which is 1 1% higher than 2010. The earnings per share of the bank were 14% up than 2010.
