Budget Review Sample for a Bank

Budget Review Sample for a Bank

PART: 3

 

3.1  Considerations

It should be noted that the financial figures accompanying this Plan require consideration in the light of the following:

·      The Plan has taken no account of the effect of a possible change in the value of the Bank’s freehold property although a formal revaluation was carried out at the end of 2002 and accepted as reasonable in November 2003 by the Board. The Board will further review the premises values in December 2004 but, unless market conditions dictate otherwise a further formal valuation of freeholds will not be required until December 2005.

·      The introduction of a debit card product with the maximum set-up costs of some $500,000 written off over five years from 2004 and ongoing annual estimated costs of some $300,000 has been included from 2012.

·      Pre-tax profitability for 2003 is expected to be in excess of $250,000 well above the budgeted figure of  $400,000. Approximately half of the pre-tax profit arises from the taking into profit the increase in value of the ABC Bank bonds written down in 2003.  

·      The net interest margin on resident business has averaged 5.5% over the past year. Earnings on money market placements (some $74m daily average) remain depressed due to the low interest rates on offer. It is estimated that each 1% increase in rates would yield the Bank some $150,000 on free balances. The Plan expects that interest rates will not be raised significantly during 2002 but marked increases may be seen thereafter. To attract longer dated maturities in its savings products the Bank expects to have to offer comparatively high interest rates to be competitive which again adds pressure on the earnings from the net interest margin.

·       The own-funds of the Bank are expected to be some $12.5m at the year-end 2000, the base year for the Plan. Of this $12m is shareholder capital.

·      The Bond and Promissory Note portfolio has been stated as being less than the Bank’s capital and reserves which is the maximum amount the Board has authorised in this category. It is recognised that in recent times such exposure has been below this target level reflecting the tight interest margins and, more recently, the unsettled nature found in the Markets. Bonds will continue to be marked-to-market.

·      The introduction of a debit card product has been recognised in attributing $100,000 per annum running costs.

·      It is expected that the Bank of ..USA.. Reserve Account balance will be maintained at $1m over the life of the Plan although it is recognised that the requirements of the Liquidity Regime may require a larger liquidity buffer than the $4m provided currently. This figure includes $2m of Gilts held in the bond portfolio.

·      No account has been taken of the likely cost of further developing the Bank’s Internet offering.

·      The Bank has planned for only a modest increase of one-half per cent in the Base Rate through 2001 to 1% and an increase through 2003 to 3% pa. Exchange rates between euro and the main currencies of USD and the Sterling are expected to remain broadly in line with the current levels over the length of the Plan. 

Strategic Review Sample for a Banking Sector

PART: 1

The Bank is part of the ..... Banking Group established over 100 years ago with Group headquarters in ..........  The Bank was established in 1928 and now has eleven branches in ..., ..., ... etc and ... Branch (which is situated in the Head Office building near ....). The Bank has over 500.000 customers using some 15.000 accounts served by 500 full and part-time staff.

The Group has maintained a strategy of conservative lending, realistic interest margins, sound operational procedures and firm cost controls. This will continue. Although ....... will be  the only ............ bank offering a full community banking service. in the ........, the Plan recognises the competition from and the highly focused approach of, the ........ clearing banks in targeting good quality business opportunities within the ethnic communities including the Bank’s chosen market sector. 

In harmony with the Group strategy of encouraging autonomy in the Group operating companies, as well as intra-group synergy, the Bank continues to focus on serving the needs of the ....Spanish.. speaking communities, particularly in ....., as well as the ...Brazil.. needs of the customers of its Group companies from USA and Chile and vice versa. In addition, it has in the past reached out to the wider ..Brazil.. public through its deposit products by offering competitive interest rates. Whilst this policy is under review at the time of writing, the issue of the products will be assessed when appropriate, in conjunction with the Board and the Regulator.

Financial Review And Dynamic Methods

*Note : I am going to add my Corporate Strategy Assigment when i was at the university about Financial Investment Methods. Enjoy it :)

PART -3

1.   FINANCIAL REVIEW & DYNAMIC METHODS

All expenditures made for investment projects, investment costs, operating costs, completion and renovation costs usually do not occur within a year, they occur piece by piece at various times in the economic life of the project.

Similarly, the expected revenue flows will be charged step by step in the economic life of the project. In addition, we know that a unit of the revenue will not be the same value with a unit cost, which obtained different times. Then, the resulting revenue and costs in different periods are reduced similar and homogeneous for a specific period. According the dynamic evaluation methods, revenues, all the costs be taken into account and the scrap value are estimated during the economic life of the project. Therefore, to predict the cost series, yield series in this period and the economic life of the project would be obtained. It is clear that not easy to estimate this. Because cash inflows and outflows is not enough just to predict the global level, it is necessary to estimate the needs in the course of their periods.

The main feature of the dynamic methods used in valuation of investment projects for investors that to consider the calculations time value of money. The plain meaning of the time value of money, the revenue that is at the provided capital in the process cycle or that should be used to collect an undue cost

What is the importance of taking into account of the time value of money to invest?

Expenditures for the investment project and financial revenues in the useful life of the investment are calculated by taking into account of the time value of money. It is necessary to reduce the same level of investment related cash inflows and outflows to make a meaningful comparison. On the other hand, all the countries of the world more or less in the presence of inflation at the real value of money require the calculation over the long-term investments.

The main dynamic valuation methods are:

·    Net Present Value Method ( NPV )

·    Payback Period

·    The accounting rate of return ( ARR )

·    Internal Rate of Return ( IRR )