Profitability for Greater Cincinnati, Ohio, banks

Case Study 1

(55 points total)

Due: week 6

PROFITABILITY FOR GREATER CINCINNATI, OHIO, BANKS

In its June 4, 1995, issue, the Cincinnati Enquirer published a report on the profitability of banks in the Cincinnati Metropolitan Statistical Area (MSA). A summary of the date presented is given in the file named BankReport.

About the Survey

The chart includes numerous categories that often are used to determine the solvency and profitability of banks. Here is a brief look at each category:

Assets – anything that has monetary value, which includes outstanding loans, bonds, or claims against another entity;

Net income – profit made after expenses are covered;

Return on assets – a ratio that determines how efficiently assets are used or invested. The 1994 industry average is 1.10 percent;

Loan loss reserves – cash set aside to cover problem loans;

Return on equity – a profitability ratio measuring how well equity capital is used. The 1994 industry average is 14.82 percent;

Net interest margin – often referred to as “spread”, it is the difference3 between what banks pay on deposits and what they charge on loans. The 1994 industry average is 4.15 percent;

Equity capital – a key measurement of capital that can be used for several purposes, such as cushioning against operating losses like bad debt or protecting depositors’ money.

Managerial Report

Use the methods of descriptive statistics to summarize the data. Preset the summaries that will be beneficial in communicating the results to others. Discuss your findings.

1. Include the summary for the following variables in the data set:
1. Return on assets;
2. Return on equity;
3. Net interest margin.

2. Make comments and interpretations based on maximums and minimums, as well as appropriate means and proportions if applicable. What new insights do these descriptive statistics provide concerning Greater Cincinnati Banks, Ohio?

3. Which graphical techniques are the most appropriate to visualize the data? Please apply.

4. Computer the mean and median of assets and of the percentage change in assets for the 25 banks. What do these values say about skewness? Please explain.

5. Compare the industry average with the data provided on:

1. Return on assets;
2. Return on equity;
3. Net interest margin.

How many banks exceed the industry average on the given categories? Interpret your findings.

1. Present any additional, tabular, graphical and numerical summaries that will be beneficial in communicating the data to others.

Use the summary section of your report to provide a discussion of what you learned.

Your report should be in MLA format with tables and graphs from Excel imbedded in the text of the Word document. Include your graphs. Copy and paste them into your Word document (NEVER include a graph without an explanation of what it illustrates). Make sure to title your paper with a running header labeled with your names, the IDs numbers, and the assignment number. You will need to submit a hard copy of your paper.

Group Leader evaluates the group members’ performance with accuracy, fairness and realistic expectations and assigns the appropriate rating number to each student:

Rating Definitions:

1- Performance is very unsatisfactory/ student does not meet the requirements

2- Improvement is needed/ student performance is below the standard requirements

3- Performance is satisfactory/ student meets the standard requirements

4- Performance is very satisfactory/ student clearly exceeds requirements

5- Excellent performance/student performance demonstrates superior performance

Write a paragraph evaluating the group members’ performance. Use the following criteria:

1. Productivity
2. Quality
3. Reliability
4. Attendance
5. Cooperation
6. Your comments

Grading Criteria (55 points total)

• Accuracy and completeness of information: 0 – 30 points
• Presentation and appropriateness of graphs and worksheets: 0 – 15 points
• Up to 10 points will be deducted for incorrect format, spelling and grammar

Дата добавления: 2015-11-04