Survey
* Your assessment is very important for improving the work of artificial intelligence, which forms the content of this project
Download balance sheet analysis
Document related concepts
no text concepts found
Transcript
ASSET & LIABILITY MANAGEMENT IN COMMERCIAL BANKS Instructor……Bülent Şenver bsenver@superonline.com ALM bsenver@superonline.com 1 ALM Assett Liability Asset Management Liability Management ALM bsenver@superonline.com 2 ASSET & LIABILITY MANAGEMENT (ALM) • DEFINITION • ALM is continuously arranging and rearranging the assets and liabilities of the bank without infringing the liquidity and safety of the bank and with the purpose of maximizing the bank’s profits. ALM bsenver@superonline.com 3 LIQUIDITY • The ability of a bank to fulfill its obligations, and after doing so having enough cash left to do its normal daily banking business. ALM bsenver@superonline.com 4 SAFETY • The ability of a bank’s “Share Holder’s Equity” (SHI) to absorb the future possible losses that may arise and after doing so having enough SHI left to run the bank and to comply with the minimum “Capital Requirements”. ALM bsenver@superonline.com 5 Capital protects your bank in rainy days!.. ALM bsenver@superonline.com 6 ALM DEVELPOMENT 1950’s 1960’s ASSET MNG. LIABILITY MNG. LOAN PRODUCTS DEPOSIT PRODUCTS ALM bsenver@superonline.com 1970’s ASSET & LIABILITY MNG. LOAN & DEPOSIT BOTH 7 Internet Personal Training Office Automation Computerization Management Reorganization GAAP SC of Accounts Deregulations ALM bsenver@superonline.com 8 Yesterday Tomorrow Arena Services Organizatio n & Reporting Data ALM bsenver@superonline.com 9 NEW DEVOPLEPMENTS • 1. Deregulation of Interest Rates • 2. Deregulation of Foreign Exchange Operations • 3. Changes in Laws and Regulations • 4. Increase in Deposit Interest Rates ALM bsenver@superonline.com 10 NEW DEVELOPMENTS • 5. Increase in Deposit Interest Rates • 6. Change in Deposit Characteristics • Increase in Term-Deposits • Decrease in Demand-Deposits • Increase in Short Terms ALM bsenver@superonline.com 11 NEW DEVELOPMENTS • • • • • 7. Increase in Personnel Expenses 8. Increase in Operating Expenses 9. Increase in Technology Investments 10. Frequent Changes in Interest Rates 11. Increase in Share Capital Requirements ALM bsenver@superonline.com 12 NEW DEVELOPMENTS • 12. Change in Asset Structure • Increase in Government Bonds • Increase in Treasury Bills • Increase in Foreign Exch. Loans • Increase in Short Term Loans • Increase in Non-Performing Loans • Increase in Consumer Loans ALM bsenver@superonline.com 13 NEW DEVELOPMENTS • • • • • • • 13. Decrease in S/H Equity Growth 14. Increase in Customer Expectations 15. New Service Points Small Branches ATM and POS Telephone and Internet Banking 16. 24 Hours 365 Days Banking ALM bsenver@superonline.com 14 1950 1970 1980 2000 RELATIONSHIP MANAGEMENT SALES FORCE SPACE SHARING IN-STORE BRANCH BRANCH DATABASE MARKETING DIRECT MAIL MAIL CREDIT CARD FRANCHISE BRANCHES REMOTE RELATIONSHIP MANAGEMENT CALL CENTER OUTBOUND CALL CENTER INBOUND DEBİT CARD ATM SMART CARD INTERNET ATM KIOSK TELEPHONE BANKING Kaynak: A.T.Kearney 1990 VIDEO KIOSK SCREEN PHONES PC INTERNET ALM BANKING BANKING bsenver@superonline.com INTERACTIVE 15TV FINANCIAL STATEMENTS • 1. BALANCE SHEET • 2. STATEMENT OF INCOME • 3. STATEMENT OF SHAREHOLDER’S EQUITY • 4. SOURCES & USES OF FUNDS STATEMENT ALM bsenver@superonline.com 16 Balance Sheet Liabilities Assets Earning Assests Interest Income Deposits Loans Interest Income Statement Interest Bearing Treasury Bills Liabiliti es Interest Expences Debt Net Interest Income NonInterest Bearing Liabiliti Share Holders’ es Equity NonInterest Earning Assests Total Assets = Total Liabilities ALM bsenver@superonline.com 17 Balance Sheet Deposits 100 120 Interest Bearing Liabiliti es Treasury Bills 80 Debt 60 Non35 Total Assets Interest Rate Assets = %20 NonInterest Earnin g Assests Interest Income Liabilities Assets Loans Interest Earning Assests Income Statement Interest Bearing Liabiliti Share Holders’ Equity es = 30 35 Interest Rate Liabiliti es = Total Liabilities 36 Interest Expence 9 Net Interest Income 27 %5 ALM bsenver@superonline.com 18 BALANCE SHEET SHOWS • The Financial Position of a Bank • As at a specific date. • As of Dec. 31,1998 ALM bsenver@superonline.com 19 BALANCE SHEET EQUATION • • ASSETS • 100 = = Equals • = 100 • LIABILITIES • + Plus • SHAREHOLDER’S EQUITY ALM bsenver@superonline.com 20 ASSET CLASSIFICATION TOTAL ASSETS NON INTEREST EARNING ASSETS INTEREST EARNING ASSETS ALM bsenver@superonline.com 21 LIABILITY CLASSIFICATION TOTAL LIABILITIES INTEREST BEARING LIABILITIES NON INTEREST BEARING LIABILITIES ALM bsenver@superonline.com 22 BALANCE SHEET Assets • • • • • • • • Liquid Assets Loans Marketable Securities Investment Securities Fixed Assets Accrued Interest Other Assets Total Assets ALM bsenver@superonline.com 150 400 200 50 100 70 80 1050 23 BALANCE SHEET Liabilities • • • • • • • Deposits Bank Borrowings Accrued Expenses Other Liabilities Bonds Issued Shareholder’s Equity Total Liabilities & S/HE ALM bsenver@superonline.com 400 150 100 80 70 250 1050 24 SHAREHOLDER’S EQUITY • • • • • • • Share Capital Legal Reserves Retained Earnings Revaluation Surplus Share Premiums Net Income Total S/H Equity ALM bsenver@superonline.com 100 30 50 20 10 40 250 25 BALANCE SHEET DOES NOT SHOW • • • • Interest Rates Interest Sensitivity Due Dates Foreign Currency breakdown • Collateral ALM bsenver@superonline.com 26 STATEMENT OF INCOME SHOWS • The results of operations of a bank. • For the period between two dates. • For the year ended Dec. 31 , 1998 ALM bsenver@superonline.com 27 NET PROFIT NET PROFIT TOTAL INCOME TOTAL EXPENSE ALM bsenver@superonline.com 28 TOTAL INCOME TOTAL INCOME NET INTEREST INCOME NET NON-INTEREST INCOME ALM bsenver@superonline.com 29 NET INTEREST INCOME NET INTEREST INCOME INTEREST INTEREST INCOME EXPENSE (+) (-) ALM bsenver@superonline.com 30 $ interest income + net interest income net interest income interest expense ALM bsenver@superonline.com - time 31 NET INTEREST INCOME NET INTEREST INCOME INTEREST INCOME P/L INTEREST EXPENSE P/L INTEREST EARNING ASSETS B/S INTEREST BEARING LIABILITIES B/S ALM bsenver@superonline.com 32 NET NON-INTEREST INCOME NET NON-INTEREST INCOME NON NON INTEREST INTEREST INCOME EXPENCE (+) (-) ALM bsenver@superonline.com 33 STATEMENT OF INCOME • • • • • • • • Interest Income Interest Expense Net I.Income Non Interest Income Operating Expenses Pre-Tax Profit Tax Provision Net Income ALM bsenver@superonline.com 1000 (700) 300 220 (450) 70 (30) 40 34 ANALYSIS OF PROFIT NET PROFIT (NP) PROFIT FROM BANKING OPERATIONS (NET OPERATING INCOME) (NOI) PROFIT FROM EXTRAORDINARY TRANSACTIONS (PEXT) ALM bsenver@superonline.com PROFIT FROM SECURITY TRANNSACTIONS (PST) 35 BANKING RISKS ALM bsenver@superonline.com 36 BANKING RISKS •C AMEL • • • • A M E L ALM bsenver@superonline.com 37 CAMEL • Capital Adequacy ALM bsenver@superonline.com 38 C AMEL • Asset Quality ALM bsenver@superonline.com 39 CA MEL • Management Quality ALM bsenver@superonline.com 40 EL CAM • Earnings Efficiency ALM bsenver@superonline.com 41 L CAME • Liquidity Risk ALM bsenver@superonline.com 42 CAMEL RISKS • Capital Adequacy • Asset Quality • Management • Earnings • Liquidity ALM bsenver@superonline.com 43 BANKING RISKS • • • • • • 1.2.3.4.5.CAMEL 6. Credit Risk 7. Interest Rate Risk 8. Interest Rate Sensitivity Risk 9. Foreign Exchange Availability Risk 10. F/X Position Risk ALM bsenver@superonline.com 44 BANKING RISKS • • • • • • • 11. Accounting & Reporting Risk 12. Computer Risk 13. Capital Market Operations Risk 14. Money Market Operations Risk 15. Country (Sovereign) Risk 16. Pricing Risk 17. Market Risk ALM bsenver@superonline.com 45 BANKING RISKS • • • • • • • 18. Theft Risk 19. Fraud & Defalcations Risk 20. Natural Disasters 21. Strategic Risk 22. Fiduciary Risk 23. Transaction Risk 24. Regulatory/Compliance ALM bsenver@superonline.com 46 BANKING RISKS • 25. Reputation Risk • 26. Large Loans/Deposits Risk • 27. Concentration Risk ALM bsenver@superonline.com 47 RATIO ANALYSIS Numerator ______________________ Denominator ALM bsenver@superonline.com 48 RATIO ANALYSIS • Balance Sheet __________________ Balance Sheet • Income Statement ________________ Balance Sheet ALM bsenver@superonline.com 49 RATIO ANALYSIS • What is the • What is the • LEVEL ? • TREND ? ALM bsenver@superonline.com 50 RATIO ANALYSIS • • • • • 1. Capital Adequacy 2. Asset Quality 3. Management 4. Earnings & Efficiency 5. Liquidity ALM bsenver@superonline.com 51 RATIO ANALISIS CAPITAL ADEQUACY • “The Capital of a Bank protects the Bank against unexpected future losses.” ALM bsenver@superonline.com 52 RATIO ANALYSIS CAPITAL ADEQUACY • 1. • • Shareholders’ Equity -----------------------------------Total Assets • The ability of the present Capital to support the further growth of Assets ALM bsenver@superonline.com 53 RATIO ANALYSIS CAPITAL ADEQUACY • 2. • • Shareholders’ Equity -----------------------------------Risk Weighted Assets ALM bsenver@superonline.com 54 RATIO ANALYSIS CAPITAL ADEQUACY • 3. • • Shareholders’ Equity -----------------------------------Risk Weighted Assets + RW Contingent Liabilities ALM bsenver@superonline.com 55 RATIO ANALYSIS CAPITAL ADEQUACY • 4. • • Total Debt -----------------------------------Shareholder’s Equity • The ability to raise additional Debt Capital ALM bsenver@superonline.com 56 RATIO ANALYSIS CAPITAL ADEQUACY • 5. Financial Leverage : • • Total Assets -----------------------------------Shareholder’s Equity ALM bsenver@superonline.com 57 RATIO ANALYSIS CAPITAL ADEQUACY • 6. Capital Formation Rate : • Retained Net Income (RNI) -------------------------------------------------• Average Shareholder’s Equity • RNI = Net Income - Dividends to be paid • The internal growth of Equity Capital ALM bsenver@superonline.com 58 RATIO ANALISIS ASSET QUALITY • 1. • • Loans -------------------------------Total Assets ALM bsenver@superonline.com 59 RATIO ANALISIS ASSET QUALITY • 2. Non Performing Loans = • a) Loans past due more than 90 days • b) Loans not accruing interest • c) Loans with low interest rates • d) Loans on which repayment terms have been renegotiated. • ALM bsenver@superonline.com 60 RATIO ANALISIS ASSET QUALITY • 3. • Non Performing Loans ------------------------------------Total Loans • Indicates how much of the loan portfolio is non performing. ALM bsenver@superonline.com 61 RATIO ANALISIS ASSET QUALITY • 4. Reserves for Non Performing Loans ---------------------------------------------• Non Performing Loans • Indicates the ability of the loan loss reserve to absorb potential losses from currently non performing loans. ALM bsenver@superonline.com 62 RATIO ANALISIS ASSET QUALITY • 5. • Loan Loss Provision ------------------------------------Average Loans • Shows current income reduction in anticipation of loan losses. ALM bsenver@superonline.com 63 RATIO ANALISIS ASSET QUALITY • 6. • Net Charge - Offs ------------------------------------Average Loans • Shows current income reduction in anticipation of loan losses. ALM bsenver@superonline.com 64 RATIO ANALISIS ASSET QUALITY • 7. • • Interest Earning Assets ------------------------------------------------Total Assets ALM bsenver@superonline.com 65 RATIO ANALISIS ASSET QUALITY • 8. • • Non Interest Earning Assets ------------------------------------------------Total Assets ALM bsenver@superonline.com 66 RATIO ANALISIS EARNINGS & EFFICIENCY • “A Bank with no profit is like a human body with no blood.” ALM bsenver@superonline.com 67 THE PRIMACY OF EARNINGS • A bank can not sustain itself long without a positive cash flow. • Earnings are essential to : • 1.Absorb loan losses • 2.Finance internal growth of capital • 3.Attract investors to supply capital ALM bsenver@superonline.com 68 RATIO ANALISIS EARNINGS & EFFICIENCY • 1. Return on Assets ( ROA ) • • Net Income -------------------------------------------Total Average Assets ALM bsenver@superonline.com 69 RATIO ANALISIS EARNINGS & EFFICIENCY • 2. Return on Equity ( ROE ) • • Net Income -------------------------------------------Average Shareholder’s Equity ALM bsenver@superonline.com 70 RATIO ANALISIS EARNINGS & EFFICIENCY • 3. Return on Equity ( ROE ) • ROE = ROA * Equity Multiplier • ROE = ( NI / AST ) * ( AST / SHEQ ) ALM bsenver@superonline.com 71 RATIO ANALISIS EARNINGS & EFFICIENCY • 4. • • Interest Income -------------------------------------------Average Interest Earning Assets ALM bsenver@superonline.com 72 RATIO ANALISIS EARNINGS & EFFICIENCY • 5. • • Net Interest Income -------------------------------------------Average Total Assets ALM bsenver@superonline.com 73 RATIO ANALISIS EARNINGS & EFFICIENCY • 6. • • Interest Income on Loans -------------------------------------------Average Total Loans ALM bsenver@superonline.com 74 RATIO ANALISIS EARNINGS & EFFICIENCY • 7. • Total Operating Expense ------------------------------------------------• Total Operating Income ALM bsenver@superonline.com 75 RATIO ANALISIS EARNINGS & EFFICIENCY • 8. Efficiency Ratio • Non Interest Expense ---------------------------------------------------• Net Interest Income + Fees Commissions ALM bsenver@superonline.com 76 RATIO ANALISIS EARNINGS & EFFICIENCY • 9. Break Even Ratio • Total Expenses - Non Interest Income ---------------------------------------------------• Total Average Interest Earning Assets ALM bsenver@superonline.com 77 RATIO ANALISIS EARNINGS & EFFICIENCY • 10. Net Free Funds Ratio • Non Paying Liabilities - Non Earning Assets -------------------------------------------------• Interest Earning Assets ALM bsenver@superonline.com 78 RATIO ANALISIS EARNINGS & EFFICIENCY • 11. Interest Rate Sensitivity Gap : • Interest Rate Sensitive Assets ( minus ) • Interest Rate Sensitive Liabilities • Shows the net amount to be effected by the future change of interest rates in the market ALM bsenver@superonline.com 79 RATIO ANALISIS EARNINGS & EFFICIENCY • 12. Interest Rate Sensitivity Gap Ratio : • • Interest Rate Sensitive Assets ------------------------------------------------Interest Rate Sensitive Liabilities ALM bsenver@superonline.com 80 RATIO ANALYSIS LIQUIDITY • “Inadequate Liquidity of a Bank may cause an accident similar to an airplane crash !” ALM bsenver@superonline.com 81 RATIO ANALISIS LIQUIDITY • 1. • • Loans ------------------------Deposits ALM bsenver@superonline.com 82 RATIO ANALISIS LIQUIDITY • 2. • • Liquid Assets ------------------------Deposits ALM bsenver@superonline.com 83 RATIO ANALISIS LIQUIDITY • 3. • • Liquid Assets -------------------------------Deposits + Borrowings ALM bsenver@superonline.com 84 RATIO ANALISIS LIQUIDITY • 4. • • Assets Due for the Period ----------------------------------------Liabilities Due for the Period ALM bsenver@superonline.com 85 RATIO ANALISIS LIQUIDITY • 5. Net Large Liabilities ----------------------------------------• Net Earning Assets • Both numerator & denominator are net of short-term assets. • Measures the extent to which net earning assets would be effected by the loss of a bank’s large liabilities. ALM bsenver@superonline.com 86 RATIO ANALISIS LIQUIDITY • 6. • Liquid Assets ----------------------------------------Large Liabilities • Measures the assets readily available to cover a loss of large liabilities. ALM bsenver@superonline.com 87 RATIO ANALISIS LIQUIDITY • 7. • Core Deposits ----------------------------------------Earning Assets • Indicates the extend to which earning assets are funded by those deposits considered stable and not subject to interest rate disintermediation. ALM bsenver@superonline.com 88 RATIO ANALISIS LIQUIDITY • 8. • Brokered Deposits ----------------------------------------Earning Assets • Measures the extent to which a bank is funding assets with high-priced and volatile brokered deposits. ALM bsenver@superonline.com 89 MATURITY ANALISIS Days Cash Loans 0-10 100 200 300 Deposit 400 Borrow 150 550 10-30 200 500 700 300 200 500 30-60 300 200 500 800 200 1000 ALM bsenver@superonline.com 60-90 50 100 150 20 30 50 90 MATURITY ANALYSIS Days 0-10 10-30 30-60 60-90 Asset Liab 100 300 500 200 1000 1500 2000 700 Short - -200 Long + -500 +300 ALM bsenver@superonline.com 1300 91 OFF - BALANCE SHEET RISK • 1. • Loan Commitments ----------------------------------------Average Assets • Shows the extent of a bank’s obligation to make loans. ALM bsenver@superonline.com 92 OFF - BALANCE SHEET RISK • 2.Contingent Liabilities & Commitments ---------------------------------------------------• Average Assets • Shows the extent of a bank’s commitments & contingent liabilities. ALM bsenver@superonline.com 93 I manage Assets! % rates, due dates... RISKS I manage Liabilities % rates, due dates... ALM bsenver@superonline.com 94 ASSET & LIABILITY MATCH ALM bsenver@superonline.com 95 A & L Match • • • • • • Amounts Currency Due Dates Interest Rates Interest Sensitivity Volatility ALM bsenver@superonline.com 96 Foreign Exchange Position • USA $ Short Position • $Liabilities>$Assets • USA $ Long Position • $Assets>$Liabilities ALM bsenver@superonline.com 97 F/X Position Strategy Increasing F/X Rates Decreasing F/X Rates Long Position YES NO NO YES Short Position ALM bsenver@superonline.com 98 Interest Rate Sensitivity • Interest Rate Sensitive Assets/Liabilities • IRSA/L are such assets and Liabilities whose interest rates will change before their due dates when there is a change in market interest rates. ALM bsenver@superonline.com 99 Interest Rate Sensitivity Interest Rate Sensitive Assets & Liabilities Interest Rate Non-Sensitive Assets & Liabilities VARIABLE RATES ALM bsenver@superonline.com FIXED RATES 100 Interest Rate Sensitivity Gap • Positive Gap • IRSA>IRSL • IRS GAP = • (IRSA – IRSL) • Negative Gap • IRSL>IRSA ALM bsenver@superonline.com 101 Interest Rate Sensitivity Strategy Interest Rates Will Increase Interest Rates Will Decrease Positive IRS GAP YES NO Negative IRS GAP NO YES ALM bsenver@superonline.com 102 INTEREST MARGIN INCREASING THE INTEREST MARGIN % ALM bsenver@superonline.com 103 INCREASING INTEREST MARGIN • Interest Income…………..200 • Interest Expense…………( 50 ) ---------• INTEREST MARGIN….. 150 ---------- ALM bsenver@superonline.com 104 $ interest income + net interest income net interest income ALM bsenver@superonline.com interest expense - time 105 INCREASING THE INTEREST MARGIN BANK STRATEGY TO INCREASE THE INTEREST MARGIN INCREASE SIZE CHANGE INTEREST SPREAD ALM bsenver@superonline.com ALTER ASSET/LIABILITY MIX 106 INCREASING THE INTEREST MARGIN • BANK STRATEGY • ACTION • Increase Size • 1.Expand Assets • 2.Reduce Fixed Assets • 3.Increase Equity Base ALM bsenver@superonline.com 107 INCREASE THE INTEREST MARGIN • BANK STRATEGY • ACTION • Change Interest Spread • 1.Re-Price Asset Portfolio • 2.Re-Price Liability Portfolio ALM bsenver@superonline.com 108 INCREASE THE INTEREST MARGIN • BANK STRATEGY • Alter Asset / Liability Mix • • • • ACTION 1.Plan Taxes 2.Reduce Liquidity 3.Increase Aggressiveness • 4.Change Asset Yield Sensitivity • 5.Change Liability Cost Sensitivity ALM bsenver@superonline.com 109 INCREASE THE INTEREST MARGIN • BANK STRATEGY Increase Size • ACTION Expand Assets • IMPLEMENTATION • 1.Offer new Products and Services • 2.New Loans/Deposits • 2.Open new Branches • 3.Expand Promotion Budget • 4.Reduce Interest Spread ALM bsenver@superonline.com 110 EXPAND ASSETS • REPERCUSSION • 1.Increase operating Expenses • 2.Need for Capital • 3.F/A Regulations • 4.Decrease Capital Ratio • 5.Reduce ROA • IMPLEMENTATION • 1.Offer new Products and Services • 2.New Loans/Deposits • 3.Open new Branches • 4.Expand Promotion Budget • 5.Reduce Interest Spread ALM bsenver@superonline.com 111 INCREASE THE INTEREST MARGIN • BANK STRATEGY Increase Size • ACTION Increase Equity Base • IMPLEMENTATION • 1.Reduce Dividend pay out • 2.Offer Dividend reinvestment • 3.Sell Stock • 4.Establish Employee Stock Ownership PL ALM bsenver@superonline.com 112 INCREASE EQUITY BASE • REPERCUSSIONS • 1.Hurt shareholders • 2.Double taxation S/H 3.Reduce ability to leverage ROA, dilution of earnings • 4.Continued Employee Expectations • IMPLEMENTATION • 1.Reduce Dividend pay out • 2.Offer Dividend reinvestment • 3.Sell Stock • 4.Establish Employee Stock Ownership PL ALM bsenver@superonline.com 113 INCREASE INTEREST MARGIN • BANK STRATEGY Change Interest Spread • ACTION Re-price Portfolio • IMPLEMENTATION • 1.Increase rates on Loans • 2.Compound return more frequently • 3.Reduce rates on Deposits • 4.Compound cost less frequently ALM bsenver@superonline.com 114 REPRICE PORTFOLIO • REPERCUSSIONS • 1.Lose business Loan quality decrease • 2.Increase operations Client dissatisfaction • 3.Lose business Liquidity problem • 4.Increase operations Client dissatisfaction • IMPLEMENTATION • 1.Increase rates on Loans • 2.Compound return more frequently • 3.Reduce rates on Deposits • 4.Compound cost less frequently ALM bsenver@superonline.com 115 INCREASE INTEREST MARGIN • IMPLEMENTATION • BANK STRATEGY • Alter Asset/Liability Mix • ACTION • Reduce Liquidity • 1.Minimize cash • 2.Minimize due from • 3.Sell Securities & Bonds • 4.Increase short term Deposits ALM bsenver@superonline.com 116 REDUCE LIQUIDITY • REPERCUSSION • IMPLEMENTATION • 1.Liquidity Risk • 2.Lose correspondent • 3.Incur book losses • 1.Minimize cash • 2.Minimize due from • 3.Sell Securities & Bonds • 4.Increase short term Deposits • 4.Increase volatility of deposits ALM bsenver@superonline.com 117 INCREASE INTEREST MARGIN • BANK STRATEGY • Alter Asset/Liability Mix • ACTION • Increase Aggressiveness • IMPLEMENTATION • 1.Increase loan/deposit ratio • 2.Increase highest yielding loans • 3.Increase highest yielding securities ALM bsenver@superonline.com 118 INCREASE AGGRESSIVENESS • REPERCUSSION • 1.Increase need for capital • 2.Increase loan losses • 3.Increase security losses • IMPLEMENTATION • 1.Increase loan/deposit ratio • 2.Increase highest yielding loans • 3.Increase highest yielding securities ALM bsenver@superonline.com 119 INCREASE INTEREST MARGIN • BANK STRATEGY • Alter Asset/Liability Mix • ACTION • Change Asset Yield Sensitivity • IMPLEMENTATION • 1.Increase S/T & variable rate assets if rates will increase • 2.Decrease S/T & variable rate assets if rates will decrease ALM bsenver@superonline.com 120 CHANGE ASSET YIELD SENSITIVITY • REPERCUSSION • 1.Wrong estimate of interest movement, thereby reducing interest spread • IMPLEMENTATION • 1.Increase S/T & variable rate assets if rates will increase • 2.Decrease S/T & variable rate assets if rates will decrease ALM bsenver@superonline.com 121 INCREASE INTEREST MARGIN • BANK STRATEGY • Alter Asset/Liability Mix • ACTION • Change Liability Cost Sensitivity • IMPLEMENTATION • 1.Decrease S/T & variable rate liabilities if rates will increase • 2.Increase S/T & variable rate liabilities if rates will decrease ALM bsenver@superonline.com 122 CHANGE LIABILITY COST SENSITIVITY • REPERCUSSION • 1.Wrong estimate of interest movement, thereby reducing interest spread • IMPLEMENTATION • 1.Decrease S/T & variable rate liabilities if rates will increase • 2.Increase S/T & variable rate liabilities if rates will decrease ALM bsenver@superonline.com 123
Related documents