Industry Report: Banking
Introduction
When it comes to an industry, then there are number of things which have been taken into account for the same. The essence of effectiveness and productivity always been associated with an industry and the stance of effectiveness depends upon certain factors. There are number of industries working in the world and all of the industries have their own significance and importance lies in a broad nutshell. There are certain aspects which have to be taken into consideration by an organization or by an industry in order to become competitive and eminent in a certain industry.
Financial Productivity and effectiveness of the companies are vital at one place, but there are certain aspects which also take into consideration as well. Apart from maximizing profit and productivity, the name of minimizing the risks is one of them which are very much essential for the company. Among number of industries in which the inclusion of risk and productivity are essential, the name of Banking Industry is one of them, which has its own recognition and importance. Banking industry is one of those industries of the world that affected severely during the current economic crisis, in which number of risks associated with them. The main perspective of this assignment is to analyze the effectiveness of a certain industry with the help of different things in particular. Risk association and mitigation technique would also be used in the same analysis with a special focus on five different banks, which particularly are BMO, TD, BNS, Royal Bank of Canada and bank of Canada.
There are five different banks which have been taken into consideration for the same analysis and all of the banks have their importance and recognition in particular. There are number of risk factors that would be used for the same analysis. It is required to run a multivariate regression analysis on all of the five selected banks and their securities. It is required to first analyze the regression analysis on all of the selected banks and then analyze the level of effectiveness associated with the selected risk factors. We have taken the Standard & Poor (S&P) 500 Index analysis as well.
Bank of Montreal
Bank of Montreal is one of largest banks of Canada, with a high deposit rate and high amount of assets. The share power of the bank is wonderful, effective and high as well, which are some of the essentials due to which the investors throughout the world and especially of Canada like to invest in it. Return, Excess return and other important provisions have been taken into consideration for the same analysis and all of these aspects are important. Observations of five years have been taken into account. Mentioned below is the share chart of Bank of Montreal (BOM) juts to have a fluctuation based analysis of the shares of the company.
The standard of error is quite low in this particular provision and the level of intercept is quite high. The result of return is not so much high for the company and also not deviated enough from the mean return which is a positive and effective sign for BOM.
Toronto Dominion Bank (TD)
Toronto Dominion Bank (TD) is yet another important and largest bank of the region of Canada. Same amount of analysis has been taken into account for the same
The standard of error is quite low in this particular provision and the level of intercept is quite high. The result of return is not so much high for the company and also not deviated enough from the mean return which is a positive and effective sign for TD.
Bank of Nova Scotia
Bank of Nova Scotia (BNS) is not as high as compared to other selected banks in this particular analysis, but the provision of the bank is still quite high.
The mean price of the share of the bank is $ 47.81 which is quite high as well. Apart from this, the average return of the shares of the company is 0.02%. From the above mentioned chart, is could be found that the return pertaining to the share went on top in the last three observations, showing that the bank became generous in terms of returning their shareholders with high amount of return. The standard deviation or deviation from the mean return is 0.066% which is quite low. The relationship between the rate of return of BNS and S&P market is positive and showing a relationship of 0.73 which is quite high indeed. The regression statistics mentioned below is showing the same thing
The standard of error is quite low in this particular provision and the level of intercept is quite high. The result of return is not so much high for the company and also not deviated enough from the mean return which is a positive and effective sign for BNS.
Royal Bank of Canada (RY)
Royal Bank of Canada (RBC) is one of the largest banks of Canada with extensive amount of asset provisions in particular. It is known as one of the strongest banks of Canada in terms of size and financial competitiveness as well.
The graph mentioned above is somewhat similar to the graph of the rate of return mentioned and computed above in the analysis. It is again quite high in the observations like 52 to 60. The mean price of the share of the bank is $ 50.28 which is quite high as well. Apart from this, the average return of the shares of the company is 0.02%. From the above mentioned chart, is could be found that the return pertaining to the share went on top in the last three observations, showing that the bank became generous in terms of returning their shareholders with high amount of return. The standard deviation or deviation from the mean return is 0.071% which is quite low. The relationship between the rate of return of RY and S&P market is positive and showing a relationship of 0.73 which is quite high indeed. The regression statistics mentioned below is showing the same thing
The standard of error is quite low in this particular provision and the level of intercept is quite high. The result of return is not so much high for the company and also not deviated enough from the mean return which is a positive and effective sign for RY.
National Bank of Canada
National bank of Canada is known as one of the largest banks of Canadian region in terms of size, deposits as well as operational assets, which is an important and effective sign from their own standpoint.
The graph mentioned above is somewhat similar to the graph of the rate of return mentioned and computed above in the analysis. It is again quite high in the observations like 52 to 60. The mean price of the share of the bank is $ 32.52 which is quite high as well. Apart from this, the average return of the shares of the company is 0.02%. From the above mentioned chart, is could be found that the return pertaining to the share went on top in the last three observations, showing that the bank became generous in terms of returning their shareholders with high amount of return. The standard deviation or deviation from the mean return is 0.049% which is quite low. The relationship between the rate of return of RY and S&P market is positive and showing a relationship of 0.73 which is quite high indeed. Therefore, it could be said that the lowest amount of risk associated with the shares of this particular bank only. The regression statistics mentioned below is showing the same thing
The standard of error is quite low in this particular provision and the level of intercept is quite high. The result of return is not so much high for the company and also not deviated enough from the mean return which is a positive and effective sign for National bank of Canada
Risks Analysis
There are number of risks which are not in the favor of a bank. There are four different risks have been taken into consideration for the same and the names of the risks are market return, interest rate, inflation consumer spending. All of these risks have a dominating effective over the financial position and productivity of the banks
Market Return: High market return would have an adverse effect over the position of the banks as the bank would also have to increase their rate of return in order to compete with the market
Interest Rate: With high and lower interest Rate, the movements of securities are higher and lower for a bank which may possess risks in either side
Inflation: Inflation has a direct relationship with the riskiness of a company, like if the inflation is high; the banks also have to increase their rates and salaries in order to compensate the same risk
Consumer Spending: This is the only risk which would be effective for the bank if it increases but not effective if it decreases, because it may derail the stance of the banks as far as increasing their economic belongings are concerned
Conclusion
The main perspective of this assignment is to analyze the effectiveness of a certain industry with the help of different things in particular. Risk association and mitigation technique would also be used in the same analysis with a special focus on five different banks, which particularly are BMO, TD, BNS, Royal Bank of Canada and bank of Canada. From the entire analysis, it is found that the rate of return of all of the banks are similar and their relationship with the S&P index is also similar but the lowest amount of risk associated with the National bank of Canada and high investment should be there for future needs.
