Analysis on CMBC and BC
Group member: Le hangxin
Zhang shuting
Pan bilin
Xi hanping
Introduction of two banks
Bank of China, or Bank of China Limited in full, is one of China’s
four state-owned commercial banks. It was established in 1912
pursuant to the approval of Mr. Sun Yatsen. Its businesses cover
commercial banking, investment banking and insurance. Members of
the group include BOC Hong Kong, BOC International, BOCG
Insurance and other financial institutions. The Bank provides a
comprehensive range of high-quality financial services to individual
and corporate customers as well as financial institutions worldwide. It
is mainly engaged in commercial banking, including corporate and
retail banking, treasury business and financial institutions banking.
Introduction of two banks
Founded in 1987 with its head office in Shenzhen, China, the
Company mainly focuses on the market in China. As at 31 December 2012,
the Company had 99 branches, 853 sub-branches, 2 branch-level operation
centers (a credit card center and a credit center for small enterprises), 1
representative office, 2,174 self-service centers and 1 wholly-owned
subsidiary, CMB Financial Leasing in more than 110 cities in Mainland
China.
The Company provides customers with various wholesale and retail
banking products and services, and maintains treasury businesses for
proprietary purpose and on behalf of customers. Many innovative products
and services of the Company, such as “All-in-one Card”, “All-in-one Net”,
dual-currency credit card and private banking services, have been widely
recognized by consumers in China.
Analysis on the Liability Structure of Two Banks
Compared the above
two tables，we find
that the total liabilities
of CMBC is 3,207,712
and the total liabilities
of BOC is 10,468,716.
The liabilities of BC
are three times more
than that in CMBC.
In the following, we
are going to compare
the differences of
liabilities between the
two commercial banks.
CMBC:
BC:
CMBC:
BC:
CMBC:
BC:
CMBC:
BC:
Asset structure & loan structure &security investment structure
As at 31 December 2012, the total assets of Bank Of China (hereinafter referred to as BC
for short) is RMB11, 242,120 billion representing an increase of 7.28% as compared with
the end of 2011.On the other hand, the total assets of China Merchants Bank (hereinafter
referred to as CMB for short) amounted to RMB3, 408, 219 billion, representing an increase
of 21.94% as compared with the end of 2011. According to the former data, we can figure
out that the size (often measured by total assets) of BC is larger than CMB while the rate of
increase is just the opposite.
It’ s clear from the “asset” charts above, that the item “loan” and the item
“investment securities” are both the most important parts in this two banks.
To make the further and more detailed comparisons in total assets, we will
continue to compare the loans structure and security investments structure of
these two commercial banks.
The item of “loan” can be divided into two parts, “Corporate loans and
advances” and “Personal loans”, and we can use the data from the annual report
to get the following pie charts. As at the dates indicated, the loans and advances
by product type so that we can find out that the big banks are more willing to offer
the personal loans to further optimize loan structure and systematically control
various risks.
Normally, available for sale investment, held to maturity investment and
investment receivables constitute the investment securities. The component of
investment in CMB is more detailed, and the conclusion is really different in the
banks of different scale.
Holding the held to maturity investment which is generally in the form of bonds
of fixed maturity and income accords with the principle of conservation that most
big banks required. On the other hand, the available for sale investment shows
better liquidity than other investment securities and the holders have the
opportunity to get the capital gains.
According to the above analysis, it is clear that the size effect to
commercial banks can influence the various aspects. Big banks and
small banks have different decision and strategy in their operating
activities.
The banks of big scale prefer to hold the investment securities asset
because the risk of investment securities is often smaller than the loan,
but the return is steadier.
Analysis on the Income Structure of Two Banks
Now we will analysis the income differences between large banks and small banks.
From every part of the income structure, the total revenue of the two banks is
composed of two parts, one part is net interest income, and another part is non–interest
income
Net interest income is composed of three parts, the first part of it is interest spreads
of deposit and loan, the second part is due from banks and other financial institutions,
and the last part is investment in securities. Because of two banks focus on different
aspects, the three aspects in net interest income are not same.
(1)
(2)
From these three points, we can find the different between large bank and small bank.
The difference is the importance of interest spreads of deposit and loan for small banks is
more than the importance of interest spreads of deposit and loan for large bank.
Non–interest income is composed of three parts, one part of it is net fee and commission
income, one part of it is other net non-interest income, and the last part of it is other net
income. Fee and commission income refers to the company for the customers to deal with
various businesses charging handling fees and commission incomes.
(3)
(4)
We can know that the importance of net fee and commission income for small banks
is the same as the importance of net fee and commission income for large bank. With
the increase of net fee and commission income in recent years, it is in the proportion of
non-interest income will be bigger than now.
(5)
(6)
Compared with picture (5) and picture (6), we can know that the impartment
thing of total revenues is net interest income. The proportions of two banks’
incomes are slightly different, but they are roughly the same. Net interest income
is still the largest proportion of total revenues. According to the longitudinal
analysis on some years of data banks themselves, we can get a conclusion that
with the trend of mercerization of the interest rate, the return the bank can get on
the interest income will be less and less, so non-interest income in total income
accounted for the proportion will be more.
Comparisons on the Performances of Big Bank and Small Bank
As small banks have larger possibilities to increase their scale, business and so on,
they are the potential increaser. While big banks have set up for many years, their
scale, possibilities for mature is much lower, they have already formed their own
fixed ways of business operations, and can’t be changed in short-terms. Because big
banks have larger assets and liabilities scales, their liquidity of assets is also higher
than small banks, they don’t need to worry about the source of money and tend to
focus on some fixed big customers rather than small and retail investors, because
more retail and unfamiliar customers means larger credit risks.
Greater competition tends to squeeze the difference between average asset yields
and average liability costs. Almost every bank has the same basic business, what they
can do to make a difference is to form their special business, or to create a new kind
of business.
When talking about banks, risk is also a very important aspect. Small banks needs
large scales of money to support it’s financial work, as they don’t have much money
and reputation, what they can do is to increase the times and the numbers of their trades.
Thus, they get the money from private investors that many big banks don’t want. These
investors may be carried with large default risk.