Ally Financial Inc. is an independent financial firm that was founded in 1919. They are a leading automotive financial company, provide mortgages and other commercial financing and also became a bank holding company in December 2008. Ally Bank is a subsidiary of Ally Financial and raises deposits from customers through the internet, over the phone and through mobile applications. As a direct bank, Ally does not have any bank branches and strives to grow its business through direct channels (internet, phone, mail, and mobile). The percentage of customers who prefer to do banking via direct channels has increased by 41% between 2007 and 2012, while the number of people who prefer traditional branch banking declined by 21%.
In order to analyze Ally, I will be evaluating its balance sheet and performance ratios over the period from June 2006 to June 2013. This will show the progression of the bank throughout the 2008-2009 financial crisis. I will compare Ally’s financial data to the whole US banking industry as a way to analyze the banks risk and performance over that period. Factors such as profitability, credit risk, capital adequacy, liquidity risk, interest rate risk, market risk, ad off balance sheet exposures will all be evaluated.
Ally Bank is showing growth over the period from 2006-2013. Total assets have increased by over 2000% from $3.5B to $92B. Total deposits have been increasing steadily at an average of 31% every year since 2006. Within the past year, net loans have been steady at about $66B.
Ally’s lines of business include mortgage loans, insurance, and automotive loans. Over the past three years, automotive loans have been increasing while insurance and mortgage loans have been decreasing. I suspect...
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...its, and long term assets to total assets. However, in the past two years these metrics seem to be getting worse. Ally’s ROE and ROA is dropping along with its cash to deposit ratio and cash and AFS to deposits. It’s no longer in a better position when compared to other financial institutions. Ally has minor exposure to other risks though. It does not carry many derivatives to assets, all deposits are in US offices, and Ally does not carry any trading account assets. All of these measures keep risks low when compared to other banks. Going forward, Ally will need to watch its gap ratios, particularly the 1-3 year bucket. Ally has a negative gap ratio for this time period meaning that it has liability sensitivity for that time bucket.
Works Cited
http://www.ally.com/about/investor/annual-reports/ http://www2.fdic.gov/SDI/ http://www2.fdic.gov/Call_TFR_Rpts/
In this case, the reader learns that liquidity is a better than average. The ratio and cash on hand have been better than 2013 from the past years. Moreover, it shows that the hospital has a higher ability to meet its cash obligation because it has more security compared to other hospitals. Funding allows hospitals to control funds and limit investments. Not-for-profit organizations help provide more services and margin of safety. Therefore, creditors look for a margin of safety so that the community that financed a small portion of total financing can be returned to the owners by leveraging. Capitalization ratio measures the funds that were borrowed and the assets that have been used. The coverage ratio measures the number that time they fixed financial charges. The time's interest earned ratio shows the ability of the hospital to meet
These ratios can be used to determine the most desirable company to grant a loan to between Wendy’s and Bob Evans. Wendy’s has a debt to assets ratio of 34.93% while Bob Evans is 43.68%. When it comes to debt to asset ratios, the company with the lower percentage has the lowest risk. Therefore, Wendy’s is more desirable than Bob Evans. In the area of debt to equity ratios, Wendy’s comes in at 84.31% while Bob Evans comes in at 118.71%. Like debt to assets, a low debt to equity ratio indicates less risk in a company. Again, Wendy’s is the less risky company. Finally, Wendy’s has a times interest earned ratio of 4.86 while Bob Evans owns a 3.78. Unlike the previous two ratios, times interest earned ratio is measured on a scale of 1 to 5. The closer the ratio is to 5, the less risky a company is. From the view of a banker, any ratio over 2.5 is an acceptable risk. Both companies are an acceptable risk, however, Wendy’s is once again more desirable. Based on these findings, Wendy’s is the better choice for banks to loan money to because of the lower level of
Ratio analysis are useful tools when judging the performance of a company by weighing and evaluating the operating performance (Block-Hirt). There are 13 significant ratios that can separate by four main categories, profitability, asset utilization, liquidity and debt utilization ratios. The ratio analysis covered here consists of eight various ratios with at least one from each of these main categories. These ratios were used to compare and contrast the performance of Verizon versus AT& T over the years 2005 and 2006.
The banking industry is under pressure in today’s business climate. Banks have been through big changes. There is opportunity, but there is also increasing competition. To be the preferred bank means changing “good enough” into a unique value proposition. And that means changing the way people have always done things, change on this level requires cutting edge technology. Change cannot be achieved with a simple directive or surface adjustment especially within the banking industry. It requires an innovative rethink of the entire system, in a strong partnership between bank leaders and their change agents. New systems and policies must support the strategy to be successful. The real test of a good strategy implementation plan is whether the people understand the strategy, are motivated and enabled to implement it, and actually start achieving its goals.
Capital One uses IT through its information-based strategy (IBS) to “record, organize, and analyze data on the characteristics and behaviors of their customers,” as stated by CEO Richard Fairbank. Their philosophy was to exploit information by constructing scientific models that could be used to both assess the creditworthiness of potential cardholders through FICO scoring, and to customize product offerings for existing ones. This was done through data mining, sorting, customizing offers and marketing campaigns, and then analyzing this data to see what campaigns worked – for what reason and what it returned in revenue and profit generation. This differs from other financial institutions in that these other institutions were compiling data manually, accepting applicants based upon debt-income ratios and were all charging the same interest rate and annual fee.
The new era in banking is what Ally Banks has to offer. We may not be able to walk into a brick and mortar building…but you are able to reach someone 24/7 anytime one wants, and have instant online banking availability. Ally Bank boasts that they do not pay rent on building instead they pass that savings along to the customer. Ally Bank, a subsidiary of Ally Financial Inc., originally stemmed from General Motors Acceptance Corporations, otherwise known as GMAC. GMAC was founded in 1919 and was the key provider of automotive financing to its dealerships.
Notably, its share price has dropped 43% just in the last year, after the publication of the year losses of €6.8 billion (remarkably €2.8 billion more than the losses of 2008) . The ROE for the bank passed from 7.89% in 2010 to minus -9.02% at the end of 2015. Based on the figures in the latest interim report in July 2016 the ratio decreased further to -11.52% in June . Considering this trend, we need to take into account also that in recent years, the ROE was consistently below the cost of capital, eroding value. A company can increase its ROE in 2 ways: increasing the numerator - raising your net income - or decreasing the denominator – the equity capital. Banks represent generally a capital-intense business, and the introduction of tighter regulations is posing difficulties to the banks that aim to reduce their equity capital. It appears clear that the only way to achieve a better ROE is to attain a high financial leverage . The pre-financial crisis leverage level was impressive (71.73%), and today is 27.11%, above the standard of its direct competitors .The return on assets has also decreased in the last six years and has reached a negative level of -0.46%
JPMorgan Chase and Company was set up in 1968 as a corporation by Delaware law. It is the leader in financial transaction processing and asset management, financial services for consumers and businesses, and also investment banking. This company is the servant to millions of customers in over 70 countries. The principle bank branches include JPMorgan Chase Bank, National Association and Chase Bank USA, NA. JPMorgan Chase's principal non-bank branch is J.P. Morgan Securities, Inc. The Retail Financial Services division helps consumers and businesses through personal service at bank branches, ATMs, online banking, telephone banking, auto dealerships and school financial aid offices. I never knew that Chase bank was a part of JPMorgan Company until now; I always knew the company as just “JPMorgan”. The Company’s Commercial Banking branch works for over 26,000 clients nationwide. Its Treasury and Securities Services branch is a worldwide leader in transaction, investment and information services. The JPMorgan Chase's business headquarters are located in New York City. Their retail financial services and commercial banking headquarters are located Chicago. J.P. Morgan, Chase Manhattan, Chemical, Manufacturers Hanover, Bank One, First Chicago, and National Bank of Detroit also funded the development of communities worldwide.
Wells Fargo leading aspects has shown they are strong and manageable. One of the factors of management that has caught my attention is how transparent they are. According to John Stumpf, CEO of Wells Fargo, if an employee wants to say it, just say it! Stumpf said that managers have learned to disagree without being disagreeable. The fact that they care for their customers so much, they tend to likewise care for their employees.
By the 1970s the bank had firmly developed a policy of expansion by acquisition or formation of subsidiaries with their own identities and expertise.
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound. Among the study’s findings were that the deciding factor of the predictor of bankruptcy should not be only a few ratios, as the measure of a company’s financial solvency may differ as the firm’s situations differ. The important question is to which ratios are to be used and of those ratios chosen, which ratios are given priority weight.
Barra Airways has an interest coverage ratio (ICR) of 18; this means that Barra Airways is not burdened with a large amount of interest payments on existing debts. Therefore, using debt does appear to be an attractive source of finance. This is because Barra Airways existing interest burden is low, meaning that to increase it would have a reduced effect on the company’s net profit. However, EasyJet has an ICR of 30.88, considerably larger than that of Barra Airways [5]. Lenders may look at this data and conclude that Barra Airways is a riskier company to lend too than others in the same industry; this will result in a higher interest rate on any debt taken out.
Banks have been forced to respond to the substantial increase in capital and liquidity requirements by scaling down their businesses and strategically evaluating their choice of customers, products and geographies. To a certain extent simplification of banking business is positive since leading up to the crisis, bank balance sheets were undoubtedly too big, business models were too complex, leverage was too high and risk models were inadequate and to handle the extreme events that occurred. However the required changes will inevitably lead to lower returns.
A variety of groups are concerned in bank profitability for various reasons. The bank shareholders would want to know if the value of their investments is high or low. The investors also use current and past performance to predict future price of the banks’ shares traded on the stock exchanged. The management of the bank as trustee of the shareholders is evaluated and compensated on the basis of how well their decisions and planning have contributed to growth in assets and profits of their banks. Employees of bank also are concerned with profits, since their salaries and promotions are frequently tied to the profitability performance of their banks.
According to Alliance bank (n.d.), family was the most valuable assets that continue to drive success of their company. Alliance bank was committed to provide their employees a safe, health, and conductive working environment. Human capital investment was the strategic and integral part in the Bank’s policies, financial commitment, and business framework. Besides that, development is critical to our goal of being the Malaysia’s Best Customer Service Bank.