During the report I will rely on my company’s audited balance sheet and PL account. I have got help and additional information from the controlling department and also the auditor of the bank. In a case of a bank business the common used asset and cost analysing methods are quite different from the studied methods of the given literature, but basically I will rely on the studied methods with some distinction. First of all in my work I will outline the main assets of my organisation, and point out the main differences of a bank asset structure.
I will use a different interpretation of asset structure, which can be useful for the analysis and point out the main points of the progress driven by the management strategy. In the second part I will interpret the different type of costs of my organisation, I will outline the special costs structure of the banking business. And finally I will analyse the effect of the management decisions in this area. During the research I will try to point out of the weak points of the structure and processes, and recommend appropriate directions of solution. A business unit uses its funds to invest into all sort of assets.
Assets are the main ground of its business activity, and determine the profile of a company. In these terms the assets tell lots of things about the kind of business area where the organisation exits. There are two main groups of assets: Fixed and Current. Fixed assets serve the company in longer terms, and have more than trivial value. It can be tangible, intangible and investments. The most common fixed assets are land, buildings, machinery, vehicles etc. Currents assets used for operating activities and change frequently, these can be inventories, receivables, securities, and cash.
In a case of banking operation, the proportion of these asset elements uses to be different from an ordinary producer or commercial company. The equipment of this kind of business is the money itself. The rate of financial based assets (receivables, bonds, shares, etc. ) is the highest due to the type of financial business. The Bank’s total asset side amounted to HUF 331 billion by the end of the last financial year. Based on this figure, the Bank had a market share of 4% in the banking sector of Hungary at last year’s end.
In our case, among this kind of assets we can find those, which acquire the main revenues of the classical retail bank business. This kind of assets forms the majority of the asset side. As a result of corporate and retail lending boom, and the portfolio clean-out, the asset portfolio significantly improved, and the portion of current assets increased dramatically, which helps to improve the profitability too. In this row, we counted all sort of cash and cash-equal stock. There is a minimum amount of banknote to operate the branches without any hitch.
The management tried to decrease this non-interest bearing assets, but the increased activity on the banknote market and the newly opened branches required more banknote than in the previous year. With the spread of cash saving methods (bankcards, e-banking) and the introduction of Euro banknote, the proportion of this element of assets can be reduced in the future. These are securities bought for trading purposes. As we can see from the numbers the bonds and other marketable interest bearing securities trading activity dramatically increased and represent the major part of the assets (more than 30%).
The purpose of this boom, that the Bank assumed responsibility of the primary dealership license of Postabank Security Ltd. For this year the Bank become the fourth largest dealer in government bonds and T-bills. And other portion of the increase was the result of the portfolio clean up, when Reorg corporate bonds subscribed in amount of HUF 25 billion. The rate of shares and non-interest bearing securities remained low. The security portfolio performance was outstanding in the year 2000. These are all sort of financial credit type assets. This group is the most significant among the assets.
These kinds of assets provide the most important part of the bank revenues; these have biggest profit production ability. Within receivables, constituting 44% of total assets, corporate loans were the determining factor. In the Bank strategy, a conservative lending policy and the active presence in the small and medium sized business market, the Bank aimed at vigorously increasing the number and volume of its loans. In regards of the maturity structure of the loan portfolio, the share of loans maturing within and beyond one year was 54% to 46%, which shows healthy progress from the previous year’s 39% to 61%.
