Assignment: Read the Sections for your Analysis below, and look at the CapitalOne
UBPRRatiosSpreadsheet.xls posted in Mod. 3 that shows ratios for 2019 and 2018
for the Bank (Capital One) and the Peer Average (PG1). Then do a Bank
Performance and Risk Analysis using the Exhibits at the end of the case.
****Be sure to go over the Audio Overviews in Module 3 for doing the different
sections of a Bank Performance/Risk Analysis and examples, along with the lecture
notes and review questions and answers that also provide examples for a bank
analysis. Feel free to copy any tables from the spreadsheet file for each section of
your analysis.
Here are the Sections to Do for Your Bank Performance Analysis listed below:
I. Introduction (Look up Capital One on the web and do a short intro. paragraph
about the bank. Also, include the primary types of loans the bank has including each
type’s % of total loans, as shown on the Capital One UBPRRatiosSpread sheet under the
third tab “Page05&06BalShtLoanMixOBS” (Page 7A Loan Mix).
II. Performance Analysis
A. Trend OROA Analysis (explain why the Bank’s OROA changed in 2019 by looking
at differences in 2018 versus 2019 for the NIM, Burden%, and PLL% –including IR%
and IE% changes to explain why the NIM changed, and the likely funding gap. Also,
explain why the Burden Changed by analyzing differences in the NIE% and NIR% for
the Bank in 2019 versus 2018 (see spreadsheet 1st tab: Page 01 EarningsProf&Risk
Ratios, top of the page Under Earnings & Profitability for A,B,C).
B. Peer OROA 2019 Comparison Analysis (explain why the Bank’s OROA differs
from the PG1 in 2019 by looking at differences in the NIM, Burden%, and PLL% for the
Bank compared to the PG1 in just 2019.1(including analyzing differences in in the IR%
and IE% to explain why the NIMs for Capital One and the Peers differ in 2019, and
differences in the NIE% and NIR% to explain why the Burdens are different for Capital
One in 2019 compared to the Peers.
C. Dupont Trend Analysis: Calculate the Bank’s AU and NPM, EM, and ROE and put
these in a Table as below. Recall: (EM = 1 / Tier 1 Capital Ratio as a fraction); ROE =
ROA x EM; AU = IR% + NIR%; NPM = ROA / (AU as a fraction)
Do a Table 2019 Bank Peer 2018 Bank Peer
ROE
ROA
EM
AU
NPM
B. Dupont Trend Analysis for 2018 to 2019: Using a Dupont Analysis, explain why
the ROE and ROA for the Bank changed in 2019 compared to 2018 (by analyzing
differences in AU, NPM, and EM).
C. Dupont Peer Comparison Analysis for 2019: Using a Dupont Analysis, explain
why the ROE and ROA for the Bank differ in 2019 from the Peer average (by
analyzing differences in AU, NPM, and EM. What strengths/weaknesses are
revealed?
III. Net Interest Margin (NIM) Trend & Peer Analysis
A. Asset Rate/Mix Analysis Explain why the Bank’s IR% changed & why it is
different from the Peers in 2019 by looking at the %of earnings assets, % of net
loans & leases, and the types of loans it has and the rates it has on its loans
compared to the Peers) (see 1st tab on the spreadsheet & look under margin
analysis; and the 3rd tab under Loan Mix, and the 2nd tab under Yield on (Loan
Rates).
B. Liability Rate/Mix Analysis ((Explain why the Bank’s IE% changed & why it
is different from the Peers in 2019 by looking at the types of liabilities it has
and rates on these). For the spreadsheet, see tab 3 to see “Liabilities” for the
Liability Mix, and see Tab 2 for “Costs (Rates on Liabilities).
IV. Burden Analysis Analyze by looking at different costs & efficiency ratios &
explain why the Bank’s NIE% changed & why it is different from the Peers in
2019). (For the spreadsheet, see Tab 2 “Page 03 Noninterest Exp” top of the page).
V. Risk Analysis Peer Comparison for 2021)
(See Spreadsheet, Tab 1, bottom of the page for risk ratios for Credit Risk,
Liquidity Risk, Capitalization, and Growth Rates for Capital and Assets, with
Additional Risk Ratios on the 4th Tab “Risk Ratios including Int. Rate Analysis).
A. Analysis of Credit Risk Comparing the Bank to its Peers in 2019 (Look at the
bank’s mix changes & credit risk ratios including loss ratios and earnings coverage
ratios)
B. Analysis of Liquidity Risk Comparing the Bank to its Peers in 2019 (Look at
ratios for the Bank’s Liquidity risk on the asset, liability, and off-balance sheet
sides)
C. Analysis of Capital Risk Comparing the Bank to its Peers in 2019 (Look at Tier 1
Capital Ratios, Dividend Payout Ratios, Growth in Equity compared to Growth in
Assets)
D. Analysis of Interest Rate Risk Comparing the Bank to its Peers in 1-year and 3-
year positions, that take Long-term Assets – Long-term Liabilities). Larger net
positions indicate greater interest rate risk.
VI. Conclusion: Based on your Analysis: Summarize why the Bank’s Performance
Changed in 2019and why it differs from the Peers in 2019 and your risk analysis
compared to the Peers, and the Bank’s strengths and weaknesses, and suggestions
for improvement.
