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论文题目：英国牛津布鲁克斯大学ACCA毕业论文：AN EVALUATION OF THE BUSINESS AND FINANCIAL PERFORMANCE OF CHINA MERCHANT BANK (CMB) FROM 2008 TO 2010
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要求字数：5000
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英国牛津布鲁克斯大学ACCA毕业论文：AN EVALUATION OF THE BUSINESS AND FINANCIAL PERFORMANCE OF CHINA MERCHANT BANK (CMB) FROM 2008 TO 2010
CHAPTER 1. THE OVERALL RESEARCH APPROACH
1.1 Structure of the Report
There are three chapters in the report totally to demonstrate the performance valuation respectively. The reasons for selecting the company called China Merchant Bank, the aims and the objectives as well as research approach suitable for the company http://www.ukassignment.org/uklunwen/ are provided in the first chapter. Then in the second chapter the sources of information collected and the reason to use them as important references are illustrated in which the limitations of the information and industry background are explained as well. More importantly, the essence of the report, business and financial analysis, is revealed in chapter 3, which applies representative industry indicators to justify the financial position, applicable business mode to analyze the economic prospects and existing problems of the company. Eventually, the valuable conclusions based on the analysis above could be drawn, and the improvements and recommendations will be put forward to promote the development of the company.
报告中有三章展示了其性能的估值分别。选择公司所谓的中国商业银行的原因和目的，以及研究方法适用于本公司的目标是在第一章规定。然后在第二章的信息收集和使用它们作为重要的参考说明其中的信息和行业背景的局限性作了说明原因的来源。更重要的是，该报告的本质，业务和财务分析，在3章中透露，将有代表性的工业指标的财务状况证明，适用的商业模式分析经济前景和存在的问题，公司。最后，基于以上分析可以得出有价值的结论，并建议改进将提出促进公司的发展。
CONTENTS
PART 1 - PROJECT OBJECTIVES AND OVERALL RESEARCH APPROACH PAGE
Structure of the report 3
Executive summary 3
The Research Approach in Detail 5
PART 2 - INFORMATION GATHERING AND ACCOUNTING / BUSINESS TECHNIQUES
Sources Used, and Reasons for Their Use 6
Limitations and Ethics in Information and Information Gathering 7
Company Background/Case Study Background 8
PART 3 - RESULTS, ANALYSIS AND CONCLUSIONS
Introduction of Business and Financial Analysis Methods 13
Application of Financial Performance Analysis 16
Profitability analysis 16
Loan Quality analysis 22
Analysis of Capital Adequacy Ratio 27
Application of Business Performance 30
Conclusions 42
1.2 Executive Summary
As for the reasons why choosing China Merchant Bank as the research target, the representative position in Chinese commercial banks and the remarkable achievement it has achieved in recent years are the key factors. Furthermore, from the perspective of global business, CMB has become the first Chinese bank to be approved by the Federal Reserve Committee to make business in the United States, which remains Top One among domestic commercial banks (ACCA study text book, 2008).
Although the experience of the filing of bankruptcy protection and the escalation of sub-prime crisis into the global financial tsunami in 2009 causes operating environment for banks to become more complicated and was full of uncertainties, CMB achieved satisfactory results from year 2009 afterwards and dodged the great economy shock through swiftly response to the urgent international situation. Especially, the company has seized the opportunities from macro economy and market growth to speed up the advancement of the "second transformation" strategy and then has made a pretty good achievements in 2011 when confronting with a more complex and volatile financial environment at home and abroad (James, Patrick and Giovanni, 2003). Therefore it should be significant to study that what kinds of business strategy or business mode creates the success of CMB till Chen Chunhua (2010) showed the fact that as long as maintaining absolute advantages on products, they won't be tripped by rivals in the following competition.
As a result, the objective of research not only presents a balanced and sustainable development of CMB, but also provides new operation mode and guides the direction of development and innovation of bank industry. For example, the permanent service philosophy of "We are here just for you", which has impressed the domestic banking industry with new service model and reforms. CMB was the first commercial bank among the domestic competitors to introduce a new concept of service-standing up to serve you, serving you with smile and door-to-door service. Followed by other banks' emulation, the whole service quality of bank industry enhanced.
Currently, CMB has made effective measures to establish a new model of customer service to adjust to the changes in customers' demand, which could promote its business and financial performance eventually.
1.3 The Research Approach in Detail
Unlike other industries such as manufacture, bank industry is a special chain industry in which the profitability source is different from the former. It could be showed between net interest income, non-interest income etc. and operating expenses, interest expenses etc. How to relate these factors to assess the performance of the target bank are pointed clearly. These indicators must be representative in bank industry: profitability reveals the ability to earn money; Loan quality indicates three meanings: (1) Degree of possibility that bank will recoup the loan capital; (2) The legality of granting loans; (3) The effectiveness of loan capital to earn money; Capital adequacy implies whether the scale of capital can recover accidental losses and shelter the bank from insolvency.#p#分页标题#e#
At the same time, the SWOT model as the most appropriate method is used to analyze the targeted company as bank industry is heavily affected by state policies and world macro-economy. Through the recognition of internal factors including strengths and weaknesses, external factors including opportunities and threats, providing strategic suggestions and improvement recommendations for consideration by CMB.
The duration of financial year in research is also a key point. The global economy and financial market remained turbulent and volatile in year 2009 and financial environment changed by time gone till in 2011, so the focus of the public is the direct effect on the China's banking industry. The analysis from year 2009 to year 2011 fully displays the business performance of CMB based on the subprime crisis. It provides persuasive evidences of capability of sustainable development.
CHAPTER 2. INFORMATION GATHERING
2.1 Sources Used, and Reasons for Their Use
When commencing to research the CMB, the brief overview of history concerning the subject should be firstly studied. First of all, the official website presenting a comprehensive introduction of the history and enterprise culture should be focused; additionally, main published books like China needs good banks: China Merchant Bank and Ma Weihua, which is one of the best-seller books in China, should be checked carefully; representative articles and their standpoints in common and at dispute should be gathered effectively.
At the same time, new research results from related research organizations and journals should be paid attention to provides convincing materials to support the opinions and conclusions. The government views (policy, meetings, speech) and the public opinions(inquiry, interview) are also essential to know, just like in year 2009, after the broke out of financial crises, China's monetary policy has undergone changes from 'tightening up' to 'striking a delicate growth-inflation balance' and then appropriately 'loosening'. Acquisition those information certainly facilitates the understanding of company's strategies response to the macroeconomic policies.
The common channels of collecting information include:
Library collection: key words retrieval, bibliographical retrieval, index retrieval etc.
Internet collection: input key words and search on website.
Communicative collection: academic lectures, classroom communication etc.
2.2 Limitations and Ethics in Information and Information Gathering
To take the ideas of another without credit and present them as your own is called plagiarism, and is perhaps the most serious offense a person can commit in the world of intellectual or scholarly work (Devine, 1998). Many persons do not understand what constitutes plagiarism and believe that all electronic content is in the public domain. Of course, it is a misunderstanding information gathering ethics. This report complies with ethical regulations relating ACCA and Oxford Brookes University reports. However, because the limitation of important information collected, we should employ skepticism attitude to approach others' articles or works. For example, the timeliness, relevance and objectivity of information, the restriction on financial and accounting information, the uncertainty of information etc. Those factors, more or less, will influence the outcome of conclusions reached.
2.3 Company Background/Case Study Background
2.3.1 Company Background
China Merchants Bank which is founded on 1987 with its head office in Shenzhen, is the first share-holding commercial bank wholly owned by corporate legal entities. It was successfully listed in Shanghai Stock Exchange on April 9, 2002 (Stock trading Code: 600036).
China Merchant Bank mainly focuses on the market in China. With the internationalization of Chinese banking industry, CMB has developed rapidly and undergone profound and historic transformations to modernization and globalization. In 2007, it established its first branch outside of China, in New York and it was the starting point of expanding its global operations and began research into developing a presence in Europe (UK Trade & Investment, 2010). In addition, the representative office of the Company in Taipei was officially opened on 15 March 2011.
CMB provides customers with various corporate and retail banking products and services, and treasury businesses for proprietary purpose and on behalf of customers. The innovative products and services of the Company, such as "All-in-one Card", a multi-function debit card, "All-in-one Net", a comprehensive online banking service platform, dual-currency credit card, the "Sunflower Wealth Management" services and private banking services, have been widely recognized by customers in China. It already is popular amongst Chinese youth because of aggressive marketing techniques, like co-branding credit cards with youth oriented companies such as training firm EF Education. China Merchants Bank has shown that there is a huge market for credit cards that will continue to grow as the Chinese entire banking system reforms and make it easier for banks to issue cards to consumers.
2.3.2 Bank industry background
As the global economy and financial market remained turbulent and volatile in 2009, the governments of the crisis-striken countries have taken every possible measures to revive the economies and resume financial order. Especially, the Chinese government has also resorted to a moderately loose monetary policy and proactive fiscal policy and implemented a full-range basket of plans to cope with the international financial crisis, which also leads to a vitality and increase for CMB eventually (Rowe and Wang, 2011). Of course, as the increasing number of Chinese commercial banks in recent years, there will be a more and more competition among those commercial banks by providing more dominant services. More widely kinds of services and work are extended by both large and small banks, and they all aim to obtain a maximized profit ultimately. So there is a necessity for CMB to make a detailed comparison with other competitors, showing a strong evidence for the financial performance of CMB.
However, looking forward to 2012, CMB will still confront a very severe and complicated external environment. For one thing, residual effects of global financial tsunami persist and recovery of major economics such as Europe, the United States and Japan is not optimistic. Downward pressure on China's Economic Growth will linger on in the near term (Bin, 2011). For another, risks and opportunities are embedded in increasingly frequent fluctuations. Tougher regulatory requirements, clearer trend towards financial disintermediation and expectation for interest rate liberalization collectively present great challenges to bank's operation; and the industrial upgrading, transformation and innovation, changing financial demands of different kinds of customers, rapid accumulation of social wealth, emerging consumption trend of well-to-do residents and fast popularization of mobile internet also jointly provide development and transformation opportunities for the banking industry.
Facing the lingered effect of financial crisis, the CMB follows the main strategies to react:
(1). Confirming a clear and accurate strategic position that is selective and achievable. In light of tighter constraints to capital, credit, cost, human resources and other resources, CMB is going to make most of limited resources based on its current conditions and its own strengths, and conduct differentiated competition strategy with emphasis on excellence and its characteristics so as to strengthen the its market influence and competitive edges.
(2). Achieving higher efficiency in three aspects and building an innovative business model. To cope with the external changes, a new and more efficient way of operating business will be established featuring higher efficiency in three aspects (Richy, 2009). Firstly, raise capital efficiency. Effectively use capital and reduce capital consumption through better allocation of capital. Meanwhile, match risk with income by improving risk pricing capacity. Secondly, improve operating efficiency. Maximizing returns through scientific deployment of various factors of production and exploiting the customer value. Thirdly, promote management efficiency, which can be achieved by making full use of the advanced IT system to streamline workflows and integrate existing resources (Ryan, 2009).
(3). Striking a balance between transformation and succession. During the course of reform and change, CMB will ensure the consistency of the interests of the staff, customers and shareholders, the succession of the market oriented system and the management philosophy, so that the well-proven guiding ideas and philosophies of "Balanced Development of Profits, Quality and Scale", "We are here, just for you" and "Change as Situation Does" can be succeeded and carried forward (Song and Wang, 2012).
CHAPTER 3 FINANCIAL AND BUSINESS PERFORMANCE ANALYSIS, CONCLUSIONS
3.1 Introduction of Business and Financial Analysis Methods
In this chapter, the financial performance of CMB will be analyzed in detail by profitability, loan quality and capital adequacy indicators which are representative ratios in bank industry. Especially the profitability is a key factor to assess the financial conditions in the competitive industry, which is weighed with the peerby ROAE (Return on average equity) and ROAA (Return on average assets). In addition, it is also very important to apply the loan quality in the analysis, for sound asset quality contributes immense profit while poor loan structure will lead to a bank bankruptcy. Further, the factor of capital adequacy is to evaluate whether having adequate fund to meet in potential programs or grant loans to earn profit rest with the resources owned by the bank. #p#分页标题#e#
However, the limitations on financial analysis should bear in mind (Chen Guanju, 2007): firstly, those indicators are outdated post-mortem of what has already happened, and not suitable to assess the future performance of the company; Secondly, those indicators are easy to be manipulated by creative accounting and 'window dressing', which refers to the overstatement or understatement of financial facts; Thirdly, it is very difficult to say based on financial analysis whether a company is healthy or not because it cannot reflect long-term competitive advantages, such as the CMB's competitive edge of sound service quality and innovation cannot be fully reflected by financial ratios.
What is more, combined the current macroscopic financial situation and policy guiding, synthesized microcosmic marketing analysis, this report researches the business performance through the SWOT analysis. When the strategies are determined by the managers, the internal strengths and weakness of their organization should be considered, and the external opportunities and threats also should be compared at the same time. This process is known as SWOT analysis.
Strengths are internal factors that a firm may build on to develop a strategy. For example, they may include:
1) Marketing strengths e.g. Strong brand or access to a good distribution network
2) Financial strengths e.g. High level of cash, access to loan capital if needed and good credit rating
3) Operation strengths e.g. A high level of efficiency, flexible production systems and high quality levels
4) Weaknesses are internal factors that a firm may need to protect itself against such as: Marketing weaknesses such as limited distribution, a poor product range and ineffective promotion
5) Financial weaknesses such as high levels of borrowing and low rate of return
6) Operational weaknesses such as old, insufficient equipment and poor quality
The external factors may include macroeconomic matters, technological change, legislation, and socio-cultural changes, as well as changes in the marketplace or competitive position.
Strategy may be developed by using a company's strengths to exploit the opportunities that exist. For example, strong brand name may be used to extend a firm's products into new markets. It may also use strengths to protect its products against threat. For example, a retailer may use its finance advantage to acquire key locations to prevent a competitor buying them. Besides, a company will also take effective measures against its weaknesses. For instance, it may aim to cooperate with a variety of alternative suppliers so as to reduce the risk of over-reliance only by a particular supplier.
After the introduction the usefulness of SWOT analysis in working out of appropriate strategies, as with many other strategic models, SWOT has its own limitations. Firstly, the depth of a SWOT analysis may not address inherent problems but only show company officials that they exist. A drawback of a SWOT analysis is that it may simply reveal that more research is needed. Secondly, SWOT analyses have many applications and can be utilized for just about any problem (Chen Guanju, 2007).
However, one disadvantage should not be ignored that a SWOT analysis takes the same approach regardless of the problem's dimensions, depth, simplicity or complexity. It is important to deal with problems comprehensively, which are not solved only by using the same tactics.
3.2 Application of Financial Performance Analysis
The financial performance of CMB will be discussed in the part from the three crucial aspects.
3.2.1. Profitability
To make a practical comment on profitability status of CMB, the two indicators of ROAA and ROAE are utilized in the report.
ROAA (Return on average assets (after tax) attributable to the Bank's shareholders)
ROAA is used to assess the profitability of bank's assets as a means to gauge their performance and compare to the peers in the same industry. It also displays how efficiently a company is utilizing its assets. It is defined as:
The final ratio is expressed as a percentage of total average assets. The total average assets are calculated as:
(Assets balance at the beginning of the year+ assets balance at the end of the year)/2
ROAE (return on average equity (after tax) attributable to the Bank's shareholders)
By measuring the rate of ROAE a more accurate depiction of a company's profitability will be provided, particularly relating to the ordinary shareholders. It could be expressed as:
ROAE=Net profit attributable to the Bank's shareholders/ total average equity 100%
It could be known that a more fair and accurate view will be provided by the average equity when the equity changes considerably during the year.
Following a detailed analysis to the crucial component of the two ratios-net profit attributable to the Bank's shareholders will be illustrated respectively.
The profit of the Bank has maintained relatively rapid growth. For the year 2011 when the global economy was highly uncertain and complicated while China's economy grew steadily at a slower space, the Bank realized a net profit attributable to the shareholders of the Bank of RMB 36,127 Million, representing an increase of RMB 10,358 Million or 40.20% over the previous year and an increase of RMB 17,892Million or 98.12% over the year 2009 (China Merchant Bank, 2011). It could be inferred that the company has overcome various difficulties to carry forward the Second Transformation, and achieved steady growth in profit and continued improvement in operating efficiency. Given the influencing achievement, the components for the high net profit are demonstrated as follows.
1. Net interest income
The net interest income accounts for the sound profitability performance over the three years, for it occupies nearly 80% of the total operating income. The effective way to evaluate the net interest income is net interest margin (NIM), which is a performance metric that examines how successful a firm's investment decisions are compared to its debt situation and whether the firm makes an optimal decision (Phyllis and Jim, 2009). It is expressed as:
Net interest margin=net interest income/the average balance of total interest-earning assets.
Actually, the net interest margin of the Company was 2.23% in 2009 (China Merchant Bank, 2009) which is an increase 42 basis points to 2.65% in year 2010. Especially, the net interest margin of the company was 3.06% in 2011 which is still a larger rate compared to the previous ones which could be showed in the appendix of table1. The root for the increase in 2010compared to 2009 was:
The effect of the interest rate cut by central bank in 2009 was fully reflected, and the market interest rate was at a relatively lower level against the loose monetary policy.
The average balance of the interest-earning assets as a result of the increase in loans and investments.
Further, the situation was remained in year 2010 and 2011, mainly due to the Group's total corporate loans amounted to an increase of 24.11% and 64% as compared to the end of the previous years respectively (China Merchant Bank, 2011). Since in 2010 CMB has actively implemented a customer strategy that equally emphasized small, medium and large customer and pushed forward the Second Transformation in a down-to-earth manner, with developing SME business as its key strategy.
It is inferred from the amounts analyzed that there is an obvious trend characterized by customers transferring their cash from banks to the investment market and from time deposits to demand deposits when interest rates enter into the rate cut cycle. Therefore, the question on how to win the customers and deposit in a competitive market is put forward and analyzed in the report as follows:
High end customers are targeted by CMB with value-added services who will be commended the marketing based on customer database which is helpful to promote the integration of sales and service processes.
The focus of the strategy for CMB should be the brand building for its products and services, the brands such as All-in-one Card, All-in-one Net and credit cards have gained relatively high recognition.
Brand building for launched marketing campaigns such as "Sunflower Cup National Teenager Piano Competition" and "The second Wealth Management Education Community Tour", bear off publicity among potential customers.
2. Net fee and commission income
In 2009, net fee and commission income significantly raised up 42.75% in 2010. Especially, in 2011 net fee and commission income of CMB increased by RMB4.298 billion (China Merchant Bank, 2011), which has an increase percentage of 37.93% as compared with 2010. The roots of rise during year 2011 include agency service fees and other fee and commission income.
Due to the effective implementation of the Second Transformation, the company's intermediate business has maintained rapid growth. And the company has enriched its product offerings and optimized revenue structure.
Generally speaking, China's rapid economic growth, internationalization of the RMB and continuous increase in national income provided excellent external environment and opportunities for the development of intermediate business. On the other hand, the uncertainties in the capital market, possible changes in regulatory policies and homogeneous competition among banks brought challenges to the development of intermediate business.#p#分页标题#e#
The company fully explored the potential of existing channels and products while actively created new http://www.ukassignment.org/uklunwen/ products and new channels, aiming at overcoming the adverse effect of external environment with quality service and marketing efforts (China Merchant Bank, 2011). Consequently, a relatively fast growth in net non-interest income analyzed above was maintained. The wealth management and investment banking services are also the driving force.
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