Commercial Bank Management Project Case Study Analysis
How did the bank (or other financial institution of your choice) perform?
Throughout the period of the recent year 2019; the company had exceptionally performed as the financial state of the company wasstrong. The significant increase in the net interest income, noninterest income, operating income and the pre-tax net operating income stipulates a well-managed bank and also indicate that the bank remained profitable throughout the year, which in turn provides a solid foundation for expecting the profitability and strong financial state of the company in the near future. Even though, the company has been performing exceptionally well when comparing the recent year with past year; the performance of Synovus does not match with all the commercial banks, with assets of more than $10 billion, which means that the current position of the company in the competitive environment is not strong, due to which the company needs to strengthen its capabilities in each and every aspect of the sales process due to the fact that the sales effectiveness couldtransform into a significant differentiator of bank in the competitive days ahead (Gup, 2003).Certain of the company’s competitors are larger and have more resources, which in turn allows them to be more aggressive as compared to Synovus, in competing for deposits and loans and investing in new technology, product and services. Furthermore, the size of the competitors or peer group enable them to achieve the benefit of the economies of scale, and as a consequence, tend to offer the broad range off the services and products to the customers and better pricing for those services and products.
Compare over the various measures of operational efficiency.
The operational efficiency of the banking institutions could be measured by using input variables, such as: number of employees, deposits, fixed assets and interest expense; whereas the output variables of the banks include: interest income, loan and investments and non-interest income. Additionally, the operational efficiency of the company could be measured through assessing and evaluating the profitability and efficiency ratios for the recent and prior year. The return on equity of Synovus is reduced from 0.41 percent in 2018 to 0.36 percent in 2019. When compared to the ROE of peer group for the year 2018; Synovus has made a good use of the investor’s money whereas the ROE of Synovus was reduced than the ROE of the peer group for the year 2019. The significant decline in the percentage of the ROE suggests that Synovus is not worth investing because of the reason it does not make good use of the money invested by the investors. In other words, it shows that the management of thecompany is deploying the capital of the shareholders.
In addition, the return on assets of Synovus has declined from 0.043 percent in 2018 to 0.039 percent in 2019, which shows that the bank is earning less money on more investment and is not efficiently using its asset to generate profitable income.The ROA of Synovus for the year 2018 was similar to that of the peer group, but ROA of Synovus declined in 2019 when comparing to the peer group, hence demonstrating that the bank was not efficient in using its assets. Additionally, the net interest margin of Synovus was higher than that of the peer group in both years 2019 and 2018, which means that the difference was massive between the interest income generated from operations and interest paid out to the lenders, but the net interest margin of Synovus was reduced from 3.59 percent in 2018 to 3.39 percent in 2019. It might be due to the fact that the demand for the saving account was larger as compared to the loans, due to which the net interest margin of bank reduced as it was required to pay out more interest than it contained. On the other hand, the reduction in the net interest margin could be caused by a significant increase in the interest rates, which in turn tends to make the loans more costly, hence making savings a better option than loans, thus consequently reducing the net interest margin of the bank.
As such, the operating margin of Synovus was higher than that of the peer groups in both the years 2018 as well as 2019, which means that Synovus was efficiently making profits from the operations, but the operating margin of Synovus reduced from 0.32 percent in 2018 to 0.30 percent in 2019, which shows that the bank was not efficient in making profit from its operating activities. On the positive note, theefficiencyratio of Synovus was higher as compared to the efficiency ratio of the peer groups in both the years 2018 and 2019. Furthermore, theefficiency ratio of Synovus was at 3.65 percent in 2019, up from 3.25 percent in 2018, reflecting the relative productivity and performance of the bank.
Compare performance over short term (current year with the previous year) and long term (current year with a year five or 10 years before, for example 2019 with 2014 and 2009, to understand trend of performance or related measures).
The performance of the company is compared with the prior year or over short term and long term with the years 2014 and 2009 to come up with the trend of the performance or the related measure. Referring to the year to year financial performance of the company, the most significant changes is witnessed in the total interest income of the company which is increased from $1343684 in 2018 to $2049887 in 2019, which means that the company has efficiently generated revenues by the interest bearing assets, such as: securities, mortgages and loans over the interest paid out on the deposits of institutions. The net operating income of the company also increased from $461998 in 2018 to $589711 in the year 2019, hence stipulating that the bank had effectively taken gains from the sale of securities deducted operating expenses……………………………….
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