US Bank Corp. Analysis

The devil Institutions chosen or comparison are come up Fargo (WFM) and commit of America (BACK). To evaluate the boilers suit strength the major assets, liabilities, capital, risk, liquidity and direct decisions of the common chord chosen institutions leave behind be discussed. Balance Sheet Analysis Out of the collar lodges US bank is the smallest in regards to assets with depository financial institution of America being the magnanimousst followed by surface Fargo. When comparing totality assets to total liabilities USB finds itself in the weakest position having a total debt to total assets resemblanceality of 0. 11 . Commercial banks are known to supplement themselves highly and leverage Is normal in the Industry.However In comparison to BACHS ratio of 1 . 124 and Wifes ratio of 0. 89 this relatively high leverage Is a cause for concern. Federal Deposit Insurance Corp Chairman Sheila bewitching has advocated for the US aver to reduce their leverage to half believing that their fiscal position poses too great a risk. The attention fairs for long end point debt to equity and total debt to equity ratios are 64. 36 and 177. 19 respectively. In respect to this, US confide finds itself taking the middle ground among Wells Fargo and Bank of America. Wells Fargo seems to be In equity ratio of 84. 6, well below the industry average. The most indebted institution would be Bank of America whos ratios of 120. 09 and 249. 67 are well above the industry average. US Bank in comparison has a long endpoint debt to equity ratio of 67. 93 which is right around the industry average go their total debt to equity is far below it at 139. 98. despite being in good position relative to the industry and the two chosen quasi(prenominal) financial institutions in these metrics, this indicator should be held with doubt as many believe that all commercialised banking institutions are unreasonably leveraged.One of the reasons for US Banks highly levera ged position ay lay in the managements decision to meet more banks finished IBID-assisted deals. It is stated that, In total, the firm has acquired $35 million of banking assets through these deals at minimal costs. Though these deals have been stated to be not signifi toilett enough to pose such a threat. They are still campaigning to acquire even more assets. Assets All three companies have real landed estate loanwords as their largest asset category. This acknowledges residential loans, commercial real estate, and other loans secured by farmland.These loans can be considered safe as they are secured with liens on the reporter however they are illiquid and would be considered a long term asset. Wells Fargo has the largest amount of real estate loans as a parcel of their assets at 35. 81%, followed by US Banks 32. 18% and finally Bank of Americas far smaller 20. 97%. All the banks second largest assets are debt securities over one year and they all have similar sizes as per centage of total assets. Commercial and industrials are the triad largest asset for Wells Fargo and US Bank and they hold similar sizes as percentage of assets.Bank of Americas trio largest asset however is trading assets which should be more marketable. practically of the securities held by US Bank are not held for sale which makes them unresistant to lodge in rate risk. It is unclear how much of the banks loans use a float interest rate but we can assume which would better dish up determine the risks involved. With US Banks fairly high percentage of real estate loans and commercial and industrial loans which are usually long term these risks to the bank are significant. The largest liability for the three financial institutions are interest mien deposits.Wells Fargo holds the largest proportion at 50. 14% followed by US Bank at 47. 70% and then Bank of America at 32. 0%. US Bank holds and Wells Fargo have similar proportions of this liability. While these liabilities accru e interest the banks do have to expect back up cash outflows from this. The three banks third largest liabilities are interested-bearing deposits with US Bank having the largest proportion of 23. 36%, followed by Wells Fargo at 21. 93% and Bank of America at 18. 97%. These proportions seems relatively similar to each other but with US Banks higher proportion they should be weary.These interested bearing accounts are likely to be checking outs and while they do not accrue interest you can expect frequent editorials from customers which should keep them weary of loaning out too much money. ultimately all three banks have listed other borrowed money as their third capitalized leases. Bank of America has the largest proportion of 14. 24%. Next is US Bank with 13. 66% and then Wells Fargo with 9. 62%. These proportions also seem rather similar too each other. Interest Revenue, last backside US Bank largest source of revenue is on fully taxable income on loans and leases at 44%.This p roportion is comparable to Bank of America that accounts for 41% of their revenues. What is surprising is the large mount of revenue Wells Fargo receives from interest and fees on which accounts for 76% of their revenues. While US Bank only receives 42% of its income in the same category. Interested Revenue, Last Quarter The largest sources of interested income for the chosen financial institutions vary greatly which makes it difficult to compare US Banks position in comparison to the other financial institutions.The largest category listed in sources of interested income for US Bank was stated as unspecified at 18% and 19% for Wells Fargo. The largest source for Bank of America is investment banking fees and commissions. Expenses Last Quarter Largest Expenses US Bank amount % of expenses Interest on other borrowings & disdain Lab 987,000 2 Interest on time deposits Cash from operating activities has been steadily increasing which is a good sign but so is cash from financing activi ties which is much larger. As commercial bank it can be expected that they finance their operation with a significantly large portion of debt. However in combination with their highly averaged position with their competitors this could be a cause for concern in their financial viability. Corporate jeopardy Profile As a company that operates in the financial services, U. S. Banks largest characterisation of risk comes from credit risk, operational, residual value, interest rate, market, liquidity and reputation risk.U. S. Bank has spent many years working to perfect managing these risks. For credit risk, U. S. Bank has incorporated well-defined, centralized credit policies, uniform underwriting criteria, and ongoing risk monitor and review processes for all commercial and consumer credit exposures (SEC. Gob). US Bank has essential a very strenuous and extensive procedure in tack to evaluate the credit risk that it handles on a sidereal day to day basis. Another way US Bank manag es its credit risk is through diversification of its loan portfolio and limit setting by product grapheme criteria and concentrations (SEC.Gob). US Bank divides its overall loan portfolio into three separate atoms to, following the dont put all your eggs in the same basket theory. The three portions of the portfolio consist of commercial lending, consumer lending and covered loans. The risks associated with commercial lending include a rarity of factors including many risks associated with the borrowers business such as industry, geography, the loans purpose, how the borrower give repay, debt capacity among others.In order to prioritize these risks and keep them all organized, US Bank assigns risk ratings to these characteristics in attempt to create the ability to focus on specific risks depending on importance. As far as the consumer lending firmament goes, this encompasses residential mortgages, credit card loans, and other retail loans such as revolving consumer lines, auto loans and leases, student loans, and home equity loans and lines (SEC. Gob). The risk characteristic of this share of the portfolio is focused on the borrower and their keenness to pay off the loan as well as prior repayment history.The 3rd portion of the loan portfolio is the covered loan segment. Before touching on the risk of this venture, it must(prenominal) first be noted that there are loss manduction agreements between US Bank and the IBID that ultimately reduce the risk of in store(predicate) credit losses to the company (SEC. Gob). The risks that are associated with covered loans are consistent with the segment they would otherwise be included in had the loss share coverage not been in place (SEC. Gob). Another important aspect of US Bank to take into account is the sub-prime lending side of the banking industry.