Bank Of New York The Asset Utilization example essay topic

Executive Summary Founded in 1784, the Bank of New York is the oldest bank in the United States. It was the first bank in New York that opened just months after the departure of British troops from American soil in lower Manhattan. During that time period the monetary system was complex and confusing. The founders decided that The Bank of New York wasn't going to be a common institution that capitalized on land; it focused on specie, which is money in coins. Then in 1792 the first corporate stock to trade on the newly established New York Stock Exchange was the Bank of New York. During the course of their 220-year history, The Bank of New York has seen the country through turbulent times - seven wars, ten economic depressions and the World Trade Center disaster.

And yet, The Company has survived all these crises and emerged even stronger... The Bank of New York is in the industry of Money Center Banks, which provide many services that enable institutions and individuals to move and manage their financial assets in more than 100 markets worldwide. This company has a long tradition of collaborating with clients to focus on securities servicing, treasury management, investment management, and individual and regional banking services. This company also has an extensive global client base. The Bank of New York is ranked 15th in its industry with a capital market of 21.2 billion. Some of its top three competitors are Citigroup Inc, JP Morgan Chase, and State Street Corp. Given its long history and conservative approach, it is no wonder that The Bank of New York is one of the leading retail banks in the Metropolitan Area.

It has 350 locations which not only offer traditional banking, but insurance and investment services. Although the stock price of The Bank of New York has decreased over the past year, it is our opinion that it would be a good opportunity to buy the stock at its price. The most recent quarterly earnings have been much higher than analysts' forecasts have predicted. The Bank of New York earnings growth in the past year has accelerated more rapidly than it has in the past three years. The Bank of New York - Industry position Founded in 1794, The Bank of New York is New York's first and oldest bank. It opened for business at the Walton House in lower Manhattan.

The New York Stock Exchange was formed in 1792, and the first Corporation stock to be traded on the NYSE was The Bank of New York. The history of this bank began on February 23, 1794 with a small advertisement in the New York Packet. Alexander Hamilton, a respected New York attorney and future statesman, was appointed to write the new banks constitution, and became the most actively involved person in the Bank of New York. He negotiated the new US government's first loan from the Bank of NY for $200,000 against the US Treasury, who drew a series of warrants on the Bank. These warrants were to establish the credit of the United States and the economic independence of the young nation. Alexander Hamilton has left a lasting imprint on the Banks philosophy that remains with the bank today.

During the course of its 220 year history, The Bank of New York has seen its country go through some turbulent times, seven wars, ten economic depressions and the World Trade Center disaster. The bank has survived these entire crises and has come out even stronger owning to a commitment of certain shared and enduring values - Integrity, Respect, Personal Responsibility, Teamwork and Excellence - and a firm focus on the needs of their clients. These core values formed the foundation for everything they do. Today the Chairman and CEO is Thomas A. Re nyi. He has successfully directed The Bank of New York's transformation from a traditional commercial bank to a global leader in securities servicing for issuers, investors and financial intermediaries. The industry that the Bank of New York is associated with is in the industry of Money Center Banks.

The bank provides many services that enable institutions and individuals to move and manage their financial assets in more than 100 markets worldwide. This company also has an extensive global client base including a broad range of leading financial institutions, corporations, government entities, endowments and foundations. Some of its top three competitors are Citigroup Inc, JP Morgan Chase, and State Street Corp. The Bank of New York has maintained its position well within the banking industry and with its top competitors. Its revenue growth has been well within the industry average.

Earnings per share have been also within the industry average and above J. P Morgan Chase. Its Profit earnings ratio has been actually above the industry standards. A view of the Bank of New York stock value will show that it has been stable and on a constant growth pattern which is also similar to the industry pattern. As a world wide securities service specialist, investors are able to direct purchase stock or sell stock without going through a broker. An investor is also able to view account balances, transactions, and check history. Given its long history and conservative approach, it is no wonder that The Bank of New York is one of the leading retail banks in the Metropolitan Area.

The Bank of New York is probably one of the most lucrative and growing bank in its category, out performing other major banks in the same industry. Ratio Analysis The objective of the analysis of the Bank of New York is to evaluate the company's overall financial standing. In researching the company and its relative position in its industry I discovered some interesting points. The Bank of New is ranked 15th in the Money Center Banks Industry due to it's market cap of $21.2 Billion. Market Cap is short for market capitalization which is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price.

An interpretation of all the ratios is key in providing us useful insights of the company's condition. I will point out the significant ratio's that should be looked at when deciding the financial health of The Bank of New York. Return on Equity (ROE) is the first ratio that I will go over. ROE is a measure of how well a company used reinvested earnings to generate additional earnings, equal to a fiscal year's after-tax income (after preferred stock dividends but before common stock dividends) divided by book value, expressed as a percentage. It is used as a general indication of the company's efficiency; in other words, how much profit it is able to generate given the resources provided by its stockholders. Investors usually look for companies with returns on equity that are high and growing.

The Bank of New York's Return on Equity is 16.09 for 2004, 13.72 for 2003, and 13.49 for 2002. So through the years they have increased their ROE significantly. The next ratio is Return on Assets (ROA). ROA is a measure of a company's profitability, equal to a fiscal year's earnings divided by its total assets, expressed as a percentage. The Bank of New York's Return on Assets was calculated to be 1.53% for 2004, 1.25% for 2003, and 1.16% for 2002.

This calculation is an important measure of a company's profitability. It provides insight into how efficiently a company is being run by management and their ability to generate profits from the assets available to the company. Equity Multiplier is total assets divided by common stockholder's equity. This is a measure of leverage. The higher the ratio is, the more the company is relying on debt to finance its asset base. Leverage is the degree to which an investor or business is utilizing borrowed money.

Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Leverage is not always bad, however; it can increase the shareholders' return on their investment and often there are tax advantages associated with borrowing. The Equity Multiplier for the Bank of New York is 10.17 for 2004, 10.96 in 2003, and 11.60 in 2002. Net Profit Margin Ratio is necessary to be looked at continuously; it is determined to be 53.03 in 2004, 58.55 in 2003 and 53.82 in 2002. It is calculated by net income divided by total operating income.

This number is an indication of how effective a company is at cost control. The higher the net profit margin is, the more effective the company is at converting revenue into actual profit. The net profit margin is a good way of comparing companies in the same industry, since such companies are generally subject to similar business conditions. Interest Expense is the amount you pay for borrowing money. When you pay back a loan or other debt, the additional amount you pay back is interest expense. Interest is calculated as a percentage of the amount of your loan for each period of time.

Interest expense ratio is calculated by taking the interest expense and dividing it by total operating income. The Bank of New York's interest expense ratio was calculated to be 10.57 for 2004, 10.83 for 2003, and 18.14 for 2002. Provision of Loan Losses is the amount a bank charges to operating expenses to provide an adequate reserve to cover anticipated losses in the loan portfolio. It is calculated by taking the provision for loan losses and dividing it by total operating income. Tax Ratio is the percent of income paid as tax, or the percent of the value of a good, service or asset paid as tax. This is different from the applicable marginal tax rate, which is the tax rate applicable on the last dollar.

Tax rates can be classified as one of three types: progressive tax, proportional, or regressive. A progressive tax is one in which the percent paid as tax rises as the amount rises (for example, personal income tax in many countries). A proportional tax is one in which the percent paid as tax stays the same as the amount rises (for example, sales tax, or corporate income tax in some countries). A regressive tax is one in which the percent paid as tax falls as the amount rises (for example, value added tax in some cases). Thus, a person's applicable tax rate will depend on how much of each type of tax he / she pays as part of his / her total tax burden. The sum of personnel compensation, legal expense, office occupancy and equipment expense, are other noninterest expenses and loan loss provisions.

Total Asset Utilization is a tool used to model how efficiently you use your assets to perform your value function. It is utilized to achieve breakthrough improvements in profitability, cost reduction, revenue growth, and market share. When you accurately model the total asset utilization of a process and use that information to improve your effective use of those assets, you have essentially found additional capacity without significant capital investment, thus finding additional capacity that was there all along. To calculate the Asset Utilization is dividing total operating income into total assets. For the Bank of New York the Asset Utilization is 6.07 for 2004, 6.08 for 2003 and 6.19 for 2002. In calculating the Asset Utilization using the total operating income, you must calculate the operating income by adding the interest income ratio and the non interest income ratio.

To calculate the Interest income ratio is by taking interest income and dividing it by total assets. Net interest income is an important tool in assessing the bank's ability to generate profits and control interest rate risk. Non interest income ratio is important because it includes all other income received by the bank as a result of its on and off balance sheet activities. To calculate non interest income ratio you take non interest income and divide it by Total Assets. When comparing The Bank of New York to the rest of the industry, the bank is ranked 15th in market capitalization with $21.5 billion. The leader is Citigroup Inc with $244.8 billion.

In the Return on Equity, the Bank of New York is ranked 7th in the industry. This is important that this ratio is high because it is used as a general indication of the company's efficiency; in other words, how much profit it is able to generate given the resources provided by its stockholders. So compared to the market The Bank of New York is doing pretty good especially when the leader UBS has a ROE of 22.84%, which the bank of New York is not very far behind. Also from my ratio analysis you can see that the ROE increased significantly for the bank from 2003 to 2004. I also compared the Bank of New York and the industry with the Price-Earning Ratio or (P / E Ratio). It is a valuation ratio of a company's current share price compared to its per-share earnings.

In general, a high P / E means high projected earnings in the future. However, the P / E ratio actually doesn't tell us a whole lot by itself. It's usually only useful to compare the P / E ratios of companies in the same industry, or to the market in general, or against the company's own historical P / E. So in comparing The Bank of New York's P / E Ratio to the industry the bank is ranked 5th, with a ratio of 14.57. The leader of the industry is Dollar Financial Cor. with a ratio of 46.44. In Conclusion the Bank of New York is doing pretty well as compared to the industry. They are in the top ten of the industries two major ratios, P / E ratio and ROE Ratio.

Though they are lacking in the market cap, I feel that the Bank of New York is still a strong company that with it's household name will continue to increase in the Market. Bank of New York - Invest or Not To Invest Although the stock price of The Bank of New York has decreased over the past year, it is our opinion that it would be a good opportunity to buy the stock at its price. A good look at its ratios as compared to the industry averages have performed very well. The Bank of New York is within the industry guidelines as to its revenue growth, as well as its earnings per share. It exceeds other Banks in performance as it pertains to Price Earnings and in other areas. The Bank of New York has become a leading retail bank in New York metropolitan area with over 350 branches that offer traditional banking, insurance and investment services.

The Bank of New York is also a lucrative and growing investment service business. They offer mutual fund administration and accounting, collateral management, and securities lending which is offered nationally and globally. Banking has never been considered attractive as an industry, but the industry has virtually been embodied in the movement of bigger, faster, and more. The BANK OF New York has been involved in faster transactions via ATM'S and the Internet. They have also been involved in more proceeds such as insurance and securities. The Bank of New York has been notable in de-emphasizing lower margin traditional banking operations and has focused on more lucrative technology based activities such as transaction processing and account custody services.

Given The Bank of New York redirection of its focus and earnings potential it would our opinion to invest in this company's stock. The Bank of New York seems to be a leader in its industry class and the value of its services will certainly be recognized in its future performance and innovation. Trend Analysis for Bank of New York 2004, 2003 & 2002.