BAHRAIN POLYTECHNIC

Bank Evaluation
BSB 6301 Money and Banking
Mohammed Haji
201100040

Assessment 2
Supervised By: Felim ORourke
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Table of Contents

Executive Summary

Overview

Share Price

Statistics

Risk Evaluation

Evaluation and Prediction

Bibliography

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Executive Summary
This report gives a general analysis and overview of three publically quoted banks
based in the UK. These banks are HSBC, Lloyds Bank, and Barclays Bank. A general overview is
written including each banks history, scale of operations, balance sheet growth rate over the
last five years, and any exceptional events that have impacted the bank over the last 12
months. The share price movement is written as well taken from Yahoo! finance for each bank
from the last 10 years. To go even further with the analysis, the statistics was as well taken
from each banks latest annual report including their market capitalization, profit margin,
earnings per share, total assets, and change in total assets over the last year. Each banks risk
evaluation is also mentioned in this report, which includes risk of liquidity or insolvency issues
in the near future based on each banks quality of collateral, industry concentration of loans
and/or investments, holdings of cash, rate of growth, and capital adequacy ratio. Finally, the
evaluation and prediction of each bank is written in order to assess and predict the future
movement of its share price based on their business performances.
The historical data for the share prices of each bank proves that there was a sudden
drop between 2008 and 2009 because of the great recession. As for HSBC, after the great
recession we can clearly see that they are picking up their pace and slowly increasing their
share price based on their net income, and is expected to grow even more in the future. We
can see the share prices after the great recession in Lloyds bank that they did not improve
much and isnt expected to grow much more in the future unless any sudden change happens
in the operation of the bank. Barclays is quite the same as HSBC, and are improving after the
great recession. Their share price is also expected to increase in the future based on the
historical data, which is generally increasing.

Overview
HSBC:

History: Hongkong and Shanghai Banking Corporation Ltd. (HSBC) was established in
1865 mainly to finance the trade between Europe, India, and China. Since there was a
lot of demand in Hongkong and the coast of China for banking facilities, Thomas
Sutherland helped establish the HSBC, opening in Hongkong and later in Shanghai. Soon,
branches began to form and spread throughout Europe and America, however the main
focus was in the Asia-Pacific region. It was the first bank that opened in Thailand and
delivered banknotes. It successfully grew strong and became the most recognizable
financial institution in Asia.

Scale of Operations: HSBC is a massive bank. Everywhere you go you can see it, even
here in Bahrain. If you see the red hexagon symbol you would know that this bank is
HSBC, because they have purposely created this attractive logo and drill it in the minds
of people for brand awareness. They are operating in Asia-pacific, Europe, and the
Americas, with over 200 branches worldwide.

Growth Rate: 2,364,452 in 2009, 2,454,689 in 2010, 2,555,579 in 2011, 2,692,538 in

2012, and 2,671,318 in 2013. These are the value of the banks balance sheet in those
years. As we can see, the value was growing from 2009 to 2012, however there was a
slight decrease in 2013. Growth rate= [(f/s)^(1/y)]-1, which is equal to 2.47%.

Exceptional Events over One Year: They have reaffirmed their return on equity between
12% to 15%, wanting to reach their target to 16% by the end of 2014. Their underlying
revenue grew almost 9% in the last 12 months.

Lloyds Bank:

History: Lloyd Banks journey began in 1765 in Birmingham, where it was known as
Taylor and Lloyds. It operating as one single shop in the town for approximately the first
century, however in 1865, Lloyd became independent and the financial institute was
known as Lloyds banking co. Ltd. After years of merging and separating from different

companies, they were officially named Lloyds bank Ltd. in 1889. Lloyds bank continued
growing throughout the years and is now one of the well known banks in the UK.

Scale of Operations: This bank is not very popular worldwide, probably only in England
and Scotland. It had merged with many banks in its history, however those banks were
small and did not account for much. It does not have many branches worldwide, but
only in the UK.

Growth Rate: 1,027,255 in 2009, 991,574 in 2010, 980,248 in 2011, 934,221 in 2012, and
847,030 in 2013. These are the values of the banks balance sheet in the years listed. As
we can see, the value is significantly decreasing at a high rate. It is equal to -3.78%.

Exceptional Events over One Year: This bank has no exceptional events over the last
year.

Barclays Bank:

History: It starts in Lombard Street, where John Freame and Thomas Gould start trading
as goldsmith bankers. In 1736, Freames son-in-law John Barclay got partnership in the
bank, making it Freame and Barclay. Over the years, the bank was merging with more
than 20 banks and was financing major companies in the field of logistics, businesses,
and property. It was the first bank to hire a female bank manager, first to be listed in the
New York and Tokyo stock exchange in UK, first to issue debit cards in UK, and launched
the worlds first cash machine. Barclays is now one of the biggest banks in UK and is
anticipated to grow even more.

Scale of Operations: When you first hear of Barclays, you would automatically think
about the Barclays English Premier League, which is a group of English football clubs
playing a series of matches over the course of 20 weeks. This is because this league is
funded by Barclays bank. It is a well-known bank throughout Europe, and it has many
branches over the continent, mainly in the UK.

Growth Rate: 1,378,929 in 2009, 1,489,645 in 2010, 1,601,352 in 2011, 1,513,246 in

2012, and 1,345,833 in 2013. These are the value of the banks balance sheet in those

years. We can see that the value was growing from 2009 to 2011, but there was a slight
drop in the value in 2012 and 2013. The growth rate is equal to -0.48%.

Exceptional Events over One Year: In 2013, Barclays launched the LifeSkills campaign,
which is an educational program merged with real life work experiences for the youth of
the country, preparing them for the future and giving them job opportunities.

Share Price
Below are the share prices of HSBC, Lloyds Bank, and Barclays Bank.
HSBC:
Dec
31st
2004
85.14

Dec
31st
2005
80.57

Dec
31st
2006
91.65

Dec
31st
2007
83.71

Dec
31st
2008
45.73

Dec
31st
2009
56.98

Dec
31st
2010
51.04

Dec
31st
2011
38.05

Dec
31st
2012
53.35

Dec
31st
2013
54.76

Lloyds Bank:
Dec
31st
2004
36.79

Dec
31st
2005
33.8

Dec
31st
2006
45.33

Dec
31st
2007
37.65

Dec
31st
2008
7.36

Dec
31st
2009
3.25

Dec
31st
2010
4.13

Dec
31st
2011
1.52

Dec
31st
2012
3.12

Dec
31st
2013
5.32

Dec
31st
2006
54.847

Dec
31st
2007
37.2074

Dec
31st
2008
9.0323

Dec
31st
2009
16.1751

Dec
31st
2010
15.106

Dec
31st
2011
10.0461

Dec
31st
2012
15.8525

Dec
31st
2013
18.13

Barclays Bank:
Dec
31st
2004
42.1014

Dec
31st
2005
38.894

Statistics
Below are the statistics provided for HSBC, Lloyds Bank, and Barclays Bank. The market
capitalization and Earnings per Share were taken from Yahoo! Finance, and the profit margin,
total assets, and change in total assets over the last year were taken from each banks annual
report in 2013.
HSBC:
Market Capitalization: 191.25 Billion
ttm Profit Margin: 34.77% [(net income/interest income)]*100 (at December 31st 2013)
EPS: 4.03$ (up to date)
Total Assets: $2,671,318 million (at December 31st 2013)
Change in Total Assets over last year: -0.79% [(new-old)/(old)]*100 (at December 31st 2013)

Lloyds Bank:
Market Capitalization: 69.24 Billion
ttm Profit Margin: -3.79% [(net income/interest income)]*100 (at December 31st 2013)
EPS: 0.00$ (up to date)
Total Assets: 847,030 million (at December 31st 2013)
Change in Total Assets over last year: -9.33% [(new-old)/(old)]*100 (at December 31st 2013)

Barclays Bank:
Market Capitalization: 73.43 Billion
ttm Profit Margin: 7.14% [(net income/interest income)]*100 (at December 31st 2013)
EPS: 0.36$ (up to date)
Total Assets: 1,312,840 million (at December 31st 2013)
Change in Total Assets over last year: -11.82% [(new-old)/(old)]*100 (at December 31st 2013)
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Risk Evaluation
HSBC:
The latest annual report proves that it holds $166,599 million in cash, its core tier 1 ratio
10.9%, their growth rate for the last year is -0.78%, and their total debt is $104,080 million.
Depending on this information given, we would think the bank is risky, however based on the
historical data, HSBC can always turn it the other way, meaning that they have the potential to
raise their cash and capital and lower their debts.
Lloyds Bank:
The banks holdings in cash are equal to 49,915 million pounds, its core tier 1 ratio is
10.3%, their growth rate over the last year is -9.33%, and their total debt is 87,102 million
pounds. Based on this and its historical data, we can assume that this bank is risky and is nearly
going to go bankrupt.
Barclays:
Its holdings in cash in its latest annual report are 42,139 million pounds, its core tier 1
ratio is 5.5%, the growth rate is -11.82%, and their total debt is 62,812 million pounds. We can
see that they have shrunk by 11.82%, and their debt is more than the cash available. With this
information we can see that the bank is risky, however based on the historical data, we can
perceive that the bank is not in trouble and has to potential to grow again in the future.

Evaluation and Prediction

HSBC:

At the end of 2009, the share price was $59.98, which dropped down to $51.04 in the
following year. In the banks income statement in 2009, the profit was $6,694 million, which
was almost 200 million dollars more than their previous year. The share price dropped again in
2011 to $38.05, and in the banks 2010 income statement they made a profit of $14,191
million. Even though they are getting more profit, the share price kept on decreasing. The
reason behind this is that people must have had a lack of confidence in the bank depending on
its history with a major downfall in its share price between 2008 and 2009. However, seeing
that they are getting higher profits and the end of each year, the share price started to go up in
2012 and reached $53.35 because of their massive profit in 2011, which was $17,944 million.
The profit decreased at the end of 2012, which was about $15,334 million, but the share price
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kept on increasing and reached $54.76 because there was confidence. In 2013, their profit
increased to $17,800 million, but their share price decreased and is now at $47.38. It is
expected that the share price will continue to fluctuate between $47 and $54 in the future,
unless any exceptional events should happen.
Lloyds Bank:
The share price at the end of 2009 was $3.25, since they were in a loss of 6,300 million
GBP in that year. In 2010, they generated a profit of 2,212 million GBP and their share price
increased as well to $4.13. In 2011, there was a loss of 179 million GBP, and their share price
decreased to $1.52. This is again because of the lack of confidence resulted from the negative
business performance in that year. The lost a greater amount the following year which resulted
in 3,950 million GBP, but their share price increased to $3.12. As we can see here, the share
price and the loss for the year are not relevant; however the confidence of the people plays an
important role. Since there is confidence, the share price increases. The same goes for 2013,
where there was a loss of 3,335 million GBP, the share price increased to $5.32. The share price
is expected to not raise more than $5.5, rather fall down since the income statements prove
that each year there are big losses for the bank.
Barclays Bank:
The banks share price was $16.1751 at the end of 2009. Their profit for the year in 2009
was 9,393 million GBP. Their share price decreased to $15.106 in 2010 since their profit for that
year decreased as well to 3,564 million GBP. Their share price decreased as well in 2011 to
$10.0461 because their profit was stable, increased by very little to 3,580 million GBP. However
in 2012, the share price grew to $15.8525, however their profit in their income statement was
less than the previous year, which equaled to 33 million GBP only. The reason behind this is the
level of confidence increased for reasons other than their profit, such as the growth in their
assets. In 2013, their share price increased even more to $18.13, since their income for that
year increased as well to 1,308 million GBP. The banks share price is expected to grow even
more in the coming years based on the historical data of the share price movement and their
business performance.
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Bibliography
2010 RESULTS - News Release. (n.d.). Retrieved December 18, 2014, from LLOYDS BANKING
GROUP:
http://www.lloydsbankinggroup.com/globalassets/documents/investors/2010/2010_lbg_result
s.pdf
2013 RESULTS HIGHLIGHTS. (2014, February 24). Retrieved December 18, 2014, from HSBC
HOLDINGS PLC: file:///C:/Users/Mohammed%20Haji/Downloads/hsbc-holding-ar-2013-mediarelease.pdf
Annual Report 2010. (2011, March 10). Retrieved December 20, 2014, from Barclays PLC :
http://www.barclays.com/content/dam/barclayspublic/docs/InvestorRelations/AnnualReports/
AR2010/2010-barclays-plc-annual-report.pdf
Annual Report 2013. (n.d.). Retrieved December 20, 2014, from Barclays Bank PLC:
http://www.barclays.com/content/dam/barclayspublic/docs/InvestorRelations/AnnualReports/
AR2013/barclays-bank-plc-annual-report-2013.pdf
Annual Report and Accounts 2011. (n.d.). Retrieved December 18, 2014, from HSBC Holdings plc
: file:///C:/Users/Mohammed%20Haji/Downloads/hsbc2011ara0.pdf
ANNUAL REPORT AND ACCOUNTS 2013. (2014, March 5). Retrieved December 18, 2014, from
LLOYDS BANKING GROUP:
http://www.lloydsbankinggroup.com/globalassets/documents/investors/2014/2013_lbg_intera
ctive_annual_report.pdf
Barclays PLC (BCS). (n.d.). Retrieved December 16, 2014, from Yahoo! Finance:
http://finance.yahoo.com/echarts?s=BCS+Interactive#%7B%22range%22%3A%7B%22start%22
%3A%222004-12-31T09%3A00%3A00.000Z%22%2C%22end%22%3A%222014-0101T09%3A00%3A00.000Z%22%7D%2C%22lineType%22%3A%22combo%22%2C%22scale%22%
3A%22linear%22%7D
HSBC Holdings plc (HSBC). (1986, January 2). Retrieved December 16, 2014, from Yahoo!
Finance:
http://finance.yahoo.com/echarts?s=HSBC+Interactive#%7B%22range%22%3A%7B%22start%2
2%3A%222004-12-31T09%3A00%3A00.000Z%22%2C%22end%22%3A%222014-0101T09%3A00%3A00.000Z%22%7D%2C%22lineType%22%3A%22combo%22%2C%22scale%22%
3A%22linear%22%7D

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HSBC's history. (n.d.). Retrieved December 17, 2014, from HSBC.com:

http://www.hsbc.com/about-hsbc/company-history/hsbc-history
LLOYDS BANK. (n.d.). Retrieved December 17, 2014, from LLOYDS BANKING GROUP:
http://www.lloydsbankinggroup.com/our-group/our-heritage/our-history/lloyds-bank/
Lloyds Banking Group plc (LYG). (n.d.). Retrieved December 16, 2014, from Yahoo! Finance:
http://finance.yahoo.com/echarts?s=LYG+Interactive#%7B%22range%22%3A%7B%22start%22
%3A%222004-12-31T09%3A00%3A00.000Z%22%2C%22end%22%3A%222014-0101T09%3A00%3A00.000Z%22%7D%2C%22lineType%22%3A%22combo%22%2C%22scale%22%
3A%22linear%22%7D
Timeline. (n.d.). Retrieved December 19, 2014, from BARCLAYS:
http://www.timeline.barclays.com/content/2013/Citizenship-at-Barclays.html
HSBC Holdings plc. (1986, January 2). Retrieved December 18, 2014, from
http://finance.yahoo.com/q?s=hsbc
Lloyds Banking Group plc. (1986, January 2). Retrieved December 23, 2014, from
http://finance.yahoo.com/q?s=lyg
Barclays PLC. (1986, January 2). Retrieved December 16, 2014, from
http://finance.yahoo.com/q?s=bcs

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