TOPIC 1: Basel III Compliance Analysis
1. Executive Summary
Provide an overview of the report’s purpose and main findings.
2. Bank Overview
Include key details about the bank, such as its establishment date, primary services, national or regional focus, markets and regions, customer base, recent performance (including profitability and asset quality ratios, like non-performing loans ratio and provision coverage ratio). This section should help assess any potential weaknesses, issues, or strategies that may lead to risks under adverse market conditions.
3. Introduction to Basel III
Summarize Basel III’s purpose and key ratios (Capital Adequacy, Liquidity Coverage, Leverage, and Net Stable Funding), including their formulas, objectives, and requirements in Australia. Keep it brief, as the focus is the bank’s compliance and whether meeting these requirements is sufficient.
4. Bank’s Compliance Analysis
- Collect data from the past 3 years (by quarter) to create charts/graphs that show trends in the Basel III ratios (no need to calculate the ratios; they are available in the bank’s annual report or quarterly disclosures).
- Go beyond describing the trends: explore underlying factors (e.g., an increase in CET1 ratio might be due to a strategic response from the bank anticipating worsening market conditions).
- Consider the bank’s unique characteristics, current strategies, any issue in their recent performance, and market conditions. Identify potential risks and evaluate if the current ratios are sufficient or need improvement (e.g., if we observe a rising trend in non-performing loans and predict worsening market conditions, then the current level of CET1 might not be sufficient).
5. Recommendations
Based on your analysis, suggest actions the bank should take to address potential risks and improve resilience against adverse events or market shifts.
TOPIC 2: ASX Listed Company Analysis
1. Executive Summary
Provide an overview of the report’s purpose and main findings.
2. Background of the Selected ASX Listed Company
- Introduction of the company, history, business model, etc.
- Discuss the company’s equity capital market relevant information, such as market capitalisation, market liquidity, PE, Dividend yield, etc.
- Discuss various significant indicators of financial performance (past to present).
- Use FactSet to download all pertinent financial indicators and discuss the information collected. Go beyond just describing trending up or down, but to synthesize for insights.
3. Fundamental or Technical Analysis (Major Section)
a. Select one of the two analytical approaches.
b. Provide your analysis based on the approach. FactSet can assist in producing summaries of all required data.
c. Synthesize and provide insights.
4. Recommendations
Based on your analysis, provide recommendations on the share, including suitability to the type of investors with justification.
TOPIC 3: Bond Analysis
1. Executive Summary
Provide an overview of the report’s purpose and main findings.
2. Overview of the 3 Bonds Selected
Briefly describe their main features (coupon rate, coupon payment frequency, callability, sinking fund, convertibility, maturity, credit rating (issuer rating and bond rating), where they were issued and traded.
3. Bond Features and Their Impact on Yield
- You may begin with a general discussion on how various bond features affect bond yield, then apply this to the bonds in your report.
- Alternatively, directly analyze how differences in bond features explain the yield variations between bonds, supporting your analysis with concepts and previous findings from literature.
4. Macroeconomic Outlook and Potential Impact on Bond Prices and Yields
- Develop an outlook on current and expected market conditions, including any anticipated changes in central bank monetary policies. If bonds are from multiple markets, analyze each market.
- Discuss how these factors might influence bond prices and yields (e.g., an anticipated rate cut by the RBA may raise bond demand, or economic challenges in China may drive investors to safer assets like bonds, affecting yield and prices).
5. Conclusion
Summarise your main findings in greater detail than in the executive summary.
TOPIC 4: FX Risk and Hedging Strategy Evaluation
1. Executive Summary
Provide an overview of the report’s purpose and main findings.
2. Overview of the Company
- Introduce the company and its business model (what does it do to make money).
- If a company is an exporter: what are the main markets? Break down revenues by markets/countries/regions.
- If a firm imports: where does it import from? Break down cost of goods sold by market/country/region.
- This helps evaluate the company’s FX risk exposure: where the foreign exchange risk is most concentrated, what factors/events have significant impact on the firm’s FX risk.
3. Evaluation of the Firm’s FX Risk Exposure and Hedging Strategy Effectiveness
- FX Risk Exposure: Identify key areas of vulnerability, concentration, and the extent of FX risk.
- Current Hedging Strategies: Outline the company’s existing hedging strategies and assess their effectiveness, including any gains or losses due to FX fluctuations.
- Future Effectiveness of Hedging: Evaluate if these strategies will remain effective by analyzing macroeconomic factors affecting FX rates between the AUD and other currencies.
- For instance, USD has depreciated against AUD since the Fed cut rates—will the trend continue or reverse? What might happen when the RBA cuts rates in the coming quarter?
- Determine whether these FX trends benefit or pose risks for the company and assess if the current hedging strategy is still necessary.
- In cases where FX moves favorably and is expected to stay stable long-term, it may be advantageous for the firm to reduce or eliminate FX hedging to capitalize on these favorable conditions.
4. Recommendation
Based on your analysis, make recommendations on how the firm can improve their FX risk hedging strategies.