3.

(i) Based on your study and analysis of their annual financial reports, identify and analyze the main components of their balance sheet and income statements.

WESTPAC:
WESTPAC MAIN COMPONENTS OF BALANCE SHEET ($000) ASSETS 2010 2011 2012 Total Assets 1280133 1407119 1437111 Loans (including advances to customers and similar facilities 896019 929544 1016491 % Of Total Assets (rounded off) 70% 66% 71% Balance with the Reserve Bank of Fiji % Of Total Assets (rounded off) LIABILITIES Total Liabilities Deposits and Borrowings % Of Total Liabilities (rounded off) Certificates Of Deposits % Of Total Liabilities (rounded off) EQUITY CAPITAL Total Equity Capital Retained Earnings % Of Total Equity Capital (rounded off) 219197 17% 356504 25% 305316 21%

2010 2011 2012 1088639 1239145 1287105 626976 852128 938035 58% 69% 73% 372089 34% 2010 191494 171205 89% 334131 27% 2011 167974 148453 88% 298037 23% 2012 150006 127294 85%

From the table above, we have broken down Westpacs Balance Sheet into the three main sections (Assets, Liabilities and Equity Capital), in which we have identified and analyzed the main components under each sections. Assets: (Uses of Funds) For the past three years, we have identified that the main components of their assets were Loans, which included advances to customers and similar facilities, and Balance with the Reserve Bank of Fiji. (Highlighted in yellow) Loans made up an average of 69% of the Total Assets and Balance with the Reserve Bank of Fiji, an average of 21% for the last three years. The remaining 10% were allocated to: Cash and Liquid Assets

Accrued receivables and other assets Investment Securities Receivable due from other financial institutions Fixed assets

Liabilities: (Sources of Funds) Main components of their liabilities section were Deposits and Borrowings and Certificates of Deposits. (Highlighted in Blue) Deposits and Borrowings made up an average of 67% of Total Liabilities for the last three years and Certificates of Deposits, on the other hand, an average of 28%. The remaining 5% were mainly from: Payables due to other financial institutions and Other borrowed funds and liabilities.

Equity Capital: Equity Capital for the bank was mainly from Retained Earnings which accounted for about 90% of the Equity Section. (Highlighted in Green). Issued and Paid Up or Assigned Capital was constant at 7% for the last three years and the remaining 3% was on General Reserves for credit losses.
WESTPAC MAIN COMPONENTS OF INCOME STATEMENTS ($000) INCOME 2010 2011 2012 Interest Income 73363 71879 68463 Fees & Commission Revenue 18695 19153 21295 EXPENSE Other Operating Expense Interest Expense Bad & Doubtful Debts 2010 39846 31704 8056 2011 47315 24308 1470 2012 47845 15174 4374

Similar to the analysis of their Balance Sheet, we have identified the main components of their Income Statement based on 2 sections: Income and Expense. Income: There were two main components under their Income section, and they were Interest Income and Fees and Commission Revenue. (Highlighted in Purple)

Expenses: These were mainly made up of Other Operating Expenses, Interest Expense and Bad & Doubtful Debts. (Highlighted in Blue) (ii) Comment on the nature of the changes in these items over the last three years.
WESTPAC MAIN COMPONENTS OF BALANCE SHEET ( Changes over the last three years) ($000) ASSETS 2009 2010 2011 Total Assets 1228975 1280133 1407119 Loans (including advances to customers and similar facilities 921003 896019 929544 Asset Loan Growth (common-sized ratio) -3% 4% Balance with the Reserve Bank of Fiji Balance with RBF Growth Total Asset Growth LIABILITIES Total Liabilities Deposits and Borrowings D & B Growth Certificates Of Deposits COD Growth Total Liability Growth EQUITY CAPITAL Total Equity Capital Retained Earnings Retained Earnings Growth Total Equity Growth 176321 219197 24% 4.16% 2010 1088639 626976 1% 372089 5% 2% 2010 191494 171205 20% 17% 356504 63% 9.92% 2011 1239145 852128 36% 334131 -10% 14% 2011 167974 148453 -13% -12%

2012 1437111 1016491 9% 305316 -14% 2.13% 2012 1287105 938035 10% 298037 -11% 4% 2012 150006 127294 -14% -11%

2009 1065780 623623

353789

2009 163195 142877

Based on the table above are the analysis of the main changes in Westpacs Assets, Liabilities and Equities over the last three years. Using common-sized ratio to measure Asset Growth, we saw that from 2009 to 2010, total assets has increased by 4.12% and from 2010 to 2011 it increased further by 9.92%. However, there was a decline in total assets from 2011 to 2012 by 2.13%. This resulted from a decrease in the amount of balance with the Reserve Bank of Fiji. (Figures highlighted in Blue) For the Total Liabilities of the bank, we saw an increase from 2009 to 2010 by 2% as a result of more borrowings and deposit accounts by customers. From 2010 to 2011 it had increased significantly by 14% and there was a decrease from 2011 to 2012 by 4%.

Equity grew by 17% from 2009 to 2010 however; it continued to decrease in 2011 and 2012 by 12% and 11% respectively. This resulted from the decrease in the Retained Earnings amount for the two years.
Profitability Westpac Bank's Operations in Fiji Net Profit/(Loss) After Tax ($'000) As % of Avg. Total Assets 2009 26518 2.23% 2010 36328 2.90% 2011 31177 2.34% 2012 37245 2.62%

Generated from the table above is the profitability of the bank for the last three years. It has been fluctuating from 2010 to 2012 that is 2.9% profit in 2010 to 2.34% in 2011 and increases again to 2.62% in 2012. The table below shows the Capital Adequacy for Westpac Bank for the last three years.
Capital Adequacy 2009 2010 152624 183972 15.98% 20.85%

Westpac Bank's Operations in Fiji Total Capital ($'000) Capital Adequacy Ratio

2011 159749 18.37%

2012 143059 14.95%

Capital Adequacy indicates the sufficient level of Capital that Westpac Bank has to absorb all losses and to continue as a going concern. As you can see from the table above, the Capital Adequacy Ratio from 2009 to 2010 has increased substantially from 16% to 21%. This is a good sign because the bank has no problem in meeting any loss incurred during the period. However, the level of capital adequacy decreased in 2011 and 2012 from 18% to 15%. Although there is still adequate capital available, the bank will need to consider maintaining the level of capital adequacy at a certain level.