Comparison of Financial Performance in Banking Sector of UK, Credit Risk Management

By

ACKNOWLEDGEMENT

My thanks go out to all who have helped me complete this study and with whom this project may have not been possible. In particular, my gratitude goes out to friends, facilitator and family for extensive and helpful comments on early drafts. I am also deeply indebted to the authors who have shared my interest and preceded me. Their works provided me with a host of information to learn from and build upon, also served as examples to emulate.

DECLARATION

I, (Your name), would like to declare that all contents included in this thesis/dissertation stand for my individual work without any aid, and this thesis/dissertation has not been submitted for any examination at academic as well as professional level previously. It is also representing my very own views and not essentially which are associated with university.

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ABSTRACT

This research work is an attempt to study the financial performances of the three banks namely, Barclays Bank, Royal Bank of Scotland and HSBC and to test their credit risk management skills that which of the banks is performing in a better way. The performance of a bank has been described as the financial performance of the organisations is based on the criteria of their return and risk. The relationship between that prevails between the return and risk is acceptable, therefore, the greater the risk, the greater would be the expected return. The methods that are adopted for meeting the aim of this research are a survey questionnaire, ratio analysis and correlation analysis. The questionnaire was distributed to 40 people working in the three banks that are under consideration for this research study. The results of the study showed that there is a very strong correlation between the activities of credit risk management of Royal bank of Scotland and HSBC and a strong correlation which is positive in nature also prevails between the Barclays bank and Royal Bank of Scotland but this relationship is not as strong as the correlation between the Royals Bank of Scotland and HSBC.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 01: INTRODUCTION1

1.1 Background of the Study1

1.2 Aim and Objectives3

1.3 Research Questions4

1.4 Significance of the Study4

1.5 Layout of the Dissertation4

CHAPTER 02: LITERATURE REVIEW6

2.1 Introduction6

2.2 Overview of Credit Risk Management6

2.3 Financial Performance and Credit Risk Management8

2.4 Credit Risk Management Models10

2.5 Financial Development10

2.6 Banking Industry and Financial Performance13

2.7 Financial Performance of Individual Retail Banks14

CHAPTER 03: RESEARCH METHODOLOGY15

3.1 Introduction15

3.2 Research Method15

3.3 Overview of the Quantitative Research15

3.3 Philosophy of Research16

3.4 Research Instrument16

3.5 Ratio Analysis17

3.6 Correlation Analysis17

3.7 Sample17

3.8 Informed Consent17

3.9 Reliability and Validity18

3.10 Confidentiality19

3.11 Ethical Concerns19

3.12 Analysis of the Gathered Data19

3.13 Conclusion20

CHAPTER 04: DISCUSSION AND ANALYSIS21

4.1 Introduction21

4.2 Questionnaire Analysis21

4.3 Ratio Analysis31

4.4 Correlation Analysis55

CHAPTER 05: CONCLUSION59

5.1 Recommendations for Future Research64

REFLECTIVE REPORT65

REFERENCES77

APPENDIX A- SURVEY QUESTIONNAIRE85

Questionnaire85

APPENDIX B- SURVEY FINDINGS AND FREQUENCIES88

APPENDIX C- RATIO ANALYSIS92

LIST OF FIGURES

Figure 1: Gender22

Figure 2: Employed in22

Figure 3: Position in the Bank23

Figure 4: Bank's Response to Unforeseen Risk or Credit Crunches24

Figure 5: Major challenges faced in successful implementation of Credit Risk management policies25

Figure 6: Categories that your bank tracks to predict26

Figure ...