FINANCIAL ANALYSIS - HSBC & LLOYD

Financial Analysis - HSBC & Lloyd

Introduction

A financial analysis is a systematic presentation of information on the financial situation of individuals, businesses or markets in general. The main purpose behind this analysis is to envision and evaluate the financials of banks with astute findings and analyses to guide investment decisions. Such analysis is of prime consideration for investors, lenders and other stakeholders. With respect to financial analyses, profitability, liquidity and solvency of the banks hold prime attention.

In this paper, we will gauge the financial performance of two banks and present comparative results based on the analysis. We will also highlight the major challenges faced by these banks. The banks chosen for the study are Lloyd bank and HSBS Bank.

HSBC Bank - Financial Investigation

Liquidity analysis

The first ratios which we will focus on are liquidity ratios. Bragg (2007) says iquidity represents the quality of the assets to be converted into cash immediately effective without significant loss in value. It enlightens the business's ability to pay, and on the other hand, how easily their assets can be converted into cash. Considering the fact, we have focused on the financial ratio of liquidity in the first place. In the table below, liquidity ratios of HSBC Bank for five years are shown (HSBC Company Financials, 2012).

Table 1: Summary of Liquidity - HSBC Bank

The above table shows that some of the most important HSBC bank's liquidity ratios for a period of five years (from 2005 till 2010). These ratios will aid in gauging the banks' liquidity position in operation. Cash to deposits ratio reveals the amount of cash of the bank with respect its deposits. In can be observed from that table above that the cash to deposit ratio of HSBC has been in between 0.01 and 0.02. However, in the year 2009, this ratio had shot up to 0.04 and 0.06 in the coming year. From these results, it can be said that the bank still has remarks of global financial crises on its financial statements and HSBC had started its way to recovery from the year 2009. If we look at the other liquidity ratios of HSBC bank, it can be observed that similar phenomenon is observed here as well. The liquidity ratio of borrowing to deposit is another very important pointer of the bank's liquidity position, as it shows the ratio between the borrowings of a bank and the amount of deposits (HSBC Company Financials, 2012). This helps a person to analyze the proportion between deposits and borrowings of the bank. From the borrowings to deposits ratio of HSBC, in can be seen that the borrowing to deposits ratio of the bank was at relatively lower level in 2008. However, this ratio has also risen in the years 2009 and 2010 like all other ratios entailed in the above table. The next important ratio is the “Liquid assets to total assets ratio,” which shows the proportion of cash, which is the most liquid asset of a bank, as a ...