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Banking Essentials - Part I

This pathway will walk us through the basics of banks, starting with some of the different types and their main functions, then starting to look at the regulation faced by the banks, both before and after the Global Financial Crisis.

Greenwashing

Greenwashing is the act of distributing false information about something being more environmentally friendly than it actually is.

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Tackling the Cost of Living Crisis

In this video, Max discusses the cost-of-living crisis currently enveloping the UK. He examines its impact on households as well as the overall economy.

CSR and Sustainability in Financial Services

In the first video of this two-part video series, Elisa introduces us to sustainability. She begins by looking at the difference between sustainability and corporate social responsibility, two terms that can be easily confused.

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Bank Income Statements

Bank Income Statements

Chris Blake

Director

This video aims to provide a simple overview of a bank income statement, enabling the viewer to identify the principal items on it and what they mean.

This video aims to provide a simple overview of a bank income statement, enabling the viewer to identify the principal items on it and what they mean.

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Bank Income Statements

8 mins 44 secs

Overview

This video aims to provide a simple overview of a bank income statement, enabling the viewer to identify the principal items on it and what they mean. We decompose the HSBC bank income statement to see the main bank business revenue drivers and costs to see how it all comes together.

Key learning objectives:

  • Analyse the principal revenue items (footings) that typically feature on a bank’s income statement

  • Analyse the principal expense items (footings) that typically feature on a bank’s income statement

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Summary

What is a Net interest income?

Net interest income is the net amount of interest received, that is, the total interest earned during the year on both loans and on any bonds the bank may hold in its overall asset portfolio, as well as interest paid out on deposits and debt issuance.

Net interest income is also related to another performance metric in a bank called NIM (net interest margin) which looks at Net interest income divided by interest earning assets. 

What are the nominal and real interest rates?

Nominal interest rates can be commonly thought of as the rate of interest that is set by the central bank, e.g. base rate or policy rate.

Real interest rates which are a function of the nominal rate less the level of inflation and will give depositors an understanding of the increase or decrease of their purchasing power.

What are operating expenses?

Operating expenses are usually the most significant item on the cost side of a balance sheet. They can be split between employee expenses, general admin, and depreciation and amortisation. An example of depreciation and amortisation could be IT equipment and property and plant.

What are the factors affecting dividends?

  • The investment opportunities in the market
  • The size of the firm
  • The growth rate of the firm
  • What the shareholders expect
  • The amount of distributable reserves
  • Approval by the regulator

How vital is an income statement for a bank?

The income statement helps banks to:

  • Track profits and losses
  • Promote a healthy image of business practices to the public and their investors
  • Paint a clear picture of how they are spending and making their money

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Chris Blake

Chris Blake

Chris Blake holds a degree in Economics and Government from the London School of Economics. He is responsible for helping HSBC professionals understand balance sheet risk and return. He has previously worked as a risk specialist in ALM for the FSA. Prior to that, he worked as a money market and interest rate derivatives trader for Investec. Chris is also the Co-chair and Education Director of the UK Asset and Liability Management Association.

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