With a highly recommended reputation in the banking sector in the United States, the PNC bank is one among the leading bankswith a great influence in the financial trend of the country. Specializing in financial servicesincluding consultation, loans, andadvice on investments, the PNC Bankoperates with the satisfaction of their clients. The banks main offices are located in Washington, DC. However, with the ever-increasingmarkets that have potential customers, the bank has a huge number of branches all over the country.An analysis of the banks progresspresents financialtrends of its progress over the years. The analysis is presented for the years2009 -2013.Consequently, theanalyses of the years 2009-2013 are then used to project an expected trend of the bank in its operations form the year 2014-2018. Basing on these analyses, a valuation of the future of the bank is determined. However, the valuation is also a reflection of the expected trend that the Americanfinancial system will take from the years 2014-2018.
The proforma statementpresents the trends of the bank in terms of the net income, the total assets, and thetotal liabilities and capital of the bank in the years 2009-2013.The trends in thesefactors reflect the changes and progression of the bank as affected by the market trends and the economy of the country. The analysis of the net income presents a downward trend in the interests that the bank has received from the year 2009 to 2013. In the year 2009, the bank recorded an interest income of 11,667,777 dollars, which over the duration of analysis decreases gradually till 2013, which is recorded at 9,546,096 dollars.The downward trend affects the general operation of the bank and thepublic image it has among other banks and their customers. However, the trendis forecasted to increase from the year 2014 to 2018, which means that the bank will assume back its position in the banking sector.The projection shows an upward trend in the activities of the bank as it starts the year 2014.
A similar trend as theinterest income is seen in theinterest expenses.In the year 2009, the bank spent 2,547,311 dollars in the expenses and the values decrease as it moves across to the year 2013. In 2013, the bank records 715,794dollars a difference of 71.9% from the original amount in 2009. Similarly,the amounts drop even lower in the year 2014.The negative trend is positive for the bank as it reflects on the amount of savings they have retained in its accounts. Theexpense rates are expected to increase from the year 2015 as the year’s progress to the 2018. The year 2014 is considered a turning point for the bankbefore it starts to spend expensively from the year 2015. Considerate factors in the calculation of the interest expense of the bank are the totals accrued in the deposits and the borrowed cash.Theinterests on the deposits show a decreasing trend from the year 2009-2013. In the year 2009, the bank recordedan interest of 1,751,735dollars in the deposits made into the bank.As the readings are compared over the years progressing to 2013, the totals are reducing with the year 2013 showing350, 690 dollars.The ratesincrease from the year 2014 as it progresses to the year 2018.The projections estimates the year 2018 to accrue 829, 211 dollars a difference of 478521 dollars from the amount recorded in 2013. On the other hand, the interests in borrowingalso decrease over the years until 2013. The implication of the recordings show that the bank is offering loans at a lower rateinterest, which meansthat the total interest expensesit,spends less in retuning the borrowed funds at the end of each fiscal period.The year 2009, the bank realized an interest of 795,576dollars from borrowed funds, which reducesgradually to 365,104 dollars in the year 2013. A significant drop is also realized in the year 2014, but an expected increase from the year 2015 to 2018 when theapproximated value should reach 1,433,850 dollars.
On the other hand, the bank also shows a decreasing trend in the investmentsinterest income from 2009. In the year 2009, the bank recorded 2,694,164 dollars and the values have decreased from the year 2010 up to 2014.These readings reflect on the reduction of interest rates that the bank collected from the extra services they provided. The investments revenues, however, increase from the year 2015 up to 2018, which shows a positive trend in the development of the bank in their market segment.Similarly, the increase reflects an increment in theactivities the bank willparticipate in with the approximated value in the year 2018 being 4,436,116 dollars.
The net interest income from the interests and investments of the bank has a direct influence on the net income of the bank in the duration of study. In 2009, the bank had a net interest income of 9,120,466 dollars. In the years that followuntil 2013, the trend of the interest income is fluctuating. The year 2010 recorded 9,245,681 dollars and then dropped to 8,616,164 dollars. The following year 2011, there was an increase to 9,441,357 dollars, which then dropped to 8,830,302dollars in the year 2013. The trend is expected to change from the year 2014 to 2018. The expected amount in 2014 is9,034,768dollars and in 2018 the value to rise to 16,074, 430 dollars. From the factorsdiscusses, the bank records a net income trend that shows a progressive increase until 2013.Thetrend starts at 1,114,159 dollars in the year 2009 and steadily grows to 3,064,430 dollars in the year 2013. The progress reflects the ability of the bank to operate effectively in their market segment over the duration of the estimated time. Similarly, the records are a reflection of the reduced losses in the loans and the increment of interest from their customers. However,in the year 2014, the rate total net income is expected to drop to 2,245,828before it again takes an increasing trend through to 2018.In 2018, the expectedincome is expected to reach 4,172,265 dollars.
The financial position of the company is determined by the balance sheet, which constitutes the assets of a company, the liabilities, and the capital. These factors are primal in the determination of the position of a company in the market segment.Similarly,the PNC Bank presents their position in the market through the records they have on the assets of the company, the liabilities, and the capital in their accounts. The total assets increased from 257,771,062 dollars in the year 2009 to 307,735,901 dollars in the year 2013. The steady increase representsa 50 million dollarsincrease in between the years 2009-2014.Therecords are a representation of the progress of the bank as related to their competitors; as a result, their value in the market has increased over the four years.The trend is expected to be similar through the projection that the year 2018 the bank will record 405,682,287 dollars.
On the other hand, total liabilities of the bank increased to 259,685,395 dollars in the year 2013from 213,167,914 dollars recorded in the year 2009. It isexpected that the total liabilities to assume the similar trend through 2014 to 2018 with the expected value approximately 356,384,944 dollars in 2018. On the other hand, the bank’s capital improved from 31,827,917 dollars in the year 2009 to 38,304,917 dollars in the year 2013, an increase of 6, 477,000 dollars. The positive difference is an indication of increased equity, which improves the company stock value. The projection reflects that the values remain the same for capital by the end of financial year 2018.
The data collected from the liabilities, capital, and assets of the bank are used in the calculation of ratios representing the different progress of the bank.Throuhg the information collected it is possible to determine the income ration, the expense ratio, and the growth of the bank. From the projected ratios presented by the bank, a steady decrease is shown as we progress down from 2009to 2013.The year 2009, the loan interest income of the bank was at 7.4%, which reduced in the year 2010 to 7.11%.A similar trend is recorded in the years that follow throughto 2013 where the rate was 4.87%.However, in the years that follow from2014, a steadyincrease is expected in the rate of the loaninterest income.The estimated increase from the year 2014 to 2018 is expected to risefrom 3.80% to 5.30%.On the other hand, the investment interest income of the bank also shows a decreasing trend from the year 2009 to 2013.The data presented by the bank shows that in the years 2009, the bank had a rate of 4.16% and decreased through the years to 2013 where the recorded rate was 2.27%.However, in the years that follow from 2014 to 2018, there is an expected increase in the rates froma 2.10% to a3.50%.
Another ration of importance is the expense ratio, which is a factor of the interest expense on deposit, total interest on deposit,the total interest on borrowing, and the interest expense on borrowing.The income rations of the bank from the year 2009 to 2013 are recorded in a decreasing trend. However,the years from 2014 to 2018 also portend to show a decreasing rate in the ratios. The projections of the bank over the years of study show a declining trend from the year 2009 to 2013. In the interest expense on deposit, thereducing trend from the year 2009 to 2013 was 3.93%, 2.04%, 1.62%, 1.14%, and 0.91%.The following years from the year 2014 to 2018will show a similar decrease with the approximate decrease from 0.70%, 0.80%, 1.00%, 1.20%, and 1.50% in the year 2018.The rates indicate that the bank will is experiencing a decrease in the deposits in the present and in the future.The total intereston deposit also reduces from the year 2009 to the year 2018. The ratesover the different years are 0.91%, 0.51%, 0.35%, 0.18%, 0.16%, 0.15%, 0.16%, 0.18%, 0.21%, and 0.25% in the year 2018.
The total interest on borrowing and interest expenses in borrowing also shows a decreasing trend from the year 2009 to 2018. In the interest total on borrowing the rates, reduce from3.95% in the year 2009 to 2.10% in the year 2018. The lowest rate recorded is in the year 2014 where it is at0.80% before itincreases from the year2015, where it is expected to reach 1.10%.The interest expense in borrowingfor the bank ispresented as 12.66% in the year 2009. However, in the subsequent years, the rate of interestexpense reducesuntil it reaches 2.11% in the year 2013. From the year 2014, a similar decreasing trend is expected, though with an increasing progression as compared to the first section of between 2009 and 2013. The rates are 1.60%, 1.80%, 2.00%, 2.20%, and 2.50% in 2018.
The growth projection of the bank isdetermined with the factors such as the loans, borrowings, investments, non-interest income, deposits, non-interest expenses, and the provision for loans and leases.Significant changes are realized in the loans, deposits, borrowings, non-interest income, and the non-interest expenses, which have grown from negative values to positive.Theloans have grown from -4.45% in the year 2010 to 5.36% in the year 2013. The years from 2014 to 2018, these rates are expected to remain constant at 6.00%.The rate of deposits have also grown from -0.58 in the year 2010 to 4.15% in the year 2013. From the year 2014 to 2018, the expected rates are estimated to remain at 8.00%.Another growth is in theborrowings, which have also increased from -6.7% in the year 2010 to 22.2% in the year 2013. The years 2014 to 2018,the rates are expected to remain the stable at 15%.The non-interest income has also increased from a negative value of -12.56% to 18.47%.The other factors that act as determinants for the calculation of growth are represented below.
From the values of net income and share outstanding, the earnings per share improved from 2.12 in the year 2009 to 5.82 in the year 2013.However, by the year 2018, the value is expected to reach 7.93.The PNC beta as per forex analysis is 0.78. Using the capital asset pricing model, the return of the stock for the PNC bank is7%. As a result, the estimated value of the bank stock is 58.95. The current price is estimated as 86, which makes the bank stock less;therefore, it is not a good investment.
The future forecasting of the PNC bank is not stable. However, the projected estimatesportend to increase the returns and development of the bank in their market. Precaution is needed in assessing the liabilities and the assets of the bank to protect it from financial risks. Other factors such as the growth rates of the bankshould also be evaluated to boost the ability of the bank to perform. With the unstabletrends in their operations, the PNC bankstands to loseinvestors who might want to buy their shares or participate in other activities sponsored by the bank.
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