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Principles of Financial Markets Group | Principles for financial market infrastructures

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Principles of Financial Markets Group

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Introduction 

From an academic perspective, it could be deduced that economic sector of Australia could be considered fundamentally a transformative and dynamic one as far as the rate of Gross domestic product (GDP) is concerned, on a global basis. Currently, according to Gitman, Juchau & Flanagan (2015), the total amount of GDP of Australia has been that of $13.23 trillion (2017) with a persistent per annum based growth rate of 3.4%. Thus, it is necessary, considering the objectives of representation of the realistic circumstances and conditionalities in the existing market scenario concerning the various business industries of the country under consideration as well as evaluation of the associated economic variables of the same national market space of Australia, to select and analyse the financial prospects of two different business organisations which could be currently engaged in business operations within the financial sectors of Australia. These selected business entities could be identified as the Commonwealth Bank of Australia and The Australia and New Zealand Banking Group Limited. In terms of introductory observations, the economic sector of Australia is mostly exhibitive of the dominance of the service sector with annual contribution of 68% of the national GDP. The delineation of the primary principles of this market based financial sector of Australia has thus necessitated the selection of these two companies within the research ambit of the corresponding project report. The Commonwealth Bank of Australia, better identified through the abbreviation of CBA or CommBank, could be acknowledged as the largest banking organisation situated at the Southern Hemisphere. It is an Australian multinational banking organisation with which provides financial and banking services at various national contexts such as at New Zealand, Asia, the United States of America and at the United Kingdom. The entire range of different financial services which are offered by this organisation include retail banking, institutional and private banking services provision, management of funds, superannuation of funds, insurance and hedging services and finally, investment and brokerage services. As of 2015, the Commonwealth Bank of Australia could be noted to be the largest company which has been listed on the Australian Securities Exchange and the organisation includes branded services such as Commonwealth Securities (CommSec) and Commonwealth Insurance (CommInsure), Colonial First State Investments, ASB Bank (New Zealand) and Bankwest and others. This banking organisation was founded during the year 1911 by the labour government of Andrew Fisher under the pretext of nationalisation of the banking sector. The current headquarter of the bank is located at Darling Harbour, Sydney, Australia.
 
On the other hand, the Australia and New Zealand Banking Group Limited, better known through the abbreviation of ANZ within the global financial markets, could be acknowledged as the third largest banking organisation from the perspective of capitalisation of the markets within Australia. The major services comprise of the retail and commercial banking processes. ANZ is also understood to be the largest banking organisation situated at New Zealand. The organisation was established under the Royal charter in the year 1835 and the current headquarter of this organisation is based at 833 Collins Street, Docklands, Melbourne, Australia. According to Pilbeam (2018), the financial principles on which the market based operations of these financial and banking companies are executed are mostly multifarious and vary considerably as well. The policies and frameworks which are underutilisation at these organisations are formulated through the careful consideration and evaluation of various financial and internal operational factors which influence the progression of market based profit earning efforts of these two banking organisations.
 
Principles of Financial Markets Group Assignment
 
According to Busch, Bauer & Orlitzky (2016), it is of the utmost necessity to possess the necessary understanding regarding the multiplicity of elements, positive and negative alike, which influence the existing and the underdevelopment market conditions within any specific economic scenario, such as that of Australia and New Zealand to achieve the coveted measure of success in the targeted market segment such as that of the financial sector. Thus the process of Top down-analysis is necessary to be understood prior to application in this regard and this could be contemplated in the manner of a comprehensive analysis of the existing financial implications through the calculation as well as determination of the entire range of factors which influence the market area where the selected organisations are currently engaged. The outcome of such analysis process is achievement of the forecasting of the probable market shares which could be acquired by the business entities under consideration. This is further delineated as the intended percentage increase which could be achieved by the organisations under consideration on the basis of the existing market share as well as customer segment possession. According to Petty et al (2015), the increase of the Australian rate of GDP from that of the previously existing 2.5% to 3.4% within the continuing financial year is demonstrative of the gradual recovery of the Australian financial scenario which could be a catalyst that could contribute in the furtherance of the efforts on part of both the ANZ and Commonwealth Bank of Australia to project greater focus on their effort towards running of integrated economic and financial services. This has hinged upon the most effective understanding of the macro and micro financial factors which could influence the growth forecast for the financial sectors at Australia. Prospective growth and improvement of the Australian economy could be deliberated as definite factors regarding such perceptions.

 Analysis of the financial factors associated with the Australian economy

According to Beatty & Liao (2014), the Commonwealth Bank of Australia has been able to register a well calibrated growth rate revenue as 43% within the previous decade which ranged from AUD17.2 billion to AUD 26.5 billion till the year 2015. There has been a marked increment in the list of shareholders due for both of the banking organisations depending on the fact that the Australian economic sector has been deregulated and now foreign direct investment could be readily accessed by each and every business organisation. This has been beneficial for both of these banking companies since the amount of upfront investment as well as the extent of new projects have registered positive growth. The direct outcomes have been loans with lower interest rates and comparatively lesser amount of collateral securities which have benefited the loan takers in the Australian financial markets, leading to banking service expansion. Deregulation has also contributed in formulation of new collaborative efforts between previously established business entities such as ANZ and Commonwealth Bank of Australia and the new entrants. The existing stability of the fiscal policies, according to Moradi-Motlagh & Babacan (2015), has been also observable in the manner of levying of tax rates at 30% regarding the individual investors and 40% in case of institutional investors such as corporate operatives. The combined base of customer populace involving the two banking and financial organisations range upto 23.14 despite the fact that Commonwealth Bank of Australia has been only able to possess 30% of the existing market share of the Australian and New Zealand based financial and banking sectors. The performance of ANZ, according to Decker & McCracken (2018), has been not much encouraging as well since it has managed to hold only 25% of the market shares in the above mentioned sectors. However, the combined per capita GDP measure of $ 67,458.36 of Australia and New Zealand is indicative of the apparent vibrancy of the emergent financial market of these two countries. One specific benefit of the deregulation of the economy of Australia and New Zealand has been the growth in the soft credit availability prospects which could contribute to the growth in the gross rate of income regarding the customer bases of both the banking organisations.

To this context, it could be observed that the occurrence of Brexit has had a profound impact on the changes and modifications of the existing market based operating policies as well as financial strategies both of the banking organisations under consideration in this study. The changes in the purchasing capabilities of the existing and prospective customers at both the countries under consideration within this study could as well impact the financial positions as well as the sustainability of the banking institutions in a relative manner. Ultimately, the introduction of new technologies such as different applications of online banking and virtual currencies such as Bitcoin has been critical for the policy formulation of both ANZ and Commonwealth Bank of Australia. Furthermore, the lowering down of repo rates, cash reserve ratio and statutory liquidity ratio by the Reserve bank of Australia for the promotion of greater infusion of liquidity into the markets is one significant factor which determines, to the greatest extent, the financial positions and the interest rates which such banking service providing organisations could be able to charge on their loans. For ANZ and Commonwealth Bank of Australia this is one of the most fundamentally significant elements regarding the external influents upon their market based operations. Such operations are mostly indicative of the obligation of compliance on part of these two banking organisations in terms of the financial markets of the Australia and New Zealand.

Bottom-up analysis  

This analytical procedure is utilised for the purpose of formulation of the most effective understanding regarding the actual position of the aforementioned banking business organisations in comparison with those of the rival organisations which could be working within similar market spheres. The considered micro factors in the overall financial perspective of such analysis are to be considered in the manner of sustainability of the organisational operations of both ANZ and Commonwealth Bank of Australia. This has a specific benefit, from the research perspective, to contribute in generation of extensive measure of data which could be relevant as well concerning the banking and financial service provisions, management of wealth and finally, concerning the most important segment of the insurance service provisioning offerings which both ANZ and Commonwealth Bank of Australia extend to the customers of theirs.

Principles of Financial Markets Group Assignment

Currently, as per the observations of De Jong, Loudon & Choo (2016), the market capital extension of the Commonwealth Bank of Australia could be measured to be the amount of AUD 149.9 billion. This is greater than that possessed by the ANZ since the overarching financial capital possession by the entire economic sector of Australia could be understood to be that of $ 105 trillion. This has to be considered from the perspective of the regulatory safeguards which are imposed by the Australian government founded policies and the FDI measures which have been accessed recently due to currency devaluation and deregulation have also contributed to the increment of the growth rate of Australian GDP.

Profitability of commonwealth Bank and Australia and New Zealand bank

The profitability ratio is undertaken to be developed for the purpose of building better understanding regarding the rationale of determination of the methods and strategies through which the banking institutions under consideration could be attempting to translate business efforts into profit maximisation. This involves the evaluation of pivotal considerations such as stock prices and prices of individual shares for the shareholders.

Return on Assets = Net Income after tax/ Total assets

Return on Assets for Commonwealth Bank - 4150000/ 281584 = .14

Return on Assets for Australia and New Zealand = (233712000)/ 259,036= (.90)

Net Profit Margin = Net profit/ Total Sales

Net Profit Margin for Commonwealth Bank = 2552 000 / 1,056,130 000 =                                    

= 0.05
This is related to the necessity of providing adequate comprehension to the shareholders regarding the ability of the financial organisations to provide specific measures of profit within every financial years since the core functioning of the profitability ratio is associated with the extent to which profit could be earned within one year.
 

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