Report on National Bank of Australia Essay Example

Table of Contents

Executive summary

This report was commissioned primarily to evaluate the National Bank of Australia’s operations in the United States. The report is to be handed to the Chief Executive of the Bank in order to make informed decisions with regard to the bank’s performance in the foreign country. The report has managed to briefly give the background information about the national bank of Australia including the year it was founded and who was the founder. This report has also managed to establish that even though the company was founded in Australia it is operating in other foreign countries which include New Zealand, the United Kingdom and the United States. Further, the report has discussed some of the risks that the company’s facing apart from discussing some of the opportunities and success that have been achieved by the company so far. As away of understanding the economic environment the company is operating in, the report has discussed in detail the current status of economy in the United States. Finally, the report has posed some recommendations which can be applied by the CEO to enhance the company’s performance.

1.0 Introduction

The primary objective of this report is for submission to the Chief Executive Officer (CEO) of the National Bank of Australia for formal decision making process with regard to the company. The report will put more emphasis on the important aspects of the company operations which include the operating environment for the company in the foreign country where the bank has got its branches. The report will also consider the forces that trigger the performance of the bank at the foreign environment, the risks and challenges encountered as well as the opportunities that are available for the business in the foreign country (Taylor 2011). The report will also take a closer look on the company’s success and opportunities and the ways in which different risks that face the company have been managed. While the evaluating the business operating environment for the National Bank of Australia, the most important aspects that will be taken into consideration include the demographics, the foreign direct investment policy, the competition from other local banks, level of international trade, the political stability of the country and the general performance of the economy and its prospects. By using this format, the author is interested in creating an insight that will help the CEO formulate long-term strategies for the business.

2.0 Company background

The National Bank of Australia is a financial institution that was established in 1893 by then called the National Bank Limited. It is until 1981 when the bank changed its name to the National Bank of Australia after a merge with the Commercial Banking Company of Sydney Limited. The bank has got it is headquarters in Melbourne. The founder of the bank is known as Alexander Gibb and the first chairman for the company was called Cruickshank. The bank currently is having over 40,000 employees who work at the company 1,800 branches worldwide. The bank is also responsible for over 460,000 shareholders at the moment.

The national bank of Australia is currently operating numerous franchises within the country with other retail businesses in foreign countries like New Zealand, United Kingdom and United States as well as Asia. The bank products are positioned in such away that they meet the standards of local and international products (John 2010). The bank’s goal is to deliver sustainable and satisfactorily results for the company owners who in this case are the shareholders. Even though, the world has experienced financial crisis, the bank has remained stable and has managed to overcome the challenge. Doing the right thing for the customer is the bank’s philosophy and this has been managed by use of a strong and sustainable Corporate Responsibility (CR).

3.0 Operating environment

3.1 United States

In the United States, the national bank of Australia operates as the Great Western Bank (GWB). The bank in the United States serves customers from different sectors of the economy. The GWB currently serves over 300, 000 customers mainly from the agricultural sector and the business sector. In the United States, the bank currently operates over 125 branches and they are located in seven states including Iowa, Nebraska and South Dakota. These states are all from an agricultural region of Mid-West. The company’s earnings as per the end of 2011 were A$88m from America alone (Ferguson 2010). This part of the report will discuss the actual operating environment that the bank’s branches in America face as well as the opportunities that do exist in the country for the bank.

3.2 Demographic and economic status

Macroeconomic conditions refer to the economic environment that is presented by change in different aspects of the economy. The macroeconomic environment is characterized by different parameters which include: the Gross Domestic Product (GDP) growth rate, the Gross National Product, inflation rate, consumer price index (CPI), unemployment rate, interest rates, consumer confidence index, consumer sentiment index, and inventory levels. This research paper is aimed at analyzing the current macroeconomic condition in the United States and how monopolistic companies respond to such conditions in terms of stock performance, current and future sales revenue, current and future profits, labor costs, and hiring decisions.

3.3 The current economic condition

In the United States, the country’s GDP growth rate currently stands at 2% as opposed to 1.3% and 0.4% in the second and first quarters of 2011 respectively. This means that the country has had remarkable increase in the GDP during the year, a situation that has been attributed to better government spending and personal consumption expenditures. On personal income and personal consumption expenditures, according to the report by Bureau of Economic Analysis released on 23^rd November this year, personal income had increased by 0.4% during the month of October. During the same period, disposable personal income (DPI) had increased by 0.3% while personal consumption expenditures (PCE), had increased by 0.1% to reach $8.2 billion. According to the report by the Conference Board, Consumer Confidence Index had improved during the month of November 2011 from 40.9% to 56.0% during the month of October. However, Expectation Index Had increased from 50% to 67.8% during the same period meaning that there was need to do more by the government to protect the consumers from unfair treatment by the suppliers. Labor Force Statistics report produced on unemployment levels reveals that the country’s unemployment level currently stands at around 9.4%. This clearly demonstrates how the economic conditions looks like and that investment levels have gone down while the government has lacked the capacity to reduce its dependency on import goods and services. Refer to appendix 1 and 2 below. During the month of October, inflation rate had declined from 3.87% during the month of September to 3.53%. However, it is notable that inflation has never been stable through out the year and truly speaking, inflation rate has been on the increase since it was first recorded at 1.63% during the month of January this year. Refer to appendix 3 below. The interest rates have also been used to explain the condition of the economy and they are being used to show how the cost of borrowing affects the status of the economy. The table below shows different interests rates charged on different products. This is the latest report on the current interest rates. Refer to appendix 4.

4.0 Risks

Given that the bank is operating in a highly industrialized country, there is challenge that the bank has to adhere to the country’s policy on foreign direct investment which requires that all companies be it local or foreign to adhere to Corporate Social Corporate Responsibility (CSR). This is an important policy that a country uses to ensure that apart from investing in the country, the companies are also expected to play a role in the country’s development (Charles 2003). This requirement has remained a very big challenge for the company given that America is currently undergoing hard economic times. To facilitate the bank’s sustainability in the country has to comply with the policy on taxation of the country which states that the much you earn the more you pay as tax.

Now that the company is greatly depended on customers who are farmers and businessmen, the bank is experiencing difficult times especially with change in the physical climate. This has brought numerous calamities like droughts and floods which have greatly affected the agricultural sector. The economic crises has also contributed to some of the challenges is currently facing right now in the country (Stephen 2000). The trend is expected to continue until the country is able to recover from it is poor economic status. Given these conditions, it is expected that the bank is likely to have decreased customer deposits in the coming years. Consequently, it is approximated that the company is likely to have low revenues from customer fees and charges. The ever increasing unemployment level is one of the risks of the economy that have and will continue to have direct impact on the performance of the Bank in the country.

It is also believed that given the country’s resilience in economy and increased government debt will continue to affect the institution’s performance together with the peers. The ever increasing country’s debt is expected to translate into increased tax rates and thus hurting the young, foreign growing company. The other potential risk that is facing the bank in the country is the need to comply with highly sophisticated technology that will ensure high level of competence in the industry (Cline 2011). This is because the country’s banks are highly advanced and they apply various technologies to better the services of their customers. This is considered as a continuous cost for the business as it is expected that new technologies will continue to evolve. This implies that the bank will persistently embark on research and development as one way remaining at par in delivering quality customer services.

5.0 Opportunities and successes

The country’s GDP growth rate currently stands at 2% as opposed to 1.3% and 0.4% in the second and first quarters of 2011 respectively. This increase has been attributed to better government spending and personal consumption expenditures. During the month of October, personal income, disposable personal income (DPI) and personal consumption expenditures (PCE) had increased by 0.4%, 0.3% and 0.1% respectively. This research has also found that Confidence Index had improved during the month of November 2011 from 40.9% to 56.0% during the month of October. However, Expectation Index Had increased from 50% to 67.8%. This information explains the available opportunity the people have towards the recovery of the economy to encourage more savings from the customers.

However, difficult, the current macroeconomic conditions in the United States, the company have continued to generate good revenues. This is because the company has taken full advantage of their competitive status to control their operations in a country that is facing serious economic challenges. One way that the company has continued to do this is by diversifying their product range. The production of new products by the bank has helped it in opening up new markets and thus generating more revenues for the businesses (Bianconi 2003). To ensure that the companies are able to sustain their revenues even in the future, they have embarked on self advertising strategies through their products. This strategy is aimed at minimizing cost and maximizes profits.

6.0 Recommendations

In order to sustain economic development the following recommendations can form an important part of the bank’s policy with regard to economic development and management:

1. There is need to respond to global forces by ensuring that the country is more an astute marketer than ever before as this will enable the country to respond more quickly and appropriately to global challenges and opportunities as this will form an important premium package to effective global business strategy.
2. There is need to embark and invest more on research especially in areas that deals with information technology as this will facilitate the involvement of the international market through subsequent expansion. Use of highly innovative information systems will aid the country to coordinate the operations by far-flinging the international markets.
3. Finally, as the country continues to consolidate its position in the international market the act of deploying resources across the world is essential as it helps to averse the risk as well as exploit the opportunities that prevail in the global market. For Samsung to continue to prosper there is need to continually to evolve, adapt as well as respond to ever changing realities in the global market.

References

Bianconi, M.2003. Financial Economics, Risk and Information: An Introduction to Methods and Models.World Scientific Publishing Co., River Edge, NJ.

Charles N.2003. Dynamic Macroeconomic Analysis: Theory and Policy in General Equilibrium. Cambridge University Press, Cambridge, UK.

Cline, K. 2011. «Innovating for Customers». BAI Banking Strategies.

Ferguson, A.2010. «Angst over Axa and worries over bank’s performance: the woes of Cameron Clyne». The Sydney Morning Herald.

John, D.2010. «For AXA it’s goodbye NAB, hello AMP». The Sydney Morning Herald.

Ljungqvist, L. and Thomas, S.2000. Recursive Macroeconomic Theory. The MIT Press, Cambridge.

Stephen, J.2000. Methods of Macroeconomic Dynamics, Second Edition The MIT Press, Cambridge.

Taylor, P.2011. «NAB starts fresh front in mortgage loans battle». Herald Sun.

Appendixes

Appendix 1. Graph showing GDP growth rate

Appendix 2.Graph showing unemployment rate

Appendix 3.Table showing change in inflation rates

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Ave
2011	1.63%	2.11%	2.68%	3.16%	3.57%	3.56%	3.63%	3.77%	3.87%	3.53%	NA	NA	NA
2010	2.63%	2.14%	2.31%	2.24%	2.02%	1.05%	1.24%	1.15%	1.14%	1.17%	1.14%	1.50%	1.64%
2009	0.03%	0.24%	-0.38%	-0.74%	-1.28%	-1.43%	-2.10%	-1.48%	-1.29%	-0.18%	1.84%	2.72%	-0.34%
2008	4.28%	4.03%	3.98%	3.94%	4.18%	5.02%	5.60%	5.37%	4.94%	3.66%	1.07%	0.09%	3.85%
2007	2.08%	2.42%	2.78%	2.57%	2.69%	2.69%	2.36%	1.97%	2.76%	3.54%	4.31%	4.08%	2.85%
2006	3.99%	3.60%	3.36%	3.55%	4.17%	4.32%	4.15%	3.82%	2.06%	1.31%	1.97%	2.54%	3.24%
2005	2.97%	3.01%	3.15%	3.51%	2.80%	2.53%	3.17%	3.64%	4.69%	4.35%	3.46%	3.42%	3.39%
2004	1.93%	1.69%	1.74%	2.29%	3.05%	3.27%	2.99%	2.65%	2.54%	3.19%	3.52%	3.26%	2.68%
2003	2.60%	2.98%	3.02%	2.22%	2.06%	2.11%	2.11%	2.16%	2.32%	2.04%	1.77%	1.88%	2.27%
2002	1.14%	1.14%	1.48%	1.64%	1.18%	1.07%	1.46%	1.80%	1.51%	2.03%	2.20%	2.38%	1.59%
2001	3.73%	3.53%	2.92%	3.27%	3.62%	3.25%	2.72%	2.72%	2.65%	2.13%	1.90%	1.55%	2.83%
2000	2.74%	3.22%	3.76%	3.07%	3.19%	3.73%	3.66%	3.41%	3.45%	3.45%	3.45%	3.39%	3.38%
Note: Red indicates Deflation, NA indicates data not yet released.

Appendix 4.Table showing different interests for different products

Prime Rate	3.25%	30-year Fixed Mortgage	4.51%
Discount Rate (primary)	0.75%	15-year Fixed Mortgage	3.69%
Discount Rate	1.25%	1-year Treasury ARM	2.97%
Federal Funds Rate	0% — 0.25%	U.S. Savings I Bonds	4.60%
Broker Call Rate	2.00%	U.S. Savings EE Bonds	1.10%
90-day Treasury Bill	0.05%	1-year Treasury Bill	0.18%
5-year Treasury Note	1.72%	10-year Treasury Note	3.07%
6-month CD	0.44%	1-year CD	0.69%