Changyaqiao
Banking – Class #14 Apr 23, 2013. (Case: Merger of Equals – Bank of New York Mellon)
Due 5pm Monday Apr 22, 2013
Questions for homework – email by 5pm Monday Apr 22.
1 – Discuss how different types of banks make money (investment bank, commercial bank, and “wholesale” bank like BNY that provides asset servicing, corporate trust, and treasury). For the purposes of this question, ignore asset management. Investment bank
Investment Banking: transaction fee from IPO ; capital raising fee
Sales and Trading Division: selling and trading various equity and fix-income securities
Research Division: sell the research report and get the branch warehouse.l
Asset Management: managing the money from client and get management fee.
Wealth Management: managing and advising the investments for clients.
Commercial bank
Providing services to individual clients of utilities and remittance.
Making consumer loans, mortgages
Taking deposits and offering products, such as checking accounts and CDs
Making money by the spread of deposit rate and loan rate
Wholesale bank
Asset Servicing Division: providing ongoing service as custodians
Corporate Trust: providing debt access and realizing client’s business vision
Treasury: providing trade finance and logistics solutions
2 – Discuss the “lose no customers” mantra. What are some reasons this might not be a good idea?
1) Different company culture and risk management computer system might challenges
2) High exposure in investment management sector.
4) Revenue loss from client service disruption and pricing renegotiation
3 – Look at Exhibits 2a and 2b. What are BNY and Mellon’s ROA and ROE? What might drive these differences?
BNY: ROA=2.77%， ROE=25%; MELLON: ROA=2.24%, ROE=19%
From exhibit 2, we can find BNY’s profitability is stronger than Mellon because BNY has stronger Asset serving, cleaning service, treasury services. Meanwhile, BNY offer more financial products and services. Making
Due 5pm Monday Apr 22, 2013
Questions for homework – email by 5pm Monday Apr 22.
1 – Discuss how different types of banks make money (investment bank, commercial bank, and “wholesale” bank like BNY that provides asset servicing, corporate trust, and treasury). For the purposes of this question, ignore asset management. Investment bank
Investment Banking: transaction fee from IPO ; capital raising fee
Sales and Trading Division: selling and trading various equity and fix-income securities
Research Division: sell the research report and get the branch warehouse.l
Asset Management: managing the money from client and get management fee.
Wealth Management: managing and advising the investments for clients.
Commercial bank
Providing services to individual clients of utilities and remittance.
Making consumer loans, mortgages
Taking deposits and offering products, such as checking accounts and CDs
Making money by the spread of deposit rate and loan rate
Wholesale bank
Asset Servicing Division: providing ongoing service as custodians
Corporate Trust: providing debt access and realizing client’s business vision
Treasury: providing trade finance and logistics solutions
2 – Discuss the “lose no customers” mantra. What are some reasons this might not be a good idea?
1) Different company culture and risk management computer system might challenges
2) High exposure in investment management sector.
4) Revenue loss from client service disruption and pricing renegotiation
3 – Look at Exhibits 2a and 2b. What are BNY and Mellon’s ROA and ROE? What might drive these differences?
BNY: ROA=2.77%， ROE=25%; MELLON: ROA=2.24%, ROE=19%
From exhibit 2, we can find BNY’s profitability is stronger than Mellon because BNY has stronger Asset serving, cleaning service, treasury services. Meanwhile, BNY offer more financial products and services. Making