Commonwealth Bank of Australia: Leading Financial Service Provider - Essay Sample

The Commonwealth Bank of Australia is the current leading financial service provider in Australia. The bank offers integrated financial services that include business banking, premium banking, retail banking, fund management, institutional banking, insurance, superannuation, share broking services, and investment products. The Bank started by the Australian government in 1911 and became a full private Bank in 1996 after it was listed in the Australian stock exchange in 1991 (Quiggin, 2001). Today the Commonwealth Bank of Australia operates in more than 11 countries across the globe with large footprints in New Zealand, the United Kingdom, United States and Asia countries. The Bank offers a wide variety of financial services and solutions to millions of customers in Australia and across the globe (Bank, 2015). The Bank has a sound financial profile, and from the Bank's 2019 Fitch rating, both the Issuer Default Ratings (IDR) and Viability Rating indicate that it has a solid financial and management profile and meets all the regulatory authorities monetary and fiscal requirements (Rostami, 2015).

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One of the key metrics in evaluating a bank's performance with regards to its overall performance and its risks is the use of the CAMELS analysis. The CAMELS analysis is an internationally recognized rating system where banking regulatory bodies or institutions evaluates the individual banks' performance and risk and based on the strength and weakness of the banks it rates the Bank according to six factors namely the capital adequacy, asset quality, management quality, earnings, liquidity, sensitivity to market risk (Collaboration, 2015). The six factors form the acrimony CAMELS. Each of the CAMELS factors is rated from one to five and a rating of one is the best while five is the worst. When a bank is rated between one and two on a specific CAMELS factor, it is considered that the Bank has a high rating on that factor (Rostami, 2015). However, if a bank is rated a score greater than three, then it is considered that the Bank has a less than satisfactory performance on that factor.

From the 2019 financial report, the Commonwealth Bank of Australia looks to be performing very well in Australia and the overseas markets (Bank, 2015). Financially, the Bank's group and divisional performance are good. On risk management, the risk report indicates that the Bank has a sound risk management system to ensure the Bank, customers, and investors are suffer no loss. However, a CAMELS analysis shall provide a more detailed analysis of the Bank's performance with respect to the six factors including capital adequacy, asset quality, management quality, earnings, liquidity and sensitivity to market risk. Below is a detailed CAMELS analysis of Commonwealth Bank of Australia's performance.

References

CBAAnnual Report. (2019). Annual Report. file:///C:/Users/hp/Downloads/cba-annual-report-2019-spreads.pdf

Bank, C. (2015). Commonwealth Bank of Australia Environment Policy.

Collaboration, A. T. L. A. S. (2015). CAMELS'analysis in banking industry. Global Journal of f Engineering Science and Research Management, 2(11), 10-26.

https://www.researchgate.net/institution/University_of_Tehran/department/Faculty_of_Management

Rostami, M. (2015). Determination of Camels model on bank’s performance. International journal of multidisciplinary research and development, 2(10), 652-664.

https://www.researchgate.net/profile/Malihe_Rostami/publication/283457724_Determination_of_Camels_model_on_bank's_performance/links/5638ba4e08ae4bde5021d57e.pdf

Quiggin, J. (2001). The “People’s Bank”: the privatisation of the Commonwealth Bank and the case for a new publicly-owned bank’. Australian Options, 25, 1-4.

http://www.uq.edu.au/economics/johnquiggin/JournalArticles01/CBAPrivatisation01.pdf