Description
Role of Treasury in Bank’s Profit
Role of Treasury in Bank’s Profit
Why Treasury is in the spot-light?
Total Income Interest Income Other Income Other Income / Total Income Treasury Income Treasury Income / Total Income
Allahabad 3418 2669 749 22% 505 15%
ICICI Dena Bank 11958 2352 8894 1735 3064 617 26% 26% 1314 465 11% 20%
Why Treasury is in the spot-light?
Analysis of 41 banks for 2002-03 – Growth in “interest income” – 13 % – Growth in “other income” - - 42 % –Range 25 % - 90% –BOB had the highest growth
• Bank Profits
» Sources of Income & Expenditures
• Treasury functions
» Cash and Funds Management » Forex Operations » Money Trading » G-Secs Trading » Non-SLR Bonds » Equity trading » Other opportunities
• Scope & Future of the Treasury
Sources of Income
• Interest Income – Interest Rates – Volume of advances – Composition of advances portfolio • Non-fund based income – Exchange, Commission, Guarantee fees – Advisory • Foreign exchange business • Treasury Operations
Expenditures
• Interest paid – Interest Rates – Volume of advances – Composition of advances portfolio • Salaries etc • Establishment expenses Potential Loss • Loss Assets • Idle balances
Treasury functions
• • • • • • Cash Management and Funds management Forex Operations Money Trading G-Secs Trading Equity trading Policy regarding investments – Non-SLR securities, Bonds, Debentures and Equity • Research – interest rate and currency movements
Cash management
– Policy decisions regarding cash balances to be maintained at various locations – Monitoring of cash balances – Tracking of receivables and payables – Currency chest operations
–Balances property of RBI –Deposits reflected in RBI Account –Quality of note in the chest –Shortages and defective notes debited to account
Funds management
• • • • • • CRR / SLR maintenance Strategy for CRR & SLR maintenance Policy regarding mix of SLR securities Tracking of balances with RBI Tracking of balances with SGL Operating in Money,G-Secs, Bonds, Equity, Forex markets and Derivatives • Reports - RBI, MIS
Forex Operations
• Cover operations for merchant /customer business • Foreign currency trading • Foreign currency “money markets” • Correspondent accounts • Tracking of balances – reconciliation
Money Trading
• Call Money transactions – Placements of excess funds – Borrowings – Trading ?? • Policy – whether to have excess funds or shortage – Borrow in call or longer term – Whom to borrow from – Whom to lend to
G-Secs Trading
• Income – Return - investments – Carry – interest for holding period – Capital gains – increase in prices • Policy – How much to hold – How to fund – When to sell – Liquid vs ill-liquid G Secs
G-Secs Trading (2) – What mix to have • Held to maturity
–Not marked to market
• Available for trading
–Marked to market; loss provided for
• Trading assets
–Market to market; profit/loss accounted
Non-SLR Bonds
• • • • RBI restrictions Lack of liquidity Credit risk Securitised bonds
Equity trading
• RBI restrictions • Policy – Is it necessary? – What will be the net addition to profits? – Competence – Infrastructure – Risk appetite
Other opportunities
• Arbitrage – Call money between different locations – Call money and G Secs markets – $ - Rupee - money market and forex forwards • Sale of data base • I T systems development • Consultancy
Scope & Future of the Treasury
• Is treasury a facilitating department Or A profit center ? • How much does the treasury contribute to the Net Profits of the bank? • How much risk does the treasury contribute to the over-all risk profile of the bank ? • Can the treasury be made to contribute more to the Net-profits ? Should we concentrate on the treasury?
doc_437827755.pptx
Role of Treasury in Bank’s Profit
Role of Treasury in Bank’s Profit
Why Treasury is in the spot-light?
Total Income Interest Income Other Income Other Income / Total Income Treasury Income Treasury Income / Total Income
Allahabad 3418 2669 749 22% 505 15%
ICICI Dena Bank 11958 2352 8894 1735 3064 617 26% 26% 1314 465 11% 20%
Why Treasury is in the spot-light?
Analysis of 41 banks for 2002-03 – Growth in “interest income” – 13 % – Growth in “other income” - - 42 % –Range 25 % - 90% –BOB had the highest growth
• Bank Profits
» Sources of Income & Expenditures
• Treasury functions
» Cash and Funds Management » Forex Operations » Money Trading » G-Secs Trading » Non-SLR Bonds » Equity trading » Other opportunities
• Scope & Future of the Treasury
Sources of Income
• Interest Income – Interest Rates – Volume of advances – Composition of advances portfolio • Non-fund based income – Exchange, Commission, Guarantee fees – Advisory • Foreign exchange business • Treasury Operations
Expenditures
• Interest paid – Interest Rates – Volume of advances – Composition of advances portfolio • Salaries etc • Establishment expenses Potential Loss • Loss Assets • Idle balances
Treasury functions
• • • • • • Cash Management and Funds management Forex Operations Money Trading G-Secs Trading Equity trading Policy regarding investments – Non-SLR securities, Bonds, Debentures and Equity • Research – interest rate and currency movements
Cash management
– Policy decisions regarding cash balances to be maintained at various locations – Monitoring of cash balances – Tracking of receivables and payables – Currency chest operations
–Balances property of RBI –Deposits reflected in RBI Account –Quality of note in the chest –Shortages and defective notes debited to account
Funds management
• • • • • • CRR / SLR maintenance Strategy for CRR & SLR maintenance Policy regarding mix of SLR securities Tracking of balances with RBI Tracking of balances with SGL Operating in Money,G-Secs, Bonds, Equity, Forex markets and Derivatives • Reports - RBI, MIS
Forex Operations
• Cover operations for merchant /customer business • Foreign currency trading • Foreign currency “money markets” • Correspondent accounts • Tracking of balances – reconciliation
Money Trading
• Call Money transactions – Placements of excess funds – Borrowings – Trading ?? • Policy – whether to have excess funds or shortage – Borrow in call or longer term – Whom to borrow from – Whom to lend to
G-Secs Trading
• Income – Return - investments – Carry – interest for holding period – Capital gains – increase in prices • Policy – How much to hold – How to fund – When to sell – Liquid vs ill-liquid G Secs
G-Secs Trading (2) – What mix to have • Held to maturity
–Not marked to market
• Available for trading
–Marked to market; loss provided for
• Trading assets
–Market to market; profit/loss accounted
Non-SLR Bonds
• • • • RBI restrictions Lack of liquidity Credit risk Securitised bonds
Equity trading
• RBI restrictions • Policy – Is it necessary? – What will be the net addition to profits? – Competence – Infrastructure – Risk appetite
Other opportunities
• Arbitrage – Call money between different locations – Call money and G Secs markets – $ - Rupee - money market and forex forwards • Sale of data base • I T systems development • Consultancy
Scope & Future of the Treasury
• Is treasury a facilitating department Or A profit center ? • How much does the treasury contribute to the Net Profits of the bank? • How much risk does the treasury contribute to the over-all risk profile of the bank ? • Can the treasury be made to contribute more to the Net-profits ? Should we concentrate on the treasury?
doc_437827755.pptx