1. Interest Income How can gross interest income rise while the net interest mar
ID: 2736690 • Letter: 1
Question
1. Interest Income How can gross interest income rise while the net interest margin remains somewhat stable for a particular bank?
2. Impact on Income If a bank shifts its loan policy to pursue more credit card loans, how will its net interest margin be affected?
3. Noninterest Income What has been the trend in noninterest income in recent years? Explain.
4. Net Interest Margin How could a bank generate higher income before tax (as a percentage of assets) when its net interest margin has decreased?
5. Net Interest Income Suppose the net interest income generated by a bank is equal to 1.5 percent of its assets. Based on past experience, would the bank experience a loss or a gain? Explain.
6. Noninterest Income Why have large money center banks' noninterest income levels typically been higher than those of smaller banks?
7. Bank Leverage What does the assets/equity ratio of a bank indicate?
8. Analysis of a Bank's ROA What are some of the more common reasons why a bank may experience a low ROA?
9. Loan Loss Provisions Explain why loan loss provisions of most banks could increase in a particular period.
10. Bank Performance during the Credit Crisis Why do you think some banks suffered larger losses than other banks during the credit crisis?
11. Weak Performance What are likely reasons for weak bank performance?
12. Bank Income Statement Assume that SUNY Bank plans to liquidate Treasury security holdings and use the proceeds for small business loans. Explain how this strategy will affect the different income statement items. Also identify any income statement items for which the effects of this strategy are more difficult to estimate.
Explanation / Answer
1. Gross Non Interest Income will rise while interest margin decreases as the total loan book increases
2.Income will likelt to increase because credit card has higher income
3.Non Interest Incomeincreases over time
4 When Net interest margin decrease it can aget a higher income by having a lerge loan book
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