The Financial Analysis Of Shanghai Pudong Development Bank

According to our commitment to the WTO, by December 11, 2006, the special arrangement for China's banks after China's accession to the WTO– the"five-year transition period"– had come to an end. Ever since then, our country's banks have fulfilled our commitment to open to the outside to the full, and foreign banks now have the same national treatment as Chinese banks. Domestic commercial banks are encountered with severe competition and challenges, bearing the risks and pressures brought about by opening markets. With our country's financial system reforms deepening, changes have taken place in commercial banks operation concepts and running models, which has also brought about rare opportunities to the development of commercial banks. Shanghai Pudong Development Bank is a shareholding financial enterprise established in strict accordance with the"Corporate Law"and"Commercial Banking Law". 10 years'growth has witnessed remarkable achievements, and its operation has been rather smooth, coupled with some problems, though.Financial statement analysis means systematic analysis and evaluation of an enterprise's past and present operation results on the basis of financial statements and other data by means of specialized methods, and its purpose is to learn about the past, evaluate the present and predict the future to help stakeholders to adjust policies. The fundamental function of financial statement analysis is to turn large quantities of statement date into information useful in policymaking to reduce the amount of uncertainty in policymaking. Analyses of balance sheet, income statement and cashflow statement can facilitate the understanding of enterprise's profit-generating capacity, capital operation capacity, etc. to provide basis for the enterprise to make policies for development.Commercial banks take the pursuit of maximum profits as their goal. Unlike other enterprises operation objects are products or service, commercial banks amass capital by means of various financial liabilities, etc. and take varied financial equities as their operation objects. They are financial entities that can make use of liabilities in credit generation and provide customers with multi-functional and integrative services. In order to realize maximum profits and maximum market values as their ultimate goals, commercial banks must follow the three principles of liquidity, safety and profit generation in their operation management. Analyses of financial statements and adaptation of varied financial indexes and financial ratios can facilitate understanding of the three principles, especially the principle of profit generation, and they play an important role in identify and discover commercial banks'advantages and disadvantages.This paper make an attempt to analyze the financial statements of Shanghai Pudong Development Bank from 2003 to 2007 by means of financial analysis technology and methodology, point out the advantages and existing problems in operation management of Shanghai Pudong Development Bank, and make pertinent suggestions.Analyses of the balance sheets, we discovered that Shanghai Pudong Development Bank's entire assets liabilities showed a general upward tendency. Its liabilities were mainly from bank deposits, which had been growing gradually year by year, and it showed that Shanghai Pudong Development Bank's scales were on the gradual rise. Meanwhile, bond issuance of Shanghai Pudong Development Bank had shown a rising tendency, and it showed that Shanghai Pudong Development Bank tried to have initiative liabilities while expanding passive liabilities. Its major assets are loans, and its total amounts of loans showed gradual growth by the year. From 2003 to 2007, Shanghai Pudong Development Bank grew too fast in mid-term and long-term loan extensions, and in terms of future development, Shanghai Pudong Development Bank would have some hidden liquidity risks.Analyses of the income statements showed that the revenues from its major business operations were rising gradually year by year. Incomes from interest were still the biggest proportions, but the incomes from commission charges also grew fast. It shows Shanghai Pudong Development Bank placed important on innovative development of intermediary businesses, changed traditional business operation structures and profit-making models, and vigorously engaged in intermediary businesses that did not involve its own capital. However, in terms of the proportion from non-interest incomes, they were still too small, showing that Shanghai Pudong Development Bank should further expand its intermediary business scales.Analyses of the cashflow statements revealed that the operation-oriented cash flows of Shanghai Pudong Development Bank made up the highest proportions in its entire cash flows. However, the operation-oriented cash flow amounts were lowering year by year in its entire cash flow amounts, while investment-oriented cash flow amounts were increasing year by year, which showed that the capital utilization models of Shanghai Pudong Development Bank were somewhat changing. It was not restricted within traditional bank deposit and loan businesses, and Shanghai Pudong Development Bank paid some attention to investment and capital raising.At the same time, we made analyses of capital adequacy, assets quality, profit generation and liquidity of the Shanghai Pudong Development Bank,by using a series of ratio indexes, and made comparisons with other listed banks'financial indexes. We could see through our analyses that, despite the fact that the capital adequacy rate of the Shanghai Pudong Development Bank met the Basel Agreement standards, the indexes had showed a gradual dropping. It showed that the Shanghai Pudong Development Bank had some pressures from capital adequacy deficiencies, and it should take measures to raise its capital adequacy rate. The assets quality of Shanghai Pudong Development Bank is comparatively good, and the rate of its non-performing loans was the lowest among listed banking groups, and it was still lowering year by year.Generally speaking, Shanghai Pudong Development Bank had good financial situations and it had very strong potential for development. However, some problems are existent, such as the capital adequacy rate is not high, the income structure is too simplex, the long-term loan scale is too high, etc.On the existing problems of the company, this paper makes a few suggestions about the development of Shanghai Pudong Development Bank, mainly in the following: first, intensifying capital replenishment to raise capital adequacy rate; second, continuing to accelerate operation shift to lay a foundation for sustainable development of the commercial bank; third, stepping up risk control. In conclusion, with the knowledge I have acquired, I have make analyses of the financial situations of Shanghai Pudong Development Bank and made corresponding suggestions about solutions to its current problems. However, due to my limited knowledge, there are surely some shortcomings in the paper, and I sincerely hope to be corrected by my teachers.