Chapter 15 - Analyzing Financial Statements

Steady as she goes for Canada's top banks

The economic crisis is slowly catching up on Canada’s top five banks. Even though Banks in Canada are steadily earning profit, there is still a show in increase of bad loans and investment losses. With the stocks plunging to its lowest of this week, the banks still has strong domestic retail franchises to back them up for them to earn a profit. There is more for the banks to bear when they anticipate the arrival of a recession. This would then increase the loan losses which will lead to lost in assets. Banks are depending on Canadian consumers to consumer more to help ease the economy, just like in the past.

Later in the article, it compares two banks, BMO and Bank of Nova Scotia, to show how the bank industry is going. For example, they compare Bank of Nova Scotia has a flat income of $842 million, or 80¢ /share; and BMO has a drop in net income of 12% to $ 225 million, or 96¢/share. By comparing two different banks together, we can use comparative data such as comparative balance sheets and income statements to help manage, improve, and predict what should be done in the future. By using this method, insiders and outsiders can compare different banks to see which one they should invest in. The topic of comparative data is learned in section 15.2.

I can understand many people are scared to leave their money in banks since there might be a chance of the bank going bankrupt. Due to the current poor economy, many people in the world would not spend as much money compared to last year, but this is why our economy is getting worst. It is because no one wants to spend their money. It is a hard time for many to go through, but to up roar the economy to get it running smoothly again, it would take many people’s effort to achieve it.

http://www.financialpost.com/news-sectors/financials/story.html?id=1348121