HSBC and RBS Holdings in the List of FTSE 100 Companies - Example

HSBC and RBS

Background

HSBC holdings comprises of subsidiaries from the shareholders in the multinational banking sector. The company`s headquarter is in United Kingdom and acquires substantial vast assets. The ordinary shares, preference shares, and capital securities comprises HBSC holding equity with the origin of the bank located in Hong Kong. The financial report of HSBC holdings and RBS requisites the international accounting standards board in accordance with the financial statement. In addition, the incorporation of the company occurred in the year 1986. Royal bank of Scotland (RBS) is a global banking and market business. The headquarters of the bank is in United Kingdom that offers products and services. The bank enterprises consist of enormous corporate and commercial institutions. The major subsidiaries of the bank include the NatWest and royal bank of Scotland and others branches located in major cities worldwide.

Strategy of RBS and HSBC

RBS holdings focus on transformation of the banking sector through provision of quality services to customer through enhancing integrity and transparency.

HSBC provides quality and outstanding services to customers to enhance effective and efficient tasks and incorporate strategic lending policies that benefit the institution.

RBS aims at becoming a global and premier financial institution and developing shareholders value through offering affordable credit services.

HBSC aims at providing services to over 100 million customers in different nations. The main strategic objective of the financial institution is to establish value in achieving long-term sustenance in the banking industry globally.

RBS provides a variety of products and services such as opening bank accounts for customers on streets and other exceptional places in offering unprejudiced financial guidance to the public.

HBSC banking sector also implements a strategic and consistent development technique in managing the focus on obtaining the targeted profit efficiently. The holding company liaises with other subsidiary banking sectors to enhance accountability, increase performance, and manage the business effectively.

RBS RATIO ANALYSIS

The financial report describes the cash flow statement, and profit and loss account according to the accounting principles.

The acquisition cost: The weighted average cost method determines the pro rata discount technique used in the acquisition cost.

The transfer of categories: The RBI guidelines facilitate the rate of investment through the determination of carrying cost, book, and market value during depreciation and transfer.

Valuation: Amortization of the premium acquired depends on the remaining discount on the face value before maturity using the straight-line basis method.

HBSC Ratio Analysis

Acquisition cost

Implementation of revenue charges occurs according to the brokerage and commissions’ payment and investment consequently.

Valuation of cost

The yield of maturity measurement occurs according to the market value of investment. Consequently, the determination of depreciation occurs while the appreciation in the profit and loss statement ignored.

Transfer of categories

An investment in the weighted average determines the market value of the institutions’.

HBSC Financial Risk

The bank implements credit risks to their customers through the policy procedures in regulating the risks arising from the exposure of foreign currency.

The government measures the contingency in premium emanating from the foreign currency and determines methods of regulating interest rates that will affect customers.

RBS FINANCIAL RISK

The bank compromises services and products to their customers in order to mitigate risks on interest rates. In addition, the bank uses derivatives in managing the market of foreign currency and facilitates the management balance sheet.

The inherent risks evaluation occurs to reduce the prevalence of operational risks through implementation of appropriate policies.

RBS FINACIAL RISK ANALYSIS

HBSC FINACIAL INSTRUMENTS

HBSC use trade swaps derivatives structures: Banks use derivative transactions during sales activities such as structuring customers` products to enable them reduce uncertainties.

Hedging derivatives: the management of the bank applies portfolios in the acquisition of assets and liabilities within the structural positions. This situation prompts the bank to provide techniques such as structural imbalances in mitigating the market risks and smoothening the acquisition of debt capital.

Implementation of risk monitoring system expedites the banks in reducing risks to a manageable level. Such a framework provides a potential control in the traditional lending procedure at the expense of foreign exchange of currency.

RBS Financial Instruments

The scope application

The Royal Bank of Scotland restricts the information pertaining to consolidation of entities to the public hence providing only general information to the bank`s website.

Capital structure

The bank complies with other financial regulations to control the perpetual growth of the debts incurred by customers.

Summary

Camilla and Lucas should invest the US$1000000 in HBSC bank. Investing in the bank would eliminate the credit risk, market risk, and liquidity of the shareholders hence promotes profitability. The HSBC bank provides interim management report to the public and disclosing the institution assets hence becoming strategically dynamic in the banking sector.

BP PLC vs Sinopec Groups

Background

British Petroleum Petrochemical Corporation is an oil company that came into existence in 1909. Initially it was known as the Anglo-Persian Oil Company and later changed its name to the Anglo-Iranian Company in 1935. In 1954, it changed its name to British Petroleum Company. Currently it is the BP PLC; a name it has adopted since its merging with the Amoco in 1998. The Aim of the company was to be the world leaders in delivery of energy products and services. The China Sinopec Group on the other hand was established in 1998. When BP PLC company is Limited the Sinopec Group is state owned and all its investments are catered for by the state. The aim of the Sinopec Group is to be a world leading energy and chemical company.

Financial Strategy

BP’s replacement cost (RC) loss for the year 2014 was $485 million, and it made a profit of $2, 103 million. It’s net charge for non-operating items was $778 million with the fair value accounting for the effects of $2,577. The replacement cost profit was for the same quarter year was $532.

Sinopec group has been concerned with quality, efficiency and improvement of its development. For sustainable development it focused more efficiency, green, low carbon and a safety environment. Sinopec’s annual sale of natural gas has been increasing yearly at a rate of 8.7%. It’s consituents such as the Suchuan-Eastern China Gas Transmission Pipeline, Yulin-Jinan Natural Gas Transmission Pipeline have also been on the rise. With reports showing a whopping 18.7% increase yearly.

Sinopec has constantly been improving on its marketing strategies. Some of the adopted strategies include scientific pricing policy, development of new users and developing external purchasing and transmission agency.

Source: Sinopec Inc. (2014). China Petroleum Corporation Annual Report 2014. Retrieved from http://www.sinopecgroup.com/group/en/Resource/pdf/2014group_e.pdf

Sinopec group had been ranked the 3rd company by the fortune Global 500 in the year 2014.

Sinopec strengthened their marketing and information sharing strategies. The strengthening of the marketing strategies improved efficiency hence smooth production activities.

The annual sales have been on the rise thereafter like the annual sale projected for the year 2014 was 6.64 million tons.

Sinopec invested on the international business strategy. The international strategy as projected by the Sinopec Group by the 2014 had accumulated the value of USD 18.71 billion. It also led to the increase in the number of employees all over the globe thus more income.

Execution of oversees project by the Sinopec Group improves drastically too. By the year 2014, refining and chemical engineering companies had executed a total of 19 oversees projects leading to the total amount of USD 1.36 billion. It’s influence in the base oil market thus improved.

The BP Amoco Company Limited projects loses in the coming future. Due to the rising natural gas prices. They estimate a decrease in profit making as a result of the same.The BP Amoco Company limited projected an increase in oil demand globally a growth which they estimated to be at a rate of 1.4 million barrels per day in 2015.

A succinct evaluation of the cash flow of the BP Amoco for the first quarter of 2016. The underlying cash flow after the exclusion of oil spillage was $3.0 billion. The Oil spill payment for the first quarter of the year was $1.1 billion. Comparing the organic capital expenditure over the year a decrease was discovered.

Gain and losses resulting from the manufacture of Natural Gases are included in the calculation of the Net Sales and the operating revenues within the final purchases. The gain and loses resulted into risk management purposes, optimization activities and entrepreneurial trading. The actual amount relating to the derivative contracts and all related items therefore differs significantly from the amount calculated.

Northrop Grumman Corporation and BAE systems Limited.

Background

Northrop Grumman is a company that provides solutions to the rising security challenges globally. It also provides solutions to the rising cyber security and aids in development of autonomous systems. There main customers are the US government. They accounted for more than 80 percent of the organizations sales in the years 2015, 2014, and 2013. There main source of profit was the US government. Their profit margin would vary depending on the negotiated contract value, the satisfaction of their customers and the amount of work there was to be done.

BAE systems just like the Northrop Grumman, provides advanced technology security systems with advancements on the cyber security. They also manufactured and and offer support products and systems to deliver military capability and protect national security as well.

BAE sysytems in th year 2015 had developed in that they was an increase in their Backlog. The foolowing figure summarises their financial report for that same year:

Its sales increased from Euros 1.3bn to Euros 17.9bn. It controls the majority of the market. The shares earnings had also risen up to 40.2p and they received an increase mainly du he introduction of UK to their customers.

The following graphs shows how BAE systems has been performing in the stock exchange:

The number of shares is still on the rise. Currently it the increase rate is at 1.75 percent. BAE systems dominance in the stock market could be attributed to its capacity as the leading contributor in the cyber space security. They control half of the value of the market. They suply defense elecronics equipment to the US and other Western Nations. They deal in vehicle maintenance and support for the British. This accounts for 15 percent of their sales.

The order intake for the BAE system has increased of the year. Its orders from the US/UK customers only has increased by 8 percent and between 2013 and 2014.

Northrop Grumman has 800,000,000 shares trading at $1 par value per share. Comparing the 2013 and 2014 financial years the stock exchange had been in an upward trend.

The quarterly dividend of the Company over the two years has two been in the upward trend as shown in the below table:

Stock Performance Graph for the Northrop Grumman Corporation.

The graph below represents the comparison of cumulative five year total return for the case of the Northrop Grumman Corporation.

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Operating costs which comprises of labour, material, subcontractors and over heads over the years for the Northrop Grummann has not been steadyh as compared to that of BAE systems. It has been flactuating and they accumulated to the following as shown in the table below:

Northrop Grumman Company increased its performance through aligning of portfolio through initiating innovations to enhance the business at an affordable price. The cumulative total rate of return on dividends determines the standard rate of common stock.

Financial risks of Northrop Grumman Corporation

Equity risks: The portfolio of marketable securities depends on the fair value of the securities in accordance to changes in interest rates and price.

Interest rate risk: The corporate provide credit risks on short-term debt from their customers at an interest rate.

Foreign currency risk: The firm does not offer payment and receipt of on customers thereby reducing the foreign exchange rate risk in the domestic currency in an unfavorable budget.

Inflation risks: The corporate overcomes the problems of inflation associated with labour and other operational costs in the reduction of biding price to long-term customers.

BAE systems

The system determines the funding of pensions to the trustees within the schemes. The group continues to offer quality services to the shareholders and addressing the customers need through provision of security in the domestic market.

BAE SYSTEM FINANCIAL RISKS

Interest rates: The group manages the fluctuations from lenders through proportional distribution of cross currency swaps hence reducing the occurrence of rare debt.

Liquidity: The BAE system maintains adequate commitment in monitoring the use of their facilities and reducing the usage of credit risk.

Currency: The system strives to eliminate the hedging of transactions emanating from the volatility in earnings especially during the foreign exchange rates thereby ensuring equity for long term investors.