Peoples united bank Financial Analysis

To help us conduct the analysis we will employ financial ratios of the financial data for Peoples united bank data and analysis of the competitors in the market. Financial ratios refers to relationships that come into being as a result of comparisons of financial information within a given firm, and is majorly used for comparison purposes between different organizations or entities. The common size income statement for Peoples bank gives the management different trends that the bank needs to put into consideration, for instance management can clearly know whether they have correct proportion allocated for expenses based on revenue generated and quickly adjust areas that may need necessary readjustments. Competitor’s analysis of the same ensures management is able to borrow best practices and emulate and also thrive in areas of strength.

Liquidity Ratios Liquidity ratio refers to a firm’s ability to honor/pay debt obligations in consideration of its margin of safety, below are examples of liquidity ratios and their respective formulas. 73% which dropped from 65. 92% for the year 2015 which meant that Peoples bank dropped its ability to use its resources and managed its liabilities efficiently. This could be either because the liabilities in the following year increased by a higher percentage compared to the bank’s assets growth. Bank of America on the other hand had 52. 24%, Wells Fargo had 54. From the computation of the common size income statement for the year 2017 and 2016 for the peoples united bank and Bank of America various findings emerge, for instance in terms of income Peoples bank has 88% and 87% for the year 2017 and 2016 respectively whereas Bank of America has 66% and 61% of the total interest income in comparison to the total revenue of the bank.

This tells us that the Peoples bank a higher percentage of its income comes from interests from loans and dividends, which alerts the management to know they should also venture into other investments so that the biggest portion of income not only depends on interest and dividends from loans, bank of America seems to have spread its risk a bit in this regard because it has a lower percentage of income generated from interest and dividends. Bank of America has a lower percentage of the expenditure in comparison to the revenue collected compared to Peoples united bank, therefore management of Peoples united bank should efficiently device ways of either increasing the income or reducing expenditure simply because its percentage of the same is high at 84% in 2017 compared to a 63% attained by the bank of America, so if profitability is the drive that Peoples United bank management wants to attain this will be an area they need to consider.