The Commercial Bank of Dubai, Research Paper Example

The Commercial Bank of Dubai was founded in 1969 in the United Arab Emirates as a joint part of Commercial Bank of Kuwait, Commerzbank, and Chase Manhattan Bank. In 1982, the bank evolved to be the National Public Shareholding company, which was followed up by an exponential increase in the company’s capital base as well as a large scale restructuring of its operations. The Commercial Bank of Dubai’s growth drew the attention of the Dubai government in 1982, when it became a key shareholder in the company. The bank has progressed, evolved, and expanded throughout the years and has now established itself in a position where it can provide valued investment products to its consumers that are relevant in the modern world. Examples can be seen with the company’s web infrastructure that enables Facebook users to access the bank onlin without ever leaving the social network.

Commercial Bank of Dubai’s Fitch bank issuer default rating of A-, with a Stable outlook, an Issuer Default Rating of F1 with a viability rating of bb+, and a support Rating of 1. The bank’s ROAA, Net Income / Average Equity for 2013 was 14.84, while in 2012 it reported a ratio of 13.24 and in 2011 it reported a ratio of 13.57. The bank’s Operating Profit / Average Equity is consistently identical to it ROAA ratios. Commercial reported a Equity / Total Assets ratio for 2014 of 16.23 down from 17.33 in 2013 and 16.53 in 2012. The Loan Loss Prov / Net Int Rev for Commercial Bank in 2014 was 27.16, in 2013 it was 31.96, and in 2012 it was 34.80. The Loans / Customer Deposits ratio was 113.80 in 2014 and 112.84 in 2013 while in 2012 it was 107.58.

Bank of Madrid

Bank of Madrid bank reported a Fitch long term default rating of BBB+ with a Fitch short term rating of F2 and a stable outlook. As Moody’s notes, “Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk,” while “Issuers (or supporting institutions) rated Prime-1[or P1] have a superior ability to repay short-term debt obligations” (Moody’s, 2014). ROAA, Net Income / Average Equity 10.24 in 2014, 15.56 for 2013. ROAE, Operating Profit / Average Equity or return on average equity for the bank was 17.74 for 2014, 5.06 for 2013, while it was reported no data for 2012. Return on average equity (ROAE) breaks down the rate of return on ownership interest, which is also refereed to as shareholders’ equity in relation to common stock owners. It attempts to account for the ability of a company to generate profitability. Banco de Madrid, S.A.U. offers private banking services and products specifically setup for services in Spain. The company offers investment solutions for their client base in the Spain area, specifically in the form of investment companies, discretionary portfolio management, with variable capital (SICAVs). They also offer investment funds, variable incomes and fixed income. The bank also has structured financial products as well as pension plans insurance investments and savings plans through financial planning packages. Both Banco de Madrid and Commercial Bank of Dubai offer wealth management options to its clients. specifically Banco Madrid as a fund that invests in the open-ended mutual funds, investment funds in the Spanish market, and fixed income mutual funds. Founded in 1954, Banco de Madrid was housed in Madrid, Spain. As of July 20, 2011, Banco de Madrid, has functioned as a subsidiary of a collection of other financial institutions.

Bank of Madrid represents a significantly less stable bank because it is a newly founded financial services institution, compared to a substantially large number of banks in teh financial sector, but it still has established a track record since 1954. Despite the fact that the company focuses its skills on many aspects of banking such as foreign exchange, trust services estate investing and insurance, it doesn’t have a viable track record of success in financial markets compared ot that of Commercial Bank of Dubai, which has grown to become a substantialy larger bank in a much shorter period of time. Commercial Bank of Dubai has a sound business model that also enhances consumer understanding about financial institutions. The main difference between the Bank of Madrid and Commercial Bank of Dubai is that Commercial Bank of Dubai is backed by their government. Also Commercial Bank of Dubai is more aggressive in regards to expansion and growth, through providing their customers with financial planning information and education on financial services, they develop value, long-term loyalty, and integrity.

 Company Strengths

Commercial Bank of Dubai also has certain strengths that stem from its A- credit rating as a strong financial institution. This is especially true in regards to the bank’s ability to operate as a lending company, due to their backing from the Dubai government and substantially high cash volume. Another key advantage the Commercial Bank of Dubai has over the Bank of Madrid is that it has a much larger distribution and reach as well has much larger capital. This can also be seen as a disadvantage the bank has compared to the Bank of Madrid. Since Bank of Madrid is a much smaller bank, it has substantially smaller operating costs but in turn has smaller branch costs, and consolidate its location enabling it to utilize significantly more tech options for consumer use and financial service products. Commercial Bank also has significantly more capital enabling them to have mini-branches, these are locations that provide traditional banking services utilizing less resources through incorporating aspects of the latest technology available to make banking more convenient.

Company Weaknesses

Some of the bank’s weakness involve expanding too soon and the possibility of over innovating. The fact that Bank of Madrid reported a Fitch long term default rating of BBB+ with a Fitch short term rating of F2, compared to Commercial Bank of Dubai’s Fitch bank issuer default rating of A-, and their issuer default Rating of F1 with a viability rating of bb+, and a support Rating of 1, reveals that Commercial Bank of Dubai is a much more stable company than Bank of Madrid. Bank of Madrid’s net profit of only 10.5 million in 2013, compared to Commercial Bank of Dubai’s net profit of over 1 billion in 2013 makes Bank of Madrid look more like one of the newer banks in its market, despite being founded nearly 15 years earlier. This is a major weakness for Bank of Madrid, due to the fact that it was founded in 1954. Data shows in many aspects its business model is being outperformed by Commercial Bank. This is especially true in respect to net capital. Commercial Bank is actively expanding its reach by leveraging its large capital position in its market in collaboration with invested interest from the government of Dubai. Commercial has sought to enhance its customer service activities, through training programs as well as hiring multicultural and divers es staff across branches. This is the primary competitive edge that Commercial bank has over Bank of Madrid.

One of the significant advantages Commercial Bank of Dubai has over Bank of Madrid is that it’s much larger with a much more substantial track record. The problem is that the bank runs the risk of losing its 1 on 1 personal interaction with customers. Over expansion can also leave Bank of Madrid vulnerable but in a different way as their lack history and experience in the market leaves them vulnerable to counterfeiters and security threats that are common within the Commercial’s market. The bank’s minimal size reduces it as a viable option for competitors despite being one of the largest in its market. The data reveals Bank of Madrid to be the preferred option for young investors especially as it relates to the Spanish market, while Commercial Bank of Dubai is favored among older investors and foreign investment.

Benefit of Using Bank Scope

Bankscope helps economist, and others seeking financial information, a resource for comparative bank analysis on a wide range of levels. Bankscope serves as the ideal tool to evaluate how banks perform over the course of operational periods. This is due to the fact that the Bankscope database has access to over 23,000 banks. Through combined data from the site, bank information and financial data can be retrieved or reports can be drawn out for access to balance sheets, and financial ratios to better equip financial strategists with the information they need to evaluate. Through the use of analysis software, bankscop is able to gain access to data that is exclusive to financial institutions. This includes access to information through the Bureau of van Dijk Electronic Publishing (BvDEP). Bankscope also does an exceptional job of breaking down the financial ratios necessary to evaluate these banks for performance. It utilizes 16 years of financial information taken from banks both public and private, as well as European banks as many as 7,000, 12,000 in North America, and 3,000 major banks, and 800 Japanese banks. Bankscop also has access to Russian banks, as well as banks in the Middle East.