ABMF 3023 COMMERCIAL BANKING SERVICES

DIPLOMA IN BANKING & FINANCE

YEAR 2 SEMESTER 1 (2015/2016)
COURSEWORK (GROUP ASSIGNMENT)

CHONG SHIUO MUN

13WBD02114

CHONG KAH YAN

13WBD00976

TUTORIAL GROUP

: DBF G9

NAME OF TUTOR

: MR. KOH CHIN WEI

DAY

: TUESDAY

DATE OF SUBMISSION

: 21.07.2014

TABLE OF CONTENT
NO.
1.
2.
3.
4.
5.
6.

TITLE
Cover
Table of content
Assessment Criteria For Coursework
Group Member Appraisal Form
Plagiarism Statement
1. Discuss whether banks generated more non-interest based income than
interest based income from the bank activities from 2000 to 2015.

PAGE
1
2
3
4-9
10
11-12

7.

2. Discuss whether the impact of macro and regional economic effects on

banks non-interest based activities such as BASEL rules and regulation.

13

8.

3. Discuss whether the impact of the banks non-interest activities by firms

in different countries.

9.

10.
11.
12.

4. Discuss whether the non-interest activities and the bank performance

and bank risk.

Appendix
Reference

14-17
18-24

24-25
26-28
29-30

ABMF3023 Commercial Banking Services

Assessment Criteria for Course Work (20%)
Names of Students:
1. CHONG SHIUO MUN
2. CHONG KAH YAN
3. CHOU KAH MEI
Criteria

Discuss whether banks generated more

non-interest based income than interest
based income from the bank activities
from 2000 to 2015.
Prepare the calculation table for accessing
the workout.

Maximum
Marks
20

Discuss whether the impact of macro and

regional economic effects on banks noninterest based activities such as BASEL
rules and regulation.

20

Discuss whether the impact of the banks

non-interest activities by firms in different
countries.

20

Discuss whether the non-interest activities

and the bank performance and bank risk.

20

Proper referencing to source of

information.

Extent of originality of work and ability to

collate information in an organized
manner.
Group appraisal on involvement in
assignment.

Marks
Allocated

Remarks

Group Member Appraisal Form

The basis of this evaluation is your group members commitment to completing the assignment
and to their regard for other members of the group. It should be based on the contribution given
by each member and his or her involvement in this assignment.
Group members should be appraised using the following basis:
100%

50%

0%

Group member attended all group meetings or if unable to attend, contacted the
group in advance and came to an alternative arrangement that the majority of group
members were happy with.

Group member contributed to group discussion.

Group member always offered to help or volunteered for tasks.

Group member had assigned tasks completed on time.

Group member missed group meetings without making alternative arrangements
with other group members.
Group member assigned tasks were only partly completed or poorly completed.
Group member did not contribute to the group effort or volunteer for tasks.
Group member attended few meetings and made no contribution to the assignment.

Name of student: CHONG SHIUO MUN

Instructions:
Place the name of each of the members in your group in the space provided below. Appraise each
of the members in your group by circling one of the totals shown below (i.e. 100%, 50% or 0%)
Group Member
100%
100%
100%
100%
100%

50%
50%
50%
50%
50%

0%
0%
0%
0%
0%

Note:
Failure to submit a Group member appraisal Form will result in a zero appraisal being recorded
against your name.

Group Member Appraisal Form

The basis of this evaluation is your group members commitment to completing the assignment
and to their regard for other members of the group. It should be based on the contribution given
by each member and his or her involvement in this assignment.
Group members should be appraised using the following basis:
100%

50%

0%

Group member attended all group meetings or if unable to attend, contacted the
group in advance and came to an alternative arrangement that the majority of group
members were happy with.

Group member contributed to group discussion.

Group member always offered to help or volunteered for tasks.

Group member had assigned tasks completed on time.

Group member missed group meetings without making alternative arrangements
with other group members.
Group member assigned tasks were only partly completed or poorly completed.
Group member did not contribute to the group effort or volunteer for tasks.
Group member attended few meetings and made no contribution to the assignment.

Name of student: CHONG KAH YAN

Instructions:
Place the name of each of the members in your group in the space provided below. Appraise each
of the members in your group by circling one of the totals shown below (i.e. 100%, 50% or 0%)
Group Member
100%
100%
100%
100%
100%

50%
50%
50%
50%
50%

0%
0%
0%
0%
0%

Note:
Failure to submit a Group member appraisal Form will result in a zero appraisal being recorded
against your name.

Group Member Appraisal Form

The basis of this evaluation is your group members commitment to completing the assignment
and to their regard for other members of the group. It should be based on the contribution given
by each member and his or her involvement in this assignment.
Group members should be appraised using the following basis:
100%

50%

0%

Group member attended all group meetings or if unable to attend, contacted the
group in advance and came to an alternative arrangement that the majority of group
members were happy with.

Group member contributed to group discussion.

Group member always offered to help or volunteered for tasks.

Group member had assigned tasks completed on time.

Group member missed group meetings without making alternative arrangements
with other group members.
Group member assigned tasks were only partly completed or poorly completed.
Group member did not contribute to the group effort or volunteer for tasks.
Group member attended few meetings and made no contribution to the assignment.

Name of student: CHOU KAH MEI

Instructions:
Place the name of each of the members in your group in the space provided below. Appraise each
of the members in your group by circling one of the totals shown below (i.e. 100%, 50% or 0%)
Group Member
100%
100%
100%
100%
100%

50%
50%
50%
50%
50%

0%
0%
0%
0%
0%

Note:
Failure to submit a Group member appraisal Form will result in a zero appraisal being recorded
against your name.

School of Business Studies

Plagiarism Statement
Read, complete and sign this statement to be submitted with your written work.
We confirm that the submitted work are all our own work and are in our own
words.

Name (Block Capitals)

Registration. No.

Signature

CHONG SHIUO MUN

13WBD02114

...

CHONG KAH YAN

13WBD00976

...

CHOU KAH MEI

...

Programme

Diploma in Banking and Finance

Tutorial Group

Group 9

Date

21 July 2014

Discuss whether banks generated more non-interest based income than interest
based income from the bank activities from 2000 to 2015.
Standard Chartered (Malaysia)
RM ('000)
YEAR
INTEREST BASED INCOME
NON-INTEREST BASED INCOME
2000
914,731
205735
2001
1078,532
557994
2002
1141,043
252397
2003
1,201,133
789032
2004
1,309,683
536876
2005
2,080,936
1174427
2006
2,411,860
450059
2007
2,882,081
439100
2008
3,064,785
501067
2009
2,937,002
511537
2010
2,592,586
506979
2011
2,952,529
689468
2012
5,493,832
882199
2013
5,609,243
1222457
2014
5,667,175
1070304

RM(00
0)

YEA
R

ANALYSIS AND INTERPRETATION OF GRAPH

From the Hong Leongs bank analysis, the interest based income is increasing steadily
between year 2000 and 2008.However it slightly drops from year 2008 to 2010,
RM3,064,785000 to RM2,592,586000, because affects by its competitive asset yields. In
2011, there is a sharp increase from RM2, 952,529000 to RM5, 493,832000 and reached
a peak in year 2014, which the interest income are RM5,667,175000. This was partially
due to higher volumes of deposits and loans granted by Hong Leong bank.
Besides that, for non-interest income, it increases in year2000 from RM205735000 to
RM557994000 in 2001, and then it drops to RM252397000 in year 2002. Non-interest
income increases because of fixed income and interest rate derivatives income are
contributed in favorable rates movements. It also drops from RM1174427000 in 2005 to
RM450059000 in 2006, due to lower gain from sales of securities as well as a one-off
reclassification of credit card related fees. After that for the following year, the bank
experienced the increasing and decreasing of non-interest income more constantly and
more stable between year 2006 and 2014.
So, we found that the interest based income is higher than non-interest based
income during year 2000 to 2014 for Hong Leong Bank

Singapore UOB

RM
(000)

YEA
R

ANALYSIS AND INTERPRETATION OF GRAPH

From the UOB Banks analysis, the interest based income is increasing gradually from
year 2000 to 2014, because of the growth of loan and improved loan pricing in an
increasing interest rate environment of UOB Bank.
Besides that, for the non-interest income, it increases from year 2000 with RM1704000
and reached the highest level of RM2127000 in 2006 but then start to have a decline in
year 2006 to year 2008, which are RM1675000. After that it drops a lot from year 2009 to
2010, RM1732000 to RM811000 due to decline in fee income. And later in the following
years, the flow of non-interest income is more stable and steady, mainly contributed by
steady fee income and higher trading and investment gains. This also represents a
relatively faster recovery for UOB Bank.
So, we found that the bank generated more interest based income than non-interest based
income for UOB Bank.

Commonwealth Bank of Australia

45000
40000
35000
30000
25000
20000
15000
10000
5000
0

INTEREST BASED INCOME

NON-INTEREST BASED
INCOME

ANALYSIS AND INTERPRETATION OF GRAPH

From the Commonwealth Banks analysis, the interest based income is increasing slightly
from year 2000 till year 2012; $10402(Millions) to $38258(Millions).This reflects growth
in average interest earning assets and a one basis point increase in net profit margin for
Commonwealth Bank. However, this bank seems to experienced falling of interest
income from year 2012 till 2014, which at$33645 (Millions)
Besides that, for the non-interest income also rise from 2000 to 2014 every year.
The highest of non- interest income arrived at $22401(Millions) at year 2014.
From the analysis, we found that this bank generates more interest income than
the non-interest income.

Siam Commercial Bank(Thailand)

Baht (Million)
INTEREST BASED
NON-INTEREST BASED
YEAR INCOME
INCOME
2000
36667
11978
2001
33328
8212
2002
30550
10600
2003
27999
11437
2004
27278
21822
2005
32073
17412
2006
52703
19695
2007
60446
22802
2008
63331
25141
2009
42005
27082
2010
52704
29372
2011
77947
40509
2012
103399
40880
2013
120691
50523
2014
2015

140000
120000
100000
80000
60000
40000
20000
0

INTEREST BASED
INCOME
NON-INTEREST BASED
INCOME

ANALYSIS AND INTERPRETATION OF GRAPH

From Siam Commercial Banks analysis, the interest based income is slightly decreasing
from year 2000, 36667000000 Baht until year 2004, 27278000000 Baht, probably
due to increase in interest expenses. Afterward; it increased significantly until year

2013, 120691000000 Baht, with only a sharp decrease of interest income

between year 2008 and 2009 (63331000000 Baht to 42005000000 Baht).This
probably affects by the change in interest rates.

Besides that, for the non-interest income, it increases steadily from 2001 to 2013, due to
increase in fee & service income, income from subsidiaries and gains on investment.
So, we found that Siam Commercial Banks interest income is more than the non-interest
income.

Hana Bank (Korea)

3,000.00
2,500.00

KRW (in
Billions)

2,000.00
1,500.00

INTEREST BASED INCOME

1,000.00

NON-INTEREST BASED
INCOME

500.00
0.00

ANALYSIS AND INTERPRETATION OF GRAPH

From Hana Banks analysis, the interest based income increased steadily from year2005
to year 2014, which is KRW 1688.4 (in billions) to KRW 2531.6 (in billions), due to
increase in volume of interest earning assets. However, it drops a lot between year 2008
and 2009, KRW 2419.9(in billions) to KRW 1936.5 (in billions), this was due to drop in
net interest margin that is affected by sudden decline in market interest rates. Then it
gradually increases back until year 2011, KRW 2800.3 (in billions).
Besides that, for the non-interest income, it increased a lot from year 2000, KRW 24.8
(billions) to year 2001, KRW 563.1 (billions) because of solid rise in gain on disposition
and valuation and fees related to loans. After that the stable increase of non-interest
income from the graph indicates the moderate gains from credit card fees and other fees.
The highest of non- interest income arrived at KRW 740.7 (in Billions) at year 2012,
however it decrease to KRW 246.6 (billions), this is because of non-banking fees and
gains on disposition & valuation are both declined for the year.
Also, we found that Hana Banks interest income is more than the non-interest income.

CONCLUSION
In conclusion, five banks in different country are generated more interest based income
than non-interest based income. The interest income is roughly twice the rate of noninterest income. The main received of interest income is from earning on deposits at
banks and credit unions, on money market funds, on bonds, and on loans.
However, from the analysis we can found that most of the banks (Malaysia, Thailand, and
Australia) were well into millions of dollars from non-interest income in recent years,
which indicates the non-interest income is growing. Nowadays, non-interest income is
very important for bank to move from old traditional interest income into a major
contributor of bank revenue. These sources of income have a great growth and significant
in non-interest income.

Discuss whether the impact of macro and regional economic effects on banks noninterest based activities such as BASEL rules and regulation.
Non-interest incomes (also referred as fee income) for a bank are mainly income
from service charges on account they hold and interest charged for the loan they granted.
Unlike the interest income, this income is basically unaffected by regional economic and
financial market cycles and is usually not controlled by rules and regulation. Non-interest
income is less likely to move in synch with economic variables such as interest rates or gross
domestic product (GDP)

REFERENCE
1. Investopedia, 2015, Net Interest Income, viewed 18 July 2015. Available from
http://www.investopedia.com/terms/n/net-interest-income.asp
2. Investopedia, 2015, Non-Interest Income, viewed 18 July 2015. Available from
http://www.investopedia.com/terms/n/noninterest-income.asp
3. William Perez, 2015, Interest Income, viewed 19 July 2015. Available from
http://taxes.about.com/od/income/qt/interest_income.htm
4. wiseGEEK, 2015, What is a Non-Interest Income, viewed 19 July 2015. Available
from http://www.wisegeek.com/what-is-a-non-interest-income.htm
5. Wintersteen, 2007, Developed vs. Developing Countries, viewed 19 July 2014.
Available from http://www.slideshare.net/wintersteen/developed-vs-developing-countries
6. The Wall Street Journal, 2015, Malaysia: Standard Chartered Annual Income
Statement, viewed 19 July 2015. Available from
http://quotes.wsj.com/UK/XLON/STAN

7. MarketWatch, 2015, HSBC Annual Income Statement, viewed 19 July 2015. Available
from http://www.marketwatch.com/investing/stock/uovef/financials/cashflow11

8. Hana Bank (Korea), 2015, Financial Information, viewed 19 July 2015. Available
from http://www.hanafn.com/eng/ir/financial/statements/balanceDetail.do