Bank valuation

1. The management abilities and this involves the various decisions made by the regarding financing and investing. The factor can be controlled by management through making decisions through external forces may be capitalized (Madura, 2014).
2. Risk premium change – a rise in risk premium on banks will result to an increase in the Rate of Return required by investors (Madura, 2014).
3. Interest income refers to income that is gotten from the assets of a bank and is normally influenced by assets composition and market rates that a bank holds. Non-interest income is that income which is obtained from the other operations of a bank but not assets (Madura, 2014). The non-interest income is more important in the long-run since it may not be influenced by the future risks that lower value of interest.
4. To minimize the risks, banks can increase the concentration loans that are relatively risk when economic conditions are good and increase the concentration of low-return risks investments when the economy is not doing well (Madura, 2014).

5.      The Morgan Stanley bank income statement as at 30^th June 2017 shows that the bank had a net income of $ 3, 427 Billion which is a 38 percent change in comparison to a similar period in 2016 (Morgan Stanley, 2017). The bank had a health performance in the recent times. The banks performance was better than other banks like Citigroup, USA with $1.79 trillion as net income and Wells Fargo at $1.93 trillion (Badenhausen, 2017)

6. Bank capital is important because it shows the amount of funds that the firm can lose before the debts it has taken exceeds the available assets (Madura, 2014). The issue is important given that banks have a huge role they play in an economy thorough collection of savings and channeling them to various uses. If not controlled, it can lead to issues such as 2008-2009 crises.
7. Risk on interest rates refers to the risk that the value of banks investment will fluctuate due to changes in two rates spreads, yield curve or another relationship between interest rates (Madura, 2014). Because of the highlighted changes, it may be impossible to avoid the risk.
8. A major failure by the banks in 2008 financial crisis was to ignore risks, which means that the management was not prepared to bear such risks and this lead to the credit crunch.
9. Credit unions refer to financial institutions (Cooperatives) whose major goal is not to make profits like the commercial banks. Their aim is to serve the arising needs of owners who are also members.

References

Madura, J. (2014). Financial markets and Institutions. Thomson/South-Western. Cengage Learning,