Study Unit: BKF2321 and BKF 2320 Accounting for Bankers (BKF 2321: 4 credits / B

Study Unit: BKF2321 and BKF 2320 Accounting for Bankers
(BKF 2321: 4 credits / BKF 2320: 2 credits)
Assignment – 100 marks – Deadline Friday 14th January 2022
NOTE: Students are to provide answers for questions 1 and 2. Students can choose
between questions 3 or 4. Accounting for Bankers 1 only have to present questions 1 and
2
Question
1a (20 marks)
A portfolio manager, Dellorto and Partners Limited, needs to reposition one of its bond portfolios
with the introduction of a Daimler AG Bond that offers an 8.5% coupon and matures on the 18th of
January,2031, and issued in USD (ISIN code: US233835AQ08). The portfolio manager considered
buying certain tranches over 2021. The coupon is payable half yearly on 30th June and 31st
December.
On the 1st of March 2021 the company purchased a nominal amount of 50,000 nominal at USD 102.75
CUM DIV. This was followed by another purchase on the 1st of May 2021 for 30,000 nominal at
USD103.25 CUM DIV and a further 20,000 nominal at USD103.00 on the 30th of June EX DIV. On the
1
st of November 2021, the portfolio manager, seeing that yields have remained the same in the
market, sold 40,000 nominal at 104.00 CUM DIV.
Requirement:
Prepare the investment account (combined capital and interest account) showing all calculations to
the nearest US dollar, for the year ending 31st December 2021 (assuming that it is the end of the year)
in the books of Dellorto and Partners Limited using:
Average cost method (AVCO) OR First-In-First-Out cost method (FIFO).
Question 1b (5 marks)
Give a brief explanation of what CUM DIV and EX DIV represent? Can investment managers /
investors utilise cum div and ex div in their trading strategies?
Question 2 (50 Marks) Given your recent appointment as one of the analysts within a fund management company that has a
Maltese-based equity fund, the Fund management executives want you to deliver your opinion on
whether to take up a position in either of APS Bank Plc and Lombard Bank Malta plc basing your view
on the 2020 financial statements for each respective financial institution.
They have asked you to provide a report about the Bank and an evaluation of its overall position. In
the report you need to provide a ratio analysis and commentary on the following ratio classes:
1. Liquidity
2. Profitability
3. Capital Structure
4. Investment
You have also been asked to comment particularly on the Bank’s return on equity. The management
board has also asked for you to evaluate the Bank’s Capital structure from a regulatory perspective
and whether it reaches the requirements that the ECB establishes. You are to conclude on whether
you are to recommend or not and upon which criteria you have taken your decision. (Maximum word
count: 1,500).
Choose one of the following questions:
Question 3 (25 marks)
Banking has become a highly regulated industry, particularly after the credit crisis of 2008. What Is
the Role of European Central Bank in monitoring the European banking sector? What is the Joint
Supervisory Team (JST) and what is its role? (Maximum word count: 500 words).
Question 4 (25 marks)
The management of risk within banks is mainly formulated through regulation. However, there are
investment instruments / contracts that are utilised in addressing risks, such as derivatives. Give a
brief overview of what are derivatives and how they are used to manage risk in banks? (Maximum
word count: 500 words).