-1
$\begingroup$

I was wondering if banks have a certain target value when it comes to their balance sheet. I'm not speaking about the target leverage ratio or something like that. It's more like: "In the following year we (the bank) want to increase our balance sheet from 60 billion to 70 billion."

My main idea behind the question is that based on the target value for the balance sheet a bank wants to increase its market share or strengthen his position in the market.

$\endgroup$
  • $\begingroup$ Could you be a bit more specific: are you asking purely about the balance sheet size, i.e. the total value of assets? $\endgroup$ – Daneel Olivaw Jul 24 '17 at 13:08
  • $\begingroup$ Yes, I'm mainly interested in total assets. But if I had to be more precise I'm also thinking about the amount of loans in the balance sheet. $\endgroup$ – PAS Jul 24 '17 at 13:14
1
$\begingroup$

Yes, they definitely do. Most public companies - and that includes most banks - will have quarterly goals for revenue, profits, dividends, retained earnings and so on. So, while they usually won't set a specific target for assets (I'm guessing that's what you mean by balance sheet), you can sure find this target balance sheet by doing the math with the other stated targets.

$\endgroup$
1
$\begingroup$

Having worked in a bank and often closely to senior managers, I have never heard anyone talking about a balance sheet target. Every dept has its revenue and cost targets....

Would be interesting to see what others have to say.

$\endgroup$
0
$\begingroup$

Banks can lend money from other banks at FED rates or around. So, technically A bank can lend money from other bank and increase its Auto loans portfolio or mortgages portfolio. This technically increases banks balance sheet.

A risk averse bank can reduce exposure to say, Auto loans and could lend the same amount to other banks and make Fed interest rates on this lending. As this bank being not profit hungry, it just wants to protect its cash.

Some banks want to lend more from other banks and increase their exposure to sub prime auto loans for more profits, where as few banks doesn't want to increase their risk. These risk averse banks lend to other banks and make minimal interest on their cash.

$\endgroup$
0
$\begingroup$

Although i've never worked in a bank, i think it is more likely for a bank to have a target structure of its balance sheet than a target balance sheet. what i mean is that banks would structure its balance sheet for NPA, risk assets according to Basel Norms and other regulatory details. some of this might also stem from what the banks promised share holders and other stake holders including the central bank.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.