This website uses cookies to ensure you have the best experience. Learn more

Banc One Essay

559 words - 3 pages

As it has been discussed in the case the main issue for Banc One is the tremendous drop of its stock price in the market. The fair value for the stock price is to reflect the earning of Banc One’ earnings but this was not the case for Banc One and here was the issue. Given, the fact that the Banc One earnings were increasing from one year to year, it was expected for it’s the stock price to accordingly not to fall.
It is also mentioned in the case that Banc One had very well defined, three-pronged strategy:
1. Concentrate on retail and middle-market commercial customers
2. Use technology to enhance customer service and to assist in the management of Banking facilities.
3. Grow up rapidly by acquiring profitable Banks.
In the 1990s Banc One was considered to be one of the top ten ...view middle of the document...

Since price to earnings ratio of Banc One would be lower than the targeted firm, the acquisition deal will be dilutive; hence, Banc One would have to pay more to acquire the targeted firm.
There are many theories to explain why the stock price dropped and why shareholder wealth suffered.
1. One reason why the stock price of Banc One is dropping might be due to the excess usage of derivatives. Excess usage of derivatives means Banc One is decreasing its exposure to risk at high rate and making the bank less risky, hence the gain and the stock prices would decrease accordingly.
2. The fact is that in 1993 the business world was still trying to sort out the issues associated with using derivatives, to decrease interest rate risk. Banc One usage of derivatives and swaps were viewed as speculative and was not completely understood by many analysts and investors.
For derivatives usage Banc One used Interest Rate Swaps, the most common type of derivative instrument, to manage interest rate sensitivity. In addition for Banc One to manage the bases risk it used "bases swaps." The bases swaps required Banc One to pay floating rate based on prime and receive floating rate based on LIBOR.
Derivatives usage led to the development of Amortized Interest Rate Swaps (AIRS). These swaps allowed for high yields in exchange for taking on prepayment risk. Reason that led Banc One to use AIRS was the significant reduction of capital requirements.
Recommendation for Banc One:
1. Basic concept in finance is that an investment would increase as the risk involved in the investment increase. For this reason Banc One should decrease its usage of derivatives to make its investment more risky and more appealing to the investors.
2. Since swaps and derivatives seems to be appealing for the Banc One they can teach the investors about them and make an awareness for those instruments.

Other Papers Like Banc One

Lawrence V. Texas Essay

886 words - 4 pages sex (man).” Lawrence and Garner challenged the statute as a violation of the Equal Protection Clause of the Fourteenth Amendment. Lawrence and Garner were each fined $200 and order to pay $141.25 in costs. The Court of Appeals considered Ds’ federal constitutional arguments under both the Equal Protection and Due Process Clauses of the Fourteenth Amendment. After hearing the case en banc the court rejected the constitutional arguments and

The Adversary System Essay

1182 words - 5 pages responsible to help in the "search for the truth." If one lawyer has information that would help the other side or comes to agree with the other side's view, he or she has the right and/or duty to say so. Which system do you think is more effective and why? Also, do you see any constitutional problems with applying the civil law system to the U.S.? For this assignment, in addition to answering the above questions, I would like you to find at least

Lg Group's Success: Making Compromise Work

1326 words - 6 pages Attorney General Eliot Spitzer today said that his office has launched an investigation of the mutual fund industry looking into illegal after hours trading and market timing. Spitzer in a statement said he had information that showed the schemes involved were potentially costing mutual fund shareholders billions of dollars a year. He named Bank of America's Nations Funds, Bank One Corp.'s Banc One funds, Janus Capital Group and Strong Capital

The Philippine Educational System

2964 words - 12 pages 1988, the Act created a system of free education in public high schools. ✓ DEPARTMENT OF EDUCATION, CULTURE AND SPORTS (DECS) ORDER NO. 49 OF 1992: This Order serves as the guideline for the selection of honor students in all public and private high schools. All these schools were required to choose one (1) "valedictorian"  and one (1) "salutatorian,"  and to set the limit of the number of "honorable mention" to one percent of the graduating

The Texas Judicial System

1418 words - 6 pages The Texas Judicial System The Texas Judicial System The Texas judicial system has been called one of the most complex in the United States, if not the world. It features five layers of courts, several instances of overlapping jurisdiction, and a bifurcated appellate system at the top level. The structure of the system is laid out in Article 5 of the Texas Constitution. The Texas Supreme Court and Texas Court of Appeals has a bifurcated

Harvard Case

4210 words - 17 pages 4011 APRIL 7, 2009 CRAIG CHAPMAN Biovail Corporation: Revenue Recognition and FOB Sales Accounting Background Late on October 9, 2003, David Maris, an analyst at Banc of America Securities (BAS), was trying to interpret the shocking events of the previous few days and finish the write-up of his first report on the Canadian pharmaceutical firm, Biovail Corporation. Maris didn’t like what he saw at the company, but he never liked

Affirmative Action

3156 words - 13 pages use of racial quotas as employed at the school violated the equal protection clause of the Fourteenth Amendment. The remaining four justices held that the use of race as a criterion in admissions decisions in higher education was constitutionally permissible. Powell joined that opinion as well, contending that the use of race was permissible as one of several admission criteria. So, the Court managed to minimize white opposition to the goal of

Mr Midzi

1937 words - 8 pages Question: Peter Drucker observes, the purpose of the business is to create a customer. Leveraging on your understanding of the concepts of market, marketing orientation and customer orientation critically examine the applicability of the Drucker’s observation to a financial service firm. [25] According to Drucker, there is only one valid purpose for a business, and that is to create a customer. This is because as Drucker

Week One Exercise Assignment Basic Accounting Equations

2273 words - 10 pages Week One Exercise Assignment Basic Accounting Equations 1. Recognition of normal balances The following items appeared in the accounting records of Triguero's, a retail music store that also sponsors concerts. Classify each of the items as an asset, liability; revenue; or expense from the company's viewpoint. Also indicate the normal account balance of each item. a. Amounts paid to a mall for rent. Expense b. Amounts to be paid in 10


3957 words - 16 pages US/AZ Government-Pre-Test Section 1 of this examination contains 100 multiple-choice questions. Therefore, please be careful to fill in only the ovals that are preceded by numbers 1 through 100 on your answer sheet. After you have decided which of the suggested answers is best, COMPLETELY fill in the corresponding oval on the answer sheet. Give only one answer to each question. If you change an answer, be sure that the previous mark is

Stratagic Management Report on Hsbc

5173 words - 21 pages History of Bank Banking in the modern sense of the word can be traced to medieval and early Renaissance Italy, to the rich cities in the north like Florence, Venice and Sialkot Genoa. The Bardi and Peruzzi families dominated banking in 14th century Florence, establishing branches in many other parts of Europe.[9] One of the most famous Italian banks was the Medici Bank, set up by Giovanni di Bicci de' Medici in 1397.[10] The earliest known

Related Essays

Part 2: The Change Analysis Images Of Change

908 words - 4 pages conglomerate M&A with relevance to above scenario would be if health care system buys a restaurant chain. The objective may be diversification of capital investment. JPMorgan Chase 2004: Banc One Corp. merged with JPMorgan Chase & Co., keeping the name JPMorgan Chase & Co. Fortune magazine said that “the combined bank will be big and strong in a panoply of businesses,” adding that “the deal has been widely lauded” by investment analysts. The New York

Philippine Banking Essay

1661 words - 7 pages ) in 1982, and thus started engaging in non-allied undertakings.  In 2000, BPI became the first banc assurance firm in the Philippines, after it acquired the insurance companies of the Ayala Group. These companies (under the Ayala Insurance Holdings Corporation) were FGU Insurance Corporation, Universal Reinsurance Corporation, Ayala Life Assurance, Ayala Health Care, and Ayala Plans. FGU Insurance was later merged with FEB Mitsui Marine

Jpmorgan Chase Essay

813 words - 4 pages institution based in the Midwest. In 1996, The Chase Manhattan Corp. merged with Chemical Banking Corp., under the name of The Chase Manhattan Corp., creating what was then the largest bank holding company in the United States. In 1998, Banc One Corp. merged with First Chicago NBD, under the name of Bank One Corp. After a subsequent merger, Bank One became the largest financial services firm in the Midwest, the fourth-largest bank in the U. S. and

Business 240 Online Tests Essay

765 words - 4 pages Business 240 Online – Business Law Test Chapter 1 1.) The South Carolina Supreme Court decides the case of Toy Co. v. Umbrella Corp. The court issues an opinion that does not indicate which justice authored it. This opinion is a. a concurring opinion. | | | b. a dissenting opinion. | | | c. a per curiam opinion. | | | d. an en banc decision. | | | 2.) Leona enters into a contract with Munchie Bakery to