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Factors that affects the bank choice to invest in sceurities Submitted to: Mr. Nosherwan Submitted by: Sidrah Ayaz

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ACKNOWLEDGEMENT

Being a humble persons and can’t be able to complete this presentation without the help and grace of almighty Allah. I would like to acknowledge the efforts of our parents they made for our education and it is their continuous encouragement and support that we are able to complete our   presentation successfully. We would like to acknowledge the efforts of our teacher Sir Nosherwan who provides us the opportunity to explore the nuts and bolts of Cost accounting.

“Only that education deserves emphatically to be termed cultivation of the mind which teaches young people how to begin to think”. think ”. (Mary Wollstonecraft)  Wollstonecraft) 

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 Table of Contents

Introduction. 1. Proj Project ect mana manageme gement nt is the best m metho ethod d 2. what d does oes a p proje roject ct man manager ager d do o? 3. what is tthe he Me Methodo thodology logy ? 4. Wha Whatt is a pro proje ject ct ? 5. what is ttotal otal Q Quali uality ty Man Managem agement ent ? 6. What are the thec thecneaqu neaques? es? 7.

What are tools of project mnagement ?

8. Ca Case se st stud udy y 9. Co Conc nclu lusi sion on 10.

Pert Chart

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Gantt Chart

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References

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Factors affecting choice of investment securities The investment officer of a financial firm must consider several factors in deciding which investment sceurities to buy, sell or hold. 1) Expe Expect cted ed rate rate of of retu return rn 2) Tax Tax exp expos osur uree 3) Inte Intere rest st rate rate ri risk  sk  4) Credi Creditt or def defaul aultt risk  risk  5) Busi Busine ness ss ri risk  sk  6) Liqu Liquid idit ity y ris risk  k  7) Call risk  8) Pr Prep epay ayme ment nt rris isk  k  9) Infl Inflat atio ion n ris risk  k  10) Pledging Pledging requiremen requirements ts

Expected Rate of return The total rate of return that can reasonably be expected from each sceurity, including the interest payments promised and possible capital gains or losses. For most investments, this requires the investments manager to calculate the yield to maturity. If a sceurity to be held to maturity or the planned holding period yield between piont of purchase and piont of sale. The yeild to maturity formula determines the rate of discount(or yield) on a loan or  sceurity that analizes the market price of loan or security with its expected stream of cash flows. $900 = The HPY is simply the rate of return (discount factor) that equates a sceurity,s purchase  price with steam until it is sold to another investor.

Tax Exposure Interest and capital gains income from most investments held by U.S bank are taxed as ordinary income for tax purpose, just are as the wages and saleries earend by U U.S. .S. citizens because of thier relatively relatively high tax exposure,banks are more interested in tthe he after after tax rate of return on loans and securities than in thier before tax return. This situation contrast with such situation as credit unions and mutual funds which are generally tax exempt.

The Tax Status of state and Local Government Bonds For banks in the upper tax,brackets,tax exempt,state and local government(muncipal).bonds and notes have been attractive from time to time depending on thier status in the tax law.

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Before tax gross yield yield (1-firms marginal income tax rate)=after tax gross yield.

The impact of changes in tax laws.tax reformed in united states has a major impact on the relative attractivness of state and local government bonds as investmnemts for bank. But their share of the municipal market has h as fallen substationally since that time due to • • •

declineing tax advantange. lower corporate tax rates fewer qualified tax exempt securities

 Net after tax return on muncipals(in muncipals(in percent) [Nominal return on muncipals after after tax(in  percents) - Interst expense incured in aquiring the muncipals(i muncipals(in n percent)] + Tax advantage of a qualified bond. 

The Tax Swapping Tool The size of a lenders revenue from loans in any given year plays a key role in how its investments are handled in years when loan revenues are high.it is often beneficial to engage tax swapping.in a tax swapp the lending institution sells lower yeilding securities in a lose in order to reduce its current taxable income,while simultaneously purchasing new high yielding securities in order to boost future returns on its investmnet portfolio. The portfolio Shifting Tool.

  Lending institutions also do a great deal of portfolio shifting in thier holding of  investment securities and taxes and hire returns in mind.finicial firms,e.g often sell of  selected securities at a loss in order to offset large amopunts amopu nts of loans income.therby reducing their tax liability.

Interst Rate Risk  changing interst rates riskoffor investmnet officer andand thier institutions interst rates lower the create marketrela value previously issued bonds notes with therising longest term issues generally suffering the greatest losses.moreover period of rising interst rates are often marked by surging loan demand.growing number of tools to hetch interst rate risk have appeared in recent years including financial feature,options interst rate swaps,gap managmnet,and duration as we saw.

Credit or Default Risk  The investment made by banks and thier closest compitaters are closely regulated due to credit risk displayed by many securities specially,those issued by private corporation and some governments. The risk that the security issuer may default on the principal or interst owed has led to regulatory controls that prohibit the accusition of speculative securites.

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U.s banks generally are allowed to buy only investment grade securities,rated atleast Baa or BBB,in order to protect depositors against successive risk.

Buisness Risk   Finicial institutions of all sizes face significant risk that the econamy of the market area they serve may turn down,with following sales and rising unemployment.these adverse devolpments,often called buisness risk,can be refkescted quickly q uickly in the laon portfolio, where delinquent loans may rise as borrowes bo rrowes strugle to generate enough cash flow to pay the lender.b/c buisness risk is always present many financial institution rely heavily on thier security portfolios to ofset the impact of this form of risk on thier loan portfolio.

Liquidity Risk  Financial institutions must be ever mindfull of the possibilty they will be required to sell investment securities in advance of thier maturity due to liqiudity needs and be subjected to liquidity risk.thus, a key issue that a portfolio mangaer must face in sel;ecting a security for investment purposes is the breath and depth of its re-sale market.

Call Risk  Many corporations and some governments that issue securities reserve the rites to call in those instrumnet in advance of maturity and pay them off.b/c of such calls usually take  place when market interst rates have declined(and the borrower can issue new securities  bearing lower interst costs).the financial firm in cal-able securities runs the risk of an earning loss.b/c it must re-invest its recoverd funds at lower interst rates.

Pre-paymnet Risk  A form of risk specific to asset backed securites is pre-payment risk. This form of risk  arises b/c the realised interst and principal payment(cash flow) from a pool poo l of securitesed loan,such aspackages GNMA of or auto FNMA pass through,colaterlised morgage obligations,(CMOs) obligat ions,(CMOs) or  securitised or credit card loans,may be quite differnt from the cash flows expected orignally.indeed,having to price the pre-paymnet option associated with asset bagged securities distinguishes these investments from any other investment.

Inflation Risk  Investing institutions must be alter to the possibilty that the purchasing power of interst of  income and re-paid principal from a security security or loan will be eroded by rising prices for  goods and servies.inflation can also erode the value of the stalk ho holders lders investment in a financial firm its net worth.some protection against inflation risk is provided by short term securities and those with variable interst rate, which usually grant the investments officer greater flexiblity in responding to any flare up in inflationary pressures. Pledging requirment

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Depositary institutions institutions in the united states cannot accept deposits from federal federal,state,and ,state,and local governments unless they post co-lateral exceptable to these governmental units in order to safe guard public funds.state and local governments deposit pledging requiermnts differ widely from state to state,though most allow a combination of federal and muncipal securities to meet government pledging requirements.sometime the the government owning the deposit requires that the plegded securities be placed with the trusty not affiliated with the institution receiving the deposit.

WHAT IS INVESTMENT There is a clear difference between saving and investment

Savings Savings are generally funds that you set aside to meet your future needs. These could be taking your family for a small holiday or buying an electronic item. Another important feature of savings is that these can be accessed relatively quickly. The most universal way of saving is in to a bank account ('savings' account) where the money is available to you on demand. Investments Investments, on the other hand, is what helps you meet your  longer term needs and larger financial goals. There is some level of risk attached to all types of investments and this is what determines the returns on your  investments. The higher the risk, the greater the chances of a higher return. There are various investment types along the risk-return spectrum.

Types of Investment Financial InstrumentsEquities Equities are a type of security that represents the ownership in a company. Equities are traded (bought and sold) in stock markets. Alternatively, they can be purchased via the Initial Public Offering (IPO) route, i.e. directly from the company. Investing in equities e quities is a good long-term investment option as the returns on equities over a long time horizon are generally higher than most other investment avenues. However, along with the  possibility of greater returns comes greater risk. Mutual funds

A mutual fund allows a group of people to pool their money together and have it  professionally managed, in keeping with a predetermined investment objective. This investment avenue is popular because of its cost-efficiency, cost-efficiency, risk-diversification,  professional management and sound regulation. You You can invest as little as Rs. 1,000 1,00 0  per month in a mutual fund. There are various general and thematic mutual funds to choose from and the risk and return possibilities vary accordingly. accordingly.

Bonds

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Bonds are fixed income instruments which are issued for the purpose of raising capital. Both private entities, such as companies, financial institutions, and the central or state government and other government institutions use this instrument as a means of  garnering funds. Bonds issued by the Government G overnment carry the lowest level of risk but could deliver fair returns.

Deposits Investing in bank or post-office deposits is a very v ery common way of securing surplus funds. These instruments are at the low end en d of the risk-return spectrum.

Cash equivalents These are relatively safe and highly liquid investment options. op tions. Treasury bills and money market funds are cash equivalents.

Non-financial Instruments Real estate With the ever-increasing cost of land, real estate has come up as a profitable investment  proposition.

Gold The 'yellow metal' is a preferred investment option, particularly pa rticularly when markets are volatile. Today, beyond physical gold, a number of products which derive their value from the price of gold are available for investment. These include gold futures and gold exchange traded funds. Mutual Funds are subject to market risk. Please read the offer document carefully before investing. Terms and Conditions apply Why should we invest? Take a minute to think about why you may want to invest Inflation is constantly increasing the cost of goods and services and eating into the value of your income and wealth. You need to save money and invest it well so that the value of  every rupee is augmented. Higher life-expectancy means people live longer and hence, need more money to maintain their living standards.

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Investing selectively allows you to enjoy tax benefits.

By investing wisely you can improve your standard of living and create wealth for the future.

Factors which Influnce the decision to Invest Past market trends Sometimes history repeats itself; sometimes markets learn from their mistakes. You need to understand how various asset classes have performed in the past before planning your finances.

 Your  Y our risk appetite The ability to tolerate risk differs from person to person. It depends on factors such as your financial responsibilities, your environment, your basic personality, etc. Therefore, understanding your capacity to take on risk becomes a crucial factor in investment decision making.

Investment horizon How long can you keep the money invested? The longer the time-horizon, the greater are the returns that you should expect. Further, the risk element reduces with time.

Investible surplus How much money are you able to keep aside for investments? The investible surplus plays a vital role in selecting from various asset classes as the minimum investment amounts differ and so do the risks and returns.

Investment need How much money do you need at the time of maturity? This helps you determine the amount of money you need to invest every month or year to reach the magic figure.

Expected returns The expected rate of returns is a crucial factor as it will guide your choice of  investment. Based on your expectations, you can decide whether you want to invest heavily into equities or debt or balance your portfolio. Mutual Funds are subject to market risk. Please read the offer document carefully before investing. Terms and Conditions apply. THE HSBC Way Of Ivestment Your needs aims may differ, but the need to plan does not. Our long-term investment  perspective to preserve your purchasing power 

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What is are approach

Our needs-based, customer-centric focus is based on three cornerstones:

Sow and Grow – (young adult) During this phase of your life, you build assets. You get your first job, your first home, your first car. In addition, you acquire familial responsibilities – you get married and have children. Yet it is also a time when your debt begins to grow. Your first car and your first home may come to you with the help of a loan.

Strengthen – (mid life) At this stage of your life, your income and expenses both grow. As you get more secure in your career, your advancement results in a larger income. But your  expenses grow too. You tend to upgrade your lifestyle. You pay for the best education that you can afford for your children, you get them married and help them settle into their careers. You also use a part of your growing income to pay off the debts that you have incurred in the ‘Sow and grow’ stage and the ‘Strengthen’ stage.

Reap Spend live - (post retirement) During – your goldenwell, years, yourwell financial responsibilities to your near and dear  ones could diminish. You could focus more on living the lifestyle you have always wanted to. You take holidays, pursue hobbies and donate to charities that you believe in. Unfortunately, it is also a time when health issues may begin to catch up with you. At this stage of life you must be financially very well equipped to ensure that you can live your retirement dreams and meet your health expenses

what is are philosophy Start investing early We believe that to make the most of your investments, you should start investing as soon as you are financially able. The amount could increase over time, depending on your capability to invest and your long-term needs.

Invest regularly

Investing a fixed sum of money at regular frequencies is a disciplined approach to managing and growing your investments.

Invest for the long term Investing for the long term not only improves the possibility of better returns, it reduces risks as it lowers the effect of short term market fluctuations and volatility. Mutual Funds are subject to market risk. Please read the offer document carefully before investing. Terms and Conditions apply.  How do we help you to make money harder?

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Our financial planning process helps you to analyze your needs and understand how you should invest to meet your needs. Using this approach, your  Relationship Manager suggests appropriate solutions. A team of investment specialists support this process by bringing to the table, the white-listed products. These products have been carefully researched and identified to be suitable to meet your needs. To attempt that you are updated on your investments at all times, we bring you ongoing research, monitoring and review reports. We use technology as a vital enabler in consistent and structured delivery of our  investment proposition in terms of analysis, tracking and updates. Thus our constant endeavor is to provide you with investment solutions which address your needs – at the core of this entire exercise are your interests, how to help h elp you make the most of it!

About HSBC Wealth Management Global presence, scale and investment expertise HSBC Holdings plc serves over 128 million customers worldwide through around 10,000 international offices in 83 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With global assets a ssets of US$2,354 billion at 31 December 2007, HSBC is one of the world’s largest banking, investment and financial services organizations. The Hongkong and Shanghai Banking Corporation Limited in India offers a full range of   banking, investment and financial services to over 2.8 million customers through its  presence across 26 cities

Client trust We pride ourselves on the quality qu ality of relationship-managed financial solutions we offer to our 1 lac customers with more than Rs 100 billion of assets under management

Our Team A Customer Centric process Driven Approach Our experienced and skilled product research and due-diligence unit has a customer need driven view to offer our customers appropriate financial solutions. We pride ourselves in the customer centricity of our entire sales process and our  dedicated team of wealth management professionals help us offer product solutions to you that are appropriate, relevant and based on your profile and need.

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Trained and Accredited team Our 850+ Relationship Managers and team of investment specialists are supported by HSBC Treasury, HSBC Securities and Capital Markets, HSBC Global research and a dedicated in house strategist and economist. Our welltrained and accredited Relationship Managers (AMFI / IRDA / internal certifications) help you plan your investments with suitable solutions. In addition, we stay abreast of the latest trends and developments through regular training programs and on-the-job guidance by experienced specialists and trainers.

Our Approach To wealth Management Need-based sales approach with innovation Our team works to suggest financial solutions based on your risk appetite, profile and needs. Using customer insight, we have developed a financial planning tool. It analyses and generates a comprehensive financial plan based on your existing financial position, expected future cash flows, inflation and identified financial objectives. Our Relationship Managers extensively use this tool to do financial planning for you taking into account your long-term objectives and / or medium to short term requirements. For consistent and uniform delivery of financial planning as per the defined customer  need centric process, there is a dedicated, independent Sales Quality team to conduct regular quality checks close to the point-of-sale.

White-listed funds The concept of white listed funds lies in the bank's open architecture model, which lays emphasis on meritocracy. We carefully look at various products available in the market and after thorough due diligence select product providers / schemes which adequately correspond to the needs of our  customers. White listed funds are selected based on various proprietary models that are used for intense quantitative analysis. These funds help our clients build a long-term portfolio and in achieving long-term financial goals.

Technology is a potent weapon For consistency in the manner in which our Relationship Managers identify customer needs and suggest suitable solutions, we extensively leverage technology to support our sales process. Our indigenously developed systems like Wealth Management System, Financial Planning System and Customer  Relationship Management System have been built basis customer insights. We constantly look at evolving these systems to address sales process requirements arising out of dynamically changing market conditions and customer needs. We therefore treat technology as a vital ally in executing our philosophy of customer  need centricity in a structured and uniform fashion .

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Sharing the knowledge We frequently organise wealth management events and investment seminars, where you can interact with investment experts and fund manag   Comprehensive Product Suite Mutual Funds A pool of funds collected from many investors that is invested in securities such as stocks, bonds, money market instruments and similar assets. SIPs A Systematic Investment Plan (SIP) is a method of regularly investing a fixed sum in a mutual fund scheme. This could be of different periodicities though monthly SIPs are most common. Fixed income An investment product where periodic income is received at regular intervals at reasonably predictable levels. Demat A dematerialized account where stock market shares are stored and traded in electronic form.

White-listed funds White list fund selection is predominately a mix of various quantitative and qualitative factors. Proprietary models are used for intense quantitative analysis over various time frames to measure and assess risk-adjusted performance, consistency, investment style and thus future performance expectations. These funds are offered to customers to provide diversification across asset classes, product providers , investment styles, risk profiles and market segmentsers. This provides us a platform to know and understand the market and economic developments and trends.

Technological Edge For maintaining customer needs as a central philosophy, we rely heavily on technology to provide service in a structured and standardised manner. Our  Relationship Managers follow a sales process that is extensively supported by technological systems. This includes our Wealth Management System, Financial Planning System and our Customer Relationship Management System. These systems are all indigenously developed and built on the basis of the customer  insights that have been accumulated over the years. We continuously hone these systems to meet the changing needs of our customers and accommodate the evolving market conditions. Our Wealth Management System has in-house processing, hosting and tracking capability. It manages an average of 10,000 transactions per day for around 100,000 13

 

customer accounts. The system facilitates performance monitoring, post-sales servicing (such as monthly consolidated statements and alerts) and portfolio po rtfolio analysis Financial Planning System is a centralized, server based and user-friendly financial  planning tool which endeavors process-driven wealth proposition delivery.

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