Grantland National Bank

955 Words4 Pages
cASE-5 | GRANTLAND NATIONAL BANK | BANK MANAGEMENT | | | 1) a) There are several reasons behind GNB’s superior earning performance. First reason is its high service equality to the customers. They differentiated themselves from their competitors by treating to their clients as a friends and forming a corporate culture that enhance that philosophy. With this strategy, they mostly attract customers who want to stay with the bank in the long term that are mostly core depositors. These customers were not rate sensitive which reduce GNB’s sensitivity to changes in the interest rates considerably. Another reason for this success is its credit policy. GNB was good at evaluating its loan applications and has qualified loan portfolio. Therefore, it did not need to deal with the costs arising from non-performing loans and did not have liquidly risks because of safer loan portfolio. One more reason for good earning was their concentration on a niche market which other market participants didn’t value enough. This issue maybe source of risk or source of return from time to time but it largely depends on the economic conditions. In my opinion, the economy was better at those times for the small operating firms that they served and they did not had so many losses for that time. In brief, good service, safer loan portfolio and the market that they operated in has an important effect on the earnings of the company. b) GNB has lower credit risk as compare to its competitors because its loan portfolio constitutes from largely small operating firms who can pay their liabilities with their cash flows and collaterals are mostly second source of financing the loan in the case of default. GNB also have lower liquidity risk because it does not have any problem in attracting long term depositors and collecting its loan back on time as long as the economy is going well.
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