You are a business development officer of ANZ bank in Perth. An existing custome
ID: 2728476 • Letter: Y
Question
You are a business development officer of ANZ bank in Perth. An existing customer of yours told you about Mr Mark Angelo who is presently banking with Commonwealth bank. You were told that Mr Angelo is a very rich and influential customer who could be approached to move his business to your bank should you be able to offer him favourable rates. During your initial contact with Mr Angelo he indicated that he is not looking for another banker but that you should provide him with a proposal which he can consider.
MARK ANGELO
STATEMENT OF FINANCIAL POSITION AS AT 1 SEPTEMBER 20XX
ASSETS
Residential property – Mill Point Rd, South Perth
$ 15 000 000
Holiday home – Dunsborough
$ 5 160 000
Vineyard farm – Margaret River
$ 7 500 000
Investments:
Mark Equipment Pty Ltd - 50% shareholding
$ 1 527 600
Mark Equipment Pty Ltd - loan account
$ 5 325 800
Fixed deposit
$ 750 000
Vehicles:
20XX Range Rover
$ 80 000
20XX Mercedes 600 SL
$ 190 000
20XX Porsche
$ 190 000
Household goods, Persian carpets and work of art
$ 1 000 000
$ 36 723 400
LIABILITIES
Bond on Mill Point Rd, South Perth property
$ 11 500 000
Bond on Dunsborough property
$ 2 500 000
Bond on farm
$ 4 500 000
Instalment sale agreements on vehicles
$ 1 000 000
Overdraft
$ 50 000
$ 19 550 000
Net asset value
$ 17 173 400
Use the case study information about Mr Mark Angelo to answer the following:
What credit products supplied to Mr Angelo by Commonwealth bank can ANZ possibly take over if Mr Angelo can be convinced to change his bank? and what products will you, as business development officer of ANZ bank, offer to Mr Angelo to replace the products of Commonwealth bank, and what additional products may be appropriate? Substantiate your answer by providing reasons why you regard each of the products that you will offer to him as applicable.
ASSETS
Residential property – Mill Point Rd, South Perth
$ 15 000 000
Holiday home – Dunsborough
$ 5 160 000
Vineyard farm – Margaret River
$ 7 500 000
Investments:
Mark Equipment Pty Ltd - 50% shareholding
$ 1 527 600
Mark Equipment Pty Ltd - loan account
$ 5 325 800
Fixed deposit
$ 750 000
Vehicles:
20XX Range Rover
$ 80 000
20XX Mercedes 600 SL
$ 190 000
20XX Porsche
$ 190 000
Household goods, Persian carpets and work of art
$ 1 000 000
$ 36 723 400
LIABILITIES
Bond on Mill Point Rd, South Perth property
$ 11 500 000
Bond on Dunsborough property
$ 2 500 000
Bond on farm
$ 4 500 000
Instalment sale agreements on vehicles
$ 1 000 000
Overdraft
$ 50 000
$ 19 550 000
Net asset value
$ 17 173 400
Explanation / Answer
Bond on mill point property =11.5 million.
Value of the property =15 million
% of loan on the property =$11.5/$15 million =77%.
77% of the property is already on a loan.
So, additional loan cannot be offered as the balance of the value of the property can be considered as margin on the loan.
So, only he can be convinced to close the bond at common wealth bank and give an interest benefit on the loan by charging a lesser interest on the bonds that are to be issued.
Value of the dons bourough property = 5.1 million.
Loan on the property =$2.5 million.
% of loan on the property =2.5/5.1 =49%.
Still there is a possibility to lend on the property, so additional loan can be offered on this property with a second mortagage for an appropriate amount at an attractive interest rate.
Value of wine yard farm =7.5 million.
Loan on this farm =4.5 million.
% of loan on the value of the farm =4.5/7.5 =60%.
Still there is a possibiity of lending up to75% of the value of the farm. This can be issued as second mortagage loan on the farm land.
Worth of fixed deposits =$750,000. Overdraft facility availed =$50,000. So, the person can be offered an higher interest rate on the deposit than what is being offered by the common wealth bank.
Debt equity ratio = Total debt/Total assets
=19,550,000/36,723,400
=53.24%.
So, even a personal loan can be offered to him at an attractive interest rate.
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