Branch code and bank clearing code is a three digits numerical value used to identify an individual branch of a financial institution or a bank in Hong Kong. Branch code and clearing codes are regulated by HKICL (Hong Kong Interbank Clearing Limited).
To meet the international standards and minimize settlement risks, a HKD Real Time Gross Settlement (“RTGS”) system, which is known as HKD Clearing House Automated Transfer System (“CHATS”) was launched on 9 December 1996 by Hong Kong Interbank Clearing Limited (“HKICL”).
The RTGS system facilitates the settlement of real time Delivery versus Payment and real time Payment versus Payment through domestic and international linkages. All licensed banks in Hong Kong are obligated to maintain HKD settlement accounts with the Hong Kong Monetary Authority (“HKMA”). Since June 2000, restricted licence banks with a clear business need are also allowed to open settlement accounts with the HKMA. Under the RTGS system, every CHATS transaction has to be settled on an individual and gross basis. Unless with special instruction specified, payment instructions are settled immediately if there is sufficient balance in the settlement account. Banks without sufficient credit balances or securities for intraday repo to effect outgoing payment instructions will have their instructions queued in the system. The queuing mechanism allows the banks to manage their own queues of payment instructions through cancellation or re-sequencing. When a payment has been settled across the books of the HKMA, it will be regarded as final and irrevocable.
While no daylight overdraft is allowed, banks may obtain intraday liquidity through intraday repurchase (repo) with the HKMA, using mainly government paper, e.g. Exchange Fund Bills and Notes. Intraday repo that fails to be reversed before the close of the business day will be carried into overnight borrowing through the Discount Window.
To access RTGS system functions, banks must connect to the SWIFT network to initiate/receive payment instructions, and access eMBT provided by HKICL for performing administrative functions to respective payment instructions.
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Analysis of Financial Ratios
NIM (Net Interest Margin): Net interest margin (NIM) is a measure of the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to their lenders (for example, deposits), relative to the amount of their (interest-earning) assets. Thus, it also has high correlation to interest spread and thus impacts profitability of the bank. NIM of Andhra Bank is 2.77 which is greater than the average of all public sector banks but less than average NIM of all banks in India. This indicates that the bank is doing well as compared to an average PSB in India but lagging among all banks in India.
COF (Cost of Funds): Cost of funds for a bank is the average interest rate paid to depositors on financial products such as savings account, current account, and fixed deposits etc. Lower CoF is better for banks as it will increase profitability. COF of Andhra Bank is 7.13 which is poorer than the average among PSBs as well as poorer than average CoF of all banks.
Return on Advances: Return on advances indicates the average interest rate at which the bank lends money to the borrowers. Higher return of advances is better for higher profitability of the bank (however, higher interest rates also indicate risky assests). So this ratio should be read along with NPA Ratio for better understanding about the bank.
Return on Equity (ROE): Return on equity is the measure of bank's profitability. Higher the better. [RoE = Net Profit / Total Equity].
CRAR: Capital to Risk-Weighted Assets Ratio (also known as Capital Adequacy Ratio is the ratio of bank's capital to its risk. This ratio is also monitored by RBI for all banks and higher value indicates higher stability for a bank. CRAR of Andhra Bank is 11.76 which is less than group average among PSBs and also less than average of all banks.
NPA Ratio: Non Performing Assets refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset. Thus, NPA Ratio = [Non Perforing Assets/Total Assets]. Higher NPA Ratio indicates riskiness of the bank and losses as it may result in write downs. If you are investing in a bank, be aware to check this ratio carefully. NPA Ratio of Andhra Bank is 2.45 which is high and it is poorer than average NPA of PSBs as well as average NPA of all banks.