Due in 15 hours.

The paper analyzes KeyBank, which is a $142.5 billion bank located in Cleveland, Ohio. You and your group (up to six students) must briefly analyze the Uniform Bank Performance Report (UBPR) of the bank from a peer and trend analysis and assess a proposed asset/liability shift.

• First, analyze the bank’s capital, asset quality, management, earnings, liquidity and sensitivity based on the UBPR of the bank distributed.

• Second, briefly correlate the key profitability ratios from the Summary Page of the UBPR with relevant economic metrics. For example, how do short- and long-term US Treasury interest rates correlate with interest income, interest expense, net interest income, etc.? Or, how does the unemployment rate or percentage change in real GDP impact asset quality measures? You only have five annual observations.

There is no need to test for significance or run a regression. Does the correlation coefficient make economic sense and how could the projected economy in 2020 impact the bank’s operations and condition?

• Third, assume the bank forecast weak loan demand in 2020 and lower interest rates based on an accommodative monetary policy.

The institution would like to assess the sale (at the beginning of the year) of $1 billion of short-term US Treasury bills (0

% Risk Weight) earning .5

% to be reinvested in five-year BBB-rated corporate notes (100

% Risk Weight) earning 3.5

%. The bank will incur incremental management and modeling costs equal to .25

% of the funds invested. Note how the profitability of the bank will change from $1.9 billion given the change in interest income, non-interest expense, provision for loan losses and taxes.

The allowance for loan losses is deemed adequate at the end of 2019 but would need to reflect CECL in 2020 given the change in asset risk of $1 billion corporate notes. You will need to estimate the expected losses over the five-year horizon of the corporate notes. The bank is taxed at 16

%.

• Fourth, indicate how key ratios reflecting CAMELS will change given the shift in the asset portfolio; be specific when possible.

Overall, what concerns do you have, if any, with the bank going forward with the portfolio shift? Do you recommend the change?

The paper should approximate three to five pages excluding charts, graphs, correlations, computations, etc.