Question

According to its Interim 2017 results, Westpac had total assets of $840bn, risk-weighted assets of $404.4bn, and equity capital of $40.3bn. Its customer deposits were $478.7bn.

Distinguish between total assets and risk-weighted assets. What was the total value of all sources of funding used by Westpac at this point in time, excluding customer deposits and equity capital? Explain how you have calculated your answer.  

Answer 1

1. DIFFERENCE BETWEEN TOTAL ASSETS & RISK WEIGHTED ASSETS

• Total Assets is the final amount of all gross investments, cash and equivalents, receivables, and other assets as they are presented on the balance sheet.
• The Risk Weighted Assets (RWA) refer to the fund based assets such as Cash, Loans, Investments and other assets. They are the total assets owned by the corporation, however, the value of each asset is assigned a risk weight (for example 100% for corporate loans and 50% for mortgage loans) and the credit equivalent amount of all off-balance sheet activities.

2. TOTAL VALUE OF ALL SOURCES OF FUNDING EXCLUDING CUSTOMER DEPOSITS & EQUITY CAPITAL.

Total Liabilities = Total Assets i.e $840 bn

Total liabilities = Capital + Reserves + long term liabilities + current liabilities

Therefore,

$840 bn = $40.3bn + $478.7 + Other sources of funding of Westpac

Others sources of funding = $321bn.