3) ABC bank has many branches; XYZ bank has relatively few branches. Both banks are the...

3) ABC bank has many branches; XYZ bank has relatively few branches. Both banks are the same size - $100 billion in assets - and operate in a five state region. Compare/contrast likely differences in the expenses incurred by ABC relative to XYZ.

4) a) What are the reasons for “consolidation” of the financial services industry? b) When a low-risk firm combines with a high-risk firm, what can we say about the risk of the conglomerate relative to that of the high and low risk firms?

Solutions

Expert Solution

3) The fixed expenses incurred by ABC would be more because of the more number of branches. Also, the selling and distribution expenses would be more because of a larger distribution network. For XYZ the fixed expenses which comprise the salaries and depreciation would be lesser as there are fewer employees and fewer building and infrastructure involved.

4) The region for consolidation in the financial services sector is to ensure that there are synergistic benefits and cost savings which are available through the merger of entities.

The risk of the conglomerate would be less than the high-risk firm but would be more than that of the low-risk firm.

jeff jeffy answered 1 year ago

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