CASE STUDY ASSIGNMENT  BFF5926 Australian Capital Markets – 1st Semester, 2017 The CFO of the Monash Retail Commercial Bank (MRCB) had just finished her 2017 projections and the Bank's directors were contemplating its ramifications. MRCB was trading well with its ratios surprisingly similar to that of its arch rival, the Bendigo and Adelaide Bank. Even so, its CIR could be improved through cost reductions and better economies of scale. MRCB had already cut costs harshly and the board worried that any more might hurt its high customer service rankings. MRCB was already very competitive in its internet services. In terms of scale, more branches within its traditional client base seemed unwarranted as did any much outside the Victoria border. “Perhaps an acquisition?” suggested one director. Besides scale benefits, it would offer a new client base in which to cross sell the group’s products as well as serve more clients with effectively much the same fixed costs. The board, however, well remembered their Suncorp and Bank of Queensland episodes and did not want to revisit them or any Bendigo linkage. So “what about a mutual?” asked one director. There were certainly many credit unions and several mutual banks: the Defence Bank and the Australian Military Bank actually competed in MRCB's traditional military market. Would one of those be useful acquisitions? The board thought perhaps yes. MRCB actually had a lower CIR and more products, but why would a mutual agree? The problem, as one director explained, was that mutuals thought differently about banking than conventional banks. "How do mutuals measure their success?" asked another. In the old days, it would have been a combination of a low NIM and CIR coupled with high customer satisfaction ratings. Regulatory capital needs had changed that paradigm, but what was it today? Once identified, could MRCB organise an offer that a mutual board and its members would accept? Bendigo had once acquired a few small credit unions through its community bank model - an approach the MRCB board disliked. The chair, Sir Lachlan Onslow-Fawkner, concluded that the matter was too complicated to resolve at this meeting and so directed the company secretary to have your consulting firm examine the matter in more detail. He felt at a minimum, your report should provide a quick overview of the mutual banking industry in Australia, identify their key performance indicators, compare the standard conventional ratios of Defence and Military against those of MRCB and explain any differences, recommend which if any mutual should be approached, and finally what MRCB should offer. The report is required for the May board meeting. The company secretary has warned you that Sir Lachlan demands high quality written expression in all MRCB reports and is a stickler for properly formatted bibliographies. He has even taken his granddaughter's copy of the Monash Q Manual to work and insists that all reports follow it exactly. Furthermore, the managing director, a noted environmentalist, hates all plastic folders and binders and has fired staff for using them. His message is clear; a simple staple at the top of the left hand corner is more than enough to hold any report together.    Background: The Monash Retail Commercial Bank was created in 1923 to meet the financial needs of the returned soldiers that had served in World War I. Using the good name of Sir John Monash, the organisers had encouraged their various relatives and friends to participate. From that small historic base, MRCB had developed into a strong, ASX listed, retail bank dedicated to serving the financial needs of the people and businesses of rural Victoria. It later added a retail stockbroking firm to provide financial services and investment advice to its clients and then a life insurance company (as life policies once afforded important tax advantages) as subsidiaries. Others, like the Monash Investment Bank, the Monash Funds Management Company and Monash Financial Planning, were subsequently established. With technology, MRCB was an early mover in on-line banking which it developed to serve Australian armed forces members on active duty locations and its web services for all clients remain competitive. It also offers veterans and HNWIs free membership of the Monash Club with its slightly better rates and reward benefits. Today, the Monash Retail Commercial Bank remains a hypothetical medium size, mainly Victorian based financial organisation with a strong market presence particularly among older Australians as well as in provincial towns and rural areas. Its representation is similar to that of the Bendigo Bank within Victoria (some 200 branches) but MRCB utilises specialised bank staffed sub-branches whereas Bendigo uses community bank branches. While MRCB’s $1,500 million market capitalisation is much smaller than Bendigo and Adelaide, its financial ratios are nevertheless very similar. Assignment administrative details: This assessment is designed to test your achievements in the BFF5926 unit learning objectives 1, 3 and 4. It is a task for a student syndicate comprised ideally of two to three students. The students are expected to form their own syndicates. The word limit is between 3,000 to 5,000 words: the references, appendices, and preliminary pages (title page and table of contents) do not count. It should follow the standard of a professional consultancy report. Please see the Q Manual for details on the letter of transmittal, executive summary and other associated aspects and the instructions on Moodle. The hard copy version of the assignment (no binders or folders) together with signed individual faculty assignment cover sheets attached is due on 10:00AM Friday – 5 May 2017. Students must retain a copy of their submitted report until the unit’s final results are released. The reports should be placed in the lecturer’s mail box on level three of Building H. Electronic lodgements are not accepted.