Balance Sheet

As at 31 Dec 2018 (in Million)

Bank A Star Bank B Riser
Assets
Cash and Cash Equivalent 2,907.00 1,203.00
Pledged Trading Assets 540 300
Non- Pledged Trading Assets 16,122.00 8,675.00
Derivative Held for Risk Management 858 456
Loans and Advances to Banks 5,575.00 2,390.00
Loans and Advances to Customers 63,070.00 32,005.00
Investment Securities 6,302.00 3,380.00
Property and Equipment 409 201
Other Assets 689 324
Total Assets 96,472.00 48,934.00

Liabilities
Trading Liabilities 7,026.00 3,698.00
Derivative Liabilities Held for Risk Ma 828 444
Deposits from Banks 11,678.00 5,453.00
Deposits from Customers 53,646.00 26,784.00
Debt Securities Issued 11,227.00 5,454.00
Provisions 90 50
Other Liabilities 450 231
Total Liabilities 84,945.00 42,114.00

Equity
Share Capital and Share Premium 8,017.00 4,503.00
Retained Earnings 3,350.00 2,231.00
Reserves 160 86
Total Equity 11,527.00 6,820.00

Total Liabilities and Equity 96,472.00 48,934.00

Income Statement
For year ended 31 Dec 2018
Bank A Star Bank B Riser Increase
Interest Income 3,341.00 2,753.00 0.05
Interest Expense -1,406.00 -760
Net Interest Income 1,935.00 1,993.00
Fee and Comission Income 854 432 0.05
Fee and Comission Expense -179 -67
Net Fee and Comission Income 675 365
Net Trading Income 1,434.00 880
 Other Revenue 123 30
Total Revenue 4,167.00 3,268.00

Other Income 18 -
Net Impairment Loss on Financial Asset -330 -153
Personnel Expenses -2,264.00 -2,190.00 -0.1
Operating Lease Expense -344 -167
Depreciation and Amortization -47 -47
Other Expenses -400 -225 -0.1
Total Expenses -3,367.00 -2,782.00

Profit before tax 800 486

Income Tax 200 121.5
Net Profit 600 364.5

Dividend Paid 60 72.9

Retained Earning 540 291.6

required return of equity 0.05

Dividend payout ratio 0.1
terminal growth 0.01
tax rate 0.25
Cost of equity bank industry
Bank A
Year 0 1 2 3
Beginning Book Value of Equity £ 11,527.00 £ 12,067.00 £ 12,632.30 £ 13,224.08

Net Income £ 600.00 £ 628.11 £ 657.53 £ 688.34

Nominal Cost of Equity £ 603.35 £ 631.61 £ 661.20
Residual Income £ 24.76 £ 25.92 £ 27.13
Discount Factor 1.05 1.10 1.16
PV of Residual Income £ 23.58 £ 23.51 £ 23.44
Accumulated PV of Residual Income £ 23.58 £ 47.09 £ 70.52

Dividend Paid £ 60.00 £ 62.81 £ 65.75 £ 68.83

Retained Earnings £ 540.00 £ 565.30 £ 591.78 £ 619.50

Continuining Value

Firm Value £ 12,374.37

Bank B
Year 0 1 2 3
Beginning Book Value of Equity £ 6,820.00 £ 7,148.05 £ 7,482.91 £ 7,833.46

Net Income £ 364.50 £ 372.07 £ 389.50 £ 407.74

Nominal Cost of Equity £ 357.40 £ 374.15 £ 391.67
Residual Income £ 14.67 £ 15.35 £ 16.07
Discount Factor 1.05 1.10 1.16
PV of Residual Income £ 13.97 £ 13.93 £ 13.88
Accumulated PV of Residual Income £ 13.97 £ 27.89 £ 41.78

Dividend Paid £ 36.45 £ 37.21 £ 38.95 £ 40.77

Retained Earnings £ 328.05 £ 334.86 £ 350.55 £ 366.97

Continuining Value
Firm Value £ 7,321.95

Combined Value 19,696.33

 4 5 Initial Net Income £ 600.00
£ 13,843.58 £ 14,492.10 Initial Book Value of Equity £ 11,527.00
Cost of Equity 5.00%
£ 720.58 £ 754.34 Average of Historical ROE 5.21%
£ 692.18 £ 724.61 Average of Historical DPR 10%
£ 28.40 £ 29.73 Terminal growth 1%
1.22 1.28
£ 23.37 £ 23.30
£ 93.89 £ 117.19

£ 72.06 £ 75.43
£ 648.52 £ 678.90

£ 730.19

4 5 Initial Net Income £ 364.50

£ 8,200.43 £ 8,584.59 Initial Book Value of Equity £ 6,820.00
Cost of Equity 5%
£ 426.85 £ 446.84 Average of Historical ROE 5%
£ 410.02 £ 429.23 Average of Historical DPR 10%
£ 16.82 £ 17.61 Terminal growth 1%
1.22 1.28
£ 13.84 £ 13.80
£ 55.62 £ 69.42

£ 42.68 £ 44.68
£ 384.16 £ 402.16

£ 432.54
 A B
Terminal Growth 1% 1%
Debt/(Debt+Equity) 88% 86%
Growth
Interest Income 5%
Fee and Commmisison Income 5%
Personal and other expense -10%
COE 5%
Dividend Payout Ratio 10%
Tax Rate 25%
ROE 12% 14%
Initial Net Income $ 600 $ 364.50
 Balance Sheet
As at 31 Dec 2018 (in Million)
Bank A Star Bank B Riser
Assets
Cash and Cash Equivalent 2,907.00 1,203.00
Pledged Trading Assets 540 300
Non- Pledged Trading Assets 16,122.00 8,675.00
Derivative Held for Risk Management 858 456
Loans and Advances to Banks 5,575.00 2,390.00
Loans and Advances to Customers 63,070.00 32,005.00
Investment Securities 6,302.00 3,380.00
Property and Equipment 409 201
Other Assets 689 324
Total Assets 96,472.00 48,934.00

Liabilities
Trading Liabilities 7,026.00 3,698.00
Derivative Liabilities Held for Risk Management 828 444
Deposits from Banks 11,678.00 5,453.00
Deposits from Customers 53,646.00 26,784.00
Debt Securities Issued 11,227.00 5,454.00
Provisions 90 50
Other Liabilities 450 231
Total Liabilities 84,945.00 42,114.00

Equity
Share Capital and Share Premium 8,017.00 4,503.00
Retained Earnings 3,350.00 2,231.00
Reserves 160 86
Total Equity 11,527.00 6,820.00

Total Liabilities and Equity 96,472.00 48,934.00

Income Statement
For year ended 31 Dec 2018
Bank A Star Bank B Riser
Interest Income 3,508.05 2,890.65
Interest Expense -1,406.00 -760
Net Interest Income 2,102.05 2,130.65
Fee and Comission Income 896.7 453.6
Fee and Comission Expense -179 -67
Net Fee and Comission Income 717.7 386.6
Net Trading Income 1,434.00 880
Other Revenue 123 30
Total Revenue 4,376.75 3,427.25

Other Income 18 -
Net Impairment Loss on Financial Assets -330 -153
Personnel Expenses -2,037.60 -1,971.00
Operating Lease Expense -344 -167
Depreciation and Amortization -47 -47
Other Expenses -360 -202.5
Total Expenses -3,100.60 -2,540.50

Profit before tax 1,276.15 886.75

Income Tax 319.0375 221.6875
Net Profit 957.11 665.06

Dividend Paid 60 72.9

Retained Earning 540 291.6
Bank A
Year 0 1 2 3
Beginning Book Value of Equity £ 11,527.00 £ 12,388.40 £ 13,314.17 £ 14,309.13

Net Income £ 957.11 £ 1,028.64 £ 1,105.51 £ 1,188.12

Nominal Cost of Equity £ 619.42 £ 665.71 £ 715.46
Residual Income £ 409.22 £ 439.80 £ 472.66
Discount Factor 1.05 1.10 1.16
PV of Residual Income £ 389.73 £ 398.91 £ 408.30
Accumulated PV of Residual Income £ 389.73 £ 788.64 £ 1,196.94

Dividend Paid £ 95.71 £ 102.86 £ 110.55 £ 118.81

Retained Earnings £ 861.40 £ 925.77 £ 994.95 £ 1,069.31

Continuining Value

Firm Value £ 24,532.50

Bank B
Year 0 1 2 3
Beginning Book Value of Equity £ 6,820.00 £ 7,418.56 £ 8,069.64 £ 8,777.88

Net Income £ 665.06 £ 723.43 £ 786.92 £ 855.99

Nominal Cost of Equity £ 370.93 £ 403.48 £ 438.89
Residual Income £ 352.50 £ 383.44 £ 417.09
Discount Factor 1.05 1.10 1.16
PV of Residual Income £ 335.72 £ 347.79 £ 360.30
Accumulated PV of Residual Income £ 335.72 £ 683.51 £ 1,043.81

Dividend Paid £ 66.51 £ 72.34 £ 78.69 £ 85.60

Retained Earnings £ 598.56 £ 651.09 £ 708.23 £ 770.39

Continuining Value

Firm Value £ 18,489.28

Combined Value 43,021.77

Value Sinergy 23,325.45

 4 5 Initial Net Income £ 957.11
£ 15,378.44 £ 16,527.65 Initial Book Value of Equity £ 11,527.00
Cost of Equity 5.00%
£ 1,276.91 £ 1,372.33 Average of Historical ROE 8.30%
£ 768.92 £ 826.38 Average of Historical DPR 10%
£ 507.98 £ 545.95 Terminal growth 1%
1.22 1.28
£ 417.92 £ 427.76
£ 1,614.86 £ 2,042.62

£ 127.69 £ 137.23
£ 1,149.22 £ 1,235.09

£ 10,962.87

4 5 Initial Net Income £ 665.06

£ 9,548.26 £ 10,386.27 Initial Book Value of Equity £ 6,820.00
Cost of Equity 5%
£ 931.11 £ 1,012.83 Average of Historical ROE 10%
£ 477.41 £ 519.31 Average of Historical DPR 10%
£ 453.70 £ 493.52 Terminal growth 1%
1.22 1.28
£ 373.26 £ 386.69
£ 1,417.07 £ 1,803.76

£ 93.11 £ 101.28
£ 838.00 £ 911.55

£ 9,865.52
 A B
Terminal Growth 1% 1%
Debt/(Debt+Equity) 88% 86%
Growth
Interest Income 5%
Fee and Commmisison Income 5%
Personal and other expense -10%