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| | Marshall & Isley Corporation
Description of the Business
Marshall & Isley Corporation (MI) is a diversified financial services company.
It operates through the business segments: Commercial Banking, Communit
Analysis of Competitors
Its competitors are:
- Bank Of Amerika
- Wells Fargo
- JP Morgan
- Citigroup
- Huntington Bancshares
- Fifth Third Bancorp
Competitive Advantages
As a financial organization it is difficult to differentiate from competitors. Banks are competing on price and services.
A very important critical success factor is risk management.
A bank can achieve lower prices (lower interest rates on loans) compared to competitors by having lower funding costs for
example because of deposits or high credit ratings. Another important differentiator is the perceived trust customers have in a bank.
The big banks have a competitive advantage compared to smaller local players, as they have the resources to provide big loans to big corporations.
About 70% of MI's debt is funded by deposits. They have a high interest margin of more than 50% due to low funding costs.
They received $1.715 billion TARP money in 2008.
Financial Analysis
About 70% of MI debt is funded by deposits. They have a high interest margin of more than 50% due to low funding costs.
In 2008 they set aside almost$2000 million for loan losses
The book value is about $30.
They received $4.85 billion TARP money and it also issued $3 billion of debt guaranteed by the Federal Deposit Insurance Corp under the government's liquidity program.
This boosted it capital, but will reduce their future profits. The current Tier-1 ratio is above 10 (10.85), which means that they are well-capitalized.
Risks
The main short term risks are related to credit losses due to weakening economy. It is very difficult to predict how big these losses will be and whether MI will need additional capital.
If MI survives the credit crises it has huge future opportunities to grow profits and their business.
However in the short term the MI stock has a high risk rating due to the economic uncertainty.
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