Hi, for a college project I've been given the task of predicting a banks forecast, I have a financial statement from the bank for the previous two years with Net Interest Receivable, Assets, Liabilities etc.
My problem is how do you forecast the profit for the bank? I understand that for other forecasts you just estimate the amount of sales, or sales that have been confirmed for a manufacturing company for instance. But with the bank being kind of volatile, where do you even start?
The approach taken to a question like this is normally determined by the information you have been given.
The data from prior years should be enough to establish (probably shows) a consitent relationships and run rates for various drivers and resulting outputs.
I would assume you will either have some base line external economic forecasts on which to apply these drivers such as the demand for borrowing and predicted LIBOR or you will be expected to assume no change on prior years or follow an underlying trend.
Bank profit is achieved by borrowing at one rate and lending at a higher rate. depending on how your question has been set out the rate of borrowing will be LIBOR or a set Markup to LIBOR and the rate at which your lending will either be implied or stated in the question or they will be expecting you to assume something based on prior years.
If you want to post more detail from the question i don't mind having a stab at it, or providing some hints.
