Learning Objectives:

  • Understand the structure and purpose of the cash flow statement for banks.

  • Distinguish operating, investing, and financing cash flows.

  • Interpret cash flow information to assess bank liquidity.

4.1 Purpose and Structure of the Cash Flow Statement

The statement of cash flows reconciles opening and closing cash balances. The HKU Business School course requires students to “calculate relevant metrics and critically assess various risk exposure and performance” .

Operating Activities: Cash flows from the principal revenue-producing activities, including interest receipts and payments.

Investing Activities: Cash flows from the acquisition and disposal of long-term assets.

Financing Activities: Cash flows from transactions with shareholders and creditors.

4.2 The Cash Flow Statement in Banking

Cash flow analysis is critical for assessing a bank’s liquidity position. The GICP course covers “key drivers of liquidity” and “contingency funding needs” . Cash flows from operating activities are often considered a more reliable indicator of financial health than net income.

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