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Commercial bank financial statement (Evaluate Bank Performance (4 Criteria…
Commercial bank financial statement
Bank Assets
4 types
Investment Securities
Reserves
process checks
satisfy withdrawals
Physical Assets
building, machines, lands
Loans
interest revenue
Earning VS
Non-earning assets
Earning: interest&Income bearing
Non-earning: not generate income
Bank Liabilities
5 major items
Deposits
money owned by customers
Borrowings
borrow from central&other bank
Reserve Funds
accumulate over the yr from undistributed profit
Other Liabilities
Interest Bearing
Liabilities
Negotiable order of withdrawal(NOW)
Automatic transfer from saving(ATS)
Money market deposit accounts(MMDAS)
Saving & Time deposits
Non-interest
Bearing Liabilities
Demand deposit (checkable acc,pay no i%)
Share Capital
shareholder contribute for starting bank
Shareholder's equity
ownership interest
bank's capital
common stock
bank cumulative net income
Income Statement
4 sections
Interest Income (loans,securities)
Interest Expense (paid to 3rd party)
Noninterest Income(service charges,fin.activity fees)
Noninterest Expense(wages,equipment expense)
Evaluate Bank Performance
4 Criteria for
GOOD bank
Stability & Financial Performance
Service & Product Quality
Transparency
Customization
3 ways evaluation
Liquidity Ratio
Solvency Ratio
Profitability Ratio
(ROE)
6 Bank Risk
liquidity risk
credit risk(borrower default)
market risk (loan)
operational risk
reputation risk(bank position)
legal risk(penalty)
CAMELS Rating
Capital adequacy (maintain capital)
Asset quality (credit risk w loan)
Management quality (identify,monitor,control risks)
Earning (quantity,trend)
Liquidity (sources of fund)
Sensitivity to market risk (chaneg in price affect earning)
Stakeholders
External Users
investors
government
general mass&media
labour unions
central bank
Internal Users
managers & owners
employees
Importance of
profitability
provide economic
security
keep saving safe,
economy moving