L3. Measuring and Evaluating the Performance of Banks & their Principal
Competitor

Risk factors banks face

Stakeholders of bank performance

click to edit

Stockholders

• Bank management

• Regulators

• Depositors

• Business community

External performance

Public confidence

Regulatory compliance

Public confidence

c

Present value of future cash flows

Determinants of stock price

P0= image

Size of cash flows

• Timing of cash flows

Riskiness of cash flows

Vo= D1/(1+r)^1 + P1/(1+r)^1

P1= D2/(1+r)^2 + P2/(1+r)^2

Vo= D1/(1+r)^1 + D2/(1+r)^2 + D3/(1+r)^3 +......Pn/(1+r)^n

image

Valuation using P/E ratio

image

Profitability ratios

ROE image

ROA image

NII image

Net non IR margin image

Net Operating margin image

EPS image

Earnings spread = Total IR income/Total EA - Total IR exp/Total IR-bearing L

NPM image

AU image

EM image

click to edit

Credit

• Liquidity

• Operational

• Legal and compliance

• Market

• Price

• Interest rate

• Reputation

• Strategic

• Capital

Operating efficiency ratio image