MEASURING AND EVALUATING BANK PERFORMANCE
Evaluating Performance
Determining Long-Range Objectives
Profitability Ratios :
Key Profitability Ratios
Interpreting Profitability Ratios
Maximizing the Value of the Firm
Value of stock = Expected stream of future stockholder dividends/ Discount factor
Po = D1 / (r-g)
Po = [D1 / (1+r)^1] + [D2 / (1+r)^2] + .... + [Dn / (1+r)^n] + [Pn /(1+r)^n]
ROE = Net income /Total equity capital
ROA = Net income /Total assets
Net interest margin = (Interest income - Interest expense) / Total assets ^2
Net noninterest margin = (Noninterest revenues - Provision for loan and lease losses - Noninterest expenses ) / Total assets ^2
EPS = Net income / Common equity shares outstanding
Net operating margin = (Total operating revenues - Total operating expenses ) / Total asset
Earnings spread = ( Total interest income /Total earning assets) - ( Total interest expense / Total interest-bearing liabilities)
Profitability analysis
ROE = ROA x Total assets /Total equity capital
ROE= (Net income /Total assets) x (Total assets / Total equity capital)
ROE= [(Total revenues - Total operating expenses - Taxes) /Total assets] x (Total assets /Total equity capital)
ROE = Net profit margin x Asset utilization rattio x Equity multiplier
NPM = Net income / Total operating revenues
AU = Total operating revenues /Total assets
EM = Total assets /Total equity capital
Measuring Risk in Banking
Credit Risk
Liquidity Risk
Market Risk
Price Risk
Price Risk
Interest Rate Risk
Foreign Exchange and Sovereign Risk
Off-Balance-Sheet Risk
Operational Risk
Legal and Compliance Risks
Reputation Risk
Strategic Risk
Capital Risk
The Impact of Size on Performance
Other Goals in Banking and Financial-Services Management
Operating efficiency ratio = Total operating expenses / Total operating revenues
Employee productivity ratio = Net operating income / Number of full-time-equivalent employee
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