Performance Assessments - Bank Management - Lecture Slides, Slides of Banking and Finance

Download Performance Assessments - Bank Management - Lecture Slides and more Slides Banking and Finance in PDF only on Docsity! PERFORMANCE ASSESSMENT Docsity.com Performance Analysis • Return Analysis – ROE analysis – Matrix analysis – Data Envelopment Analysis • Risk Analysis – Credit risk – Liquidity risk – Market risk – Price risk – Interest rate risk – Operational risk • Capital Adequacy Analysis Docsity.com ROA Analysis • Net Interest Margin = (Interest income – Interest expense)/ Total assets • Net Non-interest Margin = (Non-interest income – Non- interest expense) / Total assets • Net Operating Margin = (Total operating income – Total operating expense) / Total Assets Docsity.com Earnings Spread Docsity.com Profitability Ratios • Break-even yield ratio – Break-Even Yield =((Interest Expense + Non-Interest Expense - Non-Interest Income) / Average Earning Assets) X 100 • Cost of funds ratio = (Interest on Borrowings / Total Borrowings) • Return on advances ratio = (Income from Advances / Total Advances) • Return on advances adjusted for cost of funds ratio = (Income from Advances – Interest on Borrowings) / Total Advances) Docsity.com Operating Efficiency • Operating Income as a Percent of Working Funds • Fund based Income as a Percent of Operating Income • Fee based Income as a Percent of Operating Income Docsity.com Business Efficiency • Demand Deposit of Total Deposits • Saving Deposit of Total Deposits • Time Deposit of Total Deposits • Deposits within India as Percent to Total Deposits • Deposits Outside India as Percent to Total Deposits Docsity.com Employee Efficiency • Business per Employee • Profit per Employee • Wages / Total Expenses • Operating Income per Employee • Operating Profit per Employee • Administrative Expenses per Employee • Deposits per Employee • Fund Advances per Employee Docsity.com Credit Risk • Gross non performing assets / Total loans & leases • Net non performing assets / Total loans & leases • Net non performing assets / Equity Docsity.com Net NPA • Net NPA = Gross NPA less Provision for NPA • NPA is a loan for which the interest or the principal or both remain unpaid for two quarters or more. • Gross NPA – Poor credit recovery – Little legal support – Lengthy legal proceedings – Sticky loans Docsity.com Net NPA • Banks in some countries provide for NPAs as a general provision and write off losses by identifying them at an early stage. In such countries, banks would carry very little NPAs in their books since recovery measures are expedited so as to avoid bankruptcy. Gross NPA and Net NPA is absent in these countries. • In India, owing to the time lag involved in the recovery, banks tend to hold on to advances considered irrecoverable in their books. In a normal scenario these should be completely written off from the books. This leads to gross NPAs. Docsity.com Other Risk • Operational risk • Legal risk • Reputation risk • Strategic risk • Capital risk – Market price / EPS – Net worth / Total assets – CRAR Docsity.com Capital Adequacy Ratio • Computation of CAR – Tier I capital – Tier II capital – Risk Weighted Assets (RWA) Docsity.com Capital to Risk Weighted Asset Ratio (CAR or CRAR) • Capital Adequacy Ratio: Capital Adequacy Ratio = (Tier I capital + Tier II capital) / Risk Weighted Assets Docsity.com Breakeven Yield Ratio • Total expense = Interest Expense + Non Interest Expense • Desired Interest Income = Total Expense - Non-Interest Income • Average Assets • Breakeven yield = 7.32% • Cost of Deposits = 6.97% • Cost of Borrowings = 1.89% • Cost of funds = 6.92% • Return on advances = 14.77% • Return on advances adjusted to cost of capital = 7.85% Docsity.com Return on Equity Analysis • Tax Management Efficiency = 33.50% • Expense control Efficiency = 13.20% • Asset Management Efficiency = 9.52% • Funds Management Efficiency = 66.83 Docsity.com Operating Efficiency • Operating Income Efficiency = 9.51% • Fee Based Efficiency = 5.96% • Fund Based Efficiency = 93.36% Docsity.com Branch Efficiency • Operating Income per Branch = 563.78 • Operating Profit per Branch = 475.97 • Net Profit per Branch = 24.93 • Personnel Expenses per Branch = 56.74 • Administrative Expenses per Branch = 31.07 • Financial Expenses per Branch = 1.11 • Borrowings per Branch = 58.81 • Deposits per Branch = 5179.05 Docsity.com Risk Analysis Coefficient of Variation • Interest income / Total assets = 0.0633 • ROE = 0.4716 • ROA = 0.4585 • Net NPA / Net Advances = 0.2025 Docsity.com Credit Risk • Gross NPA / TA = 1.95% • Net NPA / TA = 0.82% • Net NPA / Equity = 31.31% Docsity.com