Learn | Consult | Research Financial Statement of a Bank S.B.Khatri

The Financial Statement of a Bank Evaluating a Bank’s Performances Size, Location and Regulatory Bias in Analyzing Bank Performance Using Financial ratios and Other Analysis S.B.Khatri Financial Statement of Bank

The Financial Statement of a Bank Financial Statement are written detail of Income,Expenditure,Profit and loss of an organisation. It is an actual historical Data of the firm It determines the failure or growth of the Firm It is a systematic summary of Banking transaction It reflects the financial position of bank S.B.Khatri

Important Financial statement Balance Sheet *Assets side *cash Account *Investment Securities *Loan *Federal Fund sold And Securities purchased under resale Agreement *Customer Liability on acceptances *Miscellaneous Assets S.B.Khatri

Liabilities side of Balances sheet Deposit *Non interest-bearing demanddeposit *Saving deposit *NOW account *Money market deposit account *Time deposit Borrowing from Non- deposit sources Capital S.B.Khatri

Income statement Income statement show Income n Expenditure It indicate amount of revenue received and expenses incurred It is prepared Frequently There are four component of Income statement *Interest Income S.B.Khatri

Cont… *Interest expenses *Non-Interest Income *Non-Interest Expenses S.B.Khatri

Fund-Flow Statement It is the report of sources and use of fund It is also called “sources and use fund statement” It provides answer to two question *where did the fund of a bank come from over a certain period? *How were those fund used? S.B.Khatri

Capital-Account Statement It is statement showing changes in the bank’s capital account It is also called “statement of stockholder equity” It is useful for evaluation of a bank It show how owner invest fund in bank It represent cushion of financial strength for the bank, which help to protect depositor and creditors S.B.Khatri

Cont… Creditors are always eager to see the capital account statement S.B.Khatri

Methods of Evaluating Bank Performances Maximizing the value of the firm *Value of bank stock=Stockholderdividen/dicount factor based on the minimum market rate of return on equity or *Value of bank stock=E e(d^t)/t=0(1+r)^t Other: Po=D1/(r-g) S.B.Khatri

Cont… Profitability Ratios *NPM=NP after Tax/Total oper.Revenue Where NPM= Net profit Margin NP=Net profit after tax *ROA=NI after Tax/Total Assets *ROE=NI after Tax/Total Equity S.B.Khatri

Size,location and Regulatory Bias in analyzing Bank Performance Size is measured by Assets,Deposit and equity capital Size of the bank has significant impact on performances & profitability Market area help to give more valid about the performances of bank Comparison will be better if bank compared are subject to similar regulation Rules that are made by Central Bank S.B.Khatri

Cont… “There is an old saying about avoiding comparing apples and oranges beacause of their obvious differences” No 2 bank are exactly alike in size,location service menu or customer base S.B.Khatri

Financial Ratio & Analytical tools NIM=II-IE/TA *where NIM=net interest margin *II=Interest Income from loan & security investment *IE=Interest expenses on borrowed fund *TA=Total Assets S.B.Khatri

Cont… NOM=TOR-TOE/TA *where NOM=Net Operating Margin *TOR=Total operating revenue *TOE=Total operating Expense EPS=NI/CESO *where EPS=Earning Per Share *NI=Net Income after Tax *CESO=Common equity share outstanding S.B.Khatri