1. PERFORMANCE ASSESSMENT

2. 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

3. ROE ANALYSIS

4. ROE Analysis ROE = ROA X Equity Multiplier
ROA = Net Profit / Total Assets
Equity Multiplier = Total Assets / Total Equity
ROA = Net Profit Margin x Asset Utilization
Net Profit Margin = Net Profit / Operating Revenue
Asset Utilization = Operating Revenue / Total Assets

5. 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

6. Earnings Spread

7. 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)

8. Sub-Categorization Analysis
Interest
Rate analysis
Composition analysis
Volume analysis
Non-interest
Fees as a percentage of non-interest income
Trading profits as a percentage of non-interest income
Other income as a percentage of non-interest income

9. ROE Analysis Tax Management Efficiency
Net income / Pre-tax net operating income
Expense Control Efficiency
Pre-tax net operating income / Total Operating revenue
Asset Management Efficiency
Total operating revenue / Total assets
Funds Management Efficiency
Total Assets / Total Equity Capital

10. 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 

11. 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 

12. 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 

13. Branch Efficiency Operating Income per Branch
Operating Profit per Branch 
Net Profit per Branch 
Personnel Expenses per Branch 
Administrative Expenses per Branch 
Financial Expenses per Branch 
Borrowings per Branch
Advances per Branch 
Deposits per Branch 

14. Risk Analysis Standard Deviation / Variance Net income ROE ROA
Market return
Beta
Equity beta
Income beta
Operating beta

15. Credit Risk Gross non performing assets / Total loans & leases
Net non performing assets / Total loans & leases
Net non performing assets / Equity

16. 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

17. 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.

18. Liquidity Risk Liquid funds / Total assets
Cash and due from banks / Total assets
Cash and Government securities / Total assets

19. Market Risk Price risk Book value of assets / Market value of assets
Interest Rate risk
Interest sensitive assets / Interest sensitive liabilities

20. Other Risk Operational risk Legal risk Reputation risk Strategic risk
Capital risk
Market price / EPS
Net worth / Total assets
CRAR

21. Capital Adequacy Ratio
Computation of CAR
Tier I capital
Tier II capital
Risk Weighted Assets (RWA)

22. Capital to Risk Weighted Asset Ratio (CAR or CRAR)
Capital Adequacy Ratio: Capital Adequacy Ratio = (Tier I capital + Tier II capital) / Risk Weighted Assets

23. Case Analysis of Bank Performance
Financial Data Analysis Relating to a Public Sector Bank is Presented Here

24. ROE Analysis ROE = Net profit / Equity = 28%
ROE = ROA x Equity Multiplier = 0.42% x 66.83
ROA = Asset utilization x Net Profit = x 4.42%
OM = (OI-OE)/Assets = 8.03%
NIM = (II – IE)/Assets = 1.80%
NNIM = (NII – NIE)/Assets = -0.36%
Earnings spread = 2.45%

25. 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%

26. Return on Equity Analysis
Tax Management Efficiency = 33.50%
Expense control Efficiency = 13.20%
Asset Management Efficiency = 9.52%
Funds Management Efficiency = 66.83

27. Operating Efficiency Operating Income Efficiency = 9.51%
Fee Based Efficiency = 5.96%
Fund Based Efficiency = 93.36%

28. Business Efficiency Demand Deposit of Total Deposits = 7.59%
Saving Deposit of Total Deposits = 16.45%
Time Deposit of Total Deposits  = 75.97%
Deposits within India to Total Deposits = 100%
Deposits Outside India to Total Deposits = 0%

29. Employee Efficiency Business per employee = 751.60
Profit per employee = 2.19
Wages / Total expenses = 5.00
Operating Income per Employee  = 49.58
Operating Profit per Employee = 41.85
Administrative Expenses per Employee  = 2.73
Deposits per Employee  =
Fund Advances per Employee  =

30. Branch Efficiency Operating Income per Branch = 563.78
Operating Profit per Branch  =
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 =

31. Risk Analysis Coefficient of Variation
Interest income / Total assets =
ROE =
ROA =
Net NPA / Net Advances =

32. Credit Risk Gross NPA / TA = 1.95% Net NPA / TA = 0.82%
Net NPA / Equity = 31.31%

33. Liquidity Risk Liquid funds / Assets = 11.85
Cash and due from banks / Assets = 9.19%
Cash and Government securities / Assets = 32.11%

34. Market Risk Interest sensitivity = 95.83%
Capital adequacy ratio = 13.15%