Analyzing Bank Performance
Analyzing bank performance
Main objective of main performance analysis
1 Due to the inherent rick-reward trade-off in banking and finance, there is a close link between risk taking and profitability. Similar to many other business. The objective profit-maximizing bank will be to add value to the bank equity by maximizing risk-adjusted return to SHs. Risk taking is a double-edged sword. However, for banks, profitability and SH value add will depend on the efficiencies of risk management processes in optimizing the risk-reward trade-off. Risk taking is intended to generate higher expected earning, but it can also translate into actual loss.
2. the main objective of bank performance analysis is to evaluate progress towards meeting the foals and objectives set out by management and to compare a bank’s performance relative to other banks. Generally, bank performance evaluation involves the analysis of financial statement (bank’s balance sheet and profit and loss amount) and accounting ratios that identify key components of performance. In accessing bank performance, it’s important to distinguish between bank policy decisions which affect performance and external factors which are beyond the control of bank management. The analysis of performance aims to point out the strength and weakness in other for management to take appropriate action.
Regulation ratings
3. Regulations on several counties rate bank’s performance according to general categories of performance under the label of CAMELS. This refers to the following.
First. Capital adequacy. This relates to the bank’s ability to maintain adequate capital. To obtain adequate capital. Means to matte the bassel committee of capital requirement, which requires at least 8% of total risk-based capital ratio in based I accrual. Secondly, assets quality ,refers to the amount of existing credit risk associated with the loan and investment portfolio and off-balance sheet activities.
Thirdly, management quality
Main objective of main performance analysis
1 Due to the inherent rick-reward trade-off in banking and finance, there is a close link between risk taking and profitability. Similar to many other business. The objective profit-maximizing bank will be to add value to the bank equity by maximizing risk-adjusted return to SHs. Risk taking is a double-edged sword. However, for banks, profitability and SH value add will depend on the efficiencies of risk management processes in optimizing the risk-reward trade-off. Risk taking is intended to generate higher expected earning, but it can also translate into actual loss.
2. the main objective of bank performance analysis is to evaluate progress towards meeting the foals and objectives set out by management and to compare a bank’s performance relative to other banks. Generally, bank performance evaluation involves the analysis of financial statement (bank’s balance sheet and profit and loss amount) and accounting ratios that identify key components of performance. In accessing bank performance, it’s important to distinguish between bank policy decisions which affect performance and external factors which are beyond the control of bank management. The analysis of performance aims to point out the strength and weakness in other for management to take appropriate action.
Regulation ratings
3. Regulations on several counties rate bank’s performance according to general categories of performance under the label of CAMELS. This refers to the following.
First. Capital adequacy. This relates to the bank’s ability to maintain adequate capital. To obtain adequate capital. Means to matte the bassel committee of capital requirement, which requires at least 8% of total risk-based capital ratio in based I accrual. Secondly, assets quality ,refers to the amount of existing credit risk associated with the loan and investment portfolio and off-balance sheet activities.
Thirdly, management quality