How do you analyze bank financial statements?

How to analyse banks

1. Capital adequacy ratio (CAR) It is the measure of a bank’s available capital divided by the loans (assessed in terms of their risk) given by the bank.
2. Gross and net non-performing assets.
3. Provision coverage ratio.
4. Return on assets.
5. CASA ratio.
6. Net interest margin.
7. Cost to income.

How do you analyze a bank balance sheet?

The three crucial elements in all financial analyses include:

1. Liquidity: ability to meet the obligations of liquid funds.
2. Solvency: credit quality and adequacy of the bank’s own resources (indebtedness).
3. Profitability: ability to generate income/profit from allocated capital.

What is bank financial statements?

Banks prepare two sets of financial statements (includes Balance Sheet and Profit and Loss Account), one containing the performance of the Bank through its Banking operations, both domestic and international and the other called consolidated Financial Statements containing the performance of the Bank of its Banking …

How do you analyze bank results?

Here are five indicators you need to look for while analysing bank results:

1. Net Interest Income. When banks lend, they charge an interest fee.
2. Net Interest Margin. Sometimes, it is important to go beyond simple numbers to understand performance.
3. Non-Performing Assets.
4. Provisioning.
5. Loan Growth.

Why do bankers Analyse financial statements?

Financial statement analysis is used by a banker to determine a borrower’s capability to repay a loan. A banker will typically review a borrower’s current financial statements and compare them to previous financial statements to see which areas of the business have changed and by how much.

What are the 4 techniques that can be used to evaluate financial statements?

Horizontal analysis, vertical analysis, ratio, Cost Volume Profit Analysis and trend analysis are the five most often used techniques of financial statement analysis.

What are KPIs in banking?

Key Performance Indicators in banking operations can be defined as quantitative values used to determine how efficiently and effectively specific banking operational goals and objectives are achieved by the bank over a certain period of time. Think of them as the speedometer inside your dashboard for your bank.

How do you analyze financial performance?

There are generally six steps to developing an effective analysis of financial statements.

1. Identify the industry economic characteristics.
2. Identify company strategies.
3. Assess the quality of the firm’s financial statements.
4. Analyze current profitability and risk.
5. Prepare forecasted financial statements.
6. Value the firm.

How do banks evaluate financial performance?

Bank managers and bank analysts generally evaluate overall bank profitability in terms of return on equity (ROE) and return on assets (ROA). When a bank consistently reports a higher than average ROE and ROA, it is designated a high performance bank.