Financial Ratios

Question 1

LDR

Answer 1

Calculation:
* Loans/Deposits

Measure of:
* Stability of funding

Comments/Range:
* Lower = less reliance on wholesale

Question 2

NII to I

Answer 2

Calculation:
* NII/Total income

Measure of:
* Stability of income

Comments/Range
* High = more stable than trading I

Question 3

NIACC

Answer 3

Calculation:
* NII – Cost of Capital

Measure of:
* Profitability

Comments/Range:
* Economic profit
* Compare across products

Question 4

NIM

Answer 4

Calculation:
* NII/Avg Advances

Measure of:
* Efficiency of lender’s inv (not comparable between banks – nature of b/s)

Comments/Range:
* Risk vs return, int rates, Lending & deposits profitability in totality (but can’t isolate)

Question 5

NIR/A

Answer 5

Calculation:
* NIR/Advances

Measure of:
* Additional value from fees

Comments/Range:
* Compare across products

Question 6

CTI

Answer 6

Calculation:
* Cost/income

Measure of:
* Efficiency – relative cost req to generate revenue

Comments/Range:
* Business mix; identify costly areas & operational efficiencies; Compare across products

Question 7

St3 %

Answer 7

Calculation:
* St2 or St3 / Total Advances

Measure of:
* Quality of loan portfolio

Comments/Range:
* Key metric CRM; keep as low as possible
* Compare across products

Question 8

EPS

Answer 8

Measure of:
* Growth

Comments/Range:
* NB for investers

Question 9

CET %

Answer 9

Calculation:
* CET1/RWA

Measure of:
* Capital strength

Comments/Range:
* Difficult to compare across banks

Question 10

TCR

Answer 10

Total capital/ RWA

Question 11

LCR

Answer 11

Calculatoin:
* HQLA/net cash outflows (30days)

Measure of:
* Liquidity strength (BIII)

Comments/Range:
* > 100% (BIII); Survive st liquidity shock

Question 12

NSFR

Answer 12

Calculatoin:
* ASF/RSF

Measure of:
* Funding stability (BIII)

Comments/Range:
* > 100% (BIII); Target lt stable funding

Question 13

Levg %

Answer 13

Calculation:
* Capital/Total Assets

Mesure of:
* Leverage ratio (BIII)

Comments/Range:
* > 3% (4% RSA); Prevent excessive leverage

Question 14

ROE

Answer 14

Calculation:
* Retained earnings/CET1

Measure of:
* Return on book capital

Commentary/Range:
* ≠ equity capital (market value)

Question 15

ROA

Answer 15

Calculation:
* Profits or Ret earn/total avg A

Measure of:
* Effective return on investment

Commentary/Range:
* Compare across products - % contribution to profits relative to risk