Ratios

Question 1

What is return on equity

Answer 1

ROE = net income / shareholder equity

How much income is returned to shareholders

10% or greater is good

Question 2

Return on assets

Answer 2

ROA = Net income / total assets

How much income is produced from the assets the bank controls.

1% or greater is good

Question 3

What produces an increase in ROA?

Answer 3

Strong interest earnings from assets and strong non-interest income

Question 4

What does it mean if a bank is asset sensitive?

Answer 4

The assets it owns (loans) will re-price more quickly quickly than its liabilities. This is good in a rising Ray environment and less desirable in a declining right environment.

Question 5

What does it mean if a bank is liability sensitive?

Answer 5

It’s deposits will reprice more quickly than it’s assets. This is good in a declining rate environment.

Question 6

What is the average account balance a good indicator of?

Answer 6

The average account balance is a good indicator of the efficiency of marketing and whether the bank is tapping into the premium segment of its marketplace.

Question 7

If a banks average deposit account balance is below the marketplace average what does this indicate?

Answer 7

The bank is not leveraging account relationships effectively and perhaps is targeting the wrong group with its acquisition marketing.

Question 8

Five ways to improve profits

Answer 8

1. Increase interest income
2. Reduce interest expense
3. Reduce risk
4. Increase fees
5. Reduce operating expenses

Question 9

Two types of reporting to leader ship that marketing shit engage in.

Answer 9

1. Strategic - creates connection to banks strategic plan. Show KPIs
2. Campaign - shows ROI.