1 / 10

Profitability of A Bank

Profitability of A Bank. Introduction. In the highly competitive financial market, it is imperative that banks analyze each line of business in order to maximize profits. In this presentation, a brief overview of three areas of concentration will be given. LEVERAGE AND RISK. BALANCE SHEET

louisjames
Download Presentation

Profitability of A Bank

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Profitability of A Bank

  2. Introduction • In the highly competitive financial market, it is imperative that banks analyze each line of business in order to maximize profits. • In this presentation, a brief overview of three areas of concentration will be given.

  3. LEVERAGE AND RISK • BALANCE SHEET • For customers, the bank sends out a monthly statement showing all activity on each customer’s accounts. • A financial institution also has a monthly statement, the balance sheet, that is reviewed by all parties involved.

  4. BALANCE SHEET EXAMPLES

  5. Figure 3: Average Balance and Interest Rates

  6. CREDIT RISK • Simply defined as the potential that a borrower will fail to meet its obligations. • To absorb losses like this, a bank will keep an “allowance” for loan and lease losses. • These losses are written off and are replenished through the “provisions” set aside.

  7. Credit Risk Balance Sheet Example

  8. INTEREST RATE RISK • Interest earned from loans • greater than • interest paid on deposits • The total of this equation is a major factor of profitability.

  9. Market • The economic market will change. • With each change, the financial institutions must adjust in order to remain profitable. • Keeping up-to-date records of assets and liabilities is a day to day process.

More Related