BK3 - Topics in Commercial Bank Management Lecture THREE...

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MANA130107 Bank Management 1 Lecture THREE Bank Risks and Assets-Liability Management (chap 6-7 ) Topics in Commercial Bank Management MANA130107 Bank Management 2 Bank Risks & Assets-Liability Management Topics covered in this lecture Breakdown financial ratios Measuring bank risks Interest-Sensitive Gap Management MANA130107 Bank Management 3 Equity Multiplier (EM) Leverage or financing policies (risk and return trade-off) Net Profit Margin (NPM) Effectiveness of expense management Asset Utilization (AU) Portfolio management policies ( mix and yield on assets) Breaking Down ROE Net Profit Margin = Net Income/Total Operating Revenue Asset Utilization = Total Operating Revenue/Total Assets ROA = Net Income/Total Assets Equity Multiplier = Total Assets/Equity Capital ROE = Net Income/ Total Equity Capital x x ROE Depends On: Where to look to when there is a decline in ROE
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