Banking Performance Measures

Overview

There are number of different ratios and other calculations that are used to assess bank performance. Some measures can be calculated from the banks financial statements, and these calculations are used by traders and bank managers looking to pleae the markets. Other measures can only be calculated using information not available to the public and are used to assess a banks health by its executives.

Bank Performance

• Return on Equity: is a measure of a banks return on the shareholder equity. There are variations of return on equity such as return on tangible equity that are designed to overcome ROE's limiations.
• Return on Capital:

Asset Performance

• Net Interest Income: interest income minus interest expense
• Net Interest Margin: interest income minus interest expense divided by average assets.
• Cost to Income: operating expenses / operating revenue
• Economic Value Added: return on invested funds - weighted average cost of capital ^invested capital -weighted average cost fo debt * net debt

Risk Adjusted Performance (RAP)

Risk Ajusted Performance (RAP) Consistent with risk adjusted performance used in other areas of finance, banks also will try risk adjust their performance measures in order to make apples to apples comparisons.