Banks’ Financial Statements : Ratio Analysis

Sl.
Name of the Ratio Formula Remarks
No.

1) Return on Equity = Net Income (PAT) / Higher the better

(ROE) % Average Amount of
Equity^ * 100

2) Return on Assets = Net Income (PAT) / Higher the better

(ROA) % Average Amount of Assets
* 100

3) Net Income (Rs.) = Net Interest Income – Higher the better

Burden – Provision for
Loans/Losses + Gains on
Sale of Securities - Tax

4) Asset Utilisation (AU) = Total Revenue / Average Higher the better

Amount of Assets * 100

5) Net Interest Margin = (Total Interest Income – Higher the better

(NIM) % Total Interest Expenditure)
/ Earning Assets * 100
6) Spread % = (Interest Income / Avg. Higher the better
Earning Assets) – (Interest
Expense / Avg. Interest-
bearing Liabilities) * 100

7) Burden (Rs.) = Non-Interest Expense – Less the better

Non-Interest Income

8) Efficiency Ratio alias = Operating Expense / Less the better

Cost-to-Income Ratio (Interest Income + Other
% Income) * 100

9) Cost-to-Assets Ratio = Operating Cost / Less the better

% Average Assets * 100

10) Yield on Advances % = Interest Income from Higher the better

Loans / Average Amount of
Advances * 100

11) Yield on Investments = Interest Income from Higher the better

% Investments / Average
Amount of Investments *
100
12) Yield on Earning = Interest Income from Higher the better
Assets % Advances & Investments /
Average Amount of Earning
Assets * 100

13) Cost of Funds Already covered! Less the better

(reckoning negative
carry) %

14) Preemption Ratio % = (Cash Reserve Ratio + Less the better

Statutory Liquidity
Reserve) / Net Demand &
Time Liabilities * 100

15) Earnings Base % = Average Amount of Higher the better

Earning Assets / Average
Assets * 100

16) Credit – Deposit Ratio = Total Credit / Total Higher the

(CD Ratio) % Deposits * 100 better^^

17) Investment – Deposit = Total Investments / Higher the

Ratio (ID Ratio) % Total Deposits * 100 better^^
18) Funds Deployment = (Total Credit + Total Higher the
Ratio % Investments) / Total better^^
Deposits * 100

19) CASA Ratio % = (Current Account Higher the

Balances + Savings better^^
Account Balances) / Total
Deposits

20)** Priority Sector Credit = (Total Priority Sector Regulatory

Ratio % Credit / Adjusted Net Bank Requirement
Credit) * 100

21) Gross NPA (%) = Gross NPA / Total Less the better
Advances * 100

22) Net NPA (%) = Net NPA / Net Advances Less the better
* 100

23) Provision Coverage = Available Provision / Higher the better

Ratio (PCR) % Gross NPA * 100
24) Credit Cost % = Provision for Loan Cannot generalise
Losses / Average Loan
Amount * 100

25) Slippage/Slippage = (Fresh Accretion of NPAs Less the better

Ratio % during the year / Total
Standard Assets at the
beginning of the year) *
100

26)** Capital-to-Risk- = Total Capital Funds (Tier Higher the better

Weighted Assets Ratio I & Tier II) / Total Risk (Regulatory
(CRAR) alias Capital Weighted Assets * 100 Requirement)
Adequacy Ratio (CAR)
%

27) Equity Multiplier (EM) = Average Assets / Cannot generalise

% Average Equity

28)** Liquidity Coverage = Stock of High Quality Regulatory

Ratio (LCR) % Liquid Asset (HQLA) / Net Requirement;
Cash Outflow for the next Needs to be more
30 Calendar Days * 100 than 100%
29)** Net Stable Funding = Available Stable Funding Regulatory
Ratio (NSFR) % (ASF) / Required Stable Requirement;
Funding (RSF) * 100 Needs to be more
than 100%

30)** Temporary Investment = (Reverse Repo with RBI A measure of

Ratio % + Amount Due from Banks liquidity
in less than one year +
Investment in Securities of
Maturity of less than 1
year) / Total Investments

31)** Volatile Liability = (Total Volatile Liabilities Less the better

Dependency Ratio % - Temporary Investments)
/ Net Credit * 100

One requires a lot of internal data to compute the ratios given under those Sl.
Nos. that carry the ‘**’ mark.
Some of the ratios would be available as ready figures in the bank balance
sheets. You need to ignore the same and arrive at the figures using step by step
computation.