Bank A (Dollars in Millions) Balance Statement Assets Liabilities and Equity Cas

Question

Bank A (Dollars in Millions) Balance Statement Assets Liabilities and Equity Cash $ 850 Deposits $6,475 Securities $1,925 Other Borrowings $1,645 Loans $5,400 Equity $1,030 Other assets $ 975 Total Assets $ 9,150 Total Liabilities and Equity $ 9,150 Income Statement: Interest on Loans $ 450 Interest on securities $ 95 Interest Expense $ 246 Noninterest Income $ 78 Noninterest Expense $ 112 Provision for loan loss $ 35 Taxes $ 115 Net Income (NI) $115 A) Determine Bank A’s ROA? B) Determine Bank A’s ROE ? C) The bank’s profit margin is ? D) The bank’s utilization is ?

Explanation / Answer

A)

Bank A's ROA = Net Income / Total Assets = $115 / 9150 = 0.012568 or 1.2568%.

B)

Bank A's ROE = Net Income / Share Holder's Equity = $115 / $1030 = 0.11165 or 11.165%.

C) Profit Margin = Net Profit / Revenue = $115 / (450+95) = 0.211 or 21.1%.

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