Professional Documents
Culture Documents
This ratio indicated how much of the total portfolio has been provided for but not charged off. It is a reserve for losses expressed as percentage of total loans. Given a similar chargeoff policy the higher the ratio the poorer the quality of the loan portfolio will be.
This is the relationship between provisions in the profit and loss account and the interest income over the same period. Ideally this ratio should be as low as possible and in a well run bank if the lending book is higher risk this should be reflected by higher interest margins. If the ratio deteriorates this means that risk is not being properly remunerated by margins.
As Equity is a cushion against asset malfunction, this ratio measures the amount of protection afforded to the bank by the Equity they invested in it. The higher this figure the more protection there is.
Equity / Investments
( Total Shareholders' Equity / Total Investments ) * 100
Similarly this ratio measures the Equity cushion available to absorb losses on the loan book.
Equity / Liabilities
( Total Shareholders' Equity / Total Liabilities ) * 100
This leverage ratio is simply another way of looking at the Equity funding of the balance sheet and is another of looking at capital adequacy.
This ratio is the net income expressed as a percentage of earning assets. The higher this figure the cheaper the funding or the higher the margin the bank is commanding. Higher margins and profitability are desirable as long as the asset quality is being maintained.
This ratio indicates fixed income opportunities. The higher is the ratio, the higher is the stability of the Bank.
This is perhaps the most important single ratio in comparing the efficiency and operational performance of banks as it looks at the returns generated from the assets financed by the bank.
The return on equity is a measure of the return on shareholder funds. Obviously here the higher the figure the better but one should be careful in putting too much weight on this ratio as it may be at the expense of an over leveraged balance sheet.
Dividend Pay-Out
( Profit/Dividends Payable / Total Distributable Profit ) * 100
This is a measure of the amount of post tax profits paid out to shareholders. In general the higher the ratio the better but not if it is at the cost of restricting reinvestment in the bank and its ability to grow its business.
This ratio is a measure of before tax profits adding back provisions for bad debts as a percentage of Total Assets. Effectively this is a return on assets performance measurement without deducting provisions.
This ratio gives total earnings which will be distributed among the shareholders.
Interbank Ratio
( Balances with Banks and other Institutions / Due to Banks and other Financial Institutions ) * 100
This is money lent to other banks divided by money borrowed from other banks. If this ratio is greater than 100 then it indicates the bank is net placer rather than a borrower of funds in the market place, and therefore more liquid.
This liquidity ratio indicates what percentage of the assets of the bank are tied up in loans. The higher this ratio the less liquid the bank will be.
This loans to deposit ratio is a measure of liquidity in as much as high figures denotes lower liquidity.
This is a deposit run off ratio and looks at what percentage of customer and short term funds could be met if they were withdrawn suddenly, the higher this percentage the more liquid the bank is and less vulnerable to a classic run on the bank.
Deployment Ratio
( Total Investments ) / ( Customers' Funds + Total Shareholders' Equity ) * 100
This ratio reflects how best the Bank is making use of its financial resources for earning income.
This is one of the most focused on ratios currently and measures the overheads or costs of running the bank, the major element of which is normally salaries, as percentage of income generated before provisions. It is a measure of efficiency although if the lending margins in a particular country are very high then the ratio will improve as a result. It can be distorted by high net income from associates or volatile trading income.
Cash in vaults
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Cash equivalents
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Qard hasan
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Mudarabah
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Musharakah
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Salam
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Istisna
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Other
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Investment in Bonds-Bills-Securities
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Other
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Less provisions
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Investment Portfolio
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Total Investments
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Total Assets
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Letters of credit
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Letters of guarantee
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Bank acceptances
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Other
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Other
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Customers' Funds
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Total Liabilities
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Share CAPITAL
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Minority interests
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Total Income
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Staff costs
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Depreciation
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Provisions
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Extraordinary adjustments
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