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aspx Islamic Banks and Financial Institutions Information

Basic Financial Definitions


Investement Risk Reserves / Total Investement
( ( Provisions for Cash and its Equivalents + Provisions for Islamic Modes of Finance ) / Total Investments ) * 100

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.

Investment Risk Provisions / Revenues from Financing and Investment Activities


( ( Provisions for Cash and its Equivalents + Provisions for Islamic Modes of Finance ) / Income from Financing and Investments Activities ) * 100

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.

Equity / Total Assets


( Total Share Holders' Equity / Total Assets ) * 100

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.

Net Revenue Margin


( Income from Financing and Investments Activities / Total Investments ) * 100

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.

Earning Power ( Assets Turnover )


( Total Income / Total Assets ) * 100

This ratio measures costs and tax as a percentage of assets.

Fee Income / Assets


( Fees and Commissions for Banking Services / Total Assets ) * 100

This ratio indicates fixed income opportunities. The higher is the ratio, the higher is the stability of the Bank.

Return on Assets (ROA)


( Profit before Taxes and Zakah / Total Assets ) * 100

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.

Return on Equity (ROE)


( Profit before Taxes and Zakah / Total Shareholders' Equity ) * 100

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.

Recurring Earning Power


( ( Provisions + Profit before Taxes and Zakah ) / Total Assets ) * 100

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.

Earning Per Share


( Total Distributable Profit / Average Number of Shares ) * 100

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.

Total Investments / Total Assets


( Total Investments / Total Assets ) * 100

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.

Total Investments / Customer and Short Term Fund


( Total Investments / ( Customers' Funds + Due to Banks and other Financial Institutions ) ) * 100

This loans to deposit ratio is a measure of liquidity in as much as high figures denotes lower liquidity.

Liquid Assets Ratio


( ( Cash and Its Equivalents + Investments in Bonds, Bills, and Securities ) / Total Assets ) * 100

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.

Liquidity Cushion Ratio


( ( Cash and it's Equivalents + Investments and Bonds, Bills, and Securities ) / (Customers' Funds + Due to Other Creditors ) ) * 100

This ratio provides an indication of liquidity of the institution.

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.

Cost to Income Ratio


( Total Expenses & Provisions / Total Income ) * 100

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

N/A

Cash with central bank

N/A

Balances with Banks and Other Institutions

N/A

Cash equivalents

N/A

Cash and Its Equivalents

N/A

Qard hasan

N/A

Murabaha & deferred sales

N/A

Leasing & hire purchase

N/A

Mudarabah

N/A

Musharakah

N/A

Salam

N/A

Istisna

N/A

Other

N/A

Islamic Modes of Finance: Less Provisions

N/A

Islamic Modes of Finance

N/A

Investments in companies, funds, shares

N/A

Investment in Bonds-Bills-Securities

N/A

Investments in properties and real estate

N/A

Other

N/A

Less provisions

N/A

Investment Portfolio

N/A

Prepaid expenses & other receivables

N/A

Total Investments

N/A

Fixed assets net of depreciation

N/A

Other assets ( NES )

N/A

Total Assets

N/A

Letters of credit

N/A

Letters of guarantee

N/A

Bank acceptances

N/A

Other

N/A

Total Contra Accounts

N/A

Funds managed on fee basis

N/A

Total Off Balance Sheet Items

N/A

Current & savings accounts not sharing in profit

N/A

Mudarabah investment accounts

N/A

Mudarabah saving accounts

N/A

Other

N/A

Customers' Funds

N/A

Due to Banks and Other Financial Institutions

N/A

Due to subsidiaries, holdings or associated companies

N/A

Margins, LCs and accounts payable

N/A

Due to employees, contractors & suppliers

N/A

Due to Other Creditors

N/A

Profit / Dividend Payable

N/A

Provision for taxes & zakah

N/A

Other liabilities ( NES )

N/A

Total Liabilities

N/A

Share CAPITAL

N/A

Reserves ( statutory, legal, general, etc. )

N/A

Margins, LCs and accounts payable

N/A

Total Shareholders' Equity

N/A

Minority interests

N/A

Total Liabilities / Minority Interest & Owner Equity

N/A

Income from Financing and Investment Activities

N/A

Paid to depositors ( Investments accounts )

N/A

Net Operating Income

N/A

Fee for funds managed on fee basis

N/A

Fees and Commissions for Banking Services

N/A

Net income from foreign exchange dealings

N/A

Profit from subsidiary and associated companies

N/A

All other income ( NES )

N/A

Total Non Operating Income

N/A

Total Income

N/A

Staff costs

N/A

General & administrative expenses

N/A

Depreciation

N/A

Directors, committees, auditors & legal expenses

N/A

All other expenses ( NES )

N/A

Total Operating Expenses

N/A

Provisions

N/A

Total Expenses and Provisions

N/A

Profit Before Taxes and Zakah

N/A

Taxes & levies

N/A

Zakah & charitable contributions

N/A

Profit After Taxes and Zakah

N/A

Paid to minority interests

N/A

Net Profit of the Year

N/A

Extraordinary adjustments

N/A

Total Distributable Profit

N/A

Average Number of Shares

N/A

Earnings per share

N/A

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