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1、1/69Copyright 2004 by He Ziyun 商业银行世界商业银行世界（Http:/）http:/ 商业银行经营评价商业银行经营评价2/69http:/ 商业银行经营评价商业银行经营评价nBalance SheetnIncome StatementnRelationship between Balance Sheet and Income StatementnReturn on Equity Modeln股份制商业银行风险评级体系股份制商业银行风险评级体系(04年年2月月22日日)nPerformance Characteristics of Different-sized B
2、anks3/69http:/ SheetnIt is a statement of financial position listing assets owned,liabilities owed,and owners equity as of a specific date.nAssets=Liabilities+Equity.nBalance sheet figures are calculated at a particular point in time and thus represent stock values.4/69http:/ Big Four Banks(12/31/20
3、02)v.s.All US Banks(12/31/2002)Asset(%)Liabilities(%)CNUSCNUSLoans60.261.4Deposits81.465.8Investments6.623.1Borrowings14.927.2Cash24.8 9.1Other8.4 7.4Capital3.87.1Total100100Total1001005/69http:/ Bank(12/31/2000,TA:63 bn)v.s.Community National Bank(12/31/00,TA:0.1bn)Asset(%)Liabilities(%)PNCCNBPNCCN
4、BLoans78.064.9Deposits72.891.7Investments8.725.6Borrowings18.91.0Cash5.65.7Other7.73.9Capital8.37.3Total100100Total1001006/69http:/ Assets:LoansnLoans are the major asset in most banks portfolios and generate the greatest amount of income before expenses and taxes.nThey also exhibit the highest defa
5、ult risk and are relatively illiquid.7/69http:/ estate loansnCommercial loansnLoans to individualsnAgricultural loansnOther loans in domestic officesnLoans and leases in foreign officesnThree adjustmentsnLeases;Unearned income;Loss allowance8/69http:/ and CNB:Loan portfolio(2000)PNCCNBReal estate37.
6、037.0Commercial28.819.4Individuals5.64.3Agricultural0.00Domestic other7.34.7International0.50Unearned income-0.20Loss allowance-1.0-0.5Total78.064.99/69http:/ Assets:Investment securities nInvestment securities are held to nearn interest,nhelp meet liquidity needs nspeculate on interest rate movemen
7、tsnserve as part of a banks dealer functions.nThe administration and transaction costs are extremely low.10/69http:/ Assets:Investment securitiesnShort-term investmentsnInterest-bearing bank balances(deposits due from other banks)nfederal funds soldnsecurities purchased under agreement to resell(RPs
8、)nTreasury bills nmunicipal tax warrantsnLong-term investment:notes and bonds nTreasury securitiesnObligations of federal agenciesnMortgage-backed,foreign,and corporate11/69http:/ Assets:Noninterest cash and due from banksnIt consists of nvault cash,ndeposits held at Federal Reserve Banksndeposits h
9、eld at other financial institutionsncash items in the process of collectionnThese assets are held tonmeet customer withdrawal needs nmeet legal reserve requirementsnassist in check clearing and wire transfers neffect the purchase and sale of Treasury securities12/69http:/ Assets:Other assets nOther
10、assets are residual assets of relatively small magnitudes such asnbankers acceptances npremises and equipmentnother real estate owned and other smaller amounts13/69http:/ LiabilitiesnThe characteristics of various debt instruments differ in terms of ncheck-writing capabilities ninterest paidnmaturit
11、ynwhether they carry FDIC insurancenwhether they can be traded in the secondary market.14/69http:/ liabilities:DepositsnDemand deposits ntransactions accounts that pay no interestnNegotiable orders of withdrawal(NOWs)and automatic transfers from savings(ATS)accounts npay interest set by each bank wi
12、thout federal restrictionsnMoney market deposit accounts(MMDAs)npay market rates,but a customer is limited to no more than six checks or automatic transfers each month15/69http:/ liabilities:DepositsnTwo general time deposits categories exist:nTime deposits in excess of$100,000,labeled jumbo certifi
13、cates of deposit(CDs).nSmall CDs,considered core deposits which tend to be stable deposits that are typically not withdrawn over short periods of time.nDeposits held in foreign offices nbalances issued by a bank subsidiary located outside the U.S.16/69http:/ dopositsnCore deposits are stable deposit
14、s that are not highly interest rate-sensitive.nCore deposits are more sensitive to the fees charged,services rendered,and location of the bank.nCore deposits include:demand deposits,NOW accounts,MMDAs,and small time deposits.17/69http:/ funds)nLarge,or volatile,borrowings are liabilities that are hi
15、ghly rate-sensitive.nNormally issued in uninsured denominations.nTheir ability to borrow is sensitive to the markets perception of their asset quality.nVolatile liabilities or net non-core liabilities include:nlarge CDs(over 100,000)ndeposits in foreign officesnfederal funds purchased nrepurchase ag
16、reementsnother borrowings with maturities less than one year18/69http:/ notes and debenturesnNotes and bonds with maturities in excess of one year.nLong-term uninsured debt.nMost meet requirements as bank capital for regulatory purposes.nUnlike deposits,the debt is not federally insured and claims o
17、f bondholders are subordinated to claims of depositors.19/69http:/ equitynOwnership interest in the bank.nCommon and preferred stock are listed at par nSurplus account represents the amount of proceeds received by the bank in excess of par when it issued the stock.20/69http:/ StatementnIt is a finan
18、cial statement showing a summary of a firms financial operations for a specific period,including net profit or loss for the period in question.nA banks income statement reflects the financial nature of banking,as interest on loans and investments comprises the bulk of revenue.nNet interest income ma
19、de up approximately 77 percent of net revenue at a bank in 1981,but only about 58 percent of total net revenue at the end of 2001.21/69http:/ Income statement+Interest income(II)-Interest expense(IE)=Net interest Income(NII)+Noninterest income(OI)-Noninterest expense(OE)-Loan-loss provisions(PLL)=Op
20、erating income before securities transactions and taxes+(-)Realized gains or losses=Pretax net operating income-Taxes=Net income=burden22/69http:/ incomenthe sum of interest and fees earned on all of a banks assets.nInterest income includes interest from:nLoansnDeposits held at other institutions nM
21、unicipal and taxable securitiesnInvestment and trading account securities23/69http:/ expensen.the sum of interest paid on all interest-bearing liabilities.nIt includes interest paid tontransactions accounts(NOW,ATS,and MMDA)ntime and savings depositsnshort-term non-core liabilitiesnlong-term debtnIn
22、terest income less interest expense is net interest income(NII)24/69http:/ incomenTrust or fiduciary incomenreflects what a bank earns from operating a trust departmentnFees and deposit service charges nreflect charges on checking account activity,safe-deposit boxes,and many other transactions.nTrad
23、ing revenues nreflect commissions and profits or gains from operating a trading accountnOther foreign transactionsnOther noninterest income25/69http:/ expensenPersonnel expense:nSalaries and fringe benefits paid to bank employeesnOccupancy expense:nRent and depreciation on equipment and premisesnOth
24、er operating expenses:nUtilities and nDeposit insurance premiums26/69http:/ provisions(PLL)nRepresent managements estimate of potential lost revenue from bad loans.nIt is subtracted from net interest income in recognition that some of the reported interest income overstates what will actually be rec
25、eived when some of the loans go into default.nCharge-offs indicate loans that a bank formally recognizes as uncollectable and charges-off against the loss reserve.27/69http:/ provisions(PLL)The reserves maximum size is determined by tax.Provisions for loan losses Reserve for Loan LossesRecoveriesCha
26、rge offsTax Law28/69http:/ statement:PNC&CNB,2000+Interest income(II)72%&92%-Interest expense(IE)38%&27%=Net interest Income(NII)+Noninterest income(OI)27%&8%-Noninterest expense(OE)35%&46%-Loan-loss provisions(PLL)2.1%&1.7%=Operating income before securities transactions and taxes+(-)Realized gains
27、 or losses 0.3%&0%=Pretax net operating income-Taxes8.5%&8.6%=Net income16.3%&16.0%29/69http:/ securities gains(or losses)nThey arise when a bank sells securities from its investment portfolio at prices above(or below)the initial or amortized cost to the bank.nGenerally,securities change in value as
28、 interest rates change,but the gains or losses are unrealized(meaning that the bank has not sold the securities to capture the change in value).30/69http:/ between balance sheet and income statementnThe composition of assets and liabilities and the relationships between different interest rates dete
29、rmine net interest income.nThe mix of deposits between consumer and commercial customers affects the services provided and thus the magnitude of noninterest income and noninterest expense.nThe ownership of nonbank subsidiaries increases fee income but often raises noninterest expense.31/69http:/ bet
30、ween balance sheet and income statementnExpenses and loan losses directly effect the balance sheet.nThe greater the size of loan portfolio,the greater is operating overhead and PLL.nConsumer loans are usually smaller and hence more expensive(non-interest)per dollar of loans.32/69http:/ on equity(ROE
31、=NI/TE)the basic measure of stockholders returnsnROE is composed of two parts:nReturn on Assets(ROA=NI/TA)nrepresents the returns to the assets the bank has invested in.nEquity Multiplier(EM=TA/TE)nthe degree of financial leverage employed by the bank.33/69http:/ on assets(ROA=NI/TA)can be decompose
32、d into two parts:Asset utilization(AU)income generation Expense ratio(ER)expense controlnROA=AU ER=(TR/TA)(TE/TA)nTR=total revenue or total operating income=Int.inc.+non-int.inc.+SG(L)nTE=total expenses=Int.exp.+non-int.exp.+PLL+TaxesINCOMEReturn to the BankROA=NI/TAEXPENSESRateComposition(mix)Volum
33、eInterestOverheadProv.for LLTaxesFees and Serv ChargeTrustOtherRateComposition(mix)VolumeInterestNon InterestSalaries and BenefitsOccupancyOtherBank Performance ModelReturns to ShareholdersROE=NI/TEDegree of LeverageEM=1/(TA/TE)35/69http:/ utilization(AU=TR/TA):the ability to generate income.nIntere
34、st Income/TAnAsset yields(rate)nInterest income asset(i)/$amount of asset(i)nComposition of assets(mix)n$amount asset(i)/TAnVolume of Earning AssetsnEarning assets/TAnNon interest income/TAnFees and Service ChargesnSecurities Gains(Losses)nOther income36/69http:/ ratio(ER=Exp/TA)the ability to contr
35、ol expenses.nInterest expense/TAnCost per liability(rate)nInt.exp.liab.(j)/$amt.liab.(j)nComposition of liabilitiesn$amt.of liab.(j)/TAnVolume of debt and equitynNon-interest expenses/TAnSalaries and employee benefits/TAnOccupancy expenses/TAnOther operating expense/TAnProvisions for loan losses/TAn
36、Taxes/TA37/69http:/ aggregate profitability measuresnNet interest marginnNIM=NII/earning assets(EA)nSpreadnSpread=(int inc/EA)-(int exp/int bear.Liab.)nEarnings basenEB=EA/TAnBurden/TAn(Noninterest exp.-Noninterest income)/TAnEfficiency rationNon int.Exp./(Net int.Inc.+Non int.Inc.)38/69http:/ ratio
37、sPNC,2000ROE:Net Income/Average Total equity18.9%ROA:Net Income/Avg TA 1.5%AU:Total Revenue/Avg TA 9.2%ER:Total expenses(less Taxes)/Avg TA 7.0%Memo:PM:Net Income/Total Revenue16.2%EM:Avg.TA/Avg,Total Equity12.6xEB:Earning Assets/Avg TA87.0%NIM:Net interest margin 3.6%Spread 3.1%Efficiency Ratio57.2
38、%Burden/Avg.Total Assets 0.7%Non Interest Income/Noninterest exp.78.3%39/69http:/ the ability to maintain capital commensurate with the nature and extent of all types of risk and the ability of management to identify,measure,monitor,and control these risks.41/69http:/ the amount of existing credit r
39、isk associated with the loan and investment portfolio as well as off balance sheet activities.43/69http:/ the adequacy of the board of directors and senior management systems and procedures to identify,measure,monitor,and control risks.46/69http:/ not only the quantity and trend in earnings,but also
40、 the factors that may affect the sustainability or quality of earnings.48/69http:/ the adequacy of the banks current and prospective sources of liquidity and funds management practices50/69http:/ the degree to which changes in interest rates,foreign exchange rates,commodity prices,and equity prices
41、can adversely affect earnings.52/69http:/ Characteristics of Different-sized Banks:Trend with Size54/69http:/ capital ratio55/69http:/ capital(leverage)ratio56/69http:/ 1 risk-based capital ratio57/69http:/ risk-based capital ratio58/69http:/ interest margin59/69http:/ on earning assets60/69http:/ of funding earning assets61/69http:/ assets to total assets62/69http:/ ratio63/69http:/ income to earning assets64/69http:/ expense to earning assets65/69http:/ loss provision to assets66/69http:/ Banks:ROA(2002)67/69http:/ Banks:ROE(2002)68/69http:/ Banks:ROA(2002)69/69http:/ Banks:ROE(2002)