Management of Financial Institution Math Question Solve, June-2014
Posted by Ripon Abu Hasnat on Wednesday, November 11, 2015 | 0 comments
6. (A) Given the following information for bank XYZ Ltd.
Particulars | (In million) Tk. |
Interest income Interest Expense Total Assets Securities gain (loss) Earning Assets Total liabilities Taxes Number of common shares Non-interest income Non-interest expanse Provision for loan loss | 2250 1452 18918 25 15145 18528 20 145000 600 820 455 |
You are required to calculate: ROE, ROA, NIM, EPS, Net Non-interest Margin and Net Operating Margin
SOLUITION:
Income & Expenditure | Tk. in Million | Tk. in Million | |
Income: Interest Income Securities gain (loss) Non-interest income Expenses: Interest expenses Tax Non-interest expense Profit before tax (2875-2292) (-) Provision for loan loss Net profit | 2250 25 600 | 2875 2292 | |
1452 20 820 | |||
583 455 | |||
128 |
We know,
Total Equity = Total Assets – Total Liabilities
= 18918 – 18528
= 390
Calculation of Return on Equity (ROE)
We know,
Return on Equity (ROE) = Net Income/Total Equity [Net Income=Net Profit]
= 128/390
= .32821
Calculation of Return on Assets (ROA)
We know,
Return on Assets (ROA) = Net Income/Total Assets
= 128/18918
= 0.00677
Calculation of Net Interest Margin (NIM)
We know,
Net Interest Margin (NIM) = (Interest Income-Interest Expenses)/Total Assets of Earning Assets
= (2250-1452)/18918 [Considers Total Assets]
= 798/18918
= 0.04218
Or,
Net Interest Margin (NIM) = (Interest Income-Interest Expenses)/Total Assets of Earning Assets
= (2250-1452)/15145 [Considers Earning Assets]
= 798/15145
= 0.0529
Calculation of Earnings per Share (EPS)
We know,
Earnings per Share (EPS) = Net Profit/Number of Shares
= 128000000/145000 [As 1 million = 1000000]
= 882.75862
Calculation of Net Non-interest Margin
We know,
Net Non-interest Margin = Non-interest income–Non-interest expenses–Provision for loan loss/Total Assets or Earning Assets
= (600-820-455)/18918 [Considers Total Assets]
= - 675/18918
= - 0.035680
Or,
Net Non-interest Margin = Non-interest income–Non-interest expenses–Provision for loan loss/Total Assets or Earning Assets
= (600-820-455)/14145 [Considers Earning Assets]
= - 675/15145
= - 0.04457
Calculation of Net Operating Margin
We know,
Net Operating Margin = (Total Operating Revenues-Total Operating Expenses)/ Total Assets of Earning Assets
Here,
Total Operating Revenues = Interest Income + Non-interest Income
= 2250+600
= 2850
Total Operating Expenses = Interest Expense + Non-interest Expense
= 1452+820
= 2272
So,
Net Operating Margin = (Total Operating Revenues-Total Operating Expenses)/ Total Assets of Earning Assets
= (2850-2272)/18918 [Considers Total Assets]
= 578/18918
= 0.03055
Or,
Net Operating Margin = (Total Operating Revenues-Total Operating Expenses)/ Total Assets of Earning Assets
= (2850-2272)/15145 [Considers Earning Assets] = 578/15145
= 0.03816
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