Ratios relating to efficiency and income expenditure

Sr. Description Numerator Denominator Interpretation

No.
1 Operating efficiency Total operating Total assets Lower ratio shows bank’s
expenses efficiency
2 Cost of funds Total interest Total deposit Lower ratio implies lower
expenses and non deposit variable cost for the bank
borrowings
3 Non interest income Non interest Net total Shows share of non interest
to Net total income income income income in total income.
(Net total income = Net
interest income + other
income)
4 Income productivity Net income Number of full Higher ratio shows higher
per employee after taxes time employees employee productivity

Ratios relating to Profitability

Sr. Description Numerator Denominator Interpretation

No.
5 Return on equity Net profit Equity Shows return to share holders
(ROE)
6 Return on Assets Net Profit Total assets How well the bank is using
(ROA) the assets to generate profits

7 Profit margin Net profit Total income Shows margin of profit

8 Assets utilization Total income Total assets How well the bank is using
the assets to generate

9 Cost of funds Interest Interest bearing Higher the ratio, higher is the
expenses deposits + cost of funds
borrowings
10 EPS Net profit Number of Shows earning per share
 equity shares

11 P / E Ratio Share price EPS

12 Net interest margin Total interest Total assets Net interest income compared
income LESS to total assets
Total interest
expenses

Ratios relating to Liquidity

Sr. Description Numerator Denominator Interpretation
No.
13 Demand to time Total demand Total time Higher ratio requires more
deposit deposit deposit liquidity for the bank
14 Short term Short term Total assets Higher the ratio more liquid is
investment to total investment the bank’s assets portfolio
assets (Money Mkt)
15 Cash to demand Cash and bank Demand Higher the ratio, higher is the
deposit ratio balance deposit liquidity of the bank
including call
money
16 SLR investment to SLR investment Total Higher the ratio, higher is the
total investment investment liquidity of the bank
17 Credit assets ratio Total credit Total assets Higher the ratio, subject to
quality of credit, higher counter
party default risk