First: Interest expense ratio

  2013 2014

INTEREST EXPENSE/TA -3.092% -3.115%

Table 14: interest expense

As we can see in the above table, despite the decrease in the overall expense ratio, the interest
expense ratio increased which is consistent with the decrease in ROA and ROE. This is a
weakness point for the bank.

Interest expense is due to 3 factors:

 Volume of interest bearing liabilities= interest bearing liabilities/Total asset.

 Cost on interest bearing liabilities= Interest expense/ interest bearing liabilities.
 Composition= $amount of each interest bearing liabilities/interest bearing liabilities.

A . Volume of interest bearing liabilities

2013 2014

A:volume of interest bearing liabalities=int bearing 88.8662% 88.4659%

liab/TA

Table 16: volume of interest bearing liabilities

In the above table, we can tell that despite the increase in the expense ratio the volume of the
interest bearing liabilities have decreased.

B. Cost on interest bearing liabilities

2013 2014

B:cost of int bearing liab=interest expense/interest -3.47956% -3.52124%

bearing liab

Table 17: cost of interest bearing liabilities

In the above table, we calculated the cost of interest bearing liabilities. The cost has increased
from 2013 to 2014 whereas the volume has decreased. Therefore, the interest rate has increased
which pushed the expense ratio to be higher in 2014.

C. Composition and mix

 2013 2013 2014 2014

liab i/TA comp and liab i/TA comp and

mix mix

customers deposits 0.82 - 0.81 -

0.0303964 0.030642
37 531

interest bearing deposits with banks and 0.01 - 0.01 -

financial institutions 0.0003843 0.000352
32 131

total -3.08% -3.10%

Table 18: composition of interest bearing liabilities

We noticed that in 2014 the customer deposits decreased slightly; however the interest rate
increased by a lot from 2013 to 2014. Also we didn’t change the proportion of deposits with
banks and financial institutions but the interest rate on it decreased, thus it was better to increase
its proportion.