Obtain the financial statements for Sidian Bank for the year 2021 and evaluate the performance

and
the risk of the Bank.

Also examine their values and compare them with other banks.

PERFORMANCE MEASURES

The effectiveness and efficiency of a bank in achieving its goals and objectives. It can be done by
analysing various financial metrics such as return on assets, return on equity, net interest margin,
non-performing assets, and capital adequacy ratio. Additionally, customer satisfaction surveys and
assessments of the bank's compliance with regulations and industry standards can also be used to
evaluate performance.

1. Return on asset measure evaluation of performance

Return on assets (ROA) is a financial ratio that measures the profitability of a bank in relation to its
total assets. It is calculated by dividing the bank's net income by its total assets. A higher ROA
indicates that the bank is generating more profit from its assets and is therefore considered to be
more efficient and effective in its operations. ROA is widely used to evaluate the performance of
banks and other financial institutions. It can be used to compare the performance of different banks
over time, or to compare the performance of a single bank to industry averages or peer group
averages.

ROA= BANK’S NET INCOME/TOTAL ASSETS

= 485879/41410124 ×100%

= 1.17%

ROA FOR NCBA =11381061/546733550

=2.08%

NCBA has a higher ROA than Sidian Bank meaning its generating more profits from is Assets.

2. Return on equity measure evaluation of performance

Return on equity (ROE) is a financial ratio that measures the profitability of a bank in relation to its
shareholders equity. It is calculated by dividing the bank's net income by its shareholders equity. A
higher ROE indicates that the bank is generating more profit for its shareholders and is therefore
considered to be more efficient and effective in its operations. ROE is widely used to evaluate the
performance of banks and other financial institutions. It can be used to compare the performance of
different banks over time, or to compare the performance of a single bank to industry averages or
peer group averages. ROE is an important ratio for shareholders as it shows how well their
investment is performing. A bank with a high ROE is considered to be generating a high return on
investment for its shareholders.
ROE = CORE CAPITAL/TOTAL ASSETS

=4028335/41410124

=9.73%

ROE FOR NCBA =64567328/546733550

=11.81%

The ROE for NCBA is higher than Sidian indicating that NCBA is generating more profits for its
shareholders therefore more efficient and effective in its operations.

3. Net interest margin measure evaluation of performance

Net interest margin (NIM) is a financial ratio that measures the profitability of a bank in relation to
its interest-earning assets. It is calculated by dividing the bank's net interest income by its average
interest-earning assets. A higher NIM indicates that the bank is generating more profit from its
interest-earning assets and is therefore considered to be more efficient and effective in its
operations. NIM is widely used to evaluate the performance of banks and other financial institutions.
It can be used to compare the performance of different banks over time, or to compare the
performance of a single bank to industry averages or peer group averages. Banks with a higher NIM
tend to be considered more profitable, as they are earning more interest income relative to the
amount of interest-earning assets they hold.

NIM=

4. Cost-to-income ratio,
which measures the bank's operating expenses relative to its operating income. It is
calculated as the bank's operating expenses divided by its operating income. A lower
cost-to-income ratio indicates that a bank is operating more efficiently, as it is able
to generate more income for each dollar of expenses.

=OPERATING EXPENSES / OPERATING INCOME

=2427041/3126857

=77.62%

COST INCONE RATIO NCBA

=26886408/43705923

=61.52%

NCBA has a lower cost to income ratio than Sidian indicating its performing more efficiently as its
able to generate more income for each shilling of expenses

Operating Efficiency
Operating efficiency is a measure of how well a bank is able to manage its resources and operations
to produce the desired results. It is used to evaluate the performance of a bank. A bank that is
operating efficiently is able to generate more revenue from its assets and expenses, and will have
lower operating costs relative to its revenue.

One commonly used measure of operating efficiency is the efficiency ratio, which is calculated as the
bank's non-interest expenses divided by its net interest income plus non-interest income. A lower
efficiency ratio indicates that a bank is operating more efficiently, as it is able to generate more
revenue

= NON INTEREST EXPENSES / NET INTEREST INCOME + NON INTERSET INCOME

=380525/ 1533121 + 1593736

=12.17%

=TOTAL OPERATING EXPENSES/ TOTAL ASSETS

=2427041/41410124

=5.86%

OPERATING EFFICIENCY NCBA=26886408/546733550

=4.92%

NCBA has a lower efficiency ratio indicating that it’s operating more efficiently, as it is able to
generate more revenue

RISK MEASURES

The potential for loss or negative impact on the bank's financial stability due to various factors such
as credit risk, market risk, operational risk, and liquidity risk. It can be done by analysing various
financial metrics such as credit risk ratios, interest rate risk, stress testing, and value at risk.
Additionally, internal and external audits, risk management policies, and compliance with
regulations and industry standards can also be used to evaluate risk.

 Liquidity Risk: is a measure of the ability of a financial institution to meet its

obligations as they fall due.

=CA / CL or LIQUID ASSETS / TOTAL ASSETS

=803149 /41410124

=1.939%

LIQUIDITY RISK

=8926168/546733550

=1.633%

NCBA has a lower liquidity risk than Sidian. Meaning that Sidian Bank may have difficulty meeting its
financial obligations as they come due than NCBA.
Capital Risk:

The risk that the capital requirement might fall below the statutory ratio or fluctuate significantly

=T

 Credit Risk: This is that likelihood that borrowers will not pay their loans in
full.

TOTAL LOANS /TOTAL ASSETS

=22595909 / 41410124

=54.57%

CREDIT RISK FOR NCBA

=220019614/546733550

=40.24%

NCBA has a lower credit risk than Sidian indicating that the likelihood of borrowers defaulting on
their loans is lower, and therefore the bank is less likely to incur losses from those loans. This can be
seen as a positive indicator for the bank's financial stability and overall health compared to Sidian