Management of Financial Institution Math Question Solve, June-2014

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