16 pages carry this tag.
Net interest margin is the gap between what a bank earns on loans and what it pays for deposits. Rate changes move the two sides at different speeds, and that timing shapes bank profits.
The usual valuation toolkit of enterprise value, EBITDA and free cash flow stops working for a bank. Here is why, and what analysts use instead.
Why banks, insurers, real estate, oil and gas and telecom need their own valuation metrics, and why EV/EBITDA should never be used for banks.
The CASA ratio is the share of a bank's total deposits that sits in current and savings accounts, the cheapest money a bank can raise.
Cost of funds is the blended average interest a bank pays across every kind of deposit and borrowing it uses to fund its loans.
Net NPA is the percentage of a bank's loans, after provisions, that are not coming back. It measures the one skill a bank cannot do without: judging who will repay.
Advances growth is the year-on-year increase in the loans a bank has disbursed. Since banks earn interest on loans, faster loan growth means faster earnings growth.
The capital adequacy ratio measures how much capital a bank holds against its risk-weighted loans, which decides how much further lending it can support.
Net interest margin is the interest a bank earns minus the interest it pays, as a percentage of the funds it holds, after allowing for money it could not lend out.
Return on assets measures a bank's net profit against its total assets, which for a bank means the loans it has given out.
Common-size analysis restates every line of a bank's profit and loss as a percentage of interest income, and every funding source as a share of the balance sheet, so banks of any size can be compared line by line.
Gross NPA is the share of a bank's total loans on which interest or principal has been overdue for more than 90 days, before any provisions are deducted.
The provision coverage ratio is the share of a bank's gross non-performing loans that has already been written off against profit through provisions.
The cost to income ratio measures a bank's operating expenses, branches, staff, technology, against its total income from interest and fees. It is the efficiency ratio for lenders, where asset turnover does not apply.
The credit to deposit ratio shows what share of the deposits a bank has collected it has lent out as loans. It measures how fully the bank is using its cheapest source of funds.
Work out what a fixed deposit pays at maturity, and the interest it earns, for any amount, rate, tenure and compounding frequency.
Related topics: Valuation, DCF, Relative valuation, Cost of capital, Financial statements, Cash flow, Earnings quality, Red flags
