Bank A (Dollars in Millions) 12 Points Assets Liabilities and Equity Cash $850 D

Question

Bank A (Dollars in Millions) 12 Points Assets Liabilities and Equity Cash $850 Deposits $6,475 Securities $1,925 Other Borrowing $1,645 Loans $5,400 Equity $1,030 Other $975 Total $9,150 Total $9,150 Income Statement Interest income on loans $450 Interest income on securities $95 Interest expense $246 Noninterest income $78 Noninterest expense $112 Provision for loan losses $35 Taxes $115 Net Income $115 $ 115 = (450 + 95 + 78 - 246 - 112 - 35 - 115) For Bank A, calculate: a. Return on assets (ROA) b. Return on equity (ROE) c. The bank's profit margin d. The bank's utilization ratio a. Return on Assets = (Net income / Total assets) ROA = $115/$9,150 = b. Return on Equity = Net income / Total equity capital ROE = $115/$1,030 = c. Profit margin = Net income / Total operating income Profit margin = $115/($450 + $95 + $78) = d. Asset utilization = Total operating income / Total assets Asset utilization = ($450 + $95 + $78)/$9,150 = Bank A (Dollars in Millions) 12 Points Assets Liabilities and Equity Cash $850 Deposits $6,475 Securities $1,925 Other Borrowing $1,645 Loans $5,400 Equity $1,030 Other $975 Total $9,150 Total $9,150 Income Statement Interest income on loans $450 Interest income on securities $95 Interest expense $246 Noninterest income $78 Noninterest expense $112 Provision for loan losses $35 Taxes $115 Net Income $115 $ 115 = (450 + 95 + 78 - 246 - 112 - 35 - 115) For Bank A, calculate: a. Return on assets (ROA) b. Return on equity (ROE) c. The bank's profit margin d. The bank's utilization ratio a. Return on Assets = (Net income / Total assets) ROA = $115/$9,150 = b. Return on Equity = Net income / Total equity capital ROE = $115/$1,030 = c. Profit margin = Net income / Total operating income Profit margin = $115/($450 + $95 + $78) = d. Asset utilization = Total operating income / Total assets Asset utilization = ($450 + $95 + $78)/$9,150 =

Explanation / Answer

Return on Assets = (Net income / Total assets) = $115/$9150 0.012568 Return on Equity = Net income / Total equity capital = $115/$1030 0.11165 Profit margin = Net income / Total operating income = $115/($450 + $95 + $78) 0.184591 Asset utilization = Total operating income / Total assets = ($450 + $95 + $78)/$9,150 0.144809

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