Question

summarize in detail the overall financial health of this bank based off of these growth rates and ratios. also explain the importance of the equity to asset ratio please. (at least 5 sentences please)

Growth Rates (2018-2019) Cash & Due from Banks Growth (2018-2019) Investments Growth Loans - 1 Yr Growth Rate Assets-Total Growth Deposits Growth Long Term Debt Growth Total Debt/Total Assets Common Equity/Total Assets Total Shareholders' Equity/Total Assets 1375.2696 -14.1596 -1.8194 1.3596 0.7396 23.0796 14,2696 9.7896 9.7896 Figure 2

Answer 1

The overall financial health of this bank is not very good. For any bank, deposits is main source of fund to finance the loans, but, in this case, the deposits have grown at just 0.73% which is very marginal growth and bank cannot expand its loan operations efficiently. As a result, the bank is dependent on other banks fund to finance its loan activities. This is indicated by a whooping growth in Cash and Dues from Banks .The investment growth rate as well as Loan growth rate is in red which is a serious cause to the bank stability. Assets growth rate is also very marginal. Overall, the bank needs to make major re-structural changes to revive its financial health.

With respect to equity to asset ratio, it indicates how much ownership a bank has in total assets. Here, the equity to total asset ratio stood at 9.78% which indicates that bank just own 9.78% of total assets. Rest of the assets are being owned by debt- holders. This is primarily because the deposit growth of the bank is very low and as a result, the bank has been involved in inter-bank transactions to finance its loan activities. This growth rate stood at around 1375% which is very high. Bank should try to reduce its dependency on other banks fund and should try to restructure its whole financial system to attract depositors and increase its equity to asset ratio.