【正文】 s (PLL) The reserve’ s maximum size is determined by tax. Provisions for loan losses Reserve for Loan Losses Recoveries Charge offs Tax Law 28/69 (企管培訓資料下載 ) Ine statement: PNC CNB, 2023 + Interest ine (II) 72% 92% Interest expense (IE) 38% 27% = Net interest Ine (NII) + Noninterest ine (OI) 27% 8% Noninterest expense (OE) 35% 46% Loanloss provisions (PLL) % % = Operating ine before securities transactions and taxes +() Realized gains or losses % 0% = Pretax operating ine Taxes % % = Net ine % % 29/69 (企管培訓資料下載 ) Realized securities gains (or losses) ? They arise when a bank sells securities from its investment portfolio at prices above (or below) the initial or amortized cost to the bank. ? Generally, securities change in value as interest rates change, but the gains or losses are unrealized (meaning that the bank has not sold the securities to capture the change in value). 30/69 (企管培訓資料下載 ) Relationship between balance sheet and ine statement ? The position of assets and liabilities and the relationships between different interest rates determine interest ine. ? The mix of deposits between consumer and mercial customers affects the services provided and thus the magnitude of noninterest ine and noninterest expense. ? The ownership of nonbank subsidiaries increases fee ine but often raises noninterest expense. 31/69 (企管培訓資料下載 ) Relationship between balance sheet and ine statement ? Expenses and loan losses directly effect the balance sheet. ? The greater the size of loan portfolio, the greater is operating overhead and PLL. ? Consumer loans are usually smaller and hence more expensive (noninterest) per dollar of loans. 32/69 (企管培訓資料下載 ) Return on equity (ROE = NI / TE) … the basic measure of stockholders ’ returns ? ROE is posed of two parts: ? Return on Assets (ROA = NI / TA) ? represents the returns to the assets the bank has invested in. ? Equity Multiplier (EM = TA / TE) ? the degree of financial leverage employed by the bank. EMROATETATANIROE ???? 33/69 (企管培訓資料下載 ) Return on assets (ROA = NI / TA) …can be deposed into two parts: ? Asset utilization (AU) → ine generation ? Expense ratio (ER) → expense control ? ROA = AU － ER = (TR / TA) － (TE / TA) ? TR = total revenue or total operating ine = Int. inc. + nonint. inc. + SG(L) ? TE = total expenses = Int. exp. + nonint. exp. + PLL + Taxes INCOME Return to the Bank ROA = NI / TA EXPENSES Rate Composition (mix) Volume Interest Overhead Prov. for LL Taxes Fees and Serv Charge Trust Other Rate Composition (mix) Volume Interest Non Interest Salaries and Benefits Occupancy Other Bank Performance Model Returns to Shareholders ROE = NI / TE Degree of Leverage EM = 1 / (TA / TE) 35/69 (企管培訓資料下載 ) Asset utilization (AU = TR / TA): … the ability to generate ine. ? Interest Ine / TA ? Asset yields (rate) ? Interest ine asset (i) / $ amount of asset (i) ? Composition of assets (mix) ? $ amount asset (i) / TA ? Volume of Earning Assets ? Earning assets / TA ? Non interest ine / TA ? Fees and Service Charges ? Securities Gains (Losses) ? Other ine 36/69 (企管培訓資料下載 ) Expense ratio (ER = Exp / TA) … the ability to control expenses. ? Interest expense / TA ? Cost per liability (rate) ? Int. exp. liab. (j) / $ amt. liab. (j) ? Composition of liabilities ? $ amt. of liab. (j) / TA ? Volume of debt and equity ? Noninterest expenses / TA ? Salaries and employee benefits / TA ? Occupancy expenses / TA ? Other operating expense / TA ? Provisions for loan losses / TA ? Taxes / TA 37/69 (企管培訓資料下載 ) Other aggregate profitability measures ? Net interest margin ? NIM = NII / earning assets (EA) ? Spread ? Spread = (