article thumbnail

Bank Valuation: Understanding Key Ratios and Metrics

Tom Spencer

A higher ratio of fee income implies less traditional credit risk and less balance sheet usage (therefore higher ROE) but also implies greater market risk related to securities portfolios and potentially higher revenue volatility related to volatility in capital markets.

Metrics 88
article thumbnail

Bank Profitability: Decoding the Income Statement

Tom Spencer

The interest rate set by the central bank serves as a benchmark or reference rate for banks. It reflects the bank’s assessment of potential losses it may incur and its commitment to maintaining a strong balance sheet. Banks typically adjust their lending rates based on the central bank’s policy rate.

Banking 88