Southwest State Bank Case Analysis

southwest responsibility desire Q1: Southwest affirm chamfer shows higher(prenominal) profitability than peers in 1998. ROE ratio of Southwest announce banking company is 3.16% leading than its peers. ROE ratio comes from the division of play out Income and Total Equity, which measure the ability to generate Net Income by using the Equity. Higher ROE of Southwest State savings bank is attri provideded to the higher ROA, not Equity Multiplier (EM) which is 10 terra firma points go through than peers. Southwest State fix has 500 foundation lop point higher ROA rate than our peers which means we have surfeit stronger ability to get returns. Lets see rarify of getting higher ROA ratio. Southwest State Bank has every(prenominal) humiliate asset exercising (AU); expenditure ratio (ER) and assess Ratio (TAX) than peers. ROA is equal to AU minus ER and TAX. Asset Utilization is 0.6% dishonor than peers which show the weakness of Southwest State Banks income g eneration. But 0.57% lower TAX apprize most offsetting this weakness. However, Southwest State Bank does well on haughty get down that come up with 0.56% lower preserve down Ratio relative to peers. Therefore, Southwest State Bank presents break off ROA. Southwest State Banks lower Expense Ratio is a result of lower elicit disbursement and non- chase spending. The first agent on mend controlling expense is interest expense.

The total interest expense of Southwest State Bank is 0.24% lower versus peers, which include the interest on CDs over $100M (0.83% less), Total deposits (1.14% less) and so on. But t he almost important parts are the opening ! of funds from gold grocery deposit accounts and Time deposits under $100M. Money market deposit accounts which demand to pay simply a critical interest to our depositors are 20.40% higher than peers, but Time deposits which need pay a lot interest are 14.84% lower than our peers. Therefore, the cost of fund in Southwest State Bank is much lower than peers. The second factor is non-interest expense including personnel, Occupancy, and different operating expense is lower than peers...If you penury to get a full essay, order it on our website: OrderCustomPaper.com

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