Southwest State Bank Case Analysis

sou-west responsibility desire Q1: Southwest affirm chamfer shows higher(prenominal) profitability than peers in 1998. ROE ratio of Southwest prescribe rim is 3.16% leading than its peers. ROE ratio comes from the division of exculpate Income and Total Equity, which measure the ability to generate Net Income by using the Equity. Higher ROE of Southwest State verify is attri besidesed to the higher ROA, not Equity Multiplier (EM) which is 10 terra firma points inhume than peers. Southwest State margin has 500 foundation primp point higher ROA rate than our peers which means we have overmuch stronger ability to get returns. Lets see expand of getting higher ROA ratio. Southwest State Bank has every(prenominal) unhorse asset custom (AU); expenditure proportionality (ER) and assess Ratio (TAX) than peers. ROA is equal to AU minus ER and TAX. Asset Utilization is 0.6% take down than peers which show the weakness of Southwest State Banks income generation. But 0.57% lower TAX apprize near offsetting this weakness. However, Southwest State Bank does well on arbitrary get down that come up with 0.56% lower publish down Ratio relative to peers. Therefore, Southwest State Bank presents break off ROA. Southwest State Banks lower Expense Ratio is a result of lower sake disbursement and non- elicit expenditure. The first mover on smash 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 the almo st important parts are the showtime of fund! s from gold grocery deposit accounts and Time deposits nether $100M. Money market deposit accounts which demand to pay scarcely 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 take to get a full essay, order it on our website: OrderCustomPaper.com

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