Consider the following financial ratios based on published financial statements of two banks and one non-bank...

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Consider the following financial ratios based on published financial statements of two banks and one non-bank financial institutions. The ratios include return on common equity (ROCE), return on net operating assets (RNOA), financial leverage (FLEV), net borrowing costs (NBC) and spread between RNOA and NBC. r is the effective corporate tax rate. NAV represents net asset value per share. ID RNOA FLEV Company Year NAV ROCE ABBANK 2008 30.2 50.98% 11101 10.77% 10.75 11101 ABBANK 2009 40.1 50.82% 10.44% 9.54 11101 ABBANK 44.1 38.75% 8.47% 7.85 11101 ABBANK 40.7 9.83% 5.02% 6.86 11101 ABBANK 36.6 9.75% 5.42% 7.32 11101 ABBANK 2013 34.8 6.78% 4.33% 7.61 11101 ABBANK 2014 35.2 8.68% 3.98% 8.89 11101 ABBANK 2015 50.2 7.77% 4.50% 23.47% 7.75% 16.68% 6.99% 11101 ABBANK 2016 36.0 7.05% 4.27% 11138 BRACBANK 2008 34.3 31.69% 9.10% 11138 BRACBANK 2009 42.9 25.26% 8.79% 11138 BRACBANK 2010 52.7 11138 BRACBANK 2011 28.2 11138 BRACBANK 2012 29.8 11138 BRACBANK 2013 28.0 11138 BRACBANK 2014 28.7 11138 BRACBANK 2015 40.0 11138 BRACBANK 2016 43.0 6.68% 3.83% 11.67% 4.49% 6.48% 16.94% 11.45% 4.55% 16.60% 4.64% 11111 IDLC 2008 64.5 32.58% 11.88% 11111 2009 79.8 13.86% 51.01% 55.46% 15.07% 11111 2010 61.5 11111 2011 40.2 13.56% 8.35% 11111 2012 37.9 17.91% 10.80% 11111 2013 33.6 14.27% 9.81% 32.5 23.03% 10.48% 31.0 22.35% 9.34% 33.8 22.99% 8.53% 11111 11111 11111 IDLC IDLC IDLC IDLC IDLC IDLC IDLC IDLC 2010 2011 2012 2014 2015 2016 NBC 7.03% 6.21% 4.61% 4.32% 4.83% 4.01% 3.45% 10.08 4.17% 9.24 3.96% 10.85 7.02% 9.71 7.10% 7.17 5.56% 7.80 5.75% 9.32 3.52% 10.82 3.83% 9.71 5.40% 5.82 3.37% 6.46 2.79% 7.76 9.21% 7.56 8.94% 6.11 8.46% 3.78 6.98% 4.77 9.30% 5.00 8.91% 5.76 8.31% 5.79 7.10% 5.75 6.02% SPREAD 3.74% 4.23% 3.86% 0.70% 0.59% 0.32% 0.53% 0.33% 0.30% 2.08% 1.70% 2.19% 1.24% 0.31% 0.66% 1.08% 1.18% 1.85% 2.67% 4.92% 6.61% 1.38% 1.49% 0.89% 2.18% 2.25% 2.51% Required: Write a short essay reflecting on the drivers of return on common equity of the three financial companies. Hints: Note that a period from 2011 to 2014 is a high-interest rate regime of the central bank and should be contrasted with the latter period when interest rate decreased markedly. Consider the following financial ratios based on published financial statements of two banks and one non-bank financial institutions. The ratios include return on common equity (ROCE), return on net operating assets (RNOA), financial leverage (FLEV), net borrowing costs (NBC) and spread between RNOA and NBC. r is the effective corporate tax rate. NAV represents net asset value per share. ID RNOA FLEV Company Year NAV ROCE ABBANK 2008 30.2 50.98% 11101 10.77% 10.75 11101 ABBANK 2009 40.1 50.82% 10.44% 9.54 11101 ABBANK 44.1 38.75% 8.47% 7.85 11101 ABBANK 40.7 9.83% 5.02% 6.86 11101 ABBANK 36.6 9.75% 5.42% 7.32 11101 ABBANK 2013 34.8 6.78% 4.33% 7.61 11101 ABBANK 2014 35.2 8.68% 3.98% 8.89 11101 ABBANK 2015 50.2 7.77% 4.50% 23.47% 7.75% 16.68% 6.99% 11101 ABBANK 2016 36.0 7.05% 4.27% 11138 BRACBANK 2008 34.3 31.69% 9.10% 11138 BRACBANK 2009 42.9 25.26% 8.79% 11138 BRACBANK 2010 52.7 11138 BRACBANK 2011 28.2 11138 BRACBANK 2012 29.8 11138 BRACBANK 2013 28.0 11138 BRACBANK 2014 28.7 11138 BRACBANK 2015 40.0 11138 BRACBANK 2016 43.0 6.68% 3.83% 11.67% 4.49% 6.48% 16.94% 11.45% 4.55% 16.60% 4.64% 11111 IDLC 2008 64.5 32.58% 11.88% 11111 2009 79.8 13.86% 51.01% 55.46% 15.07% 11111 2010 61.5 11111 2011 40.2 13.56% 8.35% 11111 2012 37.9 17.91% 10.80% 11111 2013 33.6 14.27% 9.81% 32.5 23.03% 10.48% 31.0 22.35% 9.34% 33.8 22.99% 8.53% 11111 11111 11111 IDLC IDLC IDLC IDLC IDLC IDLC IDLC IDLC 2010 2011 2012 2014 2015 2016 NBC 7.03% 6.21% 4.61% 4.32% 4.83% 4.01% 3.45% 10.08 4.17% 9.24 3.96% 10.85 7.02% 9.71 7.10% 7.17 5.56% 7.80 5.75% 9.32 3.52% 10.82 3.83% 9.71 5.40% 5.82 3.37% 6.46 2.79% 7.76 9.21% 7.56 8.94% 6.11 8.46% 3.78 6.98% 4.77 9.30% 5.00 8.91% 5.76 8.31% 5.79 7.10% 5.75 6.02% SPREAD 3.74% 4.23% 3.86% 0.70% 0.59% 0.32% 0.53% 0.33% 0.30% 2.08% 1.70% 2.19% 1.24% 0.31% 0.66% 1.08% 1.18% 1.85% 2.67% 4.92% 6.61% 1.38% 1.49% 0.89% 2.18% 2.25% 2.51% Required: Write a short essay reflecting on the drivers of return on common equity of the three financial companies. Hints: Note that a period from 2011 to 2014 is a high-interest rate regime of the central bank and should be contrasted with the latter period when interest rate decreased markedly.

Answer rating: 100% (QA)

Return on common equity ROCE is a financial ratio that measures the profitability of a company by dividing its net income by its common equity It is a ... View the full answer