Question

Does a Bank’s Income Statement Clearly Indicate the Bank’s Performance?

Answer 1

Eventhough there are major difference between a Banks income statement to other companies income statements like lack of account recievables, payables etc. Income statement of a Bank can be used to evaluate the performance of the bank through certain parameters given below.

• Net Income which shows the profit earned by the bank by taking into account all type of incomes through which bank made money
• Net interest income; Interest earned through giving loans once the expenses occured by keeping deposits and other transaction charges are reduced
• Non Interest income: This will be larger for investment banks and smaller for retail banks. Income from fees obtained through underwriting, broker fees, proprietory trading etc.

Hence, with some obvious difference, income statement can be used to evaluate the performance of banks and can be used to compare with peers.