Question

What are some key differences in the financial ratios for small banks versus large banks?

Answer 1

1. The Return of Equity (ROE) and Return of Assets (ROA) of small banks decline slowly relative to larger banks in adverse market conditions
2. The total provisions for loan losses to average total loans are lower for smaller banks than large banks
3. Small banks are better capitalized with their Tier 1 risk-based capital and tangible equity ratios higher than large banks
4. Small banks rely mainly on retained earnings and very little on long term debt, whereas large banks rely on common stock, retained earnings and long term debt.