2. Methods of analysis of financial condition.
The method of analysis of the bank's financial condition is a complex, organically interrelated study of the commercial bank's activities using mathematical, statistical, accounting and other methods of information processing.
The analysis, as a rule, uses a system of indicators formed in the process of operational accounting and control. A part of missing indicators shall be counted in the course of the research. Using analysis, the most significant factor indicators influencing the change of the bank's activity results are established. Identification and measurement of interrelation between analyzed indicators provide complex, organically interconnected research of commercial bank work. Thus, the economic analysis of banks' activity considers economic phenomena in interrelation and development, in contradictory influence of positive and negative factors, in erasure of old and formation of new, more progressive, in the transition of quantity in quality, revealing of contradictions in commercial activity and search of ways of their overcoming.
The system of economic analysis of information on bank activity includes statistical banks and banks of mathematical models.
Statistical bank is a set of both traditional and modern statistical methods of information processing. There are a lot of methods, but among them, the following are widely used: method of comparison, method of grouping, method of visual representation of the results of analysis, method of coefficients, index method, method of system analysis and method of elimination. Nowadays, more and more often we turn to more advanced statistical methods of analysis, such as correlation and regression, cluster, dispersion, factor, analytical leveling, moving averages for revealing trends, forecasting of bank performance indicators.
The Bank of Mathematical Models is a complex model designed to solve optimization problems. These models concern various aspects of bank activity. The main ones are the model of consumer behavior, the model of possible behavior of competitors, the model of pricing system, the model of organizational structure optimization and others. The bank of mathematical models promotes considerable simplification of the work of heads of banks on working out of strategy and acceptance of administrative decisions. However, it should be noted that the application of mathematical models in the analysis of the bank's activity is not devoid of certain drawbacks, which are connected with some conditions, admitted at the development of the models themselves. The most expedient is a rational combination in the application of mathematical models and traditional methods of studying available information.
Traditional methods of analysis.
The method of grouping allows us to study economic phenomena in their interrelation and interdependence, to reveal influences on the studied indicator of separate factors, to reveal manifestation of these or those regularities peculiar to bank activity. The method of grouping allows understanding the essence of the analyzed phenomena and processes by the systematization of the bank balance data. When analyzing the bank balance, first of all, the grouping of accounts by asset and liability is applied. Depending on the purposes of the analysis the grouping of asset and liability items is carried out according to several features. The liability is grouped according to the form of ownership, and the following features are used: cost, degree of demand, counteragents, terms, types of operations, guarantees of use, types of sources. An asset is grouped according to its legal form of formation, form of ownership, sectors of economy and type of activity. Each of these groups can be further broken down by profitability, liquidity, counterparties, terms, types of operations, degree of risk of possible loss of a part of assets value, forms of investment.
It is difficult to overestimate the importance of the grouping method in economic analysis; it is used to solve rather complicated research tasks.
The method of comparison is necessary to obtain an exhaustive picture of the bank's activities. It is important to keep track of changes in individual balance sheet items and calculated indicators, while always comparing their values. The method of comparison allows us to define the reasons and degree of influence of dynamic changes and deviations, for example, actual liquidity from normative, to reveal reserves of increase of profitability of bank operations and decrease of operational expenses. It is necessary to remember that the condition of application of the method of comparison is the complete comparability of the compared indicators, i.e. the presence of unity in the method of calculation. In this connection, the methods of comparability are used: direct recalculation, closing, and bringing to one base.
Not only intra-bank comparative analysis, but also a comparison of the main major indicators of profitability, liquidity, and reliability is of interest for practical activities and management of the bank
To be continued the next part.