An important indicator that reflects the efficiency of a commercial bank is profit. The bank's profit is the excess of the bank's income over expenses (the difference between them) before the payment of income tax. All commercial activities, as well as administrative and economic activities, may be measured in the form of income of a commercial bank. Profit is formed from the income, naturally less expenses of the credit organization, and so based on income there is a payment of dividends to shareholders, premiums to top managers, increase in capitalization and the value of the company and brand. The bank's profit is the excess of the bank's income over expenses (difference between them) before the payment of income tax. The profitability of the bank is the total positive result of its commercial activity.
For the analysis of bank profit, it is necessary to calculate the basic indicators of bank profitability, such as:
- Return on Assets (ROA) - shows the internal policy of the bank and the effectiveness of the bank's managers. It is calculated as the ratio of net profit to bank assets (normative value is not less than 1%);
- Return on capital (ROE) - establishes the approximate size of net profit, which shareholders would get from investing capital, that is, the risk they go to, investing their funds to ensure an acceptable level of profit. It is calculated as the ratio of net profit to the bank's capital (the standard value is not less than 15%);
- Net interest margin (NIM) - characterizes the bank's ability to earn income, namely differential interest income, as a percentage of net assets. It is calculated as the ratio of net interest income to the bank's assets (the normative value is not less than 4.5%);
- net spread - allows to estimate the difference between the level of interest income and interest expenses related to the balances of loans granted and deposits attracted on a paid basis (the normative value is not less than 1.25%).
According to A. Kireev, a slight decline in the profitability of Russian banks, which was recorded in July-September 2018, is a temporary phenomenon and is associated with changes in the requirements for the formation of reserves.
When calculating the overall profitability (efficiency) of the attracted liabilities, the profitability indicators for specific types of borrowed funds (deposits, own securities, interbank loans, etc.) should be detailed.
Thus, each commercial bank should independently ensure maintenance of its profitability and profitability at a given level based on an analysis of its condition. Also, the bank should forecast the results of its activities and conduct in the future a scientifically sound economic policy in the field of formation of the authorized capital. It may be determined that the bank's profitability is significantly affected by external and internal environment factors. The prospect of further research in this area is the development of measures aimed at increasing the profitability of commercial banks.
The analysis of the main indicators of the bank's activity should begin with the assessment of its assets and liabilities. The study of the bank's assets consists of the use of analytical methods aimed at determining the total amount of funds at the bank's disposal, their structure, and dynamics in the analytical period. The functioning of any system, including the banking system, is aimed at improving the efficiency of its activities and ensuring sustainable development. Low level of efficiency of banks' activity testifies to their limited possibilities of development, low competitiveness, heightened sensitivity to market risks, inefficient management of assets and liabilities, and in the presence of tendencies to deterioration may lead to severe problems in banks' activity, and untimely adoption of necessary measures - to bankruptcy.
Thus, banks' activities should always be characterized by an adequate level of efficiency, which is difficult to ensure in conditions of high competition, especially when the profitability of banking operations is falling, and the introduction of new banking technologies and products requires more and more costs.
Assessment of profitability of banking activity is also one of the most important tasks of economic analysis, the solution of which is based on the application of the method of coefficients and trend method. The trend method is based on extrapolation (continuation in the future) revealed during the analysis of the market trend for the forecasted period (taking into account changes in the stages of the conjuncture). This method can be used only for short-term forecasting.