Commercial Banking Project Analysis - Case Study Example

Commercial Banking Project Analysis Student’s Name Institution Comparison Analysis for Big Banks The ROAA of National Bank of Kuwait decreases tremendously for the five-year period from 2.14 to 1.43 between 2009 and 2013 respectively. This pattern cuts across the entire “big banks” like Emirates, which also shows a downward ratio pattern; up from 1.19 to 1 in the same period and Qatar National Bank from 2.53 to 2.35. However, for KSAs National Commercial Bank, the ratio is on upward trend from 1.72 to 2.21 within the period respectively. This means that in the big banks industry, KSA’s National Commercial Bank is able to utilize its assets in a more profitable way than the others. A similar trend is manifested in the ROAE of these banks with the exception of KSA’s National Commercial Bank, which improves its ratio from 14.12 to 19.5 in the period between 2009 and 2013 respectively. This is an indication that in the big banks industry, it is only KSA’s National Commercial Bank that has been able to post an improvement in regards to its profitability performance. The graph below postulates the trend for ROAA for the five-year period. ROAA The net interest margins for the banks indicates a decreasing pattern for both National Bank Of Kuwait whose ratio values decrease insignificantly from 3.63 to 3.14 in the period between 2009 and 2013 respectively as well as KSA’s National Commercial Bank whose ratio also decreases from 3.69 to 3.22 respectively. However, the other two banks: Qatar National Bank and Emirates posits an increment in the ratio. Given that all of these values are on the positive side then it means that all of them made investments decisions that were not overburdened by their respective underlying debt conditions. The cost to income ratio for National Bank of Kuwait depicts a downward pattern while the others indicate increments within the same five financial periods. For instance, the ratio value decreases from 34.77 to 33.07 in 2009 and 2013 respectively for National Bank of Kuwait; 32.9 to 36.27 for Emirates NBD; 19.64 to 21.34 for Qatar National Bank and 38.07 to 39.04 for KSA’s National Commercial Bank. Despite the differences in pattern, it can however; be noted that all of these banks operate within a recommendable industry average. The loans loss provision/ net interest revenues ratio for National Bank of Kuwait increases significantly in the five-year period between 9.9 to 31.59 in the period between 2009 and 2013 respectively. The upward pattern of the ratio is also depicted by the Qatar National Bank whose ratio increases significantly from 7.15 to 13.03 respectively within the same period. However, for Emirates NBD whose ratio decreases significantly from 102.02 to 54.59 and KSA’s National Commercial Bank; 30.55 to 7.87 respectively. This means that in the big bank industry only KSA’s National Commercial Bank and Emirates are able to remain unaffected by the level of its loans loss provision in comparison to the amount of net revenues collected. The total capital ratio for National Bank of Kuwait increases from 15 to 17.3. The increase is also noted by Emirates NBD; 18.7 to 19.64and Qatar National Bank from 13.2 to 15.60 within the same period. However, for KSA’s National Commercial Bank, the ratio decreases from 19.3 to 17.1. The decrease however does not go below the industry average. Total Capital Graphs for the five year period is represented as follows; Net loans/total assets ratio for National Bank of Kuwait reduces from 60.56 to 57.5 in the period between 2009 and 2013 respectively. This is also true for Emirates NBD; 76.22 to 69.68 within the same period. However, for both Qatar and KSA’s National Commercial Bank, the ratio increases to 49.75 and 70.06 respectively in 2013. This means that the later banks increased the level of loans they could offer to clients in comparison to their immediate asset base. Small Bank Analysis Both ROAA and ROAE of Kuwait International Bank improve significantly within the five-year period. This is also true for Sharja Islamic Bank and KSA’s Bank AlBilad. For Qatar International Islamic Bank only the ROAE improves while the ROAA decreases slightly to industry average. This means that all of these banks have improved on their respective profitability performances within the period. ROAA Graphs for Small Banks: The cost to income ratio as well as loans loss provision/net interest revenues for Kuwait International Bank decreases slightly within the five years period. This pattern is also replicated by Qatar International Islamic Bank and KSA’s Bank AlBilad. However, the same is not shown by Sharja Islamic Bank which posts an upward movement for these ratios. This means that Sharja Islamic Bank is able to contain the level of losses attributed to affecting income and interest revenues within these periods. In regards to total capital ratio, Kuwait International Bank posts a significant increase from 14.67 to 25.24 in 2009 and 2013 respectively. This is also true for Sharja Islamic Bank that improves from 8.9 to 25.97. However, for KSA’s Bank AlBilad, the ratio decreases slightly from18.41 to17.14 and also, Sharja Islamic Bank from 34.15 to 31 respectively. Total Capital Ratio Graphs for Small Banks: NIM and NII The impact of the interest change in the banking sector had a positive effect of both the net interest margins as well as net interest income for all banks regardless of big or small banks categories. This led to the increase in the amounts collected as net interest revenues, which was able to put more of these banks within a safe and healthy zone in relation to both the costs of doing business as well as loans loss provisions for the entire three year period. Recommendations The best performing big banks was KSA’s National Commercial Bank since it was able to postulate a significant positive growth in terms of its profitability performances. While the other banks ROAE and ROAA depicted a decreasing pattern, KSA’s National Commercial Bank’s ratio showed improvements within the four year financial periods. In small banks category, the best performing bank was Kuwait International Bank. This can be attributed to the fact that its profitability performances exhibited a much greater growth in comparison to others even though all depicted growth within the area. Read More