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Journal: International scientific journal "Internauka." Series: "Economic Sciences" (Vol.3, No. 55)

Publication Date:

Authors : ; ;

Page : 105-111

Keywords : bank profit; financial analysis of profitability; express analysis; coefficient analysis; DuPont model;

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Issues related to increasing the profitability of the bank have of great practical importance in the context of the transition to a market economy, especially in the context of economic instability in the context of the COVID 19 pandemic. Profit from banking business is the most important premises and cause of interest in the outcome of financial activities. The financial result as the main result of entrepreneurial activity keeps up with the needs of the bank itself and the country as a whole. For effective management of the bank's profit, an analysis of the factors influencing both the final result (profit or loss) of the reporting period and its components is required. We recommend to divide the analysis of the bank's profitability into three stages. The first stage is an express analysis based on financial statements. Here it is appropriately to use horizontal and vertical analysis of the Statement of Financial Condition (Balance Sheet) and the Statement of Profit and Loss and Other Comprehensive Income (Statement of Financial Results). In the second stage, we use coefficient analysis based on performance indicators. In particular, the following should be calculated: the adequacy of regulatory capital, return on assets (ROA), return on equity (ROE), net interest margin (NIM), net spread. At the third stage of the analysis, factor analysis should be used, which makes it possible to determine the degree of influence of individual factors on the change in the bank's profitability indicators, to identify internal reserves and, on its basis, to develop a further development strategy. For this purpose, it makes sense to use the return on equity decomposition analysis, which is also called the Du Pont model. The Du Pont model methodology is based on the analysis of the ratios that form the ROE and ROA rates. The factor model is based on the return on equity (ROE) indicator, and the factors are indicators characterizing the financial activity of the bank. The DuPont model and its modifications allow enterprises to rapidly evaluate and predict the degree of influence of many factors on the formation of the assessment of equity capital, assets and the value of the bank for shareholders and potential investors.

Last modified: 2022-01-12 20:45:23