Reference no: EM133033308

Respond to the following either agreeing or disagreeing ROA and ROE are key indicators that banks use to determine their financial performance. A higher ROA generally means higher profits for the bank/company. An ROA of 5-10% is considered good while 20% or more is great! You can determine the return on assets by dividing net income from average total assets. Our banks ROA has been increasing almost every quarter, partly because we don't have as many assets, which makes our bank more "profitable" however our loans our down. We acquired more assets this past quarter so I would not be surprised to see a dip in our ROA. To find the ROE you would divide net income (profits) by total equity. Usually a good ROE for a bank is between 1-2%. My bank hasn't tracked our ROE too seriously as of yet. Return on equity is a good way to measure the return of a company's investments. Again, since we acquired more assets, bonds, bills, maturities, etc this past quarter we are aware that we may see a dip in our ROE at first. However our game plan will take place over many quarters so we are in no rush to be the best in every category as of yet. We are still trying to establish a strong loan base, since they are still low we suspect this is the reason our ROA and ROE have been doing well. I think these numbers will start to trend down once our loans increase and have a solid foundation before switching our main focus to NIM, ROA, ROE, etc.