Page 13 - FIN435 RHB vs BPMB

2.4 RHB BANK EXTERNAL COMPARISON EVALUATION 2018

1. PROFITABILITY RATIO

Return On Asset (ROA)

It shows how capable the management of the bank has been in converting the
institution’s assets into net earnings, The Return on Asset of RHB Bank Berhad Vs
Public Bank for the period basis for the year of 2018 indicates that Public Bank has

better Return On Asset (ROA) which is 1.37% compare to RHB Bank which only
record 0.95%. It shows that Public Bank generate it profits from total asset better than

RHB Bank.

Return On Equity

The Return On Equity (ROE) measures the rate return of flowing of income to the

bank shareholders. Based on record Public Bank shows better ROE which is 12.90%
compare to RHB which only 2.22%. It can be concluded that Public Bank generate
better profits from its shareholders investment compared to RHB Bank. This ratio also

derived from Return On Asset Ratio which Public Bank record better ratio than RHB
Bank.

Interest Spread Ratio

The net interest rate spread is the difference between the average yield that a
financial institution receives from loans along with other interest accruing activities and

the average rate it pays on deposits and borrowings. The net interest spread ratio for
RHB Bank for the year 2018 is 2% which indicates higher net interest spread ratio
compared to Public Bank in that accumulate lower percentage of 1.84% in 2018.

2. LIQUIDITY RATIO: LOAN TO ASSET RATIO

Loan on Asset Ratio (LOA) is the ratio used to demonstrate the ability of banks to meet
the demand for loans by using the total assets owned by banks. Based on the data,
Public Bank has higher Loan on Asset Ratio which is 74.65% compared to 68.11% by

RHB Bank. This shows that Public Bank has better the credit performance level than
RHB Bank, but at the same time it may face high liquidity risk which may lead to low of
liquidity such as not having sufficient of cash and borrowing capacity to loan demand.

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