Page 21 - FIN435 RHB vs BPMB

2.8 BANK PEMBANGUNAN EXTERNAL COMPARISON EVALUATION 2018

1. Profitability Ratio

Return On Asset

It shows how capable the management of the bank has been in converting the
institution’s assets into net earnings. This graph shows Return on Asset of Bank

Pembangunan Vs Agro Bank for the period basis for the year of 2018. The graph
indicates that Agrobank has better Return On Asset (ROA) which is 0.82% compare to
Bank Pembangunan which only record 0.65%. The graph shows that Agrobank

generate it profits from total asset better than Bank Pembangunan Malaysia.

Return On Equity

The Return On Equity (ROE) measures the rate return of flowing of income to the
bank shareholders. It reveals how much a profit a company earned in comparison to
the total amount of shareholder equity. ROE is is affected by the same income

statement items that affect ROA & the degree of financial leverage. Based on the
graph Agrobank record better ROE which is 4.58% compare to Bank Pembangunan

which only 2.19%. This ratio also derived from Return On Asset Ratio which
Agrobank record better ratio than Bank Pembangunan.

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
graph, Bank Pembangunan has higher Loan on Asset Ratio which is 73.93%

compared 64.21% by Agrobank. Bank Pembangunan has better the credit
performance level than Agrobank, 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

3. Capital Adequacy Ratio /Risk Weighted Capital Ratio

The capital adequacy ratio (CAR) is a measurement of a bank's available capital
expressed as a percentage of a bank's risk-weighted credit exposures. Based on the
graph Bank Pembangunan record higher CAR ratio which is 37.45% compare to

26.50% record by Agrobank. It can be concluded that, because Bank Pembangunan
has higher capital adequacy ratios a bank has, it may have greater level of unexpected

losses that it can absorb before becoming insolvent.

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