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Bank’s spread is 2.00%. The spread in RHB Bank is slightly higher than Public Bank. It means
that RHB generate more earnings from its assets, loans and securities. Meanwhile, Public Bank

pays more interest on deposits and other interest – bearing liabilities. For Public Bank to increase
its interest spread, it must lend more money to customers and lessen its borrowing. By doing so,
the bank will be able to generate more interest on its lending, hence increases the bank’s profits.

LIQUIDITY RATIO

1. Loan to Asset Ratio
The loans to assets ratio are an indicator of financial leverage or a measure of solvency, while
others find it a vital insight into the financial health or distress of a company. The higher the ratio,

the lower the liquidity and the higher the credit risk will be. Based on the calculation above in the
year 2018, it is seen that Public Bank’s loan to asset ratio is 74.65% meanwhile RHB is being
recorded at 68.11%. Therefore, it indicates that RHB manages their loan to asset ratio well

compared to Public Bank because 68.11% of its assets are financed by creditors, and 31.89%
are financed by owners (shareholders) equity.

CAPITAL ADEQUACY RATIO

1. Risk Weighted Capital Ratio
Risk weighted capital ratio is used to protect depositors and to facilitate the stability and

effectiveness of financial structures worldwide. The purpose is to establish that banks have
enough reserve capital to handle a certain amount of losses, before they become insolvent. Based

on the calculation above, Public Bank records 12.70% for risk weighted capital ratio while RHB’s
ratio is 19.21% in the year 2018. This means that RHB is the bank with a high capital adequacy
ratio that is safer and meet the minimum criteria needed to indicate solvency. Hence, RHB is more

likely to able to overcome a financial downturn or losses than Public Bank.

2. Core Capital Ratio
This ratio can be used to cover its losses and does not require the bank to discontinue their

operations. Based on the calculated table ratio above, it is seen that Public Bank’s core capital
ratio is 13.40% while RHB’s ratio is recorded at 16.91% in year 2018. We can conclude that RHB
has many capitals held than Public Bank to prepare themselves for any financial emergencies to

continue to cater for its customers’ company needs. The lower the ratio, the more likely the bank
is considered to be safe because it meets its financial obligations. Therefore, the bank needs to
have enough money to fulfil the needs of their customers to avoid from being bankrupt.

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