Stockholders

Bank management

Regulators

Depositors

Business community

Market value

Regulatory compliance

Public confidence

Present value of future cash flows

Determinants:

Changes in

P/E=Price per share/Earnings per share

ROE= Net Income / Total Equity Capital

ROA= Net Income / Total Assets

The lower ROA, the higher it must push its leverage to achive a target ROE

Nonperforming ratio = Nonperforming assets/Equity capital

Profitability

wage ratio = Wages and salaries / total expenses

fixed cost ratio = fixed occupancy costs/ total expenses

Nonperforming ratio=Nonperforming assets/Equity capital

Loss ratio = Net chargeoffs on loans / Total Loans and leases = (Grossprofit chargeoffs - recoveries)/Total loans and leases

Provision for loan lossratio = Provision for loan loss / Gross loans and leases

Reserve ratio: Reserves for loan losses / Total Loans and Leases

Loan and lease ratio = Net loans and leases / Total Assets

Funds available to meet cash demand for loans and deposit withdrawal

Liquidity ratio

Liability mgt replacing asset mgt

Price risk

Interest rate risk

Risk due to failing computer systems, errors, misconduct by employees, floods, tornadoes, lightning strikes

Legal risk – legal system creates adverse outcomes, e.g., unenforceable contracts, adverse lawsuit judgments

Compliance risk – violations to the rules and regulations, e.g., insufficient capital

Uncertainty due to public opinion as it pertains to confidence of customers and creditors

Variation in earnings due to poor business decisions, improper implementation of decisions, lack of responsiveness to industry changes or public expectations.

Impact of all the previous risks affects capital and the bank’s survival chances