Business

Financial Statements of Banks – Reviewed financial statement- Financial statement analysis of banks

Financial statements of commercial banks briefly described

Financial Statements of Banks

There are three financial statements of commercial banks that are discussed here; Balance sheet, Income Statement, and cash flow statement. These statements of commercial banks are briefly discussed and easily understandable ;

financial statements of Commercial banks

Balance Sheet

The balance sheet of any business or company tells the current position of that business or company. The balance sheet of commercial Banks is described as

Assets = Liabilities + Owner’s Equity

Then assets equation is written as below;

Assets = Cash + Investment Securities + Loans + Miscellaneous Assets

Assets = C + S + L + M.A

Cash or liquidity is very important to maintain. There is always a vault branch of the bank from where the cash inflow and outflows daily or when needed. The bank can manage the cash through its treasury department.

Investment securities are all those Treasury Bonds, Shares, and other investment instruments. That bank has purchased by investment to get profit on it after when they gain more value.

Loans are considered assets of the commercial banks. When a bank provides loans to the customers. It charges interest on it. It becomes its income and increases its liquidity.

Miscellaneous Assets are all those assets that help in Banking operations. It includes generators, Air Conditioners, Cars or Van, Stationery, Tables, chairs, etc…

Because all these things considered as assets of the Banks.

Now come on Liabilities of Bank;

All deposits of the customers are liabilities of the Bank. As it has to be returned to the customer. All Non-deposits Borrowings means Banks borrow money from other banks to manage their operations. Owner Equity is always a liability as a profit or dividend given to shareholders and stockholders of that Bank.

The liabilities and owner’s equity equation is as follows;

Deposits + Non-Deposits Borrowing + Owner Equity

D + NDB + O.E

Therefore overall Equation of Balance sheet written as;

                 Assets  = Liabilities + Owner’s Equity

C + S + L + M.A = D + NDB + O.E

Income Statement

Islamic Banking concept

In general business income statement in accounting will be as

Net Income = Revenues – Expenses

Most importantly, In Commercial Bank’s main Revenue is Interest Income and Non-Interest Income. Interest income includes all those income which banks get from interest on loans that banks gave to their customers. Non-interest income includes commission, charges, and fees from the services that the bank provided.

Expenses of banks include interest expense and non-interest expense. Interest expense is the interest that the bank gives on deposit of the customers according to the deposit amount and time period. Non=Interest expense includes all other expenses like depreciation, salaries, maintenance, generator petrol cost, utility bills, etc… These are non-interest expense or operating expenses.

The income statement of Commercial Bank summarizes as;

EBT = (Interest Income + Non-Interest Income ) – ( Interest Expense + Operating Expenses)

Net Income = Earning Before Tax – Tax

Cash Flow Statement

The cash flow statement shows the inflow and outflow of cash in the following activities

Operating Activities

In daily operations of banks, deposits and withdraws are real inflow and outflow of money.

Financing Activities

Financing activities are loans and bonds sales and purchase activities that banks perform.  

Investing Activities

Investing activities are the investment of banks’ insecurities. And share purchasing and investments in different companies and sectors.  

Read More:

What is Islamic Banking? The Basic concepts and terms of Islamic Banking

Important Functions of Banks briefly described

Calendar

June 2023
M T W T F S S
 1234
567891011
12131415161718
19202122232425
2627282930  

Recent Comments

    RSS Meks Blog

    • 10 Best Knowledge Base & Wiki WordPress Themes 2021 September 15, 2021
      Running a successful online business requires an exceptional WordPress knowledge base theme that organizes documentation and helps customers. Customization options, intuitive navigation, unique layouts, and fast responsiveness are just some of the features you need. The following 10 WordPress wiki themes represent the best options for 2021 and beyond. Explore the full range to determine […]
      Dusan Milovanovic
    • How to increase WordPress Memory Limit (quick fixes) June 16, 2021
      Here is a post about how to increase the memory limit in WordPress. Allowed memory size exhausted error message showed up in your WordPress installation? No worries – this is one of the most common errors in WordPress. You can apply an easy fix by increasing the memory limit in your PHP. Table of Contents […]
      Dusan Milovanovic
    • How to use (and why) WordPress sitemap plugin March 1, 2021
      Did you know that by knowing how to use the WordPress sitemap plugin you can significantly improve your site’s visibility and traffic? Although it isn’t mandatory to have a sitemap on your site, having one significantly improves the site’s quality, crawlability and indexing. All this is important for better optimization, which is why we wanted […]
      Ivana Cirkovic
    • 22 free and premium podcast software for your show [2021 edition] January 18, 2021
      You’re determined to start or improve your podcast but don’t know which podcast software to use to really make it stand out? We’ve got you! #podcasting Top 22 free and premium podcast software for your show #WordPressTips #podcasting The post 22 free and premium podcast software for your show [2021 edition] appeared first on Meks.
      Ivana Cirkovic
    • Digital storytelling with WordPress – an all-in-one guide to make your web stories pop! November 23, 2020
      Wondering how to improve digital storytelling with WordPress and build more awareness and exposure of your business? Let our guide lead the way. The post Digital storytelling with WordPress – an all-in-one guide to make your web stories pop! appeared first on Meks.
      Ivana Cirkovic
    • How to use WordPress autoposting plugin to improve your visibility and SEO? September 10, 2020
      Did you know you can use the WordPress autoposting plugin for your content efforts and improve not only your time management but your business and visibility as well? The post How to use WordPress autoposting plugin to improve your visibility and SEO? appeared first on Meks.
      Ivana Cirkovic
    • How to create a personal branding site? Step-by-step DIY guide August 15, 2020
      Looking for ways and means to create a personal branding site? Well, look no further ’cause we’re giving away all the how-to’s to do it yourselves! The post How to create a personal branding site? Step-by-step DIY guide appeared first on Meks.
      Ivana Cirkovic
    • Top 15 WordPress content plugins and tools to improve your visibility and rankings July 16, 2020
      Let’s take a look at some of the must-have WordPress content plugins and tools to use to improve both your UX and rankings. The post Top 15 WordPress content plugins and tools to improve your visibility and rankings appeared first on Meks.
      Ivana Cirkovic
    • WCEU 2020 recap – key takeaways from the biggest online WordPress conference June 9, 2020
      Missed WCEU 2020 and all the exciting stuff from there? Here are all the key takeaways and main points to remember so, take notes! The post WCEU 2020 recap – key takeaways from the biggest online WordPress conference appeared first on Meks.
      Ivana Cirkovic
    • How to change the WordPress username? An easy step-by-step guide May 14, 2020
      Wondering how can you change WordPress username once you set up your blog or site? Read all about it in our helpful guide! The post How to change the WordPress username? An easy step-by-step guide appeared first on Meks.
      Ivana Cirkovic

    Text

    Distinctively utilize long-term high-impact total linkage whereas high-payoff experiences. Appropriately communicate 24/365.
    /* */
    error: Content is protected !!