Reading a bank's performance: the Bank KYB case
The case: Bank KYB
Financial statements are quick to read. They are rarely understood at first glance. This exercise puts each participant in the position of an analyst who receives the accounts of an anonymised bank, with no name and no context, and has to judge its soundness before finding out who it really is.
Objectives
- Understand the ratios that measure a bank's profitability, efficiency and risk.
- Decode what those ratios show and what they leave in the blind spot.
- Take a position on a bank's soundness from limited data, as in a real situation.
Duration
Suggested duration: 45 minutes of individual or pair work, followed by 15 to 20 minutes of collective debriefing.
Here are the balance sheet and the income statement of a commercial bank, referred to here as Bank KYB. The real name, the country and the exact date have been removed. Only the financial structure is given. It is yours to assess.
Balance sheet as at 31 December N
in millions of US dollars| Item | Amount |
|---|---|
| Assets | |
| Property and equipment | 729 |
| Securities and financial investments | 120,054 |
| Net loans to customers | 74,000 |
| Cash and cash equivalents | 14,000 |
| Other assets | 3,010 |
| Total assets | 211,793 |
| Liabilities and equity | |
| Equity | 16,000 |
| Long-term debt | 22,000 |
| Customer deposits | 173,000 |
| Other liabilities | 793 |
| Total liabilities and equity | 211,793 |
Income statement for year N
in millions of US dollars| Item | Amount |
|---|---|
| Interest income | 5,673 |
| Interest expense | 1,188 |
| Other income | 1,728 |
| Operating expenses | 3,571 |
| Loan loss provisions | 420 |
| Taxes | 563 |
| Other | 13 |
| Net income | 1,672 |
Source: course document compiled by Mathias Schmit from public data (Yahoo Finance, finance.yahoo.com, accessed 13 March 2023). Rounded amounts, in millions of US dollars.
Financial statements are quick to read. They are rarely understood at first glance.
A bank's performance ratios are easily reassuring: sound profitability, efficiency within the norm, high leverage but common for a bank. They can nevertheless coexist with a major structural risk, invisible for as long as nobody looks at where the money comes from and where it goes.
This case puts every participant in the position of an analyst who receives the accounts of an anonymised bank, with no name and no context. They compute nine ratios, record how they read each one, take a position on its soundness, then find out which bank it is. The case is built on public data compiled by Mathias Schmit and ends with seven questions to ask before interpreting a bank ratio.
Who this tool is for
- Students taking an introductory course in bank analysis, whether in class or preparing for class.
- Teachers who want participants to understand the distinction between performance ratios and structural ratios through practice, rather than simply being told about it.
- Finance professionals and business leaders who review banks' financial statements as clients, investors or counterparties.
How the tool works
- Read Bank KYB's balance sheet and income statement, presented either in millions of US dollars or with total assets normalised to 1,000. Then calculate the nine ratios in the worksheet and record your interpretation of each one.
- Submit your verdict, discover the bank's identity and the timeline of events, and then explore its business model through a rate-shock simulator, a comparison of book and market values, and a true-or-false quiz.
- Compare your calculations and interpretations with the correct answers, then take away a list of seven questions to ask before interpreting any bank performance ratio.
Frequently asked questions
Do I need a code to take the case?
Yes, for the second half. The balance sheet, the nine-ratio worksheet, the hints, the guided questions and your verdict all open without asking for anything: you carry out the whole analysis. The reveal of the bank's identity, the business model, the answer sheet and the seven questions wait for a code, which the teacher gives during the session. Would you like it for a course? Write to us at formations@sagora.eu.
Are my answers saved?
Your figures, your readings and your verdict stay in your browser: nothing is transmitted to or stored by Sagora. Reloading the page loses nothing; moving to another computer does.
What prior knowledge do I need?
Being able to read a balance sheet and an income statement is enough. The formulas for the nine ratios are given.
Where do the figures come from?
From the course document compiled by Mathias Schmit from public data (Yahoo Finance, March 2023), supplemented by the Federal Reserve and Bank Policy Institute reports cited in the tool. Amounts are rounded, in millions of US dollars.