An empirical study on measuring efficiency and profitability of bank regions

Abstract

When bank managers are asked to comment on the bank’s performance over the past year, most would quote either their bank’s return on equity or return on assets. If these measures were higher than those of their peers, the bank is referred to as a high‐performance bank. The ratios involved are financial ratios and the main problem with this approach is its reliance on comparable ratios. To find suitable comparable standards (norms) is quite difficult, and when the standard (norm) is not appropriate, the comparison may mislead the analyst. A measurement tool that can compensate for the weaknesses in financial ratios is therefore needed. One such tool that can be used to measure bank performance is Data Envelopment Analysis (DEA). The objective of this article is to draw a comparison between the results of financial ratios (as a conventional performance measurement) and the results obtained by means of DEA with regard to the performance evaluation of the ten regional offices of one of South Africa’s larger banks.

Comparative Analysis of Islamic and Conventional Banks in the UAE During the Financial Crisis

“…Using ratios as financial performance indicators for banks is a commonly used tool in the financial studies. The common way of measuring the financial performance of a bank is to calculate its ratios and compare it with the past to make interpretations (Cornett et al, 2011) and Oberholzer and Westhuizen (2004). The following ratios will be used as a framework for analyzing;…”

Corporate Governance and Financial Performance of Bank in Asian Regions and Recommendations

“…Meinster and Elyasiani (1988) indicated that several financial ratios were selected to assess the financial performance to asset management ratios, expense and profitability and risk management ratios. Oberholzer and Van Der Westhuizen (2004) found the efficiency and profitability of banking in South Africa, the results was an efficiency measure existed relationship between profitability and efficiency ratios. Financial ratios could be used to identify a bank's specific strengths and weaknesses as well as providing detailed information about bank profitability, liquidity and credit quality policies (Hempel et al, 1994;Dietrich, 1996).…”

“…It indicated evaluate banks past performance which could help to plan for bank's future performance (Hempel et al, 1994). It was common to use ratios to measure the financial performance and compare with the past to make interpretations (Oberholzer and Westhuizen, 2004). The operating efficiency had an affect on the bank size.…”

Financial Performance of UAE Banking Sector- AComparison of before and during Crisis Ratios

“…There are many ways in which the Liquidity, Leverage and profitability of the banks can be studied. Most common way of measuring the financial performance of bank is to calculate its ratios and compare with the past to make interpretations (Oberholzer and Westhuizen, (2004) [14] . Moreover using ratios as financial performance indicator of banks have been highly and commonly used in the banking literature.…”