Deutsche Bank

Interpretation:This ratio indicates the interest paying capability of the bank and ideal Ratio is 6 to 7 times. So it can be inferred that the interest paying capacity of the firm is moderate. But it has increased significantly over the years.

Operating Ratio

Interpretation:Operating Ratio is a measurement of the efficiency and profitability of the business enterprise. The ratio indicates the extent of sales that is absorbed by the cost of goods sold and operating expenses. Lower the operating ratio, the better it is, because it will leave higher margin of profit on sales. It is evident that Deutsche Bank has significantly reduced their operating ratio thus increasing their margin.

Return on Capital Employed (ROCE) = (NOPAT / Capital Employed)

Interpretation

Since profit is the overall objective of a business enterprise, this ratio is a barometer of the overall performance of the enterprise. It measures how efficiently the capital employed in the business is being used.

Return on shareholders =(Net profit / Shareholders funds) *100

Interpretation:

This Ratio indicates what amount of return has been given to the Share holders of the firm which help in building the good will firm.Return on Shareholder’s Capital has seen an increasing trend in Deutsche Bank.

Interest expense ratio= (Interest expense / Gross Income) * 100

Interpretation:This Ratio indicates the Ratio of Total Interest Expenses to the Income so that we can know about profitability of firm.

Net profit ratio = (Net profit / Net income) * 100

Interpretation:

This Ratio measures the rate of net profit earned on sales. It helps in determining the overall efficiency of the business operations. An increase in the ratio over the previous year shows improvement in the overall efficiency and profitability of the business. Deutsche Bank shows an increasing trend for the Net Profit Ratio.

Operating profit ratio= (Operating profit / Income) * 100

Interpretation

Deutsche bank maintains a high operating profit ratio showing that the operating expenses are lower.

Return On Asset

Interpretation

An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings.

CAMELS Analysis of Deutsche Bank

Capital Adequacy

Capital Adequacy Ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. 

Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading, and tier two capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors.

Asset Quality

Non-performing asset ratio: The net NPA to loans (advances) ratio is used as a measure of the overall quality of the bank's loan book. An NPA are those assets for which interest is overdue for more than 90 days (or 3 months). Net NPAs are calculated by reducing cumulative balance of provisions outstanding at a period end from gross NPAs. Higher ratio reflects rising bad quality of loans. 

Management Quality

Firstly, Deutsche Bank has a strong clearing business, with a strong technology base with high resilience and critical volume. Having established this framework, we are then in a position to flex solutions according to individual customer needs, whilst still leveraging this robust framework. The management of Deutsche Bank has extraordinary quality which is evident by the various awards it received last year. In the recent Leader Awards by Greenwich Associates, Deutsche Bank was placed top in the Quality Awards for Cash Management in Asia.

Earnings

The earnings of the banks have risen steadily in the past 4 years in India.

Liquidity

Liquidity for a bank means the ability to meet its financial obligations as they come due.  Bank lending finances investments in relatively illiquid assets, but it funds its loans with mostly short term liabilities.  Thus one of the main challenges to a bank is ensuring its own liquidity under all reasonable conditions.

Deutsche Bank maintains a non statutory liquidity ratio above the regular SLR as mandated by RBI.

Sensitivity

Assets held by a bank that are vulnerable to changes in interest rates. This change can occur either when the asset matures or when it is repriced according to an index rate. The value of these assets is adjusted according to the rise or fall of a published rate or index.

There are several types of interest sensitive assets such as adjustable rate mortgages (ARMs) and variable rate consumer and demand loans. The benchmarks that their pricing adjustments are tied to, can include the 6-month T-Bill rate, the LIBOR and the prime rate. The sensitivity of these assets to interest rate changes can negatively affect the customers more than the bank itself.

Future Plan of Action

From the Analysis of the Deutsche bank financial statements, the following is suggested-