Question

- for the purpose of analysing a bank's performance, what is the meaning of "net loans&leases/core deposits ratio" and "net noncore funding dependence?".

- what is the reasonable ratio number (for a commercial bank) for each ratio previously mentioned?

Answer 1

Net Loans & Leases:

It is calculated as total loans and leases minus to the accumulated loss allowance for bad debts.The core deposit ratio indicates in which extent the organisation has backed up the loans into the business. It will estimates the bank's non collectible amount on loan and lease. In order to reduce the loan & leases value to the amount which the bank expects to receive.

Core deposits ratio:

These deposits are stable from the source of funds on lending a bank. It measures the cost prediction, customer base and measurement on cash flow from balance sheet. It is calculated as bank's total amount of loans divide by total amount of deposits in the same period.

Net non core funding dependence:

The Non-Core Funding Dependence is an average proportion of possibility liquidity. This proportion estimates the connection between long term procuring resources and net short term assets. Long term procuring resources are protections which full grown past one year and all credits. Net momentary assets are enormous Cash of Deposits,outside stores, sustained assets acquired, repo's and different borrowings developing inside one-year, net of transient speculations. A standard guideline is that the lower the non core  proportion the better. At the point when the bank's momentary speculations surpass its transient borrowings this proportion will be negative and is generally viewed as something to be thankful for since it mirrors a more prominent ability to obtain extra resources and liabilities. This depiction proportion uncovered the dependence on "non-center" sources to finance the bank's long haul resource base.

It is calculated as Non core liabilities minus short term investments divided by long term assets.

The reasonable ratio number is in between 80% to 90% on net loans and leases

For core deposit ratios it would be 65% to 75%

For net non core funding dependence 50% - 60%