Question

Why should banks be concerned about their level of profitability and exposure to risk? Compare suncorp profitability with peer group mainly Return on Assets and Return on Equity? How do you see the level of suncorp bank(ausralia)  profitability compared to its peer group?

Answer 1

Banks should always be concerned about their level of profitability and exposure to risk because profitability and risk are always major element of operations of bank because they should always be trying to enhance their profitability after undertaking each of their activities.

Banks should be trying to always uplift the level of profitability as it will provide additional strength to the bank at the time of adverse economic situations and they should always try to lower their risk by enhancing the overall quality of assets in the books of accounts because assets in books of account will be always helping the bank in order to help from any downside risk and they will able to survive through adverse economic scenario so they should properly analyse their risk associated with various loans and their risk weighting should be properly assigned so that they can proactively manage the fluctuations of these loans during adverse economic cycles.

Suncorp bank has been able to perform consistently when it will be compared with the industry standard because it has been able to maintain the return of the Assets of around 8%, which is a significant higher profitability if we are concerning about the commercial banking space because the rate of growth is very lower as these banks are already expanded towards their domestic territory and their highly dependent upon the policies of the Reserve Bank of Australia so during the times of coronavirus crisis also this bank has been able to sustain through down cycles of the Global world and it can be said that this company has also a better prospect ahead as it is able to clock double digit growth and it will enhance the sustainability of the bank in the long run.