Open AccessBank Efficiency And Financial Ratios: Rating The Performance Of The Four Largest South African Banks
Author(s) -
Gert van der Westhuizen
Publication year - 2013
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v30i1.8286
Subject(s) - net interest margin , financial ratio , data envelopment analysis , return on equity , allocative efficiency , profitability index , return on assets , econometrics , economics , equity (law) , business , margin (machine learning) , actuarial science , finance , statistics , mathematics , computer science , neoclassical economics , machine learning , political science , law
Data Envelopment Analysis (DEA) in conjunction with financial ratios is used to estimate and compare the performance of the four largest South African banks over the period 2001 to 2011. DEA is used to estimate the relative technical, allocative, cost and scale efficiencies and compare these estimates to certain financial ratios published by the banks in their financial statements. These ratios include return on equity (ROE), return on assets (ROA), net interest margin (NIM), impairment losses, etc. The results obtained from the efficiency estimates and the financial ratios are used to rate the banks according to these performances. The rating differs depending on which performance measure is applied. A combination of these measures was necessary to determine the best and the worst performing bank. From the results obtained it appears that profitability and efficiency are two sides of the same coin.