Contd....
these banks would have passed the stress
test with ease and thus place them on par
with international banks. Based on the
results, it would appear 2013 was a positive performing year for these 7 banks
and a good turn around for their future
challenges.
We are almost into the third quarter of
2014 let’s see what the full financial year
will bring. Hopefully we should be reporting more profits, less expenditures
and increased earnings for all financial
institutions operating within the banking
sector.
Bank Award, Mr Kunle Sonola; Managing Director GTBank Kenya, receiving African Bankers Award for GTB
Analysis & Comments
Chart 5 : Z -Test Scores For Banks in Sierra Leone Based on 2013 Financial Statements
Analyis & Comments
Skye bank scored just below the critical
1.24 benchmark with UTB and Standard
chartered almost neck on neck for second
position. Since the global financial crisis
that occurred over the past few years, new
measures by Central Banks and policy
makers are ensuring that banks are adequately capitalized, this measure ensures
that potential defaults can be identifies
quite early and the risk of collapse averted. The Z-score formula is used to predict
whether a firm will go into banktrupcy
within two years based on a number of
variables. In simulations and tests the
Altman Z-Score was found to be 72%
accurate in predicting bankruptcy two
years before the event.
Chart 6: Return on Capital Employed for Retail Banks in Sierra Leone 2013
Analysis & Comments
Shareholders and Management at GTB,
UBA and ECO must be quite pleased
with such performing results in terms of
Returns on capital employed (ROCE).
Managers’ own performance is often
evaluated by shareholders in terms of the
company’s overall return on capital employed. these points are relatively insignificant when compared to two further
difficulties. The first concerns the fact
that accounting profit rather than cash
flow is used as the basis of evaluation.
This is an entirely incorrect concept to
use in a decision-making context. Accounting profit is a reporting concept;
it is a creation of accountants. A capital
investment decision is an economic or
resource allocation decision and the economic unit of account is cash, because it
is cash that gives power over resources.
The other criticism of ROCE is that it
also ignores the time value of money.