Rural Bank of Suarez

Now that you have learned about RBS background, corporate structure, risk culture, and credit policies. Let’s take a look into the financial health of RBS.

We will use the following to assess financial position and performance of RBS

• Statutory & Regulatory requirements

• Capital Adequacy requirement
• Minimum capital requirement

• Financial ratios

• NIM
• ROA
• ROE
• CR
• ER
• Debt-to-Equity ratio

But before that lets take a look at the composition of RBS revenue:

[pic 1]

Now I have a question, what do you think will happen if majority or all of the borrowers from the “agricultural loan category” defaulted?        

Will it cripple the normal operations of RBS?

That’s what happened in the past when RBS almost succumbed into a financial difficulty brought about by the government’s lending program a.k.a Masagana 99. During that time, RBS like many other banks, accumulated huge amount of uncollectible accounts that almost brought down RBS had BSP did not intervene. Fortunately and as we all know the BSP allowed RBS to carry over these uncollectible accounts in its books and gradually write these off against whatever profit RBS was able to generate.

Now moving on, let’s take a look if RBS was able to meet the statutory requirements the by the BSP.

Capital Adequacy requirement

Measure of a bank's capital and financial strength.  It is expressed as a percentage of a bank's risk weighted credit exposures. The BSP mandates that CAR should not be less than 10%. in 1994 and 1995, RBS was able to meet this requirement.

[pic 2] [pic 3]

Prescribed Minimum level of Capital  

[pic 4]

[pic 5] [pic 6]

Net interest margin is a performance metric that examines how successful a firm’s investment decisions are compared to its debt situations. RBS had 8.89% and 9.59% Net Interest Margin in 1994 and 1995 respectively compared with 5.76% .This was a good sign because it indicates that RBS was able to generate more money from its borrowers in the form of interest than what it paid to its depositors.