Measuring and evaluating the performance of the two major banks in Malta : a comparative analysis between HSBC Malta Bank plc. & Bank of Valletta plc. in the years 1998 to 2003

Abstract

A bank's balance sheet and income statement are valuable information sources for identifying risk taking and assessing risk management effectiveness. Although the amounts found on these statements provide valuable insights into the performance and condition of a bank, financial analysts, bankers and bank supervisors typically use data from them to develop financial ratios to evaluate bank performance. This is done to provide perspective and facilitate making comparisons. The opening aim of this study was to give a general overview of the literature relating to the ways bank performance is measured and evaluated. Consequently, this study takes a look at the local scenario and analyses the performance of the two major banks in Malta. The study consisted mainly of obtaining various profitability ratios for both banks, and then comparing the results obtained against one another. There are literally hundreds of useful financial ratios one can use to evaluate bank's performance. However, in most instances, one only needs a few basic ratios to identify fundamental performance issues and help formulate questions regarding any underlying problems. Furthermore, the share price of banks was observed and compared to the results obtained when analyzing the financial ratios and the relationship between the two was dismissed In view of this relationship, various standing points, of different experts in the field were looked into and debated.