Aljazira Bank and Alahli Bank

...

Bank 48.21% 46.74% 44.81%

Net profit ratio:

The Net profit ratio is a popular profitability ratio that shows the link between net incomes and net sales. According to the table of the net profit, in 2013, 2014 and 2015 the ratio of alahli Bank was better than the Aljazira Bank, in 2014 aljazira bank was decreased in net profit ratio but in the last year aljazira Bank was improve and increase the net profit ratio that increased the ratio from 35.36% to 44.01%, while alahli Bank performance was decrease around 4% in the 3 years, but still in generally the net profit ratio of alahli bank more than aljazira bank.

Expenses Ratio:

=(Total Expense )/(Average Total Assets) 2013 2014 2015

Aljazira Bank 2.91% 5.98% 3.35%

alahli Bank 2.24% 1.58% 2.50%

The Expense ratio is the total expense that involved in operates the corporate that means the lower ratio leads to get more profit. On the other hand, the higher ratio leads to get less profit (Ycharts). According to the table of expense ratio, alahli Bank managed their expenses better than Aljazira Bank, while Aljazira Bank did not manage their expenses and it shows on the higher ratio of expense, moreover Alahli Bank is more profitable than Aljazira Bank.

Net Interest Margin:

=(Net Interest Income )/(Average Earning Assets) 2013 2014 2015

Aljazira Bank 2.67% 2.86% 2.91 %

Alinma Bank 3.25% 3.03% 2.95%

The Net interest margin (NIM) is a ratio that measures how a corporate successful in investing its funds in other word, it is a measure of the differences between the interest income generated by financial institution and the interest amount that paid out to lenders (Investopedia, Net Interest Margin). From to the table of net interest margin, show that alahli Bank in 2013 used generate net interest margin more than the Aljazira Bank, but Aljazira bank could increase in the net interest margin in 2014 and 2015, while alahli has decreased in 2014 and in 2015. Therefore, Aljazira Bank was managed the net interest into the current assets, while Alahli didn’t manage their net interest margin, however in general alahli bank was better than aljazira bank.

Spread:

=(Interest Income )/(Average Earning Assets)-(Interest Expense)/(average Interest-Bearing liabilities ) 2013 2014 2015

Aljazira Bank 6.45% 6.56% 6.19%

Alahli Bank 7.15% 6.46% 5.37%

The Spread Interest is the variation between the averages borrowing rate and the average lending rate for a bank or other financial institution, in addition, Changing in the spread are a showing of profitability, as the spread are where banks can make their money (Term). From to the table of spread, that shows alahli Bank in 2013 used generate interest income more than Aljazira Bank, but Aljazira bank had increase spread of interest in 2014, while alahli bank had decrease in 2014. In 2015 both of the banks had decrease because they generate interest income less than the previous years.

Efficiency Ratio:

=(Non-Interest Expenseces )/(Net Interest Income + Non-Interest Income) 2013 2014 2015

Aljazira Bank 64.75% 74.45% 56.05%

alahli Bank 45.88% 48.42% 44.63%

The Efficiency ratio is a quick and simple measure of the bank’s ability to turn their assets to revenue that are measure the expenses to revenues, moreover this ratio usually used for banks (Answers). Aljazira Bank is more Efficiency than alahli because aljazira Bank in the 3 years need around 0.64 to 0.56 of their assets to make one S.R, while Alahli Bank needs around 0.45 to 0.44 S.R of their asset to make one S.R. Therefore, Alahli bank has not an efficiency management because the cost to generate one S.R is more than Bank Aljazira to make the one S.R, that’s because the huge amount of assets Alahli bank has.

Burden:

=(non Interest expense-Income )/(Average Earning Assets) 2013 2014 2015

Aljazira Bank 2.91 % 3.91% 1.24%

alahli Bank 0.50% 0.64% 0.83%

The Burden is (the non-interest expense minus non-interest income over the average earning assets), and it is important factor that shows you the ability to take a loan, moreover when the ratio get down that means the banks in the safe side. Form the table of the Burden; Alahli Bank manages the burden better than Aljazirs Bank, which means Alahli bank can take loan more than Aljazira bank that because the high amount of non-interest income.

Conclusion:

In conclusion, Aljazira and Alahli banks both have their own way of managing their profits and controlling their banks. Alahli bank’s net profit gained much more than Aljazira bank. Also, Alahli bank’s approach of using their resources is more sophisticated than Aljazira bank’s approach in which they are more profitable. Alahli bank is also dominant in the field of assets and equity than Aljazira bank. On the other hand, Aljazira bank is more efficiency than Alahli due to the huge number of assets Alahli bank has. Which brings us to conclude that Alahli bank is more profitable with higher assets than Aljazira bank.