Question

Bank A has a higher ROA than Bank B. Both banks have similar interest income to asset ratios and noninterest income to asset ratios. We know that (I) Bank A has a higher profit margin than Bank B (II) Bank A has a higher AU ratio than Bank B (III) Bank A must have a higher PLL/OI ratio.

Answer 1

The answer is: (I) Bank A has a higher profit margin than Bank B

Step-by-step explanation:

A bank's ROA (Return on Assets ratio) measures the bank's return on investment. ROA ratio is determined using the following formula:

• ROA = (net income / total assets) x 100

ROA ratio is the most common benchmark used to compare bank profitability, since it is so easy to use.

So if Bank A has a higher ROA than Bank B, then Bank A has a higher profit margin than Bank B.