THE MASTER'S RESEARCH
PAPER:
“BANK PROFITS
MANAGEMENT”
(BASED ON THE JOINT STOCK COMPANY
“ОТP BANK”)
Naumenko T. B-09
Scientific supervisor:
S.A. Kuznetsova, Doctor of Economics, Full Professor,
Head of the International Finance and Banking Department
СONTENT :

Chapter 1 Theoretical basis of yield management of the bank.
1.1. The essence of managing the Bank's profitability
1.2. Methodological evaluation instruments bank profitability: Ukrainian and
international experience
1.3. Strategies for bank profitability
1.4. Evaluation of the profitability of banks of Ukraine

Chapter 2 Analysis of yield management of JSC "OTP Bank"
2.1. Organizational and economic characteristics of JSC "OTP Bank"
2.2. Assessment of the profitability of JSC "OTP Bank"
2.3. Evaluation of the effectiveness of management profitability JSC "OTP Bank"

Chapter 3 Ways to improve yield management of JSC "OTP Bank«
3.1. Organisational measures to improve the profitability of JSC "OTP Bank"
3.2. Directions improve profitability analysis of JSC "OTP Bank"
3.3. Model Application Dupont (Du Pont) in JSC "OTP Bank«

Chapter 4 Health and safety in emergency situations JSC "OTP Bank"
4.1. Public works in JSC "OTP Bank"
4.2. Security in emergencies in JSC "OTP Bank
2
The
purpose of the research is to develop measures to improve
JSC "OTP Bank" profits management.
Tasks:
- to examine the nature of bank profits management;
- to consider tools of bank profits management;
- to conduct a critical review of bank profits management;
- to analyze the performance of the bank during the period of 20092013;
- to develop ways of bank profits management improving.
The Object of the investigation is the bank profits.
The Subject of the investigation is the bank profits
management.
 The Basis of investigation is JSC "OTP Bank"
3

The profitability of the bank is
the relative value of enterprise
management in terms of profit.
4
The main profitability indicators
1.Return on assets(ROA)
2.Return on equity(ROE)
3.Spread
4.Interest margin (profit)
5.Net interest margin
6.Non-interest margin
7.Net non-interest margin
8.Net profit by 1 shares
9.Net operating margin
10.Profit before tax
5
Return on assets
Return on equity after tax
Use of assets * Margin of profit
Return on equity before tax * tax rate
Net margin / equity quota
Average Assets / Total
Revenue
Net income / total
income
Interest income on loans +
Risk Margin +Gross Profit Margin
Investments interest +
payment services + other incomes
Margin Gross Income - Gross margin requirements
Cash and necessary payments +
Gross margin percent +
commission margin +
trading margin +
Personnel costs
margin + material
costs margin
ekstra margin
investment (taxable and taxfree) +
loans (commercial, consumer,
farmer, mortgages and other
loans) +
other assets
Figure 1. European model of calculation and
analysis of bank profits
Total revenue interest expense (deposits, non
deposit) Operating and other expenses
(salary, relocation costs, provisions
for losses on loans and other
expenses) income taxes
Figure 2. American model of calculation and
analysis of bank profits
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Bank profits management
strategies
Aggressive
strategy
Defensive
strategy
maximization of
service by stimulating
the expansion of
branch network in
order to increase profit
entity
cost control with the
purpose of further
increase of the bank's
profit as the difference
between the absolute
value of revenues and
expenses. This strategy
is effective in the long
term
Diversification
strategy
combination of aggressive
and defensive strategy, so
called "medium", which
allows to correlate
advantages and
disadvantages of both
options of bank profits
management strategies
Figure 3. Types of bank profits management
strategies
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Table 1 Indicators of Ukrainian banks profits for the period
of 2008-2013,%.
№
Indicator
01.01.
2008
01.01.
2009
01.01.
2010
01.01.
2011
01.01.
2012
01.01.
2013
1
Return on assets
1,50
1,03
-4,38
-1,45
-0,76
0,21
2
Return on Equity
12,67
8,51
-32,52
-10,19
-5,27
1,44
3
Net interest margin
5,03
5,30
6,21
5,79
5,32
4,08
4
Net spread
5,31
5,18
5,29
4,84
4,51
3,49
8
Figure 4. Results of JSC "OTP
Bank" for 2011
Figure 5. Results of JSC
"OTP Bank" for 2012
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Table 2
Indicators of JSC "OTP Bank“ profits, %
Indicator
2010
2011
2012
Changes (+;-)
Return on Assets (ROA)
0,25
0,15
0,89
0,64
Return on equity (ROE)
12,55
12,09
6,35
-6,20
Interest margin (interest
income)
2005390
1830174
1634257
-371133
Non-interest margin (noninterest income)
255241
313223
449484
194243
Net interest margin
8,13
8,12
7,92
-0,21
Net spread (spread profit)
SPREAD
0,19
0,17
0,20
0,01
10
Figure 6 Return on assets of
JSC "OTP Bank"
Figure 7 Return on Equity
of JSC "OTP Bank"
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1. Calculation of the actual values ​of the
coefficients of return based on the balance
sheet and other forms of annual and quarterly
reports;
2. Comparative factors evaluation with their
levels in the previous years and quarters;
3. Identifying the main trends in the
dynamics of the coefficients (increase or
decrease);
4. Identifying factors that have influenced
the established tendencies in factors;
5. Evaluation of factors from the standpoint
of balance sheet liquidity and banking risks;
6. Recommendations to improve the bank
profits or ensure its stability in the new year.
Figure 8. Stages analysis of JSC
"OTP Bank" profits
Profit management
Income and
expenses
management
Analysis
of
income
Analysis
of costs
Assets
managem
ent
Liability
managem
ent
Pricing
Policy
Profitability
management of
individual units
functioning
Money back
management
Liabilities
policy
management
Turnover
of
resources
Analysis
of
financial
ratios
Development
of business
plans
Politics of
effect
(Marketing)
Figure 9. JSC "OTP Bank“
returns management process
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Increased profitability of the bank
Planning and estimating of
income yield
Developing a plan of emergency
funding
Improving of marketing policy
Determination of the usage of all
possible sources of funding
Improvement of interest policy
Reducing costs, to create banking
services
Improving risk management
Allocation of economic capital at risks
Ensuring the growth of non-interest income
The increase in bank profits
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Figure 10. Scheme of common organizational measures to
improve JSC "OTP Bank“ profits
The DuPont Model
Two-factor model
ROE = Profit / (Capital Bank) = ROA * LR
= profit / (assets) * (assets) / (Capital
Bank)
Three-factor model
ROE = Profit / (Capital Bank)
=PM*ROA*LR = profit / income * income
/ assets * (assets) / (Capital Bank)
Figure 11. Components of the DuPont model
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Table 3
Factor ROE of JSC "OTP Bank" by the DuPont model
Factor
Value
Two-factor model
Net income assets
2%
Multiplier of capital
98%
Three-factor model
Profit margin (total return)
0%
Return on (reversibility) assets
11%
Multiplier of capital
89%
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Thank you for your
attention!
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