S&P Global Ratings' bank ratings criteria framework outlines the elements of an issuer's credit profile and how we assess these elements to determine the rating on an issuer. Although we consider many quantitative and qualitative factors, the following charts highlight some of the key ratios we consider in our assessments and are meant to provide additional transparency. The glossary explains the concepts and calculations of the reported metrics and ratios.
For more definitions, please refer to "Quantitative Metrics For Rating Banks Globally: Methodology And Assumptions," published on July 17, 2013.
BLAST ratio (x): Broad liquid assets divided by short-term wholesale funding
Broad liquid assets. The sum of cash, short-term interbank loans and reverse repurchase agreements and securities borrowing with banks maturing within one year, short-term reverse repurchase agreements and securities borrowing with nonbanks net of haircut maturing within one year, and securities holdings net of haircut less restricted cash.
Short-term wholesale funding. The sum of short-term interbank and debt market funding maturing within one year, repurchase agreements and securities lending, acceptances, and nonderivative trading liabilities.
Customer loans-to-deposit ratio (%): Customer loans (net) divided by customer deposits
Net customer loans. Customer loans (gross) net of loan loss reserves and net of reverse repurchase agreements and net of securities borrowing.
Customer deposits. Customer deposits net of repurchase agreements and net of securities lending.
Efficiency ratio (%): Noninterest expenses divided by operating revenue
Noninterest expenses. Includes personnel expenses, premises, other noninterest expense, depreciation and amortization, brokerage clearing and exchange fees, marketing costs, and commission expenses.
Operating revenue. Includes net interest income plus operating noninterest income.
Gross NPL ratio (%): Gross nonperforming assets/customer loans + other real estate owned
Gross nonperforming assets. Sum of nonaccrual loans, restructured loans, repossessed real estates owned, and loans over 90 days past due but accruing.
Customer loans + OREO. Loans to nonbank customers net of unearned income and net of reserves + other real estate owned.
Loan growth: Change in gross customer loans
Customer loans (gross). Loans to nonbank customers before reserves but net of unearned income.
Net interest margin (%): Net interest income to average earning assets
Net interest income. Interest income net of interest expense. May include dividend income and loan fees according to convention of the country.
Earning assets. Interbank deposits, reverse repos, securities, gross loans and leases.
Noninterest income to operating revenues (%)
Noninterest income. Total noninterest revenue.
Operating revenues. All revenues net of interest expense and nonrecurring income.
Pretax profit margin: pretax profit divided by operating revenue
Return on average assets (%): Net income divided by average assets
Risk-adjusted capital ratio (%): Total adjusted capital/risk-weighted assets
Adjusted common equity. Common equity and equity minority interests minus revaluation reserves, goodwill, other nonservicing intangibles, interest-only strips (tax effected), equity in unconsolidated subsidiaries, and tax loss carryforwards, or other deferred taxes not permitted by regulators in the U.S. We exclude all hybrid capital instruments from adjusted common equity.
Total adjusted capital. An enlarged and globally consistent definition of the amount of capital a bank has available to absorb losses. Total adjusted capital (TAC) includes hybrid capital components that are, in our view, of somewhat weaker quality than those included in adjusted common equity, our measure of consolidated core capital. This reflects our view of the equity content of hybrid capital instruments and the equity-like characteristics of preferred stock.
Risk-weighted assets. We calculate risk-weighted assets (RWA) before diversification by adding the risk-weighted exposures for credit risk, market risk, and operational risk.
Stable funding ratio (SFR) (%): Available stable funding divided by stable funding needs
Available stable funding. The sum of total equity net of intangibles, customer deposits, and long-term interbank and debt market funding including hybrid instruments with minimal equity content maturing after one year.
Stable funding needs. The sum of customer loans (net), short-term reverse repurchase agreements, and securities borrowing with nonbanks maturing within one year net of haircut, long-term interbank loans, and reverse repurchase agreements; and securities borrowing maturing after one year, securities holdings net of haircut, restricted cash, all other assets net of haircut, and off-balance-sheet credit equivalents net of haircut.
Total payout ratio: the sum of common dividends and share repurchases divided by net income minus preferred dividends
- The Spike In U.S. Repo Rates Reflects Technical Factors, A Smaller Fed Balance Sheet, And Tighter Bank Regulation, Oct. 2, 2019
- Rating Component Scores For U.S., Canadian, And Bermudian Banks (September 2019), Sept. 30, 2019
- How To Say Goodbye To LIBOR Without Creating Market Chaos, Sept. 23, 2019
- Industry Report Card: U.S. Regional Banks' Second-Quarter Profits Held Up Despite Declining Net Interest Margins, Aug. 14, 2019
- Macroeconomic And Geopolitical Headwinds Led To Mixed Second-Quarter Results, But Large U.S. Banks Should Navigate Smoothly Through The Ups And Downs Of 2019, Aug. 13, 2019
- Comparative Statistics: U.S. Banks (April 2019), April 11, 2019
- Optimism And Growth Aspirations Are Fueling An Increase In U.S. Bank Mergers And Acquisitions Despite A Maturing Credit Cycle, Oct. 15, 2018
- Funding Has Improved For Most U.S. Banks In Recent Years, But Outliers Deserve Further Consideration, Jan. 23, 2017
This report does not constitute a rating action.
|Primary Credit Analyst:||E.Robert Hansen, CFA, New York (1) 212-438-7402;|
|Secondary Contact:||Jacob Dabrowski, New York;|
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