Profitability

Return on equity 2007 18.99% 18.64% 0.35% ROE 2008 12.53% 9.46% 3.07% 2009 9.08% 6.84% 2.24% 2010 13.19% 10.85% 2.34% 2011 14.13% 12.37% 1.76%

ANZ NAB difference

ROE
20.00% 15.00% ANZ 10.00% 5.00% 0.00% 2007 2008 2009 2010 2011 NAB difference

Comparison of Current Year Performance (fiscal year 2011) In the latest fiscal year of 2011, comparing the two banks performance based on profitability ratios, it appears ANZ is performing better than NAB. Looking at the return on equity (ROE) table, in 2011, ANZ had a higher ROE of 14.13% compared to NABs 12.37%. This means that ANZ was capable in providing a 1.76% higher return to its investors that year for each unit of equity they contribute.

From the financial statements of the latest fiscal year of 2011 ROE= Net income/Total equity capital It can tell us that how much return investor receives for each unit of equity they contribute. From the graph below, we can see that ANZ and NAB have similar ROE in 2007. Both firms have a sharply decrease in return on equity and start to recovery after 2009. In general, ANZ have a higher return on equity comparing to NAB. The different showings by the green line tell us that different between two firms return on equity is quiet constant.

ROA= Net income/Total assets It can tell us that the net income generate per unit of asset. From the graph below, we can see that ANZ always have a higher return on asset than NAB. Both banks have the highest return on asset in 2007 and start to decrease after 2007 and reach a trough before their recovery period in 2009.

Moreover, we can find that the different between two banks return on asset is quite constant from 2007 to 2011.

Equity Multiplier
25.00 20.00 15.00 10.00 5.00 0.00 2007 2008 2009 2010 2011 ANZ NAB

EM = Total assets/Total equity capital It can tell us that how much assets are funded by equity capital. The higher the ratio, the more debt the bank is using to fund the assets. From the graph below, we can see that NAB always has a higher equity multiplier than ANZ from 2007 to 2011. Both banks have the highest equity multiplier in 2008 and then start to decline until 2009 and have a slightly increase from 2009 to 2011.

Asset Utilization
0.15 0.1 0.05 0 2007 2008 2009 2010 2011 ANZ NAB difference

AU= Total operation income/Total assets It can tell us the amount of interest and nom interest income generated per unit of asset. The more income returns per unit of asset, the higher the profitability of the bank. From the graph below, we can see that ANZ always have higher asset utilization than NAB. ANZ asset utilization is the highest in 2007 and decline gradually until 2011. For NAB, its asset utilization decrease sharply from 2007 to 2008 and increase a little bit from 2008 to 2009 and remain constant form 2009 to 2011.

0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% 2007

Net charge off to net loan

ANZ NAB

2008

2009

2010

2011

Net charge off to net loan= net charge off/ average loan It can tell us the amount of loans that we are not except to receive per unit of average loans. The higher the net charge off ratio, the more the loan we expect we cannot collect. From the graph below, we can see that NAB always have a higher net charge off to net loan then ANZ. Both banks net charge off to net loan increase from 2007 to 2009. ANZ net charge off to net loan started to decrease from 2009 onwards, while NAB still increasing. There are no big different of net charge off to net loan between 2007 and 2009. However, the gap started to widen since 2009 while ANZ decreasing at a faster rate than NAB. Overall NAB has more loans that cannot be collected than ANZ. To conclude, it is more profitable to invest in ANZ then NAB as ANZ has higher ROA, ROE, EM, AU and net charge off to loan then NAB, which indicate that ANZ have better management control of their business.