Assess the bank’s risks One of the biggest risks a bank has is losing money on an outstanding loan. The lower the efficiency ratio, the more revenue a bank theoretically has. Efficiency ratio: the efficiency ratio tells you how much revenue a bank uses towards its operating costs. The higher the ROA, the more profit a bank makes from its assets.
Return on assets (ROA): the ROA tells you the overall profit a bank makes in relation to its assets. The higher this metric, the more efficient a bank is using its stakeholder’s money.
Return on equity (ROE): this metric tells you how much profit a bank makes from its shareholder’s equity. To do that, you can use the following metrics.
Look at the bank’s profitability First, you want to be sure the bank is even profitable. Over time bank stocks have been relatively safe investments, as they offer products and services that most people need.
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