The balance sheet of KriBank starts with an allowance for loan losses of $2.66 million. During the y

2022/3/29 23:27:47

编程Tag： YEAR loan million losses Allowance worthless KriBank

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The balance sheet of KriBank starts with an allowance for loan losses of $2.66 million. During the year, KriBank writes-off worthless loans amounting to $1.68 million, recovers $0.44 million on loans previously written off, and charges current income for $2.96 million provisions for loan losses. Calculate the end of year allowance for loan losses.

a. Calculate the end-of-year allowance for loan losses.

b. X-Bank reported an ROE of 15% and a ROA of 1%. How well capitalized in this bank?

answers

	Computation of end of year allowance for loan losses
a		$ in Milion
	Opening allowance for loan losses	2.66
	Less : Wortless Loan Writen off	1.68
	Add : Recovery of Loans written of Previously	0.44
	Add : Current year's provisions for Losses	2.96
	Year end allowance for Loan Losses	4.38

b	ROE=ROA×EM
	0.15=0.01×EM
	EM=15=assets/equity
	So Equity/Assets=6.66%

	The Bank is well capitalised

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The balance sheet of KriBank starts with an allowance for loan losses of $2.66 million. During the y

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