Okay, so now we're gonna build a dashboard of ratio analysis.

And this is really important to sense check the model.

You wanna make sure that the outputs in the model realign with market norms.

So the first thing we're gonna look at is tangible equity.

I'm gonna go into the historic years, and I'm gonna say, because I'm gonna go and grab the equity from the balance sheet, but that's not the tangible equity, that's the shareholder's equity from the balance sheet.

So I'm gonna subtract from that, the sum of the intangibles and the goodwill and the deferred tax assets.

That gives me the tangible, I'm gonna copy that out to the right, just really into our first projected period.

Okay, let's go a little bit further down.

Now we're gonna think about profitability.

So I'm gonna calculate return on tangible equity.

If I say equals, I'm gonna go grab from the income statement.

In the bottom of the income statement, I'm gonna grab the projected recurring net income, and I'm gonna divide that by the average tangible equity.

I'm also just gonna calculate the standard return on equity.

If I say equal will grab the recurring net income, which I know is in E 82 from the calculation above.

And I'm gonna divide that by the average equity value.

If I go up to the balance sheet, we can grab that equity value straight from the balance sheet from the prior year.

And this year we're also gonna grab a look at the net interest margin, so we can get this in prior years as well as this year.

If I say equals, let's go and grab from the income statement, the net interest income, and let's divide that by further up the model, the interest earning assets, and we can copy that out to our projected year.

If we scroll down, we should probably think about the efficiency of the business, the cost income ratio.

So I'm gonna go again into my historic year.

I'm gonna say equals. And I'm gonna go and grab a look at the income statement here.

We're gonna go and grab the operating expenses, which is in C 73, and I'm gonna divide that by the total income, which on the screen I can see is in C 71.

And we'll copy that out to the right to our first projected year.

It's also really important when we're doing analysis to make sure that our model assumes a sensible loan to deposit ratio.

And so in row 134, I'm gonna say equals.

And from the balance sheet, I'm gonna go and grab the The loans and advances to customers in E 87.

And I'm gonna divide that by the customer deposits, which you can see on the screen is in C 97.

So I'm gonna type that in C 97.

We have a 75% loan to deposit ratio.

We should also try and track high quality liquidity.

And so what we're gonna do is we're gonna go and grab open bracket the high quality liquid assets.

So I'm gonna go and grab the cash and balances at central banks.

And I'm also gonna add to that the available for sale financial assets, they're also high quality.

Now I can see that those are in C 88.

I'm gonna close a bracket on that and I'm gonna divide that by customer deposits.

I can also see that's on the screen.

Customer deposits are in C 97.

It's obviously really important from a regulatory point of view that we model the bank having sufficient high quality liquid assets relative to those deposits.

Let's think about asset quality.

So what we're gonna look at is the loan loss relative to the cost of risk ratio on a bips basis.

I'm gonna say it costs, and I'm gonna grab 10,000, which I'm gonna just hard coded.

And I'm gonna multiply that by gonna go up the model and grab the provision for credit losses.

And we're gonna divide that by the average loans and advances to customers.

And I'm gonna multiply that by minus one just to get that in the right format.

Let's copy that out to the right.

Okay, finally, we're gonna think about capital and we're gonna summarize some of the valuation work that we've done already.

So let's go and grab the common equity tier one ratio.

Now, that was an input into the model, but we're just gonna check to make sure the calculation we completed was correct.

So I'm gonna go up the model and in row 58, I'm gonna go and grab the estimated common equity tier one.

And I'm gonna divide that by the risk weighted assets, which we can see is in C 52, we've got 14%.

No surprises there.

'cause this a say that wasn't input into the model.

We should also look at the tangible equity and divide it by the total assets, Tangible equity we've already calculated above.

So I can go and grab that from row 123, and I'm gonna divide that by the total assets on the balance sheet.

And those total assets are in row 94.

Let's copy that out to the right.

And then we've really done work on valuation already, but let's just summarize what we've done.

So I'm interested in looking at the non-interest income share of total income.

If I say, because I'm gonna open a bracket because we wanna go and grab that non-interest income.

And I remember that there were two line items here.

If we go up and have a look at the income statement in row 69, we've got net fee and commission income.

And if I add to that in cell C 70, we've got other operating income.

Now let's close a bracket on that and divide it by the total income, which is in C 71.

We can see that on the screen.

So we just wanna make sure that the way we've modeled the bank, the non-interest income isn't too great or too small relative to the total income of the business.

So what we're really checking here is that the non-interest income share of total income isn't too great or too small.

We want it to be realistic based on market norms.

Final thing we're gonna do is we're gonna go and look at the price to tangible book. We've done that calculation already.

If we say equal, we can go and grab that number from our dividend discount model work above.

And that is the end of our ratio analysis.

And based on market norms, we're really just checking to make sure that these numbers are sensible and reasonable.