Bank EVA index is the EVA management used by banks. EVA management, also known as economic added value, is a set of financial management system, decision-making mechanism and incentive reward system based on the concept of economic added value, which was put forward and implemented by Stern Consulting Company of the United States in 1982.
EVA is a financial evaluation method of enterprise performance based on after-tax operating net profit and the total cost of capital investment needed to generate these profits. The economic added value created by the company every year is equal to the difference between the net operating profit after tax and the total capital cost. Capital cost includes debt capital cost and equity capital cost.
In China, enterprises and banks are no longer strangers to EVA. 20 10 state-owned assets supervision and administration commission (SASAC) generally implements EVA assessment in central enterprises across the country; As early as five years ago, China's banking industry began to introduce EVA to evaluate the performance of operating institutions, and it was widely used in resource allocation. However, our understanding and research on EVA is not enough, and its practical application is still in the primary stage. At the grass-roots level, from management to front-line employees know little about EVA, and how to improve EVA returns is even more at a loss.
When analyzing the performance of commercial banks with EVA method, it should be noted that the biggest difference between banks and general industrial enterprises is that the deposit business of banks itself is the liabilities of banks, so its calculation formula should be adjusted accordingly.
NOPAT (net operating profit after tax) = total after-tax profit+year-on-year change of bad debt provision for loans+year-on-year change of other assets impairment provision (investment impairment provision/investment risk provision, construction period impairment provision, etc.). )+(-) Non-operating expenses (income)-(+) Tax rate 3 Non-operating expenses (income).
Total capital = shareholders' equity+year-end loan bad debt provision+year-end bad debt provision+year-end other assets impairment provision (long-term investment impairment provision/investment risk provision, construction in progress impairment provision, etc.). )+(-) Cumulative non-operating expenses (income).
Cost of capital rate = cost of equity capital rate = risk-free rate of return+beta coefficient × (market risk premium)
EVA=NOPAT- CAP× WACC
The calculation formula is verified and provided by SternStewart Company.