Financial Performance for Arab Bank using DuPont Analysis 2000-2021

Abstract

In today’s business environment, financial analysis is considered one of the most reliable tools to judge performance, especially in the banking sector. The present study investigates the financial performance of one of the most famous and highest profitable banks in Jordan, the Arab Bank. It examines the Arab Bank’s financial performance from 2000 to 2019 by adopting the DuPont system of financial analysis of return on equity (ROE) model. This method relies on three main elements, which are net profit margin (NPM), total assets turnover (TAT), and equity multiplier (EM). The main scope of this study is to analyze the profitability and efficiency of the Cooperative for one of the Jordanian banks. Dupont Analysis provides an indicator of the stockholders’ wealth using the ROE index. Secondary data was used by accessing the official website of the Arab Bank and obtaining the financial information by analyzing the annual reports. The study finds that the Arab Bank has maintained stability over two decades with slight fluctuations in the ROE despite the international financial crises. On the other hand, NPM and TAT have witnessed relative strength from 2000 to 2019. Furthermore, EM indicates constant indicators for the period of 2000-2005 while the ratios from 2006 -2019 have diminished, which means the financial leverage of the Arab Bank lately was less dependent on the debts to finance the assets.