Financial Performance Analysis of the Jordanian Arab Bank by Using the DuPont System of Financial Analysis

Abstract

Abstract This study attempts basically to measure the financial performance of the Jordanian Arab commercial bank for the period 2000-2009 by using the DuPont system of financial analysis which is based on analysis of return on equity model. The return on equity model disaggregates performance into three components: net profit margin, total asset turnover, and the equity multiplier. Arab bank is one of the largest financial institutions in the Middle East and is ranked amongst the largest international financial institutions. The bank witnessed a continuation of challenges brought on by the global financial crisis. It was found that the financial performance of Arab Bank is relatively steady and reflects minimal volatility in the return on equity. Net profit margin and total asset turnover exhibit relative stability for the period from 2001 to 2009.The equity multiplier also show almost stable indicators for the period from2001-2005 and the ratios declined from 2006-2009 which indicates that the Arab bank had less financial leverage in the recent years, which means the bank is relying less on debt to finance its assets. Keywords: DuPont, Return on equity, Net profit margin, Equity multiplier, Asset utilization