Profitability as a business goal: the multicriteria approach to the ranking of the five largest Croatian banks

• Authors: Višnja Rosenzweig , Hrvoje Volarević , Mario Varović

Abstracts

EN

Background: The ranking of commercial banks is usually based on using a single criterion, the size of assets or income. A multicriteria approach allows a more complex analysis of their business efficiency. Objectives: This paper proposes the ranking of banks based on six financial criteria using a multicriteria approach implementing a goal programming model. The criteria are classified into three basic groups: profitability, credit risk and solvency. Methods/Approach: Business performance is evaluated using a score for each bank, calculated as the weighted sum of relative values of individual indicators. Results: In the process of solving the corresponding goal programming problem, the weights are calculated. It is assumed that the goal of each bank is the highest profitability. Because of the market competition among banks, the weights of indicators depend on the performance of each bank. This method is applied to the five biggest Croatian banks (ZABA, PBZ, ERSTE, RBA and HYPO). Conclusion: For the observed period (2010), the highest priority is given to profitability and then to credit risk. The ranking is achieved by using a multicriteria model.

Keywords

EN

Commercial banks; bank ranking; profitability; multicriteria modelling; goal programming

• Publisher: Sciendo
• Journal: Business Systems Research Journal
• Year: 2012
• Volume: 3
• Issue: 1
• Pages: 37-48

Dates

published

2012-06-01

online

2012-09-17

Contributors

author

Višnja Rosenzweig

• Zagrebačka škola ekonomije i managementa, Zagreb, Croatia

author

Hrvoje Volarević

• Zagrebačka škola ekonomije i managementa, Zagreb, Croatia

author

Mario Varović

• Zagrebačka škola ekonomije i managementa, Zagreb, Croatia

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Identifiers

DOI

10.2478/v10305-012-0006-0