Journal of Finance and Investment Analysis

A Comparison of Financial Performance between Samba and AlRajhi Banks by Using DuPont Model

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• Abstract

  This study basically aims at comparing the financial performance of Samba and AlRajhi banks from 2006-2011 by using the DuPont model of financial analysis. Samba and AlRajhi are considered the largest banks by market value in Saudi Arabia. The DuPont model is derived from an analysis of return on equity that divide performance into three parts: Operating efficiency ratio which is also known as financial performance ratio is measured by profit margin, asset use efficiency which determine if assets was utilized efficiently which is measured by total asset turnover, and financial leverage which shows to what extent the bank relies on debts which is measured by the equity multiplier. The results of the study discover that, the financial performance of the two banks as regards to net profit margin is relatively steady and reflects minimal volatility. Asset utilization has declined for both banks over the years under study. Equity multiplier was higher for Samba than AlRajhi, but volatility was almost low for both banks. Also, AlRajhi had less financial leverage to fund its assets. Furthermore, return on equity has sloped down for both banks over the period of this study.