Return to Equity (ROE) measures the profitability of a company, it shows how much of profit can be generated by each dollar of common stockholders' equity. The higher the value of ROE means that the company is generating income efficiently. The net benefit that shareholders' are receiving from investing their capital in the financial firm can be estimated by ROE. Usually, investors will compare and check the trend of ROE of different companies to make sure investment are done efficiently. United Overseas Bank's ROE increased from year 2010, which is 15.12% to 16.65% in year 2011. However, it remained constant from year 2011 to 2012 with 16.65%, then it slightly decreased to 16.58% in year 2013. As compared to HSBC Bank, the ROE increased from 18.05% to 20.97% from year 2010 to year 2011. There's an increase of 1% of ROE from year 2011 to year 2012, which leads to 21.97% at 2012. ROE of HSBC Bank then fluctuated to 17.38% in year 2013. HSBC Bank can generate profit more efficient as compared to UOB Bank but both banks ROE has decreased in the year of 2013.
Return on Asset (ROA).
Return to Asset (ROA) shows how efficient the company controls its assets to generate income. It shows how much return it could generate from each dollar of asset used. The higher the ROA, the more efficient the company controls its assets to generate income. Shareholders are usually less interested in ROA because it is not related to them directly. United Overseas Bank's ROA has decreased from year 2010 to year 2011, from 1.22% to 1.13%. Then it slightly increase to 1.15% at year 2012 and stayed constant until year 2013, which is also 1.15%. While HSBC Bank's ROA at year 2010 is 1.20% and it rose a little bit in the year 2011 to 1.30%. At year 2012, HSBC Bank's ROA has increased to 1.79%, which is the highest among these 4 years. It then decreased to 1.40% in year 2013. United Overseas Bank's ROA was initially better than HSBC Bank but starting from year 2011, HSBC Bank's ROA has outgrown United Overseas Bank's ROA even though their ROA is increasing.
