Top Financial Services Stocks by Return on Assets

What Return on Assets Means for Financial Services Companies

Return on assets divides net income by total assets, and in financial services that base is unusual, since most of it is money owed back to depositors, policyholders and bondholders rather than plant the company owns outright. Equity is a thin slice of the total, so the ratio lands in a narrow low range across banks and insurers. Bankers watch it closely anyway, because it is the standard measure of how profitably a balance sheet is run.

Why It Matters in Financial Services

Small gaps carry real information here. A fraction of a point separates a lender funding itself cheaply and pricing risk well from one doing neither, because the whole book is turned into earnings through a thin spread. Read next to return on equity, the difference between the two shows how much of the result comes from borrowing rather than from the business. The comparison only holds against other financial firms; set beside an industrial, a bank's figure looks poor for structural reasons.

What to Read Alongside

Pair return on assets with Return on Equity to measure the borrowing behind the balance sheet, Net Margin for the profitability of revenue itself, and Total Assets to keep the size of the book in view.