Return on assets for a bank

Net profit as a percentage of average total assets, the primary profitability measure for a lender because the balance sheet is the business.

Earning ₹720 crore on ₹60,000 crore of assets is a return of 1.2%. For an Indian bank, above 1% is good and above 1.5% is excellent. Those lines don't travel: in Japan and much of Europe the structurally lower rate environment pulls the whole distribution down, and a bank there can be well run at half these levels.

For a bank, leverage is the reason to prefer it to return on equity. A bank is levered ten to twelve times by design, so return on equity can be lifted simply by holding less capital against the same assets, which return on assets doesn't reward. Riskier lending can lift both for a while, through higher yields, until the losses arrive.

Multiply return on assets by the leverage multiple and you have return on equity. Both numbers, one identity.

One per cent is the line in India. It has been for a long time.