Explanation:
The correct answer is D.
Delta Bank, with an EBT of 2.8% and the lowest NPL ratio of 0.8%, stands out as the best candidate for this investment. The combination of a strong EBT percentage and a low NPL ratio indicates a healthy balance between profitability and effective credit risk management. This positions Delta Bank favorably for investing in advanced AI-driven systems, potentially enhancing its risk management capabilities without jeopardizing its financial stability.
A is incorrect because Alpha Bank, while having a favorable NPL ratio, has a lower EBT percentage compared to Delta Bank, suggesting less financial leeway for the investment.
B is incorrect because Beta Bank, despite its higher EBT, has a higher NPL ratio, indicating potential challenges in its credit risk management that might be exacerbated by new technology investments.
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Q.5940 In a competitive banking sector, four banks – Alpha, Beta, Gamma, and Delta – have released their financial metrics, including Earnings Before Tax (EBT) as a percentage of Total Assets and their Non-Performing Loans (NPL) ratio. The following table presents the data:
| Bank | EBT as % of Total Assets | NPL Ratio |
|---|---|---|
| Alpha Bank | 2.5% | 1.2% |
| Beta Bank | 3.2% | 2.0% |
| Gamma Bank | 1.8% | 1.5% |
| Delta Bank | 2.8% | 0.8% |
Each bank is evaluating the feasibility of investing in AI-driven risk management systems. Considering both their EBT percentage and NPL ratio, which bank is best positioned to undertake this investment while maintaining its financial health and credit risk profile?
A
Alpha Bank
B
Beta Bank
C
Gamma Bank
D
Delta Bank
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