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The loan-to-deposit ratio (LTD) is a commonly used statistic for assessing a bank’s liquidity by dividing the banks total loans by its total deposits. This number, also known as the LTD ratio, is expressed as a percentage.
If the ratio is lower than 1, the bank relied on its own deposits to make loans to its customers, without any outside borrowing.
If, on the other hand, the ratio is greater than 1, the bank borrowed money which it reloaned at higher rates, rather than relying entirely on its own deposits. Banks may not be earning an optimal return if the ratio is too low.
If the ratio is too high, the banks might not have enough liquidity to cover any unforeseen funding requirements or economic crises.
B4B.am has assessed LTD ratios for the Armenian 21 commercial banks (as of 31.12,2015). The data is taken from the 2015 4-th quarter reports of these financial institutions.
As you see on the chart Iranian Mellat Bank has the highest LTD ratio – 3.84. It’s total loans were AMD 5.4 billions, while deposits were only AMD 1.4 billions. It means that Mellat bank practically does not depend on its own deposits.
The lowest LTD is in Byblos bank – 0.63։