Using EVA tool in banks upon ex-ante profitability calculation of corporate bank clients

The dissertation thesis examines methods of bank client´s profitability calculation, currently described by theory and used in banks. The main aim is to propose Economic Value Added (EVA) as a method of bank client´s ex-ante profitability calculation, i.e. via approval of loans provided to the corporate and medium-sized enterprises clients. Furthermore, the thesis suggests a methodology of its calculation so that EVA tool could be used in banks as there is luck of Czech and foreign publications and authors drawing attention to EVA usage in banks and other financial institutions, especially as a tool for measure of profitability of corporate and medium-sized enterprises clients.With respect to the specificity of the banking sector, the introductory chapters are devoted to the banking specificities influencing the methodology of bank client´s ex-ante profitability calculated by EVA tool. The thesis also describes the characteristics of banking segments and products, the main risks related to the banking sector and structure of banks' financial statements. Some short chapters are also devoted to the banking regulation and supervision, and also the credit process and the way of rating the corporate clients when evaluating and approving the loan application.The theoretical part analyses various measures the banks use for client´s profitability calculation and shows the main differences between them and EVA tool, which is suggested as an alternative measure for ex-ante client´s profitability calculation. The thesis then describes the particular variables used in ex-ante profitability calculation by EVA tool. An empirical study based on the real bank´s data is done, in order to demonstrate the differences between EVA and Risk Adjusted Return on Capital (RAROC) to which EVA approach is compared. The results show that RAROC on the client´s level can be high even in the case of clients generating small profit, but on a very small amount of risk. On the contrary, in order to maximize EVA, the maximization of profit is necessary while considering the cost of risk. In other words, clients with high RAROC cannot always bring high EVA and vice versa. Therefore EVA can be suitable complementary tool to RAROC measurement as knowing the absolute amount of value added created by each client can be valuable information for the bank managers who are administrating huge portfolio of clients. Using statistical methods the thesis also identifies key factors influencing the level of EVA of enterprises bank´s clients.