Chapter 12 · Day 12 — Development banks and finance companies
Development banks and finance companies
Class B and C institutions run the banking playbook at smaller scale, with a narrower deposit base and a higher cost of funds.
Development banks (Class B) and finance companies (Class C) are assessed on the same metrics as commercial banks — NPL, CAR, NIM, cost of funds, CD ratio, provision coverage, cost-to-income. The differences are structural, and they all point the same way.
| Factor | Commercial (A) | Development (B) | Finance (C) |
|---|---|---|---|
| Deposit base | Broad, national | Regional | Narrowest |
| Cost of funds | Lowest | Higher | Highest |
| Borrower concentration | Lower | Higher | Highest |
| Geographic spread | National | Provincial | Local |
| NPL sensitivity | Lower | Higher | Highest |
Illustrative comparison — two development banks
| Metric | Dev Bank X | Dev Bank Y | Stronger |
|---|---|---|---|
| P/B | 1.1× | 1.4× | X on price |
| ROE | 11.8% | 13.9% | Y |
| Gross NPL | 2.2% | 1.6% | Y |
| Provision coverage | 88% | 124% | Y |
| NIM | 4.9% | 5.1% | Y |
| Cost of funds | 6.8% | 6.2% | Y |
| CD ratio | 88% | 79% | Y — more headroom |
| Cost-to-income | 58% | 47% | Y |
Y is better on every operating measure and X is cheaper on book. The CD ratio matters here: X at 88% has little room to grow lending without new deposits or capital, so its growth is capped by something outside its control.
Saved in this browser only — there is no account to create. Clearing your browser data clears your progress.