Importance The article investigates problems related to quantitative and qualitative assessment of financial stability of banks. Objectives The purpose is to underpin the necessity and expediency of using the profit and risk indicators in the analysis of commercial banks' financial stability. Methods The study rests on the analysis of methodological approaches and methods for evaluation of banks' financial soundness, methods for assessing banking risks by international financial organizations and central banks. The study also includes the analysis of financial statements presented by commercial banks, created time series with information on the level of profitability of banks and aggregated banking risks. Results We offer a methodology to calculate the profit/risk indicator (PR) enabling a quantitative assessment of financial stability of a bank; present a simplified method to evaluate aggregate banking risks based on published financial statements, and an evaluation scale for qualitative characteristics of financial stability. The paper provides quantitative and qualitative evaluation of financial stability of the analyzed banks, and reveals trends in the financial stability of banks under investigation. Conclusions The PR indicator can be used by the Bank of Russia in the assessment of financial strength of banks as an indicator of the risk management quality. Evaluation of financial stability based on the PR indicator may be useful for minority shareholders and external users, for instance, rating agencies, analytical centers, and potential investors of banks.
Keywords: bank, financial stability, profitability, risk
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