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Return on tangible equity

Return on tangible equity (ROTE) is a financial performance metric that evaluates a company's efficiency in generating profits from its tangible assets by dividing net income by tangible shareholders' equity, which excludes intangible assets like goodwill and other non-physical resources.^[1] This ratio provides a clearer assessment of returns derived from physical and financial assets compared to traditional return on equity (ROE), as it adjusts for potentially inflated equity values due to acquisitions or intellectual property.^[2] The formula for ROTE is typically calculated as net income (post-tax earnings) divided by average tangible equity, where tangible equity equals total shareholders' equity minus intangible assets.^[1] To compute it, one first determines net income from the income statement, calculates average shareholders' equity as the mean of beginning and ending balances, subtracts average intangible assets, and then divides net income by this adjusted figure.^[1] For example, if a company reports $1.76 million in net income, $9.3 million in average equity, and $2.25 million in intangible assets, the ROTE would be 25%.^[1] ROTE is particularly prominent in the banking and insurance sectors, where it serves as a key benchmark for assessing how effectively management allocates regulatory capital to produce returns for shareholders.^[2] Banks often target ROTE above 10%, as this threshold correlates with stronger investor confidence and higher share prices, making it a primary objective for optimizing profitability across operations.^[3] In practice, institutions like HSBC have used ROTE to track performance improvements, such as rising from 3.1% in 2020 to 8.3% in 2021 amid economic recovery.^[2] Unlike ROE, which includes all equity components and can overstate returns for firms with substantial intangibles from mergers, ROTE offers a more conservative and comparable view of sustainable economic value, aiding investors in evaluating long-term competitive advantages or "moats."^[1]^[2] This metric is especially valuable for comparing companies with varying growth strategies, such as organic expansion versus acquisition-driven models, by focusing on tangible capital efficiency.^[2]

Overview

Definition

Return on tangible equity (ROTE) is a financial performance metric that evaluates a company's profitability by assessing the returns generated on its tangible shareholders' equity, serving as a refined variant of the broader return on equity (ROE) ratio to emphasize efficiency in utilizing physical and financial resources. Unlike standard ROE, which includes all forms of shareholders' equity, ROTE excludes intangible assets to provide a clearer picture of operational performance, particularly for firms where non-physical assets might otherwise inflate equity bases and distort profitability assessments.^[2] Tangible equity is calculated as total shareholders' equity less deductions for intangible assets, which encompass non-physical items such as goodwill arising from business acquisitions, patents, trademarks, copyrights, and other identifiable intangibles like software or brand value that lack a physical form. This adjustment focuses on the "hard" capital—tangible assets like property, plant, equipment, and cash equivalents—that directly support core operations and long-term value creation, offering investors a more conservative view of net worth tied to verifiable, touchable resources. ROTE aligns with regulatory capital standards in sectors like banking, where intangibles are often excluded to reflect true economic capital.^[1]^[2] For instance, a company reporting $100 million in total shareholders' equity, of which $20 million consists of goodwill from prior acquisitions, would have $80 million in tangible equity available for assessing profitability.^[2]

Purpose and Significance

Return on tangible equity (ROTE) primarily evaluates how effectively a company's management generates profits from its tangible capital, excluding the impacts of non-operational assets such as acquired intangibles like goodwill.^[1] By focusing solely on tangible equity, this metric isolates the returns attributable to core operational activities, providing a clearer lens on the efficiency of capital utilization without distortions from accounting treatments of assets that do not directly produce ongoing income.^[2] The significance of ROTE is particularly evident in identifying sustainable profitability for firms with high intangible asset bases, often resulting from mergers, acquisitions, or substantial research and development expenditures.^[2] It helps discern whether reported returns reflect enduring operational strengths or temporary boosts from non-cash items, enabling stakeholders to better gauge long-term value creation potential.^[1] In investor decision-making, ROTE aids in determining if returns are propelled by fundamental business operations or inflated by accounting artifacts, offering a more reliable basis for comparisons across companies.^[3] For instance, banks employ ROTE to measure lending and operational efficiency, circumventing distortions from regulatory goodwill that can obscure true performance.^[2] This reliance on ROTE by analysts and investors underscores its role as a key performance indicator in financial evaluations.^[4] From an economic perspective, ROTE highlights resource allocation efficiency in capital-intensive industries, where it becomes increasingly vital amid the rising valuations of intangible assets in modern economies following the post-2000s technology boom.^[5]^[6] By emphasizing tangible capital, the metric reveals how adeptly firms deploy physical and financial resources in an era of intangible dominance, supporting informed assessments of economic moats and profitability sustainability.^[7]

Calculation

Key Components

Net income serves as the numerator in the return on tangible equity (ROTE) calculation, representing the after-tax profit attributable to common shareholders as reported on the income statement.^[1] In some analyses, particularly for financial institutions, net income is adjusted to exclude non-recurring items such as one-time gains or losses to better reflect ongoing profitability.^[8] Tangible equity forms the denominator and is derived from the balance sheet by subtracting intangible assets from total shareholders' equity.^[9] Intangible assets typically include goodwill, which is not amortized under U.S. GAAP or IFRS but is instead subject to annual impairment testing.^[10] To arrive at common tangible equity, further adjustments are made by deducting preferred stock and non-controlling (minority) interests from the tangible equity figure, as these elements do not represent claims available to common shareholders.^[11] Data for these components is sourced from financial statements, with tangible equity often calculated as an average over the reporting period—such as the annual average—to account for fluctuations and provide a smoother basis for comparison.^[12] For publicly traded companies, these details are commonly disclosed in annual 10-K filings with the U.S. Securities and Exchange Commission, where average tangible common equity is explicitly computed and reported.^[12]

Formula and Derivation

The return on tangible equity (ROTE) is calculated using the following core formula:

\text{ROTE} = \frac{\text{Net Income}}{\text{Average Tangible Equity}} \times 100

This expresses ROTE as a percentage, where net income represents the profit attributable to common shareholders after taxes and other deductions, and average tangible equity is derived by subtracting intangible assets (such as goodwill and other identifiable intangibles) from average shareholders' equity.^[1]^[2] The formula derives logically from the standard return on equity (ROE) metric, which is computed as net income divided by average total shareholders' equity. To isolate returns generated from tangible (physical) assets and exclude the potentially distorting effects of non-physical intangibles, the denominator is adjusted by deducting intangible assets from total equity; this adjustment provides a clearer view of profitability tied to deployable capital in asset-intensive sectors like banking.^[1]^[2] Average tangible equity in the denominator is typically calculated as the simple average of beginning and ending tangible equity balances over the reporting period: \frac{\text{Beginning Tangible Equity} + \text{Ending Tangible Equity}}{2}. This averaging approach accounts for intra-period fluctuations in equity due to retained earnings, dividends, or share issuances, ensuring the denominator better reflects the equity base supporting the net income earned throughout the period rather than a snapshot at a single point.^[1]^[2] For quarterly data, ROTE is commonly annualized to enable consistent year-over-year comparisons by multiplying the quarterly net income by 4 before applying the core formula: \text{Annualized ROTE} = \frac{\text{Quarterly Net Income} \times 4}{\text{Average Tangible Equity}} \times 100. Additionally, per Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2015-01, the concept of extraordinary items was eliminated from income statement presentation effective for fiscal years beginning after December 15, 2015; as a result, net income in ROTE calculations includes unusual or infrequent items (previously classified as extraordinary) but requires separate disclosure, with analysts often making pro forma adjustments to exclude such non-recurring effects for a normalized profitability measure.^[2]^[13]^[14] As a worked example, consider a company with annual net income of $10 million and average tangible equity of $50 million. Applying the core formula yields ROTE = \frac{10,000,000}{50,000,000} \times 100 = 20\%, indicating that the company generates 20 cents of net income per dollar of average tangible equity.^[1]

Interpretation

Benchmarking Values

Return on tangible equity (ROTE) is evaluated against established benchmarks to gauge a company's efficiency in generating profits from its tangible capital base. For most industries, a ROTE in the range of 10-20% is considered healthy, with figures exceeding 15% signaling strong performance relative to the cost of capital.^[15] Lower thresholds, such as 8-12%, are typical in capital-intensive sectors like utilities, where high physical asset bases limit returns but ensure stability.^[16] In the banking sector, industry norms have averaged 8-12% since post-2008 regulatory reforms, reflecting tighter capital requirements and risk provisions that tempered profitability. As of 2024, global banks achieved an average ROTE of 11.7%, amid higher interest rates and economic recovery.^[17] Technology firms often exhibit higher ROTE levels due to their relatively smaller tangible equity bases compared to net income, as intangibles like software and brands dominate their balance sheets. Trend analysis involves comparing year-over-year ROTE to identify performance shifts, such as improvements from operational efficiencies or declines amid economic pressures. For instance, during the 2020 COVID-19 pandemic, bank ROTE dipped sharply due to elevated credit losses and subdued lending; HSBC reported a ROTE of 3.1% for the year, down from 8.4% in 2019.^[18] Peer benchmarking relies on financial databases to assess relative positioning, with tools like Bloomberg providing ROTE percentiles across comparable firms for context on outperformance or underperformance. This approach highlights how a company's ROTE stacks up against sector medians, aiding investors in evaluating competitive standing.

Factors Influencing ROTE

Operational factors play a pivotal role in determining a company's return on tangible equity (ROTE) by directly influencing the net income numerator in the metric. Revenue growth, achieved through expanded sales or market share gains, elevates net income, thereby increasing ROTE when tangible equity remains stable.^[3] Similarly, effective cost controls, such as optimizing operational expenses and streamlining support functions, enhance profitability margins, allowing more income to flow to the bottom line relative to the tangible equity base.^[1] Asset utilization efficiency further amplifies this effect; for instance, improved turnover of tangible assets like inventory or property generates higher returns without proportionally increasing the equity denominator.^[19] In banking, decisions on product lines—such as prioritizing high-margin retail products over lower-yield lending—can significantly boost ROTE by aligning resources with profitable activities.^[3] Financial leverage exerts a substantial influence on ROTE by altering the tangible equity denominator, often amplifying returns at the expense of heightened risk. Higher debt levels reduce shareholders' equity, as liabilities increase without a corresponding rise in equity, thereby inflating ROTE if net income remains positive and exceeds interest costs.^[4] This leverage effect is particularly pronounced in banks, where lower capital ratios—enabled by competitive pressures—allow institutions to maintain elevated ROTE despite subdued return on assets.^[4] Share buybacks exemplify this dynamic, as repurchasing stock decreases outstanding shares and total equity, concentrating net income over a smaller tangible equity base and thus elevating ROTE.^[20] However, excessive leverage can magnify losses during downturns, underscoring the risk-return trade-off inherent in this factor.^[21] External influences, including macroeconomic and regulatory conditions, can reshape ROTE by impacting both net income and the tangible equity composition. Inflation erodes the real value of tangible assets on the balance sheet, which are typically carried at historical cost without frequent revaluation, potentially distorting ROTE by understating the equity base in real terms while nominal net income may rise with price increases.^[22] Regulatory changes, such as those under Basel III, compel banks to hold higher levels of high-quality capital, including tangible common equity, which enlarges the denominator and pressures ROTE downward unless offset by revenue growth.^[23] For example, the Basel III Endgame proposals elevate capital requirements for risk-weighted assets, indirectly reducing ROTE for affected institutions by constraining leverage and lending capacity.^[24] These external pressures highlight the need for firms to adapt strategies to maintain competitive ROTE levels amid evolving economic landscapes. Accounting choices, particularly regarding intangible assets, can temporarily alter ROTE through adjustments to the equity denominator. Write-downs of intangibles, such as goodwill impairments, reduce the value of these assets on the balance sheet, which in turn increases tangible equity since it is calculated as total equity minus intangibles.^[25] This adjustment lowers ROTE in the period of the write-down, as the numerator (net income) often declines due to the impairment charge, while the denominator expands.^[26] Such choices provide a more conservative view of performance but can create volatility in ROTE trends, emphasizing the metric's sensitivity to non-cash accounting decisions rather than underlying operational health.^[1]

Comparisons

Versus Return on Equity

Return on tangible equity (ROTE) and return on equity (ROE) both assess a company's profitability relative to shareholders' equity, but they differ fundamentally in how equity is defined. ROE uses total shareholders' equity, which incorporates intangible assets such as goodwill and other non-physical items, potentially understating returns for firms with substantial intangibles since these assets inflate the denominator without contributing proportionally to income generation. In contrast, ROTE excludes such intangibles to measure returns strictly on tangible equity, offering a clearer gauge of operational efficiency on physical and monetary capital.^[1] This distinction becomes particularly evident in illustrative scenarios. For a company with net income of $100 million, total shareholders' equity of $800 million (including $200 million in intangibles), the ROE calculates to 12.5% ($100 million / $800 million), while the ROTE rises to 16.7% ($100 million / $600 million), highlighting stronger performance on tangible resources alone. Such adjustments reveal how intangibles can dilute apparent returns in ROE, masking the true productivity of core assets.^[1] ROTE proves especially preferable in merger-heavy industries like banking and insurance, where acquisition accounting frequently generates large goodwill balances that depress ROE without reflecting ongoing value creation. By stripping out these non-operating elements, ROTE enables more accurate cross-company comparisons and trend analysis in sectors prone to consolidations.^[2]

Versus Return on Assets

Return on Assets (ROA) measures a company's overall efficiency in utilizing its total assets—encompassing both equity and debt-financed portions—to generate net income, providing a broad view of operational profitability relative to the entire asset base.^[27] In contrast, Return on Tangible Equity (ROTE) evaluates profitability specifically from the perspective of equity holders, using tangible common equity (shareholders' equity minus intangible assets like goodwill) as the denominator, thereby excluding the effects of debt and non-physical assets to focus on returns from concrete investments.^[1] This distinction highlights ROA's emphasis on total capital efficiency, including liabilities, while ROTE isolates the economic returns attributable to tangible shareholder capital.^[28] A key implication arises in leveraged firms, where the equity base is smaller than total assets due to debt financing; consequently, ROTE often exceeds ROA because the same net income is divided by a lower denominator, amplifying the apparent returns to equity investors.^[29] For instance, banks with high leverage may show robust ROTE figures that reflect enhanced shareholder yields but could mask underlying asset inefficiencies revealed by a lower ROA.^[28] This leverage effect makes ROTE particularly valuable for equity-focused investors seeking to understand how debt boosts returns on their stake, though it requires caution to avoid overemphasizing leverage at the expense of operational health.^[30] ROA is ideally suited for assessing a company's ability to generate profits from all capital sources, making it a tool for cross-industry comparisons of asset utilization without distortion from financing structures.^[29] ROTE, however, better serves analyses of shareholder value creation from tangible resources, aiding investors in evaluating sustainable returns in capital-intensive sectors like banking where intangibles and leverage are prevalent.^[2] For example, a firm with $100 million in total assets, $40 million in shareholders' equity ($30 million tangible after excluding intangibles), and $10 million in net income would yield an ROA of 10% and an ROTE of 33%, demonstrating how ROTE captures the leveraged uplift in equity returns compared to ROA's asset-wide measure.^[1]

Applications

In Financial Sector Analysis

In the banking sector, return on tangible equity (ROTE) serves as a critical metric for evaluating core capital efficiency, particularly by excluding intangible assets such as goodwill from acquisitions and deferred tax assets that may not reflect operational strength. Regulators like the Federal Deposit Insurance Corporation (FDIC) integrate tangible equity considerations into capital adequacy frameworks, such as the Community Bank Leverage Ratio, to ensure institutions maintain sufficient tangible capital relative to assets, with ROTE helping to gauge profitability and stability. A ROTE exceeding 10% is commonly targeted by banks and expected by investors as an indicator of sound financial health and resilience against economic pressures.^[31]^[3] In investment banking, analysts frequently apply ROTE to assess firm valuations, especially following mergers and acquisitions where intangible assets inflate traditional equity measures. For instance, JPMorgan Chase's ROTE recovered notably after the 2008 financial crisis, rising from approximately 6% in 2008 to 9% in 2009 and reaching 15% by 2012, before climbing further to around 20% in recent years, demonstrating improved efficiency in deploying tangible capital amid regulatory reforms and economic rebound. This trend underscores ROTE's utility in tracking post-crisis performance and informing investment decisions on banks' ability to generate returns from core operations.^[32] Within the insurance sector, ROTE provides a refined measure of profitability by focusing on returns generated from tangible equity, which excludes non-operational intangibles such as brand value and goodwill, thereby highlighting efficiency in managing policy-related assets and reserves. Industry analyses show that top-performing insurers achieve underwriting contributions of up to 12 percentage points to ROTE, emphasizing its role in evaluating operational returns independent of acquired intangibles that may not contribute directly to policyholder obligations. This approach is particularly valuable in a sector where balance sheets often include significant deferred acquisition costs and other intangibles, allowing for clearer comparisons of underlying performance.^[33]^[2] Post-2020, fintech firms have exhibited rising ROTE trends driven by digital transformations that minimize tangible asset requirements, resulting in lower tangible equity bases relative to growing revenues and profits. As the sector shifted toward asset-light models amid accelerated adoption during the pandemic, profitability metrics like ROTE have improved, with revenues expanding 21% year-over-year in recent periods and AI integrations projected to boost ROTE by up to four percentage points for innovative players. This reflects fintech's advantage in leveraging intangible-driven growth while maintaining high returns on limited physical capital.^[34]^[19]

In Non-Financial Industries

In the manufacturing sector, return on tangible equity (ROTE) serves as a key metric for assessing the profitability generated from equity invested in physical assets, such as factories, machinery, and equipment, which form the backbone of production processes. This measure is particularly valuable in capital-intensive industries where tangible assets dominate the balance sheet, allowing firms to gauge operational efficiency without the distortion of intangible items like goodwill. For instance, automotive manufacturers employ ROTE to benchmark performance against peers, evaluating how effectively they utilize plant and equipment to drive returns. Toyota Motor Corporation, a leading example, reported a median ROTE of 11.38% over the past 13 years, with values ranging from a low of 9.40% to a high of 16.50%, highlighting its consistent efficiency in leveraging tangible equity for profitability.^[35] In the technology sector, ROTE application is less prevalent due to the dominance of intangible assets like intellectual property, software, and brand value, which can inflate total equity figures. However, it remains useful for analyzing hardware divisions that rely heavily on tangible assets for manufacturing and supply chain operations. Companies in this space may focus on ROTE to isolate returns from physical infrastructure, such as assembly lines and data centers, especially following strategic moves that emphasize hardware production. Apple Inc., for example, demonstrates this through its exceptionally high ROTE of 157.44% as of September 2025, reflecting efficient utilization of tangible equity in its hardware ecosystem, bolstered by post-iPhone era investments in supply chain and manufacturing capabilities that prioritize physical asset productivity over intangibles.^[36]^[9] Within the energy and utilities sector, ROTE is instrumental in evaluating returns on substantial investments in physical infrastructure, including power plants, transmission lines, and renewable energy installations. This metric helps assess capital expenditure (capex) efficiency, particularly amid the 2020s transition to renewables, where utilities are ramping up spending on tangible assets to support clean energy goals. For regulated utilities, ROTE provides insights into how effectively equity tied to these assets generates profits, aiding decisions on infrastructure upgrades and cost allocation during the shift from fossil fuels. U.S. utilities, for instance, plan to increase renewables capex by up to 39% in some cases through 2027, using metrics like ROTE to ensure returns justify the physical asset outlays.^[37]^[38] A prominent case study illustrating ROTE's dynamics is General Electric (GE), whose metric declined sharply in the 2010s due to extensive writedowns on tangible assets in its power business. Facing market challenges and overcapacity, GE recorded a $22 billion charge in 2018, including impairments on physical assets like turbines and equipment, which eroded its tangible equity base and contributed to an overall net loss of $22.8 billion for the third quarter. This episode underscored how asset writedowns in capital-heavy operations can drastically lower ROTE, prompting GE to restructure by divesting non-core units and refocusing on core industrial tangibles.^[39]^[40]

Limitations

Methodological Drawbacks

One significant methodological drawback of return on tangible equity (ROTE) stems from the subjectivity in defining and classifying intangible assets, which directly impacts the calculation of tangible equity as the denominator. Under US GAAP and IFRS, the criteria for capitalizing certain assets as intangibles versus treating them as tangible or expensing them outright vary, leading to inconsistent tangible equity figures across firms and jurisdictions. For instance, software development costs can be capitalized as intangible assets once technological feasibility is established under US GAAP (ASC 350-40), but IFRS (IAS 38) allows broader capitalization during the development phase if technical and economic viability criteria are met, potentially resulting in higher intangible deductions and lower tangible equity under IFRS compared to GAAP for the same activity.^[41] This variability not only hampers cross-company comparability but also introduces estimation biases in useful lives and fair values, as intangible recognition often relies on subjective management judgments about separability and future economic benefits.^[42] ROTE is also prone to volatility arising from fluctuations in tangible equity due to capital distribution activities, such as share repurchases and dividends, which can artificially inflate the metric without reflecting underlying operational improvements. Share repurchases reduce shareholders' equity by decreasing the number of outstanding shares, thereby shrinking the tangible equity base and mechanically boosting ROTE if net income remains stable; for example, a company repurchasing shares equivalent to 10% of its equity could increase ROTE by a similar proportion absent earnings growth.^[43] Similarly, dividend payouts directly diminish retained earnings within equity, amplifying ROTE in subsequent periods, though this effect is often temporary and can mask weaker profitability trends. These dynamics introduce earnings management incentives, as executives may prioritize buybacks to enhance reported returns during performance evaluations, thereby distorting the metric's reliability as a pure measure of operational efficiency.^[44] Another limitation is ROTE's failure to incorporate off-balance-sheet items, such as operating leases and derivatives, which can materially influence a company's tangible asset efficiency but remain excluded from the balance sheet under certain accounting treatments. Prior to the adoption of IFRS 16 and ASC 842 (effective 2019), operating leases were not recognized as assets and liabilities, artificially lowering reported equity and inflating ROTE by avoiding the addition of right-of-use assets and corresponding lease liabilities that would increase the denominator.^[45] Derivatives, often netted or disclosed only in footnotes under standards like ASC 815, similarly evade direct impact on tangible equity, potentially understating leverage and overestimating returns for firms with significant exposure. This omission reduces ROTE's comprehensiveness, as these items can represent substantial economic commitments affecting capital deployment.^[46] Historically, inconsistencies in goodwill impairment testing further undermined ROTE's reliability, particularly before the 2010s when accounting standards evolved to address methodological flaws. Under pre-SFAS 142 rules (before 2001), goodwill was amortized systematically, leading to predictable but often arbitrary reductions in equity that distorted tangible equity trends unrelated to economic impairment. The subsequent two-step impairment model introduced by SFAS 142 in 2001 shifted to annual testing but involved complex fair value allocations and hypothetical purchase price allocations in Step 2, fostering inconsistencies in application and delayed recognition of losses until the mid-2010s simplifications under ASU 2017-04 eliminated Step 2.^[47] These pre-2010s practices resulted in volatile and non-comparable tangible equity figures, as impairment charges were often subjective and timed to manage earnings, thereby compromising ROTE as a consistent performance indicator.^[48]

Contextual Limitations

In industries dominated by intangible assets, such as pharmaceuticals, return on tangible equity (ROTE) can significantly undervalue companies whose core value derives from non-physical assets like patents and intellectual property. For instance, Pfizer Inc., a leading pharmaceutical firm, reported a ROTE of -12.99% in its most recent fiscal quarter ending September 30, 2025, despite maintaining a substantial market capitalization exceeding $140 billion, largely driven by the intangible value of its drug patents and research pipeline. This discrepancy arises because ROTE excludes intangibles from the equity denominator, potentially rendering tangible equity negative after accounting for goodwill impairments and amortization, thus distorting profitability assessments for firms where such assets generate the majority of revenue.^[49]^[50] During economic downturns, ROTE tends to amplify negative performance signals, as losses erode equity bases more rapidly than income streams recover, leading to exaggeratedly low or negative ratios. The 2008 financial crisis exemplified this, with major U.S. banks like Citigroup posting a return on equity (ROE) of approximately -22%, a metric closely aligned with ROTE given banks' typically low intangible holdings; ROTE would have been similarly or more negative due to the reduced tangible equity from asset write-downs and provisions for loan losses. This effect was widespread, as the crisis triggered a significant contraction in bank equity, outpacing income declines and resulting in ROTE figures that overstated insolvency risks for institutions with recoverable tangible assets post-recovery.^[51]^[52] Global variations in accounting standards further limit ROTE's utility for cross-border comparisons, particularly due to differing treatments of intangible assets under IFRS and U.S. GAAP. Under U.S. GAAP, revaluation of intangible assets to fair value is prohibited, maintaining them at historical cost and often leading to lower reported tangible equity through conservative amortization; in contrast, IFRS permits revaluation for certain intangibles under IAS 38, potentially inflating tangible equity and thus lowering ROTE for equivalent firms. These discrepancies can result in ROTE variances of up to 5-10% between jurisdictions for multinational corporations with significant intangible portfolios, complicating investor analyses in diverse markets like Europe (IFRS-dominant) versus the U.S.^[53]^[54] Over-reliance on ROTE poses risks in high-growth phases, where investors may overlook its insensitivity to intangible-driven value creation, such as in the 2020s AI boom. Technology firms like those in AI development often exhibit low or negative ROTE—sometimes below 5%—due to heavy R&D expenditures expensed immediately and high intangible amortization from acquisitions, yet their market valuations soar on expectations of future intangible yields from algorithms and data assets. This mismatch can lead investors to undervalue sustainable growth potential if fixated on ROTE, missing contributions from intangibles that fuel innovation without immediate tangible equity buildup, as seen in sectors where AI investments yielded zero short-term returns for 95% of adopting companies despite trillion-dollar market enthusiasm.^[50]^[55]

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ROA evaluates how effectively a company uses assets to generate profit, while ROE focuses on returns delivered to shareholders. ROA is less affected by debt, ...How Roa And Roe Work And... · Return On Assets (roa) · Roa Vs Roe: Comparing Two...
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Dec 5, 2024 · The primary differentiator between ROE and ROA is financial leverage or debt. Although ROE and ROA are different measures of management ...
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[PDF] RC-R Regulatory Capital Part 2 Risk Weighted Assets - FDIC
Under this approach, banks calculate the aggregate risk-weighted asset amounts of the carrying value of the exposures held by the fund as if they ...
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JPMorgan Chase return on tangible equity for the quarter ending September 30, 2025 was 0. · JPMorgan Chase average return on tangible equity for 2011-03-31 was 0 ...
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Sep 6, 2024 · Underwriting gains contributed 12 percentage points of return on tangible equity (RoTE) to top-quartile performers, while bottom-quartile ...
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Fintech's Next Chapter: Scaled Winners and Emerging Disruptors
Jun 2, 2025 · Fintech revenues grew 21% year-over-year, up from 13% in 2023, and outpaced the 6% growth in the broader financial services sector. EBITDA ...
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Rating 2.0 · Review by GuruFocusDuring the past 13 years, Toyota Motor's highest Return-on-Tangible-Equity was 16.50%. The lowest was 9.40%. And the median was 11.38%.
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Rating 5.0 · Review by GuruFocusDuring the past 13 years, Apple's highest Return-on-Tangible-Equity was 175.46%. The lowest was 38.12%. And the median was 64.81%. AAPL's Return-on-Tangible- ...Missing: divisions | Show results with:divisions
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Rebalancing “Return on Equity” to Accelerate an Affordable Clean ...
Feb 21, 2025 · Aligning ROEs with competitive market conditions can speed deployment of renewables by regulated utilities, align incentives, and speed up the ...Missing: tangible | Show results with:tangible
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Dividends and share repurchases concern analysts because, as distributions to shareholders, they affect investment returns and financial ratios. The ...
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[PDF] gross versus net balance sheet presentation of offsetting derivatives ...
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The current goodwill accounting model has evolved significantly from the model that the FASB originally introduced in 2001.
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The current guidance simplified the goodwill impairment test to address concerns related to the old guidance's cost and complexity by eliminating Step 2.
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95% of companies are getting zero return on their AI investments
Aug 24, 2025 · 95% of companies are getting zero return on their AI investments The $40 Billion Question Nobody Wants to Ask For …