Bank X has Sh. 100M of assets and Sh. 10M of Equity bank. Bank Y has Sh. 100M in assets and Sh. 4Min equity. The Equity Multipliers of each bank are:
EMx = Assets/Equity = 100M/10M = 10,
EMy = 100M/4M = 25.
If the two banks have 1%, return on assets, then the return on equity of bank X and Y are:
ROEx = ROA*EM = 0.01*10 = 0.1,
ROEy = 0.01*25 = 0.25.
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