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Abstract
The growing complexity of banking operations, increasing regulatory requirements, and heightened competition in financial markets have intensified the need for advanced methodologies to assess bank performance. Traditional profitability indicators such as Return on Assets (ROA) and Return on Equity (ROE) provide useful information regarding financial performance but fail to adequately account for the level of risk undertaken to generate returns. Consequently, risk-adjusted performance measurement has become a central component of modern bank management. This study proposes a new methodological approach for assessing the risk-based profitability of commercial banks through the integration of Risk-Adjusted Return on Capital (RAROC) and Economic Value Added (EVA). The integrated RAROC-EVA model combines the strengths of both indicators by simultaneously evaluating risk-adjusted profitability and value creation. The proposed framework enables a more comprehensive assessment of banking performance by incorporating credit risk, market risk, operational risk, capital costs, and shareholder value considerations. The study argues that the integrated model provides a more reliable basis for strategic decision-making, capital allocation, and performance evaluation than traditional profitability measures. The findings suggest that the implementation of the RAROC-EVA framework can improve risk management efficiency, optimize resource allocation, and contribute to the sustainable development of commercial banks.
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