Pre-Tax Profit Growth

Pre-tax profit is a bank's earnings before tax as a percentage of total sales or revenues. The higher the pre-tax profit, the more profitable the bank is. The growth trend of the pre-tax profit is as important as the figure itself, since it provides an indication of which way the company's profitability is headed.

Profit is the main goal of for-profit organizations. The goal is to make a profit through growth and to grow every year. As a result, one of the most important roles they must undertake is to track and forecast profitability. Financial analysts working within the bank must analyze profitability to learn what the bank can do to not only improve sale of the its services but also grow profits through cost savings. Indeed, it is the goal of every company to grow sales while reducing expenses. Companies that do this well tend to experience an increase in pre-tax profit.

Taxes are not a function of operations. As such, they are not included in operating expenses. Some analysts view taxes as a necessary cost that should not be considered when analyzing the performance of the company. That is, a company can manipulate the amount it pays in taxes, but it is not the goal of operations. Additionally, at times, tax expense can be larger than it has been in previous years due a tax penalty. Likewise, at times, tax expense may be much lower than it has been in previous years due a tax credit.