TRS or total return to shareholders which consists basically of the appreciation of

the share price plus the dividend yield was used by ABN Amro as the primary key
performance measure for the bank.
TRS, total return to shareholders is a good key performance measure, but at the
same times it has its flaws, so we cant solely concentrate on its use to analyze the
whole banks performance.
Advantages:
To start with, TRS a performance key that can be easily expressed and analyzed to
different benchmarks or competitors in the industry because it is expressed in
percentage.
Second, if TRS is calculated well and for a specific period of time it shows the past of
the company and how it has been performing over the years.
Third, TRS shows how the market evaluates a company, for it concentrates on the
appreciation of the stock price, which tells us how investors or shareholders view
the company and how they suspect its going to evolve in the future.
Disadvantages:
First of all, TRS concentrates on past performance and doesnt reflect or gives and
consideration to the future. Also, TRS concentrates on investors perspective of the
stock price, for it is a measure only for publicly traded firms. Thus, TRS can go both
ways, because the stock price is an unpredictable factor.
Second, TRS can be influenced easily and can be manipulated internally through
several ways. Such manipulation, can improve the performance of the company on
the short run but not on the long run. For example, giving a high dividend pay-out
for several years can increase TRS, but it steps in the way of future growth and
investment. This can be viewed as improving the performance key rather than
improving the company to reflect an improvement in the key itself.
Third, TRS might make managers more willingly to shift to more debt and less
equity and pursuing riskier projects just to increase the pay-out ratio, and thus
improving the performance on paper, but putting the whole bank in danger of
bearing the risk.
In conclusion, TRS has its benefits and its flaws but it cant be used solely to
measure a banks performance for it hides in it a lot of factors that can be
manipulated and which will not give the needed and recommended outcome.
So, its best if the bank combines the TRS with other key performance measures
such as ROE, return on equity which is the total net income over owners equity,
and the EPS, which is the earnings per share and is calculated by dividing the net
income after tax and interest by the number of shares.
To start with, these metrics alone also have their flaws but when combined the three
can give a better understanding of what the bank/company looks like and how it is
performing towards its shareholders.

ROE, a key performance measure used by many companies, can also act as an
incentive for managers to increase debt and decrease equity, but when combined
with EPS and altered to contain the risk managers are taking to reach the given net
income or to explain the reason of the amount of debt, it becomes somehow
flawless.
These three metrics should be used together, for each one shows a different
purpose inside the large purpose which is showing the shareholders how the well
the company is performing. Each metric shows different aspect of the performance
and when used together can provide an improved understanding. The integration of
key performances and not relying on a single key performance metric is a very
important aspect because it doesnt lead managers or CEOs to neglect or try to
manipulate performance rather shows transparency and provides discipline.