financial ratio analysis

FINANCIAL ANALYSIS ON ASKARI COMMERCIAL BANK

LIMITEDPRESENTED BY

SYED SUBHAN SHAHMUHAMMAD SARMAD

SHAFI ULLAH

INTRODUCTIONACBL was incorporated on October, 09, 1991.commenced its operations in April, 1992 as a

Public Limited Company. Askari bank has expended in to a nationwide

presence of 200 branches, 199 in Pakistan and 1 in Azad Kashmir.

CONT… 18 Islamic banking branches, An offshore Banking unit in Bahrain. A shared network of over 800 online ATMs

covering all major cities in Pakistan.Askari Commercial Bank is pioneer in Mobile

ATM facility started in 2005 dedicated to serving the urban consumer market.

CONT… ACBL has a correspondent Bank network in more

than 95 countries with about 167 banks. The registered office of the bank is situated at

AWT plaza, The Mall, Rawalpindi.

CREDIT RATING OF ACBL (PACRA)

• A1+ for obligation supported by the higher capacity for timely repayment.

• AA rating denote a very low expectation of credit risk, they indicate very strong capacity for timely payment of financial commitments.

FINANCIAL RATIOS ANALYSIS

The following types of ratios are frequently used:

• Liquidity Ratios• Profitability Ratios• Solvency Ratios• Financial leverage Ratios• Credit Risk Ratios

Liquidity Ratios

• Earning Asset to Total Assets: (Earning Asset / Total Assets) * 100• Advances to Deposit Ratio: TOTAL ADVANCES/TOTAL DEPOSITS*100• Yield on Earning Assets: (Net Profit after Tax / Earning Assets) * 100

Years 2006 (‘000) 2007 (‘000 2008 (‘000)

Earning Assets

147,344,027 163,687,402 181,895,045

Total Assets 166,033,588 182,171,885 206,191,138

Results 89% 90% 88%

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

Total Advances

99,179,372 100,780,162 128,818,242

Total Deposits

131,839,283 143,036,707 167,676,572

Results 75.22 70.45 76.82

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

Net Profit After Tax

2,249,974 2,681,012 386,225

Earning Assets

147,344,027 163,687,402 181,895,045

Results 1.53 % 1.64% 0.21%

Liquidity Ratios

0%

20%

40%

60%

80%

100%

2006 2007 2008

Years

0.00%

0.50%

1.00%

1.50%

2.00%

Asset to Asset

Advance to Deposit

Yeild on EarningAssets

Profitability ratios• Return on Equity (ROE):

ROE= Net income/Total Equity

• Return on Assets: ROA= Net income/Total Assets

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)Net Income 2,249,974 2,681,012 386,225

Total Equity

11,053,230 12,265,987 12,971,363

ACBL Ratio 20.27% 21.86% 2.98%Industry Ratio

27.0% 25.0% 12.0%

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

Net Income 2,249,974 2,681,012 386,225

Total Assets 166,033,588 182,171,885 206,191,138

ACBL Ratio 1.35% 1.47% 0.18%

Industry Ratio

3.5% 3.7% 1.7%

SOLVENCY RATIOS

• Equity to Asset Ratio: Total Equity / Total Assets)

• EQUITY TO DEPOSIT RATIO: (Total Equity / Total Deposits)

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

Total Equity 11,053,230 12,265,987 12,971,363

Total Assets 166,033,588 182,171,885 206,191,138

Results 6.6% 6.7% 6.2%

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

Total Equity 11,053,230 12,265,987 12,971,363

Total Deposits

131,839,283 143,036,707 167,676,572

Results 8.3% 8.5% 7.7%

Leverage Ratios• Owner’s Equity-to-Total Asset

Ratio• Owner’s Equity-to-Fixed Asset

RatioOwner's E quity-to-T otal As s et

R atio

0

0.5

1

1.5

2

2.5

2006 2007 2008

Owner's E quity-to-F ixed As s ets R atio

44

46

48

50

52

54

56

58

60

2006 2007 2008

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

Share holder’s Equity

2,004,333 3,006,499 4,058,774

Total Assets 166,033,588 182,171,885 206,191,138

Results 1.20 1.65 1.96

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

Share holder’s Equity

2,004,333 3,006,499 4,058,774

Total Fixed Assets

3,810,331 5,128,428 8,266,458

Results 52.60 58.62 49.09

Credit Risk Ratios• Nonperforming assets to loans

• NON-PERFORMING ASSETS TO EQUITY CAPITAL

00.10.20.30.40.50.60.70.80.9

1

2006 2007 2008 PeerGroup

Non-Performingloans to equitycapital

Annual Provisionfor loan losses toequity capital

Non-PerformingAssets to equitycapital

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

Net NPLs 3,656,297 6,907,591 11,689,417

Total loans 99,179,372 100,780,162 128,818,242

Results 0.04 0.07 0.09

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

Net NPLs 3,656,297 6,907,591 11,689,417

Equity Capital

9,619,066 12,099,645 12,034,895

Results 0.38 0.57 0.97

•ANNUAL PROVISION FOR LOAN LOSSES TO EQUITY CAPITAL

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

Provisions 1,128,137 3,920,240 3,824,778

Equity Capital

9,619,066 12,099,645 12,034,895

Results 0.12 0.32 0.32

ASSET QUALITY• Non-Performing loans to Advances • Provision to Non-Performing Loans:

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

NPLs 3,656,297 6,907,591 11,689,417

Advances 99,179,372 100,780,162 128,818,242

Results 0.04 0.07 0.09

Years 2006 (‘000) 2007 (‘000) 2008 (‘000)

Provisions 1,128137 3,920,240 3,824,778

NPLs 3,656,297 6,907,591 11,689,417

Results 0.3 0.6 0.3

0

0.02

0.04

0.06

0.08

0.1

2006 2007 2008

00.10.20.30.40.50.60.7

Non-Performing Loansto Advances

Provisions to Non-Performing Loans

CONCLUSION• The year 2007 was a volatile year for the banking

sector in terms of profitability.• The bank is either not very efficient at collecting

the outstanding loans or has a very liberal loans distribution policy.

• bank may face considerable credit risk from its loan defaulters.

• The liquidity of the bank has maintained a consistent trend.

• The solvency of the company has been successfully maintained over the year.