FIN619 Ratio Analysis Financial Statements of Askari Bank and United Bank

Wednesday, May 18, 2016

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FIN619 Ratio Analysis Financial Statements of Askari Bank and United Bank

FIN619 Ratio Analysis Financial Statements of United bank,Askari bank and Bank Alfalah.

A PROPOSAL FOR REPORT

TO BE SUBMITTED TO THE DEPARTMENT OF MANAGEMENT SCIENCES,

VIRTUAL UNIVERSITY OF PAKISTAN

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR

THE DEGREE OF MASTER IN BUSINESS ADMINISTRATION (MBA-Exec)

AAMIR SHAHZAD

MC100403644

MBA-EXEC (FIN619 FINANCE)

SUBMISSION DATE:

02-02-2016

Acknowledgement

All my efforts for my MBA and this Project would have been nothing with out the help and grace of Almighty Allah and I am always Gratified to Blessings of Allah.

More than anybody else, I would like to acknowledge my uncle Mr. Ashfaq Ali Tabassam for his never ending support. He always guided me whenever I felt stuck off and his encouragement always worked as moral booster for me.

I would like to extend my special thanks to my friend Mr. Aamir who advised me time to time and provided me technical assistance.

I am highly indebted to my boss in my organization Mr. Muzaffar Ali who spared me and gave me ample time, out of my professional commitments, to go all out for my MBA from Virtual University of Pakistan.

FIN619 Financial Ratio Analysis of Askari bank and United bank with Bank Alfalah

The purpose of this report titled “RATIO ANALYSIS OF ASKARI BANK, UNITED BANK AND BANK ALFALAH FOR THE YEARS 2009, 2010, 2011”is to investigate the financial performance of these banks during the mentioned period. The first chapter of this report deals with introduction of project and banks under study, financial period under consideration, objectives and significance of the project. The second part is about data processing and analysis.

The fourth chapter is about calculation of different ratios its comparison and interpretation. In last chapter conclusions and recommendations have been given.

The data for the study is collected from financial repots of the banks which are available on theirs respective websites. The financial reports included the balance sheet, income statement and cash flow statements.

As regards to finding of study, the Net Profit Margin ratio of Askari and bank Alfalah is low as compare to UBL. UBL is also on top in gross spread ratio, return on equity, debt ratio and Advance/Deposit ratio. While Askari Bank has better cash flow ratio and Price/Earning ratio.

It is recommended for Bank Alfalah and Askari bank to cut down their non markup expenses to improve their Net Profit Margin Ratio while, on the other hand their turnover is satisfactory. UBL and Alfalah should decrease their current liabilities and ensure the availability of more liquidity to meet short term debts. Askari bank and bank Alfalah both banks need to adopt measures to cut down their interest expenses in order to increase their gross spread ratio. In order to increase non interest income Askari and Alfalah needs to increase their earnings through fees, commissions and other advisory charges etc.

In Advance/Deposit ratio Askari bank and Alfalah should have to utilize their deposits in more projects either through corporate financing or general public financing.

Table of Contents

Section I

Chapter 1………………………………………………………………8

· 1.1 Introduction of the project

· 1.2 Banks Introduction

· 1.4 Period Under Consideration

· 1.5 Objectives

· 1.6 Significance

Chapter 2………………………………………………………….……11

· 2.1 Data Collection

· 2.2 Data Processing and Analysis

Chapter 3……………………………………………………………….12

· 3.1 Net Profit Margin

· 3.2 Operating cash flow ratio

· 3.3 Gross Spread ratio

· 3.4 Non-interest income to total income ratio

· 3.5 Spread ratio

· 3.6 Advances/deposit ratio

· 3.7 Return on total equity (ROE)

· 3.8 Debt ratio

· 3.9 Debt/Equity ratio

· 3.10 Price/Earning ratio

Chapter 4……………….……………………………………………….26

· 4.1 Conclusions

· 4.2 Recommendations

Section I

· a) Student Introduction …………………………………………29

· b) Bibliography …………………………………………………30

1.1 Project Introduction

The financial ratio analysis techniques referred to in this aid could be useful to analyze any company financial performance. This study is also going to investigate the financial performance of three mentioned banks e.g. Askari bank, united bank and Bank Alfalah. These banks are surveying in the Pakistani Market and are competitors each other. Hence this study is going to find out which bank has strong financial position over other two banks. With the help of financial ratio analysis we can analyze the financial position of any company. Many stakeholders, investors, creditors may analyze any company, firms financial position with the help of ratio analysis before taking any important decision regarding to investments or any other. Therefore financial ratio is a mathematical correlation among several numbers often stated in the form of percentage, times, or days.

1.2 Banks Introduction

Askari Bank was incorporated in Pakistan on October 9, 1991, as a public limited company. It commenced operation on April 1, 1992, and is principally engaged in the business of banking, as defined in the Banking Companies Ordinance, 1962. The Bank is listed on Karachi, Lahore and Islamabad Stock Exchanges.

Since inception, the bank has concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network which includes Islamic and Agricultural banking.

United Bank Limited (UBL) was incorporated in Pakistan on November 7th 1959.In 1963 the bank opened its first overseas branch in London, United Kingdom. In 1971 the UBL was nationalized by the Government. In 2002, the Government of Pakistan sold it in an open auction to a consortium of Abu Dhabi Group and Bestway.

Currently UBL is one of the largest commercial banks in Pakistan having more than 1,220 online branches inside the country. Its 15 branches outside the country are in the United States of America, Qatar, UAE, Bahrain, and Republic of Yemen. It also has representative offices in Tehran (Iran), and Almaty (Kazakhstan). It owns subsidiaries in the UK (United National Bank Limited), and in Zurich (Switzerland).

Bank Alfalah Limited was incorporated on June 21st, 1992 as a public limited company under the Companies Ordinance 1984. Its banking operations commenced from 1st Nov, 1997.The Bank is currently operating through various branches in Pakistan, Bahrain, Bangladesh & Afghanistan, with the registered office at B.A.Building, I.I.Chundrigar, Karachi.

Strengthened with the banking of the Abu Dhabi Group and driven by the strategic goals set out by its board of management, the Bank has invested in revolutionary technology to have an extensive range of products and services. During the past five years, Bank Alfalah has emerged as one of the foremost financial institution in the region endeavoring to meet the needs of tomorrow today.

1.3 Financial Period Under-Consideration for Analysis:

Financial period under consideration for ratio analysis (2011, 2011, 2012) of Askari bank and United bank.

1.3 Significance

The significance of these projects may include the following

1. The finding of this research will be more beneficial for investors, creditors, to take good decision after seeing the result of ratio. They can easily analyze the bank position through this study result. Bank Management may also study the finding of this study to determine the success or failure of particular sales, marketing as well as financing strategies.

2. At the end of this research, we will be able to get which bank is more able to pay its current liabilities from their cash equivalents.

3. The major outcomes of this research, this study will clear the concept regarding to financial ratio analysis in banking sector by applying different ratios.

4. This research may help the stakeholders to analyze financial ratios result before taking any serious decisions.

5. Financial mangers of selected banks also take advantages from this study to identify their bank strengths and weakness and will improve their poor areas.

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