Showing posts with label ratio analysis. Show all posts
Wednesday, May 18, 2016
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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Wednesday, May 4, 2011
Ratio Interpretation between Askari Bank and Bank Alfalah
1. Current Ratio, we have seen that current ratio of askari bank increase in 2008 as compare to year 2007 and 2009 on the other hand Bank alfalah ratio also increase in the same year 2008 as compare to 2007 and 2009
2. Working Capital ratio of askari bank increase in 2009 as compare to year 2008 but we can see that 2007 and 2009 ratio is high then 2008 on the other hand bank alfalah working capital ratio is for the year 2007 to 2008 is remain constant but it also increase in 2009
3. Mark-up is increase on the working capital. It means that with the passage of time higher interest has to be paid to meeting the current liabilities regarding the current asset. The ration decrees 2007 and 2009 as compare to 2008 but on the other hand askari bank Mark-up is increase on the working capital. It means that with the passage of time higher interest has to be paid to meeting the current liabilities regarding the current asset. The ration decrees 2007 and 2009 as compare to 2008
4. Acid test ratio. My working shows that liquidity of the Alfalah bank has changing consistently from 2007 to 2008 but in 2009 it are again decrease. In 2007 the ratio was 0.18 it will increase again and in 2008 it reach 0.20 but last year it will then again decrease and reach -0.06 on the other hand Askari bank changing trend of graph shows that liquidity of the bank is changing consistently from 2008 to 2009 after the year 2007 continually
5. Debt/Equity Ratio This working shows that bank Alfalah Debt/equity ratio is continually decreasing during 2008 to 2009, which shows that decrease in liquidity position. It means low investment from shareholders funds. On the other hand Same as the working shows that Askari bank Debt/equity ratio is also continually decreasing during 2008 to 2009, which shows that decrease in liquidity position. It means low investment from shareholders funds.
6. Debt ratio The working shows that debt ratio of bank alfalah is slightly decreased in 2009 as we compare to previous years. More of this ratio more the risky the financial position. Lower ratio means lower risk. But the ratio above show normal increasing trend on the other hand askari bank is working shows that debt ratio is slightly increased in 2008, 2007 and then it again increases in 2009. More of this ratio means more the risky the financial position. Lower ratio means lower risk. But the ratio above show normal increasing trend
7. Time interest ratio for the askari bank is increased in 2009 as compare to previous years 2007 to 2008 but bank alfalah ratio increased strongly in last three years as compare to Askari bank.
8. Asset turn over ratio for bank Alfalah working shows decreasing trend of time interest earned ratio from 2007 to 2009.This calculation concludes through changing trend that in the 2007 and 2008 bank is in good position to fulfill its interest obligation on the other hand If we look Askari bank this is also have the same situation the working shows decreasing trend of time interest earned ratio from 2007 to 2009. According to above analysis this also concludes through changing trend that in the 2007 and 2008 bank is in good position to fulfill its interest obligation
9. Basic Earning per share for Bank Alfalah working shows that earning per share is continually decreasing from 2008 to 2009. This changing trend affects the price of share. It also shows that is steady achieving the benefits from its shareholders. Profit is too increasing in slightly steady manner. Same as the side of Askari bank this working shows that earning per share is continually decreasing from 2008 to 2009. This changing trend affects the price of share. It also shows that is steady achieving the benefits from its shareholders. Profit is too increasing in slightly steady manner
10. Total capitalization ratio of Bank Alfalah decreased in 2008 as compare to for the year 2007. but we have seen that in 2009 it again increased. Now we could see same ratio of askari bank we can see that ratio same in 2009 as we compare to Bank alfalah
11. Debt to Tangibale Net worth Ratio for both companies is same. But in 2008 bank alfalah ratio has little increased
12. Return on asset ratio for Bank Alfalah my working shows that shows that the return on asset ratio in the 2007 has high value but in 2008 it will decrease continuously but if we look askari bank graph shows that the return on asset ratio in the 2007 has high value but in 2008 it will decrease as compare to 2007 but in 2009 it little increase
13. Net Profit margin ratio of askari bank decreased after the year 2007 as compare to other years. On the other hand bank alfalah have also same condition we if we compare to askari bank. It might be due to country certain reasons. Both companies net profit margin has decreased in 2008 and 2009
14. Dupont Return on Assets of askari bank continually decreased as compare to 2007 if we look bank alfalah ratio result it seem also like askari bank. It is also decreased after the year 2007.
15. Operating income margin ratio of askari bank we have seen that ratio decreased after the year 2007. Bank alfalah also been suffered the same situation
16. Return on operating assets we have seen askari bank ratio in 2008 it decreased very badly as compare to previous year 2007 but it little increase in 2009 now we could see bank alfalah we can see that it decreased in 2009 but askari bank have increasing trend
17. Return on Total equity. We have seen that askari bank ratio is decrease after the year 2007. In 2008 it is 9.51 Percent in 2009 it is little increased and reached at 21.83 % now we could see bank alfalah in 2007 ratio was 0.48 percent and 2008 0.16 percent and 2009 it was 0.066 percent
2. Working Capital ratio of askari bank increase in 2009 as compare to year 2008 but we can see that 2007 and 2009 ratio is high then 2008 on the other hand bank alfalah working capital ratio is for the year 2007 to 2008 is remain constant but it also increase in 2009
3. Mark-up is increase on the working capital. It means that with the passage of time higher interest has to be paid to meeting the current liabilities regarding the current asset. The ration decrees 2007 and 2009 as compare to 2008 but on the other hand askari bank Mark-up is increase on the working capital. It means that with the passage of time higher interest has to be paid to meeting the current liabilities regarding the current asset. The ration decrees 2007 and 2009 as compare to 2008
4. Acid test ratio. My working shows that liquidity of the Alfalah bank has changing consistently from 2007 to 2008 but in 2009 it are again decrease. In 2007 the ratio was 0.18 it will increase again and in 2008 it reach 0.20 but last year it will then again decrease and reach -0.06 on the other hand Askari bank changing trend of graph shows that liquidity of the bank is changing consistently from 2008 to 2009 after the year 2007 continually
5. Debt/Equity Ratio This working shows that bank Alfalah Debt/equity ratio is continually decreasing during 2008 to 2009, which shows that decrease in liquidity position. It means low investment from shareholders funds. On the other hand Same as the working shows that Askari bank Debt/equity ratio is also continually decreasing during 2008 to 2009, which shows that decrease in liquidity position. It means low investment from shareholders funds.
6. Debt ratio The working shows that debt ratio of bank alfalah is slightly decreased in 2009 as we compare to previous years. More of this ratio more the risky the financial position. Lower ratio means lower risk. But the ratio above show normal increasing trend on the other hand askari bank is working shows that debt ratio is slightly increased in 2008, 2007 and then it again increases in 2009. More of this ratio means more the risky the financial position. Lower ratio means lower risk. But the ratio above show normal increasing trend
7. Time interest ratio for the askari bank is increased in 2009 as compare to previous years 2007 to 2008 but bank alfalah ratio increased strongly in last three years as compare to Askari bank.
8. Asset turn over ratio for bank Alfalah working shows decreasing trend of time interest earned ratio from 2007 to 2009.This calculation concludes through changing trend that in the 2007 and 2008 bank is in good position to fulfill its interest obligation on the other hand If we look Askari bank this is also have the same situation the working shows decreasing trend of time interest earned ratio from 2007 to 2009. According to above analysis this also concludes through changing trend that in the 2007 and 2008 bank is in good position to fulfill its interest obligation
9. Basic Earning per share for Bank Alfalah working shows that earning per share is continually decreasing from 2008 to 2009. This changing trend affects the price of share. It also shows that is steady achieving the benefits from its shareholders. Profit is too increasing in slightly steady manner. Same as the side of Askari bank this working shows that earning per share is continually decreasing from 2008 to 2009. This changing trend affects the price of share. It also shows that is steady achieving the benefits from its shareholders. Profit is too increasing in slightly steady manner
10. Total capitalization ratio of Bank Alfalah decreased in 2008 as compare to for the year 2007. but we have seen that in 2009 it again increased. Now we could see same ratio of askari bank we can see that ratio same in 2009 as we compare to Bank alfalah
11. Debt to Tangibale Net worth Ratio for both companies is same. But in 2008 bank alfalah ratio has little increased
12. Return on asset ratio for Bank Alfalah my working shows that shows that the return on asset ratio in the 2007 has high value but in 2008 it will decrease continuously but if we look askari bank graph shows that the return on asset ratio in the 2007 has high value but in 2008 it will decrease as compare to 2007 but in 2009 it little increase
13. Net Profit margin ratio of askari bank decreased after the year 2007 as compare to other years. On the other hand bank alfalah have also same condition we if we compare to askari bank. It might be due to country certain reasons. Both companies net profit margin has decreased in 2008 and 2009
14. Dupont Return on Assets of askari bank continually decreased as compare to 2007 if we look bank alfalah ratio result it seem also like askari bank. It is also decreased after the year 2007.
15. Operating income margin ratio of askari bank we have seen that ratio decreased after the year 2007. Bank alfalah also been suffered the same situation
16. Return on operating assets we have seen askari bank ratio in 2008 it decreased very badly as compare to previous year 2007 but it little increase in 2009 now we could see bank alfalah we can see that it decreased in 2009 but askari bank have increasing trend
17. Return on Total equity. We have seen that askari bank ratio is decrease after the year 2007. In 2008 it is 9.51 Percent in 2009 it is little increased and reached at 21.83 % now we could see bank alfalah in 2007 ratio was 0.48 percent and 2008 0.16 percent and 2009 it was 0.066 percent
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