F
INANCIAL
S
TATEMENTS
A
NALYSIS
7
T
ENY
EARSP
ERFORMANCE1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Capital & Reserves 418 451 566 645 733 1219 1389 1515 3002 3012 Deposits 19825 25041 33757 37121 41445 51124 55897 63430 76541 93107 Advances 11115 11871 15734 18037 19901 29552 32766 36231 42719 55264 Investments 7268 9981 14586 14948 16549 15610 15553 20193 25605 26775 Income 2044 2349 3435 4453 5010 6102 7056 8397 8974 10925 Expenditure 1983 2249 3080 4038 4665 5571 6822 8368 8814 10854 Pre-tax Profit 61 100 355 415 345 531 234 29 170 71 Total Assets 23319 28342 37973 41759 47390 58480 63439 72404 89356 106926
T
RENDA
NALYSIS OFT
ENY
EARSP
ERFORMANCE1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Capital & Reserves 7.89 25.50 13.96 13.64 66.30 13.95 9.07 98.15 0.33 Deposits 26.31 34.81 9.97 11.65 23.35 9.34 13.48 20.67 21.64 Advances 6.80 32.54 14.64 10.33 48.50 10.88 10.57 17.91 29.37 Investments 37.33 46.14 2.48 10.71 (5.67) (0.37) 29.83 26.80 4.57 Income 14.92 46.23 29.64 12.51 21.80 15.63 19.01 6.87 21.74 Expenditure 13.41 36.95 31.10 15.53 19.42 22.46 22.66 5.33 23.14 Pre-tax Profit 63.93 255.00 16.90 (16.87) 53.91 (55.93) (87.61) 486.21 (58.24) Total Assets 21.54 33.98 9.97 13.48 23.40 8.48 14.13 23.41 19.66
Deposites, Advances & Investments 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Years R s . in b il li o n
Deposites, Advances & Investments -10 0 10 20 30 40 50 60 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Years P e rc e n ta g e
Deposits Advances Investments
The graph shows a good picture of company’s past 10 years performance regarding deposits, advances and investments. Deposits and advances are constantly increasing but the rate of increase is different during different periods. But when we see at the rate of change, it has a lot of ups and downs. Particularly rate of change in Advances fluctuate in a very wider band. In year 1992 advances increased by 6.80% in the next year it increased by 32.54% and in year 1995 it increased by 48%. There is no stability in the rate of change.
Income, Expenditures & Pre-tax Profit -200 -100 0 100 200 300 400 500 600 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Years R s . in b il li o n
Income Expenditure Pre-tax Profit
Income, Expenditures & Pre-tax Profit
0 2000 4000 6000 8000 10000 12000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Years R s . in b il li o n
Income Expenditure Pre-tax Profit
The graph shows that the income of the bank is increasing gradually. This seems to be good but at the same time if we take into consideration the facts, not only income of the bank is increasing but expenditure is too increasing that shows the in efficiency of the management. The pre-tax profit is least. The bank should notice that what are the reasons behind this? Why the expenses are increasing with the passage of time. Another thing notable in this regard is that there is a great fluctuation in the income expenditure and profit. This fluctuation is giving a negative impression to the investor, and as well other people who are dealing with the bank in other matters, this complex situation can be controlled by effective organization and techniques.
ALLIED BANKOF PAKISTAN LTD.
BALANCESHEET
Hailey College of Commerce, University of the Punjab
Assets 1999 1998 1997
Cash 8,601,193 7,646,93
7 6,316,337
Balance with other Banks 1,757,510 1,878,79
6 1,380,840
Money at call and short notice. 300,000 100,000 450,000
Investments 26,774,76
6 25,605,470 20,192,699
Advances net of provisions 55,263,76
2 42,719,179 36,231,357
Operating Fixed Assets 3,062,045 2,488,61
9 872,730
Capital work in Progress 44,246 37,472 33160
Net investments in Finance Lease 34,415 53,707 43,755
Other Assets 11,088,39
4 8,827,987 6,882,772
106,926,
331 89,358,167 72,403,650
LIABILITIES
Deposits and other accounts 93,107,29
1 76,541,153 63,429,709
Borrowings from other bank agents
etc. 7,144,163 6,243,517 4,914,558 Bills Payable 1,073,491 1,084,15 0 802,367 Other Liabilities 2,588,936 2,487,44 0 1,741,598 103,913,8 81 86,356,261 70,888,232 Net Assets 3,012,450 3,001,90 6 1,515,418 PRESENTED BY Share capital 1,063,156 1,063,15 6 1,063,156
Reserve fund and Other Reserves 480,760 455,760 451,760
Unappropriate profit 1,638 16,094 502
Shareholders equity 1,545,554 1,535,01
0 1,515,418
Surplus on revaluation of Fixed
Assets. 1,466,896 1,466,896
-3,012,450 3,001,90
6 1,515,418
MEMORANDUM ITEMS
Bills for collection 8,142,388 10,910,8
97 10,062,812
Acceptances endorsements and
ALLIED BANKOFPAKISTAN
PROFIT ANDLOSSACCOUNT
FORTHEYEARENDEDDECEMBER 31, 1999
PARTICULARS 1999 1998 1997
Mark up interest and discount or return
earned 7,287,432 6,059,060 5,026,784
Less Cost/Return on Deposits, borrowing
etc 6,953,006 5,289,971 4,639,053
334,426 769,089 387,731
Free commission and brokerage 358,997 426,229 361,322
Profit from dealing securities 1,172,04
2 1,033,310 1,130,242
Profit from investment securities 971,956 755,170 564,453
Dividend Income 21,791 14,401 18,398
Other operating income 995,310 607,820 1,191,17
6 3,520,07 8 2,836,930 3,265,591 3,854,50 4 3,606,019 3,653,322 OPERATING EXPENSES Administrative Expenses 3,772,88 9 3,396,440 2,960,699
Provision written back and against non performing
Advances (53,131) (254,885) 712,492
Loss from diminution value of investments -- 218,398 (9,649)
Other provisions -- 36,587 33,157 3,719,75 8 3,396,440 3,696,699 134,746 209,579 (43,377) Other Income 64,356 88,017 104,144 199,102 297,596 60,767 Other charges 128,004 128,004 32,001
Profit before taxation 71,098 169,592 28,766
Taxation – Current 60,554 150,000 335,125
Deferred -- -- (320,02
3)
Profit after taxation 10,554 19,592 13,664
Unappropriated profit brought forward 16,091 502 338
Profit available for appropriation 26,638 20,094 14,002
Appropriations
Transfer to statutory reserve 25,000 4,000 13,500
ALLIED BANKOF PAKISTAN LTD.
COMMON SIZE BALANCESHEET
ASONDECEMBER 31, 1999
ASSETS 1999 1998 1997
Cash 8.04 8.56 8.72
Balance with other Banks 1.64 2.10 1.91
Money at call and short notice. 0.28 0.11 0.62
Investments 25.04 28.65 27.89
Advances net of provisions 51.68 47.81 50.04
Operating Fixed Assets 2.86 2.78 1.21
Capital work in Progress 0.04 0.04 0.05
Net investments in Finance Lease 0.03 0.06 0.06
Other Assets 10.37 9.88 9.51
100.00 100.00 100.00
LIABILITIES
Deposits and other accounts 87.08 85.66 87.61
Borrowings from other bank agents etc. 6.68 6.99 6.79
Bills Payable 1.00 1.21 1.11 Other Liabilities 2.42 2.78 2.41 97.18 96.64 97.91 Net Assets 2.82 3.36 2.09 PRESENTED BY Share capital 0.99 1.19 1.47
Reserve fund and Other Reserves 0.45 0.51 0.62
Unappropriate profit 0.00 0.02 0.00
Shareholders equity 1.45 1.72 2.09
Surplus on revaluation of Fixed Assets. 1.37 1.64 -
2.82 3.36 2.09
MEMORANDUM ITEMS
Bills for collection 7.61 12.21 13.90
Acceptances endorsements and other
obligations 17.17 14.95 18.81
ALLIED BANKOFPAKISTAN
COMMON SIZE PROFITANDLOSS ACCOUNT
FORTHEYEARENDEDDECEMBER 31, 1999
Particulars 1999 1998 1997
Mark up interest and discount or return
earned 100.00
100.0
0 100.00
Less Cost/Return on Deposits, borrowing
etc 95.41
87.31 92.29
4.59 12.69 7.71
Free commission and brokerage 4.93 7.03 7.19
Profit from dealing securities 16.08 17.05 22.48
Profit from investment securities 13.34 12.46 11.23
Dividend Income 0.30 0.24 0.37
Other operating income 13.66 10.03 23.70
48.30 46.82 64.96
52.89 59.51 72.68
OPERATING EXPENSES
Administrative Expenses 51.77 56.06 58.90
Provision written back and against non performing
Advances (0.73) (4.21) 14.17
Loss from diminution value of investments - 3.60 (0.19)
Other provisions - 0.60 0.66 51.04 56.06 73.54 1.85 3.46 (0.86) Other Income 0.88 1.45 2.07 2.73 4.91 1.21 Other charges 1.76 2.11 0.64
Profit before taxation 0.98 2.80 0.57
Taxation – Current 0.83 2.48 6.67
Deferred - - (6.37)
0.83 2.48 0.30
Profit after taxation 0.14 0.32 0.27
Unappropriated profit brought forward 0.22 0.01 0.01
Profit available for appropriation 0.37 0.33 0.28
Appropriations
Transfer to statutory reserve 0.34 0.07 0.27
R
ATIOSA
NALYSISPROFITABILITY RATIOS
NET PROFIT RATIO
= × 100
1997 1998 1999
Net Profit After Tax 13,664 19,592 10,554
Interest Received 5,026,784 6,059,060 7,287,432
Net Profit Ratio 0.2718% 0.3234 % 0.1448 %
Net profit as percentage of Interest received increased a little in 1998 (from 0.2718% to 0.323%), but it is very low and has a decreasing trend in year 1999 it decreased to 0.1448% from year 1998 i.e. 0.3234% the decrease in the profit from year 1998 to year 1999 is too much than an increase in profit volume from year 1997 to year 1998. The decreasing Net Profit trend shows the management’s inefficiencies to control the operating costs and maximize the profit.
Net Profit after Tax
Interest Received
Net Profit Ratio
-0.0500 0.1000 0.1500 0.2000 0.2500 0.3000 0.3500 1997 1998 1999 Years P e rc e n ta g e
RETURN ON ASSETS
= × 100
1997 1998 1999
Net Profit After Tax 13,664 19,592 10,554
Total Assets 72,403,650 89,358,167 106,926,331
Return on Assets 0.0189 0.0219 0.0099
This ratio shows that the return is lesser in 1999 as compared to return on assets in the year 1998. it was 0.0189% in 1997 and increased to 0.0219% in 1998, but it decreased very sharply in 1999 to 0.0099%. Although interest and discount on loans which is the major source of revenue for bank has increased in 1999 as compared to last year, but cost on deposits and borrowing which is the major expenditure of bank has increased more in the current year than the last year.
Another reason of decrease in return is
the reduction in lending rate and increase in financial cost, total assets in 1999 have also increased substantially than last year so return on assets has decreased in 1999.
Net Profit after Tax Total Assets Return on Assets -0.0050 0.0100 0.0150 0.0200 0.0250 1997 1998 1999 Years P e rc e n ta g e
RETURN ON SHAREHOLDERS FUNDS
= × 100
1997 1998 1999
Net Profit After Tax 13,664 19,592 10,554
Shareholders’ Funds 1,515,418 3,001,906 3,012,450
Return on Shareholders’ Funds 0.9017 0.6527 0.3503
This ratio is a further explanation of the above ratio that is the rate of return has decreased substantially in year 1998 and again in year 1999. The reason behind is that rate of increase in revenue in 1999 is lesser than the rate of increase in expenditure, moreover in 1999 profit after tax has decreased and on the other hand its denominator shareholders fund has increased due to increase in reserve fund and other reserves. Therefore both the factors are responsible for this worrisome ratio.
If this ratio decreases due to decrease in Profit, it is not a positive sign, but if the ratio decreases due to increase in shareholders’ equity, it is not bad. In this case the net profit of year is more 1998 then that of year 1997, but the ratio decreased due to increase in the shareholders’ equity, which is resultant of increased reserves. The sharp decline in year 1999 is due to decrease in profits.
Net Profit after Tax
Shareholders Funds
Return on Shareholders Fund
-0.1000 0.2000 0.3000 0.4000 0.5000 0.6000 0.7000 0.8000 0.9000 1.0000 1997 1998 1999 Years P e rc e n ta g e
RETURN ON EQUITY CAPITAL
= × 100
1997 1998 1999
Net Profit After Tax 13,664 19,592 10,554
Equity Share Capital 1,063,156 1,063,156 1,063,156
Return on Equity Share Capital 1.2852 1.8428 0.9927
Calculation made on the base of data available shows that profit earning after taxes in 1999 has decreased due to increased financial cost of funds for which expected investment avenues did not open up the situation rather worsened with reduced return on lending.
Here in this ratio we see that ratio is disturbed by the single factor of reduction in profit as there in no further flotation of share in the stock exchange in current year.
Net Profit after Tax
Equity Capital
Return on Equity Capital
-0.2000 0.4000 0.6000 0.8000 1.0000 1.2000 1.4000 1.6000 1.8000 2.0000 1997 1998 1999 Years P e rc e n ta g e
EARNINGPER SHARE
= × 100
1997 1998 1999
Net Profit After Tax 13,664 19,592 10,554
No. of Equity Shares 106,316 106,316 106,316
Return on Equity Share Capital 0.1285 0.1843 0.0993
This ratio is telling the same story as was telling the above ratio. Because there is no issuance of share capitals in year 1998 and year 1999. The profit increased in year 1998, but it has decreased in 1999 and that is why earning per share has also decreased. This ratio has a great importance for the shareholders point of view. The shareholders want a higher return on their investment.
Net Profit after Tax
No. of Equity Shares
Earning per Share
-0.0200 0.0400 0.0600 0.0800 0.1000 0.1200 0.1400 0.1600 0.1800 0.2000 1997 1998 1999 Years R u p e e s
RATE OF RETURN AT LOANS
= × 100
1997 1998 1999
Interest Income 5,026,784 6,059,060 7,287,432
Total Loans 36,231,357 42,719,179 55,263,762
Rate of Return on Loans 13.8741 14.1835 13.1866
Here we are watching very interesting situation, as there is an increasing interest income in 1999 but ratio is decreasing reason is this that growth ratio (20%) in interest income not accompanied by ratio of increase in total loans.
As government reduced lending rate during 1999 and people borrowed more from banks for investment that is why return on loans has decreased in 1999. Investment in any country will be encouraged by fall in the interest ratio. In
improvement in the ratio leads to improvement in very aggregate profitability measures. Interest
Income Total Loans
Rate of Return at Loans
12.6000 12.8000 13.0000 13.2000 13.4000 13.6000 13.8000 14.0000 14.2000 14.4000 1997 1998 1999 Years P er c e n ta g e
OPERATING RATIO = × 100 1997 1998 1999 Operating Costs 3,696,699 3,396,440 3,719,758 Interest Earned 5,026,784 6,059,060 7,287,432 Operating Ratio 73.5400 56.0556 51.0435
As the graph shows the operating costs are decreasing year by year. In year 1997 it was 73.54 % of the interest earned and it decreased in year 1998 to 56.06% in the next year it again decreased to 51.04% of the interest earned. The decreasing trend of the operating costs shows the efficiency of the management to control the operating costs. But the Operating costs itself as a percentage of the interest earned is very heavy although the management is trying to control these costs; these are still a very huge percentage of interest earned.
Operating Costs Interest Earned Operating Ratio -10.0000 20.0000 30.0000 40.0000 50.0000 60.0000 70.0000 80.0000 1997 1998 1999 Years P er ce n ta g e
LIQUIDITY RATIOS CURRENT RATIO = 1997 1998 1999 Current Assets 8,147,177 9,625,733 10,658,703 Current Liabilities 49,911,493 54,266,721 67,896,718 Current Ratio 1:0.16 1:0.18 1:0.16
Current ratio of the bank is going to be decreased as in it 0.16 in 1997, increased somewhat to 0.18 in 1998 and decreased 0.16 in 1999. The fluctuation in the ratio is normal thing by year to year, but is alarming because, it is less than one. It is recommended that the current ratio should be at least 1 : 1, where it not so. It means the Bank is not in a position to its current liabilities fully. It should be increased. Current Assets Current Liabilities Current Ratio -0.2000 0.4000 0.6000 0.8000 1.0000 1.2000 1997 1998 1999 Years C u rr e n t A s s e t/C u rr e n t L ia b ili ti e s
LOAN TO DEPOSITS RATIO
= × 100
1997 1998 1999
Total Loans 36,231,357 42,719,179 55,263,762
Total Deposits 63,429,709 76,541,153 93,107,291
Loan to Deposit Ratio 57.12% 55.81% 59.35%
This ratio shows a relationship between loans and advances and reveals how much productively the deposits are used. Analysis shows an increase in loan to deposit ratio, this is because of Govt. has decreased lending rate that is why borrowing is more in 1999 as compared to in 1998 on the other hand bank’s deposits are also increasing sharply if deposits increase by higher rate than an increase in loan then bank has to face difficulty to pay its borrowing cost to the lender.
Total Loans Total Deposits
Loan to Deposit Ratio
54.0000 55.0000 56.0000 57.0000 58.0000 59.0000 60.0000 1997 1998 1999 Years P e rc e n ta g e
LOAN TO ASSETS RATIO
= × 100
1997 1998 1999
Total Loans 36,231,357 42,719,179 55,263,762
Total Assets 72,403,650 89,358,167 106,926,331
Loan to Assets Ratio 50.0408 47.8067 51.6840
Total assets of the bank increased from Rs.89 (billion) to Rs.107 (billion) in 1999 (72 billion to 89 billion in year 1998) and advances/loans net of provision have increased from Rs.43 (billion) in 1998 to Rs.55 (billion) in 1999. We have 22% increase in assets and 28% increase in total assets is lesser than the increase in total advances which has resulted in an increase in loan to assets ratio from 47.80% in 1998 to 51.68% in 1999.
Total Loans Total Assets
Loan to Assets Ratio
45.0000 46.0000 47.0000 48.0000 49.0000 50.0000 51.0000 52.0000 1997 1998 1999 Years P e rc e n ta g e
LONG TERM SOLVENCY & CAPITAL RATIOS
EQUITY CAPITAL TO ASSETS RATIO
= × 100
1997 1998 1999
Equity Capital 1,063,156 1,063,156 1,063,156
Total Assets 72,403,650 89,358,167 106,926,331
Equity Capital to Assets Ratio 1.47% 1.19% 0.99%
In current year bank’s assets have been increased from Rs.89 billion to Rs.107 billion there by increase @ 20.22% over the last year (year 1998: 23.42% increase). On the other hand bank’s equity has not increased and remained unchanged during the year 1999, so this is the reason that ratio equity to assets has decreased from 1.19% in 1998 to 0.994% in 1999. Denominator total assets have increased substantially during the year 1999 but no increase in equity capital resulting in decreasing ratio.
Equity Capital Total Assets
Equity Capital to Assets
-0.2000 0.4000 0.6000 0.8000 1.0000 1.2000 1.4000 1.6000 1997 1998 1999 Years P e rc e n ta g e
PROPRIETARY RATIO = × 100 1997 1998 1999 Shareholders’ Funds 1,515,418 3,001,906 3,012,450 Total Assets 72,403,650 89,358,167 106,926,331 Proprietary Ratio 2.09% 3.36% 2.82%
This ratio explains that participation in the assets by the shareholders funds is limited by outsiders fund but when we take year under review (1999) we see ratio has further decreased in 1999 as compared to the year 1998 that was increased in year 1998. Reason behind this is that increase in assets in financed by outsider’s fund rather than the fund provided by the shareholders because there is lesser increase in shareholders fund as compared to increase in total assets. Shareholders’ Funds Total Assets Proprietry Ratio -0.5000 1.0000 1.5000 2.0000 2.5000 3.0000 3.5000 4.0000 1997 1998 1999 Years P e rc e n ta g e
DEBT EQUITY RATIO
= × 100
1997 1998 1999
Long Term Debt 70,888,232 86,356,261 103,913,881
Shareholders’ Equity 1,515,418 3,001,906 3,012,450
Debt Equity Ratio 97.9:2.09 96.64:3.36 97.18:2082
This ratio depicts the relation between equity and debt financing. This current year ratio shows an increase in ratio from 28.76times to 34.49 times. The ultimate increase in this ratio has decreased the ling term solvency of the bank. Because lesser is the equity financing lesser will be the soundness of the bank.
The reason behind this increase is an increase in external borrowings although there is an increase in internal debt but rate of increase in external borrowing.
Long term Debt Shareholders’
Equity
Debt Equity Ratio
-20.0000 40.0000 60.0000 80.0000 100.0000 120.0000 1997 1998 1999 Years P e rc e n ta g e
Recommendations
Allied Bank of Pakistan Limited is a well known and successful financial institution in the banking sector, it is said, nothing is perfect in the world, and there is always space for deficiencies. I would like to suggest some recommendations for the deficiencies which I have found during my internship. I am humbly committed that these recommendations are not result of financial analysis of the bank because recent accounts were not available to me.
• In order to complete with the other banks ATM services should be expanded throughout the country.
• All branches should be linked through network that can better help to meet the daily transactions. In this regard Internet, E-mail and Fax Services should be provided at least in the main branches of each region.
• Some of the schemes are not profit making where as the bank is an institution that earn earns from them, so those unprofitable schemes should be finished as Karsaaz Scheme.
• Separate counters must be set up to give the facility of bills collection of all utilities like WAPDA, SUI GAS, and TELEPHONE.
• There should be separate cashiers for the Receipts & Payments in the each branch office.
• Door to door marketing in this regard especially media and electronic marketing should be promoted in order to acquire handsome share of banking sector.
• Bank branches must be beautified internally and externally by providing appropriate interior decoration.
• As we know that only 15% of the people have their bank accounts, so it is the need of the time to open the branches in rural areas as well.
• The bank should acquire the services of the highly qualified people accompanied by lucrative incentives to promote its status as desirable in the next millennium.
• In order to market its products as Allied Tahaffuz Deposit Scheme, it should accentuate to give advertisements on both print and electronic media.
• The bank should develop healthy relationships with the renowned banks of the work in order to expand its operations globally.
• The individual efficiency of worthy employees should be rewarded in the form of proper increments and promotion in grades.
