FINANCIAL RATIO ANALYSISRATIO ANALYSIS OF BANK AL HABIB

AND

HABIB BANK LIMITED

GROUP MEMBERS

SAQIB MEHMOOD

MILHAN TAHIR

NOMANA TAHIRA MALIK

INDUSTRY OVERVIEW

HUMBLE BEGINNINGS, 1947 – 1970

A LEGACY OF PUBLIC CONTROL, 1970 – 1980

BUSINESS AS USUAL, 1980-1990

PRIVATIZATION, 1990 – 1997

USHERING IN THE REFORMS, 1997 – 2006

THE POST-REFORM ERA, 2006 – PRESENT

TYPES OF BANKS

• State Bank of PakistanSTATE BANK

• National Bank of Pakistan• Bank of Punjab

NATIONALIZED SCHEDULED BANKS

• Industrial Development Bank• Zarai Taraqiati Bank Limited

SPECIALIZED BANKS

• Bank AL Habib• MCB Bank Limited

CARD ISSUERS

• Bank AL Habib• Habib Bank Limited

COMMERCIAL BANKS

• JS Investment Bank Limited• IGI Investment Bank Limited

INVESTMENT BANKS

• Asian Housing Finance LimitedHOUSING FINANCE COMPANIES

• The First Micro Finance Bank Limited• Tameer Microfinance Bank Limited

MICRO FINANCE BANKS

• Dubai Islamic Bank Pakistan Limited• Meezan Bank Limited-Premier Islamic Bank In Pakistan

ISLAMIC BANKS

OUR BANK

INTRODUCTION

HISTORY

VISION

COMPANY PROFILE

COMPANY PROFILE

Bank AL Habib was incorporated as a Public Limited Company in October 1991

Started banking operations in 1992

In 2005, Bank AL Habib began offering internet banking

In 2006, Bank AL Habib became partners with MasterCard.

TO BE A QUALITY FINANCIAL SERVICE PROVIDER MAINTAINING THE

HIGHEST STANDARDS IN BANKING PRACTICES

VISION

MISSION

TO BE A STRONG AND STABLE FINANCIAL INSTITUTION OFFERING INNOVATIVE PRODUCTS AND

SERVICES WHILE CONTRIBUTING TOWARDS THE NATIONAL ECONOMIC AND SOCIAL DEVELOPMENT

FINANCIAL RATIO

“Financial analysis comparisons in which certain financial statement items are divided by one another to reveal their

logical interrelationships.”

USES OF FINANCIAL RATIOS

To track individual firm performance over time

To make comparative judgments regarding firm performance.

TYPES OF FINANCIAL RATIOS

FINANCIAL RATIOS

PROFITABILITY RATIO LIQUIDITY RATIO RISK MANAGEMENT

RATIO

PROFITABILITY RATIOSRETURN ON

EQUITY

RETURN ON ASSETS

AVERAGE EARNING ASSETS

NET INTEREST MARGIN

NET NON INTEREST MARGINNET MARGIN

EQUITY MULTIPLIER

ASSET UTILIZATION

RATIO

EARNING PER SHARE

RETURN ON EQUITY

2006 2007 2008 2009 2010 2011

0.2811

0.1937

0.1720 0.1784

0.1744

0.2044

0.28470.2759

0.24830.2350

0.1552

0.1831

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.2847 0.2759 0.2483 0.2350 0.1552 0.1831

HBL 0.2811 0.1937 0.1720 0.1784 0.1744 0.2044

ROE= NET INCOME / TOTAL EQUITY CAPITAL

RETURN ON ASSETS

ROA= NET INCOME / TOTAL ASSETS

2006 2007 2008 2009 2010 2011

0.0214

0.0134

0.0158 0.0155

0.01760.0195

0.0153

0.0157

0.0140

0.0116

0.00760.0086

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.0153 0.0157 0.0140 0.0116 0.0076 0.0086

HBL 0.0214 0.0134 0.0158 0.0155 0.0176 0.0195

AVERAGE EARNING ASSETS

AEA=LENDING TO OTHER FINENCIAL INSTITUTIONS + INVESTMENTS + ADVANCES

2006 2007 2008 2009 2010 2011

475570289

561743115 592382740

676482904710354890

857781887

98398015 118623889148726889

217003020264080012

307371534

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 98398015 118623889 148726889 217003020 264080012 307371534HBL 475570289 561743115 592382740 676482904 710354890 857781887

NET INTEREST MARGIN

NIM=TOTAL INTEREST INCOME -- TOTAL INTEREST EXPENSES / AVERAGE EARNING ASSETS

2006 2007 2008 2009 2010 2011

6.41%

5.58%

6.22% 6.31% 6.46%

6.40%

3.84%3.52%

4.43%4.18%

2.95%

6.59%HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 3.84% 3.52% 4.43% 4.18% 2.95% 6.59%

HBL 6.41% 5.58% 6.22% 6.31% 6.46% 6.40%

NET NON-INTEREST MARGINNNIM = (TOTAL NON-INTEREST INCOME) – (TOTAL NON-INTEREST EXPENSES) / AVERAGE

EARNING ASSETS

2006 2007 2008 2009 2010 2011

-1.86%

-1.44%

-1.81% -1.80% -1.81% -1.81%

-1.09%

-0.87%

-1.25%

-1.55%

-1.21% -1.23%

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL -1.09% -0.87% -1.25% -1.55% -1.21% -1.23%

HBL -1.86% -1.44% -1.81% -1.80% -1.81% -1.81%

EQUITY MULTIPLIER

EM=TOTAL ASSETS / TOTAL EQUITY CAPITAL

2006 2007 2008 2009 2010 2011

13.1514.40

10.91 11.50

9.9110.49

18.5917.62 17.79

20.33 20.5021.38

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 18.59 17.62 17.79 20.33 20.50 21.38

HBL 13.15 14.40 10.91 11.50 9.91 10.49

NET MARGIN

NM= NET INCOME / AVERAGE EARNING ASSETS

2006 2007 2008 2009 2010 2011

2.67%

1.80%

1.83%1.98%

2.20%2.42%

1.79%

1.86%

1.66%

1.33%

0.86%0.97%

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 1.79% 1.86% 1.66% 1.33% 0.86% 0.97%

HBL 2.67% 1.80% 1.83% 1.98% 2.20% 2.42%

ASSET UTILIZATION RATIOAUR = TOTAL INTEREST INCOME + TOTAL NON-INTEREST INCOME (TOTAL OPERATING

REVENUE) / TOTAL ASSETS

2006 2007 2008 2009 2010 2011

0.08780.0807

0.10840.1010 0.1026 0.1020

0.0236 0.0223

0.0961 0.0959

0.0711

0.0814

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.0236 0.0223 0.0961 0.0959 0.0711 0.0814

HBL 0.0878 0.0807 0.1084 0.1010 0.1026 0.1020

EARNING PER SHARE

EPS = TOTAL REVENUE / TOTAL NUMBER OF SHARES

2006 2007 2008 2009 2010 2011

18.3

14.49

11.83

14.714.17

18.82

4.786.01

3.97 4.68

2.593.37

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 4.78 6.01 3.97 4.68 2.59 3.37

HBL 18.3 14.49 11.83 14.7 14.17 18.82

MILHAN TAHIR

LIQUIDITY RATIOS

CASH ASSETS TO TOTAL ASSETS

RATIO

INVESTMENTS TO TOTAL ASSETS

RATIO

LOANS TO TOTAL ASSETS RATIO

EARNING ASSETS TO TOTAL ASSET RATIO

EARNING ASSETS TO DEPOSITS RATIO

CASH POSITION INDICATOR RATIO

LIQUID ASSET INDICATOR RATIO

CAPACITY RATIO• DEMAND DEPOSIT

CASH ASSET / TOTAL ASSET

CA/TA = CASH ASSETS / TOTAL ASSETS

2006 2007 2008 2009 2010 2011

0.1385 0.1105 0.1392 0.1392

1.1325

1.1298

0.0920 0.1018 0.0877 0.0761

0.0701 0.0684

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.0920 0.1018 0.0877 0.0761 0.0701 0.0684

HBL 0.1385 0.1105 0.1392 0.1392 1.1325 1.1298

ANALYSIS

BAHL is not up to the mark in case of Cash assets to total assets which mean it has average of 0.4961 but HBL as

average of 2.7897 which is 2.2936 times more then BAHL.

It is just because they have incresed there cash Assets along with them and other banks.

INVESTMENTS / TOTAL ASSETS

I / TA = INVESTMENTS / TOTAL ASSETS

2006 2007 2008 2009 2010 2011

0.20130.2373

0.1884

0.25060.2762

0.3759

0.1828

0.2498

0.0017 0.0000

0.4549

0.6420

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.1828 0.2498 0.0017 0.0000 0.4549 0.6420

HBL 0.2013 0.2373 0.1884 0.2506 0.2762 0.3759

ANALYSIS

BAHL is playing more with its Investments which is not a healthy sign.

HBL is following demand and supply matrix and other risk factors.

After 2009 the BAHL rapidly increase and improve it’s this ratio and become more liquid then HBL.

LOANS / TOTAL ASSET

L/TA = LOANS / TOTAL ASSETS

2006 2007 2008 2009 2010 2011

0.5882

0.5097

0.66230.5264

0.4904

0.3913

0.6156

0.5609

0.7094

0.4243 0.4171

0.3052

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.6156 0.5609 0.7094 0.4243 0.4171 0.3052

HBL 0.5882 0.5097 0.6623 0.5264 0.4904 0.3913

ANALYSIS

It is not a healthy sign because loan and advances give interest income in return.

As banks comes under service industry and there main income is basically Interest income.

Due to this reason BAHL NIM and NM is less then HBL.

EARNING ASSET / TOTAL ASSETS

EA/TA = EARNING ASSETS / TOTAL ASSETS

2006 2007 2008 2009 2010 2011

0.8005

0.7492

0.8598

0.7832

0.8008 0.80630.8556 0.8399

0.8387

0.8687

0.0256 0.0885

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.8556 0.8399 0.8387 0.8687 0.0256 0.0885

HBL 0.8005 0.7492 0.8598 0.7832 0.8008 0.8063

ANALYSIS

BAHL have a fluctuating trend with respect to HBL .

In 2006 and 2007 BAHL had more earning assets then the HBL.

Trend changed in up coming years.

Earning assets of BAHL are fluctuating but HBL’s earning assets are increasing every yearly.

EARNING ASSETS / DEPOSITS

EA/D = EARNING ASSETS / TOTAL DEPOSITS

2006 2007 2008 2009 2010 2011

1.0358 1.05730.9921 0.9908

0.9851

0.9800

1.0763 1.0331 1.0300

1.1465

0.0309

1.0591

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 1.0763 1.0331 1.0300 1.1465 0.0309 1.0591

HBL 1.0358 1.0573 0.9921 0.9908 0.9851 0.9800

ANALYSIS

BAHL and HBL both are on same trend when we talk about this ratio

BAHL improves in this field from last year

HBL is still having the dicline pattren which is not a healthy sign for the HBL but it is in the favour of BAHL

BAHL is increasing its earning assets which mean it is more liquitable bank then the HBL.

CASH POSITION INDICATOR

CPI = CASH + DEPOSITS IN OTHER BANKS / TOTAL ASSETS

2006 2007 2008 2009 2010 2011

0.1385

0.1105

0.1392 0.1392

0.1730.1627

0.0920

0.1018

0.08770.0761

0.0701 0.0684

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.0920 0.1018 0.0877 0.0761 0.0701 0.0684HBL 0.1385 0.1105 0.1392 0.1392 0.173 0.1627

ANALYSIS

For HBL this ratio represents severe upsand downs.

This ratio drastically falls below 0.79% in 2007.

The main reason was that in that year the bank’s balance sheet shows nil amount of “money at called short notice”.

BAHL is facing this problem that there this ratio is drastically falling below since 2008 till now

That mean BAHL may have to borrow money from other bank’s at a high call money rate which in turn will increase

interest cost of the bank

LIQUID ASSET INDICATOR

LAI = LIQUID ASSETS (C+S) / TOTAL ASSETS

2006 2007 2008 2009 2010 2011

0.2793

0.3113 0.2705

0.343

0.4087

0.5057

0.2641

0.3473

0.0690

0.0576

0.5179

0.7043

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.2641 0.3473 0.0690 0.0576 0.5179 0.7043HBL 0.2793 0.3113 0.2705 0.343 0.4087 0.5057

ANALYSIS

BAHL is performing more from previous 2 years but on the other hand HBL also improve but it need more attention.

According to this ratio BAHL have more liquidity then HBL.

CAPACITY RATIO

CR = NET LOANS ( LOANS-LOAN RESERVES) / TOTAL ASSETS

2006 2007 2008 2009 2010 2011

0.5882

0.5097

0.6623

0.52640.4904

0.3913

0.61560.5609

0.5651

0.42430.4171

0.3052

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.6156 0.5609 0.5651 0.4243 0.4171 0.3052HBL 0.5882 0.5097 0.6623 0.5264 0.4904 0.3913

ANALYSIS

2006 to 2008 BAHL have more loans then HBL but after 2009 BAHL issues less loan and advances then HBL so thats

why its loan to total assets ratio is 0.91% less then HBL.

loan and advances give interest income in return.

DEMAND DEPOSIT RATIO

DDR = DEMAND DEPOSIT / TOTAL DEPOSIT

2006 2007 2008 2009 2010 2011

0.7729

0.7086

0.8666

0.7904

0.8129 0.8224

0.7950 0.8130

0.81430.7577

0.8283 0.8357

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.7950 0.8130 0.8143 0.7577 0.8283 0.8357HBL 0.7729 0.7086 0.8666 0.7904 0.8129 0.8224

ANALYSIS

BAHL is performing well by improving its DDR which ultimately mean that they are highly liquitable with respect to HBL.

that BAHL are not ncreasing there loans and investments but there deposits are improving from there past record .

It mean that they have money but they keep it with them. Which make them less risky and more liquitable bank.

NOMANA TAHIRA MALIK

RISK RATIO

% OF LOAN LOSSES

NET CHARGE OFF

NON PERFORMING LOAN

NET LOAN

% OF LOAN LOSSES

%LL = PROVISION OF LOAN LOSSES / TOTAL LOAN AND LEASES

2006 2007 2008 2009 2010 2011

0.82%

2.16%

1.51%

1.93%1.83%

1.76%

0.03%0.12% 0.20%

0.39%

0.58%

1.60%

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.03% 0.12% 0.20% 0.39% 0.58% 1.60%

HBL 0.82% 2.16% 1.51% 1.93% 1.83% 1.76%

NET CHARGE OFF

NCO = GIVEN IN BALANCE SHEET

2006 2007 2008 2009 2010 2011

518,932

421,729

187,907

78,116

819,202 796,631

1,629

110,613

1,929709

23,508 91

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 1,629 110,613 1,929 709 23,508 91

HBL 518,932 421,729 187,907 78116 819,202 796,631

NON-PERFORMING LOANS

NPL = PROVIDED IN FINANCIAL STATEMENTS

2006 2007 2008 2009 2010 20113,032.99 27,692.77 40,053.22 49,438.26

46,677.0851,313.51

388.263 216.628 862.550 2,067.656

2,943,863.000

320,363.000

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 388.263 216.628 862.55 2,067.66 2,943,863 320,363

HBL 3,032.99 27,692.77 40,053.22 49,438.26 46,677.08 51,313.51

NET LOANS

NL = TOTAL LOAN / TOTAL ASSETS

2006 2007 2008 2009 2010 2011

0.5882

0.5097

0.6623

0.5264

0.4904

0.3913

0.6156

0.5609

0.5651

0.4243 0.4171

0.3052

HBL BAHL

2006 2007 2008 2009 2010 2011

BAHL 0.6156 0.5609 0.5651 0.4243 0.4171 0.3052

HBL 0.5882 0.5097 0.6623 0.5264 0.4904 0.3913

CONCLUSION

CONCLUSION

BAHL IS LESS PROFITABLE THEN HBL

BAHL HAS MORE LIQUIDITY THEN HBL

BAHL IS LESS RISKIER.

ANY QUESTIONS