10 Financial Analysis of NBP

8/22/2019 10 Financial Analysis of NBP

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CHAPTER NO 10

CHAHPTER NO 10

FINANCIAL ANALYSIS10.1 Common Size and Trend Analysis:

10.1.1 Common Size AndTrend Analysis of Balance Sheet:

10.1.2 Common Size And

Trend Analysis of Income Statement:

10.2 Ratio Analysis:10.2.1 Current Ratio

10.2.2 Cash Ratio:

10.2.3 Advances-Deposit Ratio:10.2.4 Investment-Deposit Ratio:

10.2.5 Capital to Deposit Ratio:

10.2.6 Capital to Deposit Ratio(Excluding Surplus on Revaluation of Assets):

10.2.7 Capital to Advances Ratio:

10.2.8 Advances to Total Assets Ratio:

10.2.9 Deposit to Total Assets Ratio:10.2.10 Investment to Total Assets Ratio:

10.2.11 Debt to Equity Ratio:

10.2.12 Debt to Assets Ratio:

10.2.13 Gross Profit Margin:10.2.14 Net Profit Margin:

10.2.15 Return on Equity:10.2.16 Return on Assets

10.2.17 Assets Turnover Ratio:

10.2.18 Earning Per Share:

INTERNSHIP REPORT ON NBP MAIN BRANCH KOHAT Page 66


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CHAPTER NO 10

FINANCIAL ANALYSIS

Financial analysis is an evaluation of a firms past financial performance

and its prospects for the future. It consists of applying analytical tools and otherrelevant data to obtain useful information. The financial statement with the

attached schedules and Directors report on past performance and future prospects

give compact information. The interested parties need to interpret this informationabout performance of the company through the use of financial tools. The main

purpose of financial analysis is to give a clear picture of the financial position by

studying the relationship and comparisons between the items in the statement.Keeping in view its importance I have addressed financial analysis by using the

Balance Sheet and Income Statement, their common, index, trend and ratio

analysis.

In addition, the banking sectors indicators like Deposits and Advancespositions, the investments and Advances to Total Assets have been calculated and

analyzed.

10.1 COMMON SIZE AND TREND ANALYSIS:

Common Size analysis can be extremely helpful to highlight the changesovertime in the financial performance and financial conditions of the bank. An

analysis of percentage financial statements where all balance sheet items are

divided by total assets and all income statement items are divided by net sales or

revenues.

An analysis of percentage financial statements where all balance sheet or

income statement figures for a base year equal 100 % and subsequent financial

statement items are expressed as percentage of their values in their base year.1

10.1.1 Common size and Trend analysis of Balance Sheet:

The following table shows a Balance Sheet of NBP their common size,Trend analysis for the years ending December 2005, 2006, 2007.

BALANCE SHEET

NATIONAL BANK OF PAKISTAN

1



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CHAPTER NO 10

As at December 31, 2007.

ASSETS Note

Rupees in '000'

2007 2006 2005

Cash and balances with treasury

banks 6 59,420,502 55,531,453 79,155,081

Balances with other banks 7 24,154,070 35,878,101 30,001,482

Lending to financial institutions 8 30,213,352 21,716,802 18,749,309

Investments 9 166,195,619 143,524,971 71,759,449

Advances 10 160,990,265 140,547,374 170,319,096

Other assets 11 21,946,846 27,489,021 36,952,148

Operating fixed assets 12 8,939,483 8,115,131 7,199,835

Deferred tax assets ------- ------ 952,590

TOTAL ASSETS 471,860,137 432,802,853 415,088,990

LIABILITIES

Bills payable 14 5,496,738 3,365,744 2,245,349

Borrowings from financial

institutions 15 16,493,514 10,032,135 11,484,963

Deposits and other accounts 16 395,568,490 362,865,637 349,617,068

Sub-ordinate loans ----- ----- -----

Liabilities against assets subject

to financial lease 17 41,117 74,051 46,092

Other liabilities 18 26,080,400 29,682,837 34,185,081

Deferred tax liabilities 13 595,864 2,846,186 -----

TOTAL LIABILITIES 444,276,123 408,866,590 397,578,553NET ASSETS 27,584,014 23,936,263 17,510,437

Share capital 19 4,103,422 3,730,384 3,730,384

Reserves 8,133,312 7,144,326 7,476,063

Inappropriate profit 5,897,163 3,404,593 752,226

18,133,897 14,279,303 11,958,673Surplus on revaluation of assets 20 9,450,117 9,656,960 5,551,764

27,584,014 23,936,263 17,510,437



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CHAPTER NO 10

Table 10.1.1: Common Size, Trend Analysis and Change of Balance Sheet

Note Common Size Analysis

%

Change Trend Analysis %

2007 2006 2005 2007 2006 2007 2006

6 13 13 19.0694 -19,734,579 -23,623,628 7.00333 -29.845

7 5.12 8.3 7.22772 -5,847,412 5,876,619 -32.677 19.5878

8 6 5 4.51694 11,464,043 2,967,493 39.1243 15.8272

9 35.22 33.16 17.2877 94,436,170 71,765,522 15.7956 100.008

10 34 33 41.0319 -9,328,831 -29,771,722 14.5452 -17.48

11 4.65 6.35 8.90222 -15,005,302 -9,463,127 -20.161 -25.609

12 2 2 1.73453 1,739,648 915,296 10.1582 12.7127

----- ---- 0.22949 ----- -----

100 100 100 56,771,147 17,713,863 9.02427 4.26749

14 1.16 0.78 0.54093 3,251,389 1,120,395 63.3142 49.8985

15 3.49 2.32 2.76687 5,008,551 -1,452,828 64.4068 -12.65

16 83.83 83.84 84.227 45,951,422 13,248,569 9.01239 3.78945

----- ----- ----- ----- -----

17 0.009 0.017 0.0111 -4,975 27,959 -44.475 60.6591

18 5.53 6.86 8.2356 -8,104,681 -4,502,244 -12.136 -13.17

13 0.13 0.66 ----- -79.064 -----

94.15 94.5 95.8 46,697,570 11,288,037 8.66041 2.8392

15.2394 36.6971

19 0.87 0.86 0.8987 373,038 0 9.99999 0

1.72 1.65 1.80107 5,144,937 2,652,367 13.843 -4.4373

1.25 0.79 0.18122 6,175,224 2,320,630 73.212 352.602

26.9943 19.4054

20 2 2.23 1.33749 3,898,353 4,105,196 -2.1419 73.944

100 100 100 10,073,577 6,425,826 15.2394 36.6971

a. Assets Side:

Total Assets:



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CHAPTER NO 10

In year 2005 its Total Assets are Rs.415, 088,990 million, in

2006amounting to Rs.432, 802,853 million and in 2007 amounting to Rs.471,

860,137 million.

Based upon Change with year 2006 Total Assets are 432,802,853 and in

2007 are 471,860,137 and it is increased by 39,057,284 million.

Based upon trend analysis in 2006 there is 4.27% increase and in 2007

there is 9% increase in Total Assets due to the increase in the amount ofinvestments.

Cash & Balances with treasury banks:

In 2005 its cash & balances with treasury banks are Rs.79, 155, 081

million, in 2006 amounting to Rs.55, 531, 453 million and in 2007 amounting toRs. 59, 420, 502 million.Based upon common size analysis there has been a

fall of almost 6%, 6% in the year of 2006 and 2007 respectively as compared to

2005. Based upon Change with year 2006 Cash & Balances with treasury banksare 55,531,453 and in 2007 are 59,420,502 and it is increased by 3,889,049

million.

Based upon trend analysis in 2006 there is 29.8% decrease and in 2007 there is

7% increase in cash & balances.

Investments:

In year 2005 its Total Investments are Rs.71, 759, 449 million, in 2006

amounting to Rs.143, 524, 971 million and in 2007 amounting to Rs. 166,

195, 619 million. Based upon common size analysis there has been a rise of

17.29%, 33.16% and 35.22% in the years of 2005, 2006 and 2007 respectively.Based upon Change with year 2006 Investments are 143,524,971 and in 2007 are

166,195,619 and it is increased by 20,442,891 million.

Based upon trend analysis in 2006 there is 100% increase and in 2007

there is 15.8% increase in Total Investments due to efficient management.

Advances:

In year 2005 its Total Advances are Rs.170, 319, 096 million, in 2006

amounting to Rs.140, 547, 374 million and in 2007 amounting to Rs. 160,

990, 265 million. Based upon common size analysis there has been a rise of 41%in 2005but in 2006 there is a fall to 33% and again rise to 34 % in 2007.



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CHAPTER NO 10

Based upon Change with year 2006 Advances are 140,547,374 and in 2007 are

160,990,265 and it is increased by 20,442,891 million.

Based upon trend analysis in 2006 there is 17.5% decrease and in 2007 there is14.5% increase in Advances.

b. Liabilities Side:

Total Liabilities:

In year 2005 its Total Liabilities are 397,578,553 million, in 2006amounting to Rs. 408,866,590 million and in 2007 amounting to Rs. 444,276,123

million. Based upon common size analysis Total Liabilities was the 95.8% of theTotal Assets in the year 2006and there has been a fall of 94.5% and 94.15% in the

years of 2005 and 2007 respectively due to little amount of rise in Total Liabilitiesas compare to Total Assets. Based upon Change with year 2006 Total Liabilities

are 408,866,590 and in 2007 are 444,276,123 and it is increased by 35,409,533

million.

Based upon index analysis in 2006 there is 2.8% increase and in 2007there is 8.6% increase in Total Liabilities.

Deposits:

In year 2005 its Total deposits are Rs. 349,617,068 million, in 2006

amounting to Rs. 362,865,637 million and in 2007 amounting to Rs. 395,568,490million. Based upon common size analysis when we see the percentage of

Deposits in Total Assets there has been a fall of 84.22%, 83.84% and 83.83% in

the years of 2005, 2006 and 2007 respectively.

Based upon Change with year 2006 Total Deposits are 362,865,637 and in2007 are 395,568,490 and it is increased by 32,702,853 million. Based upon trend

analysis in 2006 there is 3.8% increase and in 2007 there is 9% increase in

Deposits.

10.1.2 Common size and Trend Analysis of Income Statement:

The following table shows an Income Statement of NBP their common size and

trend analysis for the year ending December 2005, 2006 and 2007.



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CHAPTER NO 10

INCOME STATEMENT

NATIONAL BANK OF PAKISTAN

For the ended December 31, 2007

Note

Rupees in '000'

2007 2006 2005

Mark-up/return/interest earned 22

19,452,31

7

27,126,83

9 31,290,584

Mark-up/return/interest expensed 23 6,735,579

14,698,50

7 18,877,247

Net mark-up/interest income12,716,73

8

12,428,33

2 12,413,337

Provision against non-performing

advances 10.3 1,684,777 1,822,154 2,926,544

Provision for diminution in the value

of investments 9.1 459,523 21,031 -907,829

Provision against off balance sheet

obligations 18 474,743 104,217 121,752

Bad debts written off directly ----- 162,276 150

2,619,043 2,109,678 2,140,627

Net mark-up/interest income

after provision

10,097,69

5

10,318,65

4 10,272,710

Non Mark-Up/Interest Income

Fee, commission and brokerage

income 3,260,863 3,137,007 2,886,762

Dividend income 1,126,742 917,020 610,732

Income from dealing in foreign

currencies 24 710,726 659,247 892,631

Share of profit of joint venture 9.5 108 10,609 -----



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Other income 25 2,149,800 485,209 111,443

Total non mark-up/interest income 7,248,239 5,209,092 4,501,568

17,345,93

4

15,527,74

6

14,774,278

Non Mark-Up/Interest ExpensesAdministrative expenses

Salaries and allowances 4,761,408 4,563,326 5,275,597

Charge for defined benefit plans 280,632 1,629,445 772,092

Provision for voluntary handshake

scheme 293,612 513,073 -----

Other administrative expenses 26 2,471,083 2,431,935 2,503,489

7,806,735 9,137,779 8,551,178

Other provisions/write offs 33,454 3,134 332,912

Share of loss of joint venture 9.5 ----- ----- 6,456Other charges 27 22,894 23,874 8,790

Total non mark-up/interest expenses7,863,08

3

9,164,78

7 8,899,336

9,482,85

1

6,362,95

9 5,874,942

Amortization of differed cost ----- ----- 2,700,596

Staff welfare fund 474,143 318,148 158,717Extra ordinary items ----- ----- -----

Profit before tax

9,008,70

8

6,044,81

1 3,015,629

Taxation Current4,650,000

2,650,000

-2,453,275

Prior Years1,439,444

1,000,000 -622,747

Differed

-1,278,83

9 141,426 1,208,922

4,810,605

3,791,426

-1,867,100

Profit After Tax

4,198,10

3

2,253,38

5 1,148,529

Table 8.1.2: Common, Index and Trend Analysis of Income Statement



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CHAPTER NO 10

NoteCommon Size Analysis

%

Trend Analysis %



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22 100 100 100 -28.291 -13.3

23 35 54 60.3288 -54.175 -22.1

65.37 46 39.671 2.32055 0.1

10.3 9 7 9.35279 -7.5393 -37.7

9.1 2 0 -2.9013 2084.98 -102.3

18.1 2 0 0.3891 355.533 -14.4

10 ------ 1 0.00048 ----- 108084.0

13 8 6.84112 24.1442 -1.4

52 38 32.83 -2.1414 0.4

16.76 12 9.22566 3.94822 8.7

5.79 3 1.95181 22.8699 50.2

24 3.65 2 2.85271 7.80876 -26.1

9.5 0.0005 0 ----- -98.982 -----

25 11.05 2 0.35616 343.067 335.4

37.26 19 14.386 39.1459 15.7

89.17 57 47.216 11.7093 5.1

24.5 16.8 16.86 4.34074 -13.5

1.44 6 2.46749 -82.777 111.0

1.5 1.9 ---- -42.774 ------

26 12.7 8.9 8.00077 1.60975 -2.9

40.13 33.7 27.328 -14.566 6.9

0.17 0.01 1.06394 967.454 -99.1

9.5 ------ ------ 0.02063 ---- -----

27 0.11 0.08 0.02809 -4.1049 171.6

40.42 33.8 28.441 -14.203 3.0

48.75 23.5 18.775 49.0321 8.3

----- ----- 8.6307 ----- -----

2.44 1.17 0.50724 49.0322 100.4

------ ------ ------ ----- -----

46.3 22.3 9.6375 49.0321 100.4

23.9 9.8 -7.8403 75.4717 -208.0

7.4 3.7 -1.9902 43.9444 -260.6-6.6 0.52 3.86353 -1004.2 -88.3

24.7 13.98 -5.967 26.8812 -303.1

21.6 8.3 3.6705 86.3021 96.2

Markup/Interest Expense:



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In 2005 its markup/interest expense are Rs. 18,877,247 million, in 2006

amounting to Rs. 14,698,507 million and in 2007 amounting to Rs. 6,735,579

million.

Based upon common size analysis there has been a fall of 60%, 54% and 39% in

the years of 2005, 2006 and 2007 respectively.

Based upon trend analysis in 2006 there is 22% decrease and in 2007 there is 54%

decrease in markup/interest expense.

Total Non-Markup/Interest Income:

In year 2005 its Total Non markup/interest income are Rs. 4,501,568 million, in

year 2006 amounting to Rs. 5,209,092 million and in year 2007 amounting to Rs.

7,248,239 million.

Based upon common size analysis there has been a rise of 14.38%, 19% and37.26% in the years of 2005, 2006 and 2007 respectively.

Based upon trend analysis in year 2006 there is 5% increase and in 2007 there is

11.7% increase in Non markup/interest income due to the increase of fee,

commission and brokerage income.

Profit before Tax:

In year 2005 its profit before tax is Rs. 3,015,629 million, in 2006 amounting toRs. 6,044,811 million and in 2007 amounting to Rs. 9,008,708 million.

Based upon common size analysis there has been a rise of 9.6%, 22.3% and46.3% in the years of 2005, 2006 and 2007 respectively.

Based upon trend analysis in 2006 there is 100% increase and in 2007

there is 49% increase in profit before tax.

Profit after Tax:

In year 2005 its profit after tax is Rs. 1,148,529 million, in 2006amounting to Rs. 2,253,385 million and 2007 amounting to Rs. 4,198,103 million.

Based upon common size analysis there has been a rise of 3.6%, 8.3% and 21.6%

in the years of 2005, 2006 and 2007 respectively.

Based upon tend analysis in 2006 there is 96% increase and in 2007 there is 86%

increase in profit after tax.



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Fig 10.1.1 Assets and Liabilities Distribution in 2007:

13%

35%

34%

94%

83.83%

Cash

Investment

Advances

Total Libilities

Deposits

Fig 10.1.2: Income Statement Distribution 2007

39%

37%

46%

22%

Markup/interest

Expense

Non markup/interest

income

Profit before tax

profit after tax

10.2 RATIO ANALYSIS:



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A ratio is a quantitative relation between two magnitudes of the same

kind. In ratio analysis, the financial ratios of the firm are compared to that of its

competitors. This comparison allows the firm to detect major operatingdifferences. Another very popular method of ratio analysis is to compare the

firms financial ratios to industry averages. There is no doubt that financial ratios

are a useful guide for managerial decision-making. Let us now calculate some ofthe key financial ratios of NBP for the years 2005-2006-2007, and try to

understand these ratios. These ratios are calculated from the Balance Sheet and

Profit & Loss Account of NBP, 2005- 2006-2007.

Liquidity Ratios2005 2006 2007

8.2.1 Current Ratio 0.79 0.79 0.76

8.2.2 Cash Ratio 0.22 0.15 0.15

8.2.3 Advances to Deposit Ratio 48.72 38.73 40.70

8.2.4 Investment to Deposit Ratio 20.5 39.55 42

8.2.5 Capital to Deposit Ratio 5 6.60 6.97

8.2.6 Capital to Deposit Ratio(excluding surplus on

revaluation on Assets)

3.42 3.93 4.58

8.2.7 Capital to Advances Ratio 10.28 17.03 17.13

8.2.8 Advances to Total Assets

Ratio

41 33 34

8.2.9 Deposits to Total Assets Ratio 84.22 83.84 83.83

8.2.1

0

Ratio

Leverage Ratios

8.2.11 Debt to Equity Ratio 22.76 17.9 16.10

8.2.12 Debt to Total Assets Ratio 0.96 0.94 0.94

Current Assets 2005 2006 2007


Profitability Ratios

8.2.13 Gross Profit Margin Ratio 46.17 52.48 71.24

8.2.14 Net Profit Margin Ratio 11.97 7.29 4.90

8.2.15 Return on Equity Ratio 6.56 9.41 15.22

8.2.16 Return on Assets Ratio 0.27 0.52 0.89

Activity Ratios8.2.17 Assets Turnover Ratio 0.084 0.071 0.050

8.2.18 Earning per share 3.08 6.04 10.23


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CHAPTER NO 10

(Rupees in 000)

Cash and balances with Treasury

Banks

79,155,081 55,531,453 59,420,502

Balances with other Banks 30,001,482 35,878,101 24,154,070

Lendings to Financial Institutions 18,749,309 21,716,802 30,213,352

Investments (excluding longterm)

498,158 114,174 215,437

Market Treasury Bills 18,940,992 77,112,249 90,932,174

Advances (excluding long term) 128,944,699 98,750,300 101,424,865

TOTAL CURRENT ASSETS276,289,721 289,103,07

9

306,360,400

CURRENT LIABILITIES

Bills Payable 2,245,349 3,365,744 5,496,738

Deposits and other accounts 349,617,068 362,865,63

7

395,568,490

Total Current Liabilities351,862,417 366,231,38

1

401,065,228

Adjustment made (Long term investment and advances were removed

10.2.1 Current Ratio:

Current Ratio = Current Assets

Current Liabilities

Current Ratio (2005) = 276,289,721 = 0.79 times

351,862,417


366,231,381


401,065,228

Interpretation:



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Current ratio of the Bank is decreased to 0.76 in 2007 as compared to

2006 and 2005which are 0.79 and 0.79 respectively and indicates that the bank

has not kept so much current assets to pay current liabilities. It should be knownthat too much liquidity decreases profitability. The reason is that cash on hand is

the most unproductive asset and the surplus cash should be invested in short-term

ventures.

10.2.2 Cash Ratio:

Cash Ratio = Cash

Current Liabilities

Ratio for the year 2005 = 79,155,081 = 0.22 times

351,862,417


366,231,381


401,065,228

Interpretation:

Cash Ratio has been the same for 2007 and it is equal to 0.15% while it

was 0.22% in 2005 because the bank has increased the lending to the people. Thistrend shows the efficient utilization of cash by NBP in meeting its current

obligations as they arise. The reason is that cash on hand is most unproductive

assets and too much liquidity decreases profitability.

10.2.3 Advances-Deposit Ratio:

Advances Deposit Ratio = Advances X 100

Deposits

Advances Deposit Ratio (2005) = 170,319,096 X 100 = 48.72%

349,617,068




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CHAPTER NO 10

362,865,637


395,568,490

Interpretation:

The Advances deposit ratio of the Bank has declined to 40.70% in 2007 ascompared to 48.72% in the 2005 but as compared to 38.73% in 2006 there is little

increase in the advances deposit ratio. This shows that the Bank has small

concentrate on providing the loans to the customers due to lack of informationabout the background and assets of customers.

10.2.4 Investment-Deposit Ratio:

Investment Deposit Ratio = Investments X 100

Deposit

Investment Deposit Ratio (2005) = 71,759,449 X 100 = 20.5%

349,617,068


362,865,637


395,568,490

Interpretation:

The investment-deposit ratio of the Bank was 42% in 2007 and 39.55% in

2006 and 20.5% in 2005 which is increasing with the passage of time and it shows

that the bank using efficiently the deposits of the customers.

10.2.5 Capital to Deposit Ratio:

Capital to Deposit Ratio = Capital X 100

Deposit



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Capital to Deposit Ratio (2005) = 17,510,437 X 100 = 5%

349,617,068

Capital to Deposit Ratio (2006) = 23,936,263 X 100 = 6.60%

362,865,637

Capital to Deposit Ratio (2007) = 27,584,014 X 100 = 6.97%

395,568,490

Interpretation:

According to this ratio we interpret that the bank has own equity is not so

much as compared to deposit because there is large difference between capital and

deposit. The capital is increasing but with the little percentage as compared todeposit.

SBP Prudential Regulations that Capital should be 8% of Total Deposits and NBP

is not fulfilling the Prudential Regulation of SBP.

10.2.6 Capital to Deposit Ratio (Excluding Surplus on Revaluation of

Assets):

Capital to deposit ratio = Capital X 100

Deposit

Capital to deposit ratio (2005) = 11,958,673 X 100 = 3.42%

349,617,068


362,865,637


395,568,490

Interpretation:



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CHAPTER NO 10

After excluding surplus on revaluation of assets the amount of capital is

very low because the capital should be 8% of the Total Deposits by Prudential

Regulation of SBP.

10.2.7 Capital to Advances Ratio:

Capital to Advances ratio = Capital X 100

Advances

Capital to Advances ratio (2005) = 17,510,437 X 100 = 10.28%

170,319,096


140,547,374


160,990,265

Interpretation:

According to this ratio we analyze from the previous data that capital is

not increasing proportionately to advances. In 2005 the ratio is 10.28% whichincreased in 2006 to 17.03% but in 2007 the ratio is increased with very little

percentage which is 17.13% and indicates that stockholders contributing lesser

amount of capital.

10.2.8 Advances to Total Assets Ratio:

Advances to Total Assets Ratio = Advances X 100

Total Assets

Advances to Total Assets Ratio (2005) = 170,319,096 X 100 = 41%

415,088,990




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CHAPTER NO 10

432,802,853


471,860,137

Interpretation:

Advances was the 41% of the Total Assets in 2005 and fall to 33% in2006 and again rise to 34% in 2007 because of fluctuation in advances.

10.2.9 Deposit to Total Assets Ratio:

Deposit to Total Assets Ratio: = Deposit X 100

Total Assets

Deposit to Total Assets Ratio (2005) = 349,617,068 X 100 = 84.22%

415, 088, 9901


432,802,853


471,860,137

Interpretation:

In year 2005 its total deposits are Rs.349, 617 million, in 2006 amountingto Rs.362, 865 million and in 2007 amounting to Rs.395, 568 million but when

we see the percentage of deposits in Total Assets there has been a fall of 84.22%,

83.84% and 83.83% in the years of 2005, 2006 and 2007 respectively due to small

increase in deposit as compare to Total Assets.

10.2.10 Investment to Total Assets Ratio:

Investment to Total Assets Ratio = Investment X 100

Total Assets

Investment to Total Assets Ratio (2005) = 71,759,449 X 100= 17.28%



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415,088,990

Investment to Total Assets Ratio (2006) = 143,524,971 X 100 = 33.16%

432,802,853

Investment to Total Assets Ratio (2007) = 166,195,619 X 100 = 35.22%

471,860,137

Interpretation:

In year 2005 its total investments are Rs.71, 759 million, in 2006

amounting to Rs.143, 524 million and in 2007 amounting to Rs.166, 195 million.

There has been a rise of 17.29%, 33.16% and 35.22% in the years of 2005, 2006

and 2007 respectively due to the efficient management.

10.2.11 Debt to Equity Ratio:

Debt-Equity Ratio = Total Debt

Stock Holders Equity

Debt-Equity Ratio (2005) = 397,578,553 = 22.76

17,510,437


23,936,263


27,584,014

Interpretation:

The debt-equity ratio has been slightly declined in 2007. In the year 2007,

the decrease in ratio was less than as compared to year 2006 because the decreasein ratio from 2005 to 2006 was greater. In the year 2007 creditors provided Rs.

16.10 rupees for Rs. 1 rupee provided by the shareholders.

10.2.12 Debt to Assets Ratio:



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Debt to assets ratio = Total Debt

Total Assets

Debt to Assets Ratio (2005) = 397,578,553 = 0.96

415,088,990


432,802,853


471,860,137

Interpretation:

The Debt to Assets ratio in 2007 was the same as compared to 2006 but as

compared to 2005 there was very small decrease in ratio. Both Debt and Assetsare increasing at the same rate.

10.2.13 Gross Profit Margin:

Net mark up/interest income = Gross Profit X 100

Total Revenue

2007 2006 2005

Rupees in 000

Mark-Up/Return/Interest Income 19,452,317 27,126,839 31,290,584

Fee, Commission, Brokerage Income

3,260,863 3,137,007 2,886,762

Income from dealing in foreigncurrencies

710,726 659,247 892,631

Total Revenue23,423,906 30,923,093 35,069,977

Less markup/return/Interest expense 6,735,579 14,698,507 18,877,247

Net Mark-Up/Interest Income

(Gross Profit)2

16,688,327 16,224,586 16,192,730



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CHAPTER NO 10

Gross Profit Margin (2005) = 16,192,730 X 100 = 46.17%

35,069,977


30,923,093


23,423,906

Interpretation:

According to this ratio we interpret that the gross profit margin hasincreased in 2007 as compared to 2006 and 2005, but on the other side the total

revenue from regular activities has decreased. The Gross Profit Margin ratioincreases due to decrease in Non markup/return/interest expense.

As a result the regular activities of the bank were not good in 2007 as compared to

2006 and 2005.

10.2.14 Net Profit Margin:

Net Profit Margin = Profit after Taxation X 100

Total Revenue

Net Profit Margin (2005) = 1,148,529 X 100 = 11.97%

35,069,977


30,923,093


23,423,906

2



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CHAPTER NO 10

Interpretation:

The net profit margin of NBP has also shown as fall to 4.90 percent in

2007 as compared to 7.29 percent in 2006 and 11.97 percent in 2005.This signaltowards lower total revenues of the Bank during 2007.

10.2.15 Return on Equity:

Return on Equity = Profit after Taxation X 100

Shareholders Equity

Return on Equity (2005) = 1,148,529 X 100 = 6.56%

17,510,437


23,936,263


27,584,014

Interpretation:

The return on equity has increased to 15.22 percent in 2007 as comparedto 6.56 percent and 9.41 percent in 2005 and 2006 respectively. The return on

equity indicates the net profit margin trends, with the Bank registering good

performance because of better efficiency with respect to Equity.

10.2.16 Return On Assets

Return on Assets = Profit before Taxation X 100

Total Assets

Return on Assets (2005) = 1,148,529 X 100 = 0.27%

415,088,990




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CHAPTER NO 10

432,802,853


471,860,137

Interpretation:

The return on assets has improved to 0.89 percent in 2007 as compared to2006 and 2005. While the assets of the Bank are not using efficiently because the

return is very low as compared to Total Assets.

10.2.17 Assets Turnover Ratio:

Assets Turnover Ratio = Total Revenue

Total Assets

Assets Turnover Ratio (2005) = 35,069,977 = 0.084 times

415,088,990


432,802,853


471,860,137

Interpretation:

The assets turnover ratio in 2007 was decreased to 0.050 times as

compared to 0.071 times in 2006 and 0.050 times in 2005. It indicates that the

bank is not using the assets efficiently because total revenue of the bank is very

low as compare to Total Assets.

10.2.18 Earning Per Share:

Earning per Share = Earning after tax

Total shares outstanding

Earning per share ratio (2005) = 1,148,529,000 = 3.08 rupees per share



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CHAPTER NO 10

373,038,350


373,038,350


410,342,185

Interpretation:

The earning per share ratio in 2007 has improved to 10.23 rupees per share

as compared to 6.04 rupees per share in 2006 and 3.08 rupees per share in 2005. It

shows that in 2007 bank earned 10.23 for every 1 share.

Graph 10.2.1: Current Ratio 2005- 2006-2007:

0

0.05

0.1

0.15

0.2

0.25

2005

2006

2007



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CHAPTER NO 10

0

0.05

0.1

0.15

0.2

0.25

2005

2006

2007

Graph 10.2.2 Cash Ratio 2005- 2006-2007:

Graph 10.2.3: Advances-Deposit Ratio 2005-2006-2007:


0

10

20

30

40

50

1

2005

2006

2007


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CHAPTER NO 10

Graph 10.2.4: Investment-Deposit Ratio 2005-2006-2007:

0

10

20

30

40

50

1

2005

2006

2007

Graph 10.2.5: Capital to Deposit Ratio 2005-2006-2007:

0

2

4

6

8

1

2005

2006

2007

Graph 10.2.6: Capital to deposit ratio (excluding surplus on revaluation of

assets):

0

1

2

3

4

5

1

2005

2006

2007



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CHAPTER NO 10

Graph 10.2.7: Capital to Advances Ratio 2005-2006-2007:

0

5

10

15

20

1

2005

2006

2007

Graph 10.2.8: Advances to Total Assets Ratio 2005-2006-2007:

0

10

20

30

40

50

1

2005

2006

2007

Graph 10.2.9: Deposit to Total Assets Ratio 2005-2006-2007:

83.6

83.7

83.8

83.9

84

84.1

84.2

84.3

1

2005

2006

2007



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CHAPTER NO 10

Graph 10.2.10: Investment to Total Assets Ratio 2005-2006-2007:

0

10

20

30

40

1

2005

2006

2007

Graph 10.2.11: Debt to Equity Ratio 2005-2006-2007:

0

5

10

15

20

25

1

2005

2006

2007

Graph 10.2.12: Debt to assets ratio 2005-2006-2007:

0.93

0.935

0.94

0.945

0.95

0.955

0.96

1

2005

2006

2007



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CHAPTER NO 10

Graph 10.2.13: Gross Profit Margin 2005-2006-2007:

0

10

20

30

40

50

60

70

80

1

2005

2006

2007

Graph 10.2.14: Net Profit Margin Ratio 2005- 2006-2007:

0

2

4

6

8

10

12

1

2005

2006

2007

Graph 10.2.15: Return on Equity Ratio 2005-2006-2007:

0

5

10

15

20

1

2005

2006

2007



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CHAPTER NO 10

Graph 10.2.16: Return on Assets Ratio 2005-2006-2007:

0

0.2

0.4

0.6

0.8

1

1

2005

2006

2007

Graph 10.2.17: Assets Turnover Ratio 2005-2006-2007:

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

1

2005

2006

2007

Graph 10.2.18: Earning Per Share 2005 2006-2007:



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CHAPTER NO 10

0

2

4

6

8

10

12

1

2005

2006

2007

10 Financial Analysis of NBP

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