INTRODUCTION

Incorporated on September 28, 1991 the first Branch

of Soneri Bank Limited formally opened doors for

operations in Lahore on April 16, 1992 followed by

Karachi Branch on May 09, 1992. The bank now

operates with 52 branches spread all over Pakistan

including the Northern Areas of the country where no

other private bank has ventured so far. Expansion of

branches is based on a policy of maintaining a

balance between the urban and rural areas with a

view to offering services even in the remote areas of

Pakistan. Pleasant and sophisticated atmosphere has

been provided in the branches which are all fully air-

conditioned and computerized.

The essence of our business philosophy is to cater to

the banking requirements of small & medium sized

entrepreneurs, providing them qualitative &

competitive services with emphasis on encouraging

exports. Nearly forty percent of our credit portfolio is

related to export financing and credit decisions are

taken within 48 hours.

CORPORATE DATA

Chairman

President & Chief Executive Officer

Directors

Audit Committee

Company Secretary & Legal Advisors

Auditors

FUNCTIONS OF S B

Soneri Bank is a commercial bank, in modern time

commercial banks play a very important role and

their functions are manifold. But main functions are

as follows:

Accepting various types of deposits

Granting loans and advances

Undertaking of agency services and also general

utility functions, few of those are as under:

Collecting cheques and bill of exchange for the

customers.

Collecting interest due, dividend, pensions and

other sum due to customers.

Transfer of money from place to place.

Acting an executor, trustee or attorney for the

customers.

Providing safe custody and facilities to keep

jeweler, documents or securities.

Issuing of travelers cheques and letters of

credit to give credit facilities to travel.

Accepting bills of exchange on behalf of

customers.

Undertaking foreign exchange business.

Furnishing trade information and tendering

advice to customers.

FUNCTIONS OF INTER-BANK DEPARTMENTS

For swift functioning of various branches of the bank,

each branch has been divided in different

departments. These departments handle different

jobs so that division of work is there for improvement

of functions and also it is easy to control the

situation. The general division in a branch is as

follows:

1. Cash department

2. Deposit department

3. Advances & credit department

4. Remittance department

5. Foreign exchange department

6. Technology department (new addition in order to

cop with the growing needs of day to day

technology requirements).

The workings of each of the above mentioned

departments are discussed as follows in order to

clarify the functions being performed by the

individual departments.

1. CASH DEPARTMENT

The following books are maintained in the Cash

Department:

1) Receiving Cashier Bank

2) Paying Cashier Book3) Token Book

4) Scroll Book5) Cash Balance BookWhen cash is received in counter, it is entered in the Scroll Book and Receiving Cashier Book. At the close of the day, these are balanced with each other.

When the cheque or any negotiable instrument is presented at counter for payment, it is entered in the token book and token is issued to the customer. The token clerk and the Cashier make entries in the paying book and payment is made to payee. At the close of day, the Token Book and Paying Cashier Book are balanced.

The consolidated figure of receipt and payment of cash is entered in the cash balance book and drawn closing balance of cash.

Opening Balance + Receipts - Payments = Closing Balance

This is a very important department because cash is the most liquid asset and mostly frauds are made in this department, therefore, extra care is taken in this department and nobody is allowed to enter or leave the area freely. Mostly, cash area is grilled and its door is under supervision of the head of that department. All the books maintained in this department are checked by an officer.

2. DEPOSIT DEPARTMENT

Bank deals in money and they are merely mobilizing

funds within the economy. They borrow from one

person and lend to another, the difference between

the rate of borrowing lending forms their spread or

gross profit. Therefore we can rightly state that

deposits are the blood of the bank which causes the

body of the institution to get to work. These deposits

are liability of the bank so from point of view of bank

we can refer to them as liabilities.

The total deposits of Soneri Bank are growing since

its inauguration. The increase in deposits is also a

cause of increase on total number of accounts; bank

has progressed in both aspects.

2.1.TYPES OF DEPOSITS

Deposits can be segregated on two bases, one is the

duration in which there funds are expected to be with

the bank and second is the cost of getting these

funds. So divide deposits in two classes according to

duration of deposits i.e.

Time deposits/liabilities

Demand deposits/liabilities

And on the basis of the cost to acquire these funds, a

deposit can be classified as any one of following four,

High cost

Medium cost

Low cost

No cost

Banks have different kinds of deposit schemes in

order to induce deposits. These schemes are a

mixture of the above mentioned two types of

deposits with an addition of different services &

requirements such as minimum balance

requirement, mode of transaction, basis for

calculation of profit, deductions, additional benefits,

eligibility for different groups.

Soneri bank has a large variety of deposit schemes

which have been discussed in the following pages.

CURRENT ACCOUNT

The current account may be opened by any member

of the public, entities, corporate or otherwise. The

request for opening an account must be made on

Bank’s standard account opening request form with a

suitable introduction acceptable to the bank. The

account holder can withdraw and deposit money at

his/her own discretion, these transactions have no

limitations. There are no limitations to the amount

being deposited or withdrawal. There is no

requirement of minimum balance maintenance. No

profit is paid by the bank and no service charges are

deducted by the bank on current deposits account.

These types of deposits are also exempt from

compulsory deduction of Zakat.

PLS SAVINGS ACCOUNT & PLS SONERI SAVINGS ACCOUNT

PLS saving bank account can only be opened after

proper introduction of the account holder which is

acceptable by the bank. This type of account is for

those persons who want to make small savings. This

type of account is opened with a minimum deposit of

Rs.100/-. The account may be opened in the name of

the individuals (in single or joint names) minors (to

be operated by the guardian) charitable institutions,

provident fund and other funds of benevolent nature,

local bodies, autonomous corporations, limited

companies, firms, associations, educations

institutions etc. Not more than one account maybe

opened in any one name but this does not prevent a

person for opening more than one account in his or

her name for more than one minor child. All sums to

the credit of an account should be accompanied by

pay-in-slip showing the name and number of the

account. The entry of the transaction will be verified

by the signatures of an official of the bank, on the

counterfoil of the pay-in-slip. Account holder can only

withdraw sums from his account by means of

cheques supplied to him by the Bank for that

particular account. Post dated and stale cheques are

not paid. Withdrawals from PLS account are allowed

not oftener than 8 times in a calendar month and for

a total amount not exceeding Rs. 15,000/-. For

withdrawals of larger amounts, 7 days notice in

writing is required to be given.

The bank would be within its rights to make

investment of credit balances/deposits in the PLS

savings account in any manner at its sole discretion

and to make use of the funds to the best of its

judgment in the banking business under the PLS

system. Calculation of products on PLS savings bank

accounts will be made for each calendar month on

the lowest credit balance in an account between the

close of business on the 6th day and the last day of

the month. If however the balance is less than Rs.

1000/- the product will be nil.

There are some features of the Soneri PLS Account

which are different from that of a PLS Savings

Account. The Soneri PLS Account makes payments of

return on a monthly basis where as the interest on

the amount invested is calculated on a daily basis.

Whereas the PLS account makes payment only twice

a year that is in the month of June and end of

December. Following are the interest rates offered by

the two savings account.

NOTICE

DEPOSI

TS

Under this deposit scheme, a deposit is received

from the depositor under the condition that he will

intimate the bank before a certain period in case of

withdrawals. There are two types of notice deposits

they are 7 days and 30 days notice deposits. The

profit is paid on these deposits but it is nearly

equivalent to saving account rate. Following are the

profits paid by Soneri Bank on Notice Deposits.

Notice Deposits % per annum

7 days 1.50

30 days 2.00

TERM DEPOSITS

Deposits Category (% per annum)

PLS Savings Account 2.00

PLS Soneri Savings Account

Upto Rs. 1.0 million 1.25

Over Rs. 1.0 million to 20.0 million 1.75

Over Rs. 20.0 million to 100.0 million 2.50

This is a type of term deposit in which a receipt is

issued for varying tenors ranging from 1 month to 5

years or more. These are in the form of receipts and

profit on these receipts is paid biannually. These

receipts are en-cashable after expiry of the period for

which they were issued. Different profit rates are

applied to different type of term deposits.

Term Deposits % per annum

1 month 2.00

3 months 2.25

6 months 2.50

1 year 3.00

2 years 3.25

3 years 3.50

4 years 3.75

5 years 4.00

3. ADVANCES DEPARTMENT

Advances are the most important source of earning

for the banks. Soneri Bank is also giving full attention

towards this aspect and it is also obvious from the

growing portfolio of advances and from very low

delinquency rate. The credit portfolio of this

institution is in a very much better shape than other

financial institutions of Pakistan and the credit goes

to the management and the staff who are concerned

about the quantity and quality as well.

4. TECHNOLOGY DEPARTMENT

The foreign banks have a competitive edge over all

local banks in their technological advancements are

automated systems. Local banks have also realized

the gravity of this situation and are striving to add

computerized systems to their branches.

Soneri Bank is ahead of all other local banks in this

field and now it is in a position to even compete with

foreign banks. Almost all the branches of big cities

are computerized; therefore, the need for a

technology department at each branch is growing.

Now a day, a computer division is working in each

city to provide service to all the branches of that

area.

PROCEDURE FOR OPENING A NEW ACCOUNT

The process of opening a new account is managed by

the deposit department. It is also responsible for the

payment of profit and accounting of all types of

deposit schemes.

Account opening is an agreement in which customer

offers his funds and bank accepts these funds,

therefore the nature of relation between a banker

and customer is contractual and all the conditions

applicable to this contract act are applicable to both

the parties.

A person, who wants to open any kind of account,

has to fill in a printed form which is provided by the

bank, free of cost. Separate account opening forms

are used for different types of accounts.

Bank usually requires that new depositor must be

introduced by some one. An introducer can be any

person known to the bank but preferably it should be

a customer of the bank. However, the manager can

open the account by his own introduction.

If the manager is satisfied, he will obtain the full

signature of the customer on the form and specimen

signature card, makes the first deposit, and issues

the cheque book.

The following are given to the customers:

Pay-in-slip is the proof of deposit. For every

payment which is to be deposited in the bank, the

pay-in-slip is to be filled up. The object of this book is

to provide the customer with the bank's

acknowledgment for receipt of money to be credited

this account.

Cheque Book contains a number of cheques. It

enables a customer to make withdrawal from this

account or make payment to various parties by issue

of cheque.

Pass Book is a copy of the customer's accounts as

appears in the bills of the bank. Balance is recorded

in this book by the Clerk.

Note:

In case of partnership account partnership deed

should be attached.

In case of companies memorandum and article

of association, certificate of incorporation,

certificates for commencement of business, list

of directors and board resolution for opening of

account is also obtained from the customer.

Accounts of Trusts, Executors & Administrators

can also be opened but with the prior approval

of the Head Office.

PROFIT PAYMENT AND CALCULATION

Profit payment and calculation is done in accordance

with the rules of each type of deposit scheme are

calculated separately and added till the end of 6

month period. Then the sum total of these products

is multiplied with the respective profit rates which

are issued by the Head Office at the end of each half

yearly closing. The profit provisions for each type of

deposits are also calculated on monthly basis by the

same department in order to calculate the net profit

or loss position of the branch.

Accounting entries are also made in the respective

books of account by this department. However, in

small and medium size branches, the accountant

performs the book keeping duties for all kinds of

ledgers.

PRODUCTS AND SERVICES

Soneri Bank does not have a wide variety of

arrays. The products and services offered by the

bank are same for consumer clients (households,

individuals) and corporate clients. The services

offered by the bank are discussed in the

following pages.

1. Soneri Ghar Finance

Soneri Ghar finance service is offered for those

consumers who desire to make their own home or

make repairs/renovation to already owned houses.

Consumers in desire of purchase of pre-

constructed residential property are allowed a

maximum amount of Rs. 5 million or 80% of the

forced sale value of the property which ever is

lower. The forced sale value of the house is

determined by the evaluators of the bank. The

repayment of this financed amount can be done

within a period of 1 to 20 years in equal monthly

installments which is inclusive of markup (banks

profit).

Financing for repairs/renovations is allowed to a

maximum amount of Rs 2 million of 55% of the

forced sale value of the property whichever is

lower. Repayment of the loan is within 1 to 7 years

in equal monthly installments inclusive of markup

(banks profit).

Markup rate charged by the bank are 1.50% above

prevailing State Bank of Pakistan discount rate

minimum 9.00 % per annum.

Like every other bank there are eligibility criteria

which a consumer/corporate client have to fulfill in

order to prevail the Soneri Ghar Finance. Following

are the different criteria’s

i) Salaried persons with continuous permanent

employment for the past 5 years with

reputable legal entities with maximum age of

60 years at the time of maturity of the finance

being applied.

ii) Self employed persons e.g. doctors, engineers,

architects etc registered with professional

organizations & business persons with

maximum age of 65 years at the time of

maturity of the finance being applied for.

iii) Monthly repayment installment must not be

more than 40% take home salary/declared

income.

iv) Borrower’s equity for purchase of house

should be a minimum of 20% of the forced

sale value of the property.

v) For security the bank mortgages the property

and mortgage protection insurance policy.

2.Soneri Car Finance

Soneri Car Finance service is offered for both

consumer and corporate clients. The clients have

to choose the make, model and the color of the

vehicle the customer wishes to purchase.

Eligible customers who are salaried individuals

need to provide an employment certificate of

joining his/her respective job. Most recently salary

slip/salary certificate. The monthly salary of the

individual should be twice the amount of the

monthly installment charged by the bank. The

bank statement of last six months has to be

provided by the customer.

Self employed or business persons need to provide

a bank statement for the last six months. A copy of

the last year filed tax returns and wealth

statement. Professional body registration copy.

Maximum amount of 1 million is financed by the

bank which is only for locally manufactured cars. If

a customer wants to avail financing facilities for a

2nd car then a approval for that is required by the

head office. The approval is granted depending

upon the previous relation of the client with bank.

Bank requires a 10% a down payment of the total

amount being financed. The balance amount is

reimbursed by the bank. This amount is paid back

by the client in equal monthly installments

inclusive of a 9% per annum markup. The tenor of

financing of an automobile is for 5 years.

3. Soneri Personal Finance

Soneri Personal Finance service is offered to

customers to meet their instant demand of cash.

Personal finance service is offered for medical

treatment, education, advance rent, traveling,

house renovation etc.

Eligible customers who are salaried individuals

need to provide an employment certificate of

joining his/her respective job. Most recently salary

slip/salary certificate. The bank statement of last

six months has to be provided by the customer.

Self employed or business persons need to provide

a bank statement for the last six months. A copy of

the last year filed tax returns and wealth

statement. Professional body registration copy.

Personal finance requires that the client has

his/her personal income salary account with Soneri

Bank. The personal finance amount is loaned out

on a ratio basis. The total amount of the loaned

amount is 5 times the income of the personal to a

maximum amount of Rs. 500,000/- for e.g. if an

individual is earning Rs. 10,000/- per month he

would be loaned out an amount upto Rs. 50,000/-

but not more than that. The bank charges a 13%

per annum markup on the financed amount.

4. Soneri ATM Card

Soneri bank through its Soneri Banking Card offers

convenient and 24 hours access to ATMs across

the country. Throughout the country the Soneri

ATM can be used to withdraw cash from any

Soneri’s own ATM and other ATM’s displaying

either the 1-LINK or M-Net symbols.

Easy access to a clients account is provided with

the Soneri Banking Card and secured ATM pin. The

Soneri ATM card is delivered to customer at their

doorstep. The 4 digit Personal Identification

Number (PIN) is assigned from the clients

perspective branch.

Facilities provided by all ATMs of 1-Link and M-Net

are:

1. Cash Withdrawal

2. Balance Enquiry

Facilities provided by Soneri ATMs:

1. Fast Cash

2. Mini Statement

3. Request for Cheque Book

4. Request for Statement of Account

5. PIN Change

The amount of cash which can be taken out from

an ATM during one working day is Rs 20,000/-. The

amount of ATM cash withdrawal is electronically

debited to the respective account at the clients

bank branch.

5. Soneri Debit Card

The Soneri debit card provides a convenient and

safer way for its holders to pay for shopping at

stores, dining out, filling of vehicle at petrol

pumps, pay hospital bills and many more directly

right from your account.

The Soneri debit card works on ORIX network

through which the holder can make every day

purchases worth Rs. 300,000/- at over 2000

locations across Pakistan. There are no hassles to

remember the payment due date and of course no

late payment surcharge and markup.

When payment is done through the debit card, the

amount is electronically debited to your bank

account. These transactions appear on the bank

statement for reconciliation of account. The Soneri

ATM card can be use as a Soneri Debit Card. So the

account holder does not have to carry to cards

rather this one card serves two purposes for the

convenience of the customers.

6. Soneri Tele Banking

Soneri Tele banking saves the customer the hassle

of coming down to the banks branch. This saves

the customer valuable time and provides

convenience at the same time. The tele banking

can be accessed with the help of the card number

and T-pin to access your account 24 hours a day, 7

days a week.

The customers can access the following facilities

through the Tele Banking:

1. Balance Enquiry

2. Today’s Transaction by Voice

3. Instant Temporary Statement of Account

through Fax

4. Request for Computer generated Statement of

Account

5. Request for Cheque Book

6. Stop Mark of Lost Soneri Banking Card

7. Change of T-Pin

8. Latest Foreign Exchange Rates

9. Product Information

No additional costs are charged to the customer

for providing these facilities.

7. Soneri Rupees Travelers Cheque

Travelers’ cheque is the preferred choice of every customer to carry

1. Secured way to Cash.

2. Printed in the United Kingdom by renowned

security printers with added security

features.

3. Beautifully designed and available in

convenient denomination of Rs. 5,000.

4. Sold and encashable free of any service

charge ( Govt. Taxes / Duties applicable)

through all branches of Soneri Bank Limited.

Also payable through Local Clearing System.

5. Minimum transaction time & speed Issuance

& Encashment through State of Art

Technology.

6. Prompt processing of refund of claim in case

of Loss / Theft on reporting to the nearest

branch of Soneri Bank Limited.

7. No validity - valid until encashed.

Evaluation of Banks Performance

BALANCE SHEET AS AT 31 DECEMBER 2006  2006 2005 2004ASSETS (RUPEES IN '000)

CASH AND BALANCES WITH TREASURY BANKS 3,627,569 2,821,394 5,048,395 BALANCES WITH OTHER BANKS 2,793,190 1,057,546 3,564,030 LENDINGS TO FINANCIAL AND OTHER INSTITUTIONS 3,585,421 2,705,000 4,417,378 INVESTMENTS 13,982,828 11,912,517 12,333,893 ADVANCES 24,375,905 17,348,525 50,542,166 OTHER ASSETS 671,372 477,187 1,473,952 OPERATING AND FIXED ASSETS 815,614 643,960 1,158,407 DEFERRED TAX ASSETS ------ ------ -   49,851,899 36,966,129 78,538,221    LIABILITIES  BILLS PAYABLE 893,762 808,858 905,637 BORROWINGS FROM FINANCIAL INSTITUTIONS 7,957,364 4,998,149 8,478,048 DEPOSITS AND OTHER ACCOUNTS 37,383,756 27,868,418 56,460,329 SUB-ORDINATED LOANS ------ ------ - LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE ------ 3,301 18,434

LEASEOTHER LIABILITIES 530,952 582,112 2,294,899 DEFERRED TAX LIABILITIES 42,757 101,445 166,442   46,808,591 34,362,283 68,323,789 NET ASSETS 3,043,308 2,603,846 10,214,432    REPRESENTED BY  SHARE CAPITAL 1,271,919 1,017,535 2,912,635 RESERVES 1,592,071 1,210,203 2,259,101 UN-APPROPRIATED PROFIT 14,771 2,643 1,079,492   2,878,761 2,230,381 6,251,228 SURPLUS ON REVALUATION OF ASSETS 164,547 373,465 3,963,204   3,043,308   2,603,846 10,214,432

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2006  2006 2005 2004  (RUPEES IN '000)   

MARK-UP/RETURN/INTEREST EARNED1,947,657

1,713,971

2,753,451

MARK-UP/RETURN/INTEREST EXPESED (752,276) (789,645)

1,118,118

NET MARK-UP/RETURN/INTEREST INCOME1,195,381 924,326

1,635,333

    REVERSAL/(PROVISION) AGAINST NON-PERFORMING LOANS AND ADVANCES 15,054 (72,840) 51,609PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS ----- ----- - BAD DEBTS WRITTEN-OFF DIRECTLY ----- ----- 1,118

  15,054 (72,840) 123,526

NET MARK-UP / RETURN / INTEREST INCOME AFTER PROVISIONS

1,210,435 851,486

1,511,807

   NON MARK-UP/ INTEREST INCOME  

FEE, COMMISSION AND BROKERAGE INCOME 177,247 153,964 397,064

DIVIDEND INCOME 17,405 2,922 697,499

INCOME FROM DEALING IN FOREIGN CURRENCIES 121,834 121,560 162,444

OTHER INCOME 163,216 184,734 -

TOTAL NON MARK-UP / INTEREST INCOME 479,702 463,180 572,035

 1,690,137

1,314,666

(2,607)

NON MARK-UP / INTEREST EXPENSES   5,050

ADMINISTRATIVE EXPENSES (642,231) (499,924)

1,831,485

PROVISION AGAINST OTHER ASSETS 3 (87)

3,343,292

OTHER CHARGES (1,343) (1,143)

TOTAL NON MARK-UP / INTEREST EXPENSES (643,571) (501,154)

1,134,672

 1,046,566 813,512 -

EXTRAORDINARY / UNUSUAL ITEMS ----- ----- 1,150

PROFIT BEFORE TAXATION1,046,566 813,512

1,135,822

TAXATION – CURRENT (365,000) (396,000)

2,207,470

PRIOR YEARS 116,959 (4,854) DEFERRED (150,145) 26,054 -

  (398,186) (374,800)

2,207,470

PROFIT AFTER TAXATION 648,380 438,712 UN-APPROPRIATED PROFIT BROUGHT FORWARD 2,643 6,057 PROFIT AVAILABLE FOR APPROPRIATION 651,023 444,769    APPROPRIATIONS  TRANSFER TO: -  

STATUTORY RESERVE (129,676) (87,742) 517,588

PROPOSED ISSUE OF BONUS SHARES @ 30% (2005: 25%) (381,576) (254,384)

(420,394)

GENERAL RESERVE (125,000) (100,000) 356,806

  (636,252) (442,126) 454,000

UN-APPROPRIATED PROFIT CARRIED FORWARD 14,771 2,643

1,753,470 1,753,470

BASIC / DILUTED EARNINGS PER SHARE (RUPEES) 5.10   3.45

RATIO ANALYSIS OF FAYSAL BANK

1. Return on Assets2006 (Rupees in '000) 2005 (Rupees in '000)Net Income / Total Assets 651,023 / 49,851,899 444,769 / 36,966,129   1.3 % 1.2 %  2004 (Rupees in 000)Net Income / Total Assets

1,753,470 / 78,538,2212.23 %

Analysis: Return on asset measures a banks managerial efficiency; showing how efficient the bank has been in converting the banks assets into earnings. As compared to year 2005 there has been a substantial increase in ROA by 0.1% which indicates that the banks management is working efficiently and is capable of performing well in the future.

2. Return on Equity2006 (Rupees in '000) 2005 (Rupees in '000)Net Income / Owners' Equity 651,023 / 3,043,308   444,769 / 2,603,846 21.4 %   17.1 %2004 (Rupees in '000)Net Income / Owners' Equity

1,753,470 / 10,214,423  17.167 %  

Analysis: Return on equity measures the rate of return flowing to the banks shareholders. An increase in this ratio would provide incentives for shareholders to invest more funds in the bank. There has been an increase from 17.1% to 21.4% in the ROE which clearly indicates that there has been an increase in the returns shared by the stockholders.

3. Net Interest Margin

2006 (Rupees in '000) 2005 (Rupees in '000)(Interest income from loans and securities investments-Interest expense on deposits and on other debt issued) / Total Assets

3,638,791 / 49,851,899 3,026,484 / 36,966,129

7.3 % 8.2 %2004 (Rupees in '000)(Interest income from loans and securities investments-Interest expense on deposits and on other debt issued) / Total Assets

1,635,333 / 78,538,2212.08 %

Analysis: This ratio is an efficiency and profitability ratio. It determines how well the management and staff have been able to keep growth of revenues ahead of rising costs. The ratio particularly measures how large a spread between interest revenues and interest costs management has been able to achieve by close control over the bank’s earning assets and the pursuit of the cheapest source of funding. As compared to the proceeding year the net interest margin has declined from 8.2% to 7.3%. This is basically due to the large number of increase in the total assets as compared to the increase in the spread of interest revenues and interest incomes which implies less profitability for the bank in the year 2006 as compared to the year 2005.

4. Net Non Interest Margin2006 (Rupees in '000) 2005 (Rupees in '000)(Non-Interest revenues-Non-Interest expenses) / Total Assets

(163,869) / 49,851,899   (37,974) /

36,996,129

(0.33)       (0.10)    2004 (Rupees in '000)(Non-Interest revenues-Non-Interest expenses) / Total Assets

695,663 / 78,538,221

0.886 %   

Analysis: For most banks the net non interest margin is negative. The same is the case with Soneri Bank. The non interest revenues are less than the expenses. There has been an increase in this margin as the banks non interest expenses have increased in comparison to its non interest revenues.

5. Net Bank Operating Margin2006 (Rupees in '000) 2005 (Rupees in '000)(Total Operating revenues -Total operating Expenses / Total Assets 648,380 / 49,851,899   438,712 / 36,996,129   1.30 %   1.19 %  2004 (Rupees in '000)

2.97 %

Analysis: Net Bank operating margin indicates that whether the bank has been able to generate more revenues than expenses relative to total assets.Net bank operating margin has increased from 2005 to 2006. This shows that total assets have been used successfully to generate more revenues than expenses.

6. Net Earning Per Share of Stock2006 (Rupees in '000) 2005 (Rupees in '000)(Net Income after Taxes / Common Equity Shares Outstanding

651,023X1000 / 127,191,776   444,769X1000 / 101,753,437  

651023000 / 127,191,776   444,769,000 / 101,753,437  

5.12       4.37      2004 (Rupees in '000)

(Net Income after Taxes / Common Equity Shares Outstanding1,753,470 / 368,448,000 

4.76Rs. 

Analysis: Earning per share is the allocation of company’s profit to each outstanding share. An increase in the earning per share is a favorable sign for the investors. Soneri’s EPS has increase by 0.75 over the last one year which shows that the profits of the bank have increased.

7. Earning Spread2006 (Rupees in '000) 2005 (Rupees in '000)(Total Interest Income / Total Earning Assets) – (Total Interest Expense / Total Interest Bearing bank liabilities)2,427,359/815,614 -643,571/7,957,364 2,177,151/643,960 - 501,154/4,998,1492.9761 - 0.0808 3.3808 - 0.25082.895 % 3.130 %

Analysis: The spread measure the earning efficiency with which a bank is managed. The spread measures the effectiveness of the banks intermediation function in borrowing and lending money and also the intensity of competition in the bank’s market area. As competition increases in the bank’s market area the difference between the average assets yields and average liability cost tends to decline. The spread for Soneri has fallen in 2006 to 2.895 from 3.130 from the proceeding year which implies that the bank has to find other ways to make up for the eroding earnings spread.

Breakdown of Equity Returns

8. Banks Net Profit Margin2006 (Rupees in '000) 2005 (Rupees in '000) Net Income after taxes/Total Operating Revenues  651,023 / 479,702   444,769 / 463,180   1.3571 %   0.9603 %  2004 (Rupees in '000) Net Income after taxes/Total Operating Revenues  1,753,470 / 4,584,936

38.24 %

Analysis: NPM is increasing which means that the costs and expenses of the bank have been controlled efficiently and it is very good for the bank.

9. The Banks Degree of Asset Utilization2006 (Rupees in '000) 2005 (Rupees in '000) Total Operating Revenues/Total Assets  479,702 / 49,851,899   463,180 / 36,966,129   0.0096 %   0.0125 %  2004 (Rupees in '000)Total Operating Revenues/Total Assets 

4,584,936 / 78,538,221 0.058

Analysis: Asset Utilization Ratio has decreased in 2006 which means that total operating revenues have decreased as compared to total assets. It also means that the portfolio management policies have not been that successful as in previous year and the yield on bank's assets has declined.

10. The Banks Equity Multiplier2006 (Rupees in '000) 2005 (Rupees in '000) Total Assets/Total Equity  49,851,899 / 2,878,761   36,966,129 / 2,230,381   17.3171 %   16.5739 %  2004 (Rupees in '000) Total Assets/Total Equity 

78,538,221 / 2,878,761 17.317 %

Analysis: The multiplier is a direct measure of the banks degree of financial leverage; how many Rupees of assets must be supported by each Rupee of equity capital and how much of the banks resources must rest on debt. The Equity Multiplier has increased in the 2006 which indicates that the bank is exposed to higher failure risk but increase in

multiplier also indicates that potential for high returns for stockholders.

11. Return on Equity; ROE = NPM x AU x EM2006 (Rupees in '000) 2005 (Rupees in '000)1.3752 x 0.0096 x 17.3171 0.9603 x 0.0125 x 16.5739 0.228       0.198      2004 (Rupees in '000)38.24 x 0.058 x 12.56 28.05

Analysis: The return on equity has increased overall which is a positive sign for the bank. The asset utilization ratio has decrease whereas the equity multiplier and net profit margin has increased. As a whole the returns on assets have increased as the performance of the bank has been positive.

Breakdown Analysis of Banks Return on Assets

12. Net Interest Margin2006 (Rupees in '000) 2005 (Rupees in '000)(Interest Income-Interest Expense)/Total Assets

1,210,435 - 643,571/ 49,851,899 851,486 - 501,154 / 36,966,129

 

566,864 / 49,851,899 350,332 / 36,966,1290.0114 % 0.0095 %

Analysis: Net interest margin has increase from the year 2005 to 2006. This is due to the fact that the interest earnings with respect to the total assets have increased in a larger amount. This shows that the banks interest earnings have increased due to better management of resources.

13. Non Interest Margin2006 (Rupees in '000) 2005 (Rupees in '000)(NonInterest Income-NonInterest Expense) / Total Assets 1,690,137 - 643,571 / 49,851,899 1,314,666 - 501,154 / 36,966,1291,046,566 / 49,851,899 813,512 / 36,966,1290.0210% 0.0220%

Analysis: The amount of non-interest revenues stripped from deposit service charges and other service fees the

bank has been able to earn has increased to a low extent relative to the amount of non-interest costs incurred which may include costs on repair, maintenance, wages salaries, and bank facilities etc. The costs have declined by a minor percentage from 2.2% to 2.1% which indicates that the bank can still manage to increase its non interest earnings by efficient management of resources and cutting down on operating costs.

17. Special Transactions Affecting the Net Income 2006 (Rupees in '000) 2005 (Rupees in '000)

Special income and expense items / Total Assets

3,043,308 / 49,851,899   2,603,846 / 36,966,129  

16.38 %   14.20 %  

Analysis: The total amount of special income and expense items has increased by 2.18%. This shows that special transactions have increased as compared to the increase in the amount of total assets.

18. Return on Assets; ROA = NIM + Non IM - Sp. Tr.

2006 (Rupees in '000) 2005 (Rupees in '000) 16.41 % 14.23% 

Analysis: The ROA of Soneri Bank has increase from 14.23% to 16.41% which shows that the bank has been done a good job in the last year as there is an increase in the returns on the total assets.

18. Credit Risk

the probability that some of bank’s assets, especially its

loans, will decline in value and perhaps become worthless is

known as credit risk.

a) Net Charge Offs of Loans to Total loans

2006 (Rupees in '000) 2005 (Rupees in '000) = Net Charge offs of loans / Total Loans * 100  

67 / 74,468,644 0 / 62,323,508 0.0008% 0 %

2004 (Rupees in '000) 2003 (Rupees in '000)1,118 / 50,542,166    

0.002 %    

Charge offs are the loans that

b) Annual provision for loan losses to total loans

2006 (Rupees in '000) 2005 (Rupees in '000) = total annual provision / Total Loans * 100  

0.0008% 0 %2004 (Rupees in '000) 2003 (Rupees in '000)

1,118 / 50,542,166    0.002 %    

19. Liquidity Risk

2006 (Rupees in '000) 2005 (Rupees in '000)                Cash and due from deposit balance held at other bank / Total Assets   10,006,180 / 49,851,899   6,583,940 / 36,966,129   0.2007 %   0.1781 %  

Analysis: Liquidity risk is increasing in our case so it is not good for the bank. This shows that bank was doing well in the field of cash in the year 2005 as compared to 2006.

20. Operating Efficiency Ratio

2006 (Rupees in '000) 2005 (Rupees in '000)                Total operating expense / Total operating Revenue   643,571 / 479,702   501,154 / 463,180   1.3416 %   1.0820 %  

Analysis: It is a ratio between operating expenses and revenues which has increase from 1.08 to 1.34 from 2005 to 2006 showing that though the operating revenues have increased but there is a larger increase in operating expenses meaning that company is not efficiently managing its earnings and returns.

TREND ANALYSIS

Total Assets: Total numbers of assets have grown by 36.34% from the year 2003 to 2006. The growth rate has declined to 32.03% in the year 2004 where as in the fiscal year 2006 the growth rate again stepped up to 34.85% but was still lower than the growth rate of year 2003.

Total Liabilities: Total liabilities of Soneri bank have grown in the year 2004 by 35.39% as compared to the year 2003. In the year 2005 the liabilities increased by 33.68% which was lower as compared to the preceding year. A 36.22% increase in liabilities was clearly seen in the year 2006 as the total number of liabilities increased to a total of 46,808,591,000.

Shareholders Equity: The year 2004 showed an increase of 48% in the shareholders equity where as the growth in 2005 was at a declining rate which was only

13.55% and slight increase from 2005 to 2006 could be seen with rate of growth totaling to 16.87%. So overall the shareholders equity had a huge jump in the fiscal year 2003-2006 where after which the shareholder’s equity was increasing a declining rate of growth.

Net Income: The net income of Soneri bank has been rising as visible by the histogram below. The banks’ net income went up by 29.57% in the year 2003 as compared to the preceding year. In year 2005 the banks net income went up to a wholesome Rs. 438,712,000 which was an increase of 25.21% which was less than the growth rate of 2005. In the year 2006 there was a huge increase of 47.79% which shows that the bank’s performance was improving yearly but in the year 2006 there was an exceptional leap in the net income.

RECOMMENDATIONS

Concentrate on financing of all types of sectors:

Soneri bank is lacking in targeting all types of sectors, they should finance everything from a house to its furniture, only than it would produce true value for its money, and would be able to meet its costs. They should also look in to small sectors and the low income group as they are the ones who would readily agree to get a television or sofa set financed.

Car financing:

Although Soneri bank has a department concerned with car financing, but not enough effort is put forward by the bank in this department. As car financing rates have declined in the preceding years the bank should focus on capturing this market. This could help the bank for achieving better prospects in the future.

Concentrate on Small Businesses:

As business scenario in Pakistan has improved in the last couple of years the bank should focus its marketing activities on capturing the small businesses for lending their financing services.

Promote Credit Cards:

Currently the bank is not offering any credit cards to its customers. The management of the bank should look forward to launching a credit card product. This would help increase the number of products as well as the profitability of the bank.

Increase the number of branches:

The competition in the banking sector has increased over the last couple of years. In order to compete with growing competition the bank should increase the number of branches nationally and regionally.