Financial ratio analysis of Bank al Habib & HBL
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Transcript of Financial ratio analysis of Bank al Habib & HBL
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