Financial ratios analysis:20122011

Return on equity (ROE)-94.38%-21.69%

Return on assets (ROA)-2.03%-1.01%

Profit / (Loss) before tax ratio-24.60%-33.59%

Gross spread ratio1.24%5.56%

Advances to deposits ratio54.22%62.45%

Income to expenses ratio (times)0.820.76

Cost to revenue ratio121.41%125.36%

Total assets to shareholders' funds (times)46.3921.40

NPL ratio34.39%16.66%

Capital adequacy ratio4.42%7.52%

Earning/ (Loss) per share (Rupee)(2.54)(1.17)

Book value per share2.842.84

Return on equity (ROE)Return on equity or return on capital is the ratio of net income of a business during a year to its stockholders' equity during that year. It is a measure of profitability of stockholders' investments. It shows net income as percentage of shareholder equity.The formula to calculate return on equity is:ROE =Annual Net Income

Average Stockholders' Equity

the return on equity ratio of summit bank has decrease from -21.69% to -94.38% in year 2012 due to increase in net loss Return on assets (ROA)Return on assets is the ratio of annual net income to average total assets of a business during a financial year. It measures efficiency of the business in using its assets to generate net income. It is a profitability ratio. The formula to calculate return on assets is:ROA =Annual Net Income

Average Total Assets

The return on assets of summit bank limited has decreased -2.03% from -1.01%. This is due to the increase In net loss of the bank Profit / (Loss) before tax ratio:A company's earnings before tax as a percentage of total sales or revenues. The higher the pre-tax profit margin, the more profitable the company. The trend of the pretax profit margin is as important as the figure itself, since it provides an indication of which way the company's profitability is headed.Summit banks loss before tax ratio has decreased to -24.60% from-33.59% due to increase in total income (both mark up an non markup interest income). Gross spread ratioGross spread ratio looks at the spread of interest between borrowing and lending. Banks make money by borrowing short-term money from depositors and then using these funds to make long-term loans to businesses, consumers and homeowners. One way to analyze gross profit rates of banks is to look at the spread between the loan rates and deposit rates. Further, through ratio analysis, you can use the gross spread ratio to determine the profitability, liquidity and leverage of a bank.Gross Spread ratio = (Net Markup Income/Gross Income)*100The gross spread ratio of summit bank has decreased from 1.24% to 5.56% it means its idle funds have increasedAdvances to deposits ratioA commonly used statistic for assessing a bank's liquidity by dividing the banks total loans by its total deposits. This number, also known as the LTD ratio, is expressed as a percentage The higher the Loan-to-deposit ratio, the more the bank is relying on borrowed funds. The summit banks Advances to deposits ratio is decreased to 54.22% from 62.45% as as deposits have increased during 2012 Cost to revenue ratio:The cost-to-revenue ratio measures operation efficiency by comparing operating costs as a proportion of the total revenue. In other words, dividing costs by the amount of revenue, the cost-to-revenue ratio shows the level of resources required to generate every dollar of revenue As an efficiency measurement, the lower the cost-to-revenue ratio, the higher the operating efficiency.Summit banks cost to revenue ratio has decreased to 121.41% from 125.36% resulting due to operating efficiency Assets to Equity ratio:The asset-to-equity ratio is a financial ratio that takes the entity's total assets and divides them by its total equity. This ratio is used to measure an entity's leverage. This is a measure of the total debt a company takes to acquire assetsTotal assets to shareholders equity has increased to 46.39 times from21.40 times due to increase in deposits and advances in the year 2012Npl Ratio:The amount of non-performing loans over total loans, expressed as a percentage. The more the Npl ratio the more non-performing loans bank has.NPL ratio of summit bank for 2012 have increased to 34.39% from 16.66%Capital adequacy ratioCapital Adequacy Ratio (CAR) or Total Capital Ratio measures a bank's capital position and is expressed as a ratio of its capital to its assets.It determines the capacity of the bank in terms of meeting the time liabilities and other risks such as credit risk, operational risk, etc. CAR below the minimum statutory level indicates that the bank is not adequately capitalized to expand its operations. The ratio ensures that the banks do not expand their business without having adequate capitaThe Capital adequacy ratio of summit bank is decreased to 4.42% from 7.52%

Eps(earning per share):The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability.It is calculated by dividing earning available for common stock holders to no of outstanding shares Summit banks Loss per share is increased to (2.54) from (1.17) in 2012 it is due to increase in administrative costs

Horizontal Analysis of Financial StatementsHorizontal analysis of financial statements involves comparison of a financial ratio, a benchmark, or a line item over a number of accounting periods. This method of analysis is also known as trend analysis. Horizontal analysis allows the assessment of relative changes in different items over time. It also indicates the behavior of revenues, expenses, and other line items of financial statements over the course of time.Horizontal analysis of consolidated balance sheet of Summit bank limited 2011 to 2012

Assets

Cash and balances with treasury banks32.58%

Balances with other banks 151%

Lending to financial institutions90.64%

Investments37.89%

Advances-6.161%

Operating fixed assets-11.74%

Deferred tax assets - net-4.20%

Other assets10.66%

Total Assets 12.59%

Liabilities

Bills payable83.77%

Borrowings55.69%

Deposits and other accounts7.9%

Sub-ordinated loans-0.046%

Other liabilities-17.86%

Total liabilities15.6%

Shareholders equity account

Net Share capital-48.38

Surplus on revaluation of assets - net of deferred tax-16.33%

Total equity-47.26%

Explanation: The cash and balances with treasury banks have increased by32.58 % and the bank has transactions of borrowings (re-purchase) from and lending (reverse re-purchase) to financial and other institutions, have increased in 2012 than in 2011. Investments made by summit bank limited have also increased. it has made investments in Federal Government Securities, Fully paid-up Ordinary Shares of listed , non-listed and mutual funds, Preference Shares, Term Finance Certificates and Bonds and Investments in associate. Advances are decreased in 2012 because some advances are placed in non-performing loans In operating fixed assets capital work in progress has increased while Property and equipment and intangible assets has decreased resulting a net decrease in operating fixed assets Deferred tax assets are reduced during 2012 Other asset have increased during 2012 eg Income / mark-up accrued in local currency Income / mark-up accrued in foreign currency Advances, deposits, advance rent and other prepayments Non banking assets acquired in satisfaction of claims Advance taxation - net of provision Receivable from Arif Habib Investments Limited, a related party Receivable from Suroor Investments Limited, the parent company Stationery and stamps on hand Receivable against sale of property and equipment Commission receivable on guarantee Receivable from other banks against clearing and settlement Un realized gain on forward foreign exchange contracts Overall total assets have increased by 12.59% Bills payable have increased Borrowing made by bank and deposits of customers and financial institutions have also increased during 2012 Subordinated loans that include Term Finance Certificate( Unquoted, Unsecured) have decreased Other liabilities have also decreased that include Mark-up / return / interest payable in local currency Mark-up / return / interest payable in foreign currency Payable to Bangladesh Bank Payable to Rupali Bank - Bangladesh, a related party Payable to vendors / creditors Provision for compensated absences Payable to Bank of Ceylon, Colombo Retention money Branch adjustment account Security deposits Accrued expenses Payable to brokers Unrealised loss on forward exchange contracts Payable to defined benefit plan Withholding taxes and government levies payable Payable to other banks against clearing and settlement Unclaimed dividend Unearned income Commission payable on home remittances Overall for the year 2012 total liabilities have increased Net Share capital is decreased as compared to last year due to increase in the amount of losses transferred to balance sheet during 2012Horizontal analysis of consolidated profit and loss account of Summit bank limited 2011 to 2012Mark-Up / Interest Income

Net mark-up / interest income after provisions408.6%

NON MARK-UP / INTEREST INCOME

Fee, commission and brokerage income39.91%

Dividend income41%

Gain from dealing in foreign currencies134.55%

Gain / (loss) on sale of securities - net847.13%

Unrealized loss on revaluation of investmentsclassified as held-for-trading - net-99.91%

Other income0.83%

Total non-mark-up / interest income86.51%

Total income95.15%

NON MARK-UP / INTEREST EXPENSES

Administrative expenses3.008%

Other provisions / write-offs-46.04%

Other charges-40.64%

Total non-mark-up / interest expenses2.43%

Share of profit of associates10.88%

LOSS BEFORE TAXATION-20.64%

Taxation-88.91%

LOSS AFTER TAXATION129.86%

Explanation: Net mark-up / interest income after provisions have increased by 408.6%. it includes Net mark-up / interest income which has decreased from 533,127 to 129,424 but the provisions on markup interest income has also decreased causing increase in net markup and interest income after provisions as compared to last year Fee, commission and brokerage income, Dividend income and Gain from dealing in foreign currencies, Gain / (loss) on sale of securities net have increased Unrealized loss on revaluation of investments in following companies is decreased to 99.91% D.G. Khan Cement Company Limited (17) (419) Engro Fertilizers Limited - (538) National Bank of Pakistan Limited - (2,673) Pakistan Telecommunication Company Limited 12 - Pakistan State Oil Company Limited - (1,284) United Bank Limited Total markup and interest income has increased by 86.51% Overall total income has increased Total markup and interest expenses have increased due to increase in administrative expenses Share of profits of associates have also increased Loss before taxation have reduced but loss after taxation have increased due to increase in taxes and deferred taxesVertical analysis of consolidated balance sheet of Summit bank limited of 2011 and 2012Vertical analysis (also known as common-size analysis) is a popular method of financial statement analysis that shows each item on a statement as a percentage of a base figure within the statement.To conduct a vertical analysis of balance sheet, the total of assets and the total of liabilities and stockholders equity are generally used as base figures20122012

Assets Rupees in 000 Rupees in 000

Cash and balances with treasury banks8,110,1986.039%6,117,9985.12%

Balances with other banks 3,601,1832.68%1,433,6141.20%

Lending to financial institutions2,038,5001.15%1,069,7570.896%

Investments49,777,08837.06%36,098,64430.26%

Advances52,549,15439.13%55,999,66446.95%

Operating fixed assets5,450,4004.058%6,175,0115,177%

Deferred tax assets - net5,986,4344.45%6,249,6582.3%

Other assets6,776,1095.04%6,123,1695.13%

Total assets 134,289,066100%119,267,515100%

Liabilities Rupees in 000 Rupees in 000

Bills payable1,654,3021.23%900,7500.7546%

Borrowings28,900,43221.52%18,562,61615.56%

Deposits and other accounts96,815,37272.09%89,665,30175.18%

Sub-ordinated loans1,499,3101.111%1,500,0001.25%

Other liabilities2,413,5951.79%2,938,2942.463%

Total liabilities131,283,01197.76%113,566,9694.98%

Shareholders equity (Rupees in 000) (Rupees in 000)

Net share capital2,840,2912.163%5,502,4344.6153

Surplus on revaluation of assets - net of deferred tax165,7640.1229%198,1200.166%

Total equity3,006,0552.238%5,700,5544.779%

Explanation: In assets largest portion is occupied by Investments and Advances made by bank and least is acquired by Lending to financial institutions While liabilities of firm is far more than its equity portionVertical analysis of consolidated profit and loss account of Summit bank limited 2011 to 2012(Rupees in 000)2012(Rupees in 000)2011

Total income1,532,132100%785,732100%

Administrative expenses(4,006,090)-261.48%(3,889,496)-495%

Other provisions / write-offs(14,924)-0.974%(27,658)-3.52%

Other charges(11,487)-0.7180(19,354)-2.4%

Total non-mark-up / interest expenses(4,032,501)-263%(3,936,508)-519%

Share of profit of associates1,27383.09%1,148146%

LOSS BEFORE TAXATION(2,499,096)163.12%(3,149,628)401%

Taxation (218,185)-14.22%1,966,859250.44%

Loss after Taxation(2,717,281)177.35%(1,182,769)150%

Explanation: Administrative expenses of the bank exceeds its total income earned thats why firm has suffered loss after taxation In 2012 the firm has experience a tax saving due to loss occurred but in 2011 tax saving cannot be availed due to deferred taxes