92

FINANCIAL STATEMENTS ANALYSIS 7

TEN YEARS PERFORMANCE

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Capital & Reserves 418 451 566 645 733 1219 1389 1515 3002 3012
Deposits 19825 25041 33757 37121 41445 51124 55897 63430 76541 93107
Advances 11115 11871 15734 18037 19901 29552 32766 36231 42719 55264
Investments 7268 9981 14586 14948 16549 15610 15553 20193 25605 26775
Income 2044 2349 3435 4453 5010 6102 7056 8397 8974 10925
Expenditure 1983 2249 3080 4038 4665 5571 6822 8368 8814 10854
Pre-tax Profit 61 100 355 415 345 531 234 29 170 71
Total Assets 23319 28342 37973 41759 47390 58480 63439 72404 89356 106926

TREND ANALYSIS OF TEN YEARS PERFORMANCE

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Capital & Reserves 7.89 25.50 13.96 13.64 66.30 13.95 9.07 98.15 0.33
Deposits 26.31 34.81 9.97 11.65 23.35 9.34 13.48 20.67 21.64
Advances 6.80 32.54 14.64 10.33 48.50 10.88 10.57 17.91 29.37
Investments 37.33 46.14 2.48 10.71 (5.67) (0.37) 29.83 26.80 4.57
Income 14.92 46.23 29.64 12.51 21.80 15.63 19.01 6.87 21.74
Expenditure 13.41 36.95 31.10 15.53 19.42 22.46 22.66 5.33 23.14
Pre-tax Profit   63.93 255.00 16.90 (16.87) 53.91 (55.93) (87.61) 486.21 (58.24)
Total Assets   21.54 33.98 9.97 13.48 23.40 8.48 14.13 23.41 19.66

Hailey College of Commerce, University of the Punjab

 93

De posites, Advance s & Inve stme nts

100000
90000
80000
R s . in b illio n

70000
60000
50000
40000
30000
20000
10000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Ye ar s

Deposits Advances Investments

Hailey College of Commerce, University of the Punjab

 94

Deposites, Advances & Investments

60

50

40
P erc en tag e

30

20

10

0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
-10
Years

Deposits Advances Investments

The graph shows a good picture of company’s past 10 years performance regarding
deposits, advances and investments. Deposits and advances are constantly increasing but
the rate of increase is different during different periods. But when we see at the rate of
change, it has a lot of ups and downs. Particularly rate of change in Advances fluctuate in
a very wider band. In year 1992 advances increased by 6.80% in the next year it increased
by 32.54% and in year 1995 it increased by 48%. There is no stability in the rate of
change.

Hailey College of Commerce, University of the Punjab

 95

Income, Expenditures & Pre-tax Profit Income, Expenditures & Pre-tax Profit

600 12000

500 10000

R s . in b illio n
400 8000
R s . in b illio n

300
6000
200
4000
100
2000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 0
-100 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
-200 Ye ars
Ye ars
Income Expenditure Pre-tax Prof it
Income Expenditure Pre-tax Profit

The graph shows that the income of the bank is increasing gradually. This seems to be
good but at the same time if we take into consideration the facts, not only income of the
bank is increasing but expenditure is too increasing that shows the in efficiency of the
management. The pre-tax profit is least. The bank should notice that what are the reasons
behind this? Why the expenses are increasing with the passage of time. Another thing
notable in this regard is that there is a great fluctuation in the income expenditure and
profit. This fluctuation is giving a negative impression to the investor, and as well other
people who are dealing with the bank in other matters, this complex situation can be
controlled by effective organization and techniques.

ALLIED BANK OF PAKISTAN LTD.

BALANCE SHEET
AS ON DECEMBER 31, 1999
ASSETS 1999 1998 1997

Cash 8,601,193 7,646,937 6,316,337

Balance with other Banks 1,757,510 1,878,796 1,380,840
Money at call and short notice. 300,000 100,000 450,000
Investments 26,774,766 25,605,470 20,192,699
Advances net of provisions 55,263,762 42,719,179 36,231,357
Operating Fixed Assets 3,062,045 2,488,619 872,730
Capital work in Progress 44,246 37,472 33160
Net investments in Finance Lease 34,415 53,707 43,755
Other Assets 11,088,394 8,827,987 6,882,772
106,926,331 89,358,167 72,403,650
LIABILITIES
Deposits and other accounts 93,107,291 76,541,153 63,429,709
Borrowings from other bank agents etc. 7,144,163 6,243,517 4,914,558
Bills Payable 1,073,491 1,084,150 802,367
Other Liabilities 2,588,936 2,487,440 1,741,598
103,913,881 86,356,261 70,888,232
Net Assets 3,012,450 3,001,906 1,515,418

Hailey College of Commerce, University of the Punjab

 96

PRESENTED BY
Share capital 1,063,156 1,063,156 1,063,156
Reserve fund and Other Reserves 480,760 455,760 451,760
Unappropriate profit 1,638 16,094 502
Shareholders equity 1,545,554 1,535,010 1,515,418
Surplus on revaluation of Fixed Assets. 1,466,896 1,466,896 -
3,012,450 3,001,906 1,515,418
MEMORANDUM ITEMS
Bills for collection 8,142,388 10,910,897 10,062,812
Acceptances endorsements and other 18,360,244 13,354,826 13,622,536
obligations
contingent liabilities and commitments - - -

Hailey College of Commerce, University of the Punjab

 97

ALLIED BANK OF PAKISTAN

PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 1999

PARTICULARS 1999 1998 1997

Mark up interest and discount or return earned 7,287,432 6,059,060 5,026,784

Less Cost/Return on Deposits, borrowing etc 6,953,006 5,289,971 4,639,053
334,426 769,089 387,731
Free commission and brokerage 358,997 426,229 361,322
Profit from dealing securities 1,172,042 1,033,310 1,130,242
Profit from investment securities 971,956 755,170 564,453
Dividend Income 21,791 14,401 18,398
Other operating income 995,310 607,820 1,191,176
3,520,078 2,836,930 3,265,591
3,854,504 3,606,019 3,653,322

OPERATING EXPENSES
Administrative Expenses 3,772,889 3,396,440 2,960,699
Provision written back and against non performing Advances (53,131) (254,885) 712,492
Loss from diminution value of investments -- 218,398 (9,649)
Other provisions -- 36,587 33,157
3,719,758 3,396,440 3,696,699
134,746 209,579 (43,377)
Other Income 64,356 88,017 104,144
199,102 297,596 60,767
Other charges 128,004 128,004 32,001
Profit before taxation 71,098 169,592 28,766
Taxation – Current 60,554 150,000 335,125
Deferred -- -- (320,023)
60,554 150,000 15,102
Profit after taxation 10,554 19,592 13,664
Unappropriated profit brought forward 16,091 502 338
Profit available for appropriation 26,638 20,094 14,002

Appropriations
Transfer to statutory reserve 25,000 4,000 13,500
Unappropriated profit carry forward 1,638 16,094 502

Hailey College of Commerce, University of the Punjab

 98

ALLIED BANK OF PAKISTAN LTD.

COMMON SIZE BALANCE SHEET
As on december 31, 1999
ASSETS 1999 1998 1997

Cash 8.04 8.56 8.72

Balance with other Banks 1.64 2.10 1.91
Money at call and short notice. 0.28 0.11 0.62
Investments 25.04 28.65 27.89
Advances net of provisions 51.68 47.81 50.04
Operating Fixed Assets 2.86 2.78 1.21
Capital work in Progress 0.04 0.04 0.05
Net investments in Finance Lease 0.03 0.06 0.06
Other Assets 10.37 9.88 9.51
100.00 100.00 100.00
LIABILITIES
Deposits and other accounts 87.08 85.66 87.61
Borrowings from other bank agents etc. 6.68 6.99 6.79
Bills Payable 1.00 1.21 1.11
Other Liabilities 2.42 2.78 2.41
97.18 96.64 97.91
Net Assets 2.82 3.36 2.09

PRESENTED BY
Share capital 0.99 1.19 1.47
Reserve fund and Other Reserves 0.45 0.51 0.62
Unappropriate profit 0.00 0.02 0.00
Shareholders equity 1.45 1.72 2.09
Surplus on revaluation of Fixed Assets. 1.37 1.64 -
2.82 3.36 2.09
MEMORANDUM ITEMS
Bills for collection 7.61 12.21 13.90
Acceptances endorsements and other obligations 17.17 14.95 18.81
contingent liabilities and commitments - - -

Hailey College of Commerce, University of the Punjab

 99

ALLIED BANK OF PAKISTAN

COMMON SIZE PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 1999

PARTICULARS 1999 1998 1997

Mark up interest and discount or return earned 100.00 100.00 100.00

Less Cost/Return on Deposits, borrowing etc 95.41 87.31 92.29
4.59 12.69 7.71
Free commission and brokerage 4.93 7.03 7.19
Profit from dealing securities 16.08 17.05 22.48
Profit from investment securities 13.34 12.46 11.23
Dividend Income 0.30 0.24 0.37
Other operating income 13.66 10.03 23.70
48.30 46.82 64.96
52.89 59.51 72.68

OPERATING EXPENSES
Administrative Expenses 51.77 56.06 58.90
Provision written back and against non performing Advances (0.73) (4.21) 14.17
Loss from diminution value of investments - 3.60 (0.19)
Other provisions - 0.60 0.66
51.04 56.06 73.54
1.85 3.46 (0.86)
Other Income 0.88 1.45 2.07
2.73 4.91 1.21
Other charges 1.76 2.11 0.64
Profit before taxation 0.98 2.80 0.57
Taxation – Current 0.83 2.48 6.67
Deferred - - (6.37)
0.83 2.48 0.30
Profit after taxation 0.14 0.32 0.27
Unappropriated profit brought forward 0.22 0.01 0.01
Profit available for appropriation 0.37 0.33 0.28

Appropriations
Transfer to statutory reserve 0.34 0.07 0.27
Unappropriated profit carry forward 0.02 0.27 0.01

Hailey College of Commerce, University of the Punjab

 100

RATIOS ANALYSIS

PROFITABILITY RATIOS

NET PROFIT RATIO

Net Profit after Tax

= × 100
Interest Received

1997 1998 1999

Net Profit After Tax 13,664 19,592 10,554
Interest Received 5,026,784 6,059,060 7,287,432
Net Profit Ratio 0.2718% 0.3234 % 0.1448 %

Net profit as percentage of Interest

Net Profit Ratio
received increased a little in 1998 (from
0.2718% to 0.323%), but it is very low 0.3500
and has a decreasing trend in year 1999
0.3000
it decreased to 0.1448% from year 1998
i.e. 0.3234% the decrease in the profit 0.2500
Percentage

from year 1998 to year 1999 is too much 0.2000

than an increase in profit volume from 0.1500
year 1997 to year 1998. The decreasing 0.1000
Net Profit trend shows the management’s
0.0500
inefficiencies to control the operating
costs and maximize the profit. -
1997 1998 1999
Years

Hailey College of Commerce, University of the Punjab

 101

RETURN ON ASSETS

Net Profit after Tax

= × 100
Total Assets

1997 1998 1999

Net Profit After Tax 13,664 19,592 10,554
Total Assets 72,403,650 89,358,167 106,926,331
Return on Assets 0.0189 0.0219 0.0099

This ratio shows that the return is lesser

Return on Assets
in 1999 as compared to return on assets
in the year 1998. it was 0.0189% in 1997 0.0250
and increased to 0.0219% in 1998, but it
decreased very sharply in 1999 to 0.0200
0.0099%. Although interest and discount
Percentage

on loans which is the major source of 0.0150

revenue for bank has increased in 1999 0.0100

as compared to last year, but cost on
deposits and borrowing which is the 0.0050
major expenditure of bank has increased
more in the current year than the last -
1997 1998 1999
year.
Years
Another reason of decrease in return is
the reduction in lending rate and increase in financial cost, total assets in 1999 have also
increased substantially than last year so return on assets has decreased in 1999.

Hailey College of Commerce, University of the Punjab

 102

RETURN ON SHAREHOLDERS FUNDS

Net Profit after Tax

= × 100
Shareholders Funds

1997 1998 1999

Net Profit After Tax 13,664 19,592 10,554
Shareholders’ Funds 1,515,418 3,001,906 3,012,450
Return on Shareholders’ Funds 0.9017 0.6527 0.3503

Return on Shareholders Fund

This ratio is a further explanation of the
above ratio that is the rate of return has 1.0000
decreased substantially in year 1998 and 0.9000
again in year 1999. The reason behind is 0.8000
that rate of increase in revenue in 1999 is 0.7000
Percentage

lesser than the rate of increase in 0.6000

0.5000
expenditure, moreover in 1999 profit after 0.4000
tax has decreased and on the other hand 0.3000
its denominator shareholders fund has 0.2000
increased due to increase in reserve fund 0.1000
and other reserves. Therefore both the -
1997 1998 1999
factors are responsible for this worrisome
ratio. Years

If this ratio decreases due to decrease in Profit, it is not a positive sign, but if the ratio
decreases due to increase in shareholders’ equity, it is not bad. In this case the net profit of
year is more 1998 then that of year 1997, but the ratio decreased due to increase in the
shareholders’ equity, which is resultant of increased reserves. The sharp decline in year
1999 is due to decrease in profits.

Hailey College of Commerce, University of the Punjab

 103

RETURN ON EQUITY CAPITAL

Net Profit after Tax

= × 100
Equity Capital

1997 1998 1999

Net Profit After Tax 13,664 19,592 10,554
Equity Share Capital 1,063,156 1,063,156 1,063,156
Return on Equity Share Capital 1.2852 1.8428 0.9927

Calculation made on the base of data

Return on Equity Capital
available shows that profit earning after
taxes in 1999 has decreased due to 2.0000
increased financial cost of funds for which 1.8000
expected investment avenues did not 1.6000
open up the situation rather worsened 1.4000
Percentage

with reduced return on lending. 1.2000

1.0000
0.8000
Here in this ratio we see that ratio is 0.6000
disturbed by the single factor of reduction 0.4000
in profit as there in no further flotation of 0.2000
share in the stock exchange in current -
year. 1997 1998 1999
Years

Hailey College of Commerce, University of the Punjab

 104

EARNING PER SHARE

Net Profit after Tax

= × 100
No. of Equity Shares

1997 1998 1999

Net Profit After Tax 13,664 19,592 10,554
No. of Equity Shares 106,316 106,316 106,316
Return on Equity Share Capital 0.1285 0.1843 0.0993

Earning per Share

This ratio is telling the same story as was
telling the above ratio. Because there is 0.2000
no issuance of share capitals in year 0.1800
1998 and year 1999. The profit increased 0.1600
in year 1998, but it has decreased in 0.1400
0.1200
Rupees

1999 and that is why earning per share

0.1000
has also decreased. 0.0800
0.0600
This ratio has a great importance for the 0.0400
shareholders point of view. The 0.0200
shareholders want a higher return on their -
investment. 1997 1998 1999
Years

Hailey College of Commerce, University of the Punjab

 105

RATE OF RETURN AT LOANS

Interest Income
= × 100
Total Loans

1997 1998 1999

Interest Income 5,026,784 6,059,060 7,287,432
Total Loans 36,231,357 42,719,179 55,263,762
Rate of Return on Loans 13.8741 14.1835 13.1866

Rate of Return at Loans

Here we are watching very interesting
situation, as there is an increasing 14.4000
interest income in 1999 but ratio is 14.2000
decreasing reason is this that growth ratio 14.0000
(20%) in interest income not 13.8000
Percentage

accompanied by ratio of increase in total 13.6000

loans. 13.4000
As government reduced lending rate 13.2000
during 1999 and people borrowed more 13.0000
from banks for investment that is why 12.8000
return on loans has decreased in 1999. 12.6000
1997 1998 1999

Investment in any country will be Years

encouraged by fall in the interest ratio. In
improvement in the ratio leads to improvement in very aggregate profitability measures.

Hailey College of Commerce, University of the Punjab

 106

OPERATING RATIO

Operating Costs
= × 100
Interest Earned

1997 1998 1999

Operating Costs 3,696,699 3,396,440 3,719,758
Interest Earned 5,026,784 6,059,060 7,287,432
Operating Ratio 73.5400 56.0556 51.0435

As the graph shows the operating costs

Operating Ratio
are decreasing year by year. In year
1997 it was 73.54 % of the interest 80.0000
earned and it decreased in year 1998 to 70.0000
56.06% in the next year it again 60.0000
decreased to 51.04% of the interest
Percentage

50.0000
earned. The decreasing trend of the
40.0000
operating costs shows the efficiency of
30.0000
the management to control the operating
costs. But the Operating costs itself as a 20.0000

percentage of the interest earned is very 10.0000

heavy although the management is trying -
to control these costs; these are still a 1997 1998 1999
very huge percentage of interest earned. Years

Hailey College of Commerce, University of the Punjab

 107

LIQUIDITY RATIOS

CURRENT RATIO

Current Assets
=
Current Liabilities

1997 1998 1999

Current Assets 8,147,177 9,625,733 10,658,703
Current Liabilities 49,911,493 54,266,721 67,896,718
Current Ratio 1:0.16 1:0.18 1:0.16

Current Ratio
Current ratio of the bank is going to be
decreased as in it 0.16 in 1997, increased 1.2000
somewhat to 0.18 in 1998 and decreased
Current Asset/Current

1.0000
0.16 in 1999. The fluctuation in the ratio is
normal thing by year to year, but is 0.8000
Liabilities

alarming because, it is less than one. It is 0.6000

recommended that the current ratio
0.4000
should be at least 1 : 1, where it not so. It
means the Bank is not in a position to its 0.2000
current liabilities fully. It should be
-
increased. 1997 1998 1999
Years

Hailey College of Commerce, University of the Punjab

 108

LOAN TO DEPOSITS RATIO

Total Loans
= × 100
Total Deposits

1997 1998 1999

Total Loans 36,231,357 42,719,179 55,263,762
Total Deposits 63,429,709 76,541,153 93,107,291
Loan to Deposit Ratio 57.12% 55.81% 59.35%

Loan to Deposit Ratio

This ratio shows a relationship between
loans and advances and reveals how 60.0000
much productively the deposits are used.
Analysis shows an increase in loan to 59.0000
deposit ratio, this is because of Govt. has 58.0000
Percentage

decreased lending rate that is why

57.0000
borrowing is more in 1999 as compared
to in 1998 on the other hand bank’s 56.0000
deposits are also increasing sharply if 55.0000
deposits increase by higher rate than an
increase in loan then bank has to face 54.0000
difficulty to pay its borrowing cost to the 1997 1998 1999
lender. Years

Hailey College of Commerce, University of the Punjab

 109

LOAN TO ASSETS RATIO

Total Loans
= × 100
Total Assets

1997 1998 1999

Total Loans 36,231,357 42,719,179 55,263,762
Total Assets 72,403,650 89,358,167 106,926,331
Loan to Assets Ratio 50.0408 47.8067 51.6840

Total assets of the bank increased from

Loan to Assets Ratio
Rs.89 (billion) to Rs.107 (billion) in 1999
(72 billion to 89 billion in year 1998) and 52.0000
advances/loans net of provision have
51.0000
increased from Rs.43 (billion) in 1998 to
Rs.55 (billion) in 1999. We have 22% 50.0000
Percentage

increase in assets and 28% increase in 49.0000

total assets is lesser than the increase in 48.0000
total advances which has resulted in an
47.0000
increase in loan to assets ratio from
46.0000
47.80% in 1998 to 51.68% in 1999.
45.0000
1997 1998 1999
Years

Hailey College of Commerce, University of the Punjab

 110

LONG TERM SOLVENCY & CAPITAL RATIOS

EQUITY CAPITAL TO ASSETS RATIO

Equity Capital
= × 100
Total Assets

1997 1998 1999

Equity Capital 1,063,156 1,063,156 1,063,156
Total Assets 72,403,650 89,358,167 106,926,331
Equity Capital to Assets Ratio 1.47% 1.19% 0.99%

In current year bank’s assets have been

Equity Capital to Assets
increased from Rs.89 billion to Rs.107
billion there by increase @ 20.22% over 1.6000
the last year (year 1998: 23.42% 1.4000
increase). On the other hand bank’s
1.2000
equity has not increased and remained
Percentage

1.0000
unchanged during the year 1999, so this
0.8000
is the reason that ratio equity to assets
0.6000
has decreased from 1.19% in 1998 to
0.994% in 1999. Denominator total assets 0.4000

have increased substantially during the 0.2000

year 1999 but no increase in equity -
capital resulting in decreasing ratio. 1997 1998 1999
Years

Hailey College of Commerce, University of the Punjab

 111

PROPRIETARY RATIO

Shareholders’ Funds
= × 100
Total Assets

1997 1998 1999

Shareholders’ Funds 1,515,418 3,001,906 3,012,450
Total Assets 72,403,650 89,358,167 106,926,331
Proprietary Ratio 2.09% 3.36% 2.82%

This ratio explains that participation in the

Proprietry Ratio
assets by the shareholders funds is
limited by outsiders fund but when we 4.0000
take year under review (1999) we see 3.5000
ratio has further decreased in 1999 as
3.0000
compared to the year 1998 that was
Percentage

2.5000
increased in year 1998. Reason behind
2.0000
this is that increase in assets in financed
by outsider’s fund rather than the fund 1.5000

provided by the shareholders because 1.0000

there is lesser increase in shareholders 0.5000

fund as compared to increase in total -
assets. 1997 1998 1999
Years

Hailey College of Commerce, University of the Punjab

 112

DEBT EQUITY RATIO

Long term Debt

= × 100
Shareholders’ Equity

1997 1998 1999

Long Term Debt 70,888,232 86,356,261 103,913,881
Shareholders’ Equity 1,515,418 3,001,906 3,012,450
Debt Equity Ratio 97.9:2.09 96.64:3.36 97.18:2082

This ratio depicts the relation between

Debt Equity Ratio
equity and debt financing. This current
year ratio shows an increase in ratio from 120.0000
28.76times to 34.49 times. The ultimate
increase in this ratio has decreased the 100.0000
ling term solvency of the bank. Because 80.0000
Percentage

lesser is the equity financing lesser will be

60.0000
the soundness of the bank.
40.0000
The reason behind this increase is an
20.0000
increase in external borrowings although
there is an increase in internal debt but -
rate of increase in external borrowing. 1997 1998 1999
Years

Hailey College of Commerce, University of the Punjab

 113

Recommendations
Allied Bank of Pakistan Limited is a well known and successful financial institution in the
banking sector, it is said, nothing is perfect in the world, and there is always space for
deficiencies. I would like to suggest some recommendations for the deficiencies which I
have found during my internship. I am humbly committed that these recommendations
are not result of financial analysis of the bank because recent accounts were not
available to me.
In order to complete with the other banks ATM services should be expanded
throughout the country.
All branches should be linked through network that can better help to meet the
daily transactions. In this regard Internet, E-mail and Fax Services should be
provided at least in the main branches of each region.
Some of the schemes are not profit making where as the bank is an institution that
earn earns from them, so those unprofitable schemes should be finished as
Karsaaz Scheme.
Separate counters must be set up to give the facility of bills collection of all utilities
like WAPDA, SUI GAS, and TELEPHONE.
There should be separate cashiers for the Receipts & Payments in the each
branch office.
Door to door marketing in this regard especially media and electronic marketing
should be promoted in order to acquire handsome share of banking sector.
Bank branches must be beautified internally and externally by providing
appropriate interior decoration.
As we know that only 15% of the people have their bank accounts, so it is the
need of the time to open the branches in rural areas as well.
The bank should acquire the services of the highly qualified people accompanied
by lucrative incentives to promote its status as desirable in the next millennium.
In order to market its products as Allied Tahaffuz Deposit Scheme, it should
accentuate to give advertisements on both print and electronic media.
The bank should develop healthy relationships with the renowned banks of the
work in order to expand its operations globally.
The individual efficiency of worthy employees should be rewarded in the form of
proper increments and promotion in grades.

Hailey College of Commerce, University of the Punjab