Professional Documents
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CHAHPTER NO 10
FINANCIAL ANALYSIS
10.1 Common Size and Trend Analysis:
10.1.1 Common Size And
Trend 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:
Page 66
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 other
relevant 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 information
about 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 Advances
positions, the investments and Advances to Total Assets have been calculated and
analyzed.
BALANCE SHEET
NATIONAL BANK OF PAKISTAN
Page 67
CHAPTER NO 10
Rupees in '000'
Note 2007
2006
6
7
8
9
10
11
12
TOTAL ASSETS
59,420,502
24,154,070
30,213,352
166,195,619
160,990,265
21,946,846
8,939,483
-------
55,531,453
35,878,101
21,716,802
143,524,971
140,547,374
27,489,021
8,115,131
------
2005
79,155,081
30,001,482
18,749,309
71,759,449
170,319,096
36,952,148
7,199,835
952,590
LIABILITIES
Bills payable
Borrowings from financial
institutions
Deposits and other accounts
Sub-ordinate loans
Liabilities against assets subject
to financial lease
Other liabilities
Deferred tax liabilities
14
5,496,738
15
16
17
18
13
41,117
26,080,400
595,864
TOTAL LIABILITIES
3,365,744
74,051
29,682,837
2,846,186
2,245,349
46,092
34,185,081
-----
NET ASSETS
Share capital
Reserves
Inappropriate profit
19
20
4,103,422
8,133,312
5,897,163
3,730,384
7,144,326
3,404,593
3,730,384
7,476,063
752,226
18,133,897
9,450,117
14,279,303
9,656,960
11,958,673
5,551,764
27,584,014
23,936,263
17,510,437
Page 68
CHAPTER NO 10
Table 10.1.1: Common Size, Trend Analysis and Change of Balance Sheet
Note Common Size
%
2007
2006
6
13
13
7
5.12
8.3
8
6
5
9
35.22
33.16
10
34
33
11
4.65
6.35
12
2
2
-------100
100
14
1.16
0.78
15
3.49
2.32
16
83.83
83.84
--------17
0.009
0.017
18
5.53
6.86
13
19
20
Analysis Change
Trend Analysis %
2005
2007
2006
19.0694 -19,734,579 -23,623,628
7.22772 -5,847,412 5,876,619
4.51694 11,464,043 2,967,493
17.2877 94,436,170 71,765,522
41.0319 -9,328,831 -29,771,722
8.90222 -15,005,302 -9,463,127
1.73453 1,739,648 915,296
0.22949
100
56,771,147 17,713,863
0.54093 3,251,389 1,120,395
2.76687 5,008,551 -1,452,828
84.227 45,951,422 13,248,569
----0.0111 -4,975
27,959
8.2356 -8,104,681 -4,502,244
2007
7.00333
-32.677
39.1243
15.7956
14.5452
-20.161
10.1582
----9.02427
63.3142
64.4068
9.01239
-----44.475
-12.136
-79.064
----8.66041 2.8392
15.2394 36.6971
9.99999 0
0.13
94.15
0.66
94.5
----95.8
46,697,570 11,288,037
0.87
0.86
0.8987
373,038
1.72
1.25
1.65
0.79
1.80107
0.18122
5,144,937
2,652,367
6,175,224
2,320,630
2
100
2.23
100
1.33749
100
3,898,353
4,105,196
10,073,577 6,425,826
13.843
73.212
26.9943
-2.1419
15.2394
2006
-29.845
19.5878
15.8272
100.008
-17.48
-25.609
12.7127
----4.26749
49.8985
-12.65
3.78945
----60.6591
-13.17
-4.4373
352.602
19.4054
73.944
36.6971
a. Assets Side:
Total Assets:
Page 69
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 of
investments.
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 to
Rs.
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 banks
are 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.
Page 70
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 is
14.5% increase in Advances.
b.
Liabilities Side:
Total Liabilities:
In year 2005 its Total Liabilities are 397,578,553 million, in 2006
amounting 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 the
Total 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 Liabilities
as 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 2007
there 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. 395,568,490
million. 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 in
2007 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
The following table shows an Income Statement of NBP their common size and
trend analysis for the year ending December 2005, 2006 and 2007.
Page 71
CHAPTER NO 10
INCOME STATEMENT
NATIONAL BANK OF PAKISTAN
For the ended December 31, 2007
Mark-up/return/interest earned
Mark-up/return/interest expensed
Rupees in '000'
Note 2007
2006
19,452,31 27,126,83
22
7
9
14,698,50
23
6,735,579 7
12,716,73 12,428,33
8
2
income
2005
31,290,584
18,877,247
12,413,337
1,684,777
1,822,154
2,926,544
459,523
21,031
-907,829
474,743
----2,619,043
104,217
162,276
2,109,678
121,752
150
2,140,627
10,097,69
5
10,318,65
4
10,272,710
3,260,863
1,126,742
3,137,007
917,020
2,886,762
610,732
710,726
108
659,247
10,609
892,631
-----
Page 72
CHAPTER NO 10
Other income
Total non mark-up/interest income
25
2,149,800
7,248,239
17,345,93
4
485,209
5,209,092
15,527,74
6
111,443
4,501,568
14,774,278
4,761,408
280,632
4,563,326
1,629,445
5,275,597
772,092
293,612
513,073
26
2,471,083
2,431,935
2,503,489
9.5
27
7,806,735
33,454
----22,894
9,137,779
3,134
----23,874
8,551,178
332,912
6,456
8,790
Current
Prior Years
Differed
-----
7,863,08
3
9,482,85
1
9,164,78
7
6,362,95
9
----474,143
-----
----318,148
-----
9,008,70
8
4,650,00
0
1,439,44
4
1,278,83
9
4,810,60
5
6,044,81
1
2,650,00
0
1,000,00
0
141,426
3,791,42
6
1,208,922
1,867,100
4,198,10
3
2,253,38
5
1,148,529
8,899,336
5,874,942
2,700,596
158,717
----3,015,629
2,453,275
-622,747
Page 73
CHAPTER NO 10
Note
Page 74
CHAPTER NO 10
100
35
65.37
10.3 9
9.1 2
18.1 2
10
-----13
52
16.76
5.79
24
3.65
9.5 0.0005
25
11.05
37.26
89.17
24.5
100
54
46
7
0
0
1
8
38
12
3
2
0
2
19
57
16.8
100
60.3288
39.671
9.35279
-2.9013
0.3891
0.00048
6.84112
32.83
9.22566
1.95181
2.85271
----0.35616
14.386
47.216
16.86
1.44
1.5
6
1.9
12.7
40.13
0.17
------
8.9
33.7
0.01
------
0.11
40.42
48.75
----2.44
-----46.3
23.9
7.4
-6.6
24.7
21.6
0.08
33.8
23.5
----1.17
-----22.3
9.8
3.7
0.52
13.98
8.3
0.02809
28.441
18.775
8.6307
0.50724
-----9.6375
-7.8403
-1.9902
3.86353
-5.967
3.6705
22
23
26
9.5
27
-28.291
-54.175
2.32055
-7.5393
2084.98
355.533
----24.1442
-2.1414
3.94822
22.8699
7.80876
-98.982
343.067
39.1459
11.7093
4.34074
-4.1049
-14.203
49.0321
----49.0322
----49.0321
75.4717
43.9444
-1004.2
26.8812
86.3021
-13.3
-22.1
0.1
-37.7
-102.3
-14.4
108084.0
-1.4
0.4
8.7
50.2
-26.1
----335.4
15.7
5.1
-13.5
171.6
3.0
8.3
----100.4
----100.4
-208.0
-260.6
-88.3
-303.1
96.2
Markup/Interest Expense:
Page 75
CHAPTER NO 10
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% and
37.26% 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.
Page 76
CHAPTER NO 10
Fig 10.1.1 Assets and Liabilities Distribution in 2007:
13%
35%
83.83%
34%
Cash
Investment
Advances
Total Libilities
Deposits
94%
22%
39%
46%
Markup/interest
Expense
Non markup/interest
income
Profit before tax
profit after tax
37%
Page 77
CHAPTER NO 10
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 operating
differences. 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 of
the 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.
8.2.1
Liquidity Ratios
Current Ratio
8.2.2
Cash Ratio
8.2.3
8.2.4
8.2.5
8.2.6
Leverage Ratios
Debt to Equity Ratio
Debt
to Total Assets
Profitability
RatiosRatio
Gross Profit Margin Ratio
Net Profit Margin Ratio
Return on Equity Ratio
Return on Assets Ratio
2005
2006
2007
0.79
0.79
0.76
0.22
0.15
0.15
48.72
20.5
5
3.42
38.73
39.55
6.60
3.93
40.70
42
6.97
4.58
10.28
41
17.03
33
17.13
34
84.22
83.84
83.83
22.76
0.96
46.17
11.97
6.56
0.27
17.9
0.94
52.48
7.29
9.41
0.52
16.10
0.94
71.24
4.90
15.22
0.89
0.084
3.08
0.071
6.04
0.050
10.23
Activity Ratios
Assets Turnover Ratio
Earning per share
Current Assets
2005
2006
2007
Page 78
CHAPTER NO 10
(Rupees in 000)
Cash and balances with Treasury
Banks
Balances with other Banks
Lendings to Financial Institutions
Investments (excluding long
term)
Market Treasury Bills
Advances (excluding long term)
TOTAL CURRENT ASSETS
CURRENT LIABILITIES
Bills Payable
Deposits and other accounts
Total Current Liabilities
79,155,081
55,531,453
59,420,502
30,001,482
18,749,309
498,158
35,878,101
21,716,802
114,174
24,154,070
30,213,352
215,437
18,940,992
128,944,699
276,289,721
77,112,249
98,750,300
289,103,07
9
90,932,174
101,424,865
306,360,400
2,245,349
349,617,068
3,365,744
362,865,63
7
366,231,38
1
5,496,738
395,568,490
351,862,417
401,065,228
Current Assets
Current Liabilities
276,289,721
0.79 times
0.79 times
0.76 times
351,862,417
Current Ratio (2006) =
289,103,079
366,231,381
306,360,400
401,065,228
Interpretation:
Page 79
CHAPTER NO 10
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 known
that 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
79,155,081
0.22 times
0.15 times
0.15 times
351,862,417
Ratio for the year 2006 =
55,531,453
366,231,381
59,420,502
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. This
trend 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
100
= 48.72%
100
= 38.73%
349,617,068
Advances Deposit Ratio (2006) =
140,547,374
Page 80
CHAPTER NO 10
362,865,637
Advances Deposit Ratio (2007) =
160,990,265
100
= 40.70%
395,568,490
Interpretation:
The Advances deposit ratio of the Bank has declined to 40.70% in 2007 as
compared 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 information
about 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
143,524,971
X 100 = 39.55%
362,865,637
Investment Deposit Ratio (2007)
166,195,619
X 100 = 42.0%
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
Page 81
CHAPTER NO 10
Capital to Deposit Ratio (2005) =
17,510,437
X 100
5%
X 100
6.60%
X 100
6.97%
349,617,068
Capital to Deposit Ratio (2006) =
23,936,263
362,865,637
27,584,014
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 to
deposit.
SBP Prudential Regulations that Capital should be 8% of Total Deposits and NBP
is not fulfilling the Prudential Regulation of SBP.
Capital
100
100
100
= 3.93%
100
= 4.58%
Deposit
Capital to deposit ratio (2005) =
11,958,673
= 3.42%
349,617,068
Capital to deposit ratio (2006) =
14,279,303
362,865,637
18,133,897
395,568,490
Interpretation:
Page 82
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
100
100
= 10.28%
100
= 17.03%
100
= 17.13%
Advances
Capital to Advances ratio (2005) =
17,510,437
170,319,096
23,936,263
140,547,374
27,584,014
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% which
increased 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
100
Total Assets
Advances to Total Assets Ratio (2005) =
170,319,096
X 100 = 41%
415,088,990
Advances to Total Assets Ratio (2006) =
140,547,374
X 100 = 33%
Page 83
CHAPTER NO 10
432,802,853
Advances to Total Assets Ratio (2007) =
160,990,265
X 100 = 34%
471,860,137
Interpretation:
Advances was the 41% of the Total Assets in 2005 and fall to 33% in
2006 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%
362,865,637
100 = 83.84%
432,802,853
395,568,490
X 100 = 83.83%
471,860,137
Interpretation:
In year 2005 its total deposits are Rs.349, 617 million, in 2006 amounting
to 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
X 100
Total Assets
Investment to Total Assets Ratio (2005) =
71,759,449
X 100= 17.28%
Page 84
CHAPTER NO 10
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-Equity Ratio
Total Debt
Stock Holders Equity
397,578,553
22.76
17.9
17,510,437
Debt-Equity Ratio (2006)
408,866,590
23,936,263
444,276,123 =
16.10
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 decrease
in 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:
Page 85
CHAPTER NO 10
Debt to assets ratio
Total Debt
Total Assets
397,578,553 =
0.96
415,088,990
Debt to Assets Ratio (2006) =
408,866,590 =
0.94
432,802,853
Debt to Assets Ratio (2007) =
444,276,123 =
0.94
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 Assets
are increasing at the same rate.
Gross Profit
X 100
Total Revenue
Mark-Up/Return/Interest Income
2007
2006
2005
Rupees in 000
19,452,317 27,126,839 31,290,584
3,260,863 3,137,007 2,886,762
659,247
892,631
Income
Page 86
CHAPTER NO 10
16,192,730
X 100
= 46.17%
X 100
= 52.48%
X 100
= 71.24%
35,069,977
Gross Profit Margin (2006) =
16,224,586
30,923,093
16,688,327
23,423,906
Interpretation:
According to this ratio we interpret that the gross profit margin has
increased 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 ratio
increases 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
X 100
Total Revenue
Net Profit Margin (2005)
1,148,529
100 = 11.97%
100 = 7.29%
100 = 4.90%
35,069,977
Net Profit Margin (2006)
= 2,253,385
30,923,093
= 4,198,129
23,423,906
Page 87
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 signal
towards lower total revenues of the Bank during 2007.
10.2.15
Return on Equity:
Return on Equity
X 100
Shareholders Equity
Return on Equity (2005)
1,148,529
100
6.56%
100
9.41%
100
= 15.22%
17,510,437
Return on Equity (2006)
2,253,385
23,936,263
4,198,129
27,584,014
Interpretation:
The return on equity has increased to 15.22 percent in 2007 as compared
to 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
X 100
Total Assets
Return on Assets (2005)
1,148,529
100
= 0.27%
100
= 0.52%
415,088,990
Return on Assets (2006)
2,253,385
Page 88
CHAPTER NO 10
432,802,853
Return on Assets (2007)
4,198,129
100
= 0.89%
471,860,137
Interpretation:
The return on assets has improved to 0.89 percent in 2007 as compared to
2006 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
Total Revenue
Total Assets
35,069,977
= 0.084 times
415,088,990
Assets Turnover Ratio (2006) =
30,923,093
0.071 times
432,802,853
23,423,906
= 0.050 times
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
1,148,529,000
Page 89
CHAPTER NO 10
373,038,350
Earning per share ratio (2006) =
2,253,385,000
373,038,350
Earning per share ratio (2007) =
4,198,103,000
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.
0.25
0.2
2005
0.15
2006
0.1
2007
0.05
0
Page 90
CHAPTER NO 10
0.25
0.2
2005
0.15
2006
0.1
2007
0.05
0
50
40
2005
30
2006
20
2007
10
0
1
Page 91
CHAPTER NO 10
Graph 10.2.4: Investment-Deposit Ratio 2005-2006-2007:
50
40
2005
30
2006
20
2007
10
0
1
8
6
2005
2006
2007
2
0
1
5
4
2005
2006
2007
1
0
1
Page 92
CHAPTER NO 10
Graph 10.2.7: Capital to Advances Ratio 2005-2006-2007:
20
15
2005
10
2006
2007
5
0
1
50
40
2005
30
2006
20
2007
10
0
1
84.3
84.2
84.1
2005
84
2006
83.9
2007
83.8
83.7
83.6
1
Page 93
CHAPTER NO 10
Graph 10.2.10: Investment to Total Assets Ratio 2005-2006-2007:
40
30
2005
20
2006
2007
10
0
1
25
20
2005
15
2006
10
2007
5
0
1
0.96
0.955
0.95
2005
0.945
2006
0.94
2007
0.935
0.93
1
Page 94
CHAPTER NO 10
Graph 10.2.13: Gross Profit Margin 2005-2006-2007:
80
70
60
50
40
2005
30
2007
2006
20
10
0
1
12
10
8
2005
2006
2007
2
0
1
20
15
2005
10
2006
2007
5
0
1
Page 95
CHAPTER NO 10
Graph 10.2.16: Return on Assets Ratio 2005-2006-2007:
1
0.8
2005
0.6
2006
0.4
2007
0.2
0
1
0.09
0.08
0.07
0.06
2005
0.05
0.04
2006
2007
0.03
0.02
0.01
0
1
Page 96
CHAPTER NO 10
12
10
8
2005
2006
2007
4
2
0
1
Page 97