2142 4203 1 SM

Imperial Journal of Interdisciplinary Research (IJIR)
Vol-2, Issue-9, 2016

ISSN: 2454-1362, http://www.onlinejournal.in
A Comparative Study of Financial Performance

Stability of Public and Private Commercial Banks
and Their Subsidiary Companies in Pakistan
Kamran Raiysat
Preston University Islamabad, Pakistan
Abstract: Banks have been playing important role in
the financial system of Pakistan. State banks of
Pakistan is controlling and monitoring the 46 banks
working in the Pakistan. Out of these 46 banks, only
21 commercial banks i.e., 5 public sector commercial
banks and 16 private commercial banks have been
selected for the study. Four null and alternative
hypotheses have been developed to check the
profitability/efficiency, liquidity, assets quality and
leverage. Different ratios of profitability/efficiency,
liquidity, assets quality and leverage have been used
to analyze the performance and stability over a
period of five years and banks are ranked 1 or 2,
accordingly to their performance stability in each
group of ratio to find the overall performance of the
banks in each group and to test the hypothesis. All
the null hypothesis have been rejected and alternate
hypotheses have been accepted which shows that the
private banks are more stable in terms of
efficiency/profitability, liquidity, assets quality and
leverage.
Islamic banks, microfinance banks and specialized

banks.
KEYWORDS: PUBLIC COMMERCIAL BANKS;

PRIVATE COMMERCIAL BANKS; FINANCIAL
PERFORMANCE STABILITY;
[2] Faisal, Tariq and Jan (2015) analyzed and

compare the financial performance of the Muslim
Commercial Bank Ltd., and National Bank of
Pakistan by applying common size and ratio analysis
during the year 2005 2006. Both the banks have
shown improvement in the financial performance but
they need to work on the current ratio, return on
equity and operating profit.
1. Introduction
1.1 Banking in Pakistan
Banks have been playing a vital role in the economy
of any country because they are considered backbone
of the economic system. Likewise banks are playing
an important role in the economy of Pakistan. The
Banking started in Pakistan with its independence in
1947 with five commercial Banks. The State Bank of
Pakistan was also established to control and monitor
the banking system in Pakistan and it has been trying
with the help of Security and Exchange Commission
to improve the banking industry in Pakistan. In 1974
the Government of Pakistan took a decision to
nationalize all the institutions. This decision badly
effect the performance and growth of the banking in
Pakistan but with the privatization in 1992and
introduction of foreign banks in Pakistan, the
industry started growing and now it is divided into
Private and public commercial banks, foreign banks,
1.2 Banks Operating in Pakistan

[1] According to the State Bank of Pakistan, there are
total 46 banks working in the Pakistan as public
commercial banks, private commercial Banks,
Islamic banks, foreign banks, microfinance banks and
specialized banks.
1.3 Research Problem and Objective:

Commercial banks play an important role in the
economy of any country. It is therefore important to
monitor their performance over the period. In this
research, I will try to find the performance stability of
the commercial banks with respect to their sector i.e.,
public or private in terms of efficiency/profitability,
liquidity, assets quality and leverage.
2. Literature Review
[3] In 2015 Helhel compared the financial

performance of the foreign and domestic banks
between 2009 and 2013 and their performance before
and after Jan 01, 2012 in Georgia. There have been
nine foreign banks and six domestic banks used for
Profitability Ratio analysis purpose. There wasnt
any significance difference in ROA, ROE, NIM and
PEM (Profit Expense Margin) between the foreign
and domestic banks but for the overall banks there
was significant difference in ROA, ROE and NIM
except PEM. Similarly there have been found
significant difference in terms of ROA and NIM and
not in terms of ROE and PEM for Pre and Post
January 01, 2012 analysis.
[4] Ibrahim (2015) conducted a comparative study of
financial performance of conventional and Islamic
Banking in United Arab Emirates. He used data of
Page 1608

Dubai Islamic Bank and Bank of Sharjah. During this
study, different financial ratios were used to compare
the financial performance. Descriptive statistics was
used to rank the performance and overall
performance stability. The findings showed that the
Bank of Sharjah was having overall high degree of
liquidity, profitability, management capacity and
capital structure while Dubai Islamic Bank was better
in Share performance and overall stability.
[5] Kousar and Irum (2012) compare the financial
performance of the conventional, mixed and pure
Islamic Banks in Pakistan. They used word mixed for
those conventional banks that have also Islamic
branches. CAMEL model ratios are analyzed using
ANOVA test to investigate any significant difference
with the help of SPSS. Islamic Banks have adequate
capital and good assets quality than the conventional
banks and Islamic branches of conventional banks.
Moreover Islamic banks have good management
competencies than the conventional banks. The
earnings of the Islamic branches of the conventional
banks is more than the full fledge conventional banks
and Islamic banks.
[6] In 2012 Shah, Naseem, Gul, Nisar, Naqvi,
Hussain and Aisha compare the financial
performance of Public and Private Banks in Pakistan.
They analyze the performance of public sector banks
(four banks) and private sector banks (twenty five
banks) using banks size and four types of ratios i.e.,
efficiency/profitability ratios, liquidity ratios,
leverage ratios and assets
quality
ratios during a period of 2007 - 2011. They found
that that public sector banks are better in terms of
investment to total assets, total liabilities to total
assets, advances to total assets, net interest margin
ratio, spread ratio, interest expenses to total income
and capital ratio while private banks are ahead in
terms of Return on Equity ratio return on assets,
break-up value per share, cash and cash equivalent
deposit to total assets, NPLS to gross advances and
NPLS to equity ratio.
[7] Velnampy and Anojan (2014) compare the
financial performance of the state and private sector
banks during war and post war scenarios of Sri
Lanka. A comparative study is done for a period of
six years i.e., 2007 2012 using different ratios,
descriptive and independent sample t test analysis.
The findings indicated that the private sector banks
performance was better than the state owned
commercial banks during and after war scenarios.
[8] In 2015 Waleed, Shah and Mughal in their study
Comparison of Private and Public Sector Banks
Performance use bank size and financial ratios such
as liquidity ratios and profitability ratios during a
period of 2011 2014 to compare the performance.
According to their study, debt ratio, debt to equity
ratio, return on equity and earnings per share of the
private banks is higher than the public sector banks

while only return on assets is high of public sector
banks than private banks.
[9] Habib (2015) in his study A Comparison of
Financial Performance of Banking Industry in
Pakistan evaluated the financial performance of the
Banking industry in Pakistan during a period of 2009
2013. He chose this period to evaluate the
performance after end of military regime and to focus
on how banks are using their total assets and
operational assets for growth and returns, growth in
shareholders equity and rate of return by each sector
and overall growth in fixed assets and equity in entire
banking industry. On the basis of this research,
private banks are the top performers followed by
specialized banks, public banks and foreign banks in
a sequence.
[10] Moin (2013) examined the financial
performance of first Islamic bank i.e., Meezan Bank
ltd., in comparison with other 5 conventional banks.
Total 12 financial ratios have been used in the study
to find the profitability, liquidity, risk and solvency
and efficiency for a period of 2003 2007. The study
found that Meezan Bank Ltd. is less profitable, more
solvent and less efficient as compared to the average
of other five conventional banks but there wasnt any
significant difference in the liquidity position.
[11] Alam, Akram and Raza in their study A
Financial Performance Comparison of Public VS
Private Banks: The Case of Commercial Banking
Sector of Pakistan compare the financial
performance using financial ratios and bank size for a
period of 2006 2009. For bank size private banks
are at first ranking but for ratios the ranking of the
banks differ as the ratio changes.
3. Methodology
3.1 Study Sample
[1] There are 46 banks categorized as public
commercial banks, private commercial Banks,
Islamic banks, foreign banks, microfinance banks and
specialized banks. Out of these 46 banks, only 21
banks i.e.,5 public sector banks and 16 private sector
banks are selected as study sample.
3.2 Hypothesis
In order to test our findings, the following null and
alternate hypotheses are being developed:
H0: Public Sector Banks and their subsidiary

companies are more stable than private sector
Banks in terms of Profitability/Efficiency
HA: Public Sector Banks and their subsidiary
companies are not more stable than private
sector
Banks
in
terms
of
Profitability/Efficiency
Page 1609


Banks in terms of Liquidity
sector Banks in terms of Liquidity
H0: Public Sector Banks are and their
subsidiary companies more stable than private
sector Banks in terms of Assets Quality
sector Banks in terms of Assets Quality
Banks in terms of Leverage
sector Banks in terms of Leverage
3.3 Data Collection

There have been one hundred and five consolidated
annual audited accounts of the 21 commercial banks
and their subsidiary companies with few exceptions
of banks without subsidiary companies and without
unaudited consolidated accounts. All the audited
accounts have been downloaded from the websites of
the respective banks and state bank of Pakistan.
3.4 Analysis Tools

[14] For Analysis purpose, different rations have
been used. The following ratios have been used in
order to find the performance of the banks over a five
years time:
Profitability / Efficiency Ratios
1.
2.
3.
4.
5.
Spread Ratio
Return On Equity
Return on Assets
Non Mark-up Income to Total Income
Earnings per Share
Liquidity Ratios
1.
2.
3.
4.
5.
Cash and Cash Equivalent to Total Assets

Investment to Total Assets
Deposits To Total Assets
Total Liabilities to Total Assets
Advances to Deposits
Assets Quality Ratios

4.
4.
4.
4.
Non-Performing Loans to Gross Advances

Provision Against NPLs to Gross Advances
NPLs to Total Equity
Provision Against NPLs to NPLs
Capital /Leverage Ratios

1.
2.
Capital Ratio
Total Deposit to Total Equity Ratio
In order to analyze the stability of the performance,

MS Excel and SPSS are being used to find the mean,
Standard Deviation and coefficient of variation over
the five years time and then the banks are ranked
according to their performance and stability in each
group for hypothesis test.
4. Analysis of the Financial Performance

In order to analyze the performance of the banks and
their subsidiary companies, the table 4.0.1(Annexure)
is used to calculate the ratios over a period of five
years.
4.1 Efficiency/Profitability Ratio

According to the readyratios.com Profitability ratios
are used to measure the ability of a company to
generate earnings relative to sales, assets and equity
whereas Investopedia.com states that efficiency ratios
are measure of a companys ability to use its assets
and manage its liabilities effectively. It also measure
the ability of a company to generate revenue using its
assets and the ability how effectively it is managing
its assets [12][13].
4.1.1 Spread Ratio (D3/D1)
Spread Ratio is used to calculate the Rate of Net
interest Income generated by divided the Net Markup with the Total Mark-up Income. The higher the
ratio, the better the performance. Table 4.1.1 and
Figure 4.1.1.2 clearly shows that the private banks
are performing better than the public banks because
there mean spread ratio is 46.47% and co. variance
6.42% against 39.09% mean and 9.18 co-efficient of
variance of public sector banks and therefore private
banks are rank 1st in the table.
Bank/Year
Table 4.1.1
Public
Private
2011
39.93
47.37
2012
36.97
43.67
2013
35.22
44.09
2014
38.39
46.14
2015
44.63
51.07
Mean
39.09
46.47
Std. Dev.
3.58
2.99
Co. Variance
9.18
6.42
Rank
Page 1610

better than the public commercial banks (0.97%and
32.03%). Similarly, private banks are less risky than
the public banks and therefore private banks are rank
1st as compared to the public banks.
Bank/Year
Figure 4.1.1.1
Figure 4.1.1.2
4.1.2 Return on Equity (D10/A)

From an investment point of view, return on equity is
considered best measure of performance because
investor is more interested in knowing the rate of turn
on its investment [3]. It is calculated by dividing
equity capital from profit before tax. The higher the
ratio, the better the performance. According to the
table 4.1.2, ROE of the private sector commercial
banks in better (Mean 18.14%) as compared to the
public sector banks which is 12.76%. It is also clear
from the table that the Coefficient of variance of
private banks is better than the public sector banks
which mean that the private banks are less risky in
terms of return on equity.
Bank/Year
Table 4.1.2
Public
Private
2011
1.27
1.46
2012
1.05
1.37
2013
0.46
1.32
2014
0.93
1.52
2015
1.12
1.46
Mean
0.97
1.43
Std. Dev.
0.31
0.08
Co. Variance
32.03
5.56
Rank
Private
2011
14.3
17.23
2012
13.62
17.57
2013
6.2
16.63
2014
13.21
19.31
2015
16.45
19.94
Mean
12.76
18.14
Std. Dev.
3.87
1.42
Co. Variance
30.34
7.82
Rank
Figure 4.1.3.1
Figure 4.1.2.2
4.1.3 Return on Assets (D10/C)

The return on assets is measured to know how
efficiently the companys assets are being used to
generate revenue. The higher the ratio, the better the
performance. The table 4.1.3 and figure 4.1.3.4
clearly indicates the average rate of return on assets
of private commercial banks (1.43% and 5.56%) is
Figure 4.1.3.2
4.1.4 Non mark-up interest to total income

(D7/D1+D6)
This is another management ratio which is calculated
by dividing non mark-up income to total income. It
shows how management has used its resources to
earn non mark-up income. Table 4.1.4 and figure
4.1.4.1 shows that both the public sector and private
sector commercial banks have same almost same
mean ratio i.e., 27.20% and 27.52% but private sector
commercial banks are more stable in terms of
variability (Risk) with co. Variance 3.39% as
compared to public sector commercial banks 3.39%.
Private sector banks are ranked 1st in this table.
Bank/Year
Figure 4.1.2.1
Table 4.1.3
Public
Table 4.1.4
Public
Private
2011
25.02
26.63
2012
26.31
26.52
2013
28.58
28.74
2014
28.40
27.81
2015
27.89
27.88
Mean
27.20
27.52
Std. Dev.
1.51
0.93
Co. Variance
5.56
3.39
Rank
Page 1611

Generally the higher the liquidity ratio, the larger the
margin of safety to pay off the short term debt [15].
4.2.1
Figure 4.1.4.1
Figure 4.1.4.2
4.1.5 Earnings Per Share (D10/F1)

From an investment point of view, the earning per
share is also very important measure because it
calculates how much earning is generated on each
share. This is simply calculated by divided profit
after tax with outstanding shares. The higher ratio
shows better performance. Although the Table 4.1.5
shows that the public sector banks are better in
earning per share i.e., 3.80% but their EPS is not
consistent which makes them more risker than the
private commercial banks which indicates that the
public banks performance in terms of EPS has not
been consistent or stable over the five years time
with a co. variance of 34.22% against 16.41% and
therefore public sector banks are rank as second.
Bank/Year
Table 4.1.5
Public
Private
2011
4.81
2.84
2012
4.39
3.13
2013
1.66
3.22
2014
3.51
4.13
2015
4.66
4.01
Mean
3.80
3.46
Std. Dev.
1.30
0.57
Co. Variance
34.22
16.41
Rank
Cash and Cash Equivalent to Total Assets

(C1+C2)/C
Cash and cash equivalent to total assets are used to
calculate how much liquid assets a banks owns out of
its total assets in order to meet its short term
obligations. It is calculated by using dividing cash
and cash equivalent assets to total assets. Table 4.2.1
indicates that the average ratio of public banks is
10.11 % against 8.98% but it fall down dramatically
from 11.31% in 2013 to 6.72% in 2014 and then
increased to 8.63% leaving an inconsistency with a
coefficient of variance of 23.10% against 14.12%,
making public sector banks more risky than the
private sector banks and therefore ranked second.
Bank/Year
Table 4.2.1
Public
Private
2011
11.99
10.01
2012
11.89
10.10
2013
11.31
9.55
2014
6.72
7.36
2015
8.63
7.89
Mean
10.11
8.98
Std. Dev.
2.34
1.27
Co. Variance
23.10
14.12
Rank
Figure 4.2.1
Figure 4.2.1.1
4.2.2 Investment to Total Assets (C4/C)
Figure 4.1.5.1
Figure 4.1.5.2
Investment to total assets is used to measure the

amount of funds employed for investment purpose
out of total assets. Table 4.2.2 and figure 4.2.2.1
shows that the private commercial banks have high
portion of funds for investment i.e., 45.15% as
compared to public commercial banks 35.95% with
more stability i.e., 10.21% against 19.14%, so private
banks are ranked first in the table.
4.2 Liquidity Ratios

Liquidity ratios are used to measure the institutions
ability to meet its short term debt obligations.
Page 1612

Bank/Year
Table 4.2.2
Public
Private
2011
30.59
39.04
2012
31.87
43.81
2013
32.04
44.00
2014
38.21
47.52
2015
47.06
51.39
Mean
35.95
45.15
Std. Dev.
6.88
4.6
Co. Variance
19.14
10.21
Rank
Figure 4.2.2
Figure 4.2.2.1
4.2.3 Advance net of Provisions to Total Assets

(C8/C)
Advances net of provisions to total assets shows how
much of the total assets consist net advance. It is
calculated by dividing Advance net of Provision to
total assets. The given below table 4.2.3 and figure
4.2.3.1 shows that public commercial banks have
employed more in the net advance with a high
coefficient of variance whereas private commercial
banks have 37.1% share of assets with better
consistency as compared to public sector banks are
ranked first in the table.
Bank/Year
Table 4.2.3
Public
Figure 4.2.3
Figure 4.2.3.1
4.2.4 Deposits to Total Assets (B3/C)

Deposits to total assets shows how much of the assets
are financed through deposits and it is calculated by
dividing deposits to total assets. Table 4.2.4 and
figure 4.2.4.1 shows that the public commercial
banks with 79.15% are more financed through
deposits than private commercial banks with 76.68%.
Although the coefficient of variance is a little more of
private commercial banks but the ratio of private
banks have always been less than the public
commercial banks, therefore, private commercial
banks are ranked first.
Bank/Year
Table 4.2.4
Public
Private
2011
79.64
76.73
2012
76.61
75.67
2013
80.34
80.37
2014
77.88
77.74
2015
81.28
72.88
Mean
79.15
76.68
Std. Dev.
1.89
2.75
Co. Variance
2.39
3.58
Rank
Private
2011
44.18
41.04
2012
46.74
37.49
2013
44.00
37.93
2014
39.74
36.37
2015
35.68
32.67
Mean
42.07
37.10
Std. Dev.
4.36
3.02
Co. Var
10.36
8.15
Rank
Figure 4.2.4
Figure 4.2.4.1
4.2.5 Total Liabilities to Total Assets (B/C)

Total liabilities to total assets are calculated by
dividing total liabilities to total assets of the company
and it is used to measure how much of the total
liabilities are of total assets. Table 4.2.5 and figure
4.2.5.1 shows that there isnt any much difference
between the average ratios and coefficient of variance
of both the public and private banks, therefore, public
Page 1613

commercial banks with a mean ratio of 89.95% and
coefficient of variance 0.61% is ranked as first in the
table.
Bank/Year
Table 4.2.5
Public
1.46
1.37
7.8
11.84
Rank
Private
2011
89.55
90.63
2012
90.13
91.09
2013
89.65
91.07
2014
89.59
90.43
2015
90.84
91.12
Mean
89.95
90.87
Std. Dev.
0.55
0.32
Co. Variance
0.61
0.35
Rank
Figure 4.2.5
Std. Dev.
Co. Variance
Figure 4.2.5.1
4.3 Assets Quality Ratios

4.3.1 Non-Performing loan to Gross Advances
(C6/C5)
This ratio is used to measure the portion of the nonperforming loans out of gross advances and it is
calculated by dividing non-performing loans to gross
advances. High ratio shows bad performance of the
advances. Table 4.3.1 ranks private commercial
banks assets quality better than the public
commercial banks with a mean of 11.55 % against
mean of 18.68%. Although coefficient of variance is
more than the public commercial banks i.e., 11.84%
against 7.80% which is due to the fact that the ratio
has been continuously declining over the five years
period and hence private sector banks are ranked first
in the table.
Figure 4.3.1
Figure 4.3.1.1
4.3.2 Provision against NPLs to Gross Advances

(C7/C5)
Provision against NPLs to gross advances is
calculated by dividing provision with the gross
advances and it shows how much of the provision is
been made against Gross advances. It is for the
benefit of the banks that the provision should remain
minimum. Table 4.3.2 shows that the private sector
banks are better with a mean of 9.18% and 5.12%
Coefficient of variance against public sector mean
12.68% and coefficient of variance 12.68% and
10.80% respectively.
Bank/Year
Table 4.3.2
Public
Private
2011
12.29
9.83
2012
10.88
9.5
2013
12.56
8.8
2014
12.98
9.04
2015
14.68
8.74
Mean
12.68
9.18
Std. Dev.
1.37
0.47
Co. Variance
10.80
5.12
Rank
Table 4.3.1
Bank/Year
Public
Private
2011
21.09
13.16
2012
17.23
12.78
2013
18.62
11.07
2014
17.94
10.82
2014
18.51
9.94
Mean
18.68
11.55
Figure 4.3.2
Figure 4.3.2.1
4.3.3 NPLs to Total Equity (C6/A)

Non-performing loans to total equity is also
calculated by dividing non-performing loans to total
Page 1614

equity and it is used to measure how much of equity
is there to withstand against non-performing loans.
Banks with lower ratio are considered. Table 4.3.3
shows that the mean ratio of the Public sector banks
is 118.75% as compared with the private sector banks
mean ratio of 59.97%. On the other hand private
sectors are showing more inconsistency with a
coefficient of variance 15.14 % against 4.2% but
since private sector ratio has always been far lower
over five years time, therefore, private banks are
ranked first in the table.
Bank/Year
Table 4.3.3
Public
119.66
70.61
2012
116.93
67.74
2013
126.86
57.91
2014
116.54
54.86
2015
113.79
48.75
Mean
118.75
59.97
Std. Dev.
4.99
9.08
Co. Variance
4.20
15.14
Rank
Figure 4.3.3.1
4.3.4 Provision against NPLs to NPLs (C7/C6)

This ratio is used to calculate the provision made
against the non-performing loans and it is calculated
by dividing provision against NPL to NPL. Lower
ratio is considered good. Table 4.3.4 and figure
4.3.4.1 indicate that the public sector commercial
banks are better because their average mean is
68.10% against 80.02% of private sector banks.
Although the public sector coefficient of variance is
11.95% against 7.3% but still it is ranked second in
the table.
Bank/Year
Table 4.3.4
Public
79.30
88.00
68.10
80.02
Std. Dev.
8.14
5.84
Co. Variance
11.95
7.3
Rank
Private
2011
Figure 4.3.3
2015
Mean
Private
2011
58.28
74.70
2012
63.13
74.35
2013
67.44
79.52
2014
72.36
83.50
Figure 4.3.4
Figure 4.3.4.1
4.4 Capital /Leverage Ratio

The leverage ratios measure the overall debt burden
of the company and compare it with the assets or
equity. This shows how much of the assets belong to
the shareholders and how much to the creditor. If the
ratio is high, the company is said to have high
leverage which means that majority of the assets
belong to the creditors and vice versa. It is therefore
important for the investors to know how much risky
is the capital structure of the company [16].
4.4.1 Capital/Equity Ratio (A/C)
Equity ratio is used to calculate how much assets of a
company are financed by the owners and it is
calculated by dividing total shareholders equity to
total assets [17]. According to the Table 4.4.1 and
figure 4.4.1.2, the private banks are more stable than
the public sector banks with the coefficient of
variance of 5.37% against 10.76%, hence ranked first
in the table.
Bank/Year
Table 4.4.1
Public
Private
2011
8.88
8.49
2012
7.73
7.81
2013
7.38
7.95
2014
7.03
7.89
2015
6.80
7.30
Mean
7.56
7.89
Std. Dev.
0.81
0.42
Co. Variance
10.76
5.37
Rank
Page 1615

compared to public sector banks. So the first null
hypothesis i.e., H0 is been rejected and first alternate
hypothesis i.e., HA: Public Sector Banks and their
subsidiary companies are not more stable than
private
sector
Banks
in
terms
of
Profitability/Efficiency is accepted.
Table 4.5.1
S. No
Figure 4.4.1
Figure 4.4.1.2
4.4.2 Total Deposit to Total Equity Ratio

(B3/A)(Times)
Total deposits to total assets ratio is used to assess
how many times the total deposits of a bank to its
total equity. It is calculated by dividing total deposits
to total equity. Table 4.4.2 and figure 4.4.2.2 shows
that average total deposits to the total equity is 10.56
times for public and 9.74 times for private banks
whereas coefficient of variance is 10.84% of public
and 4.31% of private commercial banks which means
the financial performance of private banks is more
stable than the public sector banks.
Bank/Year
Table 4.4.2
Public
Private
Ratio
Public
Private
Spread Ratio
Return on Equity
Return on Assets
Non Mark-up income to
total income
Earnings Per Share
Overall Ranking
4.5.2 Ranking as per Liquidity Ratios

Table 4.5.2 shows that the private sector banks are
more stable in terms of liquid position as compared to
public sector banks. So the second null hypothesis
i.e., H0 is also rejected and second alternate
private sector Banks in terms of Liquidity is accepted.
2011
8.97
9.04
2012
9.91
9.69
2013
10.88
10.11
2014
11.08
9.86
2015
11.95
9.99
Mean
10.56
9.74
Std. Dev.
1.15
0.42
Co. Variance
10.84
4.31
Rank
Table 4.5.2
S. No
1
2
Ratio
Cash and Cash Equivalent to
Total Assets
Public
Private
Investment to Total Assets

Advances Net of Provision to
Total Assets
Deposits to Total Assets

Total Liabilities to Total
Assets
Overall Ranking
4.5.3 Ranking as per Assets Quality Ratios
Figure 4.4.2
Figure 4.4.2.2
4.5 Hypothesis testing

With the help of the above mentioned ratio analysis,
we can test our null hypotheses as fellows
4.5.1 Ranking as per Efficiency/Profitability
Ratios
Table 4.5.1 clearly states that the private sector banks
are more stable in terms of efficiency/profitability as
Table 4.5.3 also shows that the private sector banks

are more stable in terms of assets quality as compared
to public sector banks. So the third null hypothesis
(H0) is rejected and third alternate hypothesis i.e., HA:
Public Sector Banks and their subsidiary companies
are not more stable than private sector Banks in
terms of assets quality is accepted.
Table 4.5.3
S.
No
1
2
Ratio
Non-Performing loan to Gross
Advances(C6/C5)
Provision against NPLs to Gross
Advances(C7/C5)
Pub
lic
Priv
ate
Page 1616

3
4
NPLs to Total Equity(C6/A)

Provision Against NPLs to NPLs
(C7/C6)
Overall Ranking
4.5.4 Ranking as per Leverage Ratios

Table 4.5.4 again proves that the private sector banks
are more stable in terms of leverage ratio as
compared to public sector banks. So the fourth null
hypothesis i.e., H0 is also rejected and fourth alternate
private sector Banks in terms of Leverage is
accepted.
Table 4.5.4
S.
No
1
2
Ratio
Publi
c
Privat
e
Capital Ratio
Total Deposits to Total Equity
Ratio
Overall Ranking
5. Conclusion
In order to draw conclusion from the above analysis,
we can say that banks have been playing important
role in the economy of Pakistan and their
performance has been fluctuating over the period of
time but private commercial banks performance is
observed more stable in terms of variability as
compared to the public sector banks because all the
four null hypothesis developed which states that the
public sector banks and their subsidiary companies
are more stable as compared to the private sector
banks in terms of efficiency/profitability, liquidity,
assets quality and leverage are been rejected and their
respective alternate hypothesis are accepted. So the
private sector banks are clearly showing that their
performance is more stable than the public sector
banks.
6. References
[1]
State
Bank
of
Pakistan,
Addresses
of
Banks/Development Institutions being regulated by State
Retrieved
from
Bank
of
Pakistan
(n.d).
http://www.sbp.org.pk/f_links/index.asp.
[2] Faisal, Tariq, M., Jan, F., A. Financial Performance of
Banks in Pakistan: A Comparative Analysis of Public and
Private Sectors, VFAST Transactions on Education and
Social Sciences Vol. 6 No. 2 pp. 57-71 2015.
[3] Helhel, Y. Comparative Analysis of the Financial
Performance of foreign and Domestic Banks in Georgia,
International Journal of Finance and Accounting Vol. 4

No. 1, pp. 52-59 2015.
[4] Ibrahim, M. A Comparative Study of Financial
Performance between Conventional and Islamic Banking in
United Arab Emirates, International Journal of Economics
and Financial Issues Vol. 5 No. 4 2015, pp. 868-874.
[5] Kousar, R., and Saba, I. Gauging the Financial
Performance of Banking Sector Using CAMEL Model:
Comparison of Conventional, Mixed and Pure Islamic
Banks in Pakistan, International Research Journal of
Finance and Economics Vol. 1 No. 82 2012, pp. 67-88.
[6] Shah, S., Q., Naseem, I., Gul, S., Nisar, S., Naqvi, T.,
Z., Hussain, M., Aisha. Financial Performance of Public
and Private Banks in Pakistan: A Comparative Analysis,
Science Series Data Report Vol. 4 No. 9 2012, pp. 112-130.
[7] Velnamph, T., Anojan, V. Financial Performance of
State and Private Commercial Banks: A Comparative Study
of During War and Post War Scenarios in Sri Lanka,
European Journal of Business and Innovation Research
Vol. 2 No. 1 2014, pp. 93-105.
[8] Waleed, A., Shah, M.S., and Mughal, M.K.
Comparison of Private and Public Banks Performance,
IOSR Journal of Business and Management Vol. 17 No. 7
2015, pp. 32-38.
[9] Habib, A. A comparison of Financial Performance of
banking Industry in Pakistan, Journal of Poverty,
Investment and Development Vol. 13 2015, pp. 1-11.
[10] Moin, M.,S. Financial Performance of Islamic
Banking and Conventional Banking in Pakistan: A
Comparative Study, International Journal of Innovation
and Applied Finance Vol. 1 No. 1 2013, pp. 1-22.
[11] Alam, H., M., Raza, A., Akram, M. A Financial
Performance Comparison of Public Vs Private Banks: The
Case of Commercial Banking Sector of Pakistan,
International Journal of Business and Social Sciences Vol.
2 No. 11 2011, pp. 56-64.
12] Profitability Ratios (n.d). Retrieved
http://www.readyratios.com/reference/profitability/
from
[13] N. Steven (April 7, 2015). What Do Efficiency Ratios

Measure?
Retrieved
from
http://www.investopedia.com/ask/answers/040715/whatdo-efficiency-ratios-measure.asp
[14] Banking Account and Ratio Service. Moodys
Investors Service: February 2011. Retrieved from
https://www.moodys.com/sites/products/ProductAttachmen
ts/Banking%20Account%20and%20Ratio%20Definitions.p
df
[15]
Liquidity
Ratios(n.d).
Retrieved
from
http://www.investopedia.com/terms/l/liquidityratios.asp
[16] Financial Leverage Ratios (n.d), Retrieved from
http://www.myaccountingcourse.com/financialratios/financial-leverage-ratios
Page 1617

Table Used for Ratio Analysis
Table 4.0.1
('000,000')
2011
Year /Particulars
2012
2013
2014
2015
Public
Private
Public
Private
Public
Private
Public
Private
Public
Private
Total Equity (A1

- A5)
139,138
496,145
142,595
549,195
142,425
605,191
157,504
685,773
169,285
751,208
Share Capital
41,414
300,904
44,284
308,827
53,320
316,642
59,323
326,919
59,723
379,792
Discount on Issue
(62,001
)
(62,161
)
(263)
(62,161
)
(263)
(62,161
)
(263)
(105,443
)
Share
Money
17,000
17,000
12,000
7,000
9,507
7,000
9,007
147,565
33,052
168,076
37,003
185,343
37,479
196,049
50,541
218,166
Reserves
29,285
Un Appropriate
Profit
51,439
109,677
48,259
134,453
40,365
165,367
53,965
215,458
52,285
249,687
Others
24,573
51,863
39,469
77,375
57,214
74,666
75,649
147,009
58,572
162,702
Total Liabilities
(B1 - B4)
1,403,5
86
5,298,5
81
1,663,3
71
6,403,1
20
1,729,2
48
6,934,1
87
2,006,6
40
7,864,6
25
2,260,9
10
9,380,85
8
Bills Payables
10,375
65,447
17,151
84,098
16,437
100,662
13,838
106,613
11,956
119,215
Borrowing from
F.Institutions
76,091
492,251
152,938
735,596
78,027
489,964
145,723
725,152
124,745
1,461,75
0
Deposits
and
Other Accounts
1,248,1
88
4,486,2
04
1,413,8
11
5,319,0
19
1,549,7
18
6,119,1
33
1,744,2
92
6,761,5
02
2,022,8
73
7,503,27
0
Other/Misc.
Liabilities
68,932
254,679
79,471
264,408
85,067
224,428
102,788
271,358
101,337
296,623
1,567,2
97
5,846,5
89
1,845,4
35
7,029,6
91
1,928,8
88
7,614,0
44
2,239,7
94
8,697,4
06
2,488,7
67
10,294,7
68
153,974
471,118
182,782
574,068
190,785
576,974
132,242
513,087
189,293
674,908
34,010
113,931
36,706
135,986
27,361
150,259
18,339
127,300
32,921
137,736
65,733
112,477
20,184
106,710
75,925
135,543
159,308
127,372
31,407
216,871
Deposit
Total Assets (C1

- C4 + C8 - C10)
Cash and balance
with
treasury
banks
Balances
with
Other banks
Lending
to
Financial
Institutions
Investments
479,431
2,282,5
15
588,083
3,079,4
88
617,993
3,349,8
50
855,841
4,132,8
84
1,171,3
34
5,290,31
1
789,529
2,661,0
70
967,793
2,911,7
09
970,531
3,166,8
68
1,022,9
50
3,477,0
10
1,040,7
83
3,685,47
0
Gross Advances
Advances
Non
Performing/Classi
fied
166,497
350,304
166,731
372,030
180,676
350,449
183,552
376,248
192,621
366,202
Provision Against
Advances
97,030
261,688
105,265
276,596
121,849
278,664
132,821
314,182
152,740
322,269
Advances Net of
Provision(C5-7)
692,499
2,399,3
82
862,529
2,635,1
14
848,681
2,888,2
04
890,129
3,162,8
28
888,043
3,363,20
0
Fixed Assets
34,777
161,031
36,343
170,360
41,742
182,030
42,680
203,551
43,949
220,900
1
0
Other /
Assets
106,872
306,135
118,807
327,965
126,401
331,183
141,255
430,384
131,820
390,841
1
2
Misc.
Profit and Loss

Account
Page 1618

1
2
Markup/Interest
Earned
Markup/Interest
Expenses
Net
Markup/Interest
Income
129,208
545,279
140,933
575,485
139,957
562,572
165,251
668,537
168,164
719,670
77,610
286,978
88,827
324,193
90,666
314,564
101,813
360,080
93,106
352,130
51,598
258,302
52,105
251,292
49,291
248,007
63,438
308,457
75,058
367,540
7,041
38,127
10,190
27,052
19,189
16,646
11,379
12,602
16,799
25,162
44,557
220,175
41,915
224,240
30,103
231,361
52,060
295,855
58,258
342,378
22,934
76,166
29,592
101,501
31,234
105,036
35,210
124,577
48,406
152,266
38,064
165,516
44,856
179,537
48,930
191,864
56,926
220,547
59,957
243,063
Provisions
and
Write offs
Net
Markup/Interest
Income
after
Provisions
Non
Markup/Interest
Income
Non
Markup/Interest
Expenses
Administrative
Expenses
37,488
158,645
44,001
174,477
47,818
187,383
53,682
214,450
58,249
234,522
Profit/Loss
Before Tax
29,427
130,825
26,652
146,205
12,407
144,533
30,343
199,885
46,707
251,581
1
0
Profit/Loss After
Tax
19,900
85,473
19,424
96,515
8,835
100,633
20,802
132,450
27,849
149,763
Others
Cash generated
from Operating
Activities
107,777
588,605
132,675
909,203
18,189
336,926
170,371
611,178
408,807
1,419,71
2
4,141
30,090
4,428
30,883
5,332
31,229
5,932
32,106
5,972
37,394
1
F
Number
Shares
No.
of
Shares
of
Ord.
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Imperial Journal of Interdisciplinary Research (IJIR)

Vol-2, Issue-9, 2016

A Comparative Study of Financial Performance

Islamic banks, microfinance banks and specialized

KEYWORDS: PUBLIC COMMERCIAL BANKS;

[2] Faisal, Tariq and Jan (2015) analyzed and

Imperial Journal of Interdisciplinary Research (IJIR)

1.2 Banks Operating in Pakistan

1.3 Research Problem and Objective:

[3] In 2015 Helhel compared the financial

Imperial Journal of Interdisciplinary Research (IJIR)

Imperial Journal of Interdisciplinary Research (IJIR)

private banks is higher than the public sector banks

H0: Public Sector Banks and their subsidiary

Imperial Journal of Interdisciplinary Research (IJIR)

H0: Public Sector Banks and their subsidiary

3.3 Data Collection

3.4 Analysis Tools

Cash and Cash Equivalent to Total Assets

Assets Quality Ratios

Non-Performing Loans to Gross Advances

Imperial Journal of Interdisciplinary Research (IJIR)

Capital /Leverage Ratios

In order to analyze the stability of the performance,

4. Analysis of the Financial Performance

4.1 Efficiency/Profitability Ratio

Imperial Journal of Interdisciplinary Research (IJIR)

4.1.2 Return on Equity (D10/A)

4.1.3 Return on Assets (D10/C)

Imperial Journal of Interdisciplinary Research (IJIR)

4.1.4 Non mark-up interest to total income

Imperial Journal of Interdisciplinary Research (IJIR)

4.1.5 Earnings Per Share (D10/F1)

Cash and Cash Equivalent to Total Assets

4.2.2 Investment to Total Assets (C4/C)

Investment to total assets is used to measure the

4.2 Liquidity Ratios

Imperial Journal of Interdisciplinary Research (IJIR)

Imperial Journal of Interdisciplinary Research (IJIR)

4.2.3 Advance net of Provisions to Total Assets

4.2.4 Deposits to Total Assets (B3/C)

Imperial Journal of Interdisciplinary Research (IJIR)

4.2.5 Total Liabilities to Total Assets (B/C)

Imperial Journal of Interdisciplinary Research (IJIR)

4.3 Assets Quality Ratios

4.3.2 Provision against NPLs to Gross Advances

Imperial Journal of Interdisciplinary Research (IJIR)

4.3.3 NPLs to Total Equity (C6/A)

Imperial Journal of Interdisciplinary Research (IJIR)

4.3.4 Provision against NPLs to NPLs (C7/C6)

Imperial Journal of Interdisciplinary Research (IJIR)

4.4 Capital /Leverage Ratio

Imperial Journal of Interdisciplinary Research (IJIR)

4.4.2 Total Deposit to Total Equity Ratio

Earnings Per Share

4.5.2 Ranking as per Liquidity Ratios

Investment to Total Assets

Deposits to Total Assets

4.5.3 Ranking as per Assets Quality Ratios

4.5 Hypothesis testing

Imperial Journal of Interdisciplinary Research (IJIR)

Table 4.5.3 also shows that the private sector banks

Imperial Journal of Interdisciplinary Research (IJIR)