Analysis Ratios

8/8/2019 Analysis Ratios

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Meezan Bank & Standard chartered Bank

Final Project report (FM)

Submited To:

Sir Muhammad Burhan

Gurop Members:

Ihtsham Ahmad CheemaMuhammad Ali

Muhammad Azhar

Muhammad Usman

Analysis of Profitability Ratios:

Return on Assets

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The return on assets (ROA) for Islamic banks remains high than conventional banks from 2002

to 2009, except in 2003 where conventional banks get some edge on Islamic banks.. ROA was

1.34% in 2002 which increased to 2.05% in 2003. But in 2004 the value again decreased to

1.20% while increased to 1.74% in 2005. In 2006 the ROA again slightly decreased to 1.556%.

In 2007 the value age decreased to 1.519%. In 2008 the value decreased highly to

0.466% and got slightly high in 2009 to 0.680%. On the other hand, ROA for Islamic

banks shows a upward trend from 2002-2009. Only in 2003 it shows a slight decrease to

1.786% from its previous value of 2.10%. but after that it went highly upward and it reaches to

the maximum value of 4.777% in 2009.

CONVENTIONAL BANK

BANKS

YEAR 2002 2003 2004 2005 2006 2007 2008 2009MEAN 1.345 2.053 1.199 1.740 1.556 1.519 0.466 0.680

S.D. 0.586 1.070 0.734 1.256 1.514 1.323 1.853 1.248

Min 0.609 0.878 0.197 0.613 0.229 0.048 -2.321 -1.047

Max 2.227 3.543 2.193 3.793 4.163 3.680 2.810 2.360

ISLAMIC BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN 2.059 1.786 2.607 2.996 3.151 2.336 1.135 4.777S.D. 1.545 1.101 1.586 1.909 1.931 1.630 2.334 7.923

Min 0.086 0.289 0.777 0.881 0.991 0.568 -2.808 0.770

Max 3.881 3.325 4.616 5.186 5.299 5.010 3.310 18.942



Return on Equity:

The Return on Equity (ROE) for Islamic banks is relative low than conventional banks 2002 to

2009. The ROE for conventional banks shows increasing trend from 2002 to 2007 but decreased

in 2008 and 2009. On the other hand the ROE for Islamic banks gradually increased from

20.05% in 2003 to 38% in 2007 but in the very next year it down to 22% and also decreased in

2009. As the conventional banks are getting high Return on Equity value so they have high

Return on Assets, or due to debt (leverage).

CONVENTIONAL BANK

BANKS

YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN27.30

828.05

830.47

335.38

528.68

343.74

629.87

232.83

6

S.D. 8.81010.58

517.90

232.32

422.64

221.86

529.52

425.80

4

Min16.35

218.31

713.94

712.77

612.45

113.93

3 -2.67510.78

0

Max37.88

942.13

360.54

892.47

368.08

373.83

074.88

074.68

0

ISLAMIC BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN21.33

719.82

022.22

923.39

929.64

938.23

922.32

225.07

2

S.D. 16.445 11.994 9.983 17.421 23.248 36.331 45.821 25.126Min 1.925 5.489 6.263 8.048 10.73

59.963

-44.61

8 1.090Max 44.20

434.07

932.58

052.86

969.46

894.00

467.44

857.15

4



PROFIT TO EXPENCE RATIO:

The profit to Expense Ratio for the conventional banks shows an increasing trend as itincreased in 2002 and 2003 with the value of 46% to 52.93% but it decreased in 2004, 2005 and

2006. But they get high value of the 119.94 % in 2007 and slightly decreased in the coming

years.

CONVENTIONAL BANK

BANKS

YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN46.34

352.93

648.40

945.64

440.87

0119.0

4694.80

5 71.684

S.D.20.44

833.26

418.84

917.06

116.70

3133.9

58122.0

50132.0

14

Min21.12

122.78

224.95

726.23

421.18

034.05

823.94

1-

37.905

Max73.98

0101.1

1768.76

969.08

164.71

7355.4

10312.4

40301.1

10

ISLAMIC BANK

BANKS

YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN49.22

166.15

863.55

287.16

483.96

790.40

2 3.140 44.028

S.D.55.71

717.29

831.20

042.48

640.80

039.85

7144.2

53 26.814



Min

-39.80

644.08

526.64

744.63

725.41

245.45

5

-250.000 3.990

Max112.8

9686.91

9101.9

48149.9

32130.1

98139.0

7398.80

3 77.015

Liquidity Ratios:

Cash & Portfolio Investment to Deposits

The cash & portfolio investment to deposits ratio for the Islamic banks is high than conventional

banks during 2002-2009. They show decreasing trend from 2002 to 2006 with values of

141.311% to 128.76% but remains high than the conventional banks. For conventional banks this

ratio remained low during that period but rapidly increased during 2005 form103.266 to 130.432

but then gradually decreased to 69% till 2009.

CONVENTIONAL BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN115.8

62114.9

02103.2

66130.4

23103.5

9376.59

877.39

3 68.961

S.D.46.30

944.73

257.79

154.11

836.88

661.23

071.32

5 57.542



Min65.54

759.18

245.01

853.51

145.73

910.60

0 2.200 5.160

Max181.5

72182.3

37197.2

91204.2

49141.3

05169.2

49170.6

55160.6

71

ISLAMIC BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN

141.31

1

148.6

58

127.5

60

128.7

69

130.3

60

92.97

6

82.96

9 85.227

S.D. 37.29836.62

7 2.770 4.99512.71

074.98

562.79

3 61.852

Min112.49

4120.3

21123.6

76121.2

92116.0

36 1.250 1.250 0.198

Max203.20

3211.0

03131.4

66133.8

74149.8

27181.9

29147.6

98145.9

58

Credit To Deposit Ratio:

The Credit To Deposit Ratio (CTDR) of Islamic bank were almost same in first two years that is

2002 with 69.2205% and in 2003 with 70.5693 but in 2004 it decreased to 56%. In 2005 and

2006 the percentage remain same so conventional bank decreased up 82% from 65 %. And

Islamic banks then show upward trend relatively to the conventional banks.



CONVENTIONAL BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN67.46

5 71.15555.60

0 82.37858.50

059.56

161.80

1 43.237

S.D.29.49

2 26.98025.87

0 60.67431.86

883.78

488.61

3 53.696

Min19.01

8 23.46315.30

9 8.322 9.993 0.188 0.152 0.162

Max88.52

3 86.73181.68

2170.16

691.61

3201.0

44210.8

52129.0

53

ISLAMIC BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN69.22

1 70.56958.61

4 58.65560.10

175.87

369.31

6 71.979

SD58.01

1 50.57233.57

1 29.85331.14

675.97

263.90

4 64.716

Min 5.173 4.782 8.043 12.08212.11

612.37

612.15

0 11.800

Max163.8

51138.73

393.75

5 89.20690.84

2183.4

49146.0

66146.1

55

Risk and Solvency ratios:



Shareholder’s Equity to Credit Ratio:

Islamic Banks Shareholder’s Equity Credit Ratio (SECR) is higher in overall 9 years than the

Conventional banks. In 2002 the SECR of Islamic bank is 9.6%, while the conventional bank

SECR in 2002, 7.12%. Islamic bank SECR increased in 2003 up to 12.7% , and conventional

bank SECR increased up to 8.3% still less than Islamic banks SECR. The Islamic Bank SECR

increased 14.4% till 2005. While conventional banks SECR in 2005 decreased up to 6.9%. The

SECR of Islamic bank in 2006 decreased up to 11.4% but still higher than SECR of conventional

banks SECR of 7.3%. the SECR of the Islamic bank gradually decreased 6.6% in 2007 and also

2008 and 2009. But they were still above the percentage of the conventional banks. The SECR of

conventional Banks instantly decreased to 4.7% in 2007 and almost remained same in 2008 and

2009.

CONVENTIONAL BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN 7.117 8.280 8.409 6.950 7.293 4.686 4.406 4.751

S.D. 1.981 4.728 5.493 4.823 4.670 2.581 2.465 2.268

Min 5.854 4.497 3.518 2.819 2.694 1.100 1.100 1.100

Max10.57

916.52

217.48

514.76

814.97

0 7.121 6.933 6.933

ISLAMIC BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN9.57

712.68

512.50

614.41

211.45

0 6.655 5.962 6.659

S.D.7.27

2 3.357 2.586 6.767 4.930 5.419 4.079 4.506

Min1.63

3 9.033 9.804 9.495 6.761 1.400 1.200 1.250

Max20.0

4417.90

716.46

225.79

818.69

514.47

211.49

6 11.923



Credit to Total Assets Ratio:

Islamic banks Credit to Total Assets Ratio (CTAR) is relatively high than the conventional

banks. Conventional banks CTAR 94.21% in 2002 and decreased up to 77.16%. While the

Islamic banks CTAR started from 91.7% and decrease up to 87.5% till 2005. But in 2005 the

CTAR of Islamic Bank is greater than conventional banks. In 2006 the CTAR of conventional

banks increased up to 93.3%. While then CTAR of Islamic banks increased up to 98% which

was higher than the is conventional banks. CTAR of conventional banks in 2007 is 92.6% and

CTAR of Islamic banks increase up to 88.5% which is less than conventional banks. In 2008 and

2009 the conventional banks remained stable and increased to 93% and Islamic banks increased

a little bit but not enough to get above the conventional bank. Similarly 2009 the Islamic banks

showed decreasing trend and the value decreased to 88.7%.

CONVENTIONAL BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN94.2

0982.29

277.15

793.79

993.32

992.56

593.60

8 93.002



S.D.0.39

818.46

339.42

0 4.094 3.927 5.017 3.936 3.470

Min93.5

6452.96

6 6.97187.13

286.97

984.00

087.00

0 87.000

Max94.5

2895.69

7100.0

0097.25

897.37

797.00

597.43

2 95.970

ISLAMIC BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN91.6

1781.53

387.49

892.83

497.95

788.51

189.32

1 88.711

S.D.

5.95

5

22.23

5

14.91

6

13.05

7

21.94

7 3.999 3.734 3.338

Min83.3

0343.33

563.50

381.87

482.11

183.28

084.26

5 83.544

Max97.4

02101.2

90104.6

44115.3

29136.5

3793.41

392.99

3 92.604

Equity Multiplier:

Equity Multiplier Ratio (EMR) of conventional banks is greater than Islamic Banks throughout

2002 to 2009. But in 2007 it was higher and touched the 323.303 which was very high than the

Islamic banks. The average mean of EMR for conventional banks 140.974% and average mean



of EMR for Islamic banks is 34.086%. So according to the results the conventional banks are

more risky and have more chances of failure than the Islamic bank.

CONVENTIONAL BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN 79.70379.10

481.57

598.14

592.81

2323.3

03200.9

19172.2

32

S.D. 42.75845.78

453.98

437.16

444.80

6388.3

37194.4

29169.2

65

Min 18.27617.62

2 9.05166.22

855.13

750.59

943.65

1 28.838

Max124.26

1128.0

96152.1

45161.5

58167.3

86944.8

97458.9

32431.0

49

ISLAMIC BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN46.69

936.24

040.30

331.37

033.45

733.52

624.94

8 26.148

S.D.67.93

837.55

754.66

320.62

022.53

315.61

511.02

1 11.944

Min 6.961 9.221 8.11612.28

617.77

317.77

314.24

3 12.983

Max167.0

39100.8

64137.1

2361.83

373.00

959.60

742.60

5 43.257

Efficiency Ratios:



Net operating margin:

If observe the change in the net operating margin (NOM) over time was increasing in Islamic

banks starting from1.2% to 1.23% by the year 2004 and more or less remained same in 2005 and

2006 with the value of 1.55% and 1.66% respectively. And shows a lower increasing rate. After

that the value got decreased and decreased. Then it lower than the conventional banks. Where

conventional banks starts from 0.65% of NOM to 1.55% NOM by the year 2006. Little decrease

in to 1.15% in year 2007. In 2008 it was much higher and got above the Islamic bank and 2009 it

decreased a little bit but still over the NOM of the Islamic banks. Conventional banks margin bit

stable than the Islamic bank operating margin different.

CONVENTIONAL BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN 0.655 0.948 1.055 1.349 1.149 1.893 2.030 1.630

S.D. 0.481 0.703 0.793 1.382 0.891 2.715 3.043 3.308

Min 0.169 0.293 0.106 0.504 0.484 0.025 0.012 -0.937

Max 1.292 1.794 2.193 3.793 2.705 6.700 7.400 7.400

ISLAMIC BANK

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN 1.197 1.185 1.230 1.559 1.634 1.149 0.400 0.716S.D. 1.221 0.625 0.749 0.668 0.934 1.200 2.093 0.587

Min -0.142 0.236 0.624 0.733 0.668 0.016 -3.089 0.011

Max 3.201 1.926 2.473 2.449 3.001 2.979 2.041 1.438



Assets Utilization:

In the below table we can see that conventional banks assets utilization ratio (AUR) 4.66% is

high in 2002 than the Islamic banks 4.0% And both banks ratio is almost equal in 2003, where

AUR of Islamic banks is 3.5% and Conventional Banks AUR is 3.85%. In 2004 the conventional

Banks AUR 4.72% bit high than Islamic Banks AUR 4.2%. In 2005 AUR of Islamic Banks got

lead over conventional banks of 5.1% and AUR of Conventional banks 4.70%. In 2006 the

Islamic banks AUR 5.1% is stable as in 2005 but, the conventional Banks AUR decrease to

4.38%. If we study the ratio of 2007, 2008 and 2009 AUR of Islamic banks remained stable but

conventional banks AUR decreased.

CONVENTIONAL BANK

BANKS YEAR

2002 2003 2004 2005 2006 2007 2008 2009

MEAN

4.66

2 3.848 4.722 4.799 4.381 2.960 2.367 2.404

S.D.2.17

6 1.480 3.510 2.547 3.128 2.280 2.301 1.790

Min2.71

2 2.468 0.310 2.536 1.786 0.038 -0.069 0.028

Max7.07

7 6.290 9.728 9.075 9.532 5.500 5.100 4.800

ISLAMIC BANK

BANKS 200 2003 2004 2005 2006 2007 2008 2009



YEAR 2

MEAN4.00

4 3.510 4.160 5.126 5.305 3.183 3.728 3.625

S.D.1.79

5 1.243 1.425 1.901 1.937 2.614 2.622 2.435

Min1.86

4 1.703 2.506 2.670 3.158 0.036 0.035 0.033

Max6.71

6 4.802 6.270 7.103 7.540 7.211 6.218 6.089

Operating Efficiency ratio:

As we can observe from graph below, Operating Efficiency ratio (OER) in 2002 for Islamic

banks were 38%, while it was 95.86% for Conventional Banks. In 2003 the OER of Islamic banks increased up to 49.23% but still below than conventional banks OER that is 90.28%.

Conventional banks OER are stable even in 2004 with OER of 90.31% while the Islamic banks

OER increased up to 49.6%. And in 2005 OER of Islamic bank decreased up to 40.65%. While

conventional banks also decreased the OER up to 70% but sill greater than Islamic banks OER.

Conventional bank OER increased in 2006 and 2008 again decreased to 85.17% and 50.74% and

the Islamic Bank OER are further decrease up to 37.87% and 35.24% respectively. Suddenly in

2008 the OER of conventional banks was as much decreased as low down to -623.002% which

was too much low than the Islamic Banks which showed increasing trend from 35% to 42.6%.

but in 2009 the OER of conventional banks again up to 63.65% . The Islamic banks OER little

increased from the previous year to 46.23%. The overall results shows that the OER of

conventional bank is high as compare to the Islamic Banks.



CONVENTIONAL BANKS

BANKS

YEAR2002 2003 2004 2005 2006 2007 2008 2009

MEAN 95.858 90.28583.02

570.06

6 69.369 50.747-

623.00263.65

3

S.D. 48.206 29.80938.05

845.42

7 46.631 35.7741484.66

064.97

6

Min 26.012 44.71142.68

235.47

3 27.985 2.088

-3278.60

3 4.281

Max151.61

4127.5

25128.2

80145.9

35141.79

7 96.900 64.130173.4

09

ISLAMIC BANKS

BANKS YEAR 2002 2003 2004 2005 2006 2007 2008 2009

MEAN 38.025 49.23349.68

140.65

9 37.871 35.245 42.56646.23

2

S.D. 13.260 29.70025.31

524.96

0 27.094 30.437 27.28728.07

1

Min 19.109 24.02330.76

323.45

8 18.472 0.452 0.435 0.425

Max 53.324 97.72393.50

482.87

7 83.166 83.166 73.03569.88

0



CONCLUSION:

Islamic banks are exceeding in Return on Asset, Share Holders’ Equity to Credit ratio, Portfolio

Deposit Ratio, Credit Deposit Ratio Asset Utilization Ratio than the conventional banks. But

they are also lacking in the other ratios.

Conventional Banks have better performance on Return on Equity Ratio, Profit to the Total

Expense ratio, Equity Multiplier Ratio, Operating Efficiency Ratio, Credit to Total Asset Ratio

and Net Operating Margin Ratio. So in our point of view Conventional banks have overall lead

on Islamic Banks.

We found that the Islamic banks although are improving their performance, they can gradually

become more important. As most of the ratio are going in the favor of conventional banks, but

Islamic bank return is better than it. The Islamic banks are totally different from the conventional

banks, so in Islamic countries it is improving trend because they are working and practices

according to the Shariah.

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