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1.1. Introduction
Banks being the vital component of the financial system performs very importing role of
mobilizing funds from the surplus units to the deficient parties, banks basically plays a role of
bridge between the savers of the funds and users of the funds. It is the bank which mobilizes the
money from the savor to the entrepreneur or the business man. The financial system is a complex
yet understandable and easily identifiable network of interrelated markets and intermediaries
(investment banks, saving banks, pension plan, insurance companies, financial institutions) that
allocates capital and shares risks by linking lenders to borrowers, investors to entrepreneurs,
savers to spenders and the risk-averse to risk-takers, by performing this function it brings two
very important outcome i.e. fair distribution of wealth and accumulation of wealth. The
operations of bank involves a lot of risk, in fact the financial statements of the banks depicts a lot
of risk. The risk involved in the banking operations is the Credit Risk. Credit risk arises by
dealing in lending, trading, settlement, and other financial transactions in which bank is directly
involved with the transacting party that’s why it is adhered to that credit risk. The actual loss to
the bank could be due to the reduction in the portfolio value of the bank and either the loss could
have actually happened or it could be perceived but either the state means loss to the bank. To
cope with these potential risks is the task of a credit manager and here comes the Credit Risk
Management. So before the advancement of loans the credit officer has to evaluate the applicant
for the loan. A credit manager can take help of a number of models to assess the credit applicant
the most widely used are the traditional model and the new model. Beside these models a credit
manager can take a greater help from the prevailing indicators like interest rates and inflation
rates in the economy. Due to their crucial role in the financial systems as the intermediaries the
banks have been given a lot of importance.
To analyze the performance of a bank there have been a number of models and approaches
available both qualitative and quantitative. The qualitative tools include CAMEL approach. 5 C’s
or the traditional model etc and quantitative tools include Ratio Analysis, and DuPont Analysis
etc. These approaches have been used in the past and even now to determine the standing of the
financial institutions especially banks. In terms of quantitative analysis technique of ratio
analysis has been commonly used. Generally four major categories of the ratios are used to
analyze quantitatively, these ratios clearly depicts the original picture of the position of the bank
and provide us with the information on the basis of which we can evaluate the performance, dig
out the reasons of failures, and compare our performance with past performances as well as with
other banks and industry average. These four broad categories of ratios include liquidity ratio
which indicate the borrower’s ability to meet short-term obligations, continue operations and
remain solvent, profitability ratio specifically indicate the earnings potential and its impact on
shareholder returns, leverage ratios indicate the financial risk in the firm as evidenced by its
capital structure, and the consequent impact on earnings volatility, and operating ratios exhibit
how efficiently the assets are being utilised to generate revenue.
Being a private credit rating analysis company CSN private limited, we have analysed the public
sector banks of Pakistan. The public sector banks of Pakistan include National Bank, Bank of
Punjab, Bank of Khyber, and First Women Bank. The public banking sector of Pakistan is
lacking behind the private sector banks. This opinion is based on the fact that public sector banks
are ranked lower by the other credit rating agencies of Pakistan. During our this analysis we have
used the Du Pont analytical approach for the quantitative analysis and CAMELS approach for
the qualitative analysis.The Du Pont analytical approach has been introduced in 1920 by DuPont
corporation and this approach is also sometimes known as Du Pont identity. This model provides
us with the detailed information of the above mentioned four ratios and helps us to draw a clear
picture about the performance of the banks. Though Du Pont model has some disadvantages but
its advantages like ease in calculating and clearer results overcome these disadvantages and
make it widely used and a reliable source of information that can be used in decision making. On
the other hand CAMEL is qualitative approach for the rating of the banks. The camel is an
acronym; C-Capital advocacy, A-Assets quality, M-Management quality, E-earnings, L-
Liquidity, S-Sensitivity to market risk. This approach has enabled us to rate the public sector
banks and identify that which bank is batter on which factor. The coming sections in the report
are quantitative analysis, discussion and practical implications, and at the end the conclusion.
1.2. Quantitative Analysis
Quantitative analysis is the process of drawing out the useful information from the raw data or
facts for decision making using complex mathematical and statistical tools. The effort is made in
order to quantify the data and facts in numerical form so that visibility and understanding of the
data is enhanced. The analysts while performing the quantitative analysis try to assign
mathematical values to the compact and abstract variables and then continue the process of
drawing out the relevant information out of the data under consideration.
The major approach that has been practiced in the quantitative analysis of the banks is Du Pont
analysis. This approach is one of the simplest and easy in calculation approach and it provides
clear and reliable information for decision making. Beside the Du Pont analysis we have done
the financial statement analysis in which the focus was on the balance sheet and income
statement. In the financial statement analysis we have calculated the key ratios of balance sheet
and income statement on the basis of which we can compare the banks and rank them
accordingly. In the following sub sections we discuss the comparative financial statement
analysis, Du Pont analysis and its findings.
1.2.1. Financial Statement Analysis
Financial statement analysis is the process of generating useful information from the data
available in the financial statements. Financial statement analysis is generally done with the help
of ratio analysis that is we compute ratios of the data available and then use the information for
year wise analysis inside the company to find out the trend of operations and to compare with the
industry bench marks in order to find the contribution towards the industry as whole. In this
project the financial analysis of two financial statements have been done i.e. the balance sheet or
stamen of financial position and income statement or the profit and loss account.
First we discuss the comparative analysis of balance sheet. The first item under consideration is
the net worth. Net worth of banks is calculated by taking the difference of total assets and
liabilities and it is commonly called as the net assets. Net worth is key measure of how much an
entity is worth. A constant increase in the value of net assets is a good indication to the firm, but
the net worth may be decreased due to losses and economic conditions prevailing in the economy
in which the company is operating. Taking the net worth of the public sector banks of Pakistan.
Figure 1 shows the net
worth of the public sector
banks in Pakistan. The
trends in figure depict
that the net worth of the
public sector bank is
growing as whole, except
the year of 2008, and the
basic reason of that is the
economic crisis in the
economy and the
increased liabilities of
the banks that dropped the net worth of these banks. If we expend the discussion and take
individual banks in account then the most worthy bank amongst these for banks is the bank of
Punjab. On the other hand there is a little difference between the net worth of the national bank
of Pakistan and first women bank. This means that in terms of net worth these two banks are
almost identical. Bank of Khyber is also showing a growing trend in terms of the net worth. With
bird’s eye view we can rightly claim that there is a growing trend in the public sector banks and
they are contributing to the banking industry.
The second ratio that has been calculated from the balance sheet items is the cash to total assets
ratio. This ratio measures the portion of a company's assets held in cash or marketable
securities. There is a debate among different schools of thought one is of the opinion that a
higher ratio can be good from the creditor stand point on the other hand another school of
thought is of the opinion that a higher ratio may hurt the profitability of the bank in the long run.
However the bottom line is to have a moderate ratio so that the short term liabilities and the
requirements of the short time deposit holder can be entertained without hurting the profitability
2007 2008 2009 2010 201195000000
105000000
115000000
125000000
135000000
145000000
Net Worth
Bank Of Punjab
Bank Of Khyber
First Women Bank
National Bank Of Pakistan
Years
Amount
Figure 1: Net Worth
of the bank in the longer
run.
Fig.2. indicates the
cash to assets ratios of
the public banks of
Pakistan. As indicated
in the figure the
national bank of
Pakistan has the greater
ratio, which means that
it is maintaining more
cash and short term
securities as compared
to the rest of three
bank, the basic reason behind this deviation are; firstly national bank of Pakistan is the major
collector of government, secondly most of the salaries of the government employees is paid by
the national bank for that they have to keep more in cash, thirdly the pensions of the government
employees is paid through this bank. All these reasons force the national bank of Pakistan to
keep greater sum in cash and liquid securities. On the other hand the remaining banks in the
discussion have maintained a moderate ratio in order to keep their operations going.
The third ratio that has been computed is non deposit ratio. This ratio is concerned with the
reputation risk of the bank. It means that a bank having a greater ratio will be having a greater
chance of default. Non deposit borrowings are the borrowing that a bank make in order to fulfill
its needs of funds. Though these funds help the banks in the critical situations but these funds
bring a lot of risk in terms of reputation or the default risk. So it is necessary for bank to keep the
non deposits borrowing a less as possible.
Fig.3. shows the non deposit borrowing ratio of the public sectors of Pakistan. Here the statistics
shows that bank of Khyber and bank of Punjab are having more default risk. The possible reason
for increased borrowing are the financial crisis of year 2008 and the pressure of the state bank of
Pakistan to increase the number of branches. To increase the number of branches the banks have
National Bank Of Pakistan
Bank Of Punjab
Bank Of Khyber
First Women
Bank
0.0000%
2.0000%
4.0000%
6.0000%
8.0000%
10.0000%
12.0000%
2.8966%
6.6769%
10.1471%
1.9827%
Non Deposit Borrowing Ratio
Non deposit borrowing ratio
Bank
Rate
National Bank Of Pakistan
Bank Of Punjab
Bank Of Khyber
First Women
Bank
0.0000%
2.0000%
4.0000%
6.0000%
8.0000%
10.0000%
12.0000%
14.0000%12.0306%
6.3051% 5.6363%7.0582%
Cash To Total Asset Ratio
Cash to total asset ratio
Banks
Rate
Figure 2: Cash to Total Assets Ratio
Figure 3: Non Deposit Borrowing Ratio
to incur the fixed expenses, merely the profits of the banks cannot bear these major investments
so to meet these increased demands of funds the banks have to borrow more from other sources.
After discussing three major components of balance sheet we now turn towards the ratio that has
been calculated from the Income statement items. Income statement is also known as the
statement of profit and loss and it indicates the expenses and revenues of a company or a bank.
The income statement of a bank is quite different from the income statement of other
manufacturing concerns and that is because of the nature of the business operations of a bank.
The ratio that has been calculated is the overhead efficiency ratio, and the ratio is concerned
about how much the non interest income contributing towards the coverage of the non interest
expenses. This ratio gives us a clear picture that whether a bank is capable of paying it overhead
or non interest expenses with the help of its non interest income. Banks can increase their non
interest incomes by moving to modern banking.
Fig.4. represents the over head ratios of the banks under consideration. The graph suggests that
the bank of Punjab is almost recovering it’s all non interest expenses with its non interest
income. The second most recovering bank is the national bank that is recovering its three fourth
noninterest expense with its non interest income. On the other hand the bank of Khyber and first
women bank have to implement the modern banking patterns in order to increase its non interest
income because they far behind then the two other banks and from recovering their non interest
expense with the noninterest expenses.
Besides these key ratios
from the balance sheet and
income statement, vertical
analysis of the financial
statements is also conducted
of these banks. Vertical
analysis is process or
technique for
identifying relationship between items in the same financial statement by expressing
all amounts as the percentage of the total amount taken as 100.vertical analysis is also known as
the common size analysis. In a balance sheet cash and other assets are shown as a percentage of
the total assets and the liabilities as a percentage of the total liabilities and owner equity, on the
other hand in an income statement, each expense is shown as a percentage of the sales revenue.
The graphs of the vertical analysis a given in the Annexure 1.
1.2.2. Du Pont Analysis
DuPont is a quantitative technique for the analysis of financial statements of the company. The
DuPont analysis was first introduced by the DuPont Corporation in 1920. Basically the DuPont
analysis decomposes the return on equity into its components. Following is the stepwise
discussion about the DuPont analysis of the public sector banks.
National Bank Of Pakistan
Bank Of Punjab Bank Of Khyber First Women Bank
0.0000
0.2000
0.4000
0.6000
0.8000
1.0000
1.2000
0.7496
0.9742
0.4548
0.2381
Overhead Ratio
Overhead ratio
Banks
Rate
Figure 4: Overhead Ratio
Return on equity is one of the key ratios and it indicates the dollar return as a percentage of the
shareholders equity. This ratio indicates that how much the firm is earning against the
shareholders equity invested. Figure 5 represents the graph of the return on equity of the public
sector banks. The graph and the findings of this ratio suggest that national bank of Pakistan and
first women banks are good at generating worth for the shareholders and the amount they have
invested, on the other hand the bank of Khyber and bank of Punjab are generating less return
against the amount invested by their shareholders.
Return on assets is one of the two
components when return on
equity is decomposed in the
DuPont analysis. Return on assets
shows that how much return a
bank is earning against the total
assets. Figure 6 represents the return on asset ratio of the four public banks in Pakistan. The
pattern of the return on assets is the same as that of the return on the equity except the bank of
Punjab whose value has gone negative in the determination of the return on assets ratio. And it is
evident that the national bank of Pakistan and first women bank are leading and the bank of
Khyber is following the pattern
but is lagging far behind. The
major reason of the lacking behind is the increased pressure of the state bank of Pakistan to
increase the number of branches due to which they have to do fixed expenses. In case of bank of
Punjab, there have been losses in three consecutive years. Another reason for lagging behind can
be the low values of the equity multiplier which is discussed in the coming paragraph.
National bank of pakistan
Bank of punjab Bank of Khyber First women bank0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.2926
0.06590.0479
0.1595
Return On Equity
ROE
Banks
Rate
Figure 5: Return on Equity
Figure 6: Return on Assets
The next ratio in the DuPont
analysis is the Equity multiplier.
Equity multiplier is the measure of
financial leverage and is like a
double edge sword i.e. it can
enhance the returns when the banks
are earning, and can make the
situation even worsen if the banks
are in losses. The equity multiplier
can be calculated if the total assets
are divided by the total equity.
Figure 7 represents the graphical representation of the equity multipliers of the public sector
banks of Pakistan. Due to the higher values of equity multiplier the returns of the first women
bank and national bank is increased and it is evident from the previous discussion about the
return on equity and return on assets. On the other hand the returns of bank of Khyber and bank
of Punjab are lesser because of the lesser values of the equity multiplier.
National bank of pakistan
Bank of punjab Bank of Khyber First women bank
-0.025
-0.02
-0.015
-0.01
-0.005
0
0.005
0.01
0.015
0.02
0.0252.0121%
-1.8451%
0.3794%
1.0118%
Return On Asset
ROA
Banks
Rate
National bank of pakistan
Bank of punjab Bank of Khyber First women bank0
2
4
6
8
10
12
14
16 14.8992
5.1915 5.1431
13.5679
Equity Multiplier
Equity multiplier
Years
Rate
Figure7: Equity Multiplier
The ratio that fall next in the
DuPont analysis is the asset
utilization ratio. This ratio suggest
that how the assets are used to
generate good outcomes for the
bank. This ratio basically refers to
the effective use of the asset by the
bank. This ration is mathematically
calculated by dividing the
revenues of the bank by the
total assets of a bank, the
resulting figure suggest
that how good are the
assets utilized. Figure 8
represents the graph of the
public sector banks of
Pakistan, which shows that
the national bank and first
women bank are doing
well in asset utilization; bank of Khyber is also doing the same pattern but is lagging a little bit
behind. On the other hand the bank of Punjab is doing at almost at the half of the remaining
banks. This means that the management of the bank of Punjab should take actions in order to
improve its assets utilization.
The next ratio after the asset
utilization is the Yield on Assets. Figure 9 is the graph of the yield on assets of the under
consideration four banks. Since yield on assets is the ration between the interest income and
average total income, and interest income is major income of a bank so it better for the banks to
National bank of pakistan
Bank of punjab Bank of Khyber First women bank0
0.02
0.04
0.06
0.08
0.1
0.120.1024
0.0408
0.08530.0925
Asset Utilization
Asset utilization
Banks
Rate
Figure 8: Asset Utilization
National bank of pakistan
Bank of punjab Bank of Khyber First women bank0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09 0.0829
0.0338
0.07510.0839
Yield On Asset
Yield on asset
Banks
Rate
Figure9: Yield on Asset
maintain a high yield on assets. All the under consideration banks are generating good yield on
assets which is a good sign for all these banks.
Noninterest income to
average total ratio is yet
another ratio that comes to
consideration while doing the
DuPont analysis. Noninterest
income is also a significant
portion of the banks income.
This income can be in the
form account fee, credit or
debit card fee, and
commission on collection of bills and other amount on behalf of others. Figure 10 contains the
noninterest income to
average total assets ratio.
The ratio of national bank
is highest because it is the
major collector of the
government of Pakistan.
On the other hand the
remaining banks are
maintaining good ratios
which are helpful for the
coverage of non interest
expenses
Interest expense ratio shows how much a bank has to pay to its depositors as return of their
investment. Like any other organization banks must try to minimize their expenses. To minimize
interest expense banks should get funds from savers at low interest rate and lend at high interest
rate. Figure 11 shows that Bank of Khyber has highest level of interest expense ratio that is due
Figure 9: Yield on Asset
National bank of pakistan
Bank of punjab Bank of Khyber First women bank
0
0.005
0.01
0.015
0.02
0.025
0.0195
0.0070
0.01010.0086
Non Interest Income
Non interest income
Banks
Rate
Figure 10: Non Interest Income
National bank of pakistan
Bank of punjab Bank of Khyber First women bank0
0.01
0.02
0.03
0.04
0.05
0.06
0.0381
0.0305
0.0516
0.0387
Interest Expense
Interest expense
Banks
Rate
Figure 11: Interest Expense
to the fact that when we compare the trend of deposits we come to know that Bank of Khyber
has high deposits so for that very reason it has to pay more interest.
Premium margin is a key financial indicator of banks performance. Premium margin shows how
much of its revenue a bank is converting in profit. A low premium margin shows high level of
risk because a small change in revenue may lead to serious loss. To increase premium margin
banks must carefully develop and improve their pricing strategies, cut their expenses, and
enhance process efficiencies. Premium margins take in account two major issues one is how
efficient bank is and how it is managing its cost. A high level of margin shows that bank is
efficient in converting its revenues to actual profits. Annexure 2.Fig.8 shows the average
premium margin for public sector banks. National Bank of Pakistan has the highest premium
margin in public sector banks as 19.9337% of total revenue is converted to actual profit,
followed by First Women Bank, Bank of Khyber, and Bank of Punjab. The reason for low
premium margin of Bank of Punjab is loss from 2008 to 2010.
1.3. Qualitative Analysis
Employing qualitative analysis of bank refers to that the analyses is made on abstract and
compact variable without
going into deep
mathematical and statistical
procedures and methods of
quantitative analysis.
Unlike the quantitative
approach which gives us a
compact figure say five
million sales, the
qualitative analysis
provides us with the
generalized results say this bank is batter on the basis of these variables. For the qualitative
analysis we have employed CAMELS rating approach.
National bank of pakistan
Bank of punjab Bank of Khyber First women bank0
0.05
0.1
0.15
0.2
0.25
0.1994
0.0418
0.07110.0939
Premium margin
Profit margin
Banks
Rate
Figure 12: Premium Margin
1.3.1. CAMELS Rating
Components of CAMELS rating are capital adequacy, asset quality, management quality,
earnings, liquidity, and sensitivity to market risk. Capital adequacy- refers to banks capacity to
maintain commensurate with the nature and extent of all types of risks, as also the availability of
the bank managers to identify, measure, monitor and control these risks. Assets quality this
measure reflects the magnitude of credit risk prevailing in the bank due to its composition and
quality of loans, advances, investments, and off balance sheet activities. Management quality
signals the ability of board of directors and senior managers to identify, measure, monitor and
control risks associated with banking; this qualitative measure use risk management policies as
an indicator of sound management. Earnings this indicator shows not only amount and trend in
earnings but also analyses the robustness of expected earnings growth in future. Sensitivity to
market risk this is recent addition to the ratings parameters and reflects the degree to which
changes in interest rates, exchange rates, commodity prices, and equity prices can affect earnings
and hence the bank’s capital. CAMELS rating system is to be evaluated on the scale of one to
five rating in ascending order. Lower the ratio better for the bank
Bank CAR Asset quality
Management quality
ROA
ROE
Liquidity L-1
Liquidity L-2
Sensitivity ratio
Composite rating
NBP 1 4 2 1 2 2 2 2 2FWB 1 3 3 5 5 2 2 2 4BOK 1 5 1 1 3 1 1 4 3BOP 1 5 4 5 3 1 1 4 4
Credit rating by state bank of Pakistan gives AAA to National bank of Pakistan. ‘AAA’ ratings
denote the lowest expectation of credit risk. They are assigned only in case of exceptionally
strong capacity for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events and by CAMELS rating also National bank of
Pakistan is top of the list this shows high level of performance by National bank of Pakistan.
First women bank has credit rating of BBB; ‘BBB’ ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic conditions is more
likely to impair this capacity. This is the lowest investment grade category. While on CAMLES
rating it scored 4 which shows high risk in future. Bank of Khyber has credit rating of A-; ‘A-’
ratings denote a low expectation of credit risk. This capacity for timely payment of financial
commitments is
considered strong. This
capacity may,
nevertheless, be more
vulnerable to changes in
circumstances or in
economic conditions
than is the case for
higher ratings. Same is
shown by CAMELS
rating that shows a
stable position. Bank of
Punjab as compared to other public sector bank has low credit rating AA- showing stable
performance but due to poor management and return on asset it scored least on CAMELS rating.
1.4. Discussion and Practical Implications
The major discussion has been the public sector banks. The public sector of Pakistan is showing
growing trends and is contributing towards the overall banking industry of Pakistan. The results
of the analysis show productive results. To continue the discussion and to support these claims of
growing trend we carry forward with the trends in investments, deposits and advances growth of
2007 2008 2009 2010 2011 500,000,000
600,000,000
700,000,000
800,000,000
900,000,000
1,000,000,000
1,100,000,000
1,200,000,000
1,300,000,000
Deposits
Bank Of KhyberBank Of PunjabFirst Women BankNationa Bank Of Pakistan
Years
Amount
Figure 13: Deposits
these banks over a period
of five years and we base
our arguments after the
post crisis period of 2008.
To start with we take the
deposit pattern of these
banks.
It is obvious from the
graph that the deposits in
public sector are showing
a growing pattern. This
shows that the public sector banks are performing the basic function of mobilizing the funds
efficiently. On the other hand this trend means that the public sector banks are doing well and
people have trust in them and these banks have attained the confidence of the public. Reasons
behind this increasing trend can be the well established networks of branches even in the remote
areas and another reason is the policy of government to pay salaries to its servants through these
banks which is resulting in making non savers. To draw a compact output from this graph it can
be stated that these banks are operating efficiently and contributing a lot to the banking sector
and towards the services providing to the public and organization in the economy.
Advancing loans to the public and organizations is also a major operation of banks. Banks
perform this function in order to perform its basic function of mobilizing the funds from the
savers of the funds to the investors of the funds. If banks don’t advance loan many entrepreneurs
will find it difficult to convert their ideas to final product hindering economic development,
expansion plans can’t be executed, risk averse people will not be able to find any way to make
money on their savings. The following graph shows the trends of public sector banks of Pakistan.
The graph suggests that
the public sector banks
are performing their functions in a good pattern. The banks are receiving funds from the public
and then mobilize these funds to the public and organizations. The graph suggests that the
2007 2008 2009 2010 2011 300,000,000
350,000,000
400,000,000
450,000,000
500,000,000
550,000,000
600,000,000
650,000,000
700,000,000
Advances
Bank Of KhyberBank Of PunjabFirst Women BankNational Bank Of Pakistan
Years
Amount
Figure 14: Advances
advances of the bank of
Khyber and bank of Punjab
are quite higher than the
national bank of Pakistan and
first women bank. Though
there are differences between
the advances of the
individual banks in the
public sector but as a whole
the trends are growing which
indicate that these banks are contributing to the banking sector and economy as a whole by
advancing consumer loans and commercial loans. For the betterment of society and economy
public sector banks advance loans to small businesses, to agriculturists, and blue chip companies
as well. By advancing loans to agriculture sector public sector banks had made a tremendous
contribution for strengthening economy and small enterprises.
Along with deposits and advances investments are also one of the major components of banks
balance sheet. There is no doubt that banks major investments are their consumer and
commercial loans in the form of house building finance, credit cards, line of credit, loans for
purchase of machinery and equipment, providing finances for a major real estate project and etc,
but banks have to find other ways to make more profit such as investing in government
securities, purchasing foreign currencies and shares, and other money market investments. For
the investment purpose banks try to find the right mix of short term and long term investments so
that neither liquidity nor profitability got hurt. Figure 15 shows the trend of investment by public
sector banks.
The same trend is followed
in investment pattern as in
deposits and advances Bank of Khyber being on top followed by Bank of Punjab, First Women
Bank, and National Bank of Pakistan.
2007 2008 2009 2010 2011 100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
450,000,000
500,000,000 Investments
Bank Of Khyber
Bank Of Punjab
First Women Bank
National Bank Of Pak-istan
Years
Amount
Figure 15: Investments
1.5. Conclusion
There is a strong relationship between a strong banking sector and economy. It is evident from
many studies that countries having good financial system for channelization of funds develop
more quickly than others. In Pakistan State Bank Of Pakistan along with National Bank Of
Pakistan, Bank Of Punjab, Bank Of Khyber, and First Women Bank are struggling to provide
sound base for overall financial system and banking sector specifically. DuPont approach was
being used for analyzing public sector banks. From this study this come to the knowledge that
higher the level of deposits higher the level of interest expense. Increasing trend in deposits,
advances, and investments show the confidence of public in public sector banks but still lot have
to be done. Public sector banks are facing competition from private as well as foreign banks.
Along with traditional banking public sector banks must give importance to fee based banking,
and also recovery of loans. For this purpose public sector banks have to change their product and
service pricing strategies, eliminate the redundant expenses, and create transparency in
processes.HSN analyst tried to provide a concise report for its clients, but this report is subject to
time and data constraints. The data constraints refer to the availability and extraction of data
from on the internet.
Annexure.1.
12.0306% 3.7954%
2.7805%
25.4488%47.6692%
2.6068% 0.3958% 5.2728%
Components Of Asset In %
Cash and balances with treasury banksBalances with other banksLendings to financial institutions - netInvestments - netAdvances - netOperating fixed assetsDeferred tax assets - netOther assets - net
Fig.1. components of Assets in % National Bank of Pakistan
1.0407% 2.8966%
78.6966%
0.0056%0.1401%
4.4815%1.2210%
2.2841%6.0773%
3.1566%
Components Of Liability In %Bills payableBorrowingsDeposits and other accountsSub-ordinated loans - - -Liabilities against assets subject to finance leaseDeferred tax liabilitiesOther liabilitiesShare capitalReservesUnappropriated profit
Fig.2. components of Liability in % National Bank of Pakistan
81%
19%
Revenue= Yeild On Asset + Non Interest Income
Yield on assetNon interest income
Fig.3. Revenue composition National Bank of Pakistan
52%
34%
14%
Expense=Interest Expense+Non Interest Expense+Provision
Interest expensenon interest expenseProvision rate
Fig.4. Expense composition National Bank of Pakistan
6%
1%2%
25%
56%
1%4% 4%
Components Of Assets In %
Cash and balances with treasury banksBalances with other banksLendings to financial institutionsInvestmentsAdvancesOperating fixed assetsDeferred tax assetsOther assets
Fig.5. components of Assets in % Bank of Punjab
0%
7%
86%
0%0%
2% 2%2%3% 1%
Components Of Liabilities In %
Share depositor money Surplus on revaluation of assets - net
Reserves Bills payableBorrowings Deposits and other accountsSub-ordinated loans Liabilities against assets subject to
finance leaseDeferred tax liabilities Other liabilitiesShare capital
Fig.6. components of Liabilities in % Bank of Punjab
83%
17%
Revenue = Yeild On Asset + Non Interest Income
Yield on assetNon interest income
Fig.7. Revenue Composition Bank of Punjab
64%12%
24%
Expense = Interest expense+ Non Interest Expense + Provisions
Interest expensenon interest expenseProvision rate
Fig.8. Expense composition Bank of Punjab
5.65%
6.61%
5.61%
40.97%
34.23%
1.62% 0.69% 4.23%
Components Of Assets in %
Cash and balances with treasury banksBalances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Deferred tax assets Other assets
Fig.9. Components of Assets in % Bank of Khyber
0.57%
10.15%
70.66%
2.67% 11.47%
2.12% 0.39% 4.20% 0.57%
Components Of Liabilities in %
Bills payable Borrowings Deposits and other accounts Sub-ordinated loansLiabilities against assets subject to finance lease
Deferred tax liabilities
Other liabilities Share capitalReserves Unappropriated profit Advances against share subscrip-tion
(Deficit) / surplus on revaluation of assets
Fig.10. Components of liabilities in % Bank of Khyber
88%
12%
Revenue = Yeild On Asset + Non Interest Income
Yield on assetNon interest income
Fig.11. Revenue Composition Bank of Khyber
64%
24%
13%
Expense = Interest Expense+ Non Interest Expense + Provisions
Interest expensenon interest expenseProvision rate
Fig.12. Expense Composition Bank of Khyber
0.07058152602540040.045760714
71934940.095056574
8218298
31.9287%
0.427079557085955
0.01706571286196810.0026671276351931
9 0.0225013422042691
Components Of Assets in %Cash and balances with treasury banks
Balances with other banks
Lendings to financial institutions
Investments - net
Advances - net
Operating fixed assets
Deferred tax assets - net
Other assets - net
Fig.13. Components of Assets in % First Women Bank
1.0526% 1.9827%
83.5609%
0.0221%2.3482%
3.9991%2.1356% 4.6134% 0.2854%
Components Of Liabilities in %
Bills payableBorrowingsDeposits and other accountsSubordinated loanLiabilities against assets subject to finance leaseDeferred tax liabilities - netOther liabilitiesShare capitalReservesUnappropriated profitSurplus on revaluation of assets - net of tax
Fig.14. Components of Liabilities in % First Women Bank
91%
9%
Revenue = Yeild On Asset + Non Interest Income
Yield on assetNon interest income
Fig.15. Revenue Composition First Women Bank
48%
45%
7%
Expense = Interest Expense+ Non Interest Expense + Provisions
Interest expensenon interest expenseProvision rate
Fig.16. Expense Composition First Women Bank