HAIDER TAJAMMAL MC060200242 MBA FINANCE

Department of Management Sciences, Virtual University of Pakistan

PROFITABLITY RATIO ANALYSIS HABIB BANK ASKARI BANK. BANK. MUSLIM COMMERCIAL BANK
FOR THE FINANCIAL YEARS 2008,2009 & 2010

Introduction of profitability ratio

A class of financial metrics that are used to assess a businesss ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a time. higher value relative to a competitors ratio or the same ratio from a previous period is indicative that the company is doing well. well. So when we discuss about these ratios to calculate and find result the basic aim is to find out the financial strength of a company because in business one must want to know where your business stands, which deficiencies the company have and how these deficiencies are removed so for this we also use the term named SWOT analysis in order to make the business fruitful even in the presence of many competitors already available or entering the market. market.

The main aim of any producer or business is to start a business for profit. In profit. Pakistan, these days especially the only industry which is growing and making profit is banking industry. The reason to choose this topic is also based on the industry. above mentioned facts. facts. The three banks chosen in my project are due to the fact that these are one of the oldest banks working in Pakistan, secondly these banks are always good in business and profits marking despite of all these type of circumstances in Pakistan with the passage of time the introduction of these banks are as follows

Introduction of banks
Introduction of Habib Bank
HBL was incorporated on 25th August 1941 and operated in the private sector until its nationalization in 1974. HBL has been approved for privatization and the privatization commission has selected a Financial Advisor to prepare a comprehensive plan and assist in the sale process. The government has appointed a professional management team to restructure the bank and to recover and clean its doubtful and classified portfolio.HBL is one of the largest commercial bank of Pakistan. It accounts for a substantial share (20%) of the total commercial banking market in Pakistan with a network of 1,705 domestic branches; 55 overseas branches in 26 countries spread over Europe, 3 HBL wholly owned Subsidiaries namely Habib Bank Financial Services (PVT) LTD. LTD. Karachi, Habib Finance International LTD (Hong Kong) and Habib Finance Australia Ltd. Sydney; 2 Joint Ventures namely Habib Nigeria Bank Ltd. Ltd. Sydney; Ltd. (40%) and Himalayan Bank Ltd. (20%) and 2 representative offices in Iran and 40% Ltd. 20% Egypt. Egypt. HBL is a Banking Company, which is engaged in Commercial & Retail Banking and related services domestically and overseas

Habib Bank Group is a leader in Pakistan's services industry. An extensive industry. network of 1425 domestic branches the largest in Pakistan and 55 international branches has enabled HBL to provide comprehensive services that meet customer needs. This has ensured thriving client relationships that needs. form the backbone of the Bank's operation. operation. Today, HBL plays a central role in Pakistan's financial and economic development. development. It has come a long way from its modest beginnings in Mumbai on August 25, 1941 when it commenced operations with a fixed capital of 25,000 25, 25, rupees. rupees. Impressed by its initial performance, Quaid-e-Azam Mohammed Ali QuaidJinnah asked the Bank to move its operations to Karachi after the creation of Pakistan. Pakistan. HBL established it self in the Quaid's city on August 7, 1948 and became a symbol of pride and progress for the people of Pakistan. Pakistan. Habib Bank has been a pioneer in providing innovative banking services. These services. have included the installation of the first mainframe computer in Pakistan followed by the first ATM and more recently, internet banking facilities in all our 1425 domestic branches

Introduction of Askari Bank

Banking means the accepting, for the purpose of lending, or investment, of deposits of money from the public, repayable on demand or otherwise, and withdraw able by cheque, draft, order or otherwise. Banking companies mean companies which transact the business of banking in Pakistan. The banking sector has witnessed a dramatic change during the last ten years with the development of Askari Bank, which is not only redefining priorities and focus of the banks, but also threatening the domination of traditional players. The story begins with the incorporation of Askari Bank limited in Pakistan on October 09, 1991, Askari Bank Commenced (begin) to operations in April 1992, as a public limited company. The bank is listed on the Karachi, Lahore and Islamabad Stock Exchanges and the initial public offering was oversubscribed by 16 times. While capturing the target market share amongst the view banks, Askari has provided good value to its shareholders. Its share price has remained approximately 12% higher than the average share price of quoted banks during the last four years.

Askari Bank has expanded into a nationwide presence of 83 Branches, and an Offshore Banking Unit in Bahrain. A shared network of over 800 online ATMs Bahrain. covering all major cities in Pakistan supports the delivery channels for customer service. service. As on December 31, 2006, the Bank had equity of Rs. 6.016 billion and 31, 2006, Rs. total assets of Rs. 107.168 billion, with over 475,000 banking customers, serviced Rs. 107. 475, by a total staff of 2,118. 118. Askari bank is the only bank which is having its operational head office in the twin cities of Rawalpindi-Islamabad, which have relatively limited opportunities as Rawalpindicompared to Karachi and Lahore. This created its own challenges and Lahore. opportunities, and forced as to evolve an outward-looking strategy in terms of outwardmarket. market. As a result, bank developed a geographically diversified assets base instead of a concentration and heavy reliance on business in the major commercial centers of Karachi and Lahore, where most other banks have their operational Head offices. offices.

Introduction of MCB bank

MCB (Formerly Muslim Commercial Bank) is the largest private sector bank in Pakistan. Pakistan. The Adamjee group incorporated in 1948. It proposed during the 1950s 1948. 1950s and 60s. In 1975 it was nationalized with all other private sector bank. Then 1991 60s. bank. it was privatized. Since the bank has been headway in improving of technology. In privatized. technology. the year 2006 bank name was changed to MCB Limited. The bank is now included Limited. as one of the top most banks of the nation. nation. MCB has been awarded as Euro money Award 2008 for the "Best Bank in Asia" The Chairman of MCB is Mian Mohammad Mansha and the President / CEO is Mr. Mr. Atif Aslam Bajwa. MCB is one of the leading banks of Pakistan with a deposit Bajwa. base of about Rs. 280 billion and total assets of around Rs.300 billion. Rs. Rs. billion. Incorporated in 1947, MCB soon earned the reputation of a solid and conservative 1947, financial institution managed by expatriate executives. In 1974, MCB was executives. 1974, nationalized along with all other private sector banks. The Bank has a customer banks. base of approximately 4 million and a nationwide distribution network of 1,026 branches, including 8 Islamic banking branches, and over 300 ATMs, in a market with a population of 60 million. During the last fifteen years, the Bank has million. concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network, developing a large and stable deposit base. base.

MCBs main focus remains on consumer banking and its growing reputation as a full service provider gives the bank an edge in front of increased competition in the banking sector in Pakistan. With a network of over 1200 branches and a team of Pakistan. dedicated professionals, MCB with an international outlook and a regional focus ensures prompt customer service and innovative solutions to business and personal needs. needs. MCB is one of the leading banks of Pakistan with a market share of 12.5%. It is 12. also the pioneer in innovative consumer banking in Pakistan. It is the largest Pakistan. private sector bank in Pakistan. It is the most preferred provider of quality financial Pakistan. services and is usually considered the best place to work. It has developed a large work. stable deposit base. The bank today boasts of largest online branch and ATM base. network in the country. country.

Objectives
The main objective of choosing this specific topic is to make comparative analysis in banking industry and to reuse the secondary data in different kind of analysis. The purpose is to obtain the profitability ratio of few main analysis. units in banking industry & to analyze the reasons of their consistent growth in this field. field. To analyze the ability of given banks to earn profit over a period of time. time. To analyze the selected companies efficiency managing their resources for generating profit. To find out the operating profit over the year for banks. To find out that how effectively selected companies are maximizing their profit by controlling their cost/expenses.

Significance
It can be the major source of information for investor to make investment or business with the mentioned banks. Study will show the major banking tools being used in banking now days in Pakistan It will show the positively in business in Pakistan despite of critical condition of economy and all other problem encountering these days. To work out the profitability. Help in analysis of financial statement. Helpful in comparative analysis of a performance. To simplify the accounting information. Helpful for forecasting purpose. To workout short term financial position. Helpful for investor to make decision of investment. Its also shows that who much credibility of the given bank is strong or weak. This analysis shows that what are the opportunities that investor enjoy while investing. This help the management to know that what the weaker parts of the bank are so it is easy for the management to work on it and this will help management to make some arrangements for rectifying the weak points of the bank.

Data collection
We collect all the required data from the internet of the particular banks sites as we are overseas we are not able to visit the head offices so we have only internet source to find out the required information we try our best to collect all the related information and after that we select these banks for analysis their profit ratio in Pakistan. Due to this the data collection source is Pakistan. secondary. secondary. Secondary source is been used because the topic itself need it. it. Profitability ratio can only be calculated by the financial reports of the said banks that are already issued by banks. banks.

DATA COLLECTION TOOLS:

Capture comprehensive and historical information. Using existing information. Web based material and search engines are readily available Complete financial statements of all these banks available on there web sites.

Participant: Participant:
Internet. Newspapers. Financials Reports.

Data processing & analysing

As we know that our organizations are used Microsoft excel software to enter data and analyze so my basic software which I am using while analyzing is Excel. So when I am start doing analyzing I am using excels Excel. software for this processing and analysis purposes this software helps us to show data in all types of form which may be tabular graphical. I also used graphical. Microsoft Power point for the presentation of our data. data.

Data Analysis (Cont)

HABIB BANK www.hbl.com http://www.hbl.com/downloads/pdf/annual/2010/2010-financial-statementsgroup.pdf http://www.hbl.com/downloads/pdf/annual/2009/financial-statements-group.pdf http://www.hbl.com/downloads/pdf/annual/2008/financial-statements-group.pdf
Askari Bank www.askaribank.com

http://www.askaribank.com.pk/Reports/Askari%20Financials%202009.pdf http://www.askaribank.com.pk/Reports/Askari%20AR2010%20(Final%20Version).p df . http://www.askaribank.com.pk/Reports/Askari%20Financials%202008.pdf Muslim Commercial Bank www.mcb.com

http://www.mcb.com.pk/uploads/FCG/docs/MCB%20Annual%20Report%202 010..pdf http://www.mcb.com.pk/uploads/FCG/docs/MCB%20Annual%20Report%202 010..pdf http://www.mcb.com.pk/uploads/FCG/docs/MCB%20Annual%20Report%202 008.pdf

Net Profit Margin Ratio Analysis

Net Profit Margin Ratio = Net Profit after tax * 100 Sales/Revenue Sales/Revenue= Markup/ Return/ Interest Earned
Year 2008 Year 2009 Year 2010

HABIB BANK

10,864,112/63,376,047*100= 17.142 %

13,400,749/76,076,347*100= 17.614 %

17,034,380/81,325,028*100= 20.946 %

ASKARI BANK

415,055/18,395,142*100= 2.256 %

1,068,864/22,665,248*100= 4.715 %

919,461/27,954,956*100= 3.289 %

MCB BANK

15,323,227/40,049,505*100= 38.260 %

15,665,403/51,621,911*100= 30.327 %

16,872,126/54,829,365*100= 30.772 %

Graph Net Profit Margin Ratio

NET PROFIT MARGIN
45 40 35 30 25 20 15 10 5 0 2008 2009 2010 2.25 4.71 3.28 MCB MCB 20.94 17.14 17.61 ASKARI BANK 38.26 HBL 30.32 30.77 ASKARI HBL

Trend Analysis & Interpretation

In HBL from FY 2008-2009 % change in profit after tax has increased and the % change in net sales of the bank has also increased thats why the net profit margin has increased as compared to FY 2009-2010 because in year 2010 % change in profit after tax of bank and the net sales has increased more than the FY2008-2009.So the net profit margin has more increased in 2009-2010 as compared to FY2008-2009.

In ASKARI BANK from FY 2008-2009 % change in profit after tax has increased and the % change in net sales of the bank has also increased thats why the net profit margin has increased as compared to FY 2009-2010 because in year 2010 % change in profit after tax of bank has decreased but the net sales increased So due to decrease in profit after tax the net profit margin has decreased. While MCB from FY 2008-2009 % change in profit after tax has increased and the % change in net sales of the bank has also increased but the net profit margin ratio is decreased because in FY 2008-2009 net profit after tax is not as increased as the net sales so due to slightly increase in profit after tax decreases the net profit margin ratio in year 2010 % change in profit after tax of bank and the net sales has increased more than the FY2008-2009.So the net profit margin has slightly increased in 2009-2010 The above mentioned results have been shown in the graph 3.3.1 the trend for HBL bank is showing continuously increasing trend in FY 2008-2010 while MCB and Askari bank is showing mix trend as Askari bank shows first increasing and then increasing trend and MCB is having opposite trend as compared to Askari bank Comparative analysis shows that HBL has taken the lead in FY 2009-2010 as compared to other two banks. The reason is HBL has increasing their net sales ratio and profit after tax ratio in a ways that the net profit margin ratio is continuously increasing

Return On Assets Ratio Analysis

Return on Assets = Profit before tax Total Assets * 100

Working for Total Assets

Bank s
HBL

Particulars
Cash and balance Balances with other Banks Lending to financial institutions Investments- Net Advances- Net Operating Fixed Assets Deferred Tax Assets- Net Other Assets net

2008
56,533,134 39,364,297 6,193,787 129,833,446 456,355,507 35,588,444 14,751,252 12,186,848

2009
79,839,836 40,366,687 5,352,873 216,467,532 454,662,499 41,116,582 16,766,668

2010
81,640,246 37,413,185 30,339,344 254,909,116 459,750,012 16,155,290 9,572,203

750,806,715

863,778,621

924,699,403

Banks Particulars
Cash and balance Balances with other Banks Lending to financial institutions Investments- Net Advances- Net Operating Fixed Assets Deferred Tax Assets- Net Other Assets net Cash and balance Balances with other Banks Lending to financial institutions Investments- Net Advances- Net Operating Fixed Assets Deferred Tax Assets- Net Other Assets net

2008
16,029,666 3,967,816 4,479,754 35,464,972 128,818,242 8,345,054 9,021,883

2009
19,385,850 8,374,640 4,649,059 66,885,617 135,039,901 9,917,192 10,101,179

2010
22,565,190 3,787,538 9,194,186 102,100,063 152,784,254 10,084,422 14,264,476

ASKARI

206,127,387
39,631,219 4,106,526 4,100,079 97,790,391 262,508,830 17,320,485 19,828,228

254,353,438
38,774,871 6,077,354 3,000,000 169,484,647 253,248,265 18,099,010 23,057,731

314,780,129
45,407,264 1,551,518 4,401,781 215,747,844 254,565,471 21,061,787 27,746,198

MCB

445,285,758

511,741,878

570,481,863

Calculation for Return On Assets

Banks Year 2008 Year 2009 Year 2010

16,931,932/749,806,715*100=

21,381,636/863,778,621*100= 2.475360 %

27,040,030/924,699,403*100= 2.924196 %

HBL
2.25817 %

ASKAR I

502,770/206,127,387*100= 0.243912 %

1,069,897/254,353,438*100= 0.42063 %

1,249,627/314,780,129*100= 0.396984 %

21,886,740/445,285,758*100=

23,349,146/511,741,878*100= 4.562680 %

26,509,636/570,481,863*100= 4.646884 %

MCB
4.915054 %

Graphs for Return on Assets

RETURN ON ASSETS
6 5 4 3 2 1 0 2008 2009 2010 0.24 0.42 0.39 2.25 2.47 2.92 HBL ASKARI MCB MCB 4.91 4.56 4.64 ASKARI HBL

Trend Analysis & Interpretation

In HBL from FY 2008-2010 % change in profit before tax and the % change in total 2008assets of the bank has continuously increased thats why the return on assets has also continuously increased from FY 2008-2010. 2008-2010.

In ASKARI BANK from FY 2008-2009 % change in profit before tax has increased double and the % change in total assets of the bank has also increased thats why the return on assets has increased as compared to FY 2009-2010 because in year 2010 % change in profit before tax of bank and return on assets has increased but not as increased as in FY 2008-2009 So due to small increase in profit before tax the return on total assets has decreased. While MCB from FY 2008-2009 % change in profit before tax has increased and the % change in total assets of the bank has also decreased because the ratio or increasing profit before tax and total assets are not favorable so return on total assets has decreased but FY 2009-2010 % change in profit before tax of bank and the net sales has increased more than the FY2008-2009.So the return on total assets has slightly increased in 2009-2010 The above mentioned results have been shown in the graph 3.3.2 the trend for HBL bank is showing continuously increasing trend in FY 2008-2010 while MCB and Askari Bank is showing mix trend Askari bank is showing increasing trend in first FY but then showing Decreasing Trend in Second Financial Year and MCB is opposite to Askari bank Comparative analysis shows that HBL has taken the lead in FY 2009-2010 as compared to other two banks. The reason is HBL has increasing their return on total assets and profit before tax ratio in a ways that the return on total assets is continuously increasing.

DuPont Return On Assets Ratio Analysis

DROA= Net Income X Sales Working for Return On Assets
Banks
HBL

Sales * 100 Total Assets

Particulars
Cash and balance Balances with other Banks Lending to financial institutions Investments- Net Advances- Net Operating Fixed Assets Deferred Tax Assets- Net Other Assets net

2008
56,533,134 39,364,297 6,193,787 129,833,446 456,355,507 35,588,444 14,751,252 12,186,848

2009
79,839,836 40,366,687 5,352,873 216,467,532 454,662,499 41,116,582 16,766,668

2010
81,640,246 37,413,185 30,339,344 254,909,116 459,750,012 16,155,290 9,572,203

863,778,621

863,778,621

924,699,403

Banks

Particulars
Cash and balance Balances with other Banks Lending to financial institutions Investments- Net Advances- Net Operating Fixed Assets Deferred Tax Assets- Net Other Assets net Cash and balance Balances with other Banks Lending to financial institutions Investments- Net Advances- Net Operating Fixed Assets Deferred Tax Assets- Net Other Assets net

2008
16,029,666 3,967,816 4,479,754 35,464,972 128,818,242 8,345,054 9,021,883

2009
19,385,850 8,374,640 4,649,059 66,885,617 135,039,901 9,917,192 10,101,179

2010
22,565,190 3,787,538 9,194,186 102,100,063 152,784,254 10,084,422 14,264,476

ASKARI

206,127,387
39,631,219 4,106,526 4,100,079 97,790,391 262,508,830 17,320,485 19,828,228

254,353,438
38,774,871 6,077,354 3,000,000 169,484,647 253,248,265 18,099,010 23,057,731

314,780,129
45,407,264 1,551,518 4,401,781 215,747,844 254,565,471 21,061,787 27,746,198

MCB

445,285,758

511,741,878

570,481,863

Calculation for DuPont Return On Assets

Banks Year 2008 Year 2009 Year 2010

10,864,112/749,806,715*100=

13,400,749/863778,621*100= 1.551410 %

17,034,380/924,699,403*100= 1.842153 %

HBL

1.448921 %

415,055/206,127,387*100=

1,079,150/254,353,438*100= 0.4242718 %

919,461/314,780,129*100= 0.292096 %

ASKARI
0.201358 %

15,323,227/445,285,758*100=

15,665,399/511,741,878*100= 3.061191 %

16,872,126/570,481,863*100= 2.957521 %

MCB
3.4412120 %

Graphs for DuPont Return on Assets

DUPONT RETURN ON ASSETS
4 3.5 3 2.5 2 1.5 1 0.5 0 2008 2009 2010 0.2 0.42 0.29 MCB 1.44 1.84 1.55 HBL ASKARI BANK MCB ASKARI 3.44 3.06 2.95 HBL

Trend Analysis & Interpretation

In HBL from FY 2008-2010 % change in profit after tax and the % change in total assets of the bank has continuously increased thats why the DuPont return on assets has also continuously increased from FY 2008-2010. .

In ASKARI BANK from FY 2008-2009 % change in profit before tax has increased double and the % change in total assets of the bank has also increased thats why the return on assets has increased as compared to FY 2009-2010 because in year 2010 % change in profit before tax of bank and return on assets has increased but not as increased as in FY 2008-2009 So due to small increase in profit before tax the return on total assets has decreased. While MCB from FY 2008-2009 % change in profit before tax has increased and the % change in total assets of the bank has also decreased because the ratio or increasing profit before tax and total assets are not favorable so return on total assets has decreased but FY 2009-2010 % change in profit before tax of bank and the net sales has increased more than the FY2008-2009.So the return on total assets has slightly increased in 2009-2010 The above mentioned results have been shown in the graph 3.3.2 the trend for HBL bank is showing continuously increasing trend in FY 2008-2010 while MCB and Askari Bank is showing mix trend Askari bank is showing increasing trend in first FY but then showing Decreasing Trend in Second Financial Year and MCB is opposite to Askari bank Comparative analysis shows that HBL has taken the lead in FY 2009-2010 as compared to other two banks. The reason is HBL has increasing their return on total assets and profit before tax ratio in a ways that the return on total assets is continuously increasing.

Operating Profit Margin

Operating Profit Margin = Operating profit * 100 Net Sales Operating Profit= Profit before Tax + Markup/ Interest Expense

Working for Operating Profit

Banks
HBL

2008
16,931,932+26,525,556= 43,457,488

2009
21,381,636+33,405,813= 54,787,449

2010
27,040,030+34,330,255= 61,370,285

ASKARI

502,770+10,647,277= 11,150,047

1,599,611+13,542,210= 15,141,821

1,249,627+17,931,715= 19,181,342

MCB

21,886,740+11,592,922= 33,479,662

23,349,146+15,835,581= 39,184,727

26,509,636+18,027,372= 44,537,008

Calculation for Operating Profit Margin

Banks Year 2008 Year 2009 Year 2010

43,457,488/63,376,047*100=

54,787,449/76,076,347*100= 72.016 %

61,370,285/81,325,028*100= 75.462%

HBL
68.570%

11,150,047/18,395,742*100=

15,141,821/22,590,230*100= 67.028 %

19,181,342/27,954,956*100= 68.615 %

ASKARI
60.612 %

33,479,662/40,049,505*100=

39,184,727/51,621,911*100= 75.90716%

44,537,008/54,829,365*100= 81.228 %

MCB
83.595 %

Graphs for Operating Profit Margin

OPERATING PROFIT MARGIN
90 80 70 60 50 40 30 20 10 0 83.595 68.57 60.612 72.016 75.907 67.028 75.462 68.615 HBL ASKARI MCB 81.228

HBL

ASKARI

MCB
2008 2009 2010

Trend Analysis & Interpretation

In HBL from FY 2008-2009 % change in operating profit has increased and the % change in net sales of the bank has also increased thats why the operating profit margin has increased as compared to FY 2009-2010 because in year 2010 % change in operating profit of bank and the net sales has increased more than the FY2008-2009.So the operating profit margin has more increased in 2009-2010 as compared to FY2008-2009.

In Askari Bank from FY 2008-2009 % change in operating profit has increased and the % change in net sales of the bank has also increased thats why the operating profit margin has increased as compared to FY 2009-2010 because in year 2010 % change in operating profit of bank and the net sales has increased more than the FY2008-2009.So the operating profit margin has more increased in 2009-2010 as compared to FY2008-2009. While MCB from FY 2008-2009 % change in operating profit has increased and the % change in net sales of the bank has also increased but the net profit margin ratio is decreased because in FY 2008-2009 operating profit is more increased but the net sales is not as increased as operating profit so due to less increase in net sales the operating profit margin ratio is decreased but in year 2010 % change in operating profit of bank and the net sales has increased more than the FY20082009.So the operating profit margin has slightly increased in 2009-2010 The above mentioned results have been shown in the graph 3.3.1 the trend for HBL and Askari bank is showing continuously increasing trend in FY 2008-2010 while MCB is showing mix trend first decreased then increase Comparative analysis shows that HBL and Askari bank has taken the lead in FY 2009-2010 as compared to MCB. The reason is HBL and Askari has increasing their net sales ratio and operating profit ratio in a ways that the operating profit margin ratio is continuously increasing.

Operating Assets Turnover

Operating Assets Turnover = Net Sale Operating Assets Working for Operating Assets
Banks Particulars
Cash and balance with treasury banks Balances with other banks Operating fixed assets

2008
56,533,134 39,364,297 14,751,252 110,648,683 16,029,666 3,967,816 8,345,054 28,342,536

2009
79,839,836 40,336,687 16,766,668 136,973,191 19,385,850 8,374,640 9,917,192 37,677,682 38,774,871 6,077,354 18,099,010 62,951,235

2010
81,640,246 37,413,185 16,155,290 135,208,721 22,565,190 3,787,538 10,084,422 36,437,150 45,407,264 1,551,518 21,061,787 68,020,569

HABIB

ASKARI

Cash and balance with treasury banks Balances with other banks Operating fixed assets

MCB

Cash and balance with treasury banks Balances with other banks Operating fixed assets

39,631,219 4,106,526 17,320,485 61,058,230

Calculation for Operating Assets Turn Over

Banks Year 2008 Year 2009 Year 2010

HBL

63,376,047/110,648,683= 0.572 Times

76,076,347/136,973,191= 0.555 Times

81,325,028/135,208,721= 0.601 Times

ASKARI

18,395,742/28,342,536= 0.649 Times

22,665,248/37,677,682= 0.601 Times

27,954,956/36,437,150= 0.767 Times

MCB

40,049,505/61,058,230= 0.655 Times

51,621,911/62,951,235= 0.820 Times

54,829,365/68,020,569= 0.806 Times

Graphs for Operating Assets Turn Over

OPERATING ASSETS TURNOVER
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 0.82 0.649 0.572 0.655 0.555 0.601 0.601 HBL ASAKARI MCB MCB 0.767 0.806 ASKARI HBL

2008

2009

2010

Trend Analysis & Interpretation

In HBL from FY 2008-2009 % change in net sales and the change in operating assets of the bank has increased but due to more % change in operating assets the operating assets turnover has decreased in FY 2008-2009. And in FY 20092010 % change in net sales and the change in operating assets of the bank has decreased but to more % change in net sales operating assets turnover has increased in FY 2009-2010.

In Askari Bank from FY 2008-2009 % change in net sales and the change in operating assets of the bank has decreased thats why the operating assets turnover has decreased in FY 2008-2009. And in FY 2009-2010 % change in net sales and the change in operating assets of the bank has increased thats why the operating assets turnover has increased in FY 2009-2010. In MCB from FY 2008-2009 % change in net sales and the change in operating assets of the bank has increased thats why the operating assets turnover has increased but in FY 2009-2010. % change in net sales and the change in operating assets of the bank has increased but due to more % change in gross profit the operating assets turnover has increased in FY 2009-2010. The above mentioned results have been shown in the graph 3.3.3 the trend for HBL and Asakri bank is showing decreasing trend in first financial year and increasing trend in second financial year while MCB is showing increasing trend in first financial year and decreasing trend in second financial year. Comparative analysis shows that HBL and Askari bank have showing increasing trend FY 2009-2010. The reason is all banks are increasing their operating assets and net sales ratio in a ways that the operating assets turnover is continuously increasing.

Return On Operating Assets

Return on Operating Assets = Profit before Tax * 100 Operating Assets Working for Operating Assets
Banks Particulars
Cash and balance with treasury banks Balances with other banks Operating fixed assets

2008
56,533,134 39,364,297 14,751,252 110,648,683 16,029,666 3,967,816 8,345,054 28,342,536

2009
79,839,836 40,336,687 16,766,668 136,973,191 19,385,850 8,374,640 9,917,192 37,677,682 38,774,871 6,077,354 18,099,010 62,951,235

2010
81,640,246 37,413,185 16,155,290 135,208,721 22,565,190 3,787,538 10,084,422 36,437,150 45,407,264 1,551,518 21,061,787 68,020,569

HABIB

ASKARI

Cash and balance with treasury banks Balances with other banks Operating fixed assets

MCB

Cash and balance with treasury banks Balances with other banks Operating fixed assets

39,631,219 4,106,526 17,320,485 61,058,230

Calculation for Return on Operating Assets

Banks Year 2008 Year 2009 Year 2010

HBL

16,931,932/110,648,683*100= 15.3024 %

21,381,636/136,973,191*100= 15.610 %

27,040,030/135,208,721*100= 19.998 %

ASKARI

502,770/28,342,536*100= 1.773 %

1,069,897/37,677,682*100= 2.839 %

1,249,627/36,437,150*100= 3.429 %

MCB

21,886,740/61,058,230*100= 35.845 %

23,349,146/62,951,235*100= 37.090 %

26,509,636/68,020,569*100= 38.972 %

Graphs for Return on Operating Assets

OPERATING ASSETS TURNOVER
50 40 30 20 10 0 2008 2009 2010 15.302 1.773 15.61 2.839 35.845 37.09 19.998 3.429 38.972 ASKARI HBL ASKARI BANK MCB MCB HBL

Trend Analysis & Interpretation

In HBL from FY 2008-2010 change in profit before tax and the change in operating assets of the bank has continuously increased thats why the return on operating assets turnover has also continuously increased from FY 2008-2010. In Askari Bank from FY 2008-2010 change in profit before tax and the change in operating assets of the bank has continuously increased thats why the return on operating assets turnover has also continuously increased from FY 2008-2010

In MCB from FY 2008-2010 change in profit before tax and the change in operating assets of the bank has continuously increased thats why the return on operating assets turnover has also continuously increased from FY 2008-2010. The above mentioned results have been shown in the graph 3.8.4 the trend for HBL Asakri bank and MCB is showing continuously increasing trend in FY 2008-2010 Comparative analysis shows that all three banks have showing increasing trend FY 2009-2010. The reason is all banks are increasing their operating assets and net sales ratio in a ways that the operating assets turnover is continuously increasing.

Sales to Fixed Assets

Sales to fixed Assets = Net Sale Fixed Assets

Calculation for Sales to Fixed Assets

Banks Year 2008 Year 2009 Year 2010

HBL

63,376,047/14,751,252= 4.296

76,076,347/16,766,668= 4.537

81,325,028/16,155,290= 5.033

ASKARI

18,395,742/8,345,054= 2.204

22,590,230/9,917,192= 2.277

27,954,956/10,084,422= 2.772

MCB

40,0449,505/17,320,485= 2.312

51,621,911/18,099,010= 2.852

54,829,365/21,061,787= 2.603

Graphs for Sales to Fixed Assets

SALES TO FIXED ASSETS
6 5 4 3 2 1 0 2008 2009 2010 MCB 2.2042.312 2.852 2.277 2.7722.603 HBL ASKARI MCB ASKARI 4.296 4.537 5.033

HBL

Trend Analysis & Interpretation

In HBL from FY 2008-2010 change in net sales has continuously increased more than the fixed assets of the bank thats why the sale to fixed assets has increased so the sale to fixed assets has continuously increased. In Askari Bank from FY 2008-2010 change in net sales has continuously increased more than the fixed assets of the bank thats why the sale to fixed assets has increased so the sale to fixed assets has continuously increased.

While MCB has shown mixed trend as its sale is increase and fixed assets is also increase so the sale to fixed assets is increase in FY 2008-2009 as compared to FY2009-2010 the ratio of increase in net sales and fixed assets are not favorable with respect to percentage so as a result the sales to fixed assets is decreases The above mentioned results has been shown in the graph 3.9.1 the trend for HBLand Askari bank is showing continuous increase while MCB is showing opposite trend than other two banks as its increasing in both financial year but MCB has shown the decreasing trend in second financial year. Comparative analysis shows that askari bank and HBLand Askari bank has taken the lead in FY 2008-2010 as compared to MCB. The reason is HBL and askari bank has adopted an efficient strategy as it increases its fixed assets more than the increase in the net sales.

Return on Equity
Return on Equity = Net Profit after tax* 100 Share holders equity

Calculation for Return on Equity

Banks Year 2008 Year 2009 Year 2010

HBL

10,864,112/63179222*100= 17.1953 %

13,400,749/75,133,715*100= 17.835 %

17,034,380/83,842,059*100= 19.615 %

ASKARI

415,055/12,086,226*100= 3.43411 %

1,079,150/13,164,224*100= 8.197596 %

919,461/14,819,933*100= 6.204218 %

MCB

15,313,227/54,120,812*100= 28.3130 %

15,665,403/63,120,371*100= 24.818299 %

16,874,019/71,225,105*100= 23.6911744 %

Graphs for Return on Equity

RETURN ON EQUITY
30 25 20 15 10 5 0 2008 2009 2010 3.43 MCB 8.19 6.2 17.19 17.83 28.31 24.81 19.61 HBL ASKARI BANK MCB ASKARI 23.69 HBL

Trend Analysis & Interpretation

In HBL FY 2008-2010 % change in net profit after tax of bank has continuously increased while the net sale of the bank has also continuously increased. So the return on equity has increased

Askari bank in year 2008-2009 % change in net profit after tax has almost doubled and share holder equity has also increased. Thats why return on equity has increased but in contrast in FY 2009-2010 net profit after tax has decreased but share holder equity remain increased so as a result net profit after tax has decreased the return on equity is also decreased

In MCB from FY 2008-2010 % change in share holder equity has decreased more than the net profit after tax of the bank thats why the net profit after tax has decreased So the net profit after tax has decreased continuously. The above mentioned results has been shown in the graph 3.10.1 a trend for HBL bank is showing increasing trend from FY 2008-2010 while askari bank is showing mix trend both increasing and decreasing trend.MCB is showing continuous decreasing trend in all financial years Comparative analysis shows that HBL has taken the lead in FY 2009-2010 as compared to askari and MCB. The reason is HBL generating good profit after utilizing its share holders equity.

Gross Profit Margin

Gross profit Margin= Gross Profit * 100 Net Sales

Calculation for Gross Profit Margin

Banks Year 2008 Year 2009 Year 2010

HBL

36,850,491/63,376,047*100= 58.14577 %

42,670,534/76,076,347*100= 56.08909 %

46,994,773*81,325,028*100= 57.7863 %

ASKARI

7,748,456/18,395,742*100= 42.12092 %

9,048,020/22,665,248*100= 39.92023 %

10,023,241/27,954,956*100= 35.85496 %

MCB

28,456,583/40,049,505*100= 71.05351 %

35,786,330/51,621,911*100= 69.323915 %

36,801,993/54,829,365*100= 67.12095 %

Graphs for Gross Profit Margin

GROSS PROFIT MARGIN
80 70 60 50 40 30 20 10 0 71.05 58.14 42.12 56.08 39.92 69.32 57.78 35.85 HBL ASKARI MCB MCB 2008 2009 2010 ASKA RI 67.12 HBL

Trend Analysis & Interpretation

In HBL from FY 2008-2009 % change in gross profit of the bank in FY 2008-2009 is more than % change in Gross profit thatss why there is decrease in gross profit margin ration. Incontrast in FY 2009-2010 the situation is opposite as a result there is increase in gross profit margin

In ASKARI BANK from FY 2008-2010 % change in net sale has increased but % change in gross profit of the bank in FY 2008-2010 is more than % change in Gross profit thatss why there is continous decrease in gross profit margin ratio While MCB from FY 2008-2010 % change in net sale has increased but % change in gross profit of the bank in FY 2008-2010 is more than % change in Gross profit thatss why there is continous decrease in gross profit margin ratio The above mentioned results has been shown in the graph 3.11.1 trend HBL is showing decreasing trend in first financial year and than showing increasing trend in second financial year. While Askari bank and MCB is showing continous decreasing trend fron FY 2008-2010 Comparative analysis shows that HBL has taken the lead in FY 2009-2010 as compared to Askari & MCB The reason is HBL has increases its net sales in order to get continuous increase in its gross profit margin.

Conclusion/Findings

Habib Bank:
HBL is clearly the first choice of everyone because they are performing well and leading trend in net profit margin analysis they are having large sales so they generate or produce high profits in order to make their bank is one of the most consistent and leading bank in Pakistan. Pakistan. HBL is one of the most leading bank to generate return on its assets they increase their total assets to produce or generate profit so HBL is performing and producing profit very intelligently as compared to other banks. banks. HBL always receive good result whenever we talk about profit after tax or profit before tax or operating profit so we can say that HBL is one of the leading bank that generate profit when they utilize their assets as compared to other bank. bank. If we talk about fixed assets we also have no hesitation to say that HBL is performing the leading trend to increase their fixed assets in order to generate their net sale so according to my finding HBL is also the leading bank in sale to fixed assets analysis. analysis. Bank is enjoying health marking share and taste of good status in term of its operative features and customer support HBL utilizing his share holder equity in a very efficient manner in order to generate good profit HBL is performing very well in order to achieve good rating in the field of giving their shareholder a good return so we can say the HBL is one of the leading bank while analyzing the return on equity. equity.

After my finding the gross profit margin trend is more suitable for HBL as compared to other banks this bank is performing very efficiently and effectively when we talk about any profitability ratio analysis. So in my opinion HBL is the leading bank as

Askari bank:
Askari Bank is not as strong as MCB and HBL but they are going well and trying their best in order to make good profit to maintain their name in the market. market. Askari Bank is getting edge while analyzing operating assets turnover they are using their operating assets in way to achieve good profit from their operating assets. assets. Askari bank is one of the most leading bank after analyzing sale to fixed assts ratio they also generate good profit from their fixed assets. assets. Askari bank also having edge when we talk about operating profit margin they are also having edge while increasing their profit margin because they actually adopt very efficient and effective strategy to increase their sales. sales. The commitment, teamwork and fairness of banks employees and the integrity of all of its activities are focused at efforts driven towards success, customer satisfaction and eventually long term profitable relationships. relationships.

Muslim Commercial Bank

MCB is the second most leading bank to generate return on its assets they increase their total assets to produce or generate profit so MCB is performing and producing profit very intelligently as compared to other banks MCB always receive good result whenever we talk about profit after tax and net sales so we can say that MCB is the second most leading bank that generate profit when they utilize their assets as compared to other bank. bank. It is evidence from this report and the financial statement of MCB that it is making progress by leaps and bounds The profit of MCB has grown considerably from the few year Therefore we consider that MCB has a very prosperous present and future They assure the shareholder of wealth and maximization. Side by side I maximization. think that if bank would be able to cover and control over the below mentioned recommendation then it would be in such a situation They will really leads it toward the road of prosperity development and integrity and with the above mentioned sentence I think there is the too fault of the customer and in order to make the proper working of the bank The customer should also cooperative with the bank which will be really a good ambitious and diligent condition of the bank. bank.

Recommendations
Habib Bank Ltd
As we seen from the previous analysis of the financial statement we have realized that the habib bank is performing well since the last inspection it is quite difficult to give suggestion to improve the banking condition of habib bank ltd as we know that nothing is perfect in this world there is always a room for improvement After overall finding we come to know that HBL is having weak strategy for generating operating profits so we recommend them to utilize their operating assets in such a manner that these assets give you reasonable operating profit in order to compete the market. market. Overall HBL is performing very well in al analysis of profitability ratios but the only problem is this that they are not having good quality of services so we recommend them to improve give training to their staff Now days in Pakistan some other banks introduced good quality of services to their customer so now people not only want to save the money they also want care so habib bank is not having good quality of services. services. The bank is also in process of computerizing there records which is good sign but it is going on with small progress Computerization must be done on early basis this will help in increasing efficiency of work done, customer satisfaction and decrease the stationery cost and resultantly it will increase the profit. profit.

In past habib bank is always suffered from bad government policies Government interventions should avoid completely Banks different scheme must be conveyed to the target customer so that to have a reasonable share in the market. market. Banks should help the society by providing interest free loan to the talented students. students. Fresh graduates must be recruited as the combination of experience and fresh can be produced better results and it will improve the efficiency of the management. management.

Askari Bank:

Askari bank is a growing bank so they never compete the profile of HBL or MCB but they are performing well in some of the profitability analysis Askari bank is not operating their assets equities in order to generate good profits so I suggest them to make some good sales in order to generate good profit s We also suggest them to utilize their assets in such a manners that they provide them a good return After we find that they are not having good strategy while utilizing share holder equity they must utilize their share holder equity to generate more profit. profit. A department should be established that collect feedback of the customers and as well as general public. public. One way to retain the personal sector customer is to offer a wide range of services such as tax advice, free life insurance equivalent to the amount deposited , share portfolio management, funds management facility etc. etc. Marketing department effort to market and introduce its product should be improved. improved. Banks should help the society by providing interest free loan to the talented students. students. Fresh graduates must be recruited as the combination of experience and fresh can be produced better results and it will improve the efficiency of the management. management.

Banks different scheme must be conveyed to the target customer so that to have a reasonable share in the market. market. Staff turnover particularly of trained staff result in financial and other losses. losses. The amount spent by the bank on the employment, induction training of an outgoing officer constitutes to beat till another officer should ready to prove his work. So bank try to stop or reduced their employee turnover. work. turnover.

Muslim commercial bank:

After my findings I come to know that MCB is not performing well in net profit margin analysis because they never increase their sale to generate good ration for net profit margin so we suggest them to increase their net sales to make an increasing trend in net profit margin analysis. analysis. MCB is also not performing well after analyzing Operating profit margin this ratio tells that they not increasing their net sale to produce good operating profit so we suggest them to their net sales to produce good results in operating profit margin. margin. MCB is also not having good strategy for utilizing their fixed assets that is why they are not generating good net sales so we suggest them to make some efficient utilization of fixed assets in order to achieve good net sales. sales. Almost all branches of Muslim commercial bank the problem of staff is common. common. Basically the main idea behind is that when there is shortage of staff in any organization. It always result in lot of work and also boost up organization. the destruction because people working there feel thats they can do what ever they feel they least bother about the rules and regulation as implemented by the head office and mostly it result in corruption. corruption. Staff turnover particularly of trained staff result in financial and other losses. losses. The amount spent by the bank on the employment, induction training of an outgoing officer constitutes to beat till another officer should ready to prove his work. So bank try to stop or reduced their employee turnover. work. turnover.

Most of the employee are sticking to one seat only with the result that they become master of one particular job and losses their grip on other banking operations. operations. In my opinion all employees should be regularly change from one department to an other department of the bank. bank. Every year some of the employee should be sent for training for other countries and employees from other branches should be brought here some more reading material should be provided the purpose should be to educate the employees with advance studies in there filed. The employee filed. should be attended the seminar and the lectures on banking It is most nearly a sentence right man for right job according to his qualification professional skills and experience with the job specification must be considered while posting and placing the employee. employee.

Thank You