comparitive analysis of public sector banks.docx

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


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


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.


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.


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



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



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



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


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



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.



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


Fig.7. Revenue Composition Bank of Punjab

64%12%

24%

Expense = Interest expense+ Non Interest Expense + Provisions


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%



Fig.11. Revenue Composition Bank of Khyber

64%

24%

13%

Expense = Interest Expense+ Non Interest Expense + Provisions


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%



Fig.15. Revenue Composition First Women Bank

48%

45%

7%

Expense = Interest Expense+ Non Interest Expense + Provisions


Fig.16. Expense Composition First Women Bank

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