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Analysis
2007 2008 2009 2007 2008 2009
Assets
Cash and balances 39,683,883 39,631,172 38,774,871 10% 9% 8%
with treasury banks
Balances with other 3,807,519 4,043,100 6,009,993 1% 1% 1%
banks
Lending to financial 1,051,372 4,100,079 3,000,000 0% 1% 1%
intuitions
Investments 113,089,261 96,631,874 167,134,465 28% 22% 33%
Advances 218,960,598 262,135,470 253,249,407 53% 59% 50%
Operating fixed assets 16,024,123 17,263,733 18,014,896 4% 4% 4%
Deferred tax assets – – – – – –
Other assets 17,868,761 19,810,476 23,040,095 4% 4% 5%
Analysis
2007 2008 2009 2007 2008 2009
COMMENTS
■ Cash is constantly decreasing from year 2007 to 2009; it shows that the liquidity position of
the bank is going to be weak, so it is alarming sign for the bank. Therefore bank should take
necessary steps according to the position.
■ Increase in money at call and short notice, it means that customers of bank are very punctual in
making payments. Therefore it is good sign for the bank.
■ In the field of investment there is increasing trend with the passage of time. It is common term
of finance” more investment more return.
■ As we know that main source of profit of a bank is the difference between the percentages of
interest, Banks pay less rate of interest than receiving the interest from the customers. In this case
advance to customers are high in 2007 & 2008 but it decrease in 2002. It means that MCB is not
running very well.
LIABILITIES
■ There is increasing trend in deposits and other accounts which shows the credibility of the
bank.
■ Borrowing is decreasing in 2008 but there is increasing trend in the year 2009. Although it is
seeing that bank’s borrowing is increasing with the passage of time which is not a good sign but
there is a positive thing in this behalf, usually banks borrow money at that time when they would
have to give it for earning more profit, I think the MCB BANK LTD. doing the same thing for
increasing its profits.
INCOME
■ Interest earned Increase which is a Positive sign.
■ As we know that banks provide many facilities other than money lending and borrowing.
Banks receive fee, commission etc. for these services. Therefore fee and commission income are
decreasing which is not a favorable signs.
EXPENSES
■ Return on deposit increase which decrease the profit.
■ Administration expenses are increased but no alarming rate.
Trend Analysis:
Horizontal Analysis of Balance sheet:
Analysis
2007 2008 2009 2007 2008 2009
Assets
Cash and balances 39,683,883 39,631,172 38,774,871 100% 99.9% 98%
with treasury banks
Balances with other 3,807,519 4,043,100 6,009,993 100% 106% 158%
banks
Lending to financial 1,051,372 4,100,079 3,000,000 100% 390% 285%
intuitions
Investments 113,089,261 96,631,874 167,134,465 100% 85% 148%
Advances 218,960,598 262,135,470 253,249,407 100% 120% 116%
Operating fixed assets 16,024,123 17,263,733 18,014,896 100% 108% 112%
Deferred tax assets – – – – – –
Other assets 17,868,761 19,810,476 23,040,095 100% 111% 129%
INCOME
Interest income increase with great proportion with is favorable. It means that interest received
by the bank is increasing with the passage of time. It is not good for a banking company.
As we all know that banks provide many services for their customers and also act as a agent of
the customer. The banks receive fee and commission after their services; it is a main source of
bank to receive fee and commission from their customers. In case bank is taking more fees as
compared to previous years. This is good for the bank.
EXPENSE
Return on deposit decreases which shows good sign and it is due to decrease in return rate.
Admin and diminution and provision against non performing loan increasing turned that is
favorable.
Bad debts increased with huge amount not positive sign.
Profit before taxation has increased but not with greater proportion.
Tax increases which are not bad because it is interrelated with profit, if profit increased, tax also
increase.
RATIOS ANALYSIS:
Current Ratio:
The current ratio measures the number of items of the firm s current assets cover its current
liabilities. The current ratio should be part of your business' basic financial planning,
meaning it should be tracked monthly or quarterly. By keeping a close eye on this figure, you
will recognize if it begins to get out of line. This will allow you to take early action to
prevent your business from ending up in a difficult position.
2007
Current Ratio
112%
112%
111%
111%
110%
110%
109%
2007 2008 2009 Current Ratio
Quick ratios:
Quick ratio shows a firm’s ability to meets it current liabilities with its current assets
excluding inventories and prepaid expenses, which are least liquid portion of the current
assets. Since banks don’t have any sorts of inventories, therefore only prepaid expenses
are subtracted from the current assets of the bank.
Quick Ratio = Cash + Account Receivable + Marketable Securities/Current Liabilities
2007
Quick Ratio
Graphical representation:
Quick Ratio
0.85
0.9
0.85 0.77
0.8
0.72 Quick Ratio
0.75
0.7
0.65
2007 2008 2009
Working Capital:
Working capital is the difference between current assets and current liabilities. Working
capital is often considered a measure of liquidity by it self. This ratio shows the amount of
liquidity. Working capital is used to check liquidity of the organization.
2007
Working Capital:
Graph:
Working Capital
47,700,847
50,000,000 43,144,763
40,000,000 34,129,446
30,000,000
Working Capital
20,000,000
10,000,000
0
2007 2008 2009
Cash Ratio:
Cash and equilent are the most liquid assets. The cash ratio shows the proportion of the
assets held in the most liquid possible form. It is used to check the liquidity of the
organization
2007
2009
Cash Ratio
Graph:
Cash Ratio
0.13
0.12
Cash Ratio
0.11
0.1
2007 2008 2009
Debt to Equity Ratio:
Debt-to-Equity ratio shows the extent to which debt financing is used relative to
equity financing. Debt equity is calculated by dividing total liabilities of the bank by
the total owner equity.
2007
2009
Debt Ratio:
It shows that how much assets have been financed by liabilities and it also shows the
margin of protection available for the creditors.
2007
2009
Total Liabilities 439,483,714
Total Assets 509,223,727
Debt Ratio 86%
Debt ratio
Graph:
Debt Ratio
88%
87%
87% Debt Ratio
86%
86%
2007 2008 2009
Return on Investment:
Return on investment measure the ratio of profit generated in relation to the total assets
employed. Net profit after tax divided by total assets gives the return on investment.
2007
2009
ROI
ROI
ROI
40%
20%
ROI
0%
2007 2008 2009
Interest Coverage Ratio
Interest coverage ratio shows the ability of a firm to cover up its interest charges on the
income before interest and taxes. The ratio is obtained through dividing earning before
interest and taxes (EBIT) of the bank by its interest expenses.
2007
EBIT 21,308,035
Interest Expense 7,865,533
Interest coverage ratio 270%
2008
EBIT 21,867,566
Interest Expense 11,560,740
Interest coverage ratio 189%
2009
EBIT 23,154,945
Interest Expense 15,841,463
Interest coverage ratio 146%
Graph:
Interest Coverage Ratio
300%
250%
200%
150% Interest Coverage Ratio
100%
50%
0%
2007 2008 2009
ROA
2007
2009
ROA
5.00%
4.00%
3.00%
ROA
2.00%
1.00%
0.00%
2007 2008 2009
Income/Expense Ratio
2007
Income/Expense Ratio
Graph
Income/Expense Ratio
6
4
Income/Expense
2 Ratio
0
2007 2008 2009
2007
Total Income After Tax 15,265,562,000
Weighted Average Number of Common 628,276,843
Share Outstanding
Earning Per Share Rs. 24.30
2008
2009
24
21
2007 2008 2009
Price/Earning Ratio:
2007
2009
Price/Earning Ratio
20
15
10
Price/Earning Ratio
5
0
2007 2008 2009
Dividend Payout Ratio= Dividend per Common Share/ Diluted Earning Per Share
2007
52.00%
51.00%
50.00%
Dividend Payout Ratio
49.00%
48.00%
47.00%
2007 2008 2009
Dividend Yield
Dividend Yield= Dividend per Common Share / Market Price per Common Share
2007
Dividend Yield
9.14%
10.00%
8.00%
5.00%
6.00%
3.13% Dividend Yield
4.00%
2.00%
0.00%
2007 2008 2009
1. Current Ratio:
In MCB bank limited 2008s current ratio is strong than other two years. It shows
that this year’s liabilities could be recovered with its assets. After 2008, a bank has
maintained good current ratio in 2009
Current ratio does not show the true picture of the organization. Sometimes it shows that
organization has ability to pay its obligations but its profitability ratio tells that it has not ability to
pay its obligation. But still it is very useful for the analysts especially for the creditors.
2. Quick Ratio:
Prepaid expenses are considered as current assets so they are included in current ratio calculation.
Prepaid expenses are less liquid. Normally it is not easily converted into cash on short notice. In
2008 quick ratio is better than other years it show that bank can easily recover its liabilities on
short notice.
3. Working Capital:
Working capital is better in 2009, which is 47,700,847. It means that are
assets utilized more economically in 2009 as compared to 2007, 2008.
4. Cash Ratio:
Higher cash ratio also shows the higher rate of satisfaction like other liquidity
ratios. Cash ratio is more important liquidity ratio. Cash ratio is higher in 2007 as compared to
2008 & 2009.
5. Debt Ratio:
Financial leverage is the extent to which a firm is financed with debt.. In Muslim Commercial
bank, years 2007 & 2008 were financed with debt as compare to year 2009.
6. Debt to Equity Ratio:
The debt equity ratio is a simple rearranged of the debt ratio. Debt equity ratio shows how the
firm’s stockholder bears the risk of the firm. Greater the debt greater risk for the firm s
shareholders .In 2007 risk for the share holders was very low as compared to the year 2009.
7. Return on Investment:
This ratio is more meaningful for share holders who are interested to know the profit
earned by the company because the dividend paid from available profit higher ratio
means factor of production fully utilized and good position. Here return on Investment is
higher in 2007 as compare to year 2008 & 2009.
8. Interest Coverage Ratio:
Coverage ratio shows the number of the times a firm can recover or meet particular financial
obligations. The interest coverage ratio, which is also called the time
interest earned ratio, measure the coverage of the firm s interest expense. Year 2007 is better in
interest coverage ratio as compare to the other years.
9. Return on Assets:
This ratio has a decreasing trend. It means the assets of the business are not fully utilized
in more and efficient way and also shows an unfavorable trend of the business. This ratio
of the bank was too low in the year 2009, as compare to other two years.
10. Interest to Expense Ratio:
The interest to expense ratio is the profitability ratio. The more the good ratio means that the
business is running well. The Interest to expense ratio of the MCB is not good as compare the
year 2007, 2008.
11. Earning per Share:
This ratio got really improved as it has gone with the increase in profit. Earning per share
is a good measure of profitability when compared with similar other business. Here
decreasing EPS, which will surely decrease share price. This ratio has the same trend as
the return on the assets.
12. Price earning Ratio:
Price earning ratio of MCB bank is high in 2007 as compared to the other years. Because the
market price per share is high in 2007. Because in this year MCB generate an excellent profit.
2009 is also good but 2008 is worst all of them.
13. Dividend Payout Ratio:
The dividend payout ratio of the MCB is almost constant for the years 2007, 2008, 2009.
14. Dividend Yield Ratio:
The dividend yield ratio of the MCB is higher in 2007 because the share price was higher in
2007. Dividend yield Ratio is good in 2009 and worst at all in year 2008.