RATIO ANALYSIS

The Relationship of one item to another expressed in simple mathematical form is known
as ratio. A single ratio in itself is meaningless because it does not furnish a complete picture. A
ratio becomes meaning full when compared with other standard. So I have taken ratios and
percentages of the AKBL based on its record of the financial and operating performance.
Ratios to Determine Strength & Weaknesses
Everyone in the business of analyzing financial statements has a few favorite ratios they
utilize when determining the strengths or weaknesses of a specific financial statement.
The ratios that are used could change depending upon the industry the business is in, the
size of the business, the accounting method that is used by the business and the amount of the
credit desired and how healthy the company is. The ratio analysis of the UBL for the five years
from 2007 to 2015 years is given below.
Following are the main ty
pes of ratios that we are going to calculate in this report.

Efficiency ratios/profitability ratios

Liquidity ratios
Capital /leverage ratios

EFFICIENCY/PROFITABILITY RATIOS
Spread Ratio
Spread is the gap between interest rate a bank charges on loans and rate pays on deposits.
The amount of total interest earned divided by the total interest expense paid to depositors as
mentioned in the income statement. This ratio is useful for Banks and DFIs. The formula is
= Interest Earned / Interest Expense*100
Administrative Expenses to Profit before Tax

The purpose of this ratio is to evaluate the overhead structure of a financial institution
and calculate the administrative expenses as a percentage of profit before tax. It is useful for
whole financial sector. The formula is
=Administrative expense/profit before tax
Non-Interest Expenses to Total Income
This ratio expresses the percentage of non-interest expenses to total income which
reflects efficiency of management in applying the banks resources. It is useful for Banks and
DFIs. The formula is
=Non-interest expense/total income*100
Net Interest Margin Ratio
Net interest margin ratio describes the earning capacity through core banking by utilizing
all assets. The formula is
=Total interest income Total interest expense / Total assets*100

Non Interest Income to Total Assets

This ratio expresses how much income is earned other than mark-up through other
functions of the bank by employing total assets. The formula is
= Total non markup income / Total assets*100
Return on Assets (ROA)
This ratio expresses the capacity of earning profit by a bank on its total assets employed
in the business. It is calculated as percentage of net profit after tax to total assets. It is useful for
whole financial sector.
= Net profit after tax / Total Assets *100
Return on Equity (ROE)
ROE is used for the direct measurement of returns to the shareholders. It is calculated as
a percentage of the net profit after tax to total Shareholders equity.
= Net profit after tax /Total shareholders equity

Administrative Expenses to Non-Interest Income

This ratio expresses total administrative expenses to non-interest income. It gives
percentage of administrative expenses incurred in earning non-interest income. The formula is;
=Administrative Expenses/Non-Interest Income

Gain Ratio
Gain ratio is useful for Mutual Fund. The formula is
=Total Gains/Total income*100
Operating Expense Ratio
It is a measure of operating efficiency i.e. how well the management controls its expense.
Operating expense ratio can be used to gauge the general health of the core or other businesses.
The formula is,
=Operating Expense/Net Income*100

Interpretation
Spread ratio is highest in 2011 and lowest in 2015. Non-interest expense to total income
ratio is highest in 2015 and lowest in 2011 because the more interest expenses are incurred in
2015. ROA and ROE is highest in 2011 and lowest in 2012. Non-interest income to total asset
ratio is highest in 2011 and lowest in 2015.

Interpretation

Administrative expense to profit before tax is highest in 2013and lowest in 2011. Net
interest margin ratio is highest in 2012 and lowest in 2015. Administrative expense to non
interest income is highest in 2015 and lowest in 2011.

Interpretation
Return on capital employed is consistent in 2011, 2012 & 2015. Operating expense ratio
is highest in 2014and lowest in 2011. The gain ratio is highest in 2011 and lowest in 2012.
LIQUIDITY RATIOS
Cash and Balances with Banks to Total Assets
This ratio shows the percentage of total assets available in the form of highly liquid
assets.The formula is
=

Cash and balances with banks/ Total assets*100

Investment and Total Assets

The ratio between Investment and total assets shows investment activity with reference to
its total assets. This ratio is useful for banks as well as insurance companies.The formula is
= Total Investment / Total Assets *100
Advances and Total Assets
This ratio expresses the relationship of advances to total assets. The formula is

= Advances (net) / Total assets *100

Total Deposit and Other Accounts to Total Assets
This ratio shows what percentage of total assets comprises total deposits and other
accounts. The formula is
= Total deposits and other accounts / Total assets*100
Current Ratio
This ratio shows how many times current assets cover current liabilities and the strength of the
company to pay immediate liabilities. The formula is
=Current Assets/Current Liabilities
Total Liabilities to Total Assets
This ratio shows the proportion of banks assets, which are financed through debt. The formula is
=Total Liabilities/Total Assets*100

Interpretation

Cash and balances with banks to total assets are highest in 2013 and lowest in 2014. The
current ratio is highest in 2015 and lowest in 2014. The current ratio shows that bank is in liquid
position to meet its short term obligations in 2015.

Interpretation
The proportion of total deposit in total assets is highest in 2015 and lowest in 2011 and
investment and total asset ratio is highest in 2015 and lowest in 2012. Advances and total asset s
ratio is highest in 2012 and lowest in 2015. The proportion of total assets financed by debt is
highest in 2014 and lowest in 2011.
CAPITAL/LEVERAGE RATIOS
Capital Ratio
This ratio expresses the percentage of equity in total assets. The formula is
=Total Shareholder Equity /Total Assets*100
Break Up Value per Share (Times)
Break-up Value is net worth per share and is an important criterion to measure financial
soundness of a company. The formula is

= Total shareholders equity/No. of ordinary shares

Deposits to Equity Ratio (Times)
This ratio shows the relationship between total deposits in a bank to the total
shareholders equity.
= Total Deposits/ Total Shareholders Equity

Interpretation
Capital ratio is highest in 2011 and lowest in 2014 and breakup value per share is highest
in 2011 and lowest in 2014. The breakup value per share tells about the worth of the share and
financial health of the business. Deposit to equity ratio is highest in 2015 and lowest in 2011.
VERTICAL ANALYSIS OF BALANCE SHEET
2011
Cash and Balances with
Treasury Banks
Balances with Other Banks
Lendings to Financial
Institutions

7.328521
1.950292
7.925553

2012

2013

7.77649
3
1.92491
5
2.17327
3

7.621559
3.292495
1.82778

2014

2015

7.16851 7.609963
1.20322
5
2.92080
9

1.813522
0.469246

Investments

21.58858

Advances

55.29901

Operating Fixed Assets

2.845116

Other Assets

3.061833

Total Assets

100

17.2052
62.4938
8
4.04845
5
4.37680
6
100

26.29612
53.09102
3.669023
4.201411
100

32.4351
5
48.5365
1
3.20362
4.53153
9
100

38.86826
43.82864
2.74845
4.661338
100

Liabilities
Bills Payable

1.545741

Borrowing

10.32839

Deposits and Other Accounts

84.15691

Subordinate loans

1.763593

Liabilities Against Assets

Subject to Finance Lease

0.00369

Deferred Tax Liabilities

0.278569

Other Liabilities

1.923107

Total Liabilities

100

1.33867
5
7.86693
2
86.7505
1.55167
1
0.00858
3
0.00837
6
2.47526
2
100

1.230616
8.063049
86.02445
2.504496
0.004822
0.139504
2.033067
100

1.03431
2

0.84545

8.55396 5.299336
85.6602
3
2.00587
2

89.42142
2.144309

0.00186 0.000887
0.02862
2
2.71514
2
100

0.01439
2.274209
100

Net Assets
Shareholders Equity

24.45979

Share Capital

56.38213

Reserves

17.7761

Un appropriated profit

0.028686

Non-Controlling Interest

1.353298

31.1284
2
58.9718
7
2.59398
8
0.12356
2
7.18216
1

33.85048
48.26782
5.714214
0.11518
12.05231

40.0906
8
48.1085
1
4.23920
5
0.17918
9
7.38241
6

39.53831
45.49748
7.71742
0.158692
7.0881

Surplus on Revaluation of

100
100
100
100
Assets Net of Tax
VERTICAL ANALYSIS OF PROFIT AND LOSS STATEMENT

100

2011
Markup / Return / Interest

2012

100

2013

100

2014

100

2015

100

100

Earned
Markup / Return / Interest

57.35644 57.90538 60.07976

65.60775 69.270113

Expensed
Net Markup / Interest

04
7
6
42.64355 42.09461 39.92023

1
9
34.39224 30.729886

Income
Provision Against Non
Performing Loans and
Advances Net
Provision for Diminution in
the Value of Investments
Provision Against Repurchase

96

0.009912 0.002762 0.338774

25.89763

Directly
Net Mark-up/Interest

3
16.74592

Income
Fee, Commission and

25.887721 20.79439 10.25524

Agreement lendings
Bad Debts Written Off

Income
Non Markup / Interest

7.084797

8.485677 4.9745963
18
0.980081
7

8
-0.04814

1.34457

19.95289 27.05961

25.323942

4.864230

8
0.905215 0.943935 0.717119

3.9590283
6
0.768053 0.8833667

Income from Dealing in

73
4
9
4.330387 4.749073 2.375641

16
2
2.673426 2.3573993

Foreign Currencies
Gain on Sale of Securities

4
8
3
15.59277 0.199762 0.634085

63
1
0.782003 0.9471893

Brokerage Income
Dividend Income

Net
Unrealized Loss on
Revaluation of Investments
Classified as Held for

17

6.83718 6.098967

23.28527

99

0.001786

0.013899

1.865656 1.805367

1.380371

0.0114110 0.121696
3

Trading-Net
Other Income
Total NonMarkup / Interest
Income

2.224154

4
0.0002441
3

3
4
31.70778 14.71730 11.62939

1.0620084
41
10.45418 9.2092361

96
5
4
46.89466 34.67019 38.68900

61
8
33.73946 34.533178

41

12

Non Markup / Interest

Expenses
Administrative Expenses

31.62821 32.09954 31.43444

Other Provisions / Write Offs

0.079580

Other Charges

0.059734 0.151633

29.04088
1
0.155325

26.816181
0.2648361

Interpretation of Vertical Analysis of Balance Sheet

In vertical analysis, the total assets are taken as 100% and all the other values containing

fixed and current assets are calculated as percentages.

Cash and balance sheet are not following a single pattern. In 2012 they are highest but

decrease in 2013 and 2014 then again rise in 2015.

Lending is decrease from 2011 to 2013 then increased in 2014 then again decreased in

2015.
Sum of liabilities and equity are taken 100% and values are calculated.
The share capital is decreasing from 2012 to 2015.

Interpretation of Vertical Analysis of Profit and Loss Statement

Mark-up/return/interest earned are taken are as 100% and the values are calculated on

percentage. Charges are highest in 2014 but decrease in next years.

Same as below total expenses are 100% and other values are calculated with respect to it.
The total profit after taxation is decreasing from 2011 to 2012 then 2012 to 2015
continuously increased.

HORIZONTAL ANALYSIS OF BALANCE SHEET

201
1
Cash and Balances with Treasury
Banks

100

Balances with Other Banks

100

Lendings to Financial Institutions

100

Investments

100

Advances

100

Operating Fixed Assets

100

2012

2013

2014

2015

120.017

145.146

116.400

195.927

6
111.632

4
235.615

3
45.2262

5
175.449

2
31.0143

7
32.1864

8
197.764

3
90.1391

5
152.648

339.703

133.993

8
113.140

6
149.544

7
160.941

1
179.982

1
108.058

3
182.270

191.501

133.487

287.248

113.103

4
139.565

4
123.756

9
188.681

98.3927

112.128

104.899

104.909

6
86.5361

4
109.950

2
132.407

7
98.4131

7
117.113

4
143.966

1
124.279

6
203.805

5
99.9599

8
99.9599

6
233.213

184.069

7
48.1330

2
46.1329

5
70.5317

7
25.6066

9
9.90792

9
148.894

5
166.680

9
226.825

3
127.819

169.999

11.1712

Deferred Tax
Other Assets
Total Assets

100
100

161.679

Liabilities
Bills Payable

100

Borrowing

100

Deposits and Other Accounts

100

Subordinate Loans

100

Liabilities Against Assets Subject to

Finance Lease

100

Deferred Tax Liabilities

100

Other Liabilities

100

6
264.28
3.41606
8
146.232

200.01

Total Liabilities

100

Net Assets

100

113.612

140.841

124.808

191.806

2
106.077

2
121.932

2
106.967

9
145.472

135

168.75

126.686

235.163

110.951

104.387

9
106.614

4
117.395

4
15.4796

3
39.1968

8
79.3562

2
63.1596

8
489.591

6
166.413

Shareholders Equity
Reserves

100

Unappropriated Profit

100

Non-Controlling Interest

100

Surplus on Revaluation of Assets

Net of Tax

100

456.92

804.793

HORIZONTAL ANALYSIS OF PROFIT AND LOSS STATEMENT

201
1
Markup / Return / Interest Earned

100

Markup / Return / Interest Expensed

100

Net markup / Interest Income

100

Provision Against NonPerforming Loans

and Advances Net
Impairment Loss on Available for Sale
Investments
Provision for Diminution in the Value of
Investments
Provision Against Repurchase Agreement
Lendings

100

100

Bad Debts Written Off Directly

100

Net Mark-up/Interest Income

100

Non Markup / Interest Income

Fee, Commission and Brokerage Income
Dividend Income
Income from Dealing in Foreign
Currencies
Gain on Sale of Securities Net

100
100
100
100

Unrealized Loss on Revaluation of

Investments Classified as Held for

100

Trading-Net
Other Income

100

2012

2013

2014

2015

149.67

180.487

216.393

122.6246

2
156.77

8
206.452

2
261.340

8
119.8986

9
140.11

8
145.564

9
155.937

3
97.56489

4
59.291

3
59.1616

7
41.5822

33.84410

5115.5

121.4622

6.306153
3
144.7230

241.85

117.2170

128.84

3
126.6576

6
118.57

2
133.2058

17846.3

250.969

123.918

1050.97

327.239
6

120.921

153.139

9
211.170

2
82.109

4
111.426

2
117.801

5
1.556081

9
6.0864

9.05177

13.1449

1295.370

23.438

-219.85

4.62963

101.8844

121.49

112.015

103.325

Total NonMarkup / Interest Income

100
100

56.37719

59.5075

62.8494

123.48

5
129.856

3
159.351

123.2722

148.75

165.723

183.470

91.17085

285.18

352.277

720.139

7
123.2014

8
149.09

8
166.818

4
184.817

5
20.06196

8
70.002

9
52.6837

3
106.183

20.06196

70.002

54.3366

106.746

1
569.93

9
334.727

7
845.915

21.37208

4
-

8
-

51.219
61.292

43.85221
19.71450

4
139.22

0.13913
86.6061

1
14.40594

1
40.251

6
18.790

4
89.79950

54.895

Non Markup / Interest Expenses

Administrative Expenses
Other Provisions / Write Offs

100

Other Charges

100

Total NonMarkup / Interest Expenses

100
100

Extra Ordinary / Unusual Items

Profit Before Taxation

100

Taxation Current

100

Prior

100

Deferred

100
100

Profit After Taxation

100

Unappropriated Profit Brought Forward

100

Profit Available for Appropriation

100

17.62115

119.1575

34.2953
46.3067

56.48382

5
31.605

1
39.6494

34.0854
196.664
2
63.6031
1
38.9904
51.9866
5

Interpretation of Horizontal Analysis of Balance Sheet

In this analysis, the year 2011 is taken as 100% and all other values are calculated in
percentages.

Investments are increasing and highest in 2015.

Borrowing is decreasing in 2015. It was increasing from 2012 to 2014.
AKBL has also increased its resources in 2015.

Interpretation of Horizontal Analysis of Profit and Loss Statement

In this analysis, the year 2011 is taken as 100% and all other values are calculated in percentages.
By the analysis I can interpret that the gross income is increasing every year. On the other hand,
the expenses and other charges are also increasing. But overall, the profit after taxation is higher
in 2012.