Banking project

NIB Bank Limited

Group Members:
Ahmed Ali
Fariha Humayun
Ziad Bashir


Introduction:
NIB Bank started operations in October 2003 when National Development Leasing
Corporation (NDLC) and Pakistan operations of IFIC Bank were merged. The Bank grew rapidly
and further achievements took place the Pakistan operations of Credit Agricole Indosuez were
acquired in April 2004, and in 2007, PICIC Commercial Bank Limited merged with the Bank.
Temasek Holdings of Singapore continues to be the largest single investor in NIB Bank with a
stake in excess of 88%. NIB Bank is the largest foreign bank in Pakistan in terms of its branch
network and one of the largest corporate entities of the country with a paid up capital of Rs. 103
billion. The Bank through its banking footprint of 179 branches in 59 cities of the country
continues to serve its more than 450,000 customers for all their financial needs. The Banks
resolve to provide world-class financial products and services to the banking population of
Pakistan is driven by its key business units including Consumer Banking, Small Medium
Enterprises and Commercial Banking, Corporate and Investment Banking and Treasury. The
core business activities of NIB are to accept deposits and to give advances.

Analysis:
Balance sheet:
TA = TL + EQUITY
On the balance sheet there has been a clear increase in the assets, which has also caused
an increase in the liabilities and equity of the balance sheet formula. In any bank the major use of
funds are either the investments or the advances, similarly in NIB the major use of funds are the
investments (85,386,110,000 in 2012 and 49,598,830,000 in 2011) and the second major use are
the advances ( 71,564,237,000 in 2012 and 60,844,380,000 in 2011). Therefore as you can see
there has been a huge increase in investments in 2012 along with an increase in advances.
Along with an increase in the asset portion of the balance sheet, there has been an increase in the
liabilities portion as well. The two major portions of the liabilities portion in the balance sheet
are the deposits and the borrowings. In the case of NIB bank, deposits are a major form of
liabilities (91,291,234,000 in 2012 and 85,488,268,000 in 2011), while borrowings being on the
second major form at (76,179,065,000 in 2012 and 47,382,031,000 in 2011). Along with
increases in the total assets and total liabilities, there has also been an increase in equity from
13,584,070,000 in 2011 to 13,622,136,000 in 2012.

Through the balance sheet we can calculate the percentage of deposit borrowings by:
2011 2012
Total assets: 154,793,630 190,609,361
Total liabilities 141,117,126 176,595,567

Percentage of
Deposit borrowings 91.16% 92.65%


Income Statement:
An income statement, gives the financial position of the bank, in the year of 2011, NIB went
through a loss before and after taxation. In 2011 before taxation NIB faced a loss of
3,480,418,000 and after taxation it faced a total loss of 2,044,090,000. But in 2012, the banks
financial position went up and it faced a profit of 145,120,000 before taxation and went up to
38,066,000 after taxation. So in the year of 2012 the bank has faced profits, unlike in the year
2011 where it faced losses. Since there has been almost a 42% increase in the total investments
in NIB bank, this may be a reason for the increase in their total profits at the end of the year
2012.


Major use of funds: investments: 32.1% (2011) and 44.8% (2012)
Major source of funds: deposits: 60.6% (2011) and 51.7% (2012)
The general provision for loan losses was 78,923 in 2012 as which is less compared to 282,139
in 2011, the provision has been subjected to 1.25% of the total risk weighted assets. The total
risk weighted assets in 2011 were 76,146,551 and were 80,036,703 in 2012 therefore the risk
weighted assets had increased in 2012. Though the percentage of risk has decreased from
49.19% in 2011 to 41.99% in 2012.








Profitability and Efficiency Ratios:

ROE: Net income after taxes
Total Equity Capital

ROA: Net income after taxes
Total Assets

2012 (,000) 2011 (,000)
Total revenue 38,066 (2,044,090)
Total equity 13,622,136 13,584,070
Total assets 190,609,361 154,793,630
Profit (NI) after taxes 38,066 (2,044,090)
ROE 0.28% -15.04%
ROA 0.02% -1.32%

Net interest margin: interest income from loans and security
Investments-interest expense on deposits and other debts
Total Assets
2012(,000) 2011(,000)
Interest income from
loans and security
investments
2855709 2078896
Interest expense on
deposits and other debts
5232575

4945251
Total assets 190,609,361 154,793,630
Net interest margin -1.25% -1.85%

Net non interest margin: Non interest revenue Non interest expense
Total Assets

2012(,000) 2011(,000)
Non interest revenue 2422182 2152080
Non interest expense 5232575 4945251
Total assets 190,609,361 154,793,630
Net non interest margin 0.99% 1.80%

Net bank operating Margin: Total Operating Revenue - Total Operating Expense
Total assets


2012(,000) 2011(,000)
Total Operating Revenue
5377695 1464833
Total Operating Expense
5232575 4945251
Total assets 190,609,361 154,793,630
Net bank operating Margin
0.08% -2.25%

Earning Base: Earning assets
Total assets



Earning Assets = Cash & balances + Balances with other banks + lending to financial
institutions

2012(,000) 2011(,000)
Cash & balances 7672866 7969044
Balances with other
banks
960850 1486830
lending to financial
institutions
3440910 14666918
Earning Assets 12074626 24122792
Total assets 190,609,361 154,793,630
Earning Base 6.33% 15.58%


Asset utilization: Total Operating Revenues
Total Assets
2012(,000) 2011(,000)
Total Operating
Revenues
5377695 1464833
Total assets 190,609,361 154,793,630

Asset utilization

2.82%

0.95%



Net profit Margin (NPM): Net Income after Taxes
Total Operating Revenue

2012(,000) 2011(,000)
Net Income after Taxes 38,066 (2,044,090)
Total Operating 5377695 1464833
Revenues
Net profit Margin 0.71% 139.54%
Equity Multiplier: Total assets
Total equity

2012(,000) 2011(,000)
Total assets 190,609,361 154,793,630
Total equity 13622136 13584070
Equity multiplier 13.99 11.38


Yield on earning assets: ________ Interest Income_______
Earning assets Equity investment

2012(,000) 2011(,000)
Interest Income 2422182 24122792
Earning Assets 12074626 24122792
Equity investment 103028512 103028512
Yield on earning Assets -2.67% 2.7%


Cost of borrowing: _____Interest expense____
Interest bearing liabilities

2012(,000) 2011(,000)
Interest expense 5232575 4945251
Interest bearing
liabilities
176,595,567 141,117,126
Cost of borrowing 2.96% 5.50%




Spread: Yield on earning assets cost of borrowings on interest bearing liabilities
2012(,000) 2011(,000)
Yield on earning assets -2.67 2.7
Cost of borrowings on
interest bearing liabilities
-2.96 -3.5
Spread -5.63% -0.8%

Expense Control Measures:

Interest expense/ TA:
2012(,000) 2011(,000)
Interest expense 55232575 4945251
Total assets 190,609,361 154,793,630
2.74% 3.79%

Administrative expense/ TA:
2012(,000) 2011(,000)
Administrative Expense 5173194 4714974
Total assets 190,609,361 154,793,630
2.71% 3.05%

Noninterest expense/ TA:
2012(,000) 2011(,000)
Noninterest expense 5173194 4714974
Total assets 190,609,361 154,793,630
2.71% 3.05%




Credit Risk:

Nonperforming loans/ Gross loans and leases
2012(,000) 2011(,000)
Nonperforming loans 116,533 2,355,074
Gross loans and leases 94856101 84472078
0.12% 2.78%
PLL/ Gross Loans and leases

2012(,000) 2011(,000)
PLL 8432590 8880336
Gross loans and leases 94856101 84472078
8.89% 10.51%

NPL Trend:
There has been a reduction in the NPL performance from 2355074 in 2011 to
116533 in 2012 showing that the loan risk has decreased.

Liquidity Risk:

Cash and due from deposits placed with other banks/TA

2012(,000) 2011(,000)
Cash and due from
deposits placed with
other banks
960850 1486830
Total assets 190,609,361 154,793,630
0.50% 0.95%


Government Securities/ TA
2012(,000) 2011(,000)
Government securities 47459121 26834300
Total assets 190,609,361 154,793,630
25.95% 17.20%

*The higher the percentage is of the government securities the lower the risk
involved, in the case of NIB, government securities ratio went up, therefore the
risk of loss has gotten lower for NIB.

Market Risk:

EPS: Net income_____
Shares outstanding

2012(,000) 2011(,000)
NI 145120 -3480418
Shares outstanding 10302851 5998632
EPS 1.41% -87.04%
Solvency and capital adequacy:

Equity capital/TA
2012(,000) 2011(,000)
Equity capital 13622136 13584070
Total assets 190,609,361 154,793,630
7.14% 8.77%

Capital adequacy ratio

2012(,000) 2011(,000)
CAR 12.96% 14.11%

Minimum Capital requirement:
2012(,000) 2011(,000)
Minimum Capital requirement 103028512 103028512

*NIB does meet the minimum capital requirement for both 2011 and 2012, being
that the minimum capital requirement for 2011 was 8 billion and for 2012 was 9
billion, and for both years the share capital of NIB remained 103028512 ( more
than 10 billion).

DU PORT ANALYSIS:

ROE has increased from 2011 to 2012, in 2011 it was -15.04% and it increased to
0.28%. Therefore NIB is increasing its ability to generate more profit; this also
indicates how well NIBs management is deploying the shareholders capital.
There has also been an increase in the ROA from -1.32% in 2011 to 0.02% in
2012. This increase shows how well the banks management is generating its assets.
The equity multiplier has also increased from 11.39% in 2011 to 13.99% in 2012;
this indicates that the financial leverage of NIB is increasing.
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