Professional Documents
Culture Documents
This case is written by Roma Israni1& Bakhtawar Shaikh2 , solely to provide for class
discussion. The author may have disguised certain names and other identifying information
to protect confidentiality.
This Publication may not be transmitted, photocopied, and digitalized, or otherwise
reproduced in any form by means without the permission of copyright holder. This Case
Study covers practical implications of Business theories, models, and structures. This is
written for Financial Reporting and Analysis.
Its June, the last month of Pakistans fiscal year, After analyzing financial
statements of NIB Bank, Mr.Shanawaz is looking disturbed because of banks
performance, so many questions raised in the mind of Mr. Shanawaz that
either the bank will perform well enough in future to support its operations
or not? Will the bank continue its strategy for longer period? Will the
economic indicators support the NIB bank for the future actions? He became
further confused when MCB Bank has given them offer of merger. Would this
attempt of merging will be beneficial for the NIB Bank? Either this merging
option will reduce its risks of bankruptcy or not? If NIB Bank will not follow
the MCB Bank offer of merging then what type of activities will make the
bank more profitable than the option of merging?
For pondering over these situations, he along with the banks higher
authorities recommendations have decided to hire external consultant for
individually analyzing these financial statements and who will provide
independent banks performance and also give suggestions for the future
actions.
Business Portfolio:
NIB has the vast portfolio of financial products that includes Deposits,
Consumer loans, Wealth management, Trade Finance, Working Capital
Finance, Seasonal Finance, and Medium Term Finance, Transaction banking,
etc. And also the financial services through three different business units
like:
Retail banking: Consumer banking includes the services by a bank to
individual consumers, instead of companies, corporations or other banks.
Services
offered
include savings and transactional
accounts, mortgages, loans, debit, and credit cards.
Commercial Banking: Commercial bank is a division of a NIB bank, which
more specifically deals with deposit and loan services provided to
corporations or large/middle-sized business.
Investment Banking: It is division of NIB that assists individuals,
corporations, and governments in raising financial capital by underwriting or
acting as the client's agent in the issuance of securities.
will be done only with the permission of State Bank of Pakistan and also with
the permission of SECP and CCP. NIB Bank has officially announced that by
the merger of two banks stakeholders of the NIB Bank will remain the
investor of the MCB Bank. These are the only talks between the banks
nothing more than this declared by NIB management. According to some
analyst If the both banks come to mutual decision of having a merger of MCB
and NIB bank then this may be the win-win situation for both of the banks as
MCB will get the benefit from the vastly expanded branch networking of NIB
bank as MCB has adequate liquidity and capital buffer to grow itself through
risky assets and take a initiate to expand and face the competition more
strongly on the other hand NIB having lower capital adequacy of 12.5%, high
cost to income of 95% in CY15. With 21% of total loan book currently
classified, heavy cost structure, low interest rate environment and adverse
changes in the minimum deposit rate last year, the banks earnings and
business turnaround looks stretched.
Questions:
1. Analyze the performance of NIB bank through ratios by using
financial statements provided in the Exhibits.
2. Comment over the flaws in the NIB banks financial performance
after working through the ratio analysis.
3. What do you think would be the best decision for NIB? Whether to
go for merger or not?
4. What should be the future steps that management of NIB should
take in order to get stable profits in the coming years if it does
not go for merger?
EXHIBIT 1
Income Statement
NIB Bank
2012
14,095.
1
11,125.8
2,969.3
1,059.8
2013
13,228.
1
9,878.1
3,350.0
998.1
2014
15,144.
9
11,248.9
3,896.1
1,102.7
2015
14,928.6
10,086.7
4,841.9
4,164.0
1,166.2
157.7
5,353.0
116.5
5,236.5
1,620.4
226.8
6,195.3
-751.0
6,946.3
1,616.9
10.2
6,625.8
1,536.5
5,089.3
1,420.9
3.0
10,429.8
199.2
10,230.5
- Non-Interest Expense
Operating Income or Losses
- Net Non-Operating Losses (Gains)
Pretax Income
- Income Tax Expense (Benefit)
Income Before XO Items
- Extraordinary Loss Net of Tax
- Minority/Non-Controlling Interests
(Credits)
Net Income/Net Profit (Losses)
5,413.1
-176.6
-617.1
440.5
178.4
262.1
0.0
5,636.5
1,309.8
-802.5
2,112.3
532.3
1,580.1
0.0
6,305.0
-1,215.7
-575.1
-640.6
423.3
-1,064.0
-443.3
6,388.8
3,841.8
10.0
3,831.8
1,390.8
2,441.0
-109.5
4.8
257.3
43.4
1,536.6
99.2
-719.9
15.9
2,534.6
EXHIBIT 2
Balance Sheet
NIB Bank
Assets
+ Cash & Near Cash Items
+ Inter banking Assets
+ Short-Term Investments
+ Net Loans
+ Total Loans
- Reserve for Losses on
Loans
+ Long-Term Investments
+ Net Fixed Assets
+ Other Assets
Total Assets
Liabilities & Shareholders
Equity
+ Demand Deposits
2011
2012
2013
2014
2015
7,411.5
16,711.0
39,386.4
7,282.0
4,788.6
75,139.9
7,681.5
3,142.2
53,768.3
7,767.0
8,582.7
47,558.3
60,861.5
71,585.9
84,489.2
94,879.8
82,026.0
104,583.
9
93,673.5
117,653.
6
9,602.9
3,693.8
86,364.6
110,669.
0
135,028.
0
23,627.7
4,832.9
2,722.9
22,898.8
154,825.
0
23,293.9
4,692.7
2,754.1
24,612.1
190,855.
2
22,557.9
1,728.4
2,879.3
27,567.8
178,793.
5
23,980.1
6,703.4
3,033.1
27,677.3
194,995.
3
24,359.0
6,678.9
3,086.4
24,947.1
245,042.
7
28,537.1
33,605.4
35,081.7
58,882.3
26,112.8
32,769.5
25,169.5
58,434.7
33,574.9
24,859.8
27,784.1
69,697.3
40,747.7
28,949.6
65,146.4
38,948.7
26,197.7
84,051.8
3,158.9
2,574.2
51,376.4
141,161.
Total Liabilities
3
+ Total Preferred Equity
0.0
+ Minority Interest
0.0
103,028.
+ Share Capital & APIC
5
+ Retained Earnings & Other
Equity
89,364.9
Total Equity
13,663.7
154,825.
Total Liabilities & Equity
0
Source: Annual reports of the bank
86,218.8
4,875.6
5,193.3
80,171.9
0.0
176,459.
6
0.0
0.0
103,028.
5
88,632.9
14,395.6
190,855.
2
98,234.4
9,516.0
3,836.9
51,506.7
0.0
163,094.
0
0.0
0.0
103,028.
5
87,329.1
15,699.5
178,793.
5
98,751.8
9,091.6
3,271.7
66,948.1
0.0
178,063.
1
0.0
0.0
103,028.
5
86,096.3
16,932.2
194,995.
3
+ Customer Deposits
+ ST Borrowings & Repos
+ Other Short-Term Liabilities
+ Long-Term Borrowings
+ Other Long-Term Liabilities
74,835.8
41,684.5
33,151.4
109,917.
6
23,058.3
4,105.4
89,872.3
0.0
226,953.
5
0.0
0.0
103,028.
5
84,939.4
18,089.2
245,042.
7
EXHIBIT 3
2012
2013
2014
2015
257.3
1,536.6
-719.9
2,534.6
703.7
1,178.4
1,622.5
1,839.
9
-121.9
2,187.2
-971.3
1,071.7
-628.2
-851.5
1,635.3
1,019.
4
835.7
2,497.7
90.7
72.8
32.9
1,554.7
2,427.
3
11.5
+ Increase in Investments
-130.1
34,580.
8
+ Decrease in Investments
0.0
+ Change in Loans
+ Other Investing Activities
Cash From Investing Activities
369.5
212.1
34,096
.4
-0.4
+ Capital Expenditures
-447.8
-599.5
0.0
23,623.
8
0.0
-450.6
36,633.
7
4,152.5
18,758.
6
774.9
14,357
.8
0.0
11,100.
8
321.3
47,852
.3
0.0
0.0
11,122.
1
4,197.2
22,761.
6
0.0
0.0
0.0
0.0
-1.7
0.0
0.0
25,296.
8
415.9
8,380.1
151.8
15,038
.3
35,110
.4
-1.4
24,239.
8
0.0
3,992.8
0.0
0.0
13,793.
3
97.1
14,343
.6
15,331
.2
-825.9
66.5
-46.1
29,488.
6
0.0
-1.6
0.0
0.0
5,622.2
1.6
215.1
-203.2
48,472
.6
3,047.
5
Exhibit 4.
Projected consolidated statements after if the merger
takes place.
2016
147373
21
100866
90
46506
31
199229
184639
2248
38611
6
42645
15
142093
1
191231
357056
400778
7
-14731
41582
60038
56
10268
371
618481
9
141402
96877
64230
98
-13473
38318
00
207359
2017
150714
57
112488
71
38225
86
153650
1
-11561
2421
15273
61
22952
25
161686
9
73483
587181
509014
89578
28761
25
51713
50
609609
8
140376
66075
63025
49
490574
64062
5
215001
10851
1,183,4
31 197477
1,390,7
90 423,329
2,441,
010
109524 443.257
2,550,
1,063,
534
511
1,063,
954
2017
10052543
1645086
1599044
96023597
110668994
3086446
890491
9359609
7157979
4558914
245042703
8063675
586418
7699646
59670691
93673494
3033057
2926075
9992164
9350081
194995301
2576216
85676741
130399643
4195516
2740528
62750894
105102800
4197195
3463013
642415
226953544
3271665
178063082
103028512
997582
-45769623
103028512
474123
-45769623
Accumulated loss
Shareholders' equity
Surplus on revaluation of assets - net
-40416118
17840353
248806
18089159
245042703
-42432340
15300672
1631547
16932219
194995301
2016
2017
IN RS (000)
402913
6 -107897
-191231
-92743
383790
5 200640
311847
324637
27941
400778
7
-8780
-64
8619
199229
2248
184639
309133
341516
-729629
-37907
-162
153650
1
2421
-11561
14731
141402
-1948
280328
6
103461
9
-21558
140376
-548290
610060
2
557213
980840
780200
-853935
172013
76
200160
6
-164286
229258
47
252968
43
406995
395469
15
-353261
Borrowings
391936
54
366582
38
24504
321120
191231
-272189
-169470
-8935
11468
181
365603
28
-1,679
0
367686
131864
49
154551
2
-122135
11,244,
221
215069
-457435
827648
5
-257708
853419
3
912752
0
497503
1
773898
93336
-327379
-270795
-1284
72780
1030
449407
5
4,197,1
Dividend paid
Receipt from non-controlling unit holders PICIC Mutual Funds
Net cash generated from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
-45
415,934
414,21
0
3,047,5
36
8,650,0
93
11,697,
629
95
-22
203,168
3,994,0
05
-46,113
8,696,2
06
8,650,0
93