Financial Analysis

Horizontal Analysis: (as per Excel)

Statement of Financial Position

2017 2016 2015

Assets

Cash and balances with treasury banks 18.799% 36.523% 10.871%

Balances with other banks 61.381% -16.537% 101.505%
Lending to financial institutions 112.511% 89.132% -81.333%
Investments-net 21.410% 13.462% 13.668%
Advances-net 12.853% 19.448% 28.821%
Operating fixed assets 10.740% 18.635% 18.109%
Deferred tax assets-net 65.495% -18.033% -19.699%
Other assets-net 4.254% -29.212% 20.713%
19.13614% 15.44209% 12.34946%

Liabilities

Bills payable -19.557% 121.649% 9.243%

Borrowings -2.209% -27.893% 23.454%
Deposits and other accounts 22.740% 20.871% 9.545%
Sub-ordinated loans -0.022% 125.000% 0.000%
Liabilities against assets subject to final - - -100.000%
lease
Deferred tax liabilities - - 0.000%
Other liabilities 6.995% 0.689% 50.958%
19.80357% 15.06973% 12.10887%

Net assets 6.73953% 22.82424% 17.34198%

Represented by
Share Capital 70.000% 0.000% 0.000%
Reserves 209.844% -55.452% 11.904%
Share Deposit money -100.000% 0.000% 0.000%
(Accumulated loss)/unappropriated profit -525.903% -112.623% -42.717%
10.713% 23.336% 26.681%
Surplus on revaluation of assets -19.970% 9.912% -19.383%
6.73953% 21.41534% 17.10902%
 Profit and Loss/Income Statement:

2017 2016 2015

Mar-up/interest earned 16% -5% 6%

Mark-up/interest expensed 8% -14% -2%
Net mark-up/interest income 27% 11% 23%

Provision against non-performing loans 1432% -73% 207%

and advances-net
Provision for diminution in value of -17% 58% -42%
investments-net
Bad debt written off directly - - -
1287% -71% 184%

Net mark-up after provisions -88% 48% -3%

NON Mark-up/Interest Income

Fee, commission and brokerage 26% 18% -9%
Dividend income 47% 21% 53%
Income from dealing in foreign 45% -31% -41%
currencies
Gain on sale and redemption of -48% -50% 651%
securities-net
Unrealized loss on revaluation of -76% -86% 1203%
investments-for trading
Other income 11% 1% 63%

Total non-markup income -13% -31% 173%

Non mark-up/ Interest Expense

Administrative Expenses 21% 13% 19%
Provisions against other assets -10% 154% -9387%
Reversal of provision against balance - -1605% 81%
sheet obligations
Other charges 28% 69% 1%

Total non-markup expense 26% 10% 23%

Loss/profit before tax -158% 7% 75%

Less: taxation -143% 15% 83%
- - -
Loss/profit after taxation -168% 2% 70%
EPS -152% 2% 57%
Vertical Analysis: (as per Excel):
Statement of Financial position:

2017 2016 2015

Assets

Cash and balances with treasury 6.54% 6.56% 5.55%

banks
Balances with other banks 0.94% 0.69% 0.96%
Lending to financial institutions 3.78% 2.12% 1.29%
Investments-net 37.33% 36.64% 37.27%
Advances-net 45.53% 48.07% 46.45%
Operating fixed assets 1.31% 1.41% 1.37%
Deferred tax assets-net 1.65% 1.19% 1.67%
Other assets-net 2.91% 3.33% 5.43%
100.00% 100.00% 100.00%

Liabilities

Bills payable 0.52% 0.77% 0.40%

Borrowings 6.00% 7.31% 11.70%
Deposits and other accounts 85.64% 83.13% 79.39%
Sub-ordinated loans 0.69% 0.83% 0.42%
Liabilities against assets subject to 0.00% 0.00% 0.00%
final lease
Deferred tax liabilities 0.00% 0.00% 0.00%
Other liabilities 2.57% 2.87% 3.29%
95.42% 94.89% 95.20%

Net assets 4.58% 5.11% 4.80%

Represented by
Share Capital 4.07% 2.85% 3.29%
Reserves 0.49% 0.19% 0.49%
Share Deposit money 0.00% 1.28% 1.48%
(Accumulated loss)/unappropriated -0.43% 0.12% -1.11%
profit
4.13% 4.45% 4.16%
Surplus on revaluation of assets 0.44% 0.66% 0.69%
4.58% 5.11% 4.86%
Income statement:

2017 2016 2015

Mar-up/interest earned 100.000% 100.000 100.000%
%
Mark-up/interest expensed 54.795% 58.738% 64.602%
Net mark-up/interest income 45.205% 41.262% 35.398%

Provision against non-performing loans and 41.021% 3.108% 10.975%

advances-net
Provision for diminution in value of 0.248% 0.346% 0.207%
investments-net
Bad debt written off directly -
3.454% 11.182%

Net mark-up after provisions 3.937% 37.808% 24.216%

NON Mark-up/Interest Income

Fee, commission and brokerage 3.560% 3.285% 2.636%
Dividend income 0.264% 0.208% 0.163%
Income from dealing in foreign currencies 0.317% 0.254% 0.350%
Gain on sale and redemption of securities-net 3.820% 8.511% 16.035%
Unrealized loss on revaluation of investments- -0.001% -0.004% -0.027%
for trading
Other income 5.367% 5.588% 5.229%

Total non-markup income 13.327% 17.842% 24.385%

Non mark-up/ Intesrt Expense

Administrative Expenses 29.285% 28.125% 23.634%
Provisions against other assets 1.490% 1.921% 0.718%
Reversal of provision against balance sheet - -1.637% 0.103%
obligations
Other charges 0.125% 0.114% 0.064%

Total non-markup expense 30.901% 28.523% 24.519%

Loss/profit before tax -13.637% 27.127% 24.082%

Less: taxation -3.994% 10.755% 8.895%

Loss/profit after taxation -9.643% 16.372% 15.187%

Significant Points of Analysis:

Horizontal analysis:

Statement of financial position:

 Statement of financial position has improved overall.

 Total assets and liabilities are increasing at an increasing rate. Both increased
by 20 percent in 2017.
 Balances with other banks increased by 61 percent.
 Lending to other financial institutions increased by 112 percent.
 However, net assets have increased at a decreasing rate i.e. by 6 percent in
2017.
 Bills payable have reduced by 20 percent and borrowings have also been
reduced by 2 percent.
 Deposits have increased by 22 percent.
 Share capital has increased by 70 percent due to issuance of rights share.

Income statement:

 However, regardless of the increase of 16 percent in interest revenue profit

after taxes have been reduced by 168 percent.
 This loss can be explained by the increase in provision against non-performing
loans i.e. 132 percent.

Vertical analysis:

Statement of financial position:

 Advances contribute the largest part to the total asset i.e. 46 percent, followed
by investments that comprise of 37 percent of the total asset.
 However, liabilities are 95 percent of the total assets of which deposits have a
share of 85 percent.

Income statement:

 Net income from interest is 45 percent of the total interest income.

 However, provisions against non-performing loans are 41 percent of the total
interest income.
  Non-interest expenses are 30 percent of the total interest revenue, while non-
interest income is only 14 percent.

Critical Analysis
Overall view:
Bank of Punjab was nearly bankrupt in 2008 due to imprudent lending decisions of
the previous management. It had 84 billion of debt missing under fraud and public
looting under the ex-President Hamesh Khan. It had a CAR OF -14 percent/
Considering bank’s rapidly falling performance, State Bank of Pakistan relaxed some
of its policies for the bank (e.g. provisioning of non performing loans and CAR
requirements) and its management was changed; moreover, as the bank is backed by
government of Punjab, government provided assistance to the bank by lending money
to it. Under new management, Bank of Punjab was restructured and as a result it had
showed tremendous results over past few years. A lot have been invested on human
resource and technologies. Internal controls have been tightened and lending policies
have been reformed. Since 2012, its total assets increased by 96 percent, deposits
increased by 109 percent, current and saving accounts increased by 157 percent,
investments increased by 86 percent, shareholder’s equity increased by 150 percent,
net interest margin increased by 626 percent and its profit before tax increased by 473
percent in 2016.
Due to its tremendous results, Bank of Punjab took a step of deducting all of its
provision against non-performing loans in 2017 from the income due to which it
suffered a loss and its profits were reduced by 158 percent. However, its CAR was
was still 9.73 percent in 2017, and its required percentage was 11.275 percent.
Considering its capital management plan, SBP further relaxed the requirement. In
2017, it issued tier II capital i.e. its share capital was increased by 70 percent by an
issue of rights share; also, it issued term finance certificates of Rupees 4300 million.

Bank of Punjab’s success can be dedicated to the steps it took and also to the overall
growth of the banking industry of Pakistan in the last decade.

Proforma statements:
Assumptions and recent facts:

 Average growth rate of last 5 years have been taken in to account

 Bank of Punjab recently recovered 750 million rupees through NAB from its
missing debt.
 Consumers and investors have gained confidence as its deposits are increasing
and share prices have increased by 153 points over the last year.
 Bank of Punjab is now strictly following the framework and policies of State
Bank of Pakistan- all relaxations are released.
 Its capital adequacy ratio has reached 15 percent this year.
 9 months on unaudited financial statement shows 69 percent increase in profit
before tax.
 Earning per share has increased to 2.96 rupees.
