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Bba 1 Part 3
Bba 1 Part 3
A good margin will vary considerably by industry, but as a general rule of thumb, a
10% net profit margin is considered average, a 20% margin is considered high (or
“good”), and a 5% margin is low.
Return on asset:
𝒏𝒆𝒕 𝒊𝒏𝒄𝒐𝒎𝒆
𝒓𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝒂𝒔𝒔𝒆𝒕 =
𝒕𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔
=0.46%
Interpretation:
Return on assets gives an indication of the capital intensity of the company, which
will depend on the industry; companies that require large initial investments will
generally have lower return on assets. ROAs over 5% are generally considered good.
Return on equity:
𝒏𝒆𝒕 𝒊𝒏𝒄𝒐𝒎𝒆
𝒓𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝒆𝒒𝒖𝒊𝒕𝒚 =
𝒕𝒐𝒕𝒂𝒍 𝒆𝒒𝒖𝒊𝒕𝒚
= 9.98%
Interpretation:
𝒏𝒆𝒕 𝒊𝒏𝒄𝒐𝒎𝒆
𝑬𝑷𝑺 =
𝒔𝒉𝒂𝒓𝒆 𝒐𝒖𝒕𝒔𝒕𝒂𝒏𝒅𝒊𝒏𝒈
=1.7289
Interpretation:
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EPS indicates how much money a company makes for each share of its stock,
and is a widely used metric to estimate corporate value. A
higher EPS indicates greater value because investors will pay more for a
company's shares if they think the company has higher profits relative to its
share price
=5.6times
Interpret:
The P/E ratio shows what the market is willing to pay today for a stock based
on its past or future earnings. A high P/E could mean that a stock's price is
high relative to earnings and possibly overvalued.
Conversely, a low P/E might indicate that the current stock price is low
relative to earnings
=0.53times
Interpret:
A market-to-book ratio above 1 means that the company's stock is overvalued.
A ratio below 1 indicates that it may be undervalued; the reverse is the case for
the book-to-market ratio. Analysts can use either ratio to run a comparison on
the book and market value of a firm
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Critical analysis:
Part 1
Interpretation:
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From the above calculated figures, it has been assumed that the current ratio has
fluctuated over three years’ time span. As in the year 2018 SBL had the high ability to
meet its current liabilities from its current assets. Current ratio of 2019 posses’ low
ability to meet its current liabilities as compared to 2017-year ratio and then its lower
in 2019 that indicate the less liquid position of the bank.
IN 2017 working capital was low but in 2018 year it’s increased and then in 2019 it’s
more decreased. working capital indicates that the business has decreased current
assets and increased current liabilities. That is negative sign for SBL in 2019 year.
Bankers look at net working capital over time to determine a company’s ability to
weather financial crises.
Time Interest Earned ratio is an indicator of a company’s ability to meet the interest
payments on its debt. From the calculated figures, in 2018 0r 2019 SBL had high times
interest earned ratio so SBL had ability to meet its interest payments. In 2018 this ratio
slightly decreased that’s mean SBL had been less able to meet its interest payments on
the debt
The amount of financial leverage implies risk to creditors and owners. In 2017 debt
ratio was 0.94 and it is same position in 2018 or 2019 debt ratio was 0.95
If debt ratio has increased that’s mean more debt in relation to equity. Above
calculations shows that SBL had low debt ratio in 2018 year that was positive point for
SBL. But in 2019 its increased from 2017, If debt ratio is increased that’s mean more
debt in relation to equity and SBL is being financed by creditors rather than by internal
positive cash flow which is dangerous trend. In 2019 its increased again
Total capitalization gets higher, so does risk and the chance of bankruptcy. For the
above figures, in 2018 year this ratio increase form 2017 year so a high ratio shows that
a company is financially weak; the burden of debt may increase default risk. In 2019
year, this ratio deceasing strongly that’s a pretty good situation of capitalization.
This ratio is used for the measurement of the profitability of the bank whether bank
generate favorable profit or not. that is show in 2017-year net profit margin ratio
increased that indicates a more profitable bank that has better control over its costs and
in 2019&2018 this ratio decreasing strongly because of high sales overheads.
This particular ratio indicates how profitable a company is relative to its assets. ROA
ratio illustrates how well management is utilizing the company’s assets to make a profit.
In 2017 ROA ratio had higher so it was indicating higher the return, the more efficient
management was in utilizing its asset base. This ratio decreased in 2018 and again
slightly decreases in 2019.
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Return on equity shows how much profit a bank earned in comparison to the total
amount of shareholder’s equity. In 2017 or 2018 SBL had 9.02% to 9.78% return on
equity that’s a pretty good state of SBL. But 2019 it’s slightly increase.
This particular ratio shows to measure a company’s efficiency in using its assets. From
the ratio, it’s showing that the total assets turnover is increasing in 2019 as compared
to previous and subsequent year and assets are utilizing efficiently.
Market ratios are commonly used by the investors to assess the performance of a
business as an investment and also the cost of issuing stock.
Horizontal analysis:
This method of analysis is simply comparing the same item in a company's financial
statements from two or more comparable periods, and then calculating the difference.
Horizontal analysis allows the assessment of relative changes in different items over
time. It also indicates the behavior of revenues, expenses, and other line items
of financial statements over the course of time. Accounting periods can be two or
more than two periods
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BALANCE 2019 2018 2017
SHEET
Deferred tax 0 0 0
Assets
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Liabilities
Liabilities against 0 0 0
assets subject to
finance lease
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Soneri bank limited
HORIZONTAL ANALYSIS OF BALANCE SHEET
Dec 31 (2019,2018,2017,2016)
Interpretation of Horizontal Analysis of Balance Sheet of Soneri
Bank Limited:
Horizontal Analysis of the Bank Balance Sheet has been prepared by taking the year
2017 as the base year add the remaining years as compared to the base year. The most
liquid asset of the Bank such as cash and balances with treasury Bank has decreased
from the year 2018 to 2019 that is 34% in 2008 and 31% in 2019, whereas other
liquid assets such as balances with other Banks and lending to financial and other
institutions have shown an increasing trend such as balances with other Banks is 3%
in 2018 and 76% in 2019 and lending to financial institutions is -40% in 2018 and
-69% in 2019 show negative trend. The reason for this trend might be the uncertain
less rate of lending in other financial institution political and law and order situations
in Pakistan. All other assets such as mark-up accrued in local currency, rent and
repayments, suspense account, stamps on hand etc. shows an increasing trend as well
as fixed assets, advances and investment also have shown a positive trend. The overall
effect is increased in total assets.
In the end the net assets increased from -3 to 12%. Soneri Bank Limited shows
progress in all fields including the financial position due to this the market share of
Soneri Bank also increases.
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2019 vs 2018 2018 vs 2017 2017 vs 2016
Balances with
76% 2.484503% 40%
other banks
Lending to
financial
-69% -39.6977% 18%
institutions
Deferred tax
0 0 0
Assets
Liabilities
Liabilities against
assets subject to 0 0 0
finance lease
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Deferred tax
639% -87.1698% 18%
Liabilities
Share capital 0% 0% 0%
Surplus on
revaluation of 249% -74% -12%
asset
Unappropriated
11% 19% 5%
profit
12% -3% 1%
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Capital Gain (192) -137% 519 -63% 1399 24%
and Dividend
Income
Other income 37 -21% 47 15% 41 41%
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Vertical analysis of balance sheet items:
This type of analysis illustrates the relationship of certain components compared to the
whole, or the financial stability of a company. There are several different types of ratios
or indexes that may help us determine where the company currently stands in
relationship to where it wants to go.
The most common form of Vertical Analysis is using percentages to show one account's
relationship to another.
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2019 vs 2018 2018 vs 2017 2017 vs 2016
Balances with
0% 0% 0%
other banks
Lending to
financial
0% 1% 2%
institutions
Intangible Assets 0% 0% 0%
Deferred tax
0 0 0
Assets
Other Assets 3% 3% 3%
Liabilities
Bill Payable 1% 1% 2%
Borrowing 22% 21% 20%
Liabilities against
assets subject to 0 0 0
finance lease
Subordinate debts 2% 2% 1%
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Deferred tax
0% 0% 0%
Liabilities
Other Liabilities 3% 2% 2%
Share capital 2% 3% 3%
Reserves 1% 1% 1%
Surplus on
revaluation of 0 0 1%
asset
Unappropriated
11% 19% 5%
profit
Bills payable as the percentage of current assets is 2% in 2017 and 1% in 2018 but
remains same in 2019. Borrowing increases from 20% in 2017 to 21% in 2018 and then
22% in 2019. the increase in 2019 was due to the increase in borrowing outside the
Pakistan. As compared to 69% in 2017 or 2018 the deposits decrease in 2019 is 67%
the reason for this decrease in deposit is decrease in saving and current deposits. Other
liabilities also have shown an increase from 2% in 2017 or 2018 and 3% in 2019.
Shared holders Equity is 6% in 2007 and decrease 5% in 2018 and then decreases to
5% in 2019. However, the overall trend is positive and strengthens the banks financial
position.
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2019 2019vs 2018 2018 vs 2017 2017 vs
2018 2017 2016
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Interpretation of Vertical Analysis of Income Statement of Soneri Bank Limited:
The vertical Analysis of the Income Statement indicates that the Net Mark-up for
the Soneri Bank is favorable and decrease from 34% to 32% and then decreases to
20.4% in 2019, the decrees is due to the higher interest rate this is a positive trend
because a bank principle revenue source is usually interest from loans and interest.
Total non-mark-up interest income as a percentage of profit shows a decreasing
trend and decreases from 11% to 10% in 2018 to 7% in 2019, usually falling
interest rates are positive for a bank’s interest and because of this bank profit
increases. Taxation for the bank increase from 2017 to 2019 Soneri Bank has
already achieved its target which is settled done by the higher authorities of the
bank. The bank income statement shows that the bank net income for the year
2019 has increased as compared to previous year.
The Soneri bank has achieved broad based growth in non-interest income during
the year just ended with all categories but mortgage banking income showing
improvements.
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Interpretation:
Over all HBL got high rank in all banks their assets are more than others there share
price are higher than other banks.
A conclusion can be only being made if necessary information is provided about the
financial analysis of all banks can be viewed. In the light of information about these
banks which provided in this report the work performance, efficiency, quality of
customer services, market value and financial position of the HBL can be seen. It made
a consistent growth. In spite the of political change in the country, change in the govt.
policies external economic factor increase in inflation decrease in saving habits of the
people, more reliance on foreign loans, the HBL has sustained its profitable position.
After studying and a thorough financial analysis of HBL for latest years. HBL growths
in its assets 3 trillion which is a positive sign of growth of bank. The liability of HBL
had been decreased year by year as compared to total assets. On the other hand, total
equity of the HBL bank for the had increase because of the increase in the net assets,
and secondly the investor confidence on the banks increased which in turn increase the
intangible assets of the bank. i.e., Good will in this competitive market. The return on
equity (ROE) of the bank had shown fluctuation due to increase inflationary pressure
and computerization of different branches and expansion of new branches within and
outside the country. The financial analysis of Soneri bank or last three years had shown
remarkable growths in its assets have increased from which is a positive sign of growth
of bank. The liability of SNBL had been remained consistently year by year as
compared to total assets. On the other hand, total equity of the SNBL had also been
remained consistent because of the working capital, and secondly the investor
confidence on the bank because of government bank which enhanced because of the
trust of the investor which in turn increase the intangible assets of the bank i.e. good
will in this competitive market.
Future outlook:
SNBL team committed to taking the Bank to the next levels of success. Key features of
multi-pronged plan are as follows:
• Managements want to continue to invest in branches to make them more sales and
service oriented. Through introduction of new sales and service model, strengthened
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transaction processing and leading financial products menu, aspire to achieve this
ambition.
• Not any organization can deliver without investing in its employees. In order to
achieve growth targets, management have to further strengthen reserve of talent and
leadership powered by a strong performance culture and training.
SWOT Analysis:
STRENGTH:
WEAKNESS:
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about the functioning of bank. Poor employee development and
promotion.
No branches of Soneri bank are in any other country. So the bank has to
invite additional cost for communicator banking.
OPPORTUNITY:
THREATS
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o Car Finance
o Running -Finance
o Education Loan
Soneri bank pays special attention to the SME sector and it is a healthy
practice but other sectors also need to be given proper attention and
priority as well because attention in one sector and negligence in the
other might create an imbalance.
Conclusion:
To summarize the things, I would like to say that in a short span of time Soneri bank
has been successful in achieving a land mark amongst all private banks of Pakistan. It
started its operations in 1992 as public limited company with paid up capital of Rs.300
(M) approx. To develop Soneri Bank Limited into an aggressive and dynamic financial
institution having the capabilities to provide personalized service to the customers with
cutting edge technology and a wide range of products, and during the process to ensure
maximum return on assets with ultimate goal of serving the economy and society.
These branches are located in commercial area These branches are located in
commercial areas They have clearly defined values and norms and they strictly practice
their norms and values.
Now with its focus on the SME sector it has been successful in grabbing attention of a
lot of potential customers. Also it is a bank with a lot of promises for new generation
who want to choose banking as a career. Performance for the sake of performance is
entertained and every individual is given opportunity to rise to higher levels of their
career by taking the test of Soneri bank which if passed is a guarantee to be appointed
directly which is a healthy practice for promoting banking. Also with a less crowded
management and board of directors there are fewer clashes of interests thus resulting in
whole and unified efforts for the betterment of the bank. So in the end I just want to say
that Soneri bank is a good place to be a banker and to excel in the banking field with its
promising facilities and services to the public.
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Recommendation and suggestion:
Finally, there are some suggestion for Soneri bank limited the suggestion are based on
experience.
o Increase in the number of branches both in rural and urban areas to cater the
needs of ever increasing no of potential clients: - More branches need to be
opened. Obviously suitability and other factors need to be considered but one
can never pluck the fruit out if not try for it. So unless more branches are not
opened more benefits cannot be obtained.
o I have felt that Soneri bank is not very much into advertisement of its services
and products. In this age of competition and mass media advertisement it is hard
for you to be prominent and distinguished. So unless an effective marketing is
not done people will fail to notice an organization even exists.
o Focusing the banking not only to SME but on other potential areas as well: - It
will be favorable to extend the circle of services to more areas of serving.
Because mass production ideas also can be applied to the services sector as well.
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References:
Newsletter
Brochures
Discussion with BM OM CSM and RM
Annual reports Soneri bank 2017 2018 2019
See Price of share: https://www.psx.com.pk
https://www.scribd.com/doc/19646500/Internship-Report-Soneri-Bank-
limited
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Annexures
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