ISLAMIC FINANCE

ASSIGNMENT

BY

MUHAMMAD AMEER HAMZA KAYANI

FA18-BBA-185

SUBMITTED

TO

Dr. WAHEED AKHTAR

DEPARTMENT OF MANAGEMENT SCIENCES

COMSATS UNIVERSITY ISLAMABAD, LAHORE CAMPUS

BACHELOR OF SCIENCES IN ACCOUNTING AND FINANCE (BSAF)

DECEMBER 26, 2021

 CHAPTER ONE
Analyze its Assets and Deposits performance over 06 years period.
Assets:
While studying Meezan Bank's 6-year financial data, we discovered that the assets were steadily
increasing, indicating that the firm is expanding, as total assets of the bank reached PKRs. 1.5
trillion in fiscal year 2020. In 2015, the overall asset worth was PKRs. 536 billion. Total assets
have grown by 26% over the previous year, whereas the average growth rate of total assets for
the last 6 years has been 23%. Despite the shutdown and Covid-19 scenario, the bank was able to
reach these growth rates.

Over the last six years, total assets have increased by an average of 24 percent. Ijarah, sukkuk,
and energy sukkuk investment totaled around pkr180 billion, pkr108 billion, and pkr118 billion,
respectively.

In addition, the bank investment to deposit ratio grew from 30% in 2015 to 36% in 2020. The
share of Bai Muajjal payable from other financial institutions in relation to total assets has also
grown by 22%. The value of the bank's fixed assets has also climbed to 19 billion, up from 8
billion in 2015. For the past six years, the average growth rate of fixed assets has been roughly
19 percent. This is also due to the increasing number of Meezan bank branches, since the overall
number of branches in 2015 was 428 and has now climbed to 815.

Deposits:
The yearly growth rate of deposits in the banking industry climbed by 14 percent overall, but
deposits in Meezan banks increased by 35 percent, from PKR 932 billion in 2019 to PKR 125
trillion in 2020. In contrast, the current deposit is expected to reach PKR 505 billion in 2020, up
from PKR 149 billion in 2015. In the last six years, current deposits have climbed more than
thrice. In 2015, current deposits accounted for 32% of total deposits; by 2020, they will account
for 40% of total deposits. Deposits due to financial institutions climbed by 44% year on year,
reaching PKR 94 billion in 2020 from PKR 14 billion in 2015. All of them are favorable
indicators of Meezan Bank's growth during the last six years. These were due to the successful
issuance of sukkuk as well as the competitive price of sukkuk with mudaraba, indicating the
brand's goodwill. Regardless of overall asset growth rate, the bank's capital adequacy ratio is
now at a healthy level of 17 percent. Meezan Bank is included in the list of large banks due to its
significant deposit growth rate. As the Compound Annual Savings Account Ratio has risen to 76
percent from 74 percent in 2019. The deposits based on profit sharing mudaraba contributed
significantly to the enormous rise.
CHAPTER TWO
Calculate ROA, ROE and EPS in each year over the 05 years period.
All amounts below are in Pkr (Pakistani Rupee).

Return on Assets:
Formula to be used to calculate return on assets is as follow,

Return on asset = (Net Income / Total Assets) x 100.

Following are the percentage of return on assets of last 5 years of Meezan Bank:

Return on asset (2020) = (22,166,000,000 / 1,521,560,000,000) x 100 = 1.45%.

Return on asset (2019) = (15,232,000,000 / 1,121,258,000,000) x 100 = 1.35%.

Return on asset (2018) = (8,962,000,000 / 937,915,000,000) x 100 = 0.955%.

Return on asset (2017) = (6,313,000,000 / 788,808,000,000) x 100 = 0.80%.

Return on asset (2016) = (5,562,000,000 / 662,055,000,000) x 100 = 0.84%.

Return on Equity:
Formula to be used to calculate return on equity is as follow,

Return on Equity = (Net Income / Total Equity) x 100.

Following are the percentage of return on equity of last 5 years of Meezan Bank:

Return on equity (2020) = (22,166,000,000 / 69,155,000,000) x 100 = 32%.

Return on equity (2019) = (15,232,000,000 / 59,015,000,000) x 100 = 25.8%.

Return on equity (2018) = (8,962,000,000 / 40,333,000,000) x 100 = 22.2%.

Return on equity (2017) = (6,313,000,000 / 35,077,000,000) x 100 = 18%.

Return on equity (2016) = (5,562,000,000 / 30,474,000,000) x 100 = 18.25%.

Earnings per Share:
Formula to be used to calculate earnings per share is as follow,

Earnings per share = (Net income / Total number of Share Outstanding).

Following are the earnings per share of last 5 years of Meezan Bank:

Earnings per share (2020) = (22,166,000,000 / 1,414,722,784) = 15.67.

Earnings per share (2019) = (15,232,000,000 / 1,414,722,784) = 10.8.

Earnings per share (2018) = (8,962,000,000 / 1,414,722,784) = 6.33.

Earnings per share (2017) = (6,313,000,000 / 1,414,722,784) = 4.46.

Earnings per share (2016) = (5,562,000,000 / 1,414,722,784) = 3.93.

CHAPTER THREE
Calculate Return to Depositors in each year over the 05 years period.
Return on Deposits:
Formula to be used to calculate return on equity is as follow,

Return on Deposit = (Total Return to Depositor / Total Deposit) x 100.

Following are the Return on Deposit of last 5 years of Meezan Bank:

Return on deposits (2020) = (41,740,000,000 / 1,254,431,000,000) x 100 = 3.32%.

Return on deposits (2019) = (47,731,000,000 / 932,579, 000,000) x 100 = 5.11%.

Return on deposits (2018) = (20,457,000,000 / 785,477, 000,000) x 100 = 2.60%.

Return on deposits (2017) = (15,684,000,000 / 667,181, 000,000) x 100 = 2.35%.

Return on deposits (2016) = (13,239,000,000 / 559,398, 000,000) x 100 = 2.36%.

CHAPTER FOUR
Does Return to Depositors differ from ROA, ROE? Why or Why not? Explain with
suitable reasons.
Yes, Return on Deposit differs from Return on Assets and Return on Equity in that ROD is
computed by dividing the entire return on deposits by the total deposits of that specific year,
which is the profit granted to depositors who lend money to banks or deposit money in banks for
savings. For example, in 2020, the bank's ROD was 3.32 percent, which means that for every
100 rupee deposit, the depositor received 3.32 rupees in profit. The higher the return on deposit,
the better for the bank's marketing since it will attract more depositors and raise the amount of
money the bank will have to invest in the future.

In contrast, ROA is computed by dividing the company's net income by the entire value of its
assets. It is used to calculate the percentage of profit generated by a unit of assets. For example,
Meezan Bank has a ROA of 1.42 percent in 2020, which implies that the bank produces a profit
of 1.42 rupees for every 100 rupees of assets. It is an essential ratio since it assists investors in
making decisions by displaying a firm's efficiency in converting its investment in assets into
profit. A higher ROA % indicates that the firm is more efficient in earning profits and utilising
its assets in an efficient and effective manner.

Return on Equity (ROE) is the percentage of return a company generates on its equity, which
excludes deposits and other liabilities, where equity equals net assets. ROE may be calculated by
dividing net income by the bank's (or company's) equity. For example, the return on equity in
2020 was 32%. It is essentially the net revenue earned per rupee of stock invested. In this case,
the bank earns 32 rupees for every 100 rupees invested as equity. It is an essential ratio for
shareholder choices. Because they are the respective company's stock holdings (here Islamic
bank). (2021, Business Insider) (Meezan Bank,. 2020).
Reference:
“Financial Information”, (2020), Published on Meezan Bank

https://www.meezanbank.com/financial-information/

Ramsay L., (2021), “What is return on equity? How to calculate ROE to evaluate a company's
profitability” Published on Insiders

https://www.businessinsider.com/return-on-equity

https://www.meezanbank.com/wp-content/themes/mbl/downloads/
annualreport2020.pdf