Analysis of Ratios

• Earnings earned over investing equity.

• ROE rise up from 2013 to 2015 at about 16.17% -19.22% and fell off in the 2017 year. T
• he percentage of the 2017 year also went down from the average industry i.e. 13.30%.
• Shows from generating 16 PKR for 1 PKR to 4.33 PKR for 1 by 2017
• Shows the negative sign of the HBL’s ROE
• Suggestions: HBL should look for following options to improve their ROE. That are:
• Improve asset turn-over
• Increase profit margins
• Use more financial leverage
• Return on Assets dictates
earnings earned over assets.
ROA
• In 2017 it fell down from the
average industry ratio that is
1.10%.
• Shows HBL is earning 3 PKR for
every 100 PKR
• Suggestions
Reducing Asset Costs, Increasing
Revenues, Reducing Expenses
 • Net interest margin (NIM) is a measure of
Net Interest Margin the difference between the interest income
3.80%
generated by the amount of interest paid out
3.70%
to their lender.
3.60% • Negative net interest margin prior to 2013
3.50%

3.40% • Rises from 2013-2014

3.30%
• Above they industry average i.e. 2017 of
3.20% Net Interest Margin
3.06% by 0.03%.
3.10%

3.00% • Shows that for every 100 PKR invested HBL

2.90% made almost 4 PKR after all of its interest was
2.80% paid.
2.70%
1 2 3 4 5
 Net Non Interest Margin • Difference between non-interest income and
non interest expenses divided by total earning
assets.
5

• Helps asses the usefulness of revenue

from non-interest items such as fees and
4
service charges.
• Negative industry average HBL’s ratio fell down
3
Net Non Interest Margin
in 2017 (in comparison to 2013) to 1.14%
• Promote debit card overdraft protection as a member
service.
2
• Promote debit card acquisition and usage.
• Promote debit card acquisition and usage.
1

-1.20% -1.00% -0.80% -0.60% -0.40% -0.20% 0.00%

 Cost to income
• A company's costs in relation to its income.
74.00%
• To get the ratio, divide the operating costs by
72.00% operating income.
70.00%
• Cost of income rising from the year 2015 to
68.00%
66.00%
2017 from 63.5% - 71.0%.
64.00% • Far above the average industry that is 53 %
62.00%
which shows that the operating cost of the
60.00%
HBL is rising
58.00%
1 2 3 4 5
• Hence this indicates their inefficiency in the
Cost to Income
drive to attract more business.
 Govt Sec to Assets • Government securities are the most liquid and safe
investment.
60.00% • This ratio measures the proportion of risk-free
liquid assets invested in government securities as a
percentage of the assets held by the bank
50.00%
• Arrived by dividing investment in government
40.00%
securities by the total assets.
• HBL’s invested 55.37% of total assets in
30.00% Govt Sec to Assets government securities
• This means HBL’s has ascertain to reduce their risk
20.00%
by investing more in risk free.

10.00%

0.00%
1 2 3 4 5
Advance to deposit Ratio: (Second Major Use
of funds)
• there is a negative trend in ratio
• it is rising but this is less than the
average industry ratio that is 48.70%.
• trend of the industry average is rising
but it is concern for the HBL
management
• If the ratio is too high, it means that
the bank may not have enough
liquidity to cover any unforeseen fund
requirements.
Investments to Deposit: (First major use
funds)
Investments to Deposit • describes that in which assets most of
90.00% the funds are being used.
80.00%
• increasing trend for HBL and are
70.00%
above than the average industry.
60.00%
• It shows the positive impact on the
50.00%
HBL bank statement hence more
40.00%
Investments to Deposit
investors are attracted to the HBL
30.00% policies.
20.00%

10.00%

0.00%
1 2 3 4 5
Earning Asset:
• Earning assets include stocks,
bonds, income from rental property,
certificates of deposit (CDs) and other
interest or dividend earning accounts.
• They can provide a steady income, which
makes particularly useful for long-term
goals such as retirement planning.
• Earning assets- assets that earn interest
revenue
• From 2013 to 2017 HBL bank earning
assets have increased from 99.0% to 111
%.
• Increase in earning assets shows more
prospect of interest income in future and
profitability increases.
Infection Ratio:
12.00%
• IT shows the percentage of advances
that have the chance of going bad or
10.00%
non-payment.
8.00% • HBLS infection row is falling year by
year showing a positive trend as high
Axis Title

6.00%
Infection ratio
ration means more loans not being
recovered.
4.00%

• It has improved from 2016s 8.42% to

2.00% 7.55% in 2017.It is also well below the
industry standard of 2017 of 10%.
0.00%
1 2 3 4 5
Axis Title
Operating Margin
Operating Margin • It measures the percentage of net total
3.50% income on total assets or the return in terms
3.00%
of profit that the assets earns.
2.92%
2.68% • this ratio shows what proportion of revenues
2.50%

2.19%
is available to cover non-operating costs like
2.00% 1.95% interest expense.
1.50%
Operating Margin
• shows negative trend as it should be
increasing.
1.00%
• It shows HBL has only 1.95PKR to cover cost
0.50%
per 100 PKR. So HBL should reduce its cost
0.00% 0.00%
and improve revenue
1 2 3 4 5
EPS
3.00 • Earnings per share shows the
return that each share gives
2.50 • HBLs earning per share show a
negative trend as there is a steep
2.00 fall in its eps which has fallen by
0.56% in 2017,
Axis Title

1.50 • It is also way below the industry

EPS
average of 3.34% which is a cause
1.00 of concern for HBL
• It indicates fall in profits
0.50
• It also means for every share the
0.00
shareholder will get 0.56. It is
1 2 3 4 5 recommended that HBL improve its
Axis Title
EPS to attract more investors
Admin Exp to total Asset:
2.35%
• The ratio shows the administration
2.30%
expenses as a percentage of total
assets
2.25%
• It shows the cost of maintain assets
2.20%
• this ratio also comments on the
Axis Title

2.15%
Admin Expenses to Total efficiency of administration.
Asset

• HBL had maintained their

2.10%
administration expenses which
2.05%
shows that they are working
efficiently and are organizing their
2.00%
1 2 3 4 5
resources effectively.
Axis Title
Spread:
• Spread is the difference in Yield on
Assets and cost of Liabilities.
Earning Spread • This shows the difference between the
6.00% rate earned on assets and the rate of
expense incurred to opt debt financing.
5.00%
• There was constant rate in the ratio
however it fell down in 2017 which
4.00% shows that Decrease in the spread
dictates now less spread is earned then
3.00%
before thus less overall profit and
Earning Spread
earnings are there.
2.00% • However still as the ratio is greater than
1,
1.00% • Positive and greater than one answer
determines that assets reap more than
0.00% the expense incurred to finance them.
1 2 3 4 5
• The ratio of the liquid assets of a company to
its current liabilities
• In 2013 the cash ratio is about 8% which
reduces to 7.2% in 2014. From 2014 to 2017 it
gradually rises to 9% in 2017.
• HBL’s cash ratio is greater than 1, the
company has more cash and cash equivalents
than current liabilities. In this situation, the
company has the ability to cover all short-
term debt and still have cash remaining.