RATIO ANALYSIS

FINANCIAL ANALYSIS
The financial position of any firm be appraised by analyzing its balance sheet as well as its statements of accounts. The financial statement of any organization shows the results of its operations and its position in business. There is a big difference between data and information. When the data is arranged in such a way that it clearly indicate some facts the data becomes information. Although the balance sheet and income statement gives a great idea about the financial position of an organization but unless the data of these statements are not compared over the years they do not represent the actual position. The comparison shows the increases, decreases and growth of an organization, which helps to predict the future potential of an organization. The financial statement of any organization includes: The balance sheet The profit and loss accounts With the help of these four items, financial analysis of an organization can be conducted. Analysis of data helps to conclude the financial strength of an organization. Financial analysis can be done by Horizontal analysis Vertical analysis

HORIZONTAL ANALYSIS
Through this analysis we can check what change is going on within the years in the items of balance sheet and profit and loss account. In the analysis year 2007 is considered base year for year 2008.

VERTICAL ANALYSIS
In this analysis the percentage of each item of balance sheet and profit and loss account is calculated to the total and then the change in this percentage is checked within years. The following pages shows the horizontal and vertical analysis of Balance sheet and Profit and loss account.

BALANCE SHEET (ASSETS) As on 31st December 2008-07

Rupees (000) Item 2008 2007 Cash and balance with 39631172 39683883 treasury banks Balance bank with other 4043100 3807519 1051372

Lendings to financial 4100079 institutions Investments-net Advances-net Operating fixed assets Deferred tax asset-net

96256874 11308926 1 26251047 21896059 0 8 17263733 16024123

Other assets-net Total

19810476 17868761 4436159 04 4104855 17

MUSLIM COMMERCIAL BANK LIMITED BALANCE SHEET (LIABILTY) As on 31st December 2008-07
Rupees (000) Item Bills payable Borrowing from bank Deposits accounts and 2008 2007 10551468 10479058 22663840 39406831 other 33027415 29209806 5 6 479232

Sub-ordinated loan

Liabilities against assets subject to finance lease Deferred tax liability- 437137

1180162

net Other liabilities TOTAL LIABILITES NET ASSETS 21253250 11722493 3851798 50 5843605 4 3553658 42 5511967 5

Represented by Share capital Reserves 65 Inappropriate profit 32 Surplus on revaluation 6191189 of assets- net of tax 5843605 4 91933 50 9705519 5511967 5 6282768 367687 38 51307 6282768 340006

52244865 45414156

MUSLIM COMMERCIAL BANK LIMITED

BALANCE SHEET (ASSETS) Horizontal Analysis As on 31st December 2008-07

Rupees (000) Item 2008 2007 %age (1%) 6% 289% (15%) 19% 7% 10% 8%

Cash and balance with 39631172 39683883 treasury banks Balance bank with other 4043100 3807519 1051372

Lendings to financial 4100079 institutions Investments-net Advances-net Operating fixed assets Deferred tax asset-net Other assets-net Total

96256874 11308926 1 26251047 21896059 0 8 17263733 16024123 4436159 04 4104855 17 19810476 17868761

MUSLIM COMMERCIAL BANK LIMITED BALANCE SHEET (LIABILITIES) Horizontal Analysis As on 31st December 2008-07
Rupees (000) Item Bills payable Borrowing from bank 2008 1055146 8 2266384 0 2007 1047905 8 3940683 1 2920980 66 479232 %age 0.69% (42%) 13%

Deposits and 3302741 other 55 accounts Sub-ordinated loan Liabilities against assets subject to finance lease Deferred tax 437137 liability-net Other liabilities TOTAL LIABILITES NET ASSETS 2125325 0 385179 850 584360 54 6282768

1180162 1172249 3 355365 842 551196 75 6282768

(63%) 81% 8% 6%

Represented by Share capital

Reserves Unappropriat ed profit

36768 34000 765 638 9193 332 5224486 5 750 4541415 6 9705519 5130

8% 79% 15% (36%)

Surplus on 6191189 revaluation of assets- net of tax 584360 54

551196 75

6%

MUSLIM COMMERCIAL BANK LIMITED BALANCE SHEET (ASSETS) VERTICAL ANALYSIS As on 31st December 2008-07
Rupees (000) Items 2008 2007 9.67% 0.93 0.26 27.55 53.34 3.90 4.35 100%

Cash and balances with 8.93% treasury banks Balance with other bank Lending to institutions Investment-net Advance-net Operating fixed assets Deferred tax asset-net Other assets-net Total 0.91 financial 0.92 21.70 59.18 3.90 4.47 100%

MUSLIM COMMERCIAL BANK LIMITED BALANCE SHEET (LIABILITIES) VERTICAL ANALYSIS As on 31st December 2008-07

(Rupees in 000) Item Bills payable Borrowing from bank 11 Deposits accounts and other 74.45 0.09 4.79 1.42 8. 29 Un-appropriated profit 2.07 Surplus on revaluation of 1.40 assets- net of tax Total 100% 2.36 100% 8.28 1.25 71.16 0.17 0.29 2.86 1.53 2008 2.38% 2007 2.55% 5. 9.60

Sub-ordinated loan Deferred tax liability-net Other liabilities Share capital Reserves

MUSLIM COMMERCIAL BANK LIMITED PROFIT AND LOSS ACCOUNTS For the period ended December 2008-07
Rupees (000) Items Markup/return/interest earned Markup/return/interest expenses 2008 2007

4004382 3178659 4 5 1156074 7865533 0 2392106 2

Net markup/interest 284830 income 84

Provision for diminution in 2683994 105269 the value of investmentsnet Provision against and advances-net Bad debts directly loans 1335127 2959583 off 401912 1 199 3065051

written

Net markup/interest 2446396 2085601 income after provisions 3 1 NON-MARKUP/INTEREST INCOME Fee, commission brokerage income Dividend income & 2866729 2634610 617554 632300 693408 1500865

Income from dealing in 727564 foreign currencies Gain on sale of securities- 740429 net

Unrealized loss on (103198 revaluation of ) investments classified as held for trading Other income-net Total markup/interest income 942362 non- 579144 0 302554 03

(13105)

1000149 6448227

2730423 8

NON-MARKUP/INTEREST EXPENSES Administrative expenses Other (reversal)-net Other charges Total markup/interest expenses Extra item 7546878 5426116 (3743) 573830 5996203 provision/ 10120 830839 non- 838783 7

ordinary/unusual BEFORE 218675 66 (864824

2130803 5 (1294473

PROFIT TAXATION

Taxation-current year -prior year

7341257 6442356

) -deferred 16533 649296 6 PROFIT TAXATION Unappropriated brought forward AFTER 153746 00

) 894590 6042473 1526556 2

profit 5130750 5530973 11855

Transfer from surplus on 21319 revaluation of fixed assets-net 515206 9 Profit available appropriation Basic and after tax diluted for 205266 69 EPS- 24.47

5542828 2080839 0 24.30

MUSLIM COMMERCIAL BANK LIMITED PROFIT AND LOSS ACCOUNTS (INCOME) HORIZONTAL ANALYSIS For the period ended December 2008-07
Rupees (000) Items Interest / return earned Fees, commission etc. Income from dealing foreign currencies 2008 4004382 4 2866729 in 727564 2007 317865 95 263461 0 693408 %age 25% 9% 4%

Dividend income Other income

617554 942362

632300 100014 9

(3%) (6%)

MUSLIM COMMERCIAL BANK LIMITED PROFIT AND LOSS ACCOUNTS (EXPENSES) HORIZONTAL ANALYSIS For the period ended December 2008-07
Rupees (000) Items Interest expenses Administrative expense 2008 1156074 0 7546878 2007 786553 3 542611 6 295958 3 (3743) 199 8308 573830 39 Profit before tax Tax 2186756 6 6492966 213080 35 604247 3 % 2% 7% %age 46% 39% (55%) (170%) 44

Provision against non- 1335127 performing advances Other provisions Bad debts Other charges 10120

MUSLIM COMMERCIAL BANK LIMITED PROFIT AND LOSS ACCOUNTS (INCOME) Vertical Analysis As at December 2008-07
Items Interest earned Fees, etc. 2008 400438 24 %age 87% 6.24% 1.58% 1.34% 2.05% 1.61% 100% 2007 317865 95 263461 0 693408 632300 100014 9 150086 5 38247 927 %age 83.11 % 6.89% 1.81% 1.66% 2.61% 3.92% 100%

commission 286672 9

Income for dealing 727564 foreign currency A/C Dividend income Other income Gain on securities Total sale 617554 942362 of 740429 45938 462

MUSLIM COMMERCIAL BANK LIMITED PROFIT AND LOSS ACCOUNTS (EXPENSES) Vertical Analysis As at December 2008-07
Items Interest expenses Administrative expense 2008 115607 40 754687 8 %age 25.22% 16.47% 5.86% 2007 786553 3 542611 6 105269 %age 20.57 % 14.19 % 0.28%

Provision for 268399 diminution the value 4 of investment Provision against 133512 non-performing 7 advance Other provisions Bad debts Other charges Profit before tax Total 10120 830839 218675 66 45835 264

2.91%

295958 3 (3743) 199 573830 213080 35 38234 822

7.74%

0.02% 1.81% 47.71% 100%

(0.009 ) 0.000 5 1.50% 55.73 % 100%

PERFORMANCE 1993-2002
The following figures will give an idea of the progress made after privatization. (Rs. In million) 1993 Authorized share capital Paid-up share capital Reserve funds & other reserves Total assets (excl. contra) Deposits Advances Investments Imports Exports Home remittance Pre-tax profit No. of branches No. of employees No. of accounts 2000 663 12010 75427 62783 30753 27864 32734 16931 3023 346 1290 13768 3411427 2002 3500 2665 3027 235139 182706 78924 89610 48842 28284 32962 3103 1045 10926 4463530

Balance sheet (assets) Horizontal analysis Comments

Cash is increased in 2007 but decrease in 2008; it shows that the liquidity position of the bank is going to be weak, so it is alarming sign for the bank. Therefore bank should take necessary steps according to the position. There is decreasing trend in balance with other banks which is a negative sign. Increase in money at call and short notice, it means that customers of bank are very punctual in making payments. Therefore it is good sign for the bank. In the field of investment there is increasing trend with the passage of time. It is common term of finance more investment more return. As we know that main source of profit of a bank is the difference between the percentages of interest, Banks pay less rate of interest than receiving the interest from the customers. In this case advance to customers very low in 2007 but increase in 2008. It means that MCB is running very well. MCB is in a position that it is earning more and more profit with passage of time. Then bank can purchase more and more fixed assets, and it is bank is doing. Assets of the banks are increasing day by day by purchasing the assets. More assets mean that bank has more capacity to pay off its liabilities. There is increasing trend in field of fixed assets. It is due to purchase of new assets.
Other assets have a decreasing trend which is not a positive sign. Decrease in assets decrease the worth of organization liabilities

There is increasing trend in dep osits and other accounts which shows the credibility of the bank. Borrowing is decreasing in 2008 but there is increasing trend in the year 2007. Although it is seeing that banks borrowing is increasing with the passage of time which is not a good sign but there is a positive thing in this behalf, usually banks borrow money at that time when they would have to give it for earning more profit, I think the Muslim Commercial Bank doing the same thing for increasing its profits. Bills payable increase in 2008 but decrease in 2007 negative sign. Other liability has an increasing trend not good because increase in liability decreases the liquidity position of the bank. Share capital increase that shows the creditability of bank. The Muslim Commercial Bank Limited is increasing its reserves and Un-appropriated profit in order to increase its lending power, which is good sign, because according to the prudential regulations of State Bank of Pakistan, a bank can lend money (per party exposure) equal to the 30% of its assigned capital plus reserves.

MUSLIM COMMERCIAL BANK LIMITED PROFIT AND LOSS A/C HORIZONTAL ANALYSIS Income
Interest income increase in 2008 will great proposition which is favorable. It means that interest received by the bank is increasing with the passage of time. It is good for a banking company. As we all know that banks provide many services for their customers and also act as a agent of the customer. The banks receive fee and commission after their services; it is a main source of bank to receive fee and commission from their customers. In case bank is taking more fees as compared to previous years. This is good for the bank. In foreign currency dealing and dividend there is huge increasing trend which shows the investment of bank in healthy organization. Other income decrease in 2008 but this increase mean positive situation.

Expense
Return on deposit decreases which shows good sign and it is due to decrease in return rate. Adam and diminution and provision against non performing loan decreasing turned that is favorable. Bad debts increased with huge amount not positive sign. Profit before taxation has increased with greater proportion. Tax increases which are not bad because it is interrelated with profit, if profit increased, tax also increase.

Vertical analysis Income

Interest earned decrease which is negative sign. As we know that banks provide many facilities other than money lending and borrowing. Banks receive fee, commission etc. for these services. Therefore fee and commission income are increasing which is good and favorable signs. Divided income increased but it is very small. Other income increase with great proportion good sign.

Expenses
Return on deposit decrease good sign because it increases the profit. Administration alarming rate. expenses are increased but no

Position against non performing loan us zero which show bank have good customer. All provision is zero which sows the good credit policy. Bad debt and other charges increased but the situation is not alarming. Profit increased. Tax is increased but it is interrelated with profit.

Overall Review
The Bank has now completed more than 12 years, since its privatization and it is, indeed, gratifying to note that during this period, MCB has performed well and has sustained its growth in all the major sectors. The well deserved credit, for this good performance and progress, must surely go to the Banks management, its Directors and, in no small measure, to the entire MCB team for its dedication, concerted efforts and excellent team spirit. MCB has been a pioneer among the banks in Pakistan, particularly in introducing a number of innovative banking products and services. For the first time in the history of Pakistan, these multifarious products mostly in the shape of saving schemes have been introduced by MCB with brand names. This has set the trend and many other banks, both local and foreign, have since followed in MCBs footsteps, by launching new products and services, on similar lines.

Ratios Analysis
Ratio analysis is an important and age-old technique of financial analysis. Ratios are important and helpful in the reference that: These simplify the comprehension of financial statement and tell the whole story of changes in the financial conditions of the business. These provide data for inter-firm comparison. The ratios highlight the factors associated with successful and unsuccessful firms, also reveal strong and weak firms. These help in planning and forecasting these can assist management in its basic functions of forecasting, planning, coordination and control. These help in investment decision in case of investor and lending decision in case of Bankers etc. However, the ratios are only indicators, they cannot be taken as final regarding good or bad financial position of the business other things have also to be seen.

1. PROFITABILITY RATIOS: I. RETURN ON EQUITY

Rs. (000) 2008 2007 N.P.A.T 100 15374600 15265562 100 Share holderequtiy 100 58436054 55119675 26.31% 27.69%

COMMENTS

Earning per share is a good measure of profitability & when compared with EPS of similar other companies, it gives a view of the comparative earnings power of the company. EPS of MCB is increasing from 2000 continuously, having a vast difference & it is good for shareholders.

[Link] ON ASSETS
N.P.A.T 100 Totalassets

Rs. (000) 2008 2007 153746001 152655621 00 00 443615904 410485517 3.46% 3.72%

3.

Rs. (000) 2008 2007 N.P.A.T 15374600 15265562 No. of outstandin shares 62827684 62827684 g 3 3 2.44 2.43

EARNING PER SHARE

4. return on shareholders investment/ networth

2008 15374600 100 43051533 6 35.71% 37.89% 100 4028340 2007 15265562

N.P.A.T1 00 Shareholders fund

COMMENTS
There is a slight decrease in return on net worth. As the primary objective of every business is to maximize its earnings so this reveals that how the resources of MCB are being used. This ratio is of great importance to the present and prospective shareholders as well as for the management of the company.

NOTE
We assumes net worth by share capital + reserves, as we have not any clear-cut indication about current assets and current liabilities by which we could calculate net worth.

5. INTEREST EXPENSES / TOTAL EXPENSES RATIO

Rs. (000) 2008 2007 IntrestExpenses 115607401 786553310 0 TotalExpenses 00 45835264 38234822 25.22% 20.57%

6.

INTEREST INCOME / TOTAL INCOME RATIO

Rs. (000) 2008 2007 400438241 317865951 00 00 45938462 38247927 87% 83%

IntrestIncome Total Income

[Link] PROFIT MARGIN

Rs. (000) 2008 2007 153746001 152655621 00 00 45938462 38247927 33.46% 39.91%

N.P.A.T 100 Total Income

BALANCE SHEET RATIO CURRENT RATIO

2008 325995218 362078873 0.90:1 2007 280320761 314299617 0.89:1

Current assets Current liabilities

COMMENTS
With the help of current ratio we can see the stability of the firm. A ratio equal to 2:1 is acceptable however it is used to measure the short term financial position of a firm. The MCBS current ratio is gradually going up and in overall MCB is in good financial position & known as backbone of banking industry due to its credibility

NOTE

As there is no clear indication about current assets so we worked on assumptions. We took current assets as following Cash Balances with treasury banks Balances with other banks Advances Other assets We exclude Lendings to financial institution Investments Considering them fixed we assumed current liabilities as following Bills payable Deposits Other liabilities

We exclude Borrowing from financial institution Subordinated loans-as there are loans from directors.

DEBT TO EQUITY RATIO

Long-term loan+ deferred tax liability /fixed assets + deferred tax assets

2008 23100977 17263733

2007 41066225 16024123

1.338:1 .

2.56:1

COMMENTS
Debt to equity ratio is a relationship between external equities or outsider firms and the internal equities and shareholders fund. The purpose of this ratio is to get an idea of the cushion available to the creditors on the profit of the company. The standard for this ratio is 60:40 but there cant be any rule of thumb for all types of businesses.

NOTE

In long term loans, we assumed Borrowings from financial institution Loan from directors Deferred tax liabilities In fixed assets we assumed Operating fixed assets Deferred tax assets

PROPRITORY RATIO

Net worth/total assets

2008 21657368 443615904 4.88%

2007 21548330 410485517 5.25%

COMMENTS
This is a variant of debt equity ratio. It is used to measure the future position of the business. This ratio throws light on

general financial position of the company. Higher the ratio better is the solvency position of the company. MCB is showing increasing trend and ratio indicates shareholders participation in total assets is enough, which indicates low risk to creditors.

MANAGEMENT RATIO 1. BREAK-UP VALUE

Net worth/outstanding shares

2008 21657368 628276843 34.47%

2007 21548330 628276843 34.29%

COMMENTS
Best price from the investors point of view is called break up value. Break up value of MCB is increasing from past three years, which shows stability of business.