FIN619 Final Project Ratio Analysis Banking Sector 2015

The financial ratio analysis techniques referred to in this aid could be useful to analyze any company financial performance.  This study is also going to investigate the financial performance of three mentioned banks e.g. Askari bank, united bank and Bank Alfalah. These banks are surveying in the Pakistani Market and are competitors each other. Hence this study is going to find out which bank has strong financial position over other two banks. With the help of financial ratio analysis we can analyze the financial position of any company. Many stakeholders, investors, creditors may analyze any company, firms financial position with the help of ratio analysis before taking any important decision regarding to investments or any other.  Therefore financial ratio is a mathematical correlation among several numbers often stated in the form of percentage, times, or days.

FIN619 Final Project Finance Banking Ratio Analysis

The purpose of this report titled “RATIO ANALYSIS OF ASKARI BANK, UNITED BANK AND BANK ALFALAH FOR THE YEARS 2012, 2013, 2014is to investigate the financial performance of these banks during the mentioned period. The first chapter of this report deals with introduction of project and banks under study, financial period under consideration, objectives and significance of the project. The second part is about data processing and analysis. The fourth chapter is about calculation of different ratios its comparison and interpretation. In last chapter conclusions and recommendations have been given.

Ratio Analysis

The data for the study is collected from financial reports of the banks which are available on theirs respective websites. The financial reports included the balance sheet, income statement and cash flow statements.

As regards to finding of study, the Net Profit Margin ratio of Askari and bank Alfalah is low as compare to UBL. UBL is also on top in gross spread ratio, return on equity, debt ratio and Advance/Deposit ratio. While Askari Bank has better cash flow ratio and Price/Earning ratio.

It is recommended for Bank Alfalah and Askari bank to cut down their non markup expenses to improve their Net Profit Margin Ratio while, on the other hand their turnover is satisfactory. UBL and Alfalah should decrease their current liabilities and ensure the availability of more liquidity to meet short term debts. Askari bank and bank Alfalah both banks need to adopt measures to cut down their interest expenses in order to increase their gross spread ratio. In order to increase non interest income Askari and Alfalah needs to increase their earnings through fees, commissions and other advisory charges etc.

In Advance/Deposit ratio Askari bank and Alfalah should have to utilize their deposits in more projects either through corporate financing or general public financing.

Financial Ratios are effectual performance indicators for comparing different parameters related to any business to estimate its performance. The use of financial ratios is a time-tested method of analyzing a business. Wall Street investment firms, bank loan officers and knowledgeable business owners all use financial ratio analysis to learn more about a company’s current financial health as well as its potential.

The study has been conducted on financial ratio analysis of three banks; National Bank, Bank Al-Habib and Soneri Bank. The data required for carrying out study was mainly gathered from Banks website. Published financial statements of recent years i.e. 2009, 2010 and 2011 have been used for financial ratio analysis. The study will help in understanding the financial ratio analysis in better way and to use the result to determine the current financial health of all three banks and their future outlook.

The study found out that overall financial performance of Bank Al-Habib is better than the other two banks.  Net profit margin, operating cash flows, gross spread ratio, return of total equity ratio of Bank Al-Habib is better than National and Soneri Bank. National Bank has more non-interest income to total income ratio, debt ratio and debt to equity ratio than Bank Al-Habib and Soneri Bank. Soneri Bank is week as compared to the two banks.

The study concludes that NBP and Soneri bank shall improve their net profit margin ratio by cutting down the running expenses and also increase gross spread ratio by raising their interest earning through more investment. Non-interest income of HBL and Soneri Bank is low so it needs improvement by expanding their services operation.  NBP and HBL advance /deposit ratio is to be increased by making more loans and investments from borrowed funds. In short Bank Al-Habib has better financial health followed by National Bank

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