Introduction of Askari Commercial Bank
Formal Definition of Bank
Bank is an institution, which revives money from one party and lends to another part.
There are the following types of banks :
1. Central Bank
2. Commercial Bank
3. Industrial Bank
4. Exchange Bank
5. Saving Bank
6. Mortgage Bank
Evolution of Banking.
Bank Origin.
There are different views about origin of the word “Bank”.
According to some people word “Bank” is derived from the word “Bancus” which means a “Bench”. They argue their point by this transacted their business of money exchange on the benches. If the business of any businessman failed, his bench was destroyed by the people. Due to this practice the word “Bankrupt” was also used.
On the other hand some people say that the word “Bank” is derived from German time the word “Bank” was replaced by the word “Bank” which is called “Banco” in Italian language.
Definition of Bank
There are large number of definitions, which are offered by the different authors keeping view the various definitions we may define the bank in the following words.
“A bank is reliable financial institution which receives the money from one group of people and lends to other group of people. So bank performs the duty of financial intermediary among the people and creates the credit money.”
Evolution of Banking
The history of banking evolution is very interesting. In the early ages human like and wealth was not secure. Due to fear of lootmar and theft people buries their wealth under land but this method was not satisfied. People started to search the custodians of wealth. The evolution of banking started and it has crossed the following stages.
First Stage of Evolution
After a great struggle people succeeded in finding the reliable persons to deposit their money and valuable goods for safety. These people were goldsmiths. These were considered the most trusted persons due to their sounds financial position. On the other hand they had a very strong iron safes for keeping gold , money and other valuable items. People started depositing their gold and cash in the safe of goldsmiths. Goldsmiths charges something for this purpose and they return the depositors their money whenever they needed the banking evolution and goldsmiths where the early bankers.
Second Stage
During this period those receipts, which were issued by the goldsmiths against the valuable goods, were being used as a medium of exchange by the merchants. People purchase various things from the traders against their receipts against the payments. So the receipts were used like the bank cheque of the modern age.
Third stage
This period started at that time when goldsmith came to know by the experience that people are using their receipts as medium exchange and very few people demand their deposits. So they reach to the conclusion that they may lend some portion of their total deposits some other people and they can earn profit. Goldsmith started the business of lending. They also paying interest to attract the depositors of net cash. Now this business became very profitable, So the traders and money lenders also jumped in this field.
Fourth Stage of Evolution
It was started at that time when people were tempted to deposit more and more cash to the traders, money lenders and goldsmiths to earn maximum interest. On the other hand number of borrowers also increased borrowing the money. So for the borrowing and lending business, regular institutions came into existence.
In the percentage bank is modernized shape of those institutions. But to earn more profit every bank started issuing overdraft facility without maintaining adequate cash reserves to need the demands of the depositors. This inability created the financial crises. Now to maintain the good will, the banks performs their duties. All the commercial banks perform their duties keeping in view the instructions of the Central Bank.
Keeping in view the above discussion about the evolution of the bank, we can say that it is the result of the different activity of the goldsmiths, merchants and money lenders. They are the real founders of modern banking business. All the basic functions of modern bank like accepting are similar with the founders. Now with the changing business requirements the secondary functions of banks have been changing with the passage of time.
Growth of Banking In Pakistan
The entire banking business was controlled by the non-Muslims before the partition of sub-continent. When Hindus became sure about the division of the sub-continent, they secretly became to transfer their capital to the safe places in India. The funds and other valuables were transferred to India.
Establishment Of State Bank
After independence it was not possible for Pakistan to setup the Central Bank immediately. The Reserve Bank of India acted as a central bank of Pakistan till 13th September 1948. But it could not protect the interests of Pakistan.
To remove the financial difficulties and establish sound banking system. Government established the State Bank on 1st July 1948. In the development, to banking system it played very important role as a Central bank of the country.
Commercial Bank
Commercial Banks are companies that transact business of banking in Pakistan commercial banks have constituted the most important source of institutional credit in the economy of Pakistan.
CORPORATE FLOW
Its corporate body consist of 12 Board of director including one chairman
1. President
2. Chief Executive
3. Secretary
4. NIT Nominees
ASKARI COMMERCIAL BANK LIMITED MULTAN
Askari Commercial Bank Limited was incorporated on October 09, 1991 as a public limited company, and is listed on the Karachi, Lahore and Islamabad stock exchanges. The bank obtained business commencement certificate on February 26, 1992 and started operations from April 01, 1992. Askari Commercial Bank is a scheduled commercial bank and is principally engaged in the business of banking as defined in a banking companies ordinance, 1962.
Askari Commercial Bank Limited continued to scale new heights in all areas of its operations. The safety and security of the depositor’s funds, high productivity, and optimum use of technology are the hallmarks of it’s corporate strength.
ACBL is the first and so far the only Pakistani bank in private sector to have been rated as A1 +(for short term category ) and A+ (for long term category) by PACRA Pakistan Credit raring agency (Pvt.) Ltd. The rating of A1+ is the highest in the short term category and stands for “obligation supported by the highest capacity for timely repayment”.
In 1994 ACBL international recognition as Asia money award and a title of “Best Commercial Bank of Pakistan for the year 1994 ” while euro money declared the bank as “best domestic bank of Pakistan for the year 1995”.
A financial institution has to give due emphasis to its network expansion because with the passage of time the graph of growth through existing network attains the point of saturation ACBL has its head office in Rawalpindi. In view of deteriorating operating environment, Bank slowed down the expansion plan and added one branch in 1998 making the total number of branches 30. Now in 2002 there are 35 branches of ACBL in all over the Pakistan.
Askari Commercial Bank Limited, Multan was inaugurated on December 28, 1994. It is located on Abdali road opposite to PIA office. The location is connected to all the main trade centers in Multan. It is the prosperous branch streaming towards great achievements.
At the time of it’s establishment the factored who were considered are as follows
v Multan is zone covering a large population.
v Multan City is linked to many big cities.
v Agro based area constituting growers and gainers.
v Army Officers & Fort Colony
v Educational Institutions
The total strength of staff in ACBL Multan is 35. They are dedicated their work. The branch is progressing rapidly. Under the dynamic leadership of Vice President Mr. Muhammad Ehsan Qadir and Operational Manager Mr. Shaukat Qurashi.
Departments
The bank has following departments
v Account Opening Department
v ATM Department
v Credit Card Department
v Account Department
v Credit Department
v Foreign Trade Department
v Cash Department
v Remittance Department
WHY RATIO ANALYSIS ARE NECESSARY
Through ratio we can comparison of firm’s performance and status. And many people may have the need of different information which will be provided through ratio analysis. Share holders, supplier and creditors may also get the latest ratio information share holders are interested into the risk and return of earning per share and through ratio we can check the performance and status from time to time.
Types Of Ratio
1. Cross Section
Comparison of firm’s with Industry
2. Time Series
Comparison of firm’s present position with post year
Types Of Analysis
1. Liquidity Analysis
2. Activity Analysis
3. Debt Analysis
4. Profitability Analysis
1.Liquidity analysis.
The ability of the company to pay the short term obligations. If there are higher ratio then the position of the company is too good. Otherwise consider it weak.
Explanation of liquidity analysis
1.Net working capital.
Check the overall liquidity of the company. Its not ratio. It create the result and see the capacity to pay.
2.Current Ratio.
How many times the current assets are greater than current liabilities.
3.Quick Ratio.
To check the ability to pay immediate payment of the company.
2.Activity Analysis.
To check the efficiency of the assets and current accounts. And ho these accounts are converted into cash and the utilization of assets.
Explanation of Activity analysis
1.Average Collection Period.
A/R are converted into cash in how many days. If the days will be lesser it will consider more favorable.
2.Average Payment Period.
How many days A/Ps are paid. If the days will be lesser than it will be consider more favorable.
3.Inventory Turnover.
How many times inventory is to be going off or converted into A/R if the ratio is higher then it will be consider more favorable.
4.Total Assets turnover.
How much assets are efficient to generate the sales.
3.Debt Ratio Analysis.
How much debt financing present in capital structure and how much risk involve in capital structure of the firm. And the capacity to pay financial payments and how much financing is there.
If the ratio will be higher than it will be considered that there is involving a higher risk.
1.Debt Ratio .
Define that, how much assets are financed through debt.
2.Debts Equity Ratio.
How much finance is provided by share holders.
3.Time Interest Ratio.
What is the ability to pay interest.
4.Profitability Analysis.
In the profit analysis ,the over all effectiveness of operations of the company. And if it will high margin then it will be favorable.
Explanation of profitability Analysis.
1.Gross profit margin.
What is the margin of gross profit over sales.
2.Operating profit Margin.
What is the margin of operating over sales.
3.Net profit Margin.
What is the net profit margin over sales.
4.Return on Total Assets.
Effectiveness of assets to generate profit.
5.Return on Equity.
Profit earned over the owner’s investment.
6.Earning per Share.
Amount earned on the behalf of each share.
ASKARI COMMERCIAL BANK LTD
(QUARTLY) BALANCE SHEET (UNAUDITED)
AS ATMARCH 31,2003
Notes Mar.31,2003 Dec.31,2002
(Rupees in ‘000)
Assets
Cash &balance with treasury bank 5,309,550 5,301,388
Balance with other banks 2,777,947 1,304,363
Lending to financial institutions 3,752,486 3,414,470
Investments 24,155,184 26,759,001
Advances 31,443,425 30,035,484
Other Assets 2,010,846 1,835,072
Operating Fixed Assets 1,673,086 1,663,295
Deffered Tax Assets -- -- 71,122,524 70,313,073Liabilities
Bills Payable 753,659 608,481
Borrowings From Financial Institutions 7,915,789 11,460,934
Deposits And Other Accounts 55,598,351 51,731,506
Sub-Ordinated Loans ------ - ------
Liabilities against assets subject to finance lease 52,191 54,548
Deposits and other accounts 1,001,013 987,575
Deffered tax liabilities 1,250,662 1,297,365
66,571,665 66,140,409Net Assets 4,550,859 4,172,664
Represented by
Share capital 1,141,680 1,087,314
Reserves 1,884,870 1,939,236
Unappropriated Profit 270,835
3,297,385 3,026,550
Surplus on revaluation of assets 1,253,474 1,146,1144,550,859 4,172,664
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ASKARI COMMERCIAL BANK LTD
(QUARTLY) PROFIT AND LOSS ACCOUNT
FOR MARCH 31,2003
Notes Mar.31,2003 Dec.31,2002
(Rupees in ‘000)
Mark-up/Return/Interet earned 1,137,394 1,127,077
Mark-up/Return/Interet Expense 532,421 701,022
Net Mark-up/Interest Income 604,973 426,055
Provision against non-performing loans and advance 69,709 68,943
Provision for diminution in the value of investment
Bad debt return off directly
69,709 68,943Net mark-up/interest income after provisions 535,264 357,112
Non Mark-up/interest income
Fee,Commision & Brokerage income 126,332 146,423
Dividen income 4,400 3,740
Income from leading in foreign currencies 36,240 18,641
Other Income 37,138 38,298
Total Non Mark-up/Interest Income 204,110 207,102Non Mark-up /interest expenses
Administrative Expenses 303,555 251,973Other Provisions/write offs
Other charges
Total Non Mark-up/Interest Expense 303,555 251,973
435,819 312,241Extra Ordinary/Unusual ItemsProfit Before Taxation 435,819 312,241 Provision Taxation
-Current 168,380 156,121
-Deffered (3,396)
164,984 156,121
Profit After Taxation 270,835 156,120
Unappropriate Profit brought forward
Unappropriate Profit carried forward 270,835 156,120
Earning per share-Rupees 2.37 1.37
Ratio Calculations
Ratios | Dec. 31,2002 | March 31,2003 |
Liquidity Analysis Net working Capital = Curr. Assets- Curr. Liab Current Ratio = Curr. Asset/Curr. Liab Quick Ratio = Curr. Assets–Inv/Curr Lia | 66814706-63755469= 2959237 66814706/63755469=1.046 66814706-2675900/63855469 =0.63 | 67438592-6431990=3118602 67438592/6431990=1.04 67438592-24155184/64319990 =0.67 |
Activity Analysis Avg. Coll. Period= Ac. Rec/Avg. Sales Per day Fixed Assets Turn over= Sales/Net fixed Assests Total Asset Turn over = Sales / Total Assets | 3414470/6132.76=556.76 days 564214/1663295=0.34 564214/70313073=0.008 | 3752486/8215.2667=461.83days 739374/1673086=0.44 739374/71122524=0.0103 |
Debt Analysis Debt. Ratio = Total Liab./ Total Assets Debt. Equity Ratio = Long Term Debt./S.H Equ Time Intr Earned Ratio = EBIT/ interest | 66140409/70313073=0.94 11460934/1141680=10.04 1137077/7101022=1.62 | 66571665/71122524= 0.94 7915789/1141680=6.9 1137394/532421=2.14 |
Profitability Analysis Gross Profit Margin = Gross Profit/Sales Return on Total Assets = Net P. After Tax/Tol. Ass Net Profit Margin = Net P. After Tax/Sales Op. P. Mar.= Op. Profit / Sales Earning Per Share | 312241/564214=55% 156120/70313073=0.2% 156120/564214=%27 1137077/564214=202% 1.37 | 435819/739374=58.9% 270835/71122524=0.38% 270835/739374=36.6% 1137394/739374=135% 2.37 |
RATIO ANALYSIS
Ratios | FORMULAE | Dec. 2002 | Mar. 2003 | TSA |
Liquidity Analysis Net working Capital Current Ratio Quick Ratio | Curr. Ass - Curr.Liab Curr. Asset/Curr. Liab Curr. Ass–Inv/Curr Lia | 2959237 1.046 0.63 | 3118602 1.04 0.67 | Good ok ok |
Activity Analysis Avg. Coll. Period Fixed AssTurn Over Total Ass Turn over | Ac. Rec/Avg. Sales Per day Sales/Net fixed Assests Sales / Total Assets | 556.76 days 0.34 0.008 | 461.83 days 0.44 0.0103 | Good Ok Good |
Debt Analysis Debt. Ratio Debt. Equity Ratio Time Intr Earned Ratio = | Total Liab./Total Assets Long Term Debt./S.H Equ EBIT/ interest | 0.94 10.04 1.62 | 0.94 6.9 2.14 | Ok Poor good |
Profitability Analysis Gross Profit Margin Return on Total Ass Net Profit Margin Op. Profit Margin Earning Per Share | Gross Profit/Sales Net P. After Tax/Tol. Ass Net P. After Tax/Sales Op. Profit / Sales E.A.com.s.h/no.of Out- standing | 55% 0.2% 27% 202% 1.37 | 58.9% 0.38% 36.6% 135% 2.37 | Good Good Good Poor good |
Ratios’ Evaluation
Analysis of The liquidity Ratio
Over all the liquidity analysis of the Bank is excellent because the networking capital, current ratio & Quick ratios are increased as compared to previous quarter Dec.2002.
So we can say ,the Bank is holding its objectives.
Activity Analysis.
The position of the bank in the activity is better than the pre-Quarter because the cash (current asset),Acc/rec are increased during this quarter. Fixed assets turn over are satisfactory. Over all total fixed assets are increased by 0.008 to 0.0103.
In short, that the activity analysis of the bank are progressive in future.
Debt Analysis.
Almost the indebt ness decreased so the risk is more increase and that is not suitable for its. The EBIT is increase &the interest is almost decreasing. In summary, it appears that the post-quarter of March 2003 is an off quarter.
Profitability Analysis.
Profitability relative to sale in the post quarter is better than that the pre-quarter in the bank. Gross profit margin in quarter March2003is better than Dec.2002,it appears that lower levels of operating and interest is caused the post quarter March 2003 net profit margin is quite favorable. Return on total assets, Return on equity, and Earning per shear behaved in a fashion.
