Analysis Of Financial Statements On Askari Commercial Bank and Soneri Bank

Introduction

For the term report of this course we decided to choose a sector which is of prime focus these days. the new and upcoming banks today are getting much attention, especially the Pakistani banks. Many financial analyst are interested in the operations of these new banks. The  Fact that the banking sector has a critical importance in the functioning of the whole economy makes it even more cruicial to keep a watchful eye on the operations of the new banks, especially the banks with Pakistani origin.

 

The two banks that we selected for our report are Askari commercial Bank and Soneri Bank. both of these bank are relatively new in the banking industry and we hope that the study and analysis of the financial statements of these banks will produce some interesting results and findings.

 

For the report, we decided to compare the performances of these banks both vertically and horizontally. For this purpose we gathered the financial data of the two banks over the period of three years. We haver tried to compare the banks’ performances not only with each other but also over the period of time. We have also produced common size balance sheets and income statements . The common size statements would help in comparing the structure and performances of the banks more accurately During the last three years Pakistan’s political and economic environment has shown many fluctuations. That is why some of the inconsistency in the performances of the two banks has to be attributed to the macroeconomic faotors.

 

Despite these limitations we have tried to apply our textbook knowledge of Analysis of Financial Statements course as effectively as possilble. We believe that this report has helped us to understand the theoratical concepts much better.

 

ANALYSIS AND CONCLUSION

 

In our analysis of the two banks we found out that these are banks of similar sise and structure. They have similar histories and have gone , and are at equal stages of developement. The fact that they have similar industrial groups and owners who have helped them top develope also provides with some interesting observations.

 

Now we will try to analyse the two banks on the bases of various standards.

 

  1. Leverage:

          Traditionally the banks have a high leverage. These two banks are also not an exception. The strong deposite base is an important aspect of these two banks which comes out significantly. when we compare the two banks we find out that Soneri bank has a more safe financial strusture. It has a lower levearage and debt ratio as compared to Askari. However the times interest earned ratio of  askari shows that the bank is well capable of covering its high level of debts.

 

  1. Liquidity:

Soneri bank has a larger reserves of liquid and highly liquid assets as compared to Askari bank. This shows that Soneri is more capable of meeting its short term liabilities. The interval measure ratio of the two banks is almost similar.

 

  1. Efficiency:

          The study of efficiency rtios reveal that previously Soneri bank had more efficieny operations but lately, Askari has improved its operations. As a result now Askarei has a n edge over Soneri as far as efficiency is concerned.

 

4.Profatibility Ratios:

          Soneri bank has more profitable for its investors as compared to askari. The net profit margin of Askari is very low as compared to Soneri. the returns on assets and equity also are slightly better for Soneri than Askari. Also Askari’s returns have decreased over the period of time while Soneri is giving healthy returns.

 

  1. Market Value:

          The price earning ratio of Soneri is lower than Askari bank. This is despite the better results which Soneri has shown. Still investors regard Askari as a much safer and lucrative investment opportunity as compared to Soneri. The reason can be the fact that Askari is backed by a large group, i.e, Army Welfrae Trust whereas Soneri doesnt have such a strong backing.        

 

 

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