74953511-Soneri-Bank
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Transcript of 74953511-Soneri-Bank
INTRODUCTION
Incorporated on September 28, 1991 the first Branch
of Soneri Bank Limited formally opened doors for
operations in Lahore on April 16, 1992 followed by
Karachi Branch on May 09, 1992. The bank now
operates with 52 branches spread all over Pakistan
including the Northern Areas of the country where no
other private bank has ventured so far. Expansion of
branches is based on a policy of maintaining a
balance between the urban and rural areas with a
view to offering services even in the remote areas of
Pakistan. Pleasant and sophisticated atmosphere has
been provided in the branches which are all fully air-
conditioned and computerized.
The essence of our business philosophy is to cater to
the banking requirements of small & medium sized
entrepreneurs, providing them qualitative &
competitive services with emphasis on encouraging
exports. Nearly forty percent of our credit portfolio is
related to export financing and credit decisions are
taken within 48 hours.
CORPORATE DATA
Chairman
President & Chief Executive Officer
Directors
Audit Committee
Company Secretary & Legal Advisors
Auditors
FUNCTIONS OF S B
Soneri Bank is a commercial bank, in modern time
commercial banks play a very important role and
their functions are manifold. But main functions are
as follows:
Accepting various types of deposits
Granting loans and advances
Undertaking of agency services and also general
utility functions, few of those are as under:
Collecting cheques and bill of exchange for the
customers.
Collecting interest due, dividend, pensions and
other sum due to customers.
Transfer of money from place to place.
Acting an executor, trustee or attorney for the
customers.
Providing safe custody and facilities to keep
jeweler, documents or securities.
Issuing of travelers cheques and letters of
credit to give credit facilities to travel.
Accepting bills of exchange on behalf of
customers.
Undertaking foreign exchange business.
Furnishing trade information and tendering
advice to customers.
FUNCTIONS OF INTER-BANK DEPARTMENTS
For swift functioning of various branches of the bank,
each branch has been divided in different
departments. These departments handle different
jobs so that division of work is there for improvement
of functions and also it is easy to control the
situation. The general division in a branch is as
follows:
1. Cash department
2. Deposit department
3. Advances & credit department
4. Remittance department
5. Foreign exchange department
6. Technology department (new addition in order to
cop with the growing needs of day to day
technology requirements).
The workings of each of the above mentioned
departments are discussed as follows in order to
clarify the functions being performed by the
individual departments.
1. CASH DEPARTMENT
The following books are maintained in the Cash
Department:
1) Receiving Cashier Bank
2) Paying Cashier Book3) Token Book
4) Scroll Book5) Cash Balance BookWhen cash is received in counter, it is entered in the Scroll Book and Receiving Cashier Book. At the close of the day, these are balanced with each other.
When the cheque or any negotiable instrument is presented at counter for payment, it is entered in the token book and token is issued to the customer. The token clerk and the Cashier make entries in the paying book and payment is made to payee. At the close of day, the Token Book and Paying Cashier Book are balanced.
The consolidated figure of receipt and payment of cash is entered in the cash balance book and drawn closing balance of cash.
Opening Balance + Receipts - Payments = Closing Balance
This is a very important department because cash is the most liquid asset and mostly frauds are made in this department, therefore, extra care is taken in this department and nobody is allowed to enter or leave the area freely. Mostly, cash area is grilled and its door is under supervision of the head of that department. All the books maintained in this department are checked by an officer.
2. DEPOSIT DEPARTMENT
Bank deals in money and they are merely mobilizing
funds within the economy. They borrow from one
person and lend to another, the difference between
the rate of borrowing lending forms their spread or
gross profit. Therefore we can rightly state that
deposits are the blood of the bank which causes the
body of the institution to get to work. These deposits
are liability of the bank so from point of view of bank
we can refer to them as liabilities.
The total deposits of Soneri Bank are growing since
its inauguration. The increase in deposits is also a
cause of increase on total number of accounts; bank
has progressed in both aspects.
2.1.TYPES OF DEPOSITS
Deposits can be segregated on two bases, one is the
duration in which there funds are expected to be with
the bank and second is the cost of getting these
funds. So divide deposits in two classes according to
duration of deposits i.e.
Time deposits/liabilities
Demand deposits/liabilities
And on the basis of the cost to acquire these funds, a
deposit can be classified as any one of following four,
High cost
Medium cost
Low cost
No cost
Banks have different kinds of deposit schemes in
order to induce deposits. These schemes are a
mixture of the above mentioned two types of
deposits with an addition of different services &
requirements such as minimum balance
requirement, mode of transaction, basis for
calculation of profit, deductions, additional benefits,
eligibility for different groups.
Soneri bank has a large variety of deposit schemes
which have been discussed in the following pages.
CURRENT ACCOUNT
The current account may be opened by any member
of the public, entities, corporate or otherwise. The
request for opening an account must be made on
Bank’s standard account opening request form with a
suitable introduction acceptable to the bank. The
account holder can withdraw and deposit money at
his/her own discretion, these transactions have no
limitations. There are no limitations to the amount
being deposited or withdrawal. There is no
requirement of minimum balance maintenance. No
profit is paid by the bank and no service charges are
deducted by the bank on current deposits account.
These types of deposits are also exempt from
compulsory deduction of Zakat.
PLS SAVINGS ACCOUNT & PLS SONERI SAVINGS ACCOUNT
PLS saving bank account can only be opened after
proper introduction of the account holder which is
acceptable by the bank. This type of account is for
those persons who want to make small savings. This
type of account is opened with a minimum deposit of
Rs.100/-. The account may be opened in the name of
the individuals (in single or joint names) minors (to
be operated by the guardian) charitable institutions,
provident fund and other funds of benevolent nature,
local bodies, autonomous corporations, limited
companies, firms, associations, educations
institutions etc. Not more than one account maybe
opened in any one name but this does not prevent a
person for opening more than one account in his or
her name for more than one minor child. All sums to
the credit of an account should be accompanied by
pay-in-slip showing the name and number of the
account. The entry of the transaction will be verified
by the signatures of an official of the bank, on the
counterfoil of the pay-in-slip. Account holder can only
withdraw sums from his account by means of
cheques supplied to him by the Bank for that
particular account. Post dated and stale cheques are
not paid. Withdrawals from PLS account are allowed
not oftener than 8 times in a calendar month and for
a total amount not exceeding Rs. 15,000/-. For
withdrawals of larger amounts, 7 days notice in
writing is required to be given.
The bank would be within its rights to make
investment of credit balances/deposits in the PLS
savings account in any manner at its sole discretion
and to make use of the funds to the best of its
judgment in the banking business under the PLS
system. Calculation of products on PLS savings bank
accounts will be made for each calendar month on
the lowest credit balance in an account between the
close of business on the 6th day and the last day of
the month. If however the balance is less than Rs.
1000/- the product will be nil.
There are some features of the Soneri PLS Account
which are different from that of a PLS Savings
Account. The Soneri PLS Account makes payments of
return on a monthly basis where as the interest on
the amount invested is calculated on a daily basis.
Whereas the PLS account makes payment only twice
a year that is in the month of June and end of
December. Following are the interest rates offered by
the two savings account.
NOTICE
DEPOSI
TS
Under this deposit scheme, a deposit is received
from the depositor under the condition that he will
intimate the bank before a certain period in case of
withdrawals. There are two types of notice deposits
they are 7 days and 30 days notice deposits. The
profit is paid on these deposits but it is nearly
equivalent to saving account rate. Following are the
profits paid by Soneri Bank on Notice Deposits.
Notice Deposits % per annum
7 days 1.50
30 days 2.00
TERM DEPOSITS
Deposits Category (% per annum)
PLS Savings Account 2.00
PLS Soneri Savings Account
Upto Rs. 1.0 million 1.25
Over Rs. 1.0 million to 20.0 million 1.75
Over Rs. 20.0 million to 100.0 million 2.50
This is a type of term deposit in which a receipt is
issued for varying tenors ranging from 1 month to 5
years or more. These are in the form of receipts and
profit on these receipts is paid biannually. These
receipts are en-cashable after expiry of the period for
which they were issued. Different profit rates are
applied to different type of term deposits.
Term Deposits % per annum
1 month 2.00
3 months 2.25
6 months 2.50
1 year 3.00
2 years 3.25
3 years 3.50
4 years 3.75
5 years 4.00
3. ADVANCES DEPARTMENT
Advances are the most important source of earning
for the banks. Soneri Bank is also giving full attention
towards this aspect and it is also obvious from the
growing portfolio of advances and from very low
delinquency rate. The credit portfolio of this
institution is in a very much better shape than other
financial institutions of Pakistan and the credit goes
to the management and the staff who are concerned
about the quantity and quality as well.
4. TECHNOLOGY DEPARTMENT
The foreign banks have a competitive edge over all
local banks in their technological advancements are
automated systems. Local banks have also realized
the gravity of this situation and are striving to add
computerized systems to their branches.
Soneri Bank is ahead of all other local banks in this
field and now it is in a position to even compete with
foreign banks. Almost all the branches of big cities
are computerized; therefore, the need for a
technology department at each branch is growing.
Now a day, a computer division is working in each
city to provide service to all the branches of that
area.
PROCEDURE FOR OPENING A NEW ACCOUNT
The process of opening a new account is managed by
the deposit department. It is also responsible for the
payment of profit and accounting of all types of
deposit schemes.
Account opening is an agreement in which customer
offers his funds and bank accepts these funds,
therefore the nature of relation between a banker
and customer is contractual and all the conditions
applicable to this contract act are applicable to both
the parties.
A person, who wants to open any kind of account,
has to fill in a printed form which is provided by the
bank, free of cost. Separate account opening forms
are used for different types of accounts.
Bank usually requires that new depositor must be
introduced by some one. An introducer can be any
person known to the bank but preferably it should be
a customer of the bank. However, the manager can
open the account by his own introduction.
If the manager is satisfied, he will obtain the full
signature of the customer on the form and specimen
signature card, makes the first deposit, and issues
the cheque book.
The following are given to the customers:
Pay-in-slip is the proof of deposit. For every
payment which is to be deposited in the bank, the
pay-in-slip is to be filled up. The object of this book is
to provide the customer with the bank's
acknowledgment for receipt of money to be credited
this account.
Cheque Book contains a number of cheques. It
enables a customer to make withdrawal from this
account or make payment to various parties by issue
of cheque.
Pass Book is a copy of the customer's accounts as
appears in the bills of the bank. Balance is recorded
in this book by the Clerk.
Note:
In case of partnership account partnership deed
should be attached.
In case of companies memorandum and article
of association, certificate of incorporation,
certificates for commencement of business, list
of directors and board resolution for opening of
account is also obtained from the customer.
Accounts of Trusts, Executors & Administrators
can also be opened but with the prior approval
of the Head Office.
PROFIT PAYMENT AND CALCULATION
Profit payment and calculation is done in accordance
with the rules of each type of deposit scheme are
calculated separately and added till the end of 6
month period. Then the sum total of these products
is multiplied with the respective profit rates which
are issued by the Head Office at the end of each half
yearly closing. The profit provisions for each type of
deposits are also calculated on monthly basis by the
same department in order to calculate the net profit
or loss position of the branch.
Accounting entries are also made in the respective
books of account by this department. However, in
small and medium size branches, the accountant
performs the book keeping duties for all kinds of
ledgers.
PRODUCTS AND SERVICES
Soneri Bank does not have a wide variety of
arrays. The products and services offered by the
bank are same for consumer clients (households,
individuals) and corporate clients. The services
offered by the bank are discussed in the
following pages.
1. Soneri Ghar Finance
Soneri Ghar finance service is offered for those
consumers who desire to make their own home or
make repairs/renovation to already owned houses.
Consumers in desire of purchase of pre-
constructed residential property are allowed a
maximum amount of Rs. 5 million or 80% of the
forced sale value of the property which ever is
lower. The forced sale value of the house is
determined by the evaluators of the bank. The
repayment of this financed amount can be done
within a period of 1 to 20 years in equal monthly
installments which is inclusive of markup (banks
profit).
Financing for repairs/renovations is allowed to a
maximum amount of Rs 2 million of 55% of the
forced sale value of the property whichever is
lower. Repayment of the loan is within 1 to 7 years
in equal monthly installments inclusive of markup
(banks profit).
Markup rate charged by the bank are 1.50% above
prevailing State Bank of Pakistan discount rate
minimum 9.00 % per annum.
Like every other bank there are eligibility criteria
which a consumer/corporate client have to fulfill in
order to prevail the Soneri Ghar Finance. Following
are the different criteria’s
i) Salaried persons with continuous permanent
employment for the past 5 years with
reputable legal entities with maximum age of
60 years at the time of maturity of the finance
being applied.
ii) Self employed persons e.g. doctors, engineers,
architects etc registered with professional
organizations & business persons with
maximum age of 65 years at the time of
maturity of the finance being applied for.
iii) Monthly repayment installment must not be
more than 40% take home salary/declared
income.
iv) Borrower’s equity for purchase of house
should be a minimum of 20% of the forced
sale value of the property.
v) For security the bank mortgages the property
and mortgage protection insurance policy.
2.Soneri Car Finance
Soneri Car Finance service is offered for both
consumer and corporate clients. The clients have
to choose the make, model and the color of the
vehicle the customer wishes to purchase.
Eligible customers who are salaried individuals
need to provide an employment certificate of
joining his/her respective job. Most recently salary
slip/salary certificate. The monthly salary of the
individual should be twice the amount of the
monthly installment charged by the bank. The
bank statement of last six months has to be
provided by the customer.
Self employed or business persons need to provide
a bank statement for the last six months. A copy of
the last year filed tax returns and wealth
statement. Professional body registration copy.
Maximum amount of 1 million is financed by the
bank which is only for locally manufactured cars. If
a customer wants to avail financing facilities for a
2nd car then a approval for that is required by the
head office. The approval is granted depending
upon the previous relation of the client with bank.
Bank requires a 10% a down payment of the total
amount being financed. The balance amount is
reimbursed by the bank. This amount is paid back
by the client in equal monthly installments
inclusive of a 9% per annum markup. The tenor of
financing of an automobile is for 5 years.
3. Soneri Personal Finance
Soneri Personal Finance service is offered to
customers to meet their instant demand of cash.
Personal finance service is offered for medical
treatment, education, advance rent, traveling,
house renovation etc.
Eligible customers who are salaried individuals
need to provide an employment certificate of
joining his/her respective job. Most recently salary
slip/salary certificate. The bank statement of last
six months has to be provided by the customer.
Self employed or business persons need to provide
a bank statement for the last six months. A copy of
the last year filed tax returns and wealth
statement. Professional body registration copy.
Personal finance requires that the client has
his/her personal income salary account with Soneri
Bank. The personal finance amount is loaned out
on a ratio basis. The total amount of the loaned
amount is 5 times the income of the personal to a
maximum amount of Rs. 500,000/- for e.g. if an
individual is earning Rs. 10,000/- per month he
would be loaned out an amount upto Rs. 50,000/-
but not more than that. The bank charges a 13%
per annum markup on the financed amount.
4. Soneri ATM Card
Soneri bank through its Soneri Banking Card offers
convenient and 24 hours access to ATMs across
the country. Throughout the country the Soneri
ATM can be used to withdraw cash from any
Soneri’s own ATM and other ATM’s displaying
either the 1-LINK or M-Net symbols.
Easy access to a clients account is provided with
the Soneri Banking Card and secured ATM pin. The
Soneri ATM card is delivered to customer at their
doorstep. The 4 digit Personal Identification
Number (PIN) is assigned from the clients
perspective branch.
Facilities provided by all ATMs of 1-Link and M-Net
are:
1. Cash Withdrawal
2. Balance Enquiry
Facilities provided by Soneri ATMs:
1. Fast Cash
2. Mini Statement
3. Request for Cheque Book
4. Request for Statement of Account
5. PIN Change
The amount of cash which can be taken out from
an ATM during one working day is Rs 20,000/-. The
amount of ATM cash withdrawal is electronically
debited to the respective account at the clients
bank branch.
5. Soneri Debit Card
The Soneri debit card provides a convenient and
safer way for its holders to pay for shopping at
stores, dining out, filling of vehicle at petrol
pumps, pay hospital bills and many more directly
right from your account.
The Soneri debit card works on ORIX network
through which the holder can make every day
purchases worth Rs. 300,000/- at over 2000
locations across Pakistan. There are no hassles to
remember the payment due date and of course no
late payment surcharge and markup.
When payment is done through the debit card, the
amount is electronically debited to your bank
account. These transactions appear on the bank
statement for reconciliation of account. The Soneri
ATM card can be use as a Soneri Debit Card. So the
account holder does not have to carry to cards
rather this one card serves two purposes for the
convenience of the customers.
6. Soneri Tele Banking
Soneri Tele banking saves the customer the hassle
of coming down to the banks branch. This saves
the customer valuable time and provides
convenience at the same time. The tele banking
can be accessed with the help of the card number
and T-pin to access your account 24 hours a day, 7
days a week.
The customers can access the following facilities
through the Tele Banking:
1. Balance Enquiry
2. Today’s Transaction by Voice
3. Instant Temporary Statement of Account
through Fax
4. Request for Computer generated Statement of
Account
5. Request for Cheque Book
6. Stop Mark of Lost Soneri Banking Card
7. Change of T-Pin
8. Latest Foreign Exchange Rates
9. Product Information
No additional costs are charged to the customer
for providing these facilities.
7. Soneri Rupees Travelers Cheque
Travelers’ cheque is the preferred choice of every customer to carry
1. Secured way to Cash.
2. Printed in the United Kingdom by renowned
security printers with added security
features.
3. Beautifully designed and available in
convenient denomination of Rs. 5,000.
4. Sold and encashable free of any service
charge ( Govt. Taxes / Duties applicable)
through all branches of Soneri Bank Limited.
Also payable through Local Clearing System.
5. Minimum transaction time & speed Issuance
& Encashment through State of Art
Technology.
6. Prompt processing of refund of claim in case
of Loss / Theft on reporting to the nearest
branch of Soneri Bank Limited.
7. No validity - valid until encashed.
Evaluation of Banks Performance
BALANCE SHEET AS AT 31 DECEMBER 2006 2006 2005 2004ASSETS (RUPEES IN '000)
CASH AND BALANCES WITH TREASURY BANKS 3,627,569 2,821,394 5,048,395 BALANCES WITH OTHER BANKS 2,793,190 1,057,546 3,564,030 LENDINGS TO FINANCIAL AND OTHER INSTITUTIONS 3,585,421 2,705,000 4,417,378 INVESTMENTS 13,982,828 11,912,517 12,333,893 ADVANCES 24,375,905 17,348,525 50,542,166 OTHER ASSETS 671,372 477,187 1,473,952 OPERATING AND FIXED ASSETS 815,614 643,960 1,158,407 DEFERRED TAX ASSETS ------ ------ - 49,851,899 36,966,129 78,538,221 LIABILITIES BILLS PAYABLE 893,762 808,858 905,637 BORROWINGS FROM FINANCIAL INSTITUTIONS 7,957,364 4,998,149 8,478,048 DEPOSITS AND OTHER ACCOUNTS 37,383,756 27,868,418 56,460,329 SUB-ORDINATED LOANS ------ ------ - LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE ------ 3,301 18,434
LEASEOTHER LIABILITIES 530,952 582,112 2,294,899 DEFERRED TAX LIABILITIES 42,757 101,445 166,442 46,808,591 34,362,283 68,323,789 NET ASSETS 3,043,308 2,603,846 10,214,432 REPRESENTED BY SHARE CAPITAL 1,271,919 1,017,535 2,912,635 RESERVES 1,592,071 1,210,203 2,259,101 UN-APPROPRIATED PROFIT 14,771 2,643 1,079,492 2,878,761 2,230,381 6,251,228 SURPLUS ON REVALUATION OF ASSETS 164,547 373,465 3,963,204 3,043,308 2,603,846 10,214,432
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2006 2006 2005 2004 (RUPEES IN '000)
MARK-UP/RETURN/INTEREST EARNED1,947,657
1,713,971
2,753,451
MARK-UP/RETURN/INTEREST EXPESED (752,276) (789,645)
1,118,118
NET MARK-UP/RETURN/INTEREST INCOME1,195,381 924,326
1,635,333
REVERSAL/(PROVISION) AGAINST NON-PERFORMING LOANS AND ADVANCES 15,054 (72,840) 51,609PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS ----- ----- - BAD DEBTS WRITTEN-OFF DIRECTLY ----- ----- 1,118
15,054 (72,840) 123,526
NET MARK-UP / RETURN / INTEREST INCOME AFTER PROVISIONS
1,210,435 851,486
1,511,807
NON MARK-UP/ INTEREST INCOME
FEE, COMMISSION AND BROKERAGE INCOME 177,247 153,964 397,064
DIVIDEND INCOME 17,405 2,922 697,499
INCOME FROM DEALING IN FOREIGN CURRENCIES 121,834 121,560 162,444
OTHER INCOME 163,216 184,734 -
TOTAL NON MARK-UP / INTEREST INCOME 479,702 463,180 572,035
1,690,137
1,314,666
(2,607)
NON MARK-UP / INTEREST EXPENSES 5,050
ADMINISTRATIVE EXPENSES (642,231) (499,924)
1,831,485
PROVISION AGAINST OTHER ASSETS 3 (87)
3,343,292
OTHER CHARGES (1,343) (1,143)
TOTAL NON MARK-UP / INTEREST EXPENSES (643,571) (501,154)
1,134,672
1,046,566 813,512 -
EXTRAORDINARY / UNUSUAL ITEMS ----- ----- 1,150
PROFIT BEFORE TAXATION1,046,566 813,512
1,135,822
TAXATION – CURRENT (365,000) (396,000)
2,207,470
PRIOR YEARS 116,959 (4,854) DEFERRED (150,145) 26,054 -
(398,186) (374,800)
2,207,470
PROFIT AFTER TAXATION 648,380 438,712 UN-APPROPRIATED PROFIT BROUGHT FORWARD 2,643 6,057 PROFIT AVAILABLE FOR APPROPRIATION 651,023 444,769 APPROPRIATIONS TRANSFER TO: -
STATUTORY RESERVE (129,676) (87,742) 517,588
PROPOSED ISSUE OF BONUS SHARES @ 30% (2005: 25%) (381,576) (254,384)
(420,394)
GENERAL RESERVE (125,000) (100,000) 356,806
(636,252) (442,126) 454,000
UN-APPROPRIATED PROFIT CARRIED FORWARD 14,771 2,643
1,753,470 1,753,470
BASIC / DILUTED EARNINGS PER SHARE (RUPEES) 5.10 3.45
RATIO ANALYSIS OF FAYSAL BANK
1. Return on Assets2006 (Rupees in '000) 2005 (Rupees in '000)Net Income / Total Assets 651,023 / 49,851,899 444,769 / 36,966,129 1.3 % 1.2 % 2004 (Rupees in 000)Net Income / Total Assets
1,753,470 / 78,538,2212.23 %
Analysis: Return on asset measures a banks managerial efficiency; showing how efficient the bank has been in converting the banks assets into earnings. As compared to year 2005 there has been a substantial increase in ROA by 0.1% which indicates that the banks management is working efficiently and is capable of performing well in the future.
2. Return on Equity2006 (Rupees in '000) 2005 (Rupees in '000)Net Income / Owners' Equity 651,023 / 3,043,308 444,769 / 2,603,846 21.4 % 17.1 %2004 (Rupees in '000)Net Income / Owners' Equity
1,753,470 / 10,214,423 17.167 %
Analysis: Return on equity measures the rate of return flowing to the banks shareholders. An increase in this ratio would provide incentives for shareholders to invest more funds in the bank. There has been an increase from 17.1% to 21.4% in the ROE which clearly indicates that there has been an increase in the returns shared by the stockholders.
3. Net Interest Margin
2006 (Rupees in '000) 2005 (Rupees in '000)(Interest income from loans and securities investments-Interest expense on deposits and on other debt issued) / Total Assets
3,638,791 / 49,851,899 3,026,484 / 36,966,129
7.3 % 8.2 %2004 (Rupees in '000)(Interest income from loans and securities investments-Interest expense on deposits and on other debt issued) / Total Assets
1,635,333 / 78,538,2212.08 %
Analysis: This ratio is an efficiency and profitability ratio. It determines how well the management and staff have been able to keep growth of revenues ahead of rising costs. The ratio particularly measures how large a spread between interest revenues and interest costs management has been able to achieve by close control over the bank’s earning assets and the pursuit of the cheapest source of funding. As compared to the proceeding year the net interest margin has declined from 8.2% to 7.3%. This is basically due to the large number of increase in the total assets as compared to the increase in the spread of interest revenues and interest incomes which implies less profitability for the bank in the year 2006 as compared to the year 2005.
4. Net Non Interest Margin2006 (Rupees in '000) 2005 (Rupees in '000)(Non-Interest revenues-Non-Interest expenses) / Total Assets
(163,869) / 49,851,899 (37,974) /
36,996,129
(0.33) (0.10) 2004 (Rupees in '000)(Non-Interest revenues-Non-Interest expenses) / Total Assets
695,663 / 78,538,221
0.886 %
Analysis: For most banks the net non interest margin is negative. The same is the case with Soneri Bank. The non interest revenues are less than the expenses. There has been an increase in this margin as the banks non interest expenses have increased in comparison to its non interest revenues.
5. Net Bank Operating Margin2006 (Rupees in '000) 2005 (Rupees in '000)(Total Operating revenues -Total operating Expenses / Total Assets 648,380 / 49,851,899 438,712 / 36,996,129 1.30 % 1.19 % 2004 (Rupees in '000)
2.97 %
Analysis: Net Bank operating margin indicates that whether the bank has been able to generate more revenues than expenses relative to total assets.Net bank operating margin has increased from 2005 to 2006. This shows that total assets have been used successfully to generate more revenues than expenses.
6. Net Earning Per Share of Stock2006 (Rupees in '000) 2005 (Rupees in '000)(Net Income after Taxes / Common Equity Shares Outstanding
651,023X1000 / 127,191,776 444,769X1000 / 101,753,437
651023000 / 127,191,776 444,769,000 / 101,753,437
5.12 4.37 2004 (Rupees in '000)
(Net Income after Taxes / Common Equity Shares Outstanding1,753,470 / 368,448,000
4.76Rs.
Analysis: Earning per share is the allocation of company’s profit to each outstanding share. An increase in the earning per share is a favorable sign for the investors. Soneri’s EPS has increase by 0.75 over the last one year which shows that the profits of the bank have increased.
7. Earning Spread2006 (Rupees in '000) 2005 (Rupees in '000)(Total Interest Income / Total Earning Assets) – (Total Interest Expense / Total Interest Bearing bank liabilities)2,427,359/815,614 -643,571/7,957,364 2,177,151/643,960 - 501,154/4,998,1492.9761 - 0.0808 3.3808 - 0.25082.895 % 3.130 %
Analysis: The spread measure the earning efficiency with which a bank is managed. The spread measures the effectiveness of the banks intermediation function in borrowing and lending money and also the intensity of competition in the bank’s market area. As competition increases in the bank’s market area the difference between the average assets yields and average liability cost tends to decline. The spread for Soneri has fallen in 2006 to 2.895 from 3.130 from the proceeding year which implies that the bank has to find other ways to make up for the eroding earnings spread.
Breakdown of Equity Returns
8. Banks Net Profit Margin2006 (Rupees in '000) 2005 (Rupees in '000) Net Income after taxes/Total Operating Revenues 651,023 / 479,702 444,769 / 463,180 1.3571 % 0.9603 % 2004 (Rupees in '000) Net Income after taxes/Total Operating Revenues 1,753,470 / 4,584,936
38.24 %
Analysis: NPM is increasing which means that the costs and expenses of the bank have been controlled efficiently and it is very good for the bank.
9. The Banks Degree of Asset Utilization2006 (Rupees in '000) 2005 (Rupees in '000) Total Operating Revenues/Total Assets 479,702 / 49,851,899 463,180 / 36,966,129 0.0096 % 0.0125 % 2004 (Rupees in '000)Total Operating Revenues/Total Assets
4,584,936 / 78,538,221 0.058
Analysis: Asset Utilization Ratio has decreased in 2006 which means that total operating revenues have decreased as compared to total assets. It also means that the portfolio management policies have not been that successful as in previous year and the yield on bank's assets has declined.
10. The Banks Equity Multiplier2006 (Rupees in '000) 2005 (Rupees in '000) Total Assets/Total Equity 49,851,899 / 2,878,761 36,966,129 / 2,230,381 17.3171 % 16.5739 % 2004 (Rupees in '000) Total Assets/Total Equity
78,538,221 / 2,878,761 17.317 %
Analysis: The multiplier is a direct measure of the banks degree of financial leverage; how many Rupees of assets must be supported by each Rupee of equity capital and how much of the banks resources must rest on debt. The Equity Multiplier has increased in the 2006 which indicates that the bank is exposed to higher failure risk but increase in
multiplier also indicates that potential for high returns for stockholders.
11. Return on Equity; ROE = NPM x AU x EM2006 (Rupees in '000) 2005 (Rupees in '000)1.3752 x 0.0096 x 17.3171 0.9603 x 0.0125 x 16.5739 0.228 0.198 2004 (Rupees in '000)38.24 x 0.058 x 12.56 28.05
Analysis: The return on equity has increased overall which is a positive sign for the bank. The asset utilization ratio has decrease whereas the equity multiplier and net profit margin has increased. As a whole the returns on assets have increased as the performance of the bank has been positive.
Breakdown Analysis of Banks Return on Assets
12. Net Interest Margin2006 (Rupees in '000) 2005 (Rupees in '000)(Interest Income-Interest Expense)/Total Assets
1,210,435 - 643,571/ 49,851,899 851,486 - 501,154 / 36,966,129
566,864 / 49,851,899 350,332 / 36,966,1290.0114 % 0.0095 %
Analysis: Net interest margin has increase from the year 2005 to 2006. This is due to the fact that the interest earnings with respect to the total assets have increased in a larger amount. This shows that the banks interest earnings have increased due to better management of resources.
13. Non Interest Margin2006 (Rupees in '000) 2005 (Rupees in '000)(NonInterest Income-NonInterest Expense) / Total Assets 1,690,137 - 643,571 / 49,851,899 1,314,666 - 501,154 / 36,966,1291,046,566 / 49,851,899 813,512 / 36,966,1290.0210% 0.0220%
Analysis: The amount of non-interest revenues stripped from deposit service charges and other service fees the
bank has been able to earn has increased to a low extent relative to the amount of non-interest costs incurred which may include costs on repair, maintenance, wages salaries, and bank facilities etc. The costs have declined by a minor percentage from 2.2% to 2.1% which indicates that the bank can still manage to increase its non interest earnings by efficient management of resources and cutting down on operating costs.
17. Special Transactions Affecting the Net Income 2006 (Rupees in '000) 2005 (Rupees in '000)
Special income and expense items / Total Assets
3,043,308 / 49,851,899 2,603,846 / 36,966,129
16.38 % 14.20 %
Analysis: The total amount of special income and expense items has increased by 2.18%. This shows that special transactions have increased as compared to the increase in the amount of total assets.
18. Return on Assets; ROA = NIM + Non IM - Sp. Tr.
2006 (Rupees in '000) 2005 (Rupees in '000) 16.41 % 14.23%
Analysis: The ROA of Soneri Bank has increase from 14.23% to 16.41% which shows that the bank has been done a good job in the last year as there is an increase in the returns on the total assets.
18. Credit Risk
the probability that some of bank’s assets, especially its
loans, will decline in value and perhaps become worthless is
known as credit risk.
a) Net Charge Offs of Loans to Total loans
2006 (Rupees in '000) 2005 (Rupees in '000) = Net Charge offs of loans / Total Loans * 100
67 / 74,468,644 0 / 62,323,508 0.0008% 0 %
2004 (Rupees in '000) 2003 (Rupees in '000)1,118 / 50,542,166
0.002 %
Charge offs are the loans that
b) Annual provision for loan losses to total loans
2006 (Rupees in '000) 2005 (Rupees in '000) = total annual provision / Total Loans * 100
0.0008% 0 %2004 (Rupees in '000) 2003 (Rupees in '000)
1,118 / 50,542,166 0.002 %
19. Liquidity Risk
2006 (Rupees in '000) 2005 (Rupees in '000) Cash and due from deposit balance held at other bank / Total Assets 10,006,180 / 49,851,899 6,583,940 / 36,966,129 0.2007 % 0.1781 %
Analysis: Liquidity risk is increasing in our case so it is not good for the bank. This shows that bank was doing well in the field of cash in the year 2005 as compared to 2006.
20. Operating Efficiency Ratio
2006 (Rupees in '000) 2005 (Rupees in '000) Total operating expense / Total operating Revenue 643,571 / 479,702 501,154 / 463,180 1.3416 % 1.0820 %
Analysis: It is a ratio between operating expenses and revenues which has increase from 1.08 to 1.34 from 2005 to 2006 showing that though the operating revenues have increased but there is a larger increase in operating expenses meaning that company is not efficiently managing its earnings and returns.
TREND ANALYSIS
Total Assets: Total numbers of assets have grown by 36.34% from the year 2003 to 2006. The growth rate has declined to 32.03% in the year 2004 where as in the fiscal year 2006 the growth rate again stepped up to 34.85% but was still lower than the growth rate of year 2003.
Total Liabilities: Total liabilities of Soneri bank have grown in the year 2004 by 35.39% as compared to the year 2003. In the year 2005 the liabilities increased by 33.68% which was lower as compared to the preceding year. A 36.22% increase in liabilities was clearly seen in the year 2006 as the total number of liabilities increased to a total of 46,808,591,000.
Shareholders Equity: The year 2004 showed an increase of 48% in the shareholders equity where as the growth in 2005 was at a declining rate which was only
13.55% and slight increase from 2005 to 2006 could be seen with rate of growth totaling to 16.87%. So overall the shareholders equity had a huge jump in the fiscal year 2003-2006 where after which the shareholder’s equity was increasing a declining rate of growth.
Net Income: The net income of Soneri bank has been rising as visible by the histogram below. The banks’ net income went up by 29.57% in the year 2003 as compared to the preceding year. In year 2005 the banks net income went up to a wholesome Rs. 438,712,000 which was an increase of 25.21% which was less than the growth rate of 2005. In the year 2006 there was a huge increase of 47.79% which shows that the bank’s performance was improving yearly but in the year 2006 there was an exceptional leap in the net income.
RECOMMENDATIONS
Concentrate on financing of all types of sectors:
Soneri bank is lacking in targeting all types of sectors, they should finance everything from a house to its furniture, only than it would produce true value for its money, and would be able to meet its costs. They should also look in to small sectors and the low income group as they are the ones who would readily agree to get a television or sofa set financed.
Car financing:
Although Soneri bank has a department concerned with car financing, but not enough effort is put forward by the bank in this department. As car financing rates have declined in the preceding years the bank should focus on capturing this market. This could help the bank for achieving better prospects in the future.
Concentrate on Small Businesses:
As business scenario in Pakistan has improved in the last couple of years the bank should focus its marketing activities on capturing the small businesses for lending their financing services.
Promote Credit Cards:
Currently the bank is not offering any credit cards to its customers. The management of the bank should look forward to launching a credit card product. This would help increase the number of products as well as the profitability of the bank.
Increase the number of branches:
The competition in the banking sector has increased over the last couple of years. In order to compete with growing competition the bank should increase the number of branches nationally and regionally.