Ratio analysis

1. Profitability ratios

Profitability ratios
Return on asset (ROA) Return on equity (ROE) Net operating margin Net Interest margin

20.00%

15.00%

10.00%

5.00%

0.00%
2011 2012 2013 2014 2015

1.1. Return on asset (ROA)

The effective deploying of the company on its assets is better measured by ROA. A very low
return on asset, or ROA, usually indicates inefficient management, whereas a high ROA means
efficient management. However, this ratio can be distorted by depreciation or any unusual
expenses. The assets of the company are comprised of both debt and equity. Both of these types
of financing are used to fund the operations of the company. The higher the ROA number, the
better, because the company is earning more money on less investment.

ROA = (Net income / Total asset)

2011 2012 2013 2014 2015

Net Income 2,945,202,204 1,585,233,380 3,069,357,562 3,700,332,233 4,016,037,872
Total Asset 168,688,543,506 207,244,365,339 225,620,285,172 265,912,772,548 293,739,350,324
Return on asset 1.75% 0.76% 1.36% 1.39% 1.37%
(ROA)

ROA of UCBL indicates that the company has a good history of earnings on its investment.

1.2. Return on equity

ROE measure the utilization of the equity capital. This measurement will generally be higher
than return on assets because of leverage. ROE is considered to be one of the best indicators of
profitability. It is also a good figure to compare against competitors or an industry average. If this
ratio is too low, it can indicate poor management performance or a highly conservative business
approach. On the other hand, a high ROE can mean that management is doing a good job, or that
the firm is undercapitalized.

ROE = (Net income/Operating profit) *(Operating profit/Total asset) *(Total asset/Total equity)

2011 2012 2013 2014 2015

Net Income 2,945,202,204 1,585,233,380 3,069,357,562 3,700,332,233 4,016,037,872

Total operating income 9,294,372,286 10,177,656,171 12,412,091,923 15,269,470,979 15,627,863,370
Total Asset 168,688,543,506 207,244,365,339 225,620,285,172 265,912,772,548 293,739,350,324
Shareholders' equity 15,963,171,945 18,166,882,999 20,504,781,695 22,526,684,859 25,662,659,327
Return on equity (ROE) 18.45% 8.73% 14.97% 16.43% 15.65%

ROE of UCBL is good over the years. It indicates the company has good utilization of its equity
investment which results in more profitability.

1.3. Net operating margin (NOM)

Operating margin is a measurement of what proportion of a bank's revenue is left over after
paying for variable Interest Expenses. NOM refers the efficiency of generating spread from
banks total asset.

NOM= (total operating income-total operating expense)/ Total ending earning asset

2011 2012 2013 2014 2015

Total operating income 9,294,372,286 10,177,656,171 12,412,091,923 15,269,470,979 15,627,863,370

Total operating expenses 3,322,060,460 4,416,331,679 5,280,084,054 6,503,740,661 7,164,118,759
Total Ending Earning Asset 124,316,335,05 147,944,976,81 177,533,972,17 213,040,766,60 255,648,919,93
4 2 4 9 1
Net operating margin 4.80% 3.89% 4.02% 4.11% 3.31%

NOM of UCBL is good over years which is the result of efficient spread from its total asset.

1.4. Net interest margin (NIM)

To examine a firm's investment decisions successfulness are compared to its debt situations is
best measured by NIM. A negative value denotes that the firm did not make an optimal decision,
because interest expenses were greater than the amount of returns generated by investments.

NIM= (Interest Income Earned-Interest paid on deposit accounts)/ Total ending earning asset

2011 2012 2013 2014 2015

Interest income 15,351,632,098 21,318,920,218 23,006,187,159 22,425,322,413 22,526,569,320
Interest paid on deposits and 10,203,214,761 14,705,210,208 15,923,823,566 14,469,269,727 14,758,487,527.0
borrowings 0
Total Ending Earning Asset 124,316,335,05 147,944,976,81 177,533,972,17 213,040,766,60 255,648,919,931
4 2 4 9
Net Interest margin 4.14% 4.47% 3.99% 3.73% 3.04%

NIM of UCBL was positive over the years which indicates that the firm make an optimal
decision, because interest expenses were lower than the amount of returns generated by
investments.

2. Risk ratios

R is k ratios
Provission for loss ratio Loan ratio
80.00%
68.47% 65.66% 65.90% 65.51% 67.23%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
0.69%
10.00% 1.49% 0.83% 1.08% 0.59%
0.00%
2011 2012 2013 2014 2015

2.1. Provision for loss on loans and advances

A loan loss provision is an expense set aside as an allowance for bad loans (customer defaults, or
terms of a loan have to be renegotiated, etc.). The higher Loan Loss Ratio refers a higher
possibility of loan to be outstanding.
Provision for loss ratio = (Total Provision for loss on loans and advances / Loan and advances)

2011 2012 2013 2014 2015

Total provision 800,000,000 2,023,155,489 1,239,047,510 1,885,541,074 1,156,688,887

Loans and advances 115,506,326,932 136,071,649,404 148,677,345,884 174,205,101,408 197,493,629,137
Provision for loss ratio 0.69% 1.49% 0.83% 1.08% 0.59%

This ratio indicates that provision for losses on loan and advances are reasonable for UCBL.

2.2. Loan ratio

The Loan to total assets ratio is a measurement representing the percentage of a corporation's
assets that are financed with loans and financial obligations lasting more than one year. The ratio
provides a general measure of the financial position of a company, including its ability to meet
financial requirements for outstanding loans. A year-over-year decrease in this metric would
suggest the company is progressively becoming less dependent on debt to grow their business.

Loan ratio = (Total loans and advances / Total asset)

2011 2012 2013 2014 2015

Loans and advances 115,506,326,932 136,071,649,404 148,677,345,884 174,205,101,408 197,493,629,137

Total Asset 168,688,543,506 207,244,365,339 225,620,285,172 265,912,772,548 293,739,350,324
Loan ratio 68.47% 65.66% 65.90% 65.51% 67.23%

3. Operating efficiency ratios

 Ope rating e fficie ncy ratios
Interest expense Salaries and wages ratio
8.00% 7.10% 7.06%
6.05%
7.00%
5.44% 5.02%
6.00%
5.00%
4.00%
3.00%
1.06%
2.00% 1.14% 1.28% 1.35% 1.35%
1.00%
0.00%
2011 2012 2013 2014 2015

3.1. Interest expense

Interest expense is a non-operating expense shown on the income statement. Close attention to
solvency ratios such as debt to equity and interest coverage. The interest Expense ratio is used to
determine how easily a company can pay interest expenses From Its Assets. The ratio is
calculated by dividing the company's interest expenses by total assets for the same period. The
lower the ratio, the more the company is burdened by debt expense.

Interest expense ratio = (Interest paid on deposits and borrowings / Total borrowings)

2011 2012 2013 2014 2015

Interest paid on deposits and 10,203,214,761 14,705,210,208 15,923,823,566 14,469,269,727 14,758,487,527.0
borrowings 0
Total Asset 168,688,543,50 207,244,365,33 225,620,285,17 265,912,772,54 293,739,350,324
6 9 2 8
Interest expense 6.05% 7.10% 7.06% 5.44% 5.02%

From 2011 to 2015, interest expense is reduced over the asset for UCBL.

3.2. Sales and wages

Sales and wages ratio = (Total salaries and allowances paid / Total asset)

2011 2012 2013 2014 2015

Salaries and allowances 1,784,554,350 2,366,377,581 2,890,913,858 3,592,081,028 3,957,229,942.0

paid 0
Total Asset 168,688,543,50 207,244,365,33 225,620,285,17 265,912,772,54 293,739,350,324
6 9 2 8
Salaries and wages ratio 1.06% 1.14% 1.28% 1.35% 1.35%

4. Liquidity ratios

Liquidity ratio
Cash ratio Cash and securities ratio
35.00% 22.77% 23.76%
19.29% 20.66% 21.39%
30.00%
25.00%
20.00%
15.00%
7.73% 7.82% 6.77% 6.91% 6.11%
10.00%
5.00%
0.00%
2011 2012 2013 2014 2015

4.1. Cash ratio

The cash ratio is the most stringent and conservative of the three short-term liquidity ratios
(current, quick and cash). It only looks at the most liquid short-term asset, cash of the company,
which can be most easily used to pay off current obligations. It ignores inventory and
receivables, as there are no assurances that these two accounts can be converted to cash in a
timely matter to meet current liabilities.
Cash ratio = (Total cash / Total asset)

2011 2012 2013 2014 2015

Total cash 13,034,212,190 16,211,455,178 15,275,160,387 18,387,185,759 17,960,809,783.00

Total Asset 168,688,543,506 207,244,365,339 225,620,285,172 265,912,772,548 293,739,350,324
Cash ratio 7.73% 7.82% 6.77% 6.91% 6.11%

Cash ratio of UCBL for the 2011 to 2015 was 7% to 6% which is a good indicator of keeping
enough cash to settle short term obligations.

4.2. Cash and securities ratio

The cash asset ratio is the current value of marketable securities and cash, divided by the
company's current

liabilities. Also, known as the cash and securities ratio, the cash asset ratio compares the dollar
amount of highly liquid assets (such as cash and marketable securities) for every one dollar of
short-term liabilities. This figure is used to measure a firm's liquidity or its ability to pay its
short-term obligations. Ideal ratios will be different for different industries and for different sizes
of corporations, and for many other reasons.

Cash ratio = {(Total cash + Investment in shares and securities) / Total asset}

2011 2012 2013 2014 2015

Total cash 13,034,212,190 16,211,455,178 15,275,160,387 18,387,185,759 17,960,809,783.00
Investment in shares & securities 19,506,665,453 26,604,514,972 36,091,444,545 44,804,418,466 44,870,400,969
Total Asset 168,688,543,506 207,244,365,339 225,620,285,172 265,912,772,548 293,739,350,324
Cash and securities ratio 19.29% 20.66% 22.77% 23.76% 21.39%

5. Others financial ratio

 othe r finnancial ratios
Tax rate Dollar gap ratio
74.84%
80.00% 74.22% 73.70%
69.18%
64.95%
70.00% 57.59%
60.00% 47.75%
43.06% 46.14% 44.90%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2011 2012 2013 2014 2015

5.1. Tax rate

This ratio is a measurement of a company's tax rate, which is calculated by comparing its income
tax expense to its pretax income. This amount will often differ from the company's stated
jurisdictional rate due to many accounting factors, including foreign exchange provisions. This
effective tax rate gives a good understanding of the tax rate the company faces.

T.R = (Current tax / Profit before tax)

2011 2012 2013 2014 2015
Current Tax 2,227,109,622 2,152,935,623 2,813,602,797 3,174,857,011 3,281,017,852
Profit before tax 5,172,311,826 3,738,169,003 5,892,960,359 6,880,189,244 7,307,055,724
Tax rate 43.06% 57.59% 47.75% 46.14% 44.90%

Tax rate of UCBL was higher than 40% from 2011 to 2015 which indicates that more than 40%
income was reduced for paying tax.

5.2. Dollar Gap ratio

Dollar Gap ratio refers The value of all interest rate-sensitive assets subtracting from the value
of all interest rate-sensitive liabilities owned by a firm, relative to total assets.

Dollar Gap ratio = {(IRS asset -IRS liabilities) / Total asset}

2011 2012 2013 2014 2015

Balance with bank 3,740,008,122 4,713,327,408 7,027,894,504 6,032,024,880 10,763,934,598
Money at call and short notice 5,070,000,000 7,160,000,000 1,570,000,000 2,190,000,000 390,000,000
Investment in shares & securities 19,506,665,453 26,604,514,972 36,091,444,545 44,804,418,466 44,870,400,969
Loans, cash credits, overdrafts 112,741,460,709 132,767,635,674 144,281,809,081 164,619,664,490 185,437,071,383
Total IRS asset 141,058,134,284 171,245,478,054 188,971,148,130 217,646,107,836 241,461,406,950
Interest rate sensitive liabilities
Borrowings - 1,200,021,000 3,617,132,258 10,510,476,387 18,743,658,871
Savings deposits 14,811,191,649 16,224,242,769 19,064,894,390 23,184,508,951 31,946,122,205
Total IRS liabilities 14,811,191,649 17,424,263,769 22,682,026,648 33,694,985,338 50,689,781,076
Total Asset 168,688,543,506 207,244,365,339 225,620,285,172 265,912,772,548 293,739,350,324
Dollar gap ratio 74.84% 74.22% 73.70% 69.18% 64.95%

There is a positive gap over the years. We know that Asset generates earnings and liabilities
generates expenses. If the interest rate decreases it will decrease banks profit. Because asset
revenue drops faster than the borrowing cost, profit will drop. So, interest expense will be higher
than the interest income. So, bank will face loss.