Profitability ratios

Return on Equity
Formula:
Net Income / Total Equity

ROE 18.25057661 19.06284598

The return on the equity of the bank is 19.062 in 2015 and 18.2505 in 2016. There is a slight
decrease in the ROE because of the increase in equity which gave less return in 2016 than 2015.
This shows that the generation of return from the shareholders equity has reduced for the bank
because there is bank increase in the number of shareholders.
Return on Assets
Formula:
Net Income / Total Assets

ROA 0.845528915 0.94434702

Return on assets is the profit availed from the assets invested. It considers of both long-term as
well as short-term assets. The gross yield on assets have decreased slightly but the continuous
decrease in upcoming years can affect the expense control. They need to control the utilization
of assets i.e. short-term or long-term advances or loans and exchange of balances with other
banks.
Valuation Ratio
Price to earnings ratio

Price/earnings ratio 12.1 9.1

Formula: Price / Earnings
This is a very important ratio because it shows the NI of the past of the bank and also it shows
the market value of the shares. The goodwill for the future performance of the bank depends
upon this ratio. P/E ratio has increased from 9.1 to 12.1 in the years 2015 to 2016. This is a
healthy number showing the market value of the share has increased and thus the value of the
bank has increased.
Price to Sales Ratio
Formula:
(Current share price * outstanding number of share)/Average sales of pervious one year

Price to sales 2.9 2.1

It is the indication between how much an investor paid in comparison to how much the
company sales generated per share. It is the measure of value placed on the sales by the
market. Since there is an increase in the Price to sales ratio from 2.1 to 2.9 this means that the
market is willing to pay higher for each rupee of annual sales.
Book Value per Share
Formula:
Book value per share / no. of share outstanding
Book Value per
share 32.69 29.81

The earnings received from issuing common equity, it is the value which is extracted at the end
for investors by removing preferred equity, tangible assets and liabilities. It is the value
remained after all assets are liquidated and all liabilities are dealt with. The book value per
share for meezan bank increased over the years indicating the issued common equity is
valuable in the market for meezan bank. This can retain the investors and attract new investors.