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Asset liability management Sources and uses of funds Similarities & dissimilarities
GROUP # 7
Outlines:
Introduction of this Project Objective of the Project Companies selected for study Faysal Bank MEEZAN BANK LTD Conceptual Framework for Islamic Asset Liability Management Deposits Uses of funds Similarities & dissimilarities
Qazi waqas, Zulqarnain , Nouman 4
Holy Quran:
We have created the night as covering and we have created the day for the economic activities.
Faysal Bank
Faysal Bank Limited was incorporated in Pakistan on October 3, 1994, as a public limited company under the Companies Ordinance, 1984.
Currently, the Bank's shares are listed on the Karachi, Lahore and Islamabad Stock Exchanges Faysal Bank is engaged in Commercial, Consumer, Corporate and Islamic Banking activities
Qazi waqas, Zulqarnain , Nouman 10
They bought the local operations of Socite General (French Bank) 03 branches
Qazi waqas, Zulqarnain , Nouman 13
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Objectives of ALM
To manage the portfolio in a manner consistent with the banks investment policy. To obtain the desired earning while holding risk at acceptable levels. To maintain adequate liquidity at a cost consistent with earnings goals.
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Techniques of ALM.
Matching Techniques. Swap Techniques. Futures as a Hedging Technique. Options as Hedging Techniques.
ALM - Pillars
ALM Information Systems.
MIS Information availability Accuracy Adequacy Expediency
ALM Organization.
Structure and responsibilities Level of top management involvement Risk Parameters Risk Identification Risk Measurement Risk Management
Qazi waqas, Zulqarnain , Nouman 20
ALM Process.
Current Ratio:
The current ratio highlights
the firm ability to cover short term liabilities with its current assets. Current Ratio = Current Assets / Current Liabilities
Particulars Current Assets Current Liabilities Current Ratio Faysal Bank Meezan Bank
Interpretation:
The current ratio of Faysal bank & Meezan Bank for the year 2007, 2008 & 2009 is, 2.36, 2.06 & 1.64, 1.79, 1.61 & 1.56 respectively, compared to standard ratio 2:1 this of Meezan Bank ratio is then Faysal Bank
2.36
2.06
1.64
1.79
1.61
1.56
Current Ratio
2.50 2.00
2.36 2.06 1.79 1.61 1.64 1.56 Faysal Bank Mezaan Bank
Ratio
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Meezan Bank
2007 4,573,7 52 29,178, 594 2008 6,803,2 13 31,551, 327 2009 10,102, 060 43,862, 129
Interpretation:
The average turnover in working capital of Faysal Bank is 19% & Meezan Bank have 20% this shows the profitability of working capital of Meezan Bank is slightly high then Faysal Bank.
Ratio
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Meezan Bank
2007 66,145, 596 36,967, 002 291785 94 2008 83,395, 555 51,844, 228 315513 27 2009 121,561, 187 77,699,0 58 4386212 9
Current Assets
Current Liabilities Working Capital
Interpretation:
The working capital ratio of Faysal Bank limited is higher which indicates that Faysal bank has have sufficient resources to meets its current obligations as compare to
Meezan Bank Limited.
100000000.00 80000000.00
Ratio
Horizontal Analysis
2007 ASSETS Cash and balances with treasury banks 5,644,028 2008 Rs.In ,000 5,763,710 8,387,432 100 2009 2007 2008 Rs.In ,000 102.12 148.61 2009
3,729,549
8,850,000 10,535,186 34,576,339 1,032,963 2,810,494 67,178,559 1,192,160 2,415,606
1,344,974
18,108,000 14,286,949 39,768,481 1,880,515 4,123,441 85,276,070 1,057,017 4,008,496
5,260,467
34,499,500 23,290,309 44,188,066 2,416,375 204,172 5,935,413 124,181,734 1,249,210 8,468,425
100
100 100 100 100 100 100 100 100
36.06
204.61 135.61 115.02 182.05 146.72 126.94 88.66 165.94
141.05
389.82 221.07 127.80 233.93 #DIV/0! 211.19 184.85 104.79 350.57
54,582,353
430,377 2,851,407 61,471,903 5,706,656
70,233,875
453,038 3,548,666 79,301,092 5,974,978
100,333,051
4,946,589 114,997,275 9,184,459
100
100 100 100 100
128.68
105.27 124.45 129.00 104.70
183.82
173.48 187.07 24 160.94
REPRESENTED BY
Share capital
3,779,897
4,925,961
6,650,048
100
130.32
175.93
Reserves
Unappropriated profit
720,785
1,219,228 5,719,910
845,022
570,114 6,341,097
1,050,092
1,390,395 9,090,535
100
100 100
117.24
46.76 110.86
145.69
114.04 158.93
(13,254) 5,706,656
(366,119) 5,974,978
93,924 9,184,459
100 100
2,762.33 104.70
(708.65) 160.94
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Horizontal Analysis
2009 2007 2008 2009
ASSETS Cash and balances with treasury banks Balances with other banks Lending's to financial institutions Investments Advances Operating fixed assets Deferred tax assets - net Other assets LIABILITIES Bills payable Borrowings from financial institutions Deposits and other accounts Sub-ordinated loans Liabilities against assets subject to finance lease Deferred tax liabilities - net Other liabilities
2,406,927 9,995,855 102,067,422 1,000,000 7,827 2,691,466 6,951,421 125,120,918 6,872,032 3,708,451
8,927,524 876,780
8,427,202 508,795
100 100
129.91 23.64
122.63 13.72
7,078,102
31,553,108
2,861,401
30,186,168
15,017,826
56,531,338
100
100
40.43
95.67
212.17
179.16
87,346,401
2,514,959 2,204,368 141,277,421
89,758,789
2,646,978 2,983,846 138,241,486
91,346,001
2,787,617 1,279,918 4,966,716 180,865,413
100
100 100 100
102.76
105.25 135.36 97.85
104.58
110.84 100.00 225.31 128.02
16,156,50 3
10,772,10 8
12,782,73 9
100
66.67
79.12
Share capital
Reserves Unappropriated profit
10,345,14 6
10,135,98 7
636,121 10,772,10 8
11,336,14 6
1,446,593 12,782,73 9
100 100
97.98 10.95
109.58 24.89
5,811,357 16,156,50 3
100
66.67
79.12
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Conclusion/Findings
Liquidity position of Faysal Bank Limited is higher then Meezan Bank Limited this indicates that Meezan Bank Limited has higher leverage. Both financial institutes should improve their current ratio & working capital position in financial year 2011. The analysis shows that its lower down gradually. Net profit margin of Meezan Bank Limited is higher then Faysal Bank Limited. Gross profit margin of Meezan Bank Limited is higher then Faysal Bank Limited so we would like to suggest Faysal Bank should improve its Gross Profit margin to meet the expenses efficiently and set a sight profit for shares holders.
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Conclusion/Findings
The Operating income margin of Faysal Bank Limited is higher then Meezan Bank Limited which indicates that Faysal Bank Limited generates higher income by its own operation as compare to Meezan Bank Limited. The Long Term debt to long term liabilities ratio of Meezan Bank Limited is higher then Faysal Bank Limited because Faysal bank limited employed its funds in short term activities more then Meezan Bank Limited Meezan Bank Limited has a good market perception due to continuous declaration of dividends but on the other hand Faysal Bank limited did not declared dividend in financial year 2009. The three years average price / earning ratio of Meezan Bank Limited 13.97 while the Faysal Bank Limited has 7.78 % this indicates the Meezan Bank Limited has much potential in stock as compare to Faysal Bank Limited.
The operating cash flow to total debt ratio of Meezan Bank Limited is little higher then Faysal Bank Limited
Qazi waqas, Zulqarnain , Nouman 29
Recommendations
With the assistance analyses of financial reports we would like to recommend both financial institutes should over come their pit falls, flaws and deficiencies. Meezan Bank limited should improve its current ratio. The Meezan Bank Limited Net Profit Margin is higher then Faysal Bank Limited. The Faysal Bank Limited should improve its profitability ratio by efficiently use its resources. Similarly the price earning ratio & dividend payout ratio of Meezan Bank Limited is higher then Faysal Bank this highlights good return on investment as well good market perception. Faysal should also pay dividend consistently through generate the profit by improving its operation. We would also like to recommend that financial institute should much promote the business activities and provide financial assistance to industry which will be reduce the un employment, inflation and increase productivity of Pakistan
Qazi waqas, Zulqarnain , Nouman 30
Money is a product besides medium of exchange and store Real Asset is a product. Money is just a of value. medium of exchange.
Time value is the basis for charging interest on capital. Profit on exchange of goods & services is the basis for earning profit.
Interest is charged even in case, the organization suffers Loss is shared when the organization losses. Thus no concept of sharing loss. suffers loss. While disbursing cash finance, running finance or working The execution of agreements for the capital finance, no agreement for exchange of goods & exchange of goods & services is must, services is made. while disbursing funds under Murabaha, Salam & Istisna contracts. Due to non existence of goods & services behind the Due to existence of goods & services no money while disbursing funds, the expansion of money expansion of money takes place and thus takes place, which creates inflation. no inflation is created. Due to inflation the entrepreneur increases prices of his goods & services, due to incorporating inflationary effect into cost of product. Bridge financing and long term loans lending is not made on the basis of existence of capital goods. Rather, they are disbursed on the basis of Windo Dressed project feasibility and credibility of the entrepreneur. Due to control over inflation, no extra price is charged by the entrepreneur. Musharakah & Diminishing Musharakah agreements are made after making sure the existence of capital good before disbursing funds for a capital project. 32
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