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UBL balance sheet analysis Asset section: The total assets of UBL in 2011 is increased by a significant amount from

699.8b in 2010 to 778b in 2011 we will discuss which segment has a greater impact and how that segment operates behind this rising trend. In the advances section which is the major use of funds for a bank it seems that banks advances ratio is decreasing because it falls from 47.6% (333.7b) to 41.8% (325.3b) of total assets. The reason behind this diminishing affect is that the gross advances are decreasing by 368b in 2010 to 366b in 2011 and provisions for loan loss or ALL on the other hand is increasing by a significant amount from 34m in 2010 to 40m in 2011. Practically speaking we can say that bank is not feeling good in giving loans (advances) because of higher risk and looking for investment with lower risk thats why bank is investing more in government securities like in comparison to previous year banks investment in government securities increase from 160.1m in 2010 to 235m in 2011. The second major use of funds is investments and their ratio is increase from 32.1% in 2010 to 37.8% in 2011. The first reason is stated behind that bank start investing more in government securities and their amounts by which they increase are also mentioned, another reason behind increasing ratio of investments is that banks investments in foreign securities like Market treasury bills, govt bonds etc are also increasing by a significant amount from 24.59m in 2010 to 29.23m in 2011. Perhaps, in all the segments of investments bank has a increasing ratio thats why total investments at cost is 299.9b in 2011 as compared to 230.5b in 2010. Although, provisions for diminution in value of investments is higher in 2011 2.7b as compared to 2.6b in 2010 but it doesnt make any difference and thats why total investments were end up higher 294.4b in 2011 as compared to 224.5b in 2010. Third major use of fund by bank is cash and balances with treasury bank which increases to 11.1% in 2011 from 9.6% in 2010. The reason behind this rising ratio is that the cash in hand section of the bank has increase by a significant amount from 14b to 22.9b. Although local currency accounts with state bank is decrease by 1b from 2010 to 2011 but

it doesnt have any impact on the overall ratio because local currency accounts with NBP increase by a significant amount from 13.7b to 22.2b. Fourth major use of funds by bank is balances with other bank which decrease by small amount of ratio from 2.6% in 2010 to 2.1% in 2011. UBL place major amount of balances with banks which are outside Pakistan but in 2011 UBL move their attention toward inside Pakistan banks thats why their balance with inside Pakistan banks rose from 453.4m to 2b on the other hand balance with outside Pakistan decrease from 18.1b to 14.5b, this 4b decrease is the major reason why bank has a declining ratio in balances with other banks. Why bank is placing its money with inside Pakistan, mark-up rates can be a reason which is ranging from 0.4% to 11.5% in 2011 as compared to 0.1% to 11.75% in 2010. Lending to financial institutions is another major use of funds by any bank in case of UBL their ratio in this segment is decreasing from 1.7% in 2010 to 1.2% in 2011. The reason behind this diminishing ratio is that although banks call money lending is increased 130m in 2011 which is not present in 2010 but at the same banks repurchase agreement lending is no more in 2011 as compared to 4.4b in 2010. UBL also have provision against lending to financial institution of 356m which is not present in 2010 this provision also has a stake in diminishing trend of overall ratio. Liability section: UBLs overall liability section is increased from 631.4b in 2010 to 698.9b in 2011, we will discuss which segment has greater impact and how it is responsible in increasing trend of liability section. In both the years major portion of liabilities is coming from deposits section like in 2010 87.2% as compared to in 2011 87.7% of liabilities are comprises of deposits and this ratio is increased over the year. The reason behind this increasing trend is that banks fixed and saving deposits have increased by a significant amount from 2010 to 2011 (Fixed deposit=161.5b to 172.4b, Saving deposit=187b to 206.3b). All form of deposits has in fact an increasing trend from 2010 to 2011.

The second major source of income in banks is borrowings and its ratio from 2010 to 2011 remains the same which is 7.1%. Bank although increase its borrowings from 2010 to 2011 in Pakistan as well as outside the Pakistan but it doesnt have any significant impact on the overall ratio of borrowings. Major portion of the borrowing is coming from the repurchase agreement borrowings which increase from 22.4b to 28.2b in 2011. Unsecured borrowings on the other hand almost doubled from 2.6b to 4.3b in 2011, all these changes results final borrowings amount to 49.9b increase from 45.1b in 2010. The third major source of income for the bank is subordinate loans or debentures, which are decreased from 1.89% in 2010 to 1.6% in 2011 the major reason behind this diminishing effect is that non redeemable finance certificates are decreased by a significant amount from 1.9b to 1.3b in 2011 all the other form of certificates almost remains a same. Equity section: The equity section of the bank is comprises of share capital, reserves and unappropriated profits. Share capital remains the same but reserves and profits portion rises by a significant amount which causes an increase in the overall equity of the bank from 60.1b to 70.6b.

Income statement analysis In case of UBL their interest income has a rising trend like as mentioned in their report it is increased from 34.2b in 2010 to 39.4b in 2011. Interest earning is greater as compared to interest expense and both the interest earning section and interest expense section has increased by a significant amount from 2010 to 2011(interest income rose from 59.2b to 70.45b on the other hand interest exp rose from 24.9b to 31.025b). Investments portion of the balance sheet side which is basically 2nd major use of fund is a major reason behind rising interest earning, UBL invest in securities like held till maturity, available for sale security and held for trading securities in a very large amount due to which bank has 30.09b in 2011 as compared to last years 17.8b from them. So both the asset and liability side is responsible for this higher interest earning. Talking about the interest expense section of the income statement Interest expense is rising from a large amount because banks 1st major source of funds which is deposits is rising from a significant amount as mentioned in the balance sheet analysis section it is rising from 550.6b to 612.9b and the major increase in deposits is due to its two segment, savings and fixed deposits which are increasing from a quite large amount (from 187b to 206.3b savings deposit and 161.5b to 172.4b fixed deposit). Due to this rising trend in segments mentioned behind UBL paying 23.7b in 2011 rising from 18.9b in 2010. In short rising trend of interest expense is due to 1st major source of funds in the balance sheet section which is deposits. Secondly, bank is also selling securities under repurchase agreement on which they are paying interest 3.15b as compared to last years 1.6b, this action of bank is also accountable for higher interest expense margin as compared to last year.