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  1. 1. PRESENTATION ON CAMEL ANALYSIS OF BANK ALFALAH LIMITED Presented By: Syed Nabeel Ali 1536 Syed Abdul Rehman 1819 Adnan Ahmed 1478
  2. 2. ACKNOWLEDGMENT We have completed a report based on our familiarity with or studies in order to get a bit familiar with the practical experiences in organizations. By the grace of Allah almighty We have accomplished this report. Sincerely, to our knowledge and exposure to this subject, we dedicated our little effort to everyone who works for the cause of Pakistan. We express our appreciation to Iqra University that scheduled and assigned us this report and we hope our efforts will be duly regarded.
  3. 3. INTRODUCTION TO BANK ALFALAH Bank Alfalah Limited is a private bank in Pakistan owned by the Abu Dhabi Group. Bank Alfalah was incorporated on June 21, 1997 as a public limited company under the Companies Ordinance 1984. Its banking operations commenced from November 1, 1997. The bank is engaged in commercial banking and related services as defined in the Banking companies ordinance, 1962. Following the privatization in July 1997, Habib Credit and Exchange Bank assumed the new identity of Bank Alfalah on February 25, 1998. It is now Abu Dhabi based bank as the family of Sheikh Nahayan purchased 70% of its shares and 30% remained with Habib Bank on behalf of Government of Pakistan. It has 115 branches in 46 cities of Pakistan.
  4. 4. CAMEL FRAMEWORK During an on-site bank exam, supervisors gather private information, such as details on problem loans, with which to evaluate a bank's financial condition and to monitor its compliance with laws and regulatory policies. A key product of such an exam is a supervisory rating of the bank's overall condition, commonly referred to as a CAMEL rating. The acronym "CAMEL" refers to the five components of a bank's condition that are assessed: 1) Capital adequacy 2) Asset quality 3) Management 4) Earnings 5) Liquidity CAMEL is basically a ratio-based model for evaluating the performance of banks. Here we will explain Bank Alfalah Camel Analysis.
  5. 5. CAPITAL ADEQUACY Capital adequacy ratio (CAR) is a specialized ratio used by banks to determine the adequacy of their capital keeping in view their risk exposures. Banking regulators require a minimum capital adequacy ratio so as to provide the banks with a cushion to absorb losses before they become insolvent. This improves stability in financial markets and protects deposit-holders. Explanation: As per SBP BASEL 3 Requirement, the CAR should be 10.00 and banks with higher CAR have higher resources. RATIOS 2009 2010 2011 2012 2013 Capital Adequacy Ratio % 12.46 10.53 11.60 12.60 12.06
  6. 6. RATIOS 2013 Debt-Equity Ratio 20.47% Total advance to total asset ratio 42.70% Government Securities to Total Investments 2.71% The Debt to Equity Ratio The Debt to Equity Ratio measures how much money a bank should safely be able to borrow over long periods of time. Debt-Equity Ratio =Borrowings/Share Capital + Reserves Debt-Equity Ratio =578713/13492+14774 Debt-Equity Ratio =20.47 In 2012 it is 19.86 , this ratio is lower in 2012 because debts in that year are lower.
  7. 7. Total Advance to Total Asset Ratio Total Advance to Total Asset Ratio shows that how much amount the bank holds against its assets. Total Advance to Total Asset Ratio =Total Advance/Total Asset Total Advance to Total Asset Ratio=260780/610614 Total Advance to Total Asset Ratio = 42.7% In 2012 it is 43% because bank’s total advances are slightly higher as compare to 2013 Government Securities to Total Investments This ratio shows the percent of investment ingovernment securities. Itis believed that the more investment in government security is safer. G-sec to Total Investment =Government Securities/Total Investment G-sec to Total Investment =3620/219690 G-sec to Total Investment =2.71
  8. 8. ASSET QUALITY The asset quality reflects the quantity of existing and potential credit risk associated with the loan and investment portfolios, other real estate owned, and other assets, as well as off-balance sheet transactions. The asset quality of Bank Alfalah has seen significant improvement. The coverage ratio, which had dropped to below 60 per cent during the preceding quarter, has again surged to 67 per cent Asset Quality 2012 2013 NPL Ratio 8.90% 6.60% Coverage 62.50% 69.30%
  9. 9. Gross NPL Ratio: This ratio is used to check whether the bank's gross NPLs are increasing quarter on quarter or year on year Non-Performing Loans to Gross Advances= Total NPL/Gross advances*100 NPL to Gross Advances= 6.6%  NPL ratio improved to 6.6% from 8.9% in Dec‐ 12. NPLs reduced to PRs17.9bn from PRs22.2bn, owing to PRs2.43bn recoveries & PRs2.35 write‐offs. Coverage Ratio Coverage Ratio= Loan Loss Reserves / Non- Performing or Non-current Loans and leases Coverage Ratio=69.3 Coverage increased to 69.3% from 62.5% in Dec‐ 12.
  10. 10. MANAGEMENT Sound management is one of the most important factors behind financial institutions’ performance. Indicators of quality of management, however, are primarily applicable to individual institutions, and cannot be easily aggregated across the sector. Furthermore, given the qualitative nature of management, it is difficult to judge its soundness just by looking at financial accounts of the banks. Nevertheless, total advance to total deposit, business per employee and profit per employee helps in gauging the management quality of the banking institutions. Here We will evaluate the same with respect to Bank Alfalah. Total Advance to Total Deposit Ratio This ratio measures the efficiency and ability of the banks management in converting the deposits available with the banks (excluding other funds like equity capital, etc.) into high earning advances. Total advance to total deposit ratio=total advance/total deposit Total advance to total deposit ratio=260780/525526 Total advance to total deposit ratio=49.62%
  11. 11. Profit per Employee This ratio shows the surplus earned per employee. It is arrived at by dividing profit after taxearned by the bank by the total number of employee. The higher the ratio shows goodefficiency of the management. Profit per employee=net profit/no. of employees Profit per employee=4676/10598 Profit per employee=44.12% Business per Employee Revenue per employee is a measure of how efficiently a particular bank is utilizing its employees. In general, rising revenue per employee is a positive sign that suggests the bank is finding ways to squeeze more sales/revenues out of each of its employee. Business per employee=24120/10598 Business per employee=2.27 Total income=post provisions interest income+ non-interest income Total income= (15841+8279) =24120
  12. 12. EARNING & PROFITABLITY Earnings and profitability, the prime source of increase in capital base, is examined with regards to interest rate policies and adequacy of provisioning. In addition, it also helps to support present and future operations of the institutions. The single best indicator used to gauge earning is the Return on Assets (ROA), which is net income after taxes to total asset ratio. Dividend Payout Ratio Dividend payout ratio shows the percentage of profit shared with the shareholders. The more the ratio will increase the goodwill of the bank in the share market. Dividend pay-out ratio = dividend/net profit Dividend pay-out ratio = 483/4676 Dividend pay-out ratio = 10.32%
  13. 13. Interest Income to Total Income The interest income total income indicates the ability of the bank in generating income from its lending. Interest income to total income= interest income/total income Interest income to total income=15841/24120 Interest income to total income=65.67% Return on Assets (ROA) Net profit to total asset indicates the efficiency of the banks in utilizing their assets in generating profits. A higher ratio indicates the better income generating capacity of the assets and better efficiency of management in future. Return on asset= net profit/total asset Return on asset= 4676/610614 Return on asset=0.76%
  14. 14. LIQUIDITY An adequate liquidity position refers to a situation, where institution can obtain sufficient funds, either by increasing liabilities or by converting its assets quickly at a reasonable cost. An asset is liquid if it can easily be converted to cash.The liquidity of an institution depends on: • The institution's short-term need for cash; • Cash on hand; • Available lines of credit; • The liquidity of the institution's assets;
  15. 15. Investment and Total Assets Investment and Total Assets = Total Investment / Total Assets *100 Investment and Total Assets = 219,690/ 610,614 =36% Cash and Cash equivalent Ratio Cash ratio is the ratio of cash and cash equivalents of a company to its current liabilities. It measures the ability of a business to repay its current liabilities by only using its cash and cash equivalents and nothing else. Cash and Cash Equivalents to Total Asset= cash & cash balances / Total Assets * 100 Cash and Cash Equivalents to Total Asset=61205/610614 Cash and Cash Equivalents to Total Asset= 10%
  16. 16. CONCLUSION This critical analysis on Bank Alfalah in the previous section is the representation of its past, mirror of its present, and an insight into its future. The past data of BAL enabled us to study the bank’s financial condition and to monitor its compliance with laws and regulatory policies. Study helped us evaluate the organization in comparison to its future and competitors and We conclude that the company is having strong and healthy financial position.