My project fm (2)

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Acknowledge
We would like to acknowledge Sir Hafiz Muhammad Imran who have provided us with this
opportunity to work on a report about financial analysis of Meezan bank. We are also thankful to him
for providing us with necessary guidance and motivation needed for this project.

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Project of Managerial Finance

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Submitted to:
Sir Hafiz Muhammad Imran.
Submitted by:
Name Roll Number
Tehmina Kousar MC15205
Maryam Fayyaz MC15236
Maryam Babar MC15238
Mamoona Maqsood MC15218
Rabia Ashraf MC15226

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Introduction
MeezanBank Limited is a publicly listed company first incorporated on January 27, 1997. It
started operations as an investment bank in August of the same year. In January 2002 in an historic
initiative, the State Bank of Pakistan granted Meezan Bank the nation's first full-fledged commercial
banking license dedicated to Islamic Banking.
Meezan Bank stands today at a noteworthy point along the evolution of Islamic Banking in Pakistan.
The banking sector is showing a significant shift away from traditional means of business and is
catering to an increasingly astute and demanding financial consumer who is also becoming keenly
aware of Islamic Banking. Meezan Bank bears the critical responsibility of leading the way forward
in establishing a stable and dynamic Islamic Banking system replete with dynamic products and
services.
The Bank has made fundamental and significant progress forward, and in doing so has established a
strong and credible management team comprised of experienced professionals, which have achieved
a strong balance sheet with excellent operating profitability, including a capital adequacy ratio that
places the Bank at the top of the industry, a long-term entity rating of A+, and a short-term entity
rating of A1.
The Bank's main shareholders are leading local and international financial institutions, including
Pak-Kuwait Investment Company, the only AAA rated financial entity in the country, the Islamic
Development Bank of Jeddah, and the renowned Shamil Bank of Bahrain, that in addition to their
strength and stability, add significant value to the Bank through Board representation and applied
synergies.
At Meezan Bank, we strive to find commonalties with the conventional banking system with
absolutely no compromise on Shariah rulings. The bank has developed an extraordinary research and
development capability by combining investment bankers, commercial bankers, Shariah scholars and
legal experts to develop innovative, viable, and competitive value propositions that not only meet the
requirements of today's complex financial world, but do so with the world-class service excellence
that our customers demand, all within the bounds of Shariah.
Furthermore, the Bank has built a strong Information Technology and customer knowledge-based
focus that continues to use state of the art technology and systems. The Bank's Corporate and

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Investment Banking business unit is geared towards nurturing and developing a long-term
relationship with clients by understanding their unique financing requirements and providing Shariah
compliant financing solutions across the horizon of corporate banking and structured finance.
The Bank is also implementing robust and aggressive strategic and tactical initiatives on the
consumer banking side. The Bank has a rapidly growing branch network across all major cities
nation-wide. Providing our customers accessibility and convenience is a prime target, within an
atmosphere and culture of dedicated service and recognition of their needs.
We believe in adding value to our customers' lives and businesses through dynamic and competitive
products and services that fulfill their needs while conforming completely with the dictates of
Shariah. At the same time, we endeavor to deliver competitive risk adjusted returns to our
stakeholders.
Head Office
Our Head Office is located at:
3rd Floor, P.N.S.C. Building, Moulvi Tamizuddin Khan Road, and Karachi.
Tel: (92-21) 5610582 / 5610679
Fax: 92-21) 5610375
Our branches are conveniently located across the country in Karachi, Hyderabad, Quetta, Lahore,
Sialkot, Gujranwala, Kasur, Rawalpindi, Faisalabad, Multan, Peshawar and Islamabad.
Sharia board
Meezan bank has a very high caliber sharia supervisory board comprises of internationally renowned
scholars.The sharia supervisory board regularly reviews the banks activities and approves all new

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products. The Meezan bank also has a resident sharia advisor who monitors day to day activities of
bank
History
The founder of Pakistan, Quaid-e-Azam Mohammed Ali Jinnah while delivering speech at the
opening ceremony of State Bank of Pakistan on July 1, 1948, stated:
"We must work our destiny in our own way and present to the world an economic system
based on true Islamic concept of equality of manhood and social justice."
The statement serves as the concept of Islamic banking by the founding father of the nation that was
created in the name of Islam in 1947.
1991:
Procedure adopted by banks in 1985 was declared un-Islamic by the Federal Shariat Court (FSC).
The Government and some banks/DFIs made appeals to the Shariat Appellate Bench (SAB) of the
Supreme Court of Pakistan.
1997:
Al-Meezan Investment Bank is established with a mandate to pursue Islamic Banking. Mr. Irfan
Siddiqui appointed as first and founding Chief Executive Officer.
1999:
The Shariat Appellate Bench of the Supreme Court of Pakistan rejects the appeals and directs all
laws on interest banking to cease. The government sets up a high level commission, task forces and
committees to institute and promote Islamic banking on parallel basis with conventional system.
2001:

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The Shariah Supervisory Board is established at Al-Meezan Investment Bank led by Justice (Retd.)
Muhammad Taqi Usmani as Chairman. State Bank of Pakistan sets criteria for establishment of
Islamic commercial banks in private sector and subsidiaries and stand-alone branches by existing
commercial banks to conductIslamic banking in the country.
2002:
Meezan Bank acquires the Pakistan operations of Societe Generale and concurrently Al Meezan
Investment Bank converts itself into a full-fledged Islamic commercial bank. The first Islamic
banking license is issued to the Bank and it is renamed Meezan Bank.
2003:
Meezan Bank establishes itself as the pioneer of Islamic Banking in Pakistan and quickly establishes
branches in all major cities of the country. A wide range of products are developed and launched
consolidating the Bank’s position as the premier Islamic Bank of the country Al Meezan Investment
Management Limited (AMIM), the asset management arm of Meezan Bank, introduces Meezan
Islamic Fund (MIF), the country’s first open-end Islamic Mutual Fund.
2004:
The State Bank establishes a dedicated Islamic Banking Department (IBD) by merging the Islamic
Economics Division of the Research Department with the Islamic Banking Division of the Banking
Policy Department. A Shariah Board has been appointed to regulate and approve guidelines for the
emerging Islamic Banking industry. The Government of Pakistan awards the mandate for debut of
international Sukuk (Bond) offering for USD 500 million. The offering is a success and establishes a
benchmark for Pakistan. Meezan Bank acts as the Shariah Structuring Advisor for this historic
transaction.
2006:
62 branches in 21 cities
2007:

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Bank’s branch network reached the milestone number of 100 branches. The Bank introduced Istisna'
financing to cater to the working capital needs of customers.
2008:
Meezan Bank introduced Tijarah financing to allow customers to raise funds for financing of stocks
of finished goods.
2009:
The branch network reached 201 branches (including sub-branches) in 54 cities nationwide.
2010:
The Bank developed Meezan Business Plus, a Mudaraba-based account that offers an array of free
services for businesses, Meezan Euro Savings Account and Meezan Pound Savings Account. Bank’s
branch network reached 222 branches in 63 cities across Pakistan.
2011:
The inauguration of the new Head office in Karachi. During the year, 53 branches were opened to
reach a landmark of 275 branches in 83 cities across Pakistan.
2012:
Completed 10 years of operations.
2013:
Over 350 branches in over 100 cities
18 October 2014:

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The Bank acquired the HSBC Pakistan operations. After conversion of the business and branches
of HSBC Pakistan to Meezan Bank; the HSBC Pakistan Accounts and Term Deposit Receipts
(TDRs) converted to Meezan Bank accounts and Certificates of Islamic Investments (COIIs).
Vision and Mission
Vision:
The vision of Meezan bank is:
Establish Islamic banking as banking of first choice.
Mission
The mission of Meezan bank is stated:
To be a premier Islamic bank.
Products and Services:
Meezan Bank offers a diverse range of Shariah-compliant deposit products through its 551 branches
across 143 cities
in Pakistan. All products of the Bank are approved by the Shariah Supervisory Board and are
completely Riba-Free.
In addition to SMS banking, VISA Debit cards (Silver, Gold Platinum and Premium), MasterCard
Titanium Debit Card,

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free online banking, free internet banking, free pay order & free chequebook, the Bank also provides
free accidental
death and permanent disability coverage to all its deposit customers (current and saving account)
maintaining a
monthly average balance of Rs. 10,000/-or more
 Karobari munafa account
 Meezan rupee saving account
 Meezan rupee current account
 Meezan business plus account
 Meezan bachat account
 Meezan kids club account
 Meezan teens club account
 Meezan asaan current account
 Meezan kafalah
 Meezan asaan saving account
 Meezan labbaik
 Monthly mudarabah certificate
 Foreign currency current account
 Certificate of Islamic investment
 Meezan amdan certificate
 Meezan upaisa
 Dollar mudarabah certificate
 Meezan premium banking
 Takaful coverage
 Online banking
 Internet banking
 Mobile banking
 Meezan webpay
 Mezaan ATM network
 Meezan quick pay

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 Meezan visa debit card
 SMS banking
 Meezan mastercard titanium debit card
 SMS alerts
 Commercial vehical ijarah
 Bike ijarah
 Meezan consumer ease
 Easy home
Corporate products:
 Murabha
 Istisna
 Tijarah
 Ijarah
 Running musharaka
 Diminishing musharaka
 Structured finance solutions
 Meezan eBiz+
 Meezan eBiz
Export financing:
 Hedging facilities
 Salam and murabaha as alternative to export bill discounting
 Guarantee services
Shariah compliant range of trade financing solutions import financing:
 Letter of credit services
 Short term import financing
 Finance against imported merchandise
 Hedging facilities

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 Loan term import financing
Financial analysis:
Financial Statement Analysis is a method of reviewing and analyzing a company’s accounting
reports (financial statements) in order to gauge its past, present or projected future performance. This
process of reviewing the financial statements allows for better economic decision making.
Globally, publicly listed companies are required by law to file their financial statements with the
relevant authorities. For example, publicly listed firms in America are required to submit their
financial statements to the Securities and Exchange Commission (SEC). Firms are also obligated to
provide their financial statements in the annual report that they share with their stakeholders. As
financial statements are prepared in order to meet requirements, the second step in the process is to
analyze them effectively so that future profitability and cash flows can be forecasted.
Therefore, the main purpose of financial statement analysis is to utilize information about the past
performance of the company in order to predict how it will fare in the future. Another important
purpose of the analysis of financial statements is to identify potential problem areas and troubleshoot
those. Users of Financial Analysis:
There are different users of financial statement analysis. These can be classified into internal and
external users. Internal users refer to the management of the company who analyzes financial
statements in order to make decisions related to the operations of the company. On the other hand,
external users do not necessarily belong to the company but still hold some sort of financial interest.
These include owners, investors, creditors, government, employees, customers, and the general
public. These users are elaborated on below:
1. Management

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The managers of the company use their financial statement analysis to make intelligent decisions
about their performance. For instance, they may gauge cost per distribution channel, or how much
cash they have left, from their accounting reports and make decisions from these analysis results.
2. Owners
Small business owners need financial information from their operations to determine whether the
business is profitable. It helps in making decisions like whether to continue operating the business,
whether to improve business strategies or whether to give up on the business altogether.
3. Investors
People who have purchased stock or shares in a company need financial information to analyze the
way the company is performing. They use financial statement analysis to determine what to do with
their investments in the company. So depending on how the company is doing, they will either hold
onto their stock, sell it or buy more.
4. Creditors
Creditors are interested in knowing if a company will be able to honor its payments as they become
due. They use cash flow analysis of the company’s accounting records to measure the
company’s liquidity, or its ability to make short-term payments.
5. Government
Governing and regulating bodies of the state look at financial statement analysis to determine how
the economy is performing in general so they can plan their financial and industrial policies. Tax
authorities also analyze a company’s statements to calculate the tax burden that the company has to
pay.
6. Employees
Employees need to know if their employment is secure and if there is a possibility of a pay raise.
They want to be abreast of their company’s profitability and stability. Employees may also be

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interested in knowing the company’s financial position to see whether there may be plans for
expansion and hence, career prospects for them.
7. Customers
Customers need to know about the ability of the company to service its clients into the future. The
need to know about the company’s stability of operations is heightened if the customer (i.e. a
distributor or procurer of specialized products) is dependent wholly on the company for its supplies.
8. General Public
Anyone in the general public, like students, analysts and researchers, may be interested in using a
company’s financial statement analysis. They may wish to evaluate the effects of the firm on the
environment, or the economy or even the local community. For instance, if the company is running
corporate social responsibility programs for improving the community, the public may want to be
aware of the future operations of the company.

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SWOT
STRENGTHS:
 Pakistan's largest Islamic bank.
 Largest market share of Pakistan's Islamic banking sector.
 Comprehensive menu of truly Shariah-compliant products and services.
 Dedicated Shariah Supervisory Board comprising of world-renowned Shariah scholars.
 Dedicated department for development of Shariah-compliant products, research and Shariah
audit.
 Strong financial indicators.

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WEAKNESSES:
 Limited opportunities for investment of surplus liquidity.
 Limited availability of human resources with Islamic banking knowledge.
OPPORTUNITIES:
 Increasing awareness about Islamic financial services and demand for Shariah-compliant
products and services.
 Growing local and international Islamic Banking market.
 Significant potential for market penetration.
THREATS:
 Macro-economic challenges
 Conventional Banks entering Islamic banking Market
 Misconceptions and misunderstandings among the general publicabout Islamic banking

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Specialised Analysis
Introduction:
In specialised/ financial analysis of bank , we must determine the extent of the business generated by
banking services. In order for the specific industry ratios to be meaningful a large proportion of the
services should be bank related . Two significant differences exist between the traditional business
and banking business financial statements first is the accounts of the bank may seem the opposite of
those of other types of firms. Second one is the liabilities and assets of bank are different in nature
from normal business. The specialised analysis also known as “Profitability Analysis.”
Why a special analysis is conducted?
Special analysis for a bank includes the following ratios.

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 Earning assets to total assets.
 Interest margin to average earning assets.
 Loans loss coverage ratio.
 Equity capital to total assets.
 Deposits times capital.
 Loan to deposit.
Earning Assets to Total Assets
Earning assets include loans, leases, investment securities, and money market assets. It excludes cash
and non-earning deposits plus fixed assets. This ratio shows how well bank management puts bank
assets to work. This ratio also finds in average data of financial statements because banks typically
present asset data average annual basis.
2015
=
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐄𝐚𝐫𝐧𝐢𝐧𝐠 𝐀𝐬𝐬𝐞𝐭𝐬
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐓𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬
× 100
=
𝟐𝟗𝟒𝟑𝟎𝟒𝟗𝟕𝟓
𝟒𝟖𝟒𝟔𝟖𝟎𝟏𝟎𝟏
×100
=60.72%
2014
=
𝐀𝐯𝐞𝐫𝐚𝐠𝐞𝐄𝐚𝐫𝐧𝐢𝐧𝐠𝐀𝐬𝐬𝐞𝐭𝐬
𝐀𝐯𝐞𝐫𝐚𝐠𝐞𝐓𝐨𝐭𝐚𝐥𝐀𝐬𝐬𝐞𝐭𝐬
× 100
=
𝟐𝟗𝟎𝟒𝟓𝟑𝟎𝟕𝟒
𝟑𝟖𝟑𝟓𝟔𝟓𝟐𝟗𝟓
× 100
=75.72%
Interpretation
During the period 2014 to 2015 the Earning Assets to total Assets ratio has decrease from 75.72% to
60.72% . This means bank management put less bank assets to work. This ratio indicates the
performance of the bank as the ratio increase the performance is high and vice versa. In 2014 the
performance of bank is high as the ratio is 75.72% and in 2015 the performance becomes low as
compared to previous year is 60.72%.

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Return on Earning Assets
Return on earning assets, computed by dividing net income by average earning assets , probability
measure to be viewed in conjunction with return on assets and return on equity .
2014
=
𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑬𝒂𝒓𝒏𝒊𝒏𝒈 𝑨𝒔𝒔𝒆𝒕𝒔
=
𝟒𝟓𝟕𝟎𝟎𝟖𝟔
𝟐𝟗𝟎𝟒𝟓𝟑𝟎𝟕𝟒
=1.57
2015
=
𝐍𝐞𝐭 𝐈𝐧𝐜𝐨𝐦𝐞
=
𝟓𝟎𝟐𝟐𝟓𝟎𝟗
𝟐𝟗𝟒𝟑𝟎𝟒𝟗𝟕𝟓
=1.71%
Interpretation
This ratio indicates the return on Assets of bank and the return on equity. Both return shows the
profitability of bank. During 2014 to 2015 the ROA ratio has increased from 1.57% to 1.71%. This
means that the bank has more Earnings on less investments in 2015 as compared to 2014 the ratio
increased to 1.71 from previous year. The ROA figure gives investors an idea of how
effectively the company is converting the money it has to invest into net income.
Interest Margin to Average Earning Assets
This is a key determinant of bank profitability for it provides an indication of management ' s ability
to control the spread between interest income and interest expense.

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2014
=
𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐌𝐚𝐫𝐠𝐢𝐧
=
𝟏𝟐𝟖𝟗𝟔𝟑𝟎𝟓
𝟐𝟗𝟎𝟒𝟓𝟑𝟎𝟕𝟒
=4.44%
2015
=
𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐌𝐚𝐫𝐠𝐢𝐧
=
𝟏𝟕𝟔𝟓𝟑𝟒𝟏𝟖
𝟐𝟗𝟒𝟑𝟎𝟒𝟗𝟕𝟓
=5.99%
Interpretation
During 2014 to 2015 Interest Margin to Average earning Assets ratio has increased from 4.44% to
5.99%. This indicates that the bank has earned more profit from previous year. It shows that the bank
‘s management has strong ability to control the interest income and interest expense.
Loan loss Coverage Ratio
The loan loss coverage ratio, computed by dividing pertax income plus provision for loan and
dividing by net charge-offs. This ratio helps to determine the assets quality and the level of
protection of loans.
2014
=
𝐏𝐫𝐞𝐭𝐚𝐱 𝐈𝐧𝐜𝐨𝐦𝐞+𝐏𝐫𝐨𝐯𝐢𝐬𝐢𝐨𝐧 𝐟𝐨𝐫 𝐥𝐨𝐚𝐧 𝐋𝐨𝐬𝐬𝐞𝐬
𝐍𝐞𝐭 𝐂𝐡𝐚𝐫𝐠𝐞 −𝐨𝐟𝐟𝐬
=Nill
2015
=
𝐏𝐫𝐞𝐭𝐚𝐱 𝐈𝐧𝐜𝐨𝐦𝐞+𝐏𝐫𝐨𝐯𝐢𝐬𝐢𝐨𝐧 𝐟𝐨𝐫 𝐥𝐨𝐚𝐧 𝐥𝐨𝐬𝐬𝐞𝐬
𝐍𝐞𝐭 𝐂𝐡𝐚𝐫𝐠𝐞−𝐨𝐟𝐟𝐬
=Nill
Interpretation
During 2014 to 2015 there are no provision for loan losses and Net Charge offs in financial
statements of the Meezan bank. So, its not possible to solve this ratio for bank to determine the assets
quality and the level of protection of loans granted by bank.

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Equity Capital to Total Assets Ratio
This ratio also called funds to total assets measures the extent of equity ownership in the bank. This
ownership provides the protection against the risk of using debt and leverage.
2014
=
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐄𝐪𝐮𝐢𝐭𝐲
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐭𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬
=
𝟐𝟏𝟑𝟗𝟓𝟓𝟎𝟓
𝟑𝟖𝟑𝟓𝟔𝟓𝟐𝟗𝟓
=5.58%
2015
=
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐄𝐪𝐮𝐢𝐭𝐲
𝐀𝐯𝐞𝐫𝐚𝐠𝐞 𝐭𝐨𝐭𝐚𝐥 𝐀𝐬𝐬𝐞𝐭𝐬
=
𝟐𝟓𝟏𝟏𝟖𝟕𝟐𝟎
𝟒𝟖𝟒𝟔𝟖𝟎𝟏𝟎𝟏
=5.18%
Interpretation
During the years 2014 to 2015 the Equity to total Assets Ratio has decreased from 5.58% to 5.18.
This ratio is consider to be better as it higher but in this case the ratio decline as compare to previous
year.
Deposits Times Capital:
The ratio of deposits times capital concerns both depositors and stockholders. To some extent, it
is a type of debt to equity ratio indicating a bank ' s debt position. More capital implies a greater
margin of safety ; while a larger deposit base gives a prospect of higher return to shareholders ,
since more money is available for investment purpose.
2014
=
=
2015
=
=

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= =
Interpretation
Market Analysis
This analysis is for the investors either they invest their money in that business or not. in tis analysis
we find ratios to gather the information related to concern business. This analysis include the Earning
per share , degree of Leverage Dividend pay-out, Dividend Yield etc.
Market Analysis of Meezan Bank Ltd. Data based on 2014 to 2015
Degree of financial Leverage
The degree of financial leverage is the multiplication factor by which the net income changes as
compared to the change in Earning before interest and tax.
Degree of Financial Leverage =
𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝐵𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑇𝑎𝑥
Earning before tax
2014
=
𝟔𝟖𝟗𝟖𝟓𝟑𝟒
𝟔𝟖𝟗𝟖𝟓𝟑𝟒
=1
2015
=
𝟖𝟒𝟓𝟏𝟐𝟓𝟑
𝟖𝟒𝟓𝟏𝟐𝟓𝟑
=1
Interpretation
During 2014 to 2015 the degree of leverage is equal to 1 that means there is no any type of risk .
investors see firstly how high is the degree of leverage ? The higher the degree of laverage , the
greater the multiplication factor. Second the financial leverage is working for shareholders .

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Earnings Per Common Share
Earnings per share is the amount of income earned on a share of common stock during an accounting
period. That is applies only on to common stock to cooperate income statements. Earnings per share
receives much attention from the financial community, investors, and potential investors.
Earning Per Common Share =
𝐰𝐞𝐢𝐠𝐡𝐭𝐞𝐝 𝐚𝐯𝐞𝐫𝐚𝐠𝐞 𝐧𝐨.𝐨𝐟 𝐜𝐨𝐦𝐦𝐨𝐧 𝐨𝐮𝐭𝐬𝐭𝐚𝐧𝐝𝐢𝐧𝐠 𝐬𝐡𝐚𝐫𝐞𝐬
2014
=
𝟑𝟗𝟓𝟔𝟕𝟕𝟔
𝟏𝟎𝟎𝟐𝟕𝟑𝟕.𝟗
=3.95
2015
=
𝟓𝟎𝟐𝟐𝟓𝟎𝟗
𝟏𝟎𝟎𝟐𝟕𝟑𝟕.𝟗
=5.01
Interpretation
During the year 2014 to 2015 meezan bank Ltd. Generate different EPS number, but in 2015 it has
generate with less equity (investment) - that bank has more efficient at using its capital to generate
income and, all other things being equal, has be a "better" Islamic Bank. Investors also need to be aware
of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on
any one financial measure, but to use it in conjunction with statement analysis and other measures
Price Earnings Ratio
The price earnings ratio expresses the relationship between the market price of a share of common
stock and that stock‘ s current earnings per share. Investors view the P/E ratio as a indicator of
future earning power of the bank.
Price Earning Ratio =
𝐌𝐚𝐫𝐤𝐞𝐭 𝐩𝐫𝐢𝐜𝐞 𝐏𝐞𝐫 𝐒𝐡𝐚𝐫𝐞
𝐃𝐢𝐥𝐮𝐭𝐞𝐝 𝐄𝐚𝐫𝐧𝐢𝐧𝐠 𝐏𝐞𝐫 𝐒𝐡𝐚𝐫𝐞

24
2014
=
𝟒𝟕
𝟒.𝟓𝟔
=10.30
2015
=
𝟒𝟓.𝟕𝟓
𝟓.𝟎𝟏
=9.13
Interpretation
In case of meezan bank investor look the P/E to determine the profitability of bank.acoroding to
Pakistan Ranking meezan bank hac A+ rank. Generally a high P/E ratio means that investors are
anticipating higher growth in the future. The average market P/E ratio is 20-25 times earnings.The
P/E ratio can use estimated earnings to get the forward looking P/E ratio. Companies that are losing
money do not have a P/E ratio.
Percentage of Earning Retained
This ratio is also known as Retention Ratio and Retained Surplus. The proportion of current earning
retained for internal growth is computed as follows:
Percentage of Earning Retained =
𝐍𝐞𝐭 𝐈𝐧𝐜𝐨𝐦𝐞−𝐀𝐥𝐥 𝐃𝐢𝐯𝐢𝐝𝐞𝐧𝐝𝐬
2014
=
𝟒𝟓𝟕𝟎𝟎𝟖𝟖−𝟐𝟎𝟎𝟒𝟗𝟑𝟓
𝟒𝟓𝟕𝟎𝟎𝟖𝟖
=56.13%
2015
=
𝟓𝟎𝟐𝟐𝟓𝟎𝟗−𝟑𝟎𝟎𝟖𝟏𝟐𝟖
𝟓𝟎𝟐𝟐𝟓𝟎𝟗
=40.11%
Interpretation
Banks retain their earnings in order to invest them into areas where the bank can create growth
opportunities, such as buying new Assets or spending the money on more research and development.
Investors use this ratio to determine the Cash flow and the dividend paid. In Meezan bank Ltd. Case the
percentage ratio has decrease from previous year. Last year investor attractt invest in bank more than

25
current year.
Dividend Pay-out
The dividend pay-out ratio measures the portion of current earning per common share being paid out
in dividends. Most firms hesitate to decrease dividends since this tends to have adverse effects on the
market price of the company’s stock. No rule of thumb exists for a correct pay-out ratio. Some
investors prefer high dividends but others are preferred to have reinvest the earnings in hopes of
higher capital gain.
Dividend Pay-out =
𝐝𝐢𝐯𝐢𝐝𝐞𝐧𝐝𝐬 𝐏𝐞𝐫 𝐂𝐨𝐦𝐦𝐨𝐧 𝐒𝐡𝐚𝐫𝐞
𝐃𝐢𝐥𝐮𝐭𝐞𝐝 𝐄𝐚𝐫𝐧𝐢𝐧𝐠 𝐩𝐞𝐫 𝐬𝐡𝐚𝐫𝐞
2014
=
𝟑
𝟓.𝟎𝟏
=59.55%
2015
=
𝟐
𝟒.𝟓𝟔
=43.85%
Interpretation
The dividend payout ratio provides an indication of how much money a company is returning
to shareholders, versus how much money it is keeping on hand to reinvest in growth, pay off debt or add
to cash reserves. Dividend payout may be of 100 percent but in case of Meezan Bank Ltd. Investors
check this ratio to invest their money to gain capital dividend. During 2015 to 2015 the payout has
decrease from 59.55% to 43.85%.
Dividend Yield
The dividend yield indicates the relationship between the dividends per common share and the
market price per common share. Compute the dividend yield as follows:
Dividend yield =
𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔 𝑷𝒆𝒓 𝑪𝒐𝒎𝒎𝒐𝒏 𝑺𝒉𝒂𝒓𝒆
𝑴𝒂𝒓𝒌𝒆𝒕 𝑷𝒓𝒊𝒄𝒆 𝒑𝒆𝒓 𝒄𝒐𝒎𝒎𝒐𝒏 𝒔𝒉𝒂𝒓𝒆

26
2014
=
𝟐
𝟒𝟕
=4.26%
2015
=
𝟑
𝟒𝟓.𝟕𝟓
=6.56%
Interpretation
During 2014 to 2015 the Meezan Bank Ltd. Dividend yield has increase from 4.26% to 6.56%. Dividend
yield is a way to measure how much cash flow you are getting for each dollar invested in
an equity position. In other words, it measures how much "bang for your buck" you are getting from
dividends. In the absence of any capital gains, the dividend yield is effectively the return on
investment for a stock.
Book Value Per Share
A figure frequently published in annual reports is book value per share, which indicates the amount
of stockholders’ equity that relates to each share of outstanding common stock. The formula for book
value per share as follows:
Book Value Per Share =
𝐓𝐨𝐭𝐚𝐥 𝐒𝐭𝐨𝐜𝐤𝐡𝐨𝐥𝐝𝐞𝐫𝐬 𝐄𝐪𝐮𝐢𝐭𝐲
𝐍𝐮𝐦𝐛𝐞𝐫 𝐨𝐟 𝐂𝐨𝐦𝐦𝐨𝐧 𝐒𝐡𝐚𝐫𝐞𝐬 𝐎𝐮𝐭𝐬𝐭𝐚𝐧𝐝𝐢𝐧𝐠
2014
=
𝟐𝟑𝟖𝟗𝟎𝟑𝟑𝟎
𝟏𝟎𝟎𝟐𝟕𝟑𝟕.𝟗
=23.83%
2015
=
𝟐𝟔𝟑𝟒𝟕𝟏𝟏𝟎
𝟏𝟎𝟎𝟐𝟕𝟑𝟕.𝟗
=26.28%
Interpretation
A company's stock buybacks decrease the book value and total common share count. Stock repurchases
occur at current stock prices, which can result in a significant reductions in a company's book value per
common share. The common share count used in the denominator is typically an average number of
diluted common shares for the last year, which takes into account any additional shares beyond the basic
share count that can originate from stock options, warrants, preferred shares and other convertible

27
instruments.
Conclusion
Financial statements are prepared primarily for decision-making. But the information provided in
financial statements is not an end itself as no meaningful conclusions can be drawn from these
statements alone. The information provided in the financial statements is of immense use in making
decisions through financial analysis. Particularly in banking sector, the financial analysis is very
much essential as they deal with public money
Glossary
Earning assets:
Earning assets usually include any assets that are directly generating income, such as interest-
generating investments or income-generating rentals.
Net spread:
Net interest spread refers to the difference in borrowing and lending rates of financial institutions (such as banks) in
nominal terms. It is considered analogous to the gross margin of non-financial companies.

28
Interest margin:
Net interest margin (NIM) is a measure of the difference between the interest income generated by
banks or other financial institutions and the amount of interest paid out to their lenders (for example,
deposits), relative to the amount of their (interest-earning) assets.
Net charge offs:
A net charge off (NCO) is the dollar amount representing the difference between gross charge-offs
and any subsequent recoveries of delinquent debt. Net charge offs refer to debt owed to a company
that is unlikely to be recovered by that company.
Provision for loan losses:
Loan loss provision is an expense set aside as an allowance for uncollected loans and loan payments.
This provision is used to cover a number of factors associated with potential loan losses including
bad loans.
Shareholders’ equity:
Shareholders equity is the difference between total assets and total liabilities. It is also the Share
capital retained in the company in addition to the retained earnings minus the treasury shares.
Financial leverage:
Financial leverage is the degree to which a company uses fixed-income securities such as debt and
preferred equity. The more debt financing a company uses, the higher its financial leverage.
Degree of financial leverage:
A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its
operating income, as a result of changes in its capital structure.
Degree of financial leverage exclude items:

29
Degree of financial leverage calculations should exclude.
• Minority share of earnings
• Equity income
• Nonrecurring items
Diluted earnings per share:
Diluted earnings per share is the profit for a reporting period per share of common stock outstanding
during that period. DilutedEPS is a performance metric used to gauge the quality of a
company's earnings pershare (EPS) if all convertible securities were exercised.
Number of common share outstanding:
Sharesoutstanding refers to all shares currently owned by stockholders, company officials, and
investors in the public domain, but does not include shares repurchased by a company.
Dividend per common share :
Dividend per share (DPS) is the sum of declared dividends for every ordinary share issued.
Dividend per common share formula:
DPS can be calculated by using the following formula:
D - Sum of dividends over a period (usually 1 year)
SD - Special, one time dividends
S - Shares outstanding for the period
Dividend yield:

30
A financial ratio that indicates how much a company pays out in dividends each year relative to its
share price
Ijara/Ijarah:
Letting on lease. Technically, sale of a definite usufruct in exchange for a definite reward.
Commonly used for wages. It also refers to a mode of financing adopted by Islamic banks. It is an
arrangement under which an Islamic bank leases equipment, a building or other facility to a client
against an agreed rental.
Tijarah:
Sale & Agency based financing facility for customers who sell finished goods on credit basis. This
facility enablescustomers to sell their finished goods stock, meet theirworking capital requirements
and enjoy the benefits ofcash sales.
Takaful:
Islamic Insurance. A scheme of mutual support thatprovides insurance to individuals against hazards
offalling into unexpected and dire need
Weighted Average Cost of Deposits:
Percentage of the total cost expensed on averagedeposits of the bank for the period.
Mudarabah:
An agreement between two or more persons wherebyone or more of them provide finance, while the
othersprovide entrepreneur ship and management to carry onany business venture whether trade,
industry or service,with the objective of earning profits. They share the profitin an agreed proportion.
The loss is borne only by thefinancier(s) in proportion to their share in total capital.
Istisna’a/Istisna:

31
This is a kind of sale where a commodity is transactedbefore it comes into existance. It means: To
order amanufacturer to manufacture a specific commodity forthe purchaser. If the manufacturer
under takes tomanufacture the goods for him with material from themanufacturer, the transaction of
Istisna comes intoexistence. But it is necessary for the validity of istisnathat the price is fixed with
the consent of the parties andthat necessary specification of the commodity (intendedto be
manufactured) is fully settled between them.
Diminishing Musharakah:
In Diminishing Musharakah, the financier and the clientparticipate either in joint ownership of a
property orequipment whereby the share of the financier is dividedinto a number of units and the
client undertakes topurchase these units one by one periodically until he isthe sole owner of the
property/equipment
Sharia:
Sharia law (Arabic: ‫عة‬ ‫شري‬ ) is the body of Islamic law. The term means "way" or "path"; it is the
legal framework within which the public and some private aspects of life are regulated for those
living in a legal system based on Islam.

32
Appendix
Financial statements for 2014:

37
Financial statements for 2015:

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