PRESENTATION ON

CAMEL ANALYSIS OF BANK ALFALAH LIMITED

Presented By:

Syed Nabeel Ali 1536Syed Abdul Rehman 1819Adnan Ahmed 1478

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.

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.

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.

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

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 + ReservesDebt-Equity Ratio =578713/13492+14774Debt-Equity Ratio =20.47

In 2012 it is 19.86 , this ratio is lower in 2012 because debts in that year are lower.

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 AssetTotal Advance to Total Asset Ratio=260780/610614Total 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 InvestmentG-sec to Total Investment =3620/219690G-sec to Total Investment =2.71

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%

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 leasesCoverage Ratio=69.3

Coverage increased to 69.3% from 62.5% in Dec 12.‐

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 depositTotal advance to total deposit ratio=260780/525526Total advance to total deposit ratio=49.62%

Profit per EmployeeThis 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 employeesProfit per employee=4676/10598Profit per employee=44.12%

Business per EmployeeRevenue 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=24120/10598Business per employee=2.27Total income=post provisions interest income+ non-interest incomeTotal income= (15841+8279) =24120

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 profitDividend pay-out ratio = 483/4676Dividend pay-out ratio = 10.32%

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=15841/24120Interest 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 assetReturn on asset= 4676/610614Return on asset=0.76%

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;

Investment and Total Assets

Investment and Total Assets = Total Investment / Total Assets *100Investment 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=61205/610614Cash and Cash Equivalents to Total Asset= 10%

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.

THANK YOU