Banking Project

Muzammil Khan

Fatik Butt

Usama Basharat

Talha Bilal

Faizan Hafeez

Submitted To

Ms. Sidra Salman

Section J

December 28, 2019

Contents
History and Introduction..............................................................................................................................3
Services offered by Bank.........................................................................................................................3
UBL Wiz.............................................................................................................................................4
Features & Benefits: UBL Wiz is the 1st Prepaid VISA Debit Card in Pakistan. It is instantly..........4
UBL Net banking................................................................................................................................4
UBL E – statement..............................................................................................................................5
UBL Hamrah.......................................................................................................................................5
Salient Features:..................................................................................................................................5
UBL Wallet.........................................................................................................................................6
Remittances (UBL Tez Raftaar)..........................................................................................................6
Benefits:..............................................................................................................................................6
Analysis of Balance Sheet and Income Statement.......................................................................................7
Major Uses of Bank.....................................................................................................................................9
Major Sources of the Bank..........................................................................................................................9
Major Sources of Income and Expenses....................................................................................................10
Ratio Analysis...........................................................................................................................................11
Profitability Ratios....................................................................................................................................11
Liquidity Risk Ratios.................................................................................................................................18
Credit Ratio Analysis:...............................................................................................................................21
Expense Control Measures........................................................................................................................27
Solvency and Capital Adequacy Ratios.....................................................................................................29
Conclusion.................................................................................................................................................32
Recommendations.....................................................................................................................................32
History and Introduction

United Bank Limited (UBL) is one of the largest commercial banks in Pakistan having

more than 1200 branches inside the country and 17 branches overseas which are in different

countries across the world i.e. USA, Canada, China, Iran and so on. Its representative offices are

in Tehran, Kazakhstan and China. It has joint venture with National Bank of Pakistan in USA by

the name of United National Bank Limited.

UBL has 700 online branches in 400 cities almost in every city of Pakistan. It is the

member of 1 link due to which its cards (Debit Card and Credit Card) are acceptable on more

than one ATMs. Furthermore, it has joined hands with Visa Network due to which its cards are

acceptable at approximately 900,000 ATMs worldwide.

The company was established in June, 1959 and the company was registered on July,

1959. UBL started its operations on November, 1959. The bank continued its operations as

private banking company until Dec, 1973 when it was nationalized by the government of

Pakistan (Regime of Z.A. Bhutto). Then bank was privatized in 1991 when the government

decided to privatize some banks which included UBL.

Services offered by Bank

 UBL has taken progressive steps and has introduced innovative products and services to

provide the customers a variety of banking and financing services. Customers can get much

through UBL services. The following services are:

 UBL Wiz

 UBL Net banking

 UBL E – statement

 UBL Hamrah

 UBL Wallet

 Remittances

 UBL Online (for corporate customers only)

UBL Wiz
UBL Wiz is Pakistan’s first ever Prepaid VISA Debit Card that provides the convenience,

security and benefits of an ATM and Debit Card, locally and internationally. More than just an

ATM card, you can use your UBL Wiz everywhere VISA cards are accepted. Whether you are

using it online, paying for petrol, shopping or dining, you are accessing money directly from

your prepaid card, without having to visit the bank. It is available is three types. i.e. UBL Wiz

Travelers, UBL Wiz Ladies, & UBL Wiz Teen.

Features & Benefits: UBL Wiz is the 1st Prepaid VISA Debit Card in Pakistan. It is instantly

available at selected UBL branches with the facility of re-load, allows you to spend online and at

shopping outlets and withdraw cash at ATMs. It is also accepted at all VISA locations

internationally.
UBL Net banking
UBL net banking is an Internet Banking portal offering a simple, convenient and secure

method of accessing bank accounts on the Internet. It's never been so easy to access and manage

your finances in a secure, real-time, online environment; Anywhere, Anytime. Using UBL net

banking, the customers have access to their bank accounts 24 hours a day, 7 days a week and can

keep a close eye on their account balances, print account statements, pay bills, transfer funds,

track purchases and schedule their recurring payments at the touch of a button and much more.

Features & Benefits: Using UBL Net banking, you can avail different facilities and can benefit

yourself in many ways.

UBL E – statement
UBL makes it easier for customers to get their statement of accounts and automated

transactional debit / credit alerts right into your inbox. Available for all Rupee and Foreign

Currency Account holders, customers now do not have to wait for six months to receive a paper-

based statement of their account any more. All they need to do is tell UBL the frequency of

statements they require and UBL will ensure that it reaches their inbox.

UBL Hamrah
UBL has always been at the forefront in identifying and meeting the financial needs of its

valued customers. UBL was the pioneer in introducing Rupee Travelers Cheque facility in

Pakistan, as early as 1971. In continuation of the same tradition, UBL in the shape of "Hamrah"

Rupee Travelers Cheque enhances this facility for the convenience of its valued customers by

offering denominations up to Rs. 10,000.

UBL "Hamrah" has been designed keeping in mind, both convenience and security - be it

business, property, trade or personal needs. "Hamrah" Rupee Traveler Cheques are the ideal and

safest way of carrying cash when travelling anywhere in Pakistan.

Salient Features:
 Absolutely FREE - No Bank Commission, No Excise Duty: Whatever the value of "Hamrah"

purchased, no Bank Commission or Excise Duty will be charged.

 Denominations: Available in denominations of Rs. 10,000 and Rs. 5,000.

 Available to all: Holding an account with UBL not mandatory for availing this facility.

 Easily transferable and cashable: Indicate choice of designated UBL Branch for refund which

will be within days only. Most convenient while in transit anywhere in Pakistan.

 Valid until encased: Use them for a week, month or even years depending on when there's a

need for encashment.

 Exclusive security: Secured with especially "Coded" printing and "RAIN BOW Effect" for

added security.

UBL Wallet
Introducing the new UBL Wallet Card, now with the International power of VISA. UBL

Wallet, now with the power and international acceptance of VISA! Your Wallet VISA ATM &

Debit Card has all the convenience and security you desire and the quality you deserve. This

Wallet holds all the cash in your bank account.

Remittances (UBL Tez Raftaar)

Free Doorstep Remittances With-in the country or from abroad, UBL offers the most

efficient and price competitive service. With their large network of branches, they are poised to

offer you service almost at your door step. UBL's new remittance service, Tez Raftaar offers all

overseas Pakistanis the fastest and the most convenient delivery of their money to their

beneficiaries in Pakistan. Best of all, TezRaftaar is completely cost free and is available at all

UBL branches along the Bank's Network in the Middle East, UK and US.
Benefits:
 Free of charge transferring.

 Open to all including those who are not UBL account holders.

Analysis of Balance Sheet and Income Statement

Analysis Of Balance Sheet

UBL has managed to increase its assets. The main sources of increase in the assets are the deposits
within the bank and lending of financial institutions as we can see that their lendings has increased from
27,027 from 35,346 which menas there is increase around 8 billion in lendings. Their fixed assets has an
upward trend as well. Their deferred tax assets has increased increased only in 2018 which means they
have increased income in 2018 than that of 2017 and 2016
 Analysis of income statement

Banks sales has increased 6 % then the previous year however the net income remains the same of both
the years and there is a slight difference between both. Their expenses has been increased in 2018
which is the main cause of decreased income in 2018 as it is shown above that their foreign exchange
income has decreased. However their operating expenses has also increased which also effected their
income. hence, there is decrease in the profits.

Major Uses of Bank

Lending to financial institutions/ Total Assets

=35,346,551/ 2,002,492,874

=0.0177 = 1.7%

Investments/ Total Assets

=831,159,100/2,002,492,874

=0.415 = 41.5%

Advances/ Total Assets

=754,551,722/2,002,492,874

=0.377 = 37.6%

Major Sources of the Bank

Deposits/ Total Liabilities

=1,448,324,041/ 1,883,869,015

=0.769 = 76.9%

Borrowings from financial institutions/ Total Liabilities

=279,918,125/1,883,869,015
=0.149 = 14.9%

Subordinated loans/ Total Liabilities

=9,000,000/ 1,883,869,015

=0.0048 = 0.48%

Major Sources of Income and Expenses

Interest income/ Net income

=5,824,635/ 15,049,554

=3.87

Non-interest Income/ Net Income

=26,643,791/ 15,049,554

=1.77

Interest Expense/ Total Expenses

=5,824,635/ 40,444,478

=0.14 = 14%

Provision for Loan Loss/Net Advances

=14,496,978/ 754,551,722

=0.0192
Ratio Analysis

Profitability Ratios

Profitability Ratios

NO RATIOS 2014 2015 2016 2017 2018

.
1 ROA 0.0203 0.018 0.0168 0.0124 0.0075
2 ROE 1.962 2.20 2.2847 2.14 1.229
3 NET 0.0385 0.036 0.0344 0.026 0.0291
INTREST
MARGIN
4 NET NON 0.01806 0.012 0.015 0.0115 0.0133
INTREST
MARGIN
5 NET 0.0301 0.029 0.0283 0.0195 0.0127
OPERATION
MARGIN
6 EARNING 0.873 0.870 0.8688 0.873 0.8303
BASE
7 ASSET 0.0301 0.029 0.0283 0.0195 0.0127
UTALIZATIO
N
8 NET PROFIT 0.2801 0.276 0.275 0.237 0.1282
MARGIN
9 EQUITY 96.591 121.40 135.74 171.98 163.57
MULTIPLIER 2 3 8
10 YEILD ON 0.0206 0.060 0.0396 0.030 0.0350
EARNING
ASSET
11 COST OF 0.0325 0.027 0.0249 0.075 0.0932
BORROWING
ON
INTRESRT
BEARING
LAIBILITY
12 SPREAD -0.0119 0.033 0.0147 -0.045 -0.0582
Return on assets (ROA) is a financial ratio that shows the percentage of profit a company earns in
relation to its total Assets. It is commonly defined as net income divided by total assets. Net income is
derived from the income statement of the company and is the profit after taxes. This indicator shows
how well a company utilizes its assets, by determining how profitable a company is relative to its total
assets. It is also important for the investor as well as they get to know how much bank is earning as
compare to their total assets .ROA is best used when comparing similar companies or comparing a
company to its previous performance. United Bank earns 0.75% and 1.24% of profits through utilization
of their assets in years 2018 and 2017 respectively which marks the lowest ROA earned by the bank.
However, United Bank earns highest interest margin of 2.03% in 2014 and gradually decreased to 1.68%
in 2016 which is an alarming indicator that the company is not effective in utilization of their assets. The
graph is showing downward Trend. The reason behind this downward trend is their total asset might
have increase, net income might decrease due decrease in their sale or their total asset might increase
in greater proportion then their net income.
Return on equity (ROE) is a measure of financial performance calculated by dividing net income by share
capital. It shows how much a bank is earning with respect to its share capital. ROE is a key profitability
ratio that investors use to measure the amount of a company's income that is returned as shareholders'
equity. In 2014 ROE is 1.9% which is good ratio and it continuously increase till 2016. In 2016 it was on
top by 2.28 % but gradually started to decrease from 2016 to 2018. In 2018 it was at lowest by 1.22%.

Net interest margin formula is net interest income divided by total assets. Net interest margin indicates
that how much interest income the bank earns out of total assets. Those total assets loans and other
lending incurred by the bank that earns it a premium in form of interest income. Interest income value is
been mentioned in bank income statement by the name net interest income after provision. These are
those incomes which bank earn through charging interest to the customer. A positive net interest
margin indicates an entity invests its funds efficiently, while a negative one implies the bank or
investment firm doesn't invest efficiently. United Bank earns 2.6% and 2.91% as interest income out of
total assets in years 2017 and 2018. In 2014 they earned highest net interest margin which was 3.85%
but after 2014 it started to decrease to 2.6% till 2017. Then the trend changed and there was an
increase in net interest margin in 2018 by 2.91%.
 NET NON INTREST MARGIN
2
1.8
1.6
1.4
1.2
NET NON INTREST MARGIN
1
0.8
0.6
0.4
0.2
0
2014 2015 2016 2017 2018
Net non-interest
margin formula is non-interest income divide by total assets. It shows how much company earns its non-
interest income with respect to its total assets. The value of non interest margin is mentioned in income
statement by the name Total non-markup. These are those incomes which bank earn without charging
interest which include dividend income, brokerage fees and income dealing in foreign currencies. The
lowest non-interest income UBL earns was in 2017 which was 1.15%.There was a major increase in non-
interest from 2015 to 2016. The highest point was of 1.8% in 2014 and then there were fluctuation and
the graph could not reach to the point where it was in beginning of 2014.

NET OPERATING MARGIN

3.5

2.5

2 NET OPERATING MARGIN

1.5

0.5

0
2014 2015 2016 2017 2018

Net operating margin formula is earning before tax divided by total assets. It indicates how much a bank
EBT is with respect to its total assets. UBL earn highest net operating margin in 2014 by 3.1% It
decreased by 0.2% from 2014 to 2016. There was sharp decrease in net operating margin form 2016 to
2018. In 2018 UBL earned lowest net operating margin which was 1.27%

EARNING BASE
88

87

86

85
EARNING BASE
84

83

82

81
Earning base formula
80
is earning asset
2014 2015 2016 2017 2018
divided by total
asset. Earning base
ratio identifies the earning assets out of total assets. Earning assets incudes balances with other
banks, lending to financial institutes, investments and advances by adding all of these values you
get the value of earning assets. In 2014 the Earning base was 87.5. It gradually decreased but
again reached to 87.5 in 2017. However, after that point there was a continuous decrease in the
earning base till the year 2018. The lowest point it reached was 83 in 2018.

ASSET UTALIZATION
3.5

2.5

2 ASSET UTALIZATION

1.5

0.5

0
2014 2015 2016 2017 2018

Asset utilization indicates the extent to which how efficiently a bank is running its operational
activities over total assets. The highest efficiency was 3% in 2015 and it gradually decreased. It
was stable between 2014-2016. Then there was a large decrease from 2016 onwards. In 2018 it
fall below 1.5%.

NET PROFIT MARGIN

30

25

20
NET PROFIT MARGIN
15

10

0
2014 2015 2016 2017 2018

The net profit margin is equal to how much net income or profit is generated as a percentage of
revenue. Net profit margin is the ratio of net profits to revenues for a company or business
segment. Net profit margin is typically expressed as a percentage but can also be represented in
decimal form. From 2014 to 2016 the Net Profit Margin was almost stable. UBL earn highest net
profit margin in 2014 which was 28.5%. From 2016 to 2018, the expenses are higher than the net
profit, so there is a gradual decrease of 14.68%. This might be due to increase in expense or sales
might have decreased. In 2018 UBL earn lowest net profit margin which is 12.68%.

Yield on Earning Asset

0.07

0.06

0.05

0.04
It is the
0.03 total
income
0.02
that is
0.01

0
2014 2015 2016 2017 2018

Series 1
generated from the earning assets. The trend shows that the year 2014-2015 was very much
fruitful for the company as the values went from lowest to highest in the same year. It was 2% in
the start and it went up to 6% Yield on Earning Asset.

Cost of Borrowing
0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
2014 2015 2016 2017 2018

Cost of Borrowing

This trend line shows that how much cost did the company incur in the form of interest expense.
The trend started at 3.5% and it went up to 7.5% over the year 2014-2018
 Spread
0.04

0.03

0.02

0.01

0
2014 2015 2016 2017 2018
-0.01

-0.02

-0.03

-0.04

-0.05

Spread

The values of the spread are trending from negative to positive to negative. In 2018 it was all
time negative in the entire span. The main cause of the decline is the decrease in the yield on
earning over the years and secondly the cost of borrowing on interest bearing liabilities have
increased too.

Liquidity Risk Ratios

 Cash & Due Deposits with other banks/ Total Assets
0.14

0.12

0.1

0.08

0.06

0.04

0.02

0
2014 2015 2016 2017 2018

Liquidity Ratio 1

As the trend shows that the values of kept on averaging around 9% for over the span of 5 years.
Later in the years, the power of bank to give more cash and deposits to others banks increased
and this is why the trend of the graph kept on going upward.

Gov Securities/ Total Assets

0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2014 2015 2016 2017 2018

Gov Sector/ Total Assets

This actually states that how much of the total assets include the government securities in them.
The portion of the government securities in the total assets. This ratio is about the amount
invested by the bank in government securities with respect to the total assets that the bank
possesses. There was an overall increase in the four years from 2014-2017. This means that the
bank had been investing more in the government securities. Then in 2018 the trend changed and
the graph went down.

Cash Asset & Govt Asset/ Total Asset

0.6

0.5

0.4

0.3

0.2

0.1

0
2014 2015 2016 2017 2018

Cash Asset & Govt Asset/ Total Asset

This is the total of the cash assets that the bank possesses and the government securities that the
bank has invested in. The graph shows and upward trend which means that the cash assets and
the government securities have been increasing and with that the assets of the bank also kept on
increasing. These are mostly used by the bank in case of emergency, if they have to pay more
amount to some customer. As these are the most liquid ones so the bank can easily sale them and
pay off their loans etc
 Net Loans/ Total Assets
0.45

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2014 2015 2016 2017 2018

Net Loans/ Total Assets

Net loans are basically the assets of the bank as they give this money to the customers or other
financial institutions and then earn interest on them. The ratio for the United Bank Limited has
been falling from 2014 to 2017, but then it started to rise from 2017-2018

Credit Ratio Analysis:

Non performing loans/Gross loans and leases

14

12

10

0
2014 2015 2016 2017 2018
The non-performing loans divided by gross loans and leases ratio tells us how much of the gross
loans are non-performing. This ratio measures the quality of assets in the loan portfolio. The
trend seen from 2014 to 2018 is seen to decrease from 12.5% to 9.11%. This is beneficial for the
bank’s health as non-performing loans are decreasing over the years.

Charge off/Gross loans and leases

0.25

0.2

0.15

0.1

0.05

0
2014 2015 2016 2017 2018

The ratio of charge off to gross loans and leases is the amounts written off divided by the gross
loans. This ratio tells us how much amount will not be collected by the bank in the collection of
the bank’s outstanding loans. This ratio is important to investors as it helps them determine
important information pertaining to the credit standards of the lender. This graph shows an
overall upward trend which is not a good sign, as it weakens the bank’s profile.
 Allowance for loan losses/Gross loans
12

10

0
2014 2015 2016 2017 2018

Sometimes banks lend money to institutions who cannot return them the money for their own
reasons. As the bank becomes more aware that there is a chance that the loan may not be
recovered, the bank lowers the value of the loan to make up for the chance of not recovering the
loan. The trend is seen to decrease which a good sign for the bank as the allowance for loan
losses will decrease.

Allowance for loan losses/Equity Capital

60

50

40

30

20

10

0
2014 2015 2016 2017 2018
Over the years, the allowance for loan losses have increased. There is an overall increase in the
trend, the value in 2014 was 36% and 50% in 2018.

Provision for losses/Gross loans and leases

1.2

0.8

0.6

0.4

0.2

0
2014 2015 2016 2017 2018

Provision for loan losses is the amount the bank sets aside to recover any loan losses. Loans may
be unrecovered due to bad loans, renegotiated terms of the loan, and customer defaults. The
overall trend is seen to decrease which is good sign, as it tells us that the bank is doing business
which involves low risk.
 Gross loans/total deposits
6

0
2014 2015 2016 2017 2018

The LDR tells us the proportion of loans to the total deposits of a bank. The value should not be
too high or too low. If the value is too high, that means the bank’s liquidity is low to cover any
unforeseen expenses in the future. If the value is too low, that means the bank is not generating
enough profit according to its potential. The graph shows a decreasing trend till 2017, followed
by an increase, which is a bad sign, as it shows that the liquidity of the bank is low.

NPL Trend
70000000

60000000

50000000

40000000

30000000

20000000

10000000

0
2014 2015 2016 2017 2018
.
The non-performing loan is defined as the amount that the debtor has not made the payments in
the scheduled amount of time. However, these loans are non-performing due to the inability of
the debtor to pay in the scheduled amount of time. No payment will result in a zero payment, and
will not be considered as a non-performing loan. The trend is decreasing, followed by an
increase, which is bad for the bank.

Non performing loans/total assets

6

0
2014 2015 2016 2017 2018

This ratio tells us about the proportion of non-performing loans to the total assets. This graph
shows an overall decreasing trend which is good for the bank as it shows the non-performing
loans are of lesser proportion as compared to the total assets.
Expense Control Measures

Expense Control Measure ratio, measures how much of a fund’s assets are used for
Administrative and other Operating Expenses

Interest Expense/ Total Assets

0.03

0.03

0.02

0.02

0.01

0.01

0
2014 2015 2016 2017 2018

Interest Expense/ Total Assets

As the trend is been decreasing from 2014 to 2018, this is a negative sign for the bank as they
have less power, in a sense that if they sell of their assets then they are able to pay back less on
their interest expenses. The change in the overall difference is 0.00756
 Interest Expense/ Interest Bearing Liabilities
0.04

0.03

0.03

0.02

0.02

0.01

0.01

0
2014 2015 2016 2017 2018

Interest Expense/ Interest Bearing Liabilities

This ratio shows that how they are able to control their overall expenses with respect to the
change in the interest expense and the interest-bearing liabilities. The trend is decreasing with the
passage of time, it has come down from 3.2% to 0.2%

Administrative Expenses/ Total Assets

0.25

0.2

0.15 The administrative

expenses have been
0.1
almost the same for
four years from 2014
0.05
to 2017. But the year
0 2018 has some twists
2014 2015 2016 2017 2018
as the administrative
Administrative Expenses/ Total Assets
expenses increased
which lead to the
increase at 0.2
 Operating Expenses/ Total Assets
0
0
0
0
0
0
0
0
0
0
0
2014 2015 2016 2017 2018

Operating Expenses/ Total Assets

There was an increase in the assets and the other charges too from 2015 to 2016. Then the other
charges did not increase while the assets did keep on increasing which is why the graph did go
down.

Solvency and Capital Adequacy Ratios

Equity capital/Total assets

0.01

0.01

0.01

0.01

0
2014 2015 2016 2017 2018
This ratio tells that how much of the total assets of the company are funded by its shareholder’s equity.
On average, the United Banks assets are funded by equity, are around 1% United Bank finance its assets
by fixed deposits and time deposits as there is a limit on withdrawal on these accounts and a penalty is
imposed if a withdrawal is made beyond a limit before its maturity.

Total liabilities/Total equity

180

160

140

120

100

80

60

40

20

0
2014 2015 2016 2017 2018

This ratio is the measure of the times the liabilities are higher than the number of total equity. As in
2018, the total equity is 150 times more than the total equity. They are working in both fix and and
saving deposits which is why they are able to control their liabilities in times of need.
 car
0.02

0.01

0.01

0.01

0.01

0.01

0
2014 2015 2016 2017 2018

Capital Adequacy Ratio measures the total equity capital through the Risk-Weighted Assets. In case of
default in any of these securities, in 2018, only 1.3% of this loss can be managed by banks overall total
equity.

Conclusion

United Bank Limited has an increase in the Reserves over the period of 2018. They rely more on the
reserves in order to pay back their interest bearing liabilities. The total liabilities of the bank also
decreased in 2018. The Bank must invest in more assets in order to increase their net assets, the more
the net assets the United Bank will have the more it will be easier for them to survive

Recommendations

In order to be more profitable, the bank must diversify as they will have more portfolio for their
customers. This way they will be able to increase their net assets. They should also work on to manage
their capital requirements for the banks.