Introduction And Brief History Finance Essay

KASB Bank Limited was incorporated on October 13, 1994 as Platinum Commercial Bank Limited. The name was later changed to KASB Bank Limited on February 21, 2003, when the bulk shareholding was acquired by the KASB Group, one of the largest fiscal services groups in Pakistan with taking places in equity and debt market and doing strong headrooms in consumer banking and plus direction. The KASB Group established by Mr. Khadim Ali Shah Bukhari in 1952 has been working successfully in banking, securities, renting, engineering, research and community undertakings. The Group comprises of KASB Bank Limited and its three to the full owned subordinates ; KASB Securities Limited, a full service corporate entity supplying premium securities firm, research, investing banking and advisory services, KASB Technology Services Limited, an Information Technology platform supplying IT solution and KASB Funds Limited, an plus direction company that has late launched its first liquid fund in the name of KASB Liquid Fund. KASB Group enjoys the distinguishable advantage of holding developed a strategic relationship with Merrill Lynch, a renowned planetary investing banking house, on the KASB Securities side of its concern.[ 1 ]

KASB Bank Limited, with its presence in 13 metropoliss, through its web of 35 subdivisions, delivers a comprehensive scope of banking services in Consumer, SME & A ; Middle Market and Corporate Banking. The working system within the Bank has been revamped by deviating resources towards segmented concern countries which have been demoing improved operational activities. Besides being given a precedence is the Human Resource development besides paying continued attending to the streamlining and bettering the internal policies, processs and procedures. Information Technology substructure is besides being revamped by geting solutions best suited to the Bank ‘s demands and to run into the envisaged growing scheme.


Partnering Success




Customer Focus and Innovation



Passion and Quest that Drives Us



Sense of Integrity, Trust & A ; Accountability



Committedness to Bing a Credible Corporate Citizen



Differentiation as a Habit



Ability to Harness the Power of Teams

*SOURCE: Official Website

Associated Companies

The primary ground why I chose KASB Bank is that the KASB Group has had its presence in the Pakistani Markets since 1958 and it has been supplying assorted fiscal services specialising chiefly in Investment Banking, Research, Asset Management and Commercial Banking. This group has had close ties with the investor community of Pakistan and presently it is commanding four concerns i.e. KASB Bank, KASB Securities, KASB Funds and KASB Mudaraba. One of the chief grounds for the origin of this bank was to ease the investors in their fiscal market trading minutess.

Presently the bank has 104 subdivisions and its operating in 43 metropoliss in Pakistan. It is offering solutions to big portfolio of investing, corporate and consumer banking. Harmonizing to the fiscal studies of first one-fourth of 2012, the bank ‘s assets have crossed Rs 100 Billion, which has two-base hit since December 31, 2010. Quite late, KASB Bank was declared the Corporate Finance House of the Year in the class of Equity and Advisory ( Banks ) by a panel of senior industry experts, admiting the quantum and edification of investing banking trades executed by the bank during the twelvemonth under reappraisal.


Mahana Khazana

Mahana Khazana is a type of history that provides the characteristics of both a nest eggs history and a current history. This merchandise provides the clients with monthly involvement earned on their net incomes. It besides provides assorted installations such as limitless sedimentations & A ; backdowns, running finance installation up to 90 % , cabinet installation, free Visa Debit Card, existent clip online banking, public-service corporation measures payment installation through cyberspace banking & A ; ATM, free Pay Orders for balances above 1 million, and 24/7 phone banking installation

Maheena Asaan Plus

Maheena Asaan Plus is a one twelvemonth term sedimentation history. The net income is straight credited to the depositors ‘ Maheena Asaan Plus history, giving them excess hard currency to utilize every month. Minimal sedimentation required for this history is Rs.100,000 and maximal Rs.20 Million. There is a running finance installation of 75 % of the sum investing. Besides it provides free Cheque Book on minimal Rs. 1,000,000 invested, free Internet Banking, free ATM/Visa Debit card, and free Online Banking.

Business Flex

KASB Business Flex is a current history. It offers all business communities and executives convenient and dependable banking solutions for all concern traffics. It provides freedom and flexibleness to transact wherever business communities go. Some of import characteristics include free financess transfer installation to all KASB Bank Branches, Runing Finance installation, no minimal Balance demand, free limitless Pay Orders & A ; Demand Drafts, and public-service corporation measures payment through Internet & A ; ATM.

KASB SAMAR Savings Account

This is a savings history for the senior citizens. This history can be opened by any person of 60 old ages and supra. In instance of joint history one of the history holders shall be 60 Old ages or above. Some of import characteristics include, no lower limit or maximal sedimentation bound, monthly net income payment, net income calculated on the minimal balance during the month, and limitless figure of minutess.

KASB SAMAR Term Deposit Account

This is rather similar to the KASB SAMAR Savings Account. Most of the characteristics are same except for a few. For Instance, this is one twelvemonth fixed sedimentation history which pays a monthly net income to the depositor. There is a minimal bound of Rs 50,000/- for this history.

In-between Market and SME Banking

KASB Bank offers Customized solutions for single concerns. It besides provides flexible funding to speed up the growing. Another characteristic of this peculiar banking is One window fiscal solutions.


Assorted strategies such as “ KISSAN SARMAYA ” strategy has been designed and aimed at run intoing all types of fiscal demands of agribusiness sector. Farmers are eligible for “ KASB Agricultural Credit ” for each of the undermentioned intents.

Farm Recognition

Production Finance/ Working Capital

Merely like any other concern recognition can be provided for working capital demands of the husbandmans, such as seasonal demands for harvests i.e. purchase of seed, fertiliser, pesticides and weedicides etc. by the husbandmans. Besides short term finance can be provided for sprayers, hired farm labour, power, Diesel, oil for tractors and tubing good operations, fuel wood for hardening of baccy, electric charges for Tube good operations etc. Short term finance for hire charges for storage and transit, disbursals on selling, cost of packing and stuff and processing cost, working capital for storage of natural agriculture/ farm green goods by husbandmans from field merely, is besides provided.

Development Finance

Recognition can be given to buy of farm machinery, equipment and allied accoutrements. Besides it can be provided forLand betterment and grading.

Non-Farm Recognition

Non-farm recognition includes funding farm animal, dairy, domestic fowl, piscaries, forestry etc. In term of period of finance, non-farm recognition is divided into the undermentioned two classs

Production Finance

Short term finance for the points i.e. purchase of provenders, raining and veterinary disbursals, unreal insemination, hired farm labour, power, etc.

Development Finance

Medium and long term finance for purchase of farm animal, milk processing and cooling workss, bike for milkmen, veterinary clinics, compound feed doing industry, domestic fowl agriculture, dairy agriculture, marine piscaries, cold storage for piscaries, forestry, beekeeping, sericulture etc.

Agribusiness funding installations are available throughout the state at designated agribusiness loaning subdivisions. All types of funding are available for short, medium and long term depending upon husbandman ‘s demand and the nature of finance.

Consumer FINANCE

GharAsaan- Home Loan

This is a Home Loan installation with installment programs for the clients. GharAsaan Discrepancies have been designed in such a manner that they are convenient and comfy for clients with different demands.

Cash Asaan Personal Finance

Cash Asaan Personal Finance is a personal loan with low-cost equal monthly installments. The clients can utilize Cash Asaan for everything that money can purchase.

Transaction Banking

Correspondent Banking

KASB Bank offers a broad scope of Correspondent Banking Services such as Credit, Deposit, Collection, Clearing, and Payment services to Bankss and fiscal establishments.

Trade Finance

The Bank offers an extended scope of trade merchandises and services through its planetary letter writer banking web – which spans 69 states. It aids importers and exporters find optimum solutions for their single demands for cross boundary line trading. It provides wholly trade related services such as pull offing documental aggregations, letters of recognition and trade warrants alongside the hazard direction and structured export finance.

Cash Management

The hard currency direction services provide a broad scope of advanced merchandises, designed to ease the clients to expeditiously pull off their hard currency flows therefore cut downing their transactional and administrative costs, and efficient Histories Payables and Receivables Management.

Alternate Banking

Name Centre – KASB ONE Phone banking

KASB Connect is a 24-Hour contact centre which acts as a individual entree point for all our clients throughout the state. With merely a individual entree phone call, clients can hold entree to a broad scope of tele-banking solutions and personalized banking services.

ATM Network

The Bank has a web of 94 ATMs countrywide, which continues to spread out by the twenty-four hours. Furthermore, KASB is besides portion of the 1 Link, MNET and VISA webs. This allows utilizing the KASB ONE VISA Debit Card across Pakistan at more than 4,000 ATMs countrywide and at more than 1.6 million ATMs worldwide. The KASB ONE VISA Debit card is besides accepted on all VISA certified machines exposing the VISA Plus mark.

Internet Banking

Internet Banking lets the clients perform a assortment of fiscal minutess ; such as, financess transfer, measure payments, cheque history statements and applications for loans.

Mobile Banking and SMS Alerts

Mobile Banking allows the clients to execute assorted minutess, such as, fund transportation, measure payments, and balance cheques. Besides the Bank offers dealing based SMS Alerts service to all its history holders.

Home Remittances

KASB lets its clients receive their remittals immediately and perfectly free. It offers two options for having money in Pakistan ; Cash Payments and Instant Credit of Funds for history holders. Instant recognition of Funds installation is available for non-account holders as good through which they can have financess on the same twenty-four hours.

Corporate Banking

KASB Bank offers usages made merchandises and services for corporate clients as the focal point of the bank is on client ‘s demands and to run into their outlooks by presenting quality services rapidly. Corporate Banking Unit is equipped with expertness in supplying solutions for all On/Off Balance sheet demands of our clients, through the strength of KASB Group ‘s presence in a scope of fiscal services.

The bank provides assorted tools for the clients to provide to their demands such as:

Working Capital and Trade Finance solutions, including Imports, Exports, Guarantees, FOREX Options and Remittances.

Long Term demands, through debt funding. Tailor made balance sheet structuring is besides offered through the Investment Banking unit ‘s expertness.

Off Balance sheet, solutions for derived functions are managed througha extremely skilled Treasury derivative unit.

Cash Management through a dedicated and advanced hard currency direction unit.

Investing Banking

As the prima investing banking house in Pakistan KASB has extended cognition of domestic markets and industries and well-established relationships with local and international investors. KASB is the merely local investing bank to be affiliated with a planetary bulge-bracket bank, i.e. Bank of America – Merrill Lynch. Our services include reding on:

Mergers & A ; Acquisitions


Undertaking Finance


Equity raising through IPOs/ SPOs and issue of Global Depository Receipts

Debt raising through issue of TFCs, Sukuk and Syndicate Finance

Structured Finance services through Quasi Equity and Securitization

KASB has been really active in Pakistan and has concluded, among others, the last 6 back-to-back cross boundary line minutess in Pakistan which have resulted in a US $ 2.3 billion influx of foreign exchange since 2006. KASB has generated more private sector foreign inflow into Pakistan than anyone else and continues to foreground investing chances in Pakistan to international corporations and planetary private equity/hedge financess.

KASB has closed some of the largest minutess in Pakistan ‘s history including US $ 920mn Malayan Banking Berhad ( Malaysia ) investing in MCB Bank Limited, US $ 460mn acquisition of Paktel Limited by China Mobile, US $ 650mn GDR for United Bank Limited, US $ 150mn GDR for MCB Bank Limited and US $ 109mn Lucky Cement GDR.[ 2 ]


Money Market

Merchandises and Servicess

The KASB Bank money market desk provides its clients with a assortment of consultative and investing services. We offer our clients competitory quotation marks and investing advice based on their specific demands. We besides allow our clients to put in Government securities by opening an IPS ( Investor Portfolio Services ) account on their behalf with the State Bank of Pakistan.

The chief types of Government securities that our clients can put in are:

Treasury Bills ( T-Bills )

Treasury measures are zero voucher instruments issued by the Government of Pakistan and sold through the State Bank of Pakistan via biweekly auctions.

Treasury bills are issued with adulthoods of 3-months, 6-months and 1 Year and are priced at a price reduction. Treasury bills are risk free, SLR eligible securities, that are actively traded in the secondary market and are hence extremely liquid.

They are issued with a minimal denomination of Rs.100, 000.

Pakistan Investment Bonds ( PIBS )

Petabytes are long term bonds issued by the Government of Pakistan and sold through the State Bank of Pakistan via periodic auctions.

PIBs are issued with tenors of 3, 5, 7, 10, 15, 20 and 30 Old ages. Bing backed by the Government of Pakistan, they present a low hazard long term investing option.

The Pakistan Investment Bonds offer a fixed semi-annual voucher and refund of principal at adulthood. They are extremely liquid SLR eligible securities that are actively traded in the secondary market.

The minimal denomination of PIBs is Rs.100, 000.


Merchandises and Servicess

The KASB Bank FX desk offers its clients a huge assortment of FX merchandises including:

Ready Purchase/Sale

The KASB Bank corporate desk provides all corporate and commercial clients the latest market rates for all minutess equivalent to US $ 5,000/- and above. For sums less than US $ 5,000/- , the rates mentioned in the rate sheet are applicable.

Forward Sale

The outward frontward sale allows Importers with L/Cs to book rates on their future committednesss in order to fudge against any rate fluctuations and volatility.

Forward Purchase

The outward frontward purchase allows exporters with L/Cs or contracts to book rates for their receivables in order to fudge against any future rate fluctuations.

Foreign Bill Purchase ( FBP )

This installation allows clients to show their export measures and instantly receive rupee installation. The bank purchases and price reductions the paperss and receives the returns upon the adulthood of the measure runing from 12days to 180 yearss. The exporters can besides show the measure against any forward engagement for discounting, and adjust the returns of the forward contract through that measure.

Foreign Currency Financing ( FCF )

The Foreign Currency Finance ( FCF ) installation allows exporters to avail foreign currency loans on LIBOR based involvement rate for up to the upper limit of six months.

Foreign Currency Import Financing ( FCIF )

The Foreign Currency Import Finance ( FCIF ) installation allows importers to avail foreign currency loans for up to six months against DA or sight L/C utilizing LIBOR based involvement rates.


One really important issue with the bank is that the bank has been sing losingss since 2009, while its equals, in footings of balance sheet sizes and figure subdivisions, have been doing net incomes. The overall industry is besides making all right as it can be seen in the exhibits provided at the terminal. The Net Interest Margin of the bank has been negative magnifying the losingss of the bank. Despite the injection of Rs 13 Million in equity, the bank has been unable to cover the losingss. Why this bank has been unable to bring forth income for its stockholders, will it be able to prolong itself and how can this state of affairs be handled efficaciously are some challenging inquiries and this is what I want happen out by making research on this bank.

After a preliminary analysis of the one-year studies of KASB Bank, I found out that the bank ‘ Liabilities ( Deposits ) are turning at accelerated rate as compared to past few old ages. Due to this there is a similar tendency in the growing of the Assetss of the bank but an interesting fact here is that the chief assets ( Advances ) are non turning ; in fact they are demoing a worsening tendency since 2009. So the growing in Assets here is non because of Progresss but because of Investings and other liquid assets. There has been a steady addition in Investments of the bank for past few old ages but in 2012, the investings figure has increased to more than twice of that of December 31, 2011. Similarly loaning to other fiscal establishments has increased more than three creases. Furthermore there has been a significant addition in Balances with other Banks. The Net Interest Margin is eventually positive after three back-to-back old ages but still the bank is bring forthing losingss.

Assetss of bank have been turning but the progresss are non. This means that the bank is trusting lesser on its nucleus concern, and that would be justified slightly if the bank were doing significant net incomes from its non-core activities. But that is non the instance, so it truly does n’t do sense why the bank has restructured its balance sheet in such a manner. The growing in assets is due to increase in the liquid assets. Liquid is ever reciprocally relative to the Profitability of any house. So if the bank has increased its liquidness it means that the profitableness of the bank is traveling to diminish automatically. Looking at the historical profitableness of KASB Bank such a measure is inadvisable but the bank is making it anyhow. The principle behind this would be identified and discussed in item in this undertaking.

The above stated facts clearly show that there is a job with KASB Bank ‘s fiscal construction and it needs to be looked into. Why the bank is changing its balance sheet construction and the deductions it has on the bank ‘s public presentation have to be found out in order to place the nucleus jobs and suggest the best possible solutions.


The country of research for this survey is the Profitability of KASB Bank. In simple words the concern of banking is taking in sedimentations from assorted persons with excess resources at a specified rate and giving these out every bit loans to persons with shortage in resources at a higher rate. The rate derived function or the Spread is the chief beginning of income for a bank. How good a bank manages this differential determines the income of the bank. Banks really seldom vie on competitory rates because that is a soiled game and it is discouraged through common apprehension. So the borders for spread are rather similar in the industry.

Profitableness is a contemplation of how Bankss are run given the environment in which Bankss operate. In fact, profitableness should mirror the quality of a bank ‘s direction and the stockholders ‘ behaviour, the bank ‘s competitory schemes, efficiency and hazard direction capablenesss, Herrero ( 2007 ) .[ 3 ]

A bank is runing on a really thin window which means that it can non bear significant losingss systematically. Any loss in any peculiar period means that the equity of the bank is being wiped out in that period. In Bankss the equity proportion is rather low as compared to other concern houses, so in instance of losingss it is rapidly wiped out, taking the bank towards default. To avoid such fortunes Bankss have to be revived with equity injections so that they do non default on depositors ‘ money.[ 4 ]

Pakistan ‘s fiscal sector consists of a broad scope of commercial Bankss, specialised Bankss, insurance companies, renting companies, microfinance Bankss and Muslim Bankss. All these institutes offer a broad scope of merchandises and services to ease their clients. NBP, HBL, UBL, MCB and ABL are the top 5 Bankss of Pakistan, and the portion of these top Bankss is more than 50 % of the entire assets of the banking industry and precisely 50 % of the sum investings made by all the Bankss are contributed by these top 5 Bankss. Banks largely prefer to put in Government securities and about more than 83 % of their investings are in this peculiar section. This is because Govt. adoption has increased manifolds over past few old ages and Bankss would evidently prefer imparting to a default free entity, extinguishing recognition hazard. Consequently the consumers or private entities suffer.[ 5 ]

During the past few old ages, fiscal markets and establishments have undergone many alterations and witnessed more than 40 minutess of acquisitions and amalgamations of bank and non-bank fiscal establishments for the intent of consolidation and variegation. Today, banking sector is significantly lending in the economic growing of the state in conformity with the SBP regulations and ordinances. Presently, Pakistan has 5 populace sector Bankss, 22 local private Bankss, 7 foreign Bankss and 4 specialised Bankss. The NPLs are 5.6 % of the entire banking recognition, demoing the employment of better banking patterns and improved plus quality in the sector.[ 6 ]

In general, despite the evident difference in tenors, NSS instruments have been a cardinal replacement of bank sedimentations, peculiarly of fixed tenor. It is partially because NSS instruments offer early encashment installation without punishment. Typically, in the presence of important involvement rate derived function, motion towards NSS instruments is apprehensible. However, it has non ever been the instance. For case, while involvement rate derived function has been around 6 per centum during FY02-06, flows towards NSS instruments have really plummeted. This was mostly on history of censoring institutional investings in NSS, suspension of DSCs and SSCs gross revenues through Bankss and forbiding Bankss to impart against NSS instrument. However, with remotion of prohibition on institutional investing in late 2006, flow towards NSS instruments resumed. In recent old ages, upward alteration of NSS rates has attracted strong flow of investings, though fixed sedimentations have revived every bit good, peculiarly in FY11 amid strong growing in overall sedimentations.[ 7 ]

Prior to the recent fiscal crisis, the extra liquidness and competition among the Bankss prompted them to travel off from the traditional limited merchandise scope of recognition to the authorities and the populace sector endeavors, trade funding, large name corporate loans, and multinationals. The borrower base of the Bankss expanded many fold as the Bankss diversified into agribusiness, SMEs, consumer funding, mortgages, etc. The in-between category which could non afford to purchase autos or houses/apartments as it did non hold the fiscal strength for hard currency purchases, has been the biggest donee of these new merchandises and services.

Assetss of the banking sector are turning at the rate of 15 % whereas sedimentations are increasing with a rate of 14.5 % . Progresss have decreased by 0.2 % and investings in securities have grown enormously by 42.5 % . Net income after revenue enhancements has besides increased by 69.23 % from last twelvemonth.[ 8 ]

Asset quality of overall banking sector has improved. NPLs of the banking system are driven by a figure of factors including economic activities, legal system, unexpected dazes, and recognition rating ability of the Bankss. Apart from of the implicit in factors, addition in NPLs has strong influence on the banking spread. It non merely reduces the gaining assets of Bankss, but besides imposes a cost in the signifier of commissariats. In instance of Pakistan, the Bankss are required to supply for the sum of nonperforming loans after seting for allowable partial benefit of collateral. NPLs to entire loans ratio has improved from 14.7 to 16.2 in Dec 2011 as per SBP computations. Same consequence has been observed if we look at this ratio by banking sections ( commercial, foreign, specialised Bankss ) . Overall ratio of commissariats to NPLs has remained the same. Banks have lent largely to textile sector whereas agribusiness sector remained relatively neglected. Highest NPL ratio has been observed by electronics sector, but Bankss have non impart a important sum to this sector. Textile sector has shown 28 % infection degree which is rather high among all other sectors. The NPL state of affairs in consumer funding has improved if we compare it with old old ages.[ 9 ]

Liquidity place of overall banking sector has improved if we check the liquidness place with entire assets or entire sedimentations as base. Entire Progresss have decreased, which has besides caused the Bankss to put extra liquidness in investings which are liquid assets doing the Bankss ‘ overall liquidness state of affairs to be better off.[ 10 ]

Distinct from other hazards, market hazard is an of import hazard for Bankss. Its differentiation, peculiarly from recognition hazard, frequently gets blurred as market and recognition hazards may interact to reenforce each other and consequence in significant losingss if non managed jointly. Despite its significance, when measured in footings of current patterns of ciphering hazard weighted assets, the part of market hazard remains fiddling in the overall hazard profile of the Bankss.

Furthermore, efficient direction has introduced good services and merchandises which truly have attracted more clients towards banking. Number of subdivisions has besides been on the rise, which has decidedly increased the entire sedimentations. This extra liquidness has been invested in securities or extended as loans. Interest income from both progresss and securities raised the net income degree of overall banking sector. Although disbursals have besides increased by 10 % due to extension in subdivision web and hiring of employees, they are controlled and income has increased by 17 % as compared to last twelvemonth. Along with involvement income there is an addition in fee, committee and other service charges go forthing a positive impact on net income. Net income after revenue enhancements has increased by 69 % . NBP in peculiar has shown record net incomes excessively.[ 11 ]

More than 50 % of the entire progresss extended to any sector are contributed by these top 5 Bankss. Therefore we can state that most of the banking concern is concentrated around these top Bankss. Similarly these 5 Bankss have highest depositor base and bask more than 50 % of entire sedimentations. More than 75 % of the net incomes of the banking sector have been earned by these Bankss. So, in order to stay in the market and go on making concern, the medium and little sized Bankss will hold to stay committed to uninterrupted betterment in service quality every bit good as merchandise invention.[ 12 ]

The literature on Profitability of a bank is huge and a great trade has been written about the determiners of the Profitability. It is apparent from the surveies that there are two types of factors finding the profitableness of a bank ; internal and external. Internal factors may be bank specific features and external may be macroeconomic environment and market/industry features ; Ramlall ( 2009 ) .[ 13 ]

Size, capital, efficiency and recognition hazard are considered as the most important Internal determiners in most of the surveies. Demirguc-Kunt and Maksimovic ( 1998 ) and Akhavein et Al. ( 1997 ) , all have identified that a positive relationship exists between size and profitableness. Equally far as capital is concerned, if a bank has higher degree of capital it can run into its regulative capital demand easy and may even hold excess financess to give out as loans in order for it to gain higher net incomes, Havrylchyk et Al. ( 2006 ) .Furthermore, if a bank has efficient operations it should be able to gain higher net incomes as it would be able to maximise its cyberspace markup/interest income, Molyneux and Thornton ( 1992 ) . Finally, we know that in order to gain higher return one has to take higher hazards. But if the recognition hazard is increasing it does non needfully intend that the bank will be able to bring forth higher returns as more loan loss commissariats would hold to be kept aside, therefore compromising profitableness. This negative relation was found by Miller and Noulas ( 1997 ) .[ 14 ]

The external factors can be divided into Macroeconomic Determinants and Industry Specific determiners. The macro-economic factors include ; involvement rate, cyclical end product, the degree of economic development and stock market capitalisation. Cyclic end product and the degree of economic development normally represent the concern rhythms since Bankss ‘ net incomes are expected to be related with the concern rhythms, being higher in instance of roar and lower in instance of flop, Demirguc-Kunt and Huizinga ( 2001 ) and Bikker and Hu ( 2002 ) . Havrylchyk et Al. ( 2006 ) found that stock market capitalisation and Bankss ‘ profitableness are negatively related as equity and bank funding are replacements of each other. A good illustration is the quality of managerial determinations ( Berger and Mester, 1999 ) . The quality of bank direction is closely related to corporate administration ( DeYoung and Rice, 2004 ) .[ 15 ]

The industry-specific factors include, may be the regulative environment and the market sentiments in which all the Bankss operate. Basically, a concentrated market will confabulate higher net incomes for Bankss as they are able to tap a higher market portion comparative to Bankss capturing merely a little part of the market. On the other manus, in instance of a well-diversified market construction, Bankss are expected to bask low net incomes degree on the dorsum of a extremely competitory market construction.[ 16 ]

During the recent planetary fiscal crisis, Liquidity has had a really of import function. When the crisis hit, the excess units who had provided the financess in the market started drawing out. This well increased the demand for liquidness. Banks all over the universe faced jobs and in some utmost instances they had to unify with other Bankss. As a consequence, in order to resuscitate the fiscal stableness local governments had to step in and inject liquidness in many states, Longworth ( 2010 ) ; Bernanke ( 2008 ) .[ 17 ]

Subsequently on, the governments made it an duty for Bankss that they increase their liquidness degree in order to avoid incommodiousness at the clip of demand. Policymakers have suggested that Bankss should keep more liquid assets than in the yesteryear, to assist selfaˆ?insure against possible liquidness or support troubles. Since liquid assets such as hard currency and authorities securities by and large have a comparatively low return, keeping them imposes an chance cost on a bank. If the ordinance sing liquidness is absent, the bank will merely keep liquid assets until the point where it does non compromise the profitableness of the bank. The ground for this behaviour by Bankss is that liquidness compromises profitableness. If one wants to increase liquidness, profitableness will automatically be decreased and frailty versa. However in clip of demand, the policymakers can modulate by telling the Bankss to increase liquidness beyond that point, in order to guarantee overall fiscal stableness.

The analysis of liquidness retentions for houses has been done in a great trade of literature. However, literature sing the impact of liquidness and its relation to the profitableness of a bank is limited. This relationship is non the focal point of this paper ; it is one of the angles that we will be looking at.

Berger ( 1995 ) looked into the statistical relationships between net incomes of Bankss and capital for U.S. Bankss over the period of six old ages, from 1983-89. He found out that in perfect capital markets with symmetric information,[ 18 ]there is a positive relationship between capital and return on equity. These consequences, harmonizing to assorted bookmans, are consistent with the “ expected bankruptcy cost hypothesis ” . In other words, if the bank has higher degree of capital, it will diminish the cost of support and cost of publishing extra capital to such an extent that at some point it might even countervail the costs wholly. While Berger ( 1995 ) applies the construct of the “ expected bankruptcy cost hypothesis ” in the kingdom of capital, it is besides conceptually applicable to the impact of liquid assets on profitableness, whereby Bankss keeping more liquid assets benefit from a superior perceptual experience in support markets, cut downing their funding costs and increasing profitableness.[ 19 ]

Harmonizing to Morris and Shin ( 2010 ) , ‘illiquidity hazard ‘ is one of the constituents of Credit Risk. The theoretical account gives a expression for “ illiquidity hazard ” and the writers show that if the liquidness ratio of a bank increases it reduces the chance of illiquid default. If an addition in the comparative liquid assets retentions of a bank decreases its chance of default, and if the “ expected bankruptcy cost hypothesis ” is so right, so retentions of liquid assets should exhibit a positive relationship with bank net incomes. On the contrary, keeping liquid assets means the bank will hold low return relation to other assets, thereby holding a negative consequence on profitableness. Therefore, overall, we expect liquid assets to exhibit a nonaˆ?linear relationship to bank profitableness in which increasing liquid assets would better a bank ‘s profitableness through the “ expected bankruptcy cost hypothesis ” , every bit long as the benefit of keeping liquid assets is more than the chance cost of low return.

Interest spreads and borders play a really of import function in finding the profitableness of a bank. A comprehensive reappraisal of determiners of involvement spreads is offered by Hanson and Rocha ( 1986 ) . That paper summarizes the function that inexplicit and expressed revenue enhancements play in raising spreads and goes on to discourse some of the determiners of bank cost and net incomes, such as rising prices, scale economic systems, and market construction. Using aggregative involvement informations for 29 states in the old ages 1975-1983, the writers find a positive correlativity between involvement borders and rising prices. Brock and Suarez ( 2000 ) , for illustration, show a negative relationship between bank spreads and NPLs over entire loans for most Latin American banking systems.[ 20 ]

The balance sheet construction of a bank is another determiner of the profitableness of a bank. On the plus side, a larger portion of loans to entire assets should connote more involvement gross because of the higher hazard. However, loans besides have higher operational costs because they need to be originated, serviced and monitored. All in all, profitableness should increase with a larger portion of loans to assets every bit long as involvement rates on loans are liberalized and the bank applies mark-up pricing. In this vena, Demirguc-Kunt and Huizinga ( 1999 ) study that Bankss with a comparatively high portion of non-interest gaining assets are less profitable. In add-on, authorities intercession can besides impact the balance sheet construction. Fry ( 1994 ) shows that administered loaning and sedimentation rates result in the misallocation of recognition. On the liability side, a larger proportion of sedimentations should, in rule, increase profitableness as they constitute a more stable and inexpensive support compared to borrowed financess. However, they besides require widespread ramification and other disbursals. Such related costs seem to weigh more than the benefits in emerging states ( Demirguc-Kunt and Huizinga, 1999 ) .[ 21 ]

Bank size is by and large considered a relevant determiner of profitableness but there no consensus on the way of influence. On the one manus, a bank of a big size should cut down costs because of economic systems of graduated table. In fact, more variegation chances should let to keep ( or even increase ) returns while take downing hazard. On the other manus, big size can besides connote that the bank is much harder to pull off or it could be the effect of a bank ‘s aggressive growing scheme. The empirical grounds is besides assorted. Goddard et Al. ( 2004 ) , Garcia-Herrero and Vazquez ( 2007 ) show that really big Bankss in the industrial states tend to be more profitable. Sitroh and Rumble ( 2006 ) found out that smaller Bankss are more profitable.[ 22 ]

Market power may besides act upon profitableness, harmonizing to two well-known theoretical theoretical accounts. The first 1 is the structure-conduct-performance hypothesis, which asserts that a positive relationship between the involvement rate border and concentration ( a placeholder for market power ) reflects non-competitive pricing behaviour. The 2nd 1 is the efficient-structure hypothesis, for which a bank ‘s higher involvement border is attributable to more operational efficiency, better direction or better production engineerings. Since these Bankss will besides derive a larger market portion ( another placeholder for market power ) , the construction will go more concentrated due to efficiency additions ( Berger, 1995 ) . The policy deductions of the two hypotheses go in opposite waies. Under the construction behavior theory, high net incomes stem from market power so that antimonopoly ordinance is welcome to apportion resources more expeditiously. By contrast, under the efficient-structure hypothesis, interrupting up efficient Bankss, or prohibiting them to turn, may raise societal costs by taking to less favourable monetary values for consumers. The empirical grounds on concentration or market portion and profitableness is assorted.[ 23 ]

Finally, the macroeconomic environment may besides act upon bank profitableness through many different channels. Credit hazard, for illustration, is influenced by economic growing, rising prices and the degree of existent involvement rates as they affect the borrower ‘s refund ability and the value of collateral. Demirguc-Kunt and Huizinga ( 1999 ) show empirical grounds that rapid economic growing and high existent involvement rates increase profitableness for a big figure of states. Inflation is by and large associated with higher profitableness as it implies extra net incomes from float, which tend to counterbalance for the higher labor costs ( Hanson and Rocha, 1986 ; Bourke, 1989 ; and Boyd et Al. 2001 ) . Higher existent involvement rates have besides been found to further profitableness, particularly in developing states ( Demirguc-Kunt and Huizinga, 1999 ) . This may reflect the fact that demand sedimentations often pay zero or below market rates, even more so in developing states. In the same vena, involvement rate volatility by and large implies higher involvement borders as Bankss by and large manage to reassign the higher hazard to their clients ( Ho and Saunders 1981, Maudos and Fernandez de Guevara 2004 ) .[ 24 ]


Merely like any concern, the rivals of a house are the whole industry, but to do the comparing more realistic 1 has to place the immediate rivals. The immediate rivals that I have identified for this research are JS Bank and Silk Bank. The principle for choosing these Bankss as rivals is that both these Bankss are similar to KASB Bank in footings of their Assetss and figure of subdivisions. To look into the public presentation of KASB Bank in all respects, it will be compared to these two Bankss. From the preliminary analysis of these three Bankss, I found out that JS Bank and Silk Bank are bring forthing net incomes for their stockholders on a regular basis while KASB Bank is non. The undermentioned fiscal analysis will set visible radiation on the bank ‘s standing every bit compared to its equals.







10.28 %

-0.21 %

-8.76 %

Net Markup/interest Margin

-0.66 %

-0.02 %







-3.45 %

-4.64 %

-7.08 %

Not Markup/Interest to TA

1.30 %

1.65 %

1.82 %

Net Markup/Interest disbursal to entire income

1.05 %

-2.24 %

-3.97 %

Markup/Interest disbursal to Markup/Interest Income

110.28 %

100.21 %

108.76 %

Admin Expense-to-Profit Before Tax



-48.00 %

Not Markup/Interest to Entire Income

57.49 %

49.21 %

49.07 %

Admin disbursal to non-markup/interest income




Net incomes per Share




Leverage RATIOS

Capital Adequacy Ratio

8.00 %

-3.56 %

3.53 %

Entire Deposits to Entire Equity





Cash & A ; Cash equivalents to entire assets

21.52 %

6.17 %

5.06 %

Investing to entire Assetss

21.30 %

21.85 %

22.26 %

Progresss cyberspace of commissariats to entire assets

40.15 %

51.34 %

49.04 %

Deposits to Total Assetss

84.71 %

79.36 %

71.82 %

Entire Liabilitiess to Total Assetss

95.18 %

94.94 %

91.12 %

Gross Advances to Lodge

56.85 %

76.07 %

77.74 %

Gross Advances to borrowing and Deposit

52.92 %

66.60 %

64.86 %


NPLs to Gross Progresss

34.44 %

27.08 %

21.60 %

Commissariats against NPLs to Gross Progresss

16.62 %

14.95 %

12.15 %

NPLs to stockholder ‘s equity

128.95 %

495.69 %

168.58 %

NPLs write off to NPLs Provisions

4.86 %

24.61 %

47.64 %

Provision against NPLs to NPL

48.27 %

55.22 %

56.26 %







22.31 %

12.53 %

0.98 %

Net Markup/interest Margin

2.06 %

1.17 %

0.08 %






0.77 %

-1.56 %

-4.23 %

Not Markup/Interest to TA

0.93 %

1.63 %

0.96 %

Net Markup/Interest disbursal to entire income

4.96 %

0.85 %

-3.28 %

Markup/Interest disbursal to Markup/Interest Income

77.69 %

87.47 %

99.02 %

Admin Expense-to-Profit Before Tax




Not Markup/Interest to Entire Income

43.20 %

38.21 %

40.50 %

Admin disbursal to non-markup/interest income




Net incomes per Share




Leverage RATIOS

Capital Adequacy Ratio

6.65 %

5.24 %

0.56 %

Entire Deposits to Entire Equity





Cash & A ; Cash equivalents to entire assets

5 %

4.82 %

4.77 %

Investing to entire Assetss

19.35 %

18.15 %

29.39 %

Progresss cyberspace of commissariats to entire assets

55.07 %

61.04 %

46.75 %

Deposits to Total Assetss

70.66 %

76.66 %

72.25 %

Entire Liabilitiess to Total Assetss

93.78 %

93.35 %

97.43 %

Gross Advances to Lodge

86.32 %

95.01 %

81.82 %

Gross Advances to borrowing and Deposit

67.57 %

80.71 %

62.74 %


NPLs to Gross Progresss

19.93 %

23.35 %

29.29 %

Commissariats against NPLs to Gross Progresss

9.71 %

16.19 %

NPLs to stockholder ‘s equity

58.63 %

92.02 %

6039.17 %

NPLs write off to NPLs Provisions

48.94 %

2.66 %

27.19 %

Provision against NPLs to NPL

48.74 %

69.34 %

71.43 %







40.18 %

31.66 %

28.51 %

Net Markup/interest Margin

3.18 %

2.65 %

2.19 %






0.66 %

-1.03 %

-1.81 %

Not Markup/Interest to TA

1.41 %

0.85 %

1.03 %

Net Markup/Interest disbursal to entire income

3.46 %

2.31 %

-0.16 %

Markup/Interest disbursal to Markup/Interest Income

59.82 %

68.34 %

71.49 %

Admin Expense-to-Profit Before Tax




Not Markup/Interest to Entire Income

41.64 %

51.31 %

60.56 %

Admin disbursal to non-markup/interest income




Net incomes per Share




Leverage RATIOS

Capital Adequacy Ratio

16.13 %

17.64 %

23.99 %

Entire Deposits to Entire Equity





Cash & A ; Cash equivalents to entire assets

7.42 %

8.17 %

10.90 %

Investing to entire Assetss

42.03 %

34.79 %

28.99 %

Progresss cyberspace of commissariats to entire assets

33.08 %

35.49 %

35.54 %

Deposits to Total Assetss

73.71 %

66.72 %

64.79 %

Entire Liabilitiess to Total Assetss

83.89 %

85.18 %

82.81 %

Gross Advances to Lodge

46.16 %

55.20 %

57.09 %

Gross Advances to borrowing and Deposit

42.78 %

45.61 %

46.17 %


NPLs to Gross Progresss

14.97 %

13.12 %

7.04 %

Commissariats against NPLs to Gross Progresss

2.77 %

3.64 %

3.93 %

NPLs to stockholder ‘s equity

29.38 %

26.29 %

15.24 %

NPLs write off to NPLs Provisions

29.43 %

25.88 %

161.80 %

Provision against NPLs to NPL

18.50 %

27.72 %

55.72 %


The Profitability ratios of the rival Bankss i.e JS Bank and Silk Bank, show that they are much better off than KASB Bank. Both these Bankss are bring forthing net incomes at an increasing rate while KASB Bank is bring forthing consistent losingss for past three old ages. The negative ROE suggests that the losingss are pass overing out the equity of the bank. The ROE of JS Bank and Silk Bank is increasing steadily whereas The ROE of KASB Bank declined further in FY10 and so increased but remained a negative figure. The Return on Assets for KASB Bank has besides been negative throughout demoing that non adequate return is being generated either because of the hapless direction or hapless plus quality. The rivals ‘ for the three old ages ROA are more than KASB Bank, which means that they are using their assets better.

Net Interest Margin ratio is the difference between involvement income and involvement disbursal as a per centum of assets. The NIM ratio is negative for KASB Bank, it shows that the bank has been making hapless plus liability direction. Non-interest income as a per centum of entire assets is approximately the same for all Bankss. The ratio of involvement expensed to involvement earned shows that the involvement disbursals of KASB Bank are more than the involvement income can cover which is an dismaying state of affairs. The rivals ‘ ratios suggest that their involvement incomes earned are good above the involvement disbursals they have been incurring.

Net incomes before revenue enhancements have been negative so all the ratios associated with EBIT come out to be negative. The Administrative disbursals as a per centum of non-interest income, as compared to equals, show that the bank has non been passing every bit much money as it should hold on its human resources which can be ground for hapless direction of the bank. EPS has besides been diminishing systematically.


Capital Adequacy Ratio is fundamentally used to protect depositors and advance the stableness and efficiency of fiscal systems around the universe. Two types of capital are measured: grade one capital, which can absorb losingss without a bank being required to discontinue trading, and tier two capital, which can absorb losingss in the event of a winding-up and so provides a lesser grade of protection to depositors. The ratios calculated for these Bankss show that KASB Bank has had lower ratios than required by BASEL II and III. Silk Bank has even lower ratios than the needed. Merely JS Bank has had capital good above the required by the BASEL III.

Leverage RATIOS

Entire Deposits to Entire equity ratio indicates the degree of purchase in the Bank. The ratios show that KASB Bank has taken rather a batch of debt with regard to its equity. JS Bank has sensible purchase. Entire sedimentations are lesser times equity than other Bankss. It shows that KASB Bank has been taking on quite a batch of debt in past few old ages so it can manage.


Liquid is ever reciprocally relative to Profitability. We have seen in the ratios that the profitableness of KASB Bank has been diminishing in past few old ages, it means that its liquidness has been increasing, and this impression is easy backed by the ratios that have been calculated. JS Bank has had an opposite tendency over the old ages ; the liquidness has been diminishing steadily. Silk Bank on the other manus has been keeping the degree of its liquidness.

KASB and Silk Bank have a similar per centum of entire assets in securities investings while JS Bank has been increasing the investings during past few old ages. Besides in KASB Bank, the proportion on entire assets being financed by sedimentations has been increasing and it has reached 84.71 % , while the other two peer Bankss have kept it near 70 % . Increasing the trust on sedimentations to finance assets is non advisable after a certain extent and KASB Bank is taking significant hazard by making so.


Looking at the financials of all three Bankss, it is clear that KASB Bank has the highest proportion of NPLs with regard to entire progresss. In FY11, the NPLs as a proportion of entire loan has reached 34.44 % which is rather dismaying particularly when the bank is already in losingss. Silk Bank has been cut downing its NPLs and it has been successful in making that. JS Bank has the lowest NPLs but they have been increasing over the old ages, although still rather less than both peer Bankss. However, if we look at the Provisioning for NPLs, KASB Bank and Silk Bank have been making a better occupation than JS bank to cover their loan losingss. Non-Performing Loans to Shareholder ‘s equity besides gives us an interesting image. KASB Bank ‘s NPLs are well more than the stockholders ‘ equity, therefore pass overing out the equity of the bank.