Based on the definition of fiscal dictionary, ratio analysis is the survey of the significance of fiscal ratios for a company. Ratio analysis is really of import in cardinal analysis, which investigates the fiscal wellness of companies. The analysis can be subcategorized into five chief constituents ; that is liquidity place, fiscal purchase, plus efficiency, profitableness and market value step.
The company that our group have chosen is Public Bank, one of the esteemed local Bankss in Malaysia. However, we faced some troubles when start calculating the ratio. The chief ground is because Bankss considered one of the specialised industries. Many of the ratios that we have learnt can non straight use to bank. The manner and construction of balance sheet and income statement are differed from common manner.
There are two important differences between traditional balance sheet and bank. First, the histories of Bankss may look the antonym of other types of house. Checking histories or demand sedimentations are liabilities to a bank, since it owes the clients money in these instances. Equally, loans to clients are assets. Besides, the balance sheet histories are non subdivided into current and noncurrent histories.
For Bankss ” income statement, their chief gross beginning is normally income from loans and investing securities. The chief disbursal is normally involvement disbursal on sedimentations and other debt.
Because of the immensely different histories and statement formats, few of the traditional ratios are appropriate for Bankss. There is some particular ratio that is for Bankss, for illustration, gaining assets to entire assets, net non-performing loan ratios and net involvement border.
Therefore we have chosen Public Bank Bhd ( PBBank ) as our company for the assignment and Maybank for the comparing intent.
Public Bank Bhd ” s profile
In twelvemonth 1966, Tan Sri Dato ” Sri Dr. The Hong Piow established Public Bank and it is a taking supplier of fiscal services in Malaysia with banking operations in Hong Kong and China, Cambodia, Vietnam, Laos and Sri Lanka. In Malaysia, Public Bank is one of the most efficient Bankss as reflected by its low cost to income ratio.
In Malaysia, Public Bank is a top-tier bank, well-reputed for its prudent direction, superior client service, uncompromising service bringing criterions and strong corporate administration and corporate civilization. Public Bank remains untasted by the planetary fiscal crisis which wreaked mayhem in major fiscal lopes around the universe.
As the fact says, Public Bank Group has been portion of the strong accelerators to back up Malaysia ” s economic development over the old ages. Since its early yearss, Public Bank has transformed into a strong and successful fiscal establishment, offering a broad scope of competitory and advanced merchandises and solutions to run into its clients ” demands.
Furthermore, Public Bank is an industry leader in place mortgage funding, vehicle hire purchase funding and commercial loaning to small- and moderate-sized endeavors in Malaysia. Besides, in Malaysia, the Public Bank Group has the highest market portion for the private sector unit trust concern. In Hong Kong, the Group is an industry leader in personal consumer funding.
Public Bank is the most accepted trade name in the Malayan fiscal services industry for its strong trade name promise. In footings of size, it is the 3rd largest domestic bank in Malaysia by market capitalisation and balance sheet.
Other than that, Public Bank Group has over 17,160 staff, with 90 % of the staff in Malaysia and the remainder in its abroad operations in Hong Kong and China, Cambodia, Vietnam, Laos and Sri Lanka.
For fiscal information, Public Bank continues to be accorded with strong recognition and fiscal evaluations due to its strong capitalisation, strong plus quality, systematically profitable fiscal public presentation and strong hazard direction.
The Moody ” s Investor Service reaffirmed Public Bank ” s long-run sedimentation evaluation of A3 and short-run sedimentation evaluation of P-1 with stable mentality. Standard & A ; Poor ” s Rating Agency besides reaffirmed Public Bank ” s A- long-run evaluation and A-2 short-run counterparty recognition evaluation with stable mentality. Rating Agency Malaysia reaffirmed Public Bank ” s long-run evaluation of AAA, the highest accorded by Rating Agency Malaysia, and its short-run evaluation of P1.
In add-on, Public Bank Group ” s profile has been boosted significantly in 2009 when it was voted as the Best Retail Bank in Asia Pacific by the Asian Banker based on several standards such as superior nucleus sedimentation aggregation capablenesss, value of its franchise, first-class fiscal public presentation, sustainability of its balance sheet and hazard direction. Public Bank won this award, surpassing non merely national rivals but besides regional equals.
As a responsible corporate citizen, the Public Bank Group remains committed to the fulfillment of its corporate societal duties. The Group is confident that its corporate societal duty programmes in cardinal countries such as instruction, environmental preservation and support to the needy will non merely heighten the quality of life of the affected population but besides farther hike its corporate image, good will and trade name.
The Public Bank Group ” s corporate duty initiatives to better the work topographic point and heighten the public assistance of the staff will go on to actuate staff to better their part, productiveness and efficiency. The Group acknowledges the committedness and willingness of its staff to prolong its strong organic concern growing and farther better on the Group ” s renowned client service and bringing criterions.
For its solid and consistent fiscal public presentation, prudent direction and strong direction capablenesss, Public Bank continues to be recognized with awards of banking excellence. In 2009, Public Bank was honoured with 54 awards and awards, including many repetition best bank awards in Malaysia and in the part by international and extremely reputable finance and banking publications.
The liquidness ratios are a group that intended to supply the information about house ” s liquidness. It measures the ability of the house to run into all the short term duties. In other word, it measures the house ” s ability to pay the short term debts. There are some chief ratios in liquidness ratios, named current ratio, acerb trial ratio and hard currency ratio. Since, there is no stock list for bank, the acerb trial ratio are same as current ratio.
Current ratio determines short-run debt paying ability. It is computed as follows:
Current ratio =
Current assets for a bank includes hard currency and short-run financess, sedimentations and arrangements with Bankss and other fiscal establishments, securities portfolio, loans, progresss and funding ( matured within, derivative fiscal assets and other receivables. While current liabilities includes sedimentations from clients, sedimentations and arrangements of Bankss and other fiscal establishments, duties on securities sold under redemption understandings, measures and credences collectible, recourse duties on loans sold to Cagamas, derivative fiscal liabilities and other collectible.
2005 2006 2007 2008 2009
PBBank 0.5801 0.5585 0.5595 0.5132 0.4932
Maybank 0.7072 0.6722 0.6862 0.6288 0.5672
Based on the informations and graph above, the current ratio of PBBank is diminishing over the twelvemonth from 2005 to 2009, which is from 0.5801 times to 0.4932 times. Although there is an minor increase from twelvemonth 2006 to 2007, which is from 0.5585 times to 0.5595, that is non important plenty. The ground for the diminishing current ratio is because the rate of addition for current liabilities is higher than the rate of addition for current assets throughout the old ages.
Besides, that is a large bead in current ratio from twelvemonth 2007 to 2008, which is from 0.5595 times to 0.5132 times. The difference is 0.0463, which is besides the highest bead in current ratio within the 5 old ages. The chief ground that caused this large bead is there are major beads in PBBank securities portfolio which is 807 million and a large addition in short term clients ” sedimentations which are 17.12 % from RM138,017 million to RM161,641 million. Although there are some additions in entire current assets, the rate of addition of current liabilities is higher. Therefore, this has caused the current ratio for PBBank falls to 0.4932 in twelvemonth 2009.
By comparing to Maybank, the current ratio for PBBank is lower than Maybank throughout the old ages. One of the chief grounds is that most of the loans for Maybank are to be matured within one twelvemonth. For illustration in twelvemonth 2009, RM23, 963 million out of the entire loans RM135, 335 million which is 17.71 % , are to be matured within one twelvemonth. While for Maybank in 2009, RM 46, 589 million out of RM 185,783 million which is 25.08 % , are to be matured within one twelvemonth. So, Maybank have higher current assets and therefore higher current ratio.
This ratio is really of import in the sense that, it shows whether PBBank has the adequate short term resources to run into the short term debt duty. The lower the current ratio, the more unsafe it would be, as it may go bankrupt. By and large, the current ratio for house is 2.00. Since bank is a particular industry, it can non be applied. So, have to compare to their challenger. In this instance, the current ratio for PBBank is lower than Maybank. This indicated that PBBank are non liquid plenty and might confront insolvency in short term. This might hold worried PBBank and their stakeholder. The stakeholder might hold no confident towards PBBank by judging to their liquidness.
In order to counter for the low current ratio, PBBank can sell some fresh or low public presentation fixed assets. Then use the returns to get marketable securities, increase the loan to client or merely maintain it into hard currency modesty. Besides, PBBank may besides promote their client to lodge their money for longer clip. So, it has indirectly become long term liabilities. By utilizing these two methods, the current plus will be increased while the current liabilities felt. Therefore, the current ratio for PBBank will be improved and might besides beef up the assurance of stakeholders.
Cash ratio step the ability of the house to run into the short term duties with hard currency. The expression is as follow:
Cash ratio =
2005 2006 2007 2008 2009
PBBank 0.1853 0.1845 0.2245 0.2059 0.2215
Maybank 0.1420 0.1739 0.1804 0.1257 0.0960
Based on the informations and graph above, the hard currency ratio is drifting up and down from twelvemonth 2005 to twelvemonth 2009. At first, it decreased by merely 0.0008 times or about 0 % from twelvemonth 2005 to twelvemonth 2006. It so increased by 0.04 times in twelvemonth 2006. However, it falls in twelvemonth 2008 but increase back in twelvemonth 2009 which is 0.0186 times and 0.0156 times severally.
The chief ground for the large rise for the hard currency ratio in twelvemonth 2007 is that the hard currency and hard currency equivalent increased by about 50 % from RM24380million to RM35548 million while the entire current liabilities merely increased by 19.85 % from RM132142 million to RM158367million. While for the falls in twelvemonth 2008, the hard currency and hard currency equivalent merely increased by 2.9 % which is from RM35548 million to RM36597 million.
By comparing to Maybank, the hard currency ratio for PBBank is higher. The chief ground is because Maybank has higher current liabilities but lesser hard currency than PBBank. It implied that PBBank have more per centum of hard currency to run into the short term duties.
In term of liquidness, hard currency ratio will be a better indicant if comparison to current ratio. This is because the hard currency ratio step the hard currency or hard currency equivalent available for wage the short term debt while the current ratio step the current assets available to run into the duties. In fact, non all the current plus can easy turned to hard currency and pay the debt, it may take some clip before it changed into hard currency. So, the current ratio may seems meaningless if comparison to hard currency ratio.
For PBBank, their hard currency ratio is much better than Maybank. So, this might give assurance to the creditor and client that PBBank have better ability in paying the debt or involvement. This will promote more investing and sedimentation from foreigners. Therefore, this higher hard currency ratio can be a really good mark for PBBank.
However, the more liquid the bank is, the less profitable it is. The chief beginning of income for Bankss is involvement from loan and net income from securities trading. If the bank keeps their hard currency in the modesty instead imparting it out or put in securities, they will lose the chance for acquiring involvement income. So, it is suggested that PBBank may put portion of their free hard currency into loans or securities to acquire higher net income.
Debt to Equity ( D/E ) Ratio
Debt to equity ratio step the combination of debts and equity used in the houses. The ratio is in term of times where how many times the debts are used with regard to equity. For illustration, if the D/E ratio is 3, the debts used are ternary clip than equity. D/E ratio are computed as follow:
Debt to equity ratio =
The lower the ratio, the more desirable it is.
2005 2006 2007 2008 2009
PBBank 11.52 14.27 16.45 18.18 17.53
Maybank 10.39 11.83 11.92 12.39 11.06
Based on the informations and graph above, for PBBank, there is a steady addition from twelvemonth 2005 to twelvemonth 2008 which is 11.52 times to 18.18 times but autumn in twelvemonth 2009 as 11.06 times for D/E ratio. The rise in D/E ratio is caused big addition of client sedimentations and other long-run liabilities. However, the diminution of the ratio is because the rate of growing in liabilities is slower than the rate of rise in equity. There are fiscal crisis during old ages 2008 to 2010, this has made PBBank go more prudence in utilizing debt to finance operations.
By comparing to Maybank, Maybank has a milder motion for D/E ratio. In this instance, Maybank are playing in safer place. This is because D/E besides measures the house ” s long-run debt-paying ability. If the house could non pay the long term debt, it might confront the job of bankruptcy.
For companies as for people, debt is a cardinal portion of any fiscal image. Debt ratios step fiscal solvency and can give a glance into capital construction. Finance by debt decidedly will confront higher hazard, but it is non ever a bad thing, it depends on what schemes that they use. High hazard, high returns. However, overdriving purchase leaves the company at hazard during a recession or a downswing, peculiarly in a cyclical industry. Debt ratios are a good starting point to maintain path of a company ‘s ability to defy such periods. Therefore, PBBank has to mind of the purchase places
Equity multipliers, is like all debt direction ratios, the equity multiplier is a manner of analyzing how a company uses debt to finance its assets. Equity multipliers besides known as the fiscal purchase ratios or purchase ratios. It are computed as follow:
Equity Multiplier =
2005 2006 2007 2008 2009
PBBank 12.52 15.27 17.45 19.18 18.53
Maybank 12.39 12.83 12.92 13.39 12.06
From the graph, the multiplier for PBBank is increasing from twelvemonth 2005 to 2008 which is 12.41 times to 19.18 times, it is upward inclining. However, in twelvemonth 2009, the multiplier drops to18.53 times. The ground for why the multiplier rise and diminution is same as the account for D/E ratio, since the equity multiplier is derived from D/E ratio.
The deduction of the multiplier is that how many times the plus has created based on the equity the house has. The higher the sum, the more favorable it is. Besides, equity multiplier besides measures that how many dollar of plus per dollar of equity. If the house has high equity multiplier, the shareholder will be happy as they have higher dollar of plus per dollar of equity. However, it besides means that the house is trusting on debt instead than equity to finance its assets.
By comparing to Maybank, the equity multiplier for PBBank is higher. This mayb be a good new or bad intelligence, depend where they look in.
In decision, debt to equity ratio and equity multiplier ; these ratios are interrelated. This is because they are all utilizing the entire assets, liabilities and stockholder ” s equity to cipher the ratios, step a house ” s fiscal purchase and comparison with other same industry house twelvemonth by twelvemonth.
Gaining assets to entire assets
Gaining assets to entire assets =
Gaining assets include loans, rentals, investing securities, and money market assets that could bring forth return to the bank. It excludes the hard currency and nonearning sedimentations plus fixed assets which of course do non bring forth return for Bankss. The gaining assets to entire assets ratio implies that how good the bank direction puts their plus to work. In other words, it shows how many per cent of the bank ” s plus are really working. Normally, high public presentation Bankss have a high ratio.
2005 2006 2007 2008 2009
PBBank 71.36 75.52 73.66 75.98 75.43
Maybank 79.1 79.57 74.16 81.79 85.05
For PBBank, their gaining assets include the securities portfolio, loans and funding, derivative assets, investing in subordinate companies and associated companies, and investing companies.
Based on the graph and informations supra, the ratio addition by 4.16 % in twelvemonth 2006. This mean the proportion of gaining assets become larger now. This same spell from twelvemonth 2007 to 2008 which is 2.32 % .The ground for why it increases is because rate of addition of gaining assets is higher than the rate of addition of entire assets. For twelvemonth 2006 and 2008, although there are increases for nonearning plus, for illustration hard currency, belongings and equipment ; the rate of increasing for gaining assets is higher. In other word, the direction are more efficient on seting the assets to work.
However, there is a minor bead for the ratio from twelvemonth 2006 to 2007 and from twelvemonth 2008 to 2009 which is 1.86 % and 0.55 % severally. One of the grounds is that, there is some lessening in gaining plus and rate of addition for nonearning assets are higher. Besides, there are fiscal crisis between 2008 and 2009. This has discouraged some trading activities, for illustration the securities. However, the impact is lesser because the ratio merely bead by 0.55 %
By comparing to one of the challenger of PBBank- Maybank, the earning plus to entire assets ratio is increasing throughout the 5 old ages. Although there is a bead in twelvemonth 2007, it increased at a faster rate after that. Based on the graph, Maybank are by and large better than PBBank.
This ratio can be really critical for PBBank. This is besides one of the of import factor whether can pull the investor. Investor will take the company which are more efficient in the direction to bring forth income. If the earning plus to entire plus ratio is low comparison to their challenger, it might bespeak that the bank used the fund to get nonearning plus such is belongings and equipment or stocked-up the hard currency sum instead than gaining plus. So, the investor might believe that the direction are non efficient plenty to utilize the fund and set the assets to work and therefore the income generated could be low. They might exchange to PBBank rival. Therefore, PBBank can lose their client.
In order to counter for this, PBBank should get more earning plus, such as securities, derivative, investing in companies instead than nonearning plus or do more hard currency into idle province. Therefore, PBBank will hold higher gaining assets to entire assets ratio comparison to their challenger, and pull more investor.
Net Non-performing loan ratio
Net non-performing loan ratio=
From the fiscal dictionary, non-performing loan ( ”NPL ” ) is a loan in or near default. Harmonizing to the International Monetary Fund, a non-performing loan is any loan in which: involvement and chief payments are more than 90 yearss delinquent. In other words, a NPL is one in which the adulthood day of the month has passed but at least portion of the loan is still outstanding. The specific definition is dependent upon the loan ‘s peculiar footings.
2005 2006 2007 2008 2009
PBBank 1.73 1.57 1.23 0.86 0.8
Maybank 4.73 3.73 2.97 1.89 1.61
Based on the graph and informations supra, the net NPL ratio is diminishing over the clip from twelvemonth 2005 to twelvemonth 2009. It drops from 1.73 % in twelvemonth 2005 till merely 0.8 % in twelvemonth 2009. Besides, the ratio over the five old ages is lower than the Malayan banking industry ” s net non-performing ratio which is 3.3 % . In twelvemonth 2005, the net NPL ratio stands at about half of the industry ” s net NPL ratio in Malaysia. Throughout the twelvemonth from 2005 to 2009, the part become lesser and lesser, and it stands around one one-fourth to the industry NPL ratio.
The net NPL ratio indicated how many per cent of entire loan are unhealthy and therefore might going bad debt in the hereafter. The lower the ratio, the more favorable it is. Based on the informations above, the net NPL ratio for PBBank is comparatively lower by comparison to Maybank. Although Maybank has a higher net NPL ratio in twelvemonth 2005 and dropped throughout the twelvemonth, their ratio still lower than public bank.
The low net NPL ratio might besides bespeak that PBBank has tighter control and more effectual in publishing loan. If the bank has a tighter control in publishing loan, they will look into and travel through the borrower fiscal background carefully. This is to find whether the borrowers have the ability to return the loan. Therefore, the per centum of NPL for PBBank is low.
Besides, the banking industry ” s ratio is the standard guideline for the bank to accomplish. Normally, most of the NPL ratio of the bank will lie within the border of the standard ratio. However, the net NPL ratio for PBBank is half of the standard ratio and finally decreases over the twelvemonth since the twelvemonth 2005. In add-on to that, there are fiscal crisis happened between 2008 and 2009, but PBBank still able to diminish the per centums of NPL and go about 0.8 % .
Therefore, this can be a really good mark for PBBank as it demoing that they are more efficient in commanding their loaning. This will cut down the hazard for going insolvent as the loan considered the biggest assets for bank.
Profitableness is the ability of the house to bring forth net incomes. Analysis of net income is of critical concern to shareholders since they derive gross in the signifier of dividends. Furthermore, increased net incomes can do a rise in market monetary value, taking to capital additions and growing of the house. There are few steps for bank, for case, return on assets ( ROA ) , return on equity ( ROE ) and net involvement border ( NIM )
Tax return on Assetss ( ROA )
Tax return on Assetss ( ROA ) measures how the assets are utilized by bespeaking the profitableness of the assets base or plus mix. It besides tells us how good the company is in pull offing its assets in order to bring forth net incomes. The higher the ratio, the better it is. The ROA is computed as follows:
Tax return on assets ( ROA ) =
2005 2006 2007 2008 2009
PBBank 1.38 % 1.22 % 1.26 % 1.36 % 1.18 %
Maybank 1.30 % 1.25 % 1.27 % 1.12 % 2.42 %
Based on the informations and graph, the ROA for PBBank is besides fluctuating from twelvemonth 2005 to twelvemonth 2009. At first, it decreased in twelvemonth 2006, from 1.38 % to 1.22 % . Then it steadily increases to 1.26 % and 1.36 % in the old ages 2007 and 2008 severally. The ground for the addition and lessening for ROA is the rate of addition for net income the rate of addition for entire assets
For twelvemonth 2006, the rate of growing for net income is lower than the rate for entire assets, so, it lead to take down ROA compared to 2005. The same theory applied for twelvemonth 2007 and 2008. For both twelvemonth 2007 and 2008, the rate of growing for net income is 22.7 % and 19.1 % severally, while the rate of growing for entire assets are 17.8 % and 12.6 % severally. Since the rate of growing for net income is larger than the growing of assets, it leads to higher ROA in twelvemonth 2007 and 2008. The assets acquired in twelvemonth 2005, 2006 started to bring forth income and therefore take to higher ROA in twelvemonth 2007 and 2008.
However, the falls in ROA in twelvemonth 2009 is caused by the autumn in net income and addition in entire assets. Mathematically, the lower the nominator and higher the denominator, the fraction will go lower. The ROA for 2009 is besides the lowest per centums in the 5 old ages which is 1.18 % . The falls of net income chiefly caused by the fiscal crisis happened after the Olympics 2008.
By comparing to Maybank, PBBank has a steady rate of alteration in ROA. Maybank has a hostile alteration in ROA. Based on the graph, PBBank are by and large better than Maybank in bring forthing net income, since most of the clip PBBank has higher ROA.
Besides, the benchmark for ROA in US Bankss was 1.0 % or above. It ranges from about 0.6 % to under 2.0 % . US are one of the taking coutry in banking industry. Thus the benchmark ratio can be used to measure the public presentation for Bankss in other states. In this instance Malaysia. Based on the information, ROA throughout the old ages is between 1.0 % and 1.5 % . This indicated that PBBank are executing good in using the assets to bring forth income. Based on this, PBBank are attractive for investors to put.
As decision, PBBank should maintain the current ROA or do it higher where possible. They should be more vigorous in bring forthing income.
Tax return on Equity
Tax return on equity ( ROE ) is a ratio that measures the ability to augment capital internally and pay a dividend. It besides measures how good the company utilizing stockholders ” investing to bring forth income. It is like other profitableness ratio ; that is the higher the better. ROE is computed as follows:
Tax return on Equity =
2005 2006 2007 2008 2009
PBBank 17.17 % 18.58 % 22.07 % 25.64 % 20.78 %
Maybank 14.85 % 16.04 % 16.34 % 14.94 % 2.91 %
Based on the informations and graph above, PBBank ” s ROE showed a steady addition from twelvemonth 2005 to 2008, lifting from 17.17 % in 2005 to 25.64 % in 2008. However, a bead in PBBank ” s ROE fell to 21.78 % .
The steady addition in ROE was caused by a healthy growing in net income from twelvemonth 2005 to 2008. The rate of lifting in net income is much faster than the entire equity. Numerically, the per centums of addition for net income in twelvemonth 2006 to 2009 are 16.17 % , 22.65 % and 19.12 % severally. While for entire equity, the rate of growing is 7.36 % , 3.27 % and 2.5 % severally. For the diminution of ROE in twelvemonth 2009, as explained in ROA, it was chiefly caused by the fiscal crisis.
By comparing to Maybank, ROE for PBBank is much ever higher than Maybank in these 5 old ages. Although Maybank one-year net income is similar to PBBank, their entire equity is higher which lead to lower ROE. This is because ROE is affected by the capitalisation beside the net income.
For US, the Bankss need to at least achieve a ROE as 15 % in order to last in the long tally. The scopes are about 15 % to 17 % . This scope besides regarded every bit necessary to supply a proper dividend to stockholders and maintain necessary capital strengths. From the informations above, the ROE for PBBank in 5 old ages are higher than 17 % . This figure can besides pull possible investors and pleased the shareholder as ROE for PBBank is much higher than the benchmark ROE.
In this instance, PBBank challenger ” s Maybank, should get down benchmarking to PBBank on how to accomplish high ROE.
Market Value Measures
This step is chiefly for the concern of investors and shareholders.
Price-earnings ( P/E ) ratio
The P/E ratio is the relationship between a company ‘s net incomes and its portion monetary value, and is calculated by spliting the current monetary value per portion by the net incomes per portion. It gives the stockholder a sense of what they are paying for a stock in relation to its gaining power. It is computed as follow:
Price-earnings ratio =
2005 2006 2007 2008 2009
PBBank 14.7 14.9 17.4 11.5 15.4
Maybank 16.23 15.9 17.4 8.5 57.2
Based on the informations and graph above, the P/E ratio for PBBank grow steadily from twelvemonth 2005 to 2007 which is from 14.7 % to 17.4 % . However, there is a sudden large bead in twelvemonth 2008 to 11.5 % which is besides the lowest in 5 old ages. After that, in twelvemonth 2009, the P/E ratio managed to turn back. From the computation, for illustration in 2009 the P/E ratio is 15.4 times, this implies that the investors are willing to purchase the portions that is 15.4 times more expensive than the earning that they might earned.
The chief ground for the bead in twelvemonth 2008 is caused the psychiatrist in market monetary value. The market monetary value at 2007 twelvemonth terminal is RM11.00 and autumn to RM8.85 at 2008 twelvemonth terminal. It falls by 19.5 % . Besides, the net incomes per portion in 2008 increased by 20.5 % from RM0.633 to RM0.769, it makes the P/E ratio even lower. Mathematically, lessening nominator which is market monetary value, accompany by a addition in denominator which is net incomes per portion, the fraction will falls.
The shrinking in PBBank market monetary value in twelvemonth 2008 is partially caused the recession that start in December 2007 in US. This recession has sparked to the whole universe. So, investors become more prudence and maintain their money for safety.
By comparing to Maybank, PBBank has a smooth growing and motion for P/E ratio in these 5 old ages. In order words, Maybank P/E ratio is more volatile. Most of the old ages, the P/E ratio for Maybank is somewhat higher than PBBank. In twelvemonth 2009, there is a large shoot of P/E ratio for Maybank from 8.5 to 57.2. The chief ground is caused by a large autumn in gaining per portion from RM0.533 to RM0.12. The autumn in net incomes per portion is affected by the loss on involvement of associate company and amortisation of good will.
The high P/E ratio implied that the company is a bluish french friess company and it is deserving to put in even though is more expensive. So, in order to pull investors, PBBank should execute better so that the portion of PBBank will hold a hot demand from investors.
Based on the fiscal dictionary, market-to-book ratio is a steps where comparing the market monetary value of a house ‘s common stock with the equity per portion. It is computed as follow:
Market-to-book ratio =
2005 2006 2007 2008 2009
PBBank 2.48 2.78 3.89 3.06 3.41
Maybank 2.45 2.56 2.25 1.24 1.88
Based on the informations and graph above, the tendencies of market-to-book ratio of PBBank are similar to their P/E ratio tendency. It grows from twelvemonth 2005 to 2007, contract in twelvemonth 2008 and rises back in twelvemonth 2009. The grounds for the rises and falls in market-to-book ratio for PBBank are every bit same as the P/E ratio.
However, by comparing to Maybank, PBBank have a more favorable place. The market-to-book ratio for PBBank is all the ways higher than Maybank.
Market-to-book ratio besides measures the capital additions for a house. It indicates how successful the house has created value for its stockholder. If the ratio is 3, it would means that the value created by the house is triple the book value sum. After the comparing with Maybank, the market-to-book value for PBBank seems to be higher. This can be a really good mark to PBBank. It gives assurance to their stockholders that PBBank has been successful in making the value for its stockholder. This will pleased the current stockholder and attract possible institutional investors that seek for capital additions. With more and more possible investing in the hereafter, PBBank will thrive in the hereafter.
As decision, the market value step ratios are mostly affected by the market monetary value. The market monetary value can non be controlled straight by PBBank. The sudden addition or lessening in market monetary value might misbehave the investor for the market value step ratios. This can be either the chance or menace in SWOT analysis for PBBank. They have to turn the market monetary value into the chance.