INTRODUCTION

Incorporated on September 28, 1991 the first Branch of Soneri Bank Limited formally opened doors for operations in Lahore on April 16, 1992 followed by Karachi Branch on May 09, 1992. The bank now operates with 52 branches spread all over Pakistan including the Northern Areas of the country where no other private bank has ventured so far. Expansion of branches is based on a policy of maintaining a balance between the urban and rural areas with a view to offering services even in the remote areas of Pakistan. Pleasant and sophisticated atmosphere has been provided in the branches which are all fully airconditioned and computerized. The essence of our business philosophy is to cater to the banking requirements of small & medium sized entrepreneurs, providing them qualitative & competitive services with emphasis on encouraging exports. Nearly forty percent of our credit portfolio is related to export financing and credit decisions are taken within 48 hours.

CORPORATE DATA
Chairman President & Chief Executive Officer Directors

Audit Committee Company Secretary & Legal Advisors Auditors

FUNCTIONS OF S B
Soneri Bank is a commercial bank, in modern time commercial banks play a very important role and their

functions are manifold. But main functions are as follows: Accepting various types of deposits Granting loans and advances Undertaking of agency services and also general utility functions, few of those are as under: Collecting cheques and bill of exchange for the customers. Collecting interest due, dividend, pensions and other sum due to customers. Transfer of money from place to place. Acting an executor, trustee or attorney for the customers.

Providing safe custody and facilities to keep jeweler, documents or securities.

Issuing of travelers cheques and letters of credit to give credit facilities to travel.

 Accepting bills of exchange on behalf of customers. Undertaking foreign exchange business. Furnishing trade information and tendering advice to customers.

FUNCTIONS OF INTER-BANK DEPARTMENTS

For swift functioning of various branches of the bank, each branch has been divided in different departments. These departments handle different jobs so that division of work is there for improvement of functions and also it is easy to control the situation. The general division in a branch is as follows: 1. Cash department

2. Deposit department 3. Advances & credit department 4. Remittance department 5. Foreign exchange department 6. Technology department (new addition in order to cop with the growing needs of day to day technology requirements). The workings of each of the above mentioned departments are discussed as follows in order to clarify the functions being performed by the individual departments.

1. CASH DEPARTMENT

The following books are maintained in the Cash Department: 1) Receiving Cashier Bank

2) Paying Cashier Book 3) Token Book 4) Scroll Book 5) Cash Balance Book When cash is received in counter, it is entered in the Scroll Book and Receiving Cashier Book. At the close of the day, these are balanced with each other. When the cheque or any negotiable instrument is presented at counter for payment, it is entered in the token book and token is issued to the customer. The token clerk and the Cashier make entries in the paying book and payment is made to payee. At the close of day, the Token Book and Paying Cashier Book are balanced. The consolidated figure of receipt and payment of cash is entered in the cash balance book and drawn closing balance of cash.
Opening Balance + Receipts - Payments = Closing Balance

This is a very important department because cash is the most liquid asset and mostly frauds are made in this department, therefore, extra care is taken in this department and nobody is allowed to enter or leave the area freely. Mostly, cash area is grilled and its door is under supervision of the head of that

department. All the books maintained department are checked by an officer.

in

this

2. DEPOSIT DEPARTMENT

Bank deals in money and they are merely mobilizing funds within the economy. They borrow from one person and lend to another, the difference between the rate of borrowing lending forms their spread or gross profit. Therefore we can rightly state that deposits are the blood of the bank which causes the body of the institution to get to work. These deposits are liability of the bank so from point of view of bank we can refer to them as liabilities. The total deposits of Soneri Bank are growing since its inauguration. The increase in deposits is also a cause of increase on total number of accounts; bank has progressed in both aspects.
2.1. TYPES OF DEPOSITS

Deposits can be segregated on two bases, one is the duration in which there funds are expected to be with

the bank and second is the cost of getting these funds. So divide deposits in two classes according to duration of deposits i.e. Time deposits/liabilities Demand deposits/liabilities And on the basis of the cost to acquire these funds, a deposit can be classified as any one of following four, High cost Medium cost Low cost No cost Banks have different kinds of deposit schemes in order to induce deposits. These schemes are a mixture of the above mentioned two types of deposits with an addition of different services & requirements such as minimum balance requirement, mode of transaction, basis for calculation of profit, deductions, additional benefits, eligibility for different groups. Soneri bank has a large variety of deposit schemes which have been discussed in the following pages.
CURRENT ACCOUNT

The current account may be opened by any member of the public, entities, corporate or otherwise. The request for opening an account must be made on Banks standard account opening request form with a suitable introduction acceptable to the bank. The account holder can withdraw and deposit money at his/her own discretion, these transactions have no limitations. being There are no limitations to the amount or withdrawal. There is no deposited

requirement of minimum balance maintenance. No profit is paid by the bank and no service charges are deducted by the bank on current deposits account. These types of deposits are also exempt from compulsory deduction of Zakat.
PLS SAVINGS ACCOUNT & PLS SONERI SAVINGS ACCOUNT

PLS saving bank account can only be opened after proper introduction of the account holder which is acceptable by the bank. This type of account is for those persons who want to make small savings. This type of account is opened with a minimum deposit of Rs.100/-. The account may be opened in the name of the individuals (in single or joint names) minors (to be

operated by the guardian) charitable institutions, provident fund and other funds of benevolent nature, local bodies, autonomous corporations, limited companies, firms, associations, educations institutions etc. Not more than one account maybe opened in any one name but this does not prevent a person for opening more than one account in his or her name for more than one minor child. All sums to the credit of an account should be accompanied by pay-in-slip showing the name and number of the account. The entry of the transaction will be verified by the signatures of an official of the bank, on the counterfoil of the pay-in-slip. Account holder can only withdraw sums from his account by means of cheques supplied to him by the Bank for that particular account. Post dated and stale cheques are not paid. Withdrawals from PLS account are allowed not oftener than 8 times in a calendar month and for a total amount not exceeding Rs. 15,000/-. For withdrawals of larger amounts, 7 days notice in writing is required to be given.

The bank would be within its rights to make investment of credit balances/deposits in the PLS savings account in any manner at its sole discretion and to make use of the funds to the best of its judgment in the banking business under the PLS system. Calculation of products on PLS savings bank accounts will be made for each calendar month on the lowest credit balance in an account between the close of business on the 6th day and the last day of the month. If however the balance is less than Rs. 1000/the product will be nil. There are some features of the Soneri PLS Account which are different from that of a PLS Savings Account. The Soneri PLS Account makes payments of return on a monthly basis where as the interest on the amount invested is calculated on a daily basis. Whereas the PLS account makes payment only twice a year that is in the month of June and end of December. Following are the interest rates offered by the two savings account.

Deposits Category PLS Savings Account PLS Soneri Savings Account Upto Rs. 1.0 million Over Rs. 1.0 million to 20.0 million Over Rs. 20.0 million to 100.0 million

(% per annum) 2.00

1.25 1.75 2.50

NOTICE DEPOSITS

Under this deposit scheme, a deposit is received from the depositor under the condition that he will intimate the bank before a certain period in case of withdrawals. There are two types of notice deposits they are 7 days and 30 days notice deposits. The profit is paid on these deposits but it is nearly equivalent to saving account rate. Following are the profits paid by Soneri Bank on Notice Deposits.
Notice Deposits 7 days 30 days % per annum 1.50 2.00

TERM DEPOSITS

This is a type of term deposit in which a receipt is issued for varying tenors ranging from 1 month to 5 years or more. These are in the form of receipts and profit on these receipts is paid biannually. These receipts are en-cashable after expiry of the period for which they were issued. Different profit rates are applied to different type of term deposits.

Term Deposits 1 month 3 months 6 months 1 year 2 years 3 years 4 years 5 years

% per annum 2.00 2.25 2.50 3.00 3.25 3.50 3.75 4.00

3. ADVANCES DEPARTMENT

Advances are the most important source of earning for the banks. Soneri Bank is also giving full attention towards this aspect and it is also obvious from the growing portfolio of advances and from very low delinquency rate. The credit portfolio of this institution is in a very much better shape than other financial institutions of Pakistan and the credit goes to the management and the staff who are concerned about the quantity and quality as well.
4. TECHNOLOGY DEPARTMENT

The foreign banks have a competitive edge over all local banks in their technological advancements are automated systems. Local banks have also realized the gravity of this situation and are striving to add computerized systems to their branches. Soneri Bank is ahead of all other local banks in this field and now it is in a position to even compete with foreign banks. Almost all the branches of big cities are computerized; therefore, the need for a technology department at each branch is growing. Now a day, a computer division is working in each city to provide service to all the branches of that area.

PROCEDURE FOR OPENING A NEW ACCOUNT

The process of opening a new account is managed by the deposit department. It is also responsible for the payment of profit and accounting of all types of deposit schemes. Account opening is an agreement in which customer offers his funds and bank accepts these funds, therefore the nature of relation between a banker and customer the parties. A person, who wants to open any kind of account, has to fill in a printed form which is provided by the bank, free of cost. Separate account opening forms are used for different types of accounts. is contractual and all the conditions applicable to this contract act are applicable to both

Bank usually requires that new depositor must be introduced by some one. An introducer can be any person known to the bank but preferably it should be a customer of the bank. However, the manager can open the account by his own introduction. If the manager is satisfied, he will obtain the full signature of the customer on the form and specimen signature card, makes the first deposit, and issues the cheque book. The following are given to the customers: Pay-in-slip is the proof of deposit. For every payment which is to be deposited in the bank, the pay-in-slip is to be filled up. The object of this book is to provide the customer with the bank's acknowledgment for receipt of money to be credited this account. Cheque Book contains a number of cheques. It enables a customer to make withdrawal from this account or make payment to various parties by issue of cheque. Pass Book is a copy of the customer's accounts as appears in the bills of the bank. Balance is recorded in this book by the Clerk.

Note: In case of partnership account partnership deed should be attached. In case of companies memorandum and article of association, certificate of incorporation, certificates for commencement of business, list of directors and board resolution for opening of account is also obtained from the customer. Accounts of Trusts, Executors & Administrators can also be opened but with the prior approval of the Head Office.

PROFIT PAYMENT AND CALCULATION

Profit payment and calculation is done in accordance with the rules of each type of deposit scheme are calculated separately and added till the end of 6 month period. Then the sum total of these products is multiplied with the respective profit rates which are

issued by the Head Office at the end of each half yearly closing. The profit provisions for each type of deposits are also calculated on monthly basis by the same department in order to calculate the net profit or loss position of the branch. Accounting entries are also made in the respective books of account by this department. However, in small and medium size branches, the accountant performs the book keeping duties for all kinds of ledgers.

PRODUCTS AND SERVICES

Soneri Bank does not have a wide variety of arrays. The products and services offered by the bank are same for consumer clients (households, individuals) and corporate clients. The services offered by the bank are discussed in the following pages.
1. Soneri Ghar Finance

Soneri Ghar finance service is offered for those consumers who desire to make their own home or make repairs/renovation to already owned houses. Consumers in desire of purchase of pre-constructed residential property are allowed a maximum amount of Rs. 5 million or 80% of the forced sale value of the property which ever is lower. The forced sale value of the house is determined by the evaluators of the bank. The repayment of this financed amount can be done within a period of 1 to 20 years in equal monthly installments which is inclusive of markup (banks profit). Financing for repairs/renovations is allowed to a maximum amount of Rs 2 million of 55% of the forced sale value of the property whichever is lower. Repayment of the loan is within 1 to 7 years in equal monthly installments inclusive of markup (banks profit). Markup rate charged by the bank are 1.50% above prevailing State Bank of Pakistan discount rate minimum 9.00 % per annum.

Like every other bank there are eligibility criteria which a consumer/corporate client have to fulfill in order to prevail the Soneri Ghar Finance. Following are the different criterias
i)

Salaried persons with continuous permanent employment for the past 5 years with reputable legal entities with maximum age of 60 years at the time of maturity of the finance being applied.

ii)

Self employed persons e.g. doctors, engineers, architects etc registered & with professional with organizations business persons

maximum age of 65 years at the time of maturity of the finance being applied for. iii) Monthly repayment installment must not be more than 40% take home salary/declared income.
iv)

Borrowers equity for purchase of house should be a minimum of 20% of the forced sale value of the property.

v)

For security the bank mortgages the property and mortgage protection insurance policy.

2.Soneri Car Finance Soneri Car Finance service is offered for both consumer and corporate clients. The clients have to choose the make, model and the color of the vehicle the customer wishes to purchase. Eligible customers who are salaried individuals need to provide an employment certificate of joining his/her respective job. Most recently salary slip/salary certificate. The monthly salary of the individual should be twice the amount of the monthly installment charged by the bank. The bank statement of last six months has to be provided by the customer.

Self employed or business persons need to provide a bank statement for the last six months. A copy of the last year filed tax returns and wealth statement. Professional body registration copy. Maximum amount of 1 million is financed by the bank which is only for locally manufactured cars. If a customer wants to avail financing facilities for a 2nd car then a approval for that is required by the head office. The approval is granted depending upon the previous relation of the client with bank. Bank requires a 10% a down payment of the total amount being financed. The balance amount is reimbursed by the bank. This amount is paid back by the client in equal monthly installments inclusive of a 9% per annum markup. The tenor of financing of an automobile is for 5 years.
3. Soneri Personal Finance

Soneri Personal Finance service is offered to customers to meet their instant demand of cash. Personal finance service is offered for medical treatment, education, advance rent, traveling, house renovation etc.

Eligible customers who are salaried individuals need to provide an employment certificate of joining his/her respective job. Most recently salary slip/salary certificate. The bank statement of last six months has to be provided by the customer. Self employed or business persons need to provide a bank statement for the last six months. A copy of the last year filed tax returns and wealth statement. Professional body registration copy. Personal finance requires that the client has his/her personal income salary account with Soneri Bank. The personal finance amount is loaned out on a ratio basis. The total amount of the loaned amount is 5 times the income of the personal to a maximum amount of Rs. 500,000/- for e.g. if an individual is earning Rs. 10,000/- per month he would be loaned out an amount upto Rs. 50,000/- but not more than that. The bank charges a 13% per annum markup on the financed amount.

4. Soneri ATM Card

Soneri bank through its Soneri Banking Card offers convenient and 24 hours access to ATMs across the country. Throughout the country the Soneri ATM can be used to withdraw cash from any Soneris own ATM and other ATMs displaying either the 1LINK or M-Net symbols. Easy access to a clients account is provided with the Soneri Banking Card and secured ATM pin. The Soneri ATM card is delivered to customer at their doorstep. The 4 digit Personal Identification Number (PIN) is assigned from the clients perspective branch. Facilities provided by all ATMs of 1-Link and M-Net are:
1.

Cash Withdrawal

2. Balance Enquiry Facilities provided by Soneri ATMs: 1. Fast Cash

2. Mini Statement 3. Request for Cheque Book

4.

Request for Statement of Account

5. PIN Change The amount of cash which can be taken out from an ATM during one working day is Rs 20,000/-. The amount of ATM cash withdrawal is electronically debited to the respective account at the clients bank branch.

5. Soneri Debit Card

The Soneri debit card provides a convenient and safer way for its holders to pay for shopping at stores, dining out, filling of vehicle at petrol pumps, pay hospital bills and many more directly right from your account. The Soneri debit card works on ORIX network through which the holder can make every day purchases worth Rs. 300,000/- at over 2000

locations across Pakistan. There are no hassles to remember the payment due date and of course no late payment surcharge and markup. When payment is done through the debit card, the amount is electronically debited to your bank account. These transactions appear on the bank statement for reconciliation of account. The Soneri ATM card can be use as a Soneri Debit Card. So the account holder does not have to carry to cards rather this one card serves two purposes for the convenience of the customers.

6. Soneri Tele Banking

Soneri Tele banking saves the customer the hassle of coming down to the banks branch. This saves the customer valuable time and provides convenience at the same time. The tele banking can be accessed with the help of the card number and T-pin to access your account 24 hours a day, 7 days a week.

The customers can access the following facilities through the Tele Banking: 1. Balance Enquiry 2. Todays Transaction by Voice 3. Instant Temporary Statement of Account through Fax 4. Request for Computer generated Statement of Account 5. Request for Cheque Book 6. Stop Mark of Lost Soneri Banking Card 7. Change of T-Pin 8. Latest Foreign Exchange Rates 9. Product Information No additional costs are charged to the customer for providing these facilities.
7. Soneri Rupees Travelers Cheque

Travelers cheque is the preferred choice of every customer to carry

1. Secured way to Cash. 2. Printed in the United Kingdom by renowned security features. 3. Beautifully designed and available in convenient denomination of Rs. 5,000. 4. Sold and encashable free of any service charge ( Govt. Taxes / Duties applicable) through all branches of Soneri Bank Limited. Also payable through Local Clearing System. 5. Minimum transaction time & speed Issuance & Encashment through State of Art Technology. 6. Prompt processing of refund of claim in case of Loss / Theft on reporting to the nearest branch of Soneri Bank Limited. 7. No validity - valid until encashed. printers with added security

EVALUATION OF BANKS PERFORMANCE

BALANCE SHEET AS AT 31 DECEMBER 2006
2006 ASSETS CASH AND BALANCES WITH TREASURY BANKS BALANCES WITH OTHER BANKS LENDINGS TO FINANCIAL AND OTHER INSTITUTIONS INVESTMENTS ADVANCES OTHER ASSETS OPERATING AND FIXED ASSETS DEFERRED TAX ASSETS
(RUPEES IN '000)

2005 2,821,394 1,057,546 2,705,000 11,912,517 17,348,525 477,187 643,960 -----36,966,129

2004 5,048,395 3,564,030 4,417,378 12,333,893 50,542,166 1,473,952 1,158,407 78,538,221

3,627,569 2,793,190 3,585,421 13,982,828 24,375,905 671,372 815,614 -----49,851,899

LIABILITIES BILLS PAYABLE BORROWINGS FROM FINANCIAL INSTITUTIONS DEPOSITS AND OTHER ACCOUNTS SUB-ORDINATED LOANS LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE OTHER LIABILITIES DEFERRED TAX LIABILITIES NET ASSETS REPRESENTED BY SHARE CAPITAL RESERVES UN-APPROPRIATED PROFIT SURPLUS ON REVALUATION OF ASSETS

893,762 7,957,364 37,383,756 ----------530,952 42,757 46,808,591 3,043,308

808,858 4,998,149 27,868,418 -----3,301 582,112 101,445 34,362,283 2,603,846

905,637 8,478,048 56,460,329 18,434 2,294,899 166,442 68,323,789 10,214,432

1,271,919 1,592,071 14,771 2,878,761 164,547 3,043,308

1,017,535 1,210,203 2,643 2,230,381 373,465 2,603,846

2,912,635 2,259,101 1,079,492 6,251,228 3,963,204 10,214,432

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2006
2006 2005 (RUPEES IN '000) MARK-UP/RETURN/INTEREST EARNED MARK-UP/RETURN/INTEREST EXPESED NET MARK-UP/RETURN/INTEREST INCOME REVERSAL/(PROVISION) AGAINST NON-PERFORMING LOANS AND ADVANCES PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS BAD DEBTS WRITTEN-OFF DIRECTLY NET MARK-UP / RETURN / INTEREST INCOME AFTER PROVISIONS NON MARK-UP/ INTEREST INCOME 397,06 FEE, COMMISSION AND BROKERAGE INCOME DIVIDEND INCOME INCOME FROM DEALING IN FOREIGN CURRENCIES OTHER INCOME TOTAL NON MARK-UP / INTEREST INCOME NON MARK-UP / INTEREST EXPENSES ADMINISTRATIVE EXPENSES PROVISION AGAINST OTHER ASSETS OTHER CHARGES TOTAL NON MARK-UP / INTEREST EXPENSES EXTRAORDINARY / UNUSUAL ITEMS PROFIT BEFORE TAXATION TAXATION CURRENT PRIOR YEARS DEFERRED PROFIT AFTER TAXATION UN-APPROPRIATED PROFIT BROUGHT FORWARD (642,231) 3 (1,343) (643,571) 1,046,566 ----1,046,566 (365,000) 116,959 (150,145) (398,186) 648,380 2,643 (499,924) (87) (1,143) (501,154) 813,512 ----813,512 (396,000) (4,854) 26,054 (374,800) 438,712 6,057 177,247 17,405 121,834 163,216 479,702 1,690,137 153,964 2,922 121,560 184,734 463,180 1,314,66 6 4 697,49 9 162,44 4 572,03 5 (2,60 7) 5,050 1,831,48 5 3,343,29 2 1,134,67 2 1,150 1,135,82 2 2,207,47 0 2,207,47 0 1,947,657 (752,276) 1,195,38 1 15,054 --------15,054 1,210,43 5 1,713,97 1 (789,645) 924,326 (72,840) --------(72,840) 851,486 2004 2,753,45 1 1,118,11 8 1,635,33 3 51,609 1,118 123,52 6 1,511,80 7

PROFIT AVAILABLE FOR APPROPRIATION APPROPRIATIONS TRANSFER TO: -

651,023

444,769

517,58 STATUTORY RESERVE PROPOSED ISSUE OF BONUS SHARES @ 30% (2005: 25%) GENERAL RESERVE (129,676) (381,576) (125,000) (636,252) UN-APPROPRIATED PROFIT CARRIED FORWARD BASIC / DILUTED EARNINGS PER SHARE (RUPEES) 1,753,47 0 1,753,47 0 (87,742) (254,384) (100,000) (442,126) 8 (420,39 4) 356,80 6 454,00 0

14,771 5.10

2,643 3.45

RATIO ANALYSIS OF FAYSAL BANK

1. Return on Assets
2006 (Rupees in '000) Net Income / Total Assets 651,023 / 49,851,899 1.3 % 2004 (Rupees in 000) Net Income / Total Assets 1,753,470 / 2.23 % 2005 (Rupees in '000) 444,769 1.2 / 36,966,129 %

78,538,221

Analysis: Return on asset measures a banks managerial

efficiency; showing how efficient the bank has been in converting the banks assets into earnings. As compared to year 2005 there has been a substantial increase in ROA by 0.1% which indicates that the banks management is working efficiently and is capable of performing well in the future.
2. Return on Equity
2006 (Rupees in '000) Net Income / Owners' Equity 651,023 / 3,043,308 21.4 % 2004 (Rupees in '000) Net Income / Owners' Equity 1,753,470 / 10,214,423 2005 (Rupees in '000) 444,769 17.1 / 2,603,846 %

17.167

Analysis: Return on equity measures the rate of return flowing

to the banks shareholders. An increase in this ratio would provide incentives for shareholders to invest more funds in the bank. There has been an increase from 17.1% to 21.4% in the ROE which clearly indicates that there has been an increase in the returns shared by the stockholders.
3. Net Interest Margin
2006 (Rupees in '000) 2005 (Rupees in '000) (Interest income from loans and securities investments-Interest expense on deposits and on other debt issued) / Total Assets 3,638,791 / 49,851,899 3,026,484 / 36,966,129 7.3 % 8.2 % 2004 (Rupees in '000) (Interest income from loans and securities investments-Interest expense on deposits and on other debt issued) / Total Assets 1,635,333 / 78,538,221 2.08 %

Analysis: This ratio is an efficiency and profitability ratio. It

determines how well the management and staff have been able to keep growth of revenues ahead of rising costs. The ratio particularly measures how large a spread between interest revenues and interest costs management has been able to achieve by close control over the banks earning assets and the pursuit of the cheapest source of funding. As compared to the proceeding year the net interest margin has declined from 8.2% to 7.3%. This is basically due to the large number of increase in the total assets as compared to the increase in the spread of interest revenues and interest incomes which implies less profitability for the bank in the year 2006 as compared to the year 2005.

4. Net Non Interest Margin

2006 (Rupees in '000) 2005 (Rupees in '000) (Non-Interest revenues-Non-Interest expenses) / Total Assets (163,869) / 49,851,8 (37,974) / 36,996,1

99 (0.33) (0.10) 2004 (Rupees in '000) (Non-Interest revenues-Non-Interest expenses) / Total Assets 78,538,22 695,663 / 1 0.886 %

29

Analysis: For most banks the net non interest margin is

negative. The same is the case with Soneri Bank. The non interest revenues are less than the expenses. There has been an increase in this margin as the banks non interest expenses have increased in comparison to its non interest revenues.

5. Net Bank Operating Margin

2006 (Rupees in '000) 2005 (Rupees in '000) (Total Operating revenues -Total operating Expenses / Total Assets 648,380 / 49,851,899 438,712 / 36,996,129 1.30 % 1.19 % 2004 (Rupees in '000) 2.97 %

Analysis: Net Bank operating margin indicates that whether

the bank has been able to generate more revenues than expenses relative to total assets.Net bank operating margin has increased from 2005 to 2006. This shows that total assets have been used successfully to generate more revenues than expenses.
6. Net Earning Per Share of Stock
2006 (Rupees in '000) 2005 (Rupees in '000) (Net Income after Taxes / Common Equity Shares Outstanding 651,023X1000 / 127,191,776 444,769X1000 / 101,753,437 651023000 / 127,191,776 444,769,000 / 101,753,437 5.12 4.37 2004 (Rupees in '000) (Net Income after Taxes / Common Equity Shares Outstanding 1,753,470 / 368,448,000 4.76Rs.

Analysis: Earning per share is the allocation of companys

profit to each outstanding share. An increase in the earning per share is a favorable sign for the investors. Soneris EPS

has increase by 0.75 over the last one year which shows that the profits of the bank have increased.

7. Earning Spread
2006 (Rupees in '000) 2005 (Rupees in '000) (Total Interest Income / Total Earning Assets) (Total Interest Expense / Total Interest Bearing bank liabilities) 2,427,359/815,614 -643,571/7,957,364 2,177,151/643,960 - 501,154/4,998,149 2.9761 - 0.0808 3.3808 - 0.2508 2.895 % 3.130 %

Analysis: The spread measure the earning efficiency with

which a bank is managed. The spread measures the effectiveness of the banks intermediation function in borrowing and lending money and also the intensity of competition in the banks market area. As competition increases in the banks market area the difference between the average assets yields and average liability cost tends to decline. The spread for Soneri has fallen in 2006 to 2.895 from 3.130 from the proceeding year which implies that the bank has to find other ways to make up for the eroding earnings spread.
Breakdown of Equity Returns 8. Banks Net Profit Margin
2006 (Rupees in '000) 2005 (Rupees in '000)

Net Income after taxes/Total Operating Revenues 651,023 / 479,702 444,769 1.3571 % 0.9603 2004 (Rupees in '000) Net Income after taxes/Total Operating Revenues 1,753,470 / 4,584,936 38.24 %

/ %

463,180

Analysis: NPM is increasing which means that the costs and

expenses of the bank have been controlled efficiently and it is very good for the bank.

9. The Banks Degree of Asset Utilization

2006 (Rupees in '000) Total Operating Revenues/Total Assets 479,702 / 49,851,899 0.0096 % 2004 (Rupees in '000) Total Operating Revenues/Total Assets 4,584,936 / 78,538,221 0.058 2005 (Rupees in '000) 463,180 0.0125 / % 36,966,129

Analysis: Asset Utilization Ratio has decreased in 2006 which

means that total operating revenues have decreased as compared to total assets. It also means that the portfolio management policies have not been that successful as in previous year and the yield on bank's assets has declined.
10. The Banks Equity Multiplier
2006 (Rupees in '000) Total Assets/Total Equity 49,851,899 / 2,878,761 2005 (Rupees in '000) 36,966,129 / 2,230,381

17.3171 % 2004 (Rupees in '000) Total Assets/Total Equity 78,538,221 / 2,878,761 17.317 %

16.5739

Analysis: The multiplier is a direct measure of the banks

degree of financial leverage; how many Rupees of assets must be supported by each Rupee of equity capital and how much of the banks resources must rest on debt. The Equity Multiplier has increased in the 2006 which indicates that the bank is exposed to higher failure risk but increase in multiplier also indicates that potential for high returns for stockholders.
11. Return on Equity; ROE = NPM x AU x EM
2006 (Rupees in '000) 1.3752 x 0.0096 x 17.3171 0.228 2004 (Rupees in '000) 38.24 x 0.058 x 12.56 28.05 2005 (Rupees in '000) 0.9603 x 0.0125 x 16.5739 0.198

Analysis: The return on equity has increased overall which is a

positive sign for the bank. The asset utilization ratio has decrease whereas the equity multiplier and net profit margin has increased. As a whole the returns on assets have increased as the performance of the bank has been positive.

Breakdown Analysis of Banks Return on Assets 12. Net Interest Margin

2006 (Rupees in '000) 2005 (Rupees in '000) (Interest Income-Interest Expense)/Total Assets 1,210,435 - 643,571 566,864 0.0114 / 49,851,899 851,486 - 501,154 / 36,966,129 350,332 0.0095 / 36,966,129 %

/ 49,851,899 %

Analysis: Net interest margin has increase from the year 2005

to 2006. This is due to the fact that the interest earnings with respect to the total assets have increased in a larger

amount. This shows that the banks interest earnings have increased due to better management of resources.
13. Non Interest Margin
2006 (Rupees in '000) 2005 (Rupees in '000) (NonInterest Income-NonInterest Expense) / Total Assets 1,690,137 - 643,571 / 49,851,899 1,314,666 - 501,154 / 36,966,129 1,046,566 / 49,851,899 813,512 / 36,966,129 0.0210% 0.0220%

Analysis: The amount of non-interest revenues stripped

from deposit service charges and other service fees the bank has been able to earn has increased to a low extent relative to the amount of non-interest costs incurred which may include costs on repair, maintenance, wages salaries, and bank facilities etc. The costs have declined by a minor percentage from 2.2% to 2.1% which indicates that the bank can still manage to increase its non interest earnings by efficient management of resources and cutting down on operating costs.
17. Special Transactions Affecting the Net Income
2006 (Rupees in '000) 2005 (Rupees in '000) Special income and expense items / Total Assets 36,966,12 3,043,308 16.38 / 49,851,899 % 2,603,846 14.20 / 9 %

The total amount of special income and expense items has increased by 2.18%. This shows that special transactions have increased as compared to the increase in the amount of total assets.
Analysis:

18. Return on Assets; ROA = NIM + Non IM - Sp. Tr.

2006 (Rupees in '000) 16.41 % 2005 (Rupees in '000) 14.23%

Analysis: The ROA of Soneri Bank has increase from 14.23% to

16.41% which shows that the bank has been done a good job in the last year as there is an increase in the returns on the total assets.

18. Credit Risk

the probability that some of banks assets, especially its loans, will decline in value and perhaps become worthless is known as credit risk.
a) Net Charge Offs of Loans to Total loans
2006 (Rupees in '000) 2005 (Rupees in '000) = Net Charge offs of loans / Total Loans * 100 67 / 74,468,644 0 / 0.0008% 0% 2004 (Rupees in '000) 2003 (Rupees in '000) 1,118 / 50,542,166 0.002 %

62,323,508

Charge offs are the loans that b) Annual provision for loan losses to total loans
2006 (Rupees in '000) 2005 (Rupees in '000) = total annual provision / Total Loans * 100 0.0008% 0% 2004 (Rupees in '000) 2003 (Rupees in '000) 1,118 / 50,542,166 0.002 %

19. Liquidity Risk

2006 (Rupees in '000)

2005 (Rupees in '000)

Cash and due from deposit balance held at other bank / Total Assets 10,006,180 / 49,851,899 6,583,940 / 36,966,129 0.2007 % 0.1781 %

Analysis: Liquidity risk is increasing in our case so it is not

good for the bank. This shows that bank was doing well in the field of cash in the year 2005 as compared to 2006.
20. Operating Efficiency Ratio
2006 (Rupees in '000) 2005 (Rupees in '000)

Total operating expense / Total operating Revenue 643,571 / 479,702 501,154 1.3416 % 1.0820

/ %

463,180

Analysis: It

is a ratio between operating expenses and revenues which has increase from 1.08 to 1.34 from 2005 to 2006 showing that though the operating revenues have increased but there is a larger increase in operating expenses meaning that company is not efficiently managing its earnings and returns.

TREND ANALYSIS
Total numbers of assets have grown by 36.34% from the year 2003 to 2006. The growth rate has declined to 32.03% in the year 2004 where as in the fiscal year 2006 the growth rate again stepped up to 34.85% but was still lower than the growth rate of year 2003.
Total Assets:

Total liabilities of Soneri bank have grown in the year 2004 by 35.39% as compared to the year 2003. In the year 2005 the liabilities increased by
Total Liabilities:

33.68% which was lower as compared to the preceding year. A 36.22% increase in liabilities was clearly seen in the year 2006 as the total number of liabilities increased to a total of 46,808,591,000. The year 2004 showed an increase of 48% in the shareholders equity where as the growth in 2005 was at a declining rate which was only 13.55% and slight increase from 2005 to 2006 could be seen with rate of growth totaling to 16.87%. So overall the shareholders equity had a huge jump in the fiscal year 2003-2006 where after which the shareholders equity was increasing a declining rate of growth.
Shareholders Equity: Net Income:

The net income of Soneri bank has been rising as visible by the histogram below. The banks net income went up by 29.57% in the year 2003 as compared to the preceding year. In year 2005 the banks net income went up to a wholesome Rs. 438,712,000 which was an increase of 25.21% which was less than the growth rate of 2005. In the year 2006 there was a huge increase of 47.79% which shows that the banks performance was improving yearly but in the year 2006 there was an exceptional leap in the net income.

RECOMMENDATIONS
Concentrate on financing of all types of sectors:

Soneri bank is lacking in targeting all types of sectors, they should finance everything from a house to its furniture, only than it would produce true value for its

money, and would be able to meet its costs. They should also look in to small sectors and the low income group as they are the ones who would readily agree to get a television or sofa set financed.
Car financing:

Although Soneri bank has a department concerned with car financing, but not enough effort is put forward by the bank in this department. As car financing rates have declined in the preceding years the bank should focus on capturing this market. This could help the bank for achieving better prospects in the future.

Concentrate on Small Businesses:

As business scenario in Pakistan has improved in the last couple of years the bank should focus its marketing activities on capturing the small businesses for lending their financing services.
Promote Credit Cards:

Currently the bank is not offering any credit cards to its customers. The management of the bank should look forward to launching a credit card product. This would help increase the number of products as well as the profitability of the bank.
Increase the number of branches:

The competition in the banking sector has increased over the last couple of years. In order to compete with

growing competition the bank should increase the number of branches nationally and regionally.