Silk Bank Financial Analysis: 2011

Intro to Silk Bank:


 
On September 15, 2001, under the supervision of the State Bank of Pakistan (SBP), the institution then known as the Prudential Bank was acquired by the management and associates of the Saudi Pak Industrial and Agricultural Investment Company (Pvt) Ltd (SAPICO). On March 31, 2008, a Consortium comprising of IFC, Bank Muscat, Nomura International and Sinthos Capital- which was led by senior bankers Shaukat Tarin and Sadeq Sayeed - acquired an 86.55% stake in Saudi Pak Commercial Bank for around USD 213 million or USD 0.47 per share (PKR 29.3 equivalent per share). Saudi Pak was rebranded as Silkbank Limited on June 1, 2009.


 
Registered Office

Silk Bank House, I. I. Chundrigar Road Karachi, Pakistan
 
Website

www.silkbank.com.pk

Key Financial and Operating data: (year ended Dec 2010)

Total Assets:
72,603,408,000


Net Assets:
4,833,947,000



No. of Ordinary Shares:
2,309,173,000


No. of Branches: 85


No. of Staff: 2179


Profit or Loss per Share(Year Ended Dec 2010): Rs. 0.49


Profit or Loss per Share (Half Year Ended June 2011):Rs. 0.06


Market Price per Share (As of 16/9/2011): Rs. 2.06


Credit Rating As of June 2011


Short Term: A2


Long Term: A-

Income Analysis:

The bank incurred losses during 2006-2010. Instead of becoming income earner the bank is actually seems to be capital destroyer. Throughout this period, the bank was unable to derive enough spread income to meet its administrative expenditures. The bank has eroded its capital over this period. However, recently the amount of losses per share has declined from Rs.5 per share to less than Rs 1 per share.

Return and Efficiency:

The annual losses to net assets remained around 70% over the years 2007-2010. The bank was unable to derive a decent spread income over its deposits base which remained below 2% during the period 2006-2010. Overtime the cost of administration is rising.

Risk, Liquidity and Depth of Banking Operations:

The banks risk profile remained volatile over the years 2006-2010. Its leverage ratio reached a horrible level of more than 25 in year 2009. The liquidity of the bank's asset profile is average. The bank has assumed greater credit risk in its loan portfolio as compared to market risk in its investment portfolio. Over the years, the bank's ability to extend loan is reduced owing to reduced economic and regulatory capital.

Conclusion:

Overall financial performance of the bank is not entertaining. The bank needs to improve capital so that it can increase its banking operation i.e. accepting deposits and extending loans. The banks efficiency and return parameters are not satisfactory.