Introduction:
Faysal Bank Limited (the Bank) was incorporated in Pakistan
on October 3, 1994 as a public limited company under the provisions of the
Companies Ordinance, 1984. The Bank is mainly engaged in Corporate, Commercial
and Consumer banking activities. The Bank has a network of 269 branches
including 53 Islamic banking branches. The Registered Office of the Bank is
located at Faysal House, ST-02, Shahra-e-Faisal, Karachi. Ithmaar Bank B.S.C.,
a Bahrain based retail bank, is the parent company of the Bank, holding,
directly and indirectly through subsidiaries 66.78% of the shareholding of the
Bank.
Key data
The bank is unable to increase its presence significantly as
evidenced by its number of branches since 2011. As of 2013, the bank meet
minimum capital requirement prescribed by state bank of Pakistan. The deposit
growth of the bank is not substantial; in fact deposits declined this year.
Key economic data Faysal Bank
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|||||
2011
|
2012
|
2013
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Mar-14
|
Jun-14
|
|
capital
|
19,213,159
|
20,977,904
|
22,166,193
|
21,526,242
|
21,727,231
|
branches
|
257
|
265
|
269
|
269
|
269
|
employees
|
6,442
|
6,462
|
6,866
|
||
deposits
|
214,614,731
|
240,712,826
|
271,134,303
|
266,053,928
|
271,943,835
|
deposit growth %
|
9.881221024
|
12.16043972
|
12.63807895
|
||
Income profile:
The banks net spread income as %age of Deposits hovers
around 4.5% to 5% which is below the industry average. The bank barely covers
its admin expenses out of its core banking activity and therefore to some
extant banks income profile is sustainable.
Income Profile and sustainability
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2011
|
2012
|
2013
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Mar-14
|
Jun-14
|
|
Net Spread Income NSI
|
9,206,354
|
8,963,405
|
10,845,153
|
3,320,210
|
3,359,350
|
NSI as % of Deposits T-1
|
4.713587991
|
4.176509673
|
4.505432128
|
1.224562869
|
1.262657547
|
NSI /Admin expenses
|
0.851342978
|
0.829157131
|
0.978881991
|
1.058083855
|
0.982757173
|
EPS /LPS
|
1.227195261
|
1.363867455
|
1.773180481
|
0.41
|
0.29
|
Leverage:
The bank’s balance sheet is quite leveraged. The leverage is
stable over the period 2011-14. The bank may not increase its assets including
both loan portfolio and investment portfolio without increasing its equity
base. The bank is working hard to improve its loan portfolio. The %age of
non-performing loans has decreased from around 20% of loans in 2011 to 15% in
2014.
Leverage and Loan Portfolio Infection
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2011
|
2012
|
2013
|
Mar-14
|
Jun-14
|
|
Total Assets/equity
|
16.44
|
16.72
|
17.26
|
16.87
|
17.17
|
advances/equity
|
8.33
|
9.20
|
8.95
|
9.03
|
8.72
|
Non-Performing Loans/Advances T-1
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19.48
|
18.59
|
16.03
|
15.01
|
16.23
|
Dividend Distrbution:
The bank issued/distributed 12.5% bonus shares in the year
2012 and 2013.
Stock Valuation:
Stock Market Price Faysal Bank (Jan
2013-Oct 2014)
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2011
|
2012
|
2013
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Mar-14
|
Jun-14
|
|
Book Value
|
18.42
|
20.11
|
21.25
|
20.63
|
20.83
|
book value *
|
17.06
|
17.95
|
19.73
|
18.97
|
19.30
|
book value **
|
8.45
|
9.06
|
12.19
|
13.05
|
12.86
|
* without accounting for revaluation reserve
** without accounting for revaluation reserve and adjusted for Non
Performing Loans
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Jan 2013 –Oct 2014 (unadjusted)
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Book Value
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Max
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Min
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Range
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Average
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Stock Price
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17.66
|
19.2
|
8.21
|
10.99
|
12.41
|
Conclusion:
The bank’s balance sheet is highly leveraged and therefore
the bank needs to raise equity capital.
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