ROA MODEL FOR MCB BANK

Abstract

Analysing the financial ratios of any institution, determining and recommending the most appropriate performance yardstick is always a very arduous exercise, more so when the subject entity happens to be a leading commercial bank. In such cases, it becomes tricky business to extract the required information from the labyrinth of graphs, ratios, figures - not to talk of collection of data for a continuous performance period of several years! Accordingly, in carrying out our research, we first gathered the pertinent statistics of the leading commercial banks in the country. These comprised of their Annual Reports, Balance Sheets, etc. for a continuous period commencing from the year 1997 till the year 2011. Not all of it was available on their websites and we had to eventually obtain the same by personally visiting the State Bank’s Library as well as the Karachi Stock Exchange. Thereafter, we compared their respective market shares of business as well as their geographical spread coupled with their portfolio mix. That led us to select MBC Bank for the purpose of our research and to test our hypothesis. We then set about compiling and collating various data at a year-on-year basis and presented them in various graphs to determine the next logical step. This spurred us on to carry out trend analysis for the selected variables. This gave a realistic reflection of the said bank’s performance over the stated years. The trend analysis then enabled us to proceed further with our ultimate regression measures to determine their co-relationship and finally, their respective positioning with respect to ROA. The end-result was meant to enable us to draw conclusions that would either prove the relevance of our hypothesis or otherwise. As can be discerned from the following pages, our efforts and in-depth research proved our contention that ROA is an effective tool to determine the performance of a progressive commercial entity. We now submit the fruit of our labour for evaluation and future reference.