Posts Tagged ‘banking’

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How cost of capital determine the market performance of Commercial Banks in PAKISTAN

Sunday, April 24th, 2011

The empirically estimate the weighted average cost of capital for ten commercial banks in Pakistan that are listed in the Karachi Stock Exchange. The relationship between cost of capital and stock market returns of private commercial banks in Pakistan are examined. Therefore, our findings suggest that banks should try to lower their respective cost of capital in order to increase their market returns. The objective of this study is to find out the relationship between the Cost of capital and the market return.

The main objectives of our article work are:

  • The primary focus is likely to determine why the market performance of commercial is inconsistent.
  • To determine how the Cost of capital affects the market performance.

The article on the impact of cost of capital on market performance had been conducted on the commercial banks of Bangladesh. That article is going to be revised in the Pakistani context. As both countries are underdeveloped, so this article will help the Pakistani commercial banks to improve their market performance.

The scope of the project will only be limited to ten commercial banks of Pakistan. According to the annual reports of these banks for the calculation of cost of capital, banking system has to take part in an important role of the progress of the country. In developing countries like Pakistan for the growth of economy the banking system has to participate. A bank is like a heart and the capital is like blood supply to it in economic structure. If the blood is in circulation the organs will stay healthy and strong. Therefore, the whole economy will destroy if the capital is not supplied to any segment.

According to Cummins and Phillips costs of capital differ considerably for different types of economic activities. Using an inaccurate cost of capital can direct to the obliteration of firm worth through wrong project decision making and pricing decisions. The cost of debt capital is increased by the increased in leverage. For external financing debt typically is the merely accessible source. Cost of capital estimates diverge over time for a variety of reasons like changes in interest rates as well as changes in economic conditions may influence expected beta coefficients.

If an investment covers its cost of capital it is consider as doing well With no suitably imposed conservatism in accounting will leads to larger ambiguity, greater instability of expected prices, lower market values, and increased cost of capital.

Article Source: http://www.articlesbase.com/banking-articles/how-cost-of-capital-determine-the-market-performance-of-commercial-banks-in-pakistan-4648133.html

About the Author

Writing by professional author Farooq Khilji http://khilji-co.blogspot.com”>Burewala. He is a well reputed writer amongst the leading writers on Banking & Finance.

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Lloyds TSB Offshore Banking Benefits

Sunday, April 24th, 2011

So what is the biggest benefit of offshore banking? To start with, it is the opportunity of being a customer of your favorite bank even if the bank is located in other country. Aside even more obvious facts, one of the biggest benefits of offshore banking are tax savings. In fact, people often open offshore accounts exactly because of this very reason; no inheritance taxes, no capital gain taxes etc. This type of account is also ideal for businessmen that are dealing with different currencies. Not only businessmen benefit from offshore accounts; it is also ideal for frequent travellers that need to have access to their bank accounts more than often.

What you get with Lloyds TSB offshore banking is an easy international access to your offshore accounts from anywhere in the world, financial advantages such as fee free accounts and multiple currencies and finally, security and stability. Same as Lloyds TSB Internet Banking, offshore banking is available 24 hours a day. In fact, offshore banking is part of the Lloyds TSB Internet Banking. Lloyds TSB offshore banking interest rates are more than competitive and the features that bank provides to its customers are unparalleled. Other than 24 hours access, Lloyds offers phone banking as well as internet banking services, wide choice of currencies and secure fund transfers.

Lloyds TSB offers several types of offshore accounts. International Incentive saver account, fixed term deposit, limited accounts deposit, international bonus saver account and money market call account. After you have made your choice of which account you want to open, there is an application form to fill in. process doesn’t take long. This application form has 7 steps; you are given 15 minutes for each step to complete. If you failed to fill in the form within this time, you have to start registration from the beginning. You need to enter your email address and residential address where you have spent the last 3 years. Once you have completed registration process you will receive the confirmation email. After submitting the confirmation you will have to wait 2 days while application is being processed. You will be asked to present supporting documents, and once you submitted all the necessary documents, your account is ready to use. Lloyds will send you a confirmation letter within 5 days.

“Lloyds TSB International has recently won several awards showcasing our dedication to bringing you the best possible service and products”

Lloyds TSB Online Banking

Article Source: http://www.articlesbase.com/banking-articles/lloyds-tsb-offshore-banking-benefits-4651618.html

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Determinants of Profitability in Banking Sector of Pakistan

Saturday, April 23rd, 2011

In this article the determinants of profitability are analyzed in Pakistani Banking Sector. Return on Assets (ROA) is the most widely used ratio in this regard. During 2006 to 2010, the world banking sector showed a huge declining trend in profitability due to global economic recession with many renowned banks filing for liquidation and this affected the Pakistani banking scenario as well, and the nation’s banks both public and private showed a declining trend.

Our analysis is mainly concerned with calculating Leverage, Tax Rate and capital adequacy of the selected 10 banks and then comparing them with ROA. Along with it, the impact of variables will also be analyzed in order to see how much fluctuation that is made in banks profitability and what kind of role is played by these variables.

A bank is taken as a model of depository financial institution so that’s why banking sector is one of the main constituents of any economy. The changing trend of globalization has introduced changes in the situation of business and so Pakistani banking sector has also adopted these changes. But in last decades the banking sector all over the world has faced a great recession due to decline in the investment trend. Pakistani banking sector reforms were initiated early in 1990s under the legislative supervision of State Bank of Pakistan to transform the sector into a proficient and strong banking system to support the country’s economy.

As the main goal of bank’s senior management is to maximize profits via high returns on loans and securities, so these determinants which show the change in profitability of banking sector in Pakistan will help the policy makers to make policies according to the changes. Leverage tells us the way by which we can know from our sales that how much EBIT (earnings before interest and taxes) will be. Financial leverage is a gauge of how much a business depends on debt in order to operate or we can say that leverage is a financial effect which cannot be obtained cogently.

ROA (Return on Assets) is the percentage which shows the company’s assets profitability in generating revenue but it is considered as more volatile. Tax shield gives leverage to the bank and hence increasing the profitability. Tax policies consider the cost and benefits which alternatively increases the firm’s profitability. Also bank’s organizational form is associated with tax matters.

In view of the above analysis, it has been concluded that the effect of all the determinants selected are different on Return on Assets of each bank. Some banks are positively affected by the change and some are negatively affected.

Article Source: http://www.articlesbase.com/banking-articles/determinants-of-profitability-in-banking-sector-of-pakistan-4654687.html

About the Author

Writing by professional author Farooq Khilji http://khilji-co.blogspot.com”>Burewala. He is a well reputed writer amongst the leading writers on Banking and Finance.

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Posted in rssorange | No Comments »

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