Investment Banks/Investment Co: ESCORTS INVESTMENT BANK LIMITED - Year Ended 30-06-2004
The fortunes of the Bank are riding high particularly since the new Chief Executive has joined the enterprise. The movement towards several direction but thrust is towards capital market operations. It has ensured its standing in the stock market of Pakistan by purchasing membership cards of both Karachi and Lahore Stock Exchanges and the cost is a large amount of Rs 42.42 million which is a solid investment to appreciate with the passage of time.
The financial and operational performance have substantially improved which is evident from the performance statistics appended with the column. The other evidence of high performance comes from the JCR-VIS updated rating of the bank which is long term rating of "A".
While the short term rating has been maintained at A-2. While further diversification in revenue streams is the key note of the strategic decision of its leadership, it is also moving towards building quality human resource and thorough review of business processes.
Escorts Investment Bank Limited is a public limited company incorporated in Pakistan on May 15, 1995. It started commercial operation on October 16, 1996 carryout investment, financial services from its head office situated at Escort House, Davis Road Lahore.
It has branch offices at Bahria Complex 1 Karachi and Rahmat Centre Blue Area, Islamabad. The bank's thrust towards capital markets has led it to establish fully equipped investment services (Brokerage) centres at Lahore, Karachi and Islamabad.
The bank is listed on the Karachi and Lahore Stock Exchanges. The market value of Escorts Investment Bank share has moved above the par value during the year under review after a long time - 1999. During the last one year the price of the share improved from Rs 10.12 to Rs 17.20.
At present the share is trading at Rs 13.75 per share carrying 37.5% premium over the par value of Rs 10.
According to the shareholders statistics on 30th June 2004, the single largest stockholder was ESSEM Power (Pvt) Ltd who owned 39.01% of the bank's stock. After that directors, their sponsors etc owned 25.81% of the stock. Its 146 investors from General Public owned 21.66% of its stock.
Its dividend pay out trend has consistently moved upward since the last three years. The bank announced cash dividend at 15% like the preceding year where as there was 6% pay out in 2002.
Total asset of the bank were in the sum of Rs 2,742.12 million (FY 2002-03: Rs 2,026.83 million) showing Rs 715.29 million increase which is an impressive growth in one year.
On the asset side the largest component of the total assets was investment portfolio in the sum of Rs 1.130 billion (FY 2002-03: Rs 1.104 billion) which constituted 41.2% of total assets.
While looking at the revenue generated by this account we can see that this is the largest component of gross revenue also. Return on investments amounted to Rs 81.30 million and profit on sale of investments at Rs 46.87 million and if the two amounts are clubbed together, the aggregate sum works out to Rs 128.17 million and this amount is 53.5% of gross revenue of Rs 239.43 million.
The present scenario of rising stock market index provides opportunity for profitable operation in the capital market with least cost compared to mark-up/interest-bearing financing portfolios.
Hence the company has made a long term strategy to entrench itself in this direction by buying membership cards of stock exchanges.
But how far the stock market index will go up it is a matter of debate and at this stage all decisions should be debated to avoid bubble burst and consequential set back to the enterprise.
The other most remunerative portfolios is morabaha financing in the sum of Rs 481.40 million (2002-03: Rs 375.65 million) comprising 17.5% of total assets. The increase over last year is 28.1% and this also a commendable growth rate. The profit from morabaha financing amounted to Rs 43.42 million (FY 2002-03: Rs 41.38 million) and constituted 18.13% of gross revenue.
What is more glaring is the non-fund based income from fees and commission at Rs 17.04 million which is 8.2 times of the preceding year's amount of Rs 2.08 million.
The bank's profit after taxation at Rs 73.62 million registered 27.9% increase over the preceding year's.
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Performance Statistics (Million Rupees)
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Balance sheet -As At-
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June 30
2004 2003
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Share Capital-Paid-up: 300.00 200.00
Reserves & Profit: 69.82 41.20
Shareholders Equity: 369.82 241.20
Surplus on Reval of Securities: 3.46 92.73
Liabilities:
Borrowing from
Financial Institutions: 1,060.03 777.90
Certificate of Investments: 1,129.76 692.67
Subordinated Loans: - 84.03
Liabilities Against Assets
Subject to Finance Lease: 1.03 3.24
Creditors, Accrued
& Other Liabilities: 89.22 18.83
Provisions For Taxation: 38.76 36.26
Dividends: 45.06 30.04
Deferred Tax Liability: 4.98 49.93
Assets
Cash & Bank Balances: 60.51 68.45
Placements: 769.09 323.09
Investments: 1,130.82 1,104.77
Morabaha Financing: 481.40 375.65
Other Assets: 234.66 134.49
Membership Cards: 42.42 7.17
Fixed Assets: 23.22 13.21
Total Assets: 2,742.12 2,026.83
Income, Profit & Pay Out
Revenues
Profit From Morabaha Financing: 43.42 41.38
Profit From Placements: 14.30 40.34
Return on Investments: 81.30 69.98
Gain on Repurchase Transactions: 34.30 13.62
Profit on Sale of Investments; 46.87 59.17
Profit on Bank Deposits: 1.68 6.98
Fees & Commission: 17.04 2.08
Other Income: 0.52 0.34
Total Income: 239.43 233.89
Expenditure
Cost/Return on Deposits
Borrowings Etc: (85.14) (115.31)
Administrative & Other
Operating Expenses: (71.21) (44.51)
Financial Charges: (0.46) (0.70)
Provisions: (6.16) (1.31)
Total Expenditure & Provision: (162.97) (161.83)
Profit Before Taxation: 76.46 72.06
Profit After Taxation: 73.62 57.56
Earnings Per Share (Rs): 3.04 2.69
Share Price (Rs) on 22/12/2004: 13.75 -
Financial Ratios
Price/Earning Ratio: 4.52 -
Book Value Per Share: 12.32 12.06
Price/Book Value Ratio: 3.04 -
Net Profit Margin (%): 30.74 24.61
R O E (%): 19.90 23.86
R O A (%): 2.68 2.84
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COMPANY INFORMATION: Chairman: Bashir Ahmed; President & Chief Executive: Rashid Mansur; Director: Shazia Bashir; Company Secretary: Farooq Hameed Khawaja; Resident Office/Head Office & Lahore Branch: Escort House 26, Davis Road Lahore; Web Address: www.escortsbank.net Branch Offices: Bahria Complex, Karachi, Rehmat Centre Blue Area Islamabad. Investment Services Centres (Brokerage); Main Lahore: State Life Building Davis Road Lahore; LSE: Lahore Stock Exchange Building Room M-3, M-6, KSE: Karachi Stock Exchange Building Room 53, 53A; Islamabad: Rehmat Centre, Blue Area Islamabad.
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