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DUE DATE: JUNE 26, 2013 MARKS: 30
Learning Objectives:
• The first question will enable the students to understand the preparation of commercial
bank’s balance sheet, how it differs from a balance sheet of non financial firms and what
will be the strategies of a bank to overcome liquidity risk.
• The second question will enable the students to understand the comparative
measurement of bank’s profitability and the effect of the interest rate risk on the
profitability and on the interest sensitive assets and liabilities of banks.
In any economy, commercial banks play very important role at both national and international
level. At national level, commercial banks play key role in the economic development. They help
various consumers, both individuals and businesses. Commercial banks make funds available for
the individuals and businesses that can make more productive use of the capital/ funds. If the
banking system of any country expands, it will make capital available for everyone, it will create
investment opportunities which results in the expansion of trade and industry that will create
more employment opportunities, consequently it results in the increase of per capita income and
rise in the overall national income. In the end economy flourishes and lead to economic
development. At international level commercial bank helps in transferring money from country
to country that eliminates the need to travel with the money. Beside this, the profit and success
of banking system directly affect the economic growth of a country. While bank performs its
activities and operation, it is always exposed to several kinds of risks; on the other hand bank
has to maintain its profitability because whatever the risk, it may hurts the profitability of a bank.
So, banks have to take pro-active measures to cope up with any kind of risk. The balance sheet
of banks shows its financial position, success and profitability.
“Shams Bank Ltd. “is a fast growing and emerging commercial bank, its financial figures and
data is given below:
Data Regarding the year 2012 Rs.
net profit after tax 5283200
Share capital Reserves 3043838
investment in securities 1846626
Inappropriate profit 656162
Liabilities against assets subject to finance lease 3091
Lendings to financial institutions 876870
Bills payable 840000
Borrowings from financial institutions 2122783
Balances with other banks 2672099
Cash and balances with treasury banks 5804405
Deposits and other accounts 4534126
Data Regarding Previous Years 2010 2011
Profit before tax 2065110 5433718
Total assets 9400000 10200000
Total liabilities 2875000 3550000
Bank capital 6525000 6650000
tax rate is 25%
Question 1: (15 marks)
a. From the above table and given data prepare the balance sheet of Shams Bank LTD. (7 marks)
b. If a bank has no excess reserves, how a bank will manage liquidity risk if a customer demands Rs 1.5
million cash withdrawals from the bank? What changes will occur in the Balance Sheet if the bank
decides to manage the liquidity risk through:
1. Adjusting assets by:
Paying 40% of the amount from loans and 60% of the amount from securities. (4 marks)
2. Adjusting liabilities by:
Attracting deposits with the same amount (4 marks)
(Note: Prepare balance sheet for each case)
Question 2: ( 15 marks)
a. As the bank is new, so its management keeps an eye on its profit on yearly basis, management needs
to compare its profitability with the past years. Using the figures of question 1 (part a), you are
required to compare the efficiency of bank in the utilization of its assets and equity in year 2012 as
compared to year 2011. (8 marks)
b. 30% of the assets are sensitive to change in interest rate while 70% are non- sensitive; interest rate on
assets is 7% (it yields Rs. 7 for every Rs. 100). 70% of the liabilities are sensitive to change in
interest rate while 30% are non-sensitive; interest rate on liabilities is 3%. How a decrease in interest
rate by 2% in year 2012 will affect the profit of the bank (per Rs. 100 in assets). (7 marks)
(Note: Show complete working, where necessary)
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The mentioned research paper titled “A Portfolio Decision Model Based on the Organizational
Development Strategy” is attached with assignment file and also uploaded on download section
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Dear students!
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Replies to This Discussion

Discuss the Assignment question soon. boat lmbi assignment di ha

Bhai solution aur idea dai na

Please Discuss here about this assignment.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

plxxx koi to discuss kro is assignment ko?????????????????????????????????????

Assalam u Alikum lagta hae sab nae ye assignment kar li jo koi bi dicuss nahi kar raha.

Can anyone tell me kae balance sheet main in 2 entries ka kia bane ga:-

1. net profit after taxes and

2. In appropriate profit

main try kar raha houn laikan balance sheet balance ho rahi kiunke jab tak balance sheet thik nahi ho gi baqi question bi thik nahi houn gae

Please someone discuss it . Shukria

  Balance sheet of Sham Banl Ltd.    
  Investment in securties             1,846,626  
  Lending to financial institutions                 876,870  
  Balance with other banks             2,672,099  
  Cash and Balance with treasury banks             5,804,405  
  Liabilities against assest subject to financial lease                     3,091  
  Net profit after tax             5,283,200  
  Bills payable                 840,000  
  Borrowing from financial institution             2,122,783  
  Deposits and other accounts             4,534,126  
  Net Assest             8,989,382  
  Inapporiate profit             6,556,162  
  share captial reserve             3,043,838  

Please koi check kar ke bata do mistake kahan hai

Sadia net profit after tax aur liability against asset jo hae ye liabilities hain na kae asset

(Liabilities against assest subject to financial lease) liability mein add karna tha

but profit after tax kahan jaye ga???

ye bi maira khial hae capital main ae ga so liability ho gae laikan i m nt clear balance sheet sahi ban hi nahi rahi main khud is main phansa hoa houn aur koi mil bi nahi raha jo kuch batae

PLZ idea solution mje b dnaaaaa

Sadia, Balance Sheet  ki both side equal amount ki honi chahiye

Liabilities against assest subject to financial lease =  3,091 ko Liabilities meen daloo 

Net profit after tax =5,283,200 nahi ata Assets & Liabilities meen


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