Financial Analysis of the Commercial Bank of Qatar - Term Paper Example

Commercial Bank of Qatar Analysis Commercial Bank of Qatar Trading Day Closing Price Volume Bid-Ask J2 4.44 0 0.1 3 4.44 0 0.1 4 4.44 0 0.1 5 4.44 0 0.1 6 4.44 0 0.1 9 4.44 0 0.1 10 4.44 0 0.1 11 4.44 0 0.1 12 4.44 0 0.1 13 4.44 0 0.1 16 4.44 0 0.1 17 4.5 0 0.1 18 4.55 0 0.1 19 4.55 0 0.1 20 4.55 0 0.1 23 4.55 2,000 0.1 24 4.55 3533 0.1 25 4.55 3533 0.1 26 4.55 3533 0.2 27 4.55 3533 0.2 31 4.55 3533 0.2 F-01 4.55 3533 0.2 2 4.55 66,000 0.2 3 4.55 66,000 0.2 6 4.55 66,000 0.2 7 4.55 66,000 0.2 8 4.55 66,000 0.2 9 4.55 66,000 0.2 10 4.37 2,000 0.2 Feb-13 4.37 2,000 0.2 14 4.37 2,000 0.2 15 4.37 2,000 0.2 16 4.37 2,000 0.2 17 4.37 2,000 0.2 20 4.37 2,000 0.2 21 4.37 2,000 0.2 22 4.37 2,000 0.2 23 4.5 902 0.2 24 4.5 902 0.2 27 4.5 902 0.2 28 4.15 377,042 0.2 29 4.15 763,796 0.2 Mar-01 4.15 763,796 0.2 2 4.15 763,796 0.1 5 4.2 850 0.1 6 4.2 850 0.1 7 4 10,696 0.1 8 4 10,696 0.1 9 4 10,696 0.1 12 4 10,696 0.1 13 4 150,000 0.1 14 4 1 0.1 15 4.01 1 0.1 16 4.01 3,901 0.1 19 3.9 3,901 0.1 20 3.9 3,901 0.1 21 3.9 3,901 0.1 22 3.9 3,901 0.1 23 3.9 3,901 0.1 26 3.9 3,901 0.1 27 3.9 3,901 0.1 28 3.9 3,901 0.1 29 3.9 3,901 0.1 30 3.9 3,901 0.1 Apl 2 3.9 3,901 0.1 3 4.2 50 0.1 4 4.2 50 0.1 5 4.2 50 0.1 6 4.2 0 0.1 9 4.2 0 0.1 10 4.2 0 0.1 11 4.2 0 0.1 12 4.2 0 0.1 13 4.2 0 0.1 16 4.2 2,900 0.1 17 4.2 2,900 0.1 18 4.2 2,900 0.1 19 4.2 2,900 0.1 20 4.2 2,900 0.1 23 4.2 2,900 0.1 24 4.2 2,900 0.1 25 4.2 115,000 0.1 26 3.56 5,550 0.1 27 3.56 5,550 0.1 30 3.6 121 0.1 May-01 3.6 121 0.1 2 3.6 121 0.1 3 3.75 2,000 0.1 4 3.75 2,000 0.1 7 3.75 0 0.1 8 3.75 2,500 0.1 9 3.75 2,500 0.1 10 3.75 2,500 0.1 11 3.75 2,500 0.1 14 3.75 2,500 0.1 15 3.75 2,500 0.1 16 3.75 2,500 0.1 17 3.75 2,500 0.1 18 3.75 2,500 0.1 21 3.75 2,500 0.1 22 3.75 2,500 0.1 23 3.75 2,500 0.1 24 3.75 2,500 0.1 25 3.75 2,500 0.1 28 3.7 2,500 0.1 29 3.7 2,500 0.1 30 3.7 2,500 0.1 Jun-01 3.7 2,500 0.1 4 3.7 0 0.1 5 3.7 0 0.1 6 3.7 161,617 0.1 7 3.7 161,617 0.1 8 3.7 161,617 0.1 11 3.7 161,617 0.1 12 3.7 161,617 0.1 13 3.7 25,000 0.1 14 3.7 25,000 0.1 15 3.7 25,000 0.1 18 3.7 25,000 0.1 19 3.7 25,000 0.1 20 3.7 25,000 0.1 21 3.7 25,000 0.1 22 3.7 25,000 0.1 25 3.7 25,000 0.1 26 3.7 25,000 0.1 27 3.7 25,000 0.2 28 3.7 25,000 0.2 29 3.7 25,000 0.2 Jul-02 3.7 25,000 0.2 3 3.5 47 0.2 4 3.5 47 0.2 5 3.5 47 0.2 6 3.5 47 0.2 9 3.5 47 0.2 11 3.5 47 0.2 12 3.5 47 0.2 13 3.5 47 0.2 16 3.41 500 0.2 17 3.41 500 0.2 18 3.85 133,868 0.2 19 3.85 133,868 0.2 20 3.85 133,868 0.2 23 3.85 133,868 0.2 24 3.85 133,868 0.2 25 3.85 133,868 0.2 26 3.85 133,868 0.2 27 3.85 133,868 0.2 30 3.85 133,868 0.2 31 3.85 133,868 0.2 Aug-01 3.85 133,868 0.2 2 3.89 1,253 0.2 3 3.89 1,253 0.2 6 3.95 6,989 0.2 7 3.95 6,989 0.2 8 3.95 6,989 0.2 9 3.95 6,989 0.2 10 3.95 6,989 0.2 13 3.95 6,989 0.2 14 3.95 6,989 0.2 15 3.95 6,989 0.2 16 3.95 6,989 0.2 17 4.05 500 0.2 20 3.7 500 0.2 21 3.7 500 0.2 22 3.7 500 0.1 23 3.7 500 0.1 24 3 6,000 0.1 27 3 6,000 0.1 28 3.2 2,000 0.1 29 3.2 2,000 0.1 30 3.2 2,000 0.1 31 3.2 2,000 0.1 Sep-03 3.9 33,575 0.1 4 3.9 33,575 0.1 5 4 2,500 0.1 6 4 2,500 0.1 7 4 2,500 0.1 10 4 2,500 0.1 11 4.1 2,500 0.1 12 4.1 2,500 0.1 13 4.1 2,500 0.1 14 4.1 2,500 0.1 17 4.1 2,500 0.1 18 4.1 2,500 0.1 19 4.1 2,500 0.1 20 4.1 2,500 0.1 21 4.1 2,500 0.1 24 4.1 0 0.1 25 4.1 0 0.1 26 4.1 0 0.1 27 4.1 0 0.1 28 4.1 0 0.1 Oct-01 4.1 0 0.1 2 4.1 0 0.1 3 4.1 0 0.1 4 4.1 0 0.1 5 4.1 0 0.1 8 4.1 0 0.1 9 4.1 0 0.2 10 4.1 0 0.2 11 4.1 0 0.2 12 4.1 0 0.2 15 4.1 0 0.2 16 4.1 0 0.2 17 4.1 0 0.2 18 4.1 0 0.2 19 4.1 0 0.2 22 4.1 0 0.2 23 4.1 2,500 0.2 24 3.89 6,600 0.2 25 3.89 6,600 0.2 26 3.89 6,600 0.2 29 3.89 6,600 0.2 30 3.89 6,600 0.2 31 3.9 854 0.2 Nov-01 3.9 854 0.2 2 3.9 854 0.2 5 3.9 854 0.2 6 3.9 854 0.2 7 3.9 854 0.2 8 3.9 854 0.2 9 3.9 854 0.2 12 3.9 854 0.2 13 3.9 854 0.2 14 3.9 854 0.2 15 3.9 854 0.2 16 3.9 854 0.2 19 3.9 98,817 0.2 20 3.9 0 0.2 21 3.9 0 0.2 22 3.9 3 0.2 23 3.9 1296 0.2 26 4 40597 0.2 27 4 25000 0.2 28 4 40000 0.2 29 4 171000 0.2 30 4 0 0.2 Dec-03 4 0 0.2 4 4 40000 0.2 5 4 408620 0.2 6 4 368.227 0.2 7 4 0 0.2 Financial Analysis – Ratio Analysis In the analysis of the Commercial Bank of Qatar shares analysis, the market value ratios method was used, Market value ratios is the observable market value, to book values obtained from the firm’s financial statement. The price-earnings ratio method was used. The formula below is used when calculating the price-earnings ratio. PE Ratio = Price per share / Earnings per share Where Earnings per share = Net Income / Number of shares outstanding (Parkin & Zis, 1979) In the year 2012, the Price per share for Commercial Bank of Qatar was averagely = 78.30 per share Net Income = 471,000,000 Number of shares outstanding = 247,446,000 Earnings per share = 471,000,000 / 247,446,000 = 1.90 PE Ratio = 78.30 / 1.90 = 41.14 In the year 2012, the net earnings income preferred dividend was 15 percent and the dividend yield for the year was 8.5 percent. The dividend yield for Masraf Al-Rayyan Bank in the year 2012 was 3.7 percent while its net income preferred dividend was 47.6 percent. Stock Optimal Price for CBQ Required rate of return = return on risk free security + Beta (Saunder et al, 2009) Beta = return on stock – risk free return / Variance of the return on the market index Return on Stock = 471,000,000 Risk free Return = 2474405 Variance of the return on the market index = 247,446,000 Return on risk free security = 12 Beta = 223,553,628 / 2474405 = 90.3 Required rate of return = 90.3 + 12 = 102.3 The Commercial Bank of Qatar’s stock has been underpriced by 23.7 Stock Optimal Price for Qatars Masraf Al-Rayyan Bank (MAR) Return on risk free security = 23 Return on Stock = 517,000,000 Risk free Return = 2365510 Variance of the return on the market index = 232,564,000 Beta = 514,634,490 / 232,564,000 = 2.2129 Required rate of return = 2.2129 + 23 = 25.21 CBQ Cash Position Indicator The formula for calculating capacity ratio is Cash and deposits due from other banks/total asset Through the year 2009 to 2012, there was a steady increase in the deposits due and total assets ratio. However, there was a sharp decrease of the ratio in the year 2011 to 0.1414. The ratio however continued to increase in the next year by .0277, indicating an improvement in the liquidity position of the bank. CBQ Liquidity Securities indicator The formula for calculating capacity ratio is Investment securities/total assets (Saunder et al, 2009). Year 2009 2010 2011 2012 Investment security Ratio 0.1012 0.141 0.1142 0.2116 The year 2012 was the best for Commercial bank of Qatar since it has the highest investment ratio as compared to other years under analysis. CBQ Capacity Ratio The formula for calculating capacity ratio is Net loans and leases/total assets. Year 2009 2010 2011 2012 Capacity Ratio 0.6775 0.6126 0.5764 0.6124 In the year 2011, CBQ had its lowest capacity ratio, indicating more liquidity of assets as compared to other years under study. CBQ Leverage Ratio Leverage ratio is determined by the formula Total debt/total asset Year 2009 2010 2011 2012 Capacity Ratio 0.9002 0.8913 0.8905 0.741 The leverage ratio for the bank remained at a level of averagely 0.894 in the years 2009-2011. The bank however decreased the ratio to 0.741 in 2012, thus being in a safer position from risk exposure. Return on Assets The formula Net income/total assets determine return on assets. Year 2009 2010 2011 2012 Capacity Ratio 0.3193 0.3271 0.3261 0.3241 The return on investment remained a bit constant throughout the years 2009-2012. Net operating margin Year 2009 2010 2011 2012 Capacity Ratio 0.7291 0.69842 0.7189 0.7521 The net operating margin ratio was almost constant but drastically increased in the year 2012. This indicates that there was increased profitability in the year 2012. Conclusion The commercial bank of Qatar has a good performance throughout the year 2009-2012. The bank has generally improved in performance in the year 2012 than the previous years. This is evident from the decrease in the leverage ratio and increase in the net operating margin, capacity ratio, and the cash position ratio. The share price of CBQ has also been underpriced as shown above. Investing in the CBQ shares is a viable venture, but not in the long run. When comparing the viability of investing in CBQ or in Masraf Al-Rayyan Bank, the latter should be selected because it has a larger dividend yield than the previous. Reference Baumol, W & Blinder, A 2011, Economics: Principles and policy, South-Western Cengage Learning, Mason. Parkin, M & Zis, G 1979, Inflation in open economies, 6th edn. South-Western Cengage Learning, Mason. Saunders, M, Lewis, P & Thornhill, A 2009, Research Methods for Business Students, 5th Edn, Pearson, Harlow. Read More