EVALUATING FINANCIAL PERFORMANCEOF CONVENTIONAL BANKS IN PAKISTAN THROUGH RATIO ANALYSIS

Abstract

This study aims to evaluate the financial performance of selected conventional banks in Pakistan by using key financial ratios. The analysis focuses on understanding how these banks have managed their liquidity, leverage, and profitability. Secondary data gathered from official reports published by the State Bank of Pakistan is used in a quantitative research technique over the five- year period from 2019 to 2023. Financial factors including Return on Equity (ROE), Return on Assets (ROA), Capital Ratio, Total Deposit to Equity (TDTE), and other liquidity indicators are used to evaluate the performance of the 11 conventional banks included in the study. Ratio analysis is used to analyze the financial health of banks over time and to interpret patterns. The results reveal significant disparities in financial performance among banks. Institutions maintained stable capital and liquidity positions, reflecting strong financial discipline. Conversely, banks such as Silk Bank and JS Bank displayed weak capital adequacy and high leverage, indicating financial stress. Many banks faced fluctuations in profitability and liquidity

due to internal inefficiencies and external economic pressures, though a few showed recovery in recent years. The findings offer valuable insights for bank management, investors, regulators, and policymakers. Enhanced financial ratio monitoring can support better decision-making, risk assessment, and strategic planning. The study underscores the need for improved capital management, efficient operations, and balanced funding structures in Pakistan’s conventional banking sector. This study contributes uniquely by focusing exclusively on conventional banks in Pakistan and evaluating their financial health using a comprehensive set of ratios over a recent five-year period. Unlike prior research that often mixes Islamic and conventional banks or uses limited indicators, this study provides a detailed, comparative view of financial performance within a specific regulatory and economic context.