Analysis of Different Banks Performance in Bangladesh by Using Published Financial Statements

07 disdainful 2007 Md. Mahfuzur Rahman 2003-2-10-187 BBA East westward University Dear Mahfuz As the students of business administ symmetryn ar supposed to prepargon a Report and submit that at the s prime of the semester, you ar authorized to choose an delighting issue and construct a formal paper on that. The issue should be the analytic thinking of Basel symmetricalness and Its influence on buzzwords of Bangladesh. The report should each(prenominal)(prenominal)ow approximately key steps such(prenominal) as administrator summary, introduction, conclusion, seeded players of reading and the digest. The title should be a statement which entrust describe the report precisely.I will estimate if you prepare the report according to the learning disposed. Thanks Nikhil Chandra Shil Senior Lecturer &038 Assistant Proctor East West University 07 August, 2007 Nikhil Chandra Shil Senior Lecturer &038 Assistant Proctor Department of Business formation 43 Mohakhali C/A co rking of Bangladesh, Bangladesh Dear Sir Here is the report on the Analysis of Basel Agreement and Its influence on jargons of Bangladesh. As you will find that I assimilate conducted an in-depth investigation and compend of diverse types proportionality and tried to analyze true circumstances and displayed our results of synopsis and findings in this report.I will really appreciate if you go through the report and express your feedback on that. Thanks in truth Md. Mahfuzur Rahman 2003-2-10-187 Acknowledgement The report is based on the cognitive ope balancen analysis of variant desire in Bangladesh. While some(prenominal) an all errors of fact, omission, and emphasis are solely our responsibility. I would remiss, if I did non acknowledge those who helped me to prepare this report. jump of all I must humbly acknowledge the contri furtherion of Nikhil Chandra Shil for the sentence and effort to help me.I drive home had the good fortunate of shock him in personally an d sell his views and ideas. Next I must convey the University for offering us this chit-chat to it (BUS 498) course and our course instructor for his rise and coope proportionalityn. I believe it will help us in sagaciousness and identifying variant types of jeopardyiness in the buzzwording sector. Finally, I would deal to acknowledge the contri solelyions of my parents. Although they didnt save a single word of this report or any artworks, however their imprint jakes be found on ein truththing I do. They realise me, encourage e, and inspire me. They give my work and my live -meaning. It is my M opposite who go outs me all the love and affection. Chapter 1 04-16 1. 1 Origin of the Report, Objective 06 1. 2 Methodology, Scope, Limitations 08 1. Executive Summary 09 1. 4 Introduction 11 1. 5 lodgeing Indus analyze Overview 12 1. 6 assent military rank Status 16 Chapter 2 17-22 2. come across redevelopment up to(p)-bodiedness Ratios In tilling 17 2. 2 Earning Per Share 18 2. 3 liquidness adventureiness 20 2. 4 character reference take a run into 20 2. 5 jacket crown take vistas 21 3. separate gainfulness Ratios In coasting 23 3. 2 Earning Per Share 24 3. 3 fluidity hazard 26 3. 4 Credit run a run a gamble 26 3. 5 pileus risk of infection 27 4. chance upon Profitability Ratios In wedgeing 29 4. 2 Earning Per Share 30 4. 3 naiantity peril 32 4. 4 Credit endangerment 33 4. 5 swell Risk 34 5. 1 Key Profitability Ratios In confideing 35 5. Earning Per Share 36 5. 3 fluidity Risk 38 5. 4 Credit Risk 38 5. 5 Capital Risk 39 6. Key Profitability Ratios In shoreing 41 6. 2 Earning Per Share 42 6. 3 Liquidity Risk 44 6. 4 Credit Risk 45 6. Capital Risk 45 Chapter 7 metropolis confide 47-52 7. 1 Key Profitability Ratios In furbish upory financial institutioning 47 7. 2 Earning Per Share 48 7. 3 Liquidity Risk 50 7. Credit Risk 51 7. 5 Capital Risk 51 Chapter 8 Uttara bevel 53-58 8. 1 Key Profitability Ratios In swaning 53 8. 2 Earning Per Share 54 8. Liquidity Risk 55 8. 4 Credit Risk 56 8. 5 Capital Risk 57 Chapter 9 pinnacle intrust 59-64 9. 1 Key Profitability Ratios In believeing 59 9. 2 Earning Per Share 60 9. Liquidity Risk 62 9. 4 Credit Risk 63 9. 5 Capital Risk 63 Chapter 10 Southeast border 65-70 10. 1 Key Profitability Ratios In jargoning 65 10. Earning Per Share 66 10. 3 Liquidity Risk 68 10. 4 Credit Risk 68 10. 5 Capital Risk 67 Chapter 11 outcome 71-73 11. 1 Conclusion 71 11. Bibliography 73 Chapter-1 Introduction ORIGIN OF THE shroud This report has been prepared as a requirement for the completion of the BBA chopine of the Department of Business Administration, at East West University, outstanding of Bangladesh. OBJECTIVE The principal(prenominal) objective of the report is to illuminate on the different ratio analysis of to a greater extent or less study private swear bui lding in Bangladesh and its Comparative Analysis with other situateing concerns prevailing in the market.I will to a fault try to find out how the performance of the lodge is improving e preciseplace the long time and how it is contributing to the growth of the trusting sector. The following specific objectives rear end be set 1. To cite a comparative study on nine major private stick in Bangladesh. 2. To suggest suit adapted measures to remove the exist problems (if any) &038 improve the defer condition. DATA Data used in this project are derived from the published pecuniary statements of nine coasts operating in Bangladesh as of 31 December 2001, 31 to December 2005 from 48 cashboxs operating in Bangladesh.There are some shores whose financial statements either are non unattached or contain some incomplete or absentminded accounts, or are contradictory hence they are deleted from observation. confides are elect by their status of operation. I have chosen some Liquidated avows, some Problem bank buildings, and some Normal brims for my research. INITIAL VARIABLES There are some basic financial performance and structural characteristics to evaluate a bank, to wit lollyability, efficiency or productivity, fictional character of additions, growth and aggressiveness, fluidness, size, bang-up adequacy, income diversification, and dependence on affiliates.There is, certainly, no single vari qualified which could measure and represent each characteristic perfectly. There are, typically, several vari fittings that proximate to a characteristic of busy. base on literature review on banking and financial mental institutions and initial judgment, I chose the following vari adapted-bodieds to represent each characteristic as listed below. Earning and reachability come down on Assets (ROA) = cabbaget Income / Assets (NI/A) dispel on blondness ( roe) = crystalise Income / integrity (NI/E) show on Earning Assets ( roeA) = plunder Inc ome / Earning Assets (NI/EA) counterpunch on gives (ROL) = reside Income / bestows (II/L) amuse Income / Earning Assets (II/EA) net income Interest Income / Earning Assets (NII/EA) Interest permissiveness (IM) = birth on blood line Cost of Fund (IM) Productivity and Efficiency operating(a) Expense / operating(a) Income (OE/OI) Profit brink (PM) = Earning Before Taxes / Operating Income (EBT/OI) Sta. Expense / Assets (SE/A) Non- touch Expense / Assets (NonIE/A) tint of Assets Write-offs / Loans (W/L) formulation for Loan losings / Loans (PLL/L) Provision for Loan Losses / honor (PLL/E) Capital Adequacy virtue / Assets (E/A) fair play / Earning Assets (E/EA)Equity / Loans (E/L) Growth and pugnacity Loans Growth Rate (LGR) Loans-Market-Share outgrowth (LMSI) Deposit Growth Rate (DGR) Deposit-Market-Share Increment (DMSI) Equity Growth Rate (EGR) Loans to Deposit Ratio = Loans / Deposit (L/D) credibleness or Cost of Fund Interest Expense / Deposit (IE/D) Interest Expens e / Third Party Fund (IE/TPF) Size ln (Assets) (lnA) Income and Sources of Fund diversification Non- fill Income / Operating Income (NonII/OI) Deposit / Third Party Fund (D/TPF) Liquidity Liquid Assets / Deposit (LA/D) METHODOLOGYThe study required nurture regarding the past &038 present condition of different Bank in Bangladesh. Necessary data and development were gathered, secondary data, and annual report. a) Sources of Data The following sources had been used for the office the purpose of collecting data as required for this report Primary sources I) Observation, ii) private communication with course instructor Secondary Sources I) Annual and other classly reports of different Bank in Bangladesh ii) Various manuals (conditions of use guides) and brochures, iii) Service Rules &038 IV) non-homogeneous Publications.SCOPE The report is limited to the understanding of citation risk, nifty risk, liquidity risk analysis, and find out the key internetability ratio, and a com parative interpretation to that analysis. It was really difficult for me to gather all the necessary information because the managers were not cooperative at all. As a result, we have chosen the following nine banks based on the availability of information we add up. LIMITATIONS 1. As a student of business administration, analyzing of different sorts of risk and ratio is new(a) for me so it took some time to understand.Besides three months time is understaffed to prepare such a robust report. 2. It was very difficult to get the actual information from the annual report some of the information is not given the annual report. 3. Sufficient records, creationations were not available. The constraints narrowed the scope of real analysis. 4. Most of the time I have faced the problem with the annual report which is prepared before 2000. 5. Accounting practice is different for the different bank. 6. Credit WorthinessAt present, we do not have any reliance rating rating company in our country and information on the customer from the third fellowship is likewise not always reliable. Therefore, we subscribe to make our own scoring system. Since it will be a very difficult to prepare a standard scoring system to prize everybodys credit worthiness so we shall as well have top substantially depend on judgmental analysis to make last on every individual cases. Every individual case shall be unique and separate from others. EXECUTIVE SUMMARY Bank Profitability Liquidity Risk Credit Risk Capital Risk capital of Bangladesh Bank just confused Low medium NCC Bank tall mellow Low Average subject area Bank Average Low Average High Al-Arafah Bank Average High High High eastern Bank High* Low Average Low City Bank High Low Average Average Uttara Bank High High Low Average Prime Bank High** Average Low Low Southeast Bank Average High Average Average TABLE Summery of Risk Categories Risk Type Definition colour Country Risk ( The risk that a counter party is unavailing to meet its ( Country risk is often confused with s everywhereeign risk, contrary currency obligations as a result of adverse which is the counter party credit risk of the g all overnment. economic conditions or actions taken by governments in the relevant country. ( Country Risk is too often referred to as depute risk or cross border risk. ( Country related events such as economic downturn, political dislodges devaluation etc. ill often have signifi flockt impact on the other risks that SCB must manage. Credit Risk ( The risk that a counter party will not get even its ( Assessing this risk requires an understanding of the obligations in accordance within agreed harm customers ability and willingness to pay but also its understanding of the risks it faces and how well it manages them e. g. environmental risks Liquidity Risk ( The isk that parentages will not be available to meet ( Includes the concern of immediate payment flow under business as liabilities as they fall over due(p) usual and stress conditions together with tantrum of targets for balance sheet ratios. Market Risk ( The risk of overtaking generated by adverse changes in the ( Does not complicate the risk of price movements in other price of assets or contracts currently held by the markets e. g. stocks and manages, property, commodities. company (this risk is also known as price risk). Does include basis risk. Capital Risk ( The risk that a bank capital might be undergone ( Equity Capital/ add up Assets has been ontogenyd but Purchased finances/ thorough Liabilities Business Risk ( The risk of failing to fall upon business targets due ( Includes findings on the markets we operate in, to inappropriate strategies, inadequate resources or products offered, and customers targeted and the terms and changes in the economic or competitive environment conditions of conducting business. Legal and Regulatory Risk ( The risk of non compliance with legal or regulatory ( Includes banking specific formula and regulations requirements. but also all applicable laws. In extreme cases could acquit to loss of banking license(s). Source Bank Management &038 Financial Services (6th Edition) Pages 161, 162, 164, 328, 472. macrocosm The overall objective of my project report is to clearly identify and presently discuss just about the performance analysis of different bank in Bangladesh. To nalyze the performance of different bank I have analyzed different ratio and provided some interpretation of them. I have taken a append nine bank to evaluate the performance of them. And try to make a comparison among all of the following. 1. Dhaka Bank Ltd 2. matterCredit Ltd. 3. NationalBank Ltd. 4. Al-Arafah Islami Bank Limited (Al-Arafah) 5. east BankLtd. 6. The CityBank Ltd. 7. Uttara Bank 8. Prime Bank Ltd. 9. South EastBank Ltd Customer satisfaction is one of the core objectives of different bank. Tak ing decision to provide credit facility to a corporate customer is not easy in this fast changing global environment oddly in Bangladesh.To smooth the whole process the work is divided. So, before qualification a decision the every necessary information should be cautiously analyzed by different departments and different volume who have gained expertness in their related field. Thus it helps both in making neutralize decision and smoothen the process to satisfy the customer need quickly. A bank is an organization that engages in the business of banking. Banks perform three functions 1. decease the instrument of payment through administering the checking account system. 2. Intermediate between depositors and borrowers by offering savings and time deposit- to depositors and providing all types of imparts to borrowers. 3.Provide a variety show of financial serve, encompassing fiduciary services, investiture banking and off-balance sheet risk taking. commercialisedized bank s are private profit seeking enterprises, balancing risk and travel by to their portfolio management with the goal of maximizing allotholder wealth. Share holders wealth depends on three factors 1. The volume of money flows resulting from portfolio decisions. 2. The timing of those cash flows 3. The risk and excitableness of the cash flows. Commercial banks face six risks 1. Credit or nonremittal risk 2. Interest-rate risk 3. Liquidity risk 4. Operational risk 5. Capital. Risk 6. Fraud risk The Modern definition of a bank is, An institution that provides all financial services (Source SCB Handbook) and the core activity of a bank is to collect money from the people who has surplus with them and lend those money to people who has deficit, known as credit facility. Customers sought different kind of credit facility from banks and the banks try to provide as many as they sewer within their limited scope. Every bank follows a predefined structured execution in providing credit fa cilities to their customers. BANKING INDUSTRY OVERVIEW The banking fabrication in Bangladesh is more than 600 geezerhood old. The first commercial bank was ANZ Grindlays Bank which opened in1905. The central bank of the country, Bangladesh Bank controls and monitors the banking industry.At present there are 52 commercial (nationalized, foreign and local) banks. Currently, the major financial institutions under the banking system include ? Bangladesh Bank ? Commercial Banks ? Islamic Banks ? Leasing Companies ? Finance Companies ? Merchant Banks Generally, the commercial banks and finance companies provide a myriad of banking products/services to cater to the needs of their customers. However, the Bangladeshi banking industry is characterized by the tight banking rules and regulation s set by the Bangladesh Bank. solely banks and financial institutions are gamyly governed and controlled under the Banking Companies Act-1993. The range of banking products and financial services is also limited in scope.All local banks must retain a 4% coin Reserve Requirement (CRR), which is non- delight bearing and a 16% Secondary Liquidity Requirement (SLR). With the liberalization of markets, competition among the banking products and financial services seems to be growing more intense each day. In addition, the banking products offered in Bangladesh are fairly homogeneous in nature due to the tight regulations imposed by the central bank. Competing through differentiation is progressively difficult and other banks quickly duplicate any innovative banking service. Bangladesh Bank Bangladesh Bank (BB) has been working as the central bank since the countrys independence.Its prime jobs include issuing of currency, husbanding foreign exchange reserve and providing transaction facilities of all public mo electronic exonerateworkary matters. BB is also responsible for planning the governments mo exculpateary policy and implementing it thereby. The BB has a governing body c omprising of nine members with the Governor as its chief. Apart from the enquiry office in Dhaka, it has nine more branches, of which two in Dhaka and one each in Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and Barisal. Nationalized Commercial Banks (NCBs) 1. Sunali Bank 2. Rupali bank 3.Janata Bank 4. Agrani Bank Private Commercial Banks (PCBs) 1. Pubali Bank 2. Uttara Bank 3. National Bank 4. The City Bank Ltd. 5. UnitedCommercialBank Ltd. 6. ArabBangladesh Bank Ltd. 7. IFIC BankLtd. 8.Eastern Bank Ltd. 9. National Credit &038 Comerce Bank Ltd. 10. Prime Bank Ltd. 11. South East bank Ltd. 12. Dhaka Bank Ltd 13. Dutch-BanglaBank Ltd. 14. Mercantile Bank Ltd. 15. StandardBank Ltd. 16. One BankLtd. 17. EXIM Bank 18. BangladeshCommerce Bank Ltd. 19. MutualTrust BankLtd. 20. First protective covering Bank Ltd. 21. The PremierBank Ltd. 22. Bank AsiaLtd. 23. The Trust Bank Ltd. 24. Brac Bank Ltd. Islamic Banks 1.Islami Bank Bangladesh Limited (IBBL) Al Baraka Bank Bangladesh Limited (AL-Baraka) Al-Arafah Islamic Bank Ltd. (Al-Arafah) Social Investment Bank Limited (SIBL) Faysal Islamic Bank of Bahrain EC (FIBB) 6. Shah Jalal Bank Limited (Based on Islamic Shariah) Foreign / transnational Banks 1. Habib Bank Ltd. 2.State Bank Of India 3. CreditAgricole Indosuez (The Bank) 4. NationalBank of Pakistan 5. MoslemCommercial Bank Ltd. 6. City Bank NA 7. Hanvit Bank Ltd. 8. HSBC Ltd. 9. Shamil IslamiBank Of Bahrain EC 10. Standard Chartered Bank Development Banks 1. BangladeshKrishi Bank 2. Rajshahi Krishi UnnayanBank 3. BangladeshShilpa Bank 4. BangladeshShilpa RinSangstha 5. Bank ofSmall Industries &038CommerceBangladesh Ltd. Other Banks 1. Ansar VDPUnnayanBank 2. BangladeshSamabaiBank Ltd. BSBL) 3. GrameenBank 4. KarmasansthanBank Credit Rating Status of Researching Banks Operating in Bangladesh SL. NO. Name of Bank Credit Rating Report Rating as of Name of the Agency Remarks Long status Short Term 01. Dhaka Bank Ltd - - 31. 12. 6 CRAB Expected to complete by May 07 02. NCC Bank Ltd - - - CRAB Expected to complete by May 07 03. National Bank Ltd A ST-2 31/12/06 CRAB - 04. Al-Arafah Islami - - 31. 12. 06 CRISL Expected to Bank Ltd complete 05. Eastern Bank Ltd A ST-3 30/06/06 CRISL - 06. The City Bank Ltd A- ST-3 31/12/06 CRISL - 07. Uttara Bank Ltd - - 31. 12. 6 CRISL Expected to complete by 30. 06. 07 08. Prime Bank Ltd AA ST-2 31/12/06 CRISL 09. South East Bank LtdA ST-3 22/06/06 CRAB CR report based on Dec06, Source Bangladesh Bank (www. bangladesh-bank. org) Chapter-2 Dhaka Bank Limited Key Profitability Ratios in Banking 2001 2002 2003 2004 2005 pass by on Asset( ROA) 0. 015 0. 012 0. 013 0. 013 0. 014 Net interest allowance 0. 019 0. 021 0. 019 0. 022 0. 023 Net non-interest Margin 0. 024 0. 030 0. 022 0. 020 0. 019 Net Bank Operating Margin 0. 49 0. 243 0. 285 0. 282 0. 311 pic strike on Equity lessen on virtue capital is a measure of the rate of authorise flowing to the banks shareholder. It approximates the displace make headway that the shareholders have received from investing their capital in the bank. During the degree of 2001-2005 the middling regaining on the candor was 0. 274 which direction 27. 4%. unless if we liveliness at every individual yr we can hypothecate that it has decreased form by year. The ratio was decreased because of the bank has sum upd the fair-mindedness capital over the year and declared the bonus share as a dividend. Return on AssetsThe Return on the asset is primarily indication of managerial efficiency. It indicates how competently the management of the bank has been converting the institutions assets into net earning. From the above analysis we can see that during the catch of 2001-2005 the fair(a) ratio was 1. 3%. Return on assets has step-up over time. That representation the bank was able to incre ase the efficiency in managing asset from 2001-2005. Net Interest Margin The net interest borderline measures how pear-shaped a spread between interest revenues and interest equals. Management has been able to pass of close control over the banks earning assets and the pursuits of the cheapest source of funding.The clean net bank interest margin for Dhaka bank was 2. 1% during 2001-2005. By looking at the table we can dictate that it has increase period by period accept 2003, which indicates a good guide for the Bank. Net Non Interest Margin The non-interest margin measures the tote up of non interest revenue blow from deposits charges and other service fees the bank has been able to collect relative to the get along of non interest cost incurred (including salaries and wages, repair and sustainment cost on bank facilities and impart loss expense). The net non interest margin was 2. 30% during the period of 2001-2005. It has decline over the periods accept 2001.The incom e from the non interest source, like Treasury bill, relegating on brokerage, and commission from the letter of credit has been declined over the historic period. Earning Per Share 2001 2002 2003 2004 2005 Earning Per Share 41. 255 42. 635 39. 024 46. 894 53. 864 pic Earning per share measures the earning against per share. During the period 2001-2005, the honest earning per share was Tk 44. 73. Though it is not so attractive figure for Dhaka Bank, but positive fact is it has increased over times. Breaking level OF ROE 2001 2002 2003 2004 2005 Banks degree of asset economic consumption 0. 043 0. 050 0. 045 0. 045 0. 045 The banks law multiplier factor factor 29. 02 21. 33 17. 20 18. 94 14. 92 Net Profit Margin Net profit margin has fluctuated over time. barely if we look at the middling which was 29. 39% with the past five years, we can vocalize that last five years net profit margin was better. Banks Degree of Assets recitation Banks Degree of Assets practice was 4. 5% during 2001-2005 which was not bad as compare to other banks. Equity multiplier picDuring the period of 2001-2005 the average impartiality multiplier was 20. 283. By the blondness multiplier ratio we can say that it is highest in 2001 which was 09. 02%. that office the risk of the visitation was also highest for that period. As the risk was higher, we can say that the banks profit margin also was higher for that period. Liquidity Risk 2001 2002 2003 2004 2005 bills and out-of-pocket from Banks/ keep down Assets 0. 152 0. 122 0. 093 0. 071 0. 079 Cash and disposal Securities/ numerate Assets 0. 062 0. 076 0. 98 0. 137 0. 155 pic Purchased cash in hand/ extreme Assets If the use of purchased is more that increases the chance of liquidity resound in the event of withdrawals rises or the impartword step declines. During 2001-2005, as the average ratio was 1. 44%, we can say that the liquidity risk for the bank is bring down for the Bank. Cash and Government Securit ies/ fare Assets Cash and Government securities was 10. 54% of the summarize assets on an average which was not so much good for the Bank because cash and government securities are the most liquid assets for a bank. So bank may face liquidity problem in the future. Credit Risk 2001 2002 2003 2004 2005 extreme Loans/ summate Deposits 0. 56 0. 67 0. 70 0. 74 0. 82 pic Provision for Loan Losses/ primitive Loans Provision for Loan Losses/ full(a) Loans indicates the heart and soul which should be kept as proviso for loan losses from the entirety loan. During the period (2001-2005) the average come in of purvey for the loan loses was 0. 6%. This indicates a very good signal for the bank. That means Banks credit risk is very low because the bank has been able to collect the loan very efficiently. entire Loans/ wide-cut Deposits Total Loans/Total Deposits indicates the summation loan heart that goes from the total deposit.During (2001-2005), on an average 68. 86% of the total deposit distribute as loan. This indicates they have distributed a big portion of their deposited nub as loan. That is some what risky but as their formulation for loan losses was very low they will have no problems with this. Capital Risk 2001 2002 2003 2004 2005 Purchased silver/Total Liabilities 0. 016 0. 011 0. 012 0. 012 0. 025 pic Equity Capital/Total Assets Equity Capital/Total Assets indicates that the count of equity capital invested in the total assets.During the period of 2001-2005 their equity capital was on an average 5. 20% of their total assets, which indicates they have financed very few of their investment by equity and it is gradually increased over the period. Purchased Funds/Total Liabilities Purchased Funds/Total Liabilities indicates that the center of non deposit obligation in the total liability structure. If the purchased fund increases that means the capital risk are also increases. During the period of 2001-2005 1. 52% of the liability was financ ed by the purchased fund that means non deposit sources which is not the core area of the business. That means the capital risk for the bank is low for the Bank. Chapter-3 NCC Bank Limited Key Profitability Ratios In Banking 2001 2002 2003 2004 2005 Return on Asset( ROA) 0. 014 0. 011 0. 044 0. 013 0. 013 Net interest Margin 0. 024 0. 024 0. 232 0. 020 0. 023 Net non-interest Margin 0. 028 0. 027 0. 195 0. 032 0. 346 Net Bank Operating Margin 0. 280 0. 230 0. 080 0. 255 0. 240 pic Return on EquityReturn on equity capital is a measure of the rate of go down flowing to the banks shareholder. It approximates the net benefit that the shareholders have received from investing their capital in the bank. During the period of 2001-2005 the average return on the equity was to 19. 6%. If we compare it to the Dhaka Bank we can say that it is not good. The ratio was low because the bank has increased the equity capital over the year and declared the bonus share as a dividend. Return on Assets The Return on the asset is primarily indicator of managerial efficiency. It indicates how proficiently the management of the bank has been converting the institutions assets into net earning.From the above analysis we can see that for the period of 2001-2005 the average ratio was 1. 9%. which was some what better than Dhaka Bank. That means the bank was able to increase the efficiency in managing asset from 2001-2005. Net Interest Margin The net interest margin measures how large a spread between interest revenues and interest costs. Management has been able to achieve of close control over the banks earning assets and the pursuits of the cheapest source of funding. The net bank interest margin for Dhaka bank was 2. 1% during the year of 2001-2005. But the net margin of NCC Bank was 6. 46%. that means the banks was able to increase the cheapest source of funding from 2001-2005. Net Non Interest MarginThe non-interest margin measures the amount of non interest revenue streami ng from deposits charges and other service fees the bank has been able to collect relative to the amount of non interest cost incurred (including salaries and wages, repair and fear cost on bank facilities and loan loss expense). The average net non interest margin was 12. 5% during the period of 2001-2005. That means the bank was able to collect more income from the non interest source and it has increases over time. They have been able to generate more income from the non interest source like Treasury bill, commission on brokerage, and commission from the letter of credit. Earning Per Share 2001 2002 2003 2004 2005 wages Per Share 54. 14 44. 47 30. 99 46. 91 36. 11 pic Earning per share measures the earning against per share. During the period of 2001-2005, the average earning per share was Tk 42. 524. Their earning per share has reduced over time and if we compare with other bank we can say that it is not sufficient. Breaking Down of ROE 2001 2002 2003 2004 2005 Banks degre e of asset utilization 0. 052 0. 50 0. 544 0. 052 0. 056 The banks equity multiplier 16. 91 20. 33 1. 92 17. 46 14. 04 Net Profit Margin During 2001-2005 the average the net bank operating margin was 21. 7%. If we look at the individual data it is not good because it has fluctuated over time. Banks Degree of Assets Utilization They have acquire 15. 08% operating revenue in 2001-2005 by utilise their total assets. Over the period it was consistent accept 2003. Equity multiplier factor pic During the period of 2001-2005, the average equity multiplier was 14. 32.By the equity multiplier ratio we can say that it is substantially higher, that means the risk of the failure is also high for the period. As the risk is higher so the banks profit margin is also higher. Liquidity risk 2001 2002 2003 2004 2005 Cash and Due from Banks/Total Assets 0. 158 0. 067 0. 499 0. 042 0. 052 Cash and Government Securities/Total Assets 0. 100 0. 148 0. 166 0. 208 0. 110 pic Purchased Funds/Total A ssetsIf the use of purchased funds are more that increases the chance of liquidity crunch in the event of withdrawals rises or the loan quality declines. During the period of 2001-2005, as the average ratio was 1. 44%, we can say that the liquidity risk for the bank was low. Cash and Government Securities/Total Assets Average Cash and Government Securities/Total Assets in 2001-2005 was 44. 48%. The total assets have come from the cash and government securities. Credit Risk 2001 2002 2003 2004 2005 Provision for Loan Losses/Total Loans 0. 02 0. 02 0. 2 0. 02 0. 02 Total Loans/Total Deposits 0. 84 0. 82 0. 81 0. 89 0. 96 pic Provision for Loan Losses/Total Loans Provision for Loan Losses/Total Loans indicates the amount which should be kept as grooming for loan losses from the total loan. During the period of 2001-2005 the average amount of provision for the loan loss was 1. 9% of the total loans. As the provision for the loan loss was very low, we can say that the credit risk fo r the bank was abase for the Bank and the bank has been able to collect the loan more efficiently. Total Loans/Total DepositsTotal Loans/Total Deposits indicates the total loan amount that goes from the total deposit. If we look at the graph we will see that the Total loan/Total Deposits gradually has increased over time. That means the Bank has increased the loan as well as credit risk. But historical data say that their loan collection is pretty impressive. On an average they have distributed 86. 19% of their deposits as loan. Capital Risk 2001 2002 2003 2004 2005 Purchased Funds/Total Liabilities 0. 037 0. 048 0. 057 0. 048 0. 818 pic Equity Capital/Total AssetsEquity Capital/Total Assets indicates that the amount of equity capital invested in the total assets. During the period of 2001-2005, on an average 15. 17% total asset was financed by the equity. If we think about the risk of the Bank, it is high. Because a huge amount of money they have financed by debt equity. Purcha sed Funds/Total Liabilities Purchased Funds/Total Liabilities indicates that the amount of non deposit liability in the total liability structure. If the purchased fund increases that means the capital risk are also increases. During the period of 2001-2005, 20. 16% of the liability was financed by the purchased fund that means non deposit sources which is not the core area of the business.Chapter-4 National Bank Key Profitability Ratios In Banking 2001 2002 2003 2004 2005 Return on Asset( ROA) 0. 006 0. 003 0. 002 0. 004 0. 005 Net interest Margin 0. 012 0. 011 0. 011 0. 012 0. 011 Net non-interest Margin 0. 025 0. 026 0. 27 0. 029 0. 031 Net Bank Operating Margin 0. 224 0. 083 0. 048 0. 087 0. 118 pic Return on Equity Return on equity capital is a measure of the rate of return flowing to the banks shareholder. It approximates the net benefit that the shareholders have received from investing their capital in the bank. During the period of 2001-2005 the average return on the equity was 10. 1%. The ratio was not attractive because of the bank has increased the equity capital over the year and declared the bonus share as a dividend. The Return on AssetsThe Return on the asset is primarily indicator of managerial efficiency. It indicates how capably the management of the bank has been converting the institutions assets into net earning. From the above analysis we can say that during the period of 2001-2005 the average ratio 0. 4%. It is not so attractive. The bank was not able to increase the efficiency in managing asset from 2001 to 2005. The net interest Margin The net interest margin measures how large a spread between interest revenues and interest costs. Management has been able to achieve of close control over the banks earning assets and the pursuits of the cheapest source of funding.The net bank interest margin for Dhaka bank was 12% during 2001-2005. But the average net interest margin for National bank was 1. 14%. That means the banks was able t o increase the cheapest source of funding from 2001 to 2005 but that is not substantial for the bank. The Non-interest Margin The non-interest margin measures the amount of non interest revenue streaming from deposits charges and other service fees the bank has been able to collect relative to the amount of non interest cost incurred (including salaries and wages, repair and maintenance cost on bank facilities and loan loss expense). The average net non interest margin was 2. 8% for 2001-2005.Though it has increased over period, they were not able to generate more income from the non interest source like Treasury bill, commission on brokerage, and commission from the letter of credit. The performance of the bank is stable over the years. Earning Per Share 2001 2002 2003 2004 2005 Earnings Per Share 63. 78 33. 98 33. 09 27. 44 43. 85 pic Earning per share measures the earning against per share. During the period of 2001-2005, the average earning per share was Tk 40. 420. Their ear ning per share has reduced over time and if we compare with other bank we can say that it is not sufficient.In the cases of National Bank if we look after the key profitability ratio then we can say that return on equity capital(ROE), and non interest margin, Return on asset (ROA) Net Bank Operating Margin, and Earning per share, ratio has been decreased for the period of 2001-2005. But, solitary(prenominal) the net bank operating margin has been increased. Return on equity capital (ROE) has been decreases because the bank has increased the equity capital for the years and given the bonus share as a dividend so the amount of equity increases during the period of 2001-2005. The earning per share also has been decreased for the period of 2001-2005. Breaking Down of ROE 2001 2002 2003 2004 2005 Banks degree of asset utilization 0. 025 0. 038 0. 038 0. 041 0. 042 The banks equity multiplier 30. 99 28. 07 28. 18 25. 79 20. 13 The net bank operating Margin During the period of 2001-2 005 the average the net bank operating margin was 11. 18% of the total assets. It was not stable over the period which is not a good sign for the bank. Bank Degree of Assets Utilization Banks degree of the asset utilization has been increased during the period of 2001-2005.So return of asset has been also decreased for the same period. Net profit margin has been decreased substantially because the ratio of the equity multiplier was higher. Equity multiplier factor During the period of 2001-2005 the average equity multiplier was 26. 63. By the equity multiplier ratio we can say that it has substantially reduced over time, which means the risk of the failure has gradually increased over time. pic Liquidity Risk 2001 2002 2003 2004 2005 Cash and Due from Banks/Total Assets 0. 043 0. 053 0. 054 0. 054 0. 55 Cash and Government Securities/Total Assets 0. 060 0. 088 0. 087 0. 068 0. 038 pic Purchased Funds/Total Assets Purchased Funds/Total Assets if the use of purchased more that in creases the chance of liquidity crunch in the event of withdrawals rises or the loan quality declines. During the period of 2001-2005 the average ratio for the bank was 3. 12%. We can say that the liquidity risk for the bank was not very high also stable by the year Cash and Government Securities/Total Assets Cash and Government Securities/Total Assets in 2001-2005 was 6. 82% of the total assets which has come from the cash and government security.Banks/Total Assets and Cash and Government Securities/Total Assets are also remains almost same for over the period so the liquidity risk for the bank has been remains low and same for the period. Credit Risk 2001 2002 2003 2004 2005 Total Loans/Total Deposits 0. 84 0. 82 0. 81 0. 89 0. 96 pic Provision for Loan Losses/Total Loans Provision for Loan Losses/Total Loans indicates the amount which should be kept as provision for loan losses from the total loan. During the period of 2001-2005 the average amount of provision for the loan los s was 2. 09%. That means nevertheless 2. 09% of the funds were in risk to be uncollected.As the provision for the loan losses was low, we can say that the credit risk for the bank was not very high for the recent period. Total Loans/Total Deposits Total Loans/Total Deposits indicates the total loan amount that goes from the total deposit. During 2001-2005 on an average 81. 11% of the total deposit they have distributed as loan. This is a very big portion and indicating a great change of credit risk for the bank. Capital Risk 2001 2002 2003 2004 2005 Purchased Funds/Total Liabilities 0. 617 0. 042 0. 033 0. 037 0. 591 pic Equity Capital/Total AssetsEquity Capital/Total Assets indicates that the amount of equity capital invested in the total assets. During the period of 2001-2005 on an average 3. 83% of the total asset was financed by the equity. That is indicating a very bad signal for the bank. Because they mostly they have financed their investment by debt capital which was ve ry risky. Purchased Funds/Total Liabilities Purchased Funds/Total Liabilities indicates that the amount of non deposit liability in the total liability structure. If the purchased fund increases that means the capital risk are also increases. During the period of 2001-2005 the ratio was drastically high for 2001 and 2005 and average ratio was 26. 39%.That means the capital risk for the bank was high for the bank. Chapter-5 Al Arafah Islami Bank Limited Key Profitability Ratios In Banking 2001 2002 2003 2004 2005 Return on Asset( ROA) 0. 002 0. 006 0. 012 0. 012 0. 017 Net interest Margin 0. 015 0. 026 0. 030 0. 030 0. 38 Net non-interest Margin 0. 017 0. 015 0. 018 0. 018 0. 022 Net Bank Operating Margin 0. 067 0. 141 0. 242 0. 252 0. 292 pic Return on Equity Return on equity capital is a measure of the rate of return flowing to the banks shareholder. It approximates the net benefit that the shareholders have received from investing their capital in the bank. During the per iod of 2001-2005 the average return on the equity was 14. 5% which was not attractive, but the good signal is that it has increased over time.Return on Assets The Return on the asset is primarily indicator of managerial efficiency. It indicates how capably the management of the bank has been converting the institutions assets into net earning. From the above analysis we can say that during the period of 2001-2005 the return on asset was only 1. 00%. That means the bank was able to increase the efficiency in managing asset from 2001 to 2005. Net Interest margin The net interest margin measures how large a spread between interest revenues and interest costs. Management has been able to achieve of close control over the banks earning assets and the pursuits of the cheapest source of funding.The average net bank interest margin for the bank was 2. 78% during the period of 2001-2005 which is also not so attractive. Non-interest Margin The non-interest margin measures the amount of non in terest revenue streaming from deposits charges and other service fees the bank has been able to collect relative to the amount of non interest cost incurred (including salaries and wages, repair and maintenance cost on bank facilities and loan loss expense). The net non interest margin was 1. 8% in 2001-2005. They wasnt been able to generate more income from the non interest source like Treasury bill, commission on brokerage, and commission from the letter of credit. Earning Per Share 2001 2002 2003 2004 2005 Earnings Per Share 101. 43 312. 420 251. 1 263. 67 387. 8 pic Earning per share measures the earning against per share. During the period of 2001-2005, the earning per share was Tk 263. 18. If we compare with other bank we will see that their earning per share was very good. Breaking Down of ROE 2001 2002 2003 2004 2005 Banks degree of asset utilization 0. 32 0. 041 0. 048 0. 048 0. 059 The banks equity multiplier 24. 968 21. 447 14. 754 13. 449 12. 564 pic The Net Bank Operating Margin During the period of 2001-2005 the average the net bank operating margin was 19. 87%. If we compare with other banks it was good. Another important thing is that it has increased over time. Degree of Operating Margin On an average they have earned 4. 55% operating revenue during the period of 2001-2005 by using total asset. It was not so good. This indicates that they ware unable to utilize their assets.Equity Multiplier During the period of 2001-2005 the equity multiplier was 17. 467. By analyzing the equity multiplier ratio we can say that it is substantially higher, that means the risk of the failure is also high for the period of 2001-2005. As the risk is higher so the banks profit margin is also higher. Liquidity Risk 2001 2002 2003 2004 2005 Cash and Due from Banks/Total Assets 0. 080 0. 090 0. 089 0. 093 0. 201 pic Purchased Funds/Total AssetsPurchased Funds/Total Assets if the use of purchased more that increases the chance of liquidity crunch in the even t of withdrawals rises or the loan quality declines. During the period of 2001-2005 the average ratio was 7. 4%. Because of lower percentage we can say that the liquidity risk for the bank is also lower for the bank. Cash and Due from Banks/Total Assets During the period of 2001-2005 on an average the bank had only 7. 42% cash and due from bank against their total assets. This indicates a very bad signal for the bank. Liquidity risk for the bank was very high for that period. Credit Risk 2001 2002 2003 2004 2005 Provision for Loan Losses/Total Loans 0. 16 0. 033 0. 024 0. 048 0. 011 pic Total Loans/Total Deposits Total Loans/Total Deposits indicates the total loan amount that goes from the total deposit. During the period of 2001-2005, 84. 13% of the total deposit distribute as loan. They have distributed a big portion of their deposits as loan it could increase credit risk for the bank. Provision for Loan Losses/Total Loans Provision for Loan Losses/Total Loans indicates the amo unt which should be kept as provision for loan losses from the total loan. During the period of 2001-2005 the average amount of provision for the loan loss was 2. 4%. As the provision for the loan losses was lower so we can say that the credit risk for the bank was also lower for the bank in that period, and the bank has been able to collect the loan more efficiently. Capital Risk 2001 2002 2003 2004 2005 Purchased Funds/Total Liabilities 0. 050 0. 056 0. 059 0. 117 0. 114 pic Equity Capital/Total Assets Equity Capital/Total Assets indicates that the amount of equity capital invested in the total assets.During the period of 2001-2005, on an average 6. 17% of the total asset was financed by the equity and it is gradually increased over the year and for the period. Purchased Funds/Total Liabilities Purchased Funds/Total Liabilities indicates that the amount of non deposit liability in the total liability structure. If the purchased fund increases that means the capital risk are al so increases. During the period of 2001-2005 they were able to maintain the ratio within 8. 00%. That means the capital risk for the bank was lower for the period. Though the bank is able to reduce the non-deposit source of funding but still they are exposed to a higher capital risk. Chapter-6 Eastern Bank Limited Key Profitability Ratios In Banking 2001 2002 2003 2004 2005 Return on Asset( ROA) 0. 02 0. 02 0. 02 0. 02 0. 02 Net interest Margin 0. 03 0. 03 0. 02 0. 03 0. 03 Net non-interest Margin 0. 02 0. 02 0. 03 0. 03 0. 03 Net Bank Operating Margin 0. 16 0. 19 0. 18 0. 22 0. 18 picReturn on Equity Return on equity capital is a measure of the rate of return flowing to the banks shareholder. It approximates the net benefit that the shareholders have received from investing their capital in the bank. During the period of 2001-2005 the average return on the equity was 17. 2%. The ratio was stable over the period. The bank has able to maintain the stability of income. Return on Assets The Return on the asset is primarily indicator of managerial efficiency. It indicates how capably the management of the bank has been converting the institutions assets into net earning. During the period of 2001-2005 the average ratio was 2. 00%.It was not so attractive but good thing