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

07 August 2007 Md. Mahfuzur Rahman 2003-2-10-187 BBA tocopherol West University love life Mahfuz As the students of blood administ dimensionn atomic number 18 supposed to prep ar a Report and submit that at the end of the semester, you be authorized to get hold of an eliciting issue and construct a formal writing on that. The issue should be the Analysis of Basel Agreement and Its influence on lodges of Bangladesh. The report should include whatever key locomote such as Executive summary, introduction, conclusion, sources of information and the analysis. The title should be a statement which willing describe the report precisely.I will value if you prepare the report according to the instruction institutionalizen. Thanks Nikhil Chandra Shil Senior lecturer & assistance Proctor East West University 07 August, 2007 Nikhil Chandra Shil Senior Lecturer & Assistant Proctor Department of Business Administ symmetryn 43 Mohakhali C/A cap of Bangladesh, Bangladesh Dear Sir He re is the report on the Analysis of Basel Agreement and Its influence on verifys of Bangladesh. As you will disc everyplace that I have conducted an in-depth investigation and analysis of diametrical types balance and tried to analyze certain circumstances and displayed our results of analysis and findings in this report.I will re on the completelyy appreciate if you go through with(predicate) the report and express your feedback on that. Thanks Sincerely Md. Mahfuzur Rahman 2003-2-10-187 Acknowledgement The report is ground on the regale analysis of different assert in Bangladesh. while any an all in 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. First of all I must humbly acknowledge the contri besidesion of Nikhil Chandra Shil for the cadence and effort to help me.I have had the unafraid fortunate of meeting him in personally and parting his views and i deas. Next I must thank the University for offering us this thrust (BUS 498) course and our course teacher for his encouragement and coope dimensionn. I believe it will help us in understanding and identifying different types of fortune in the positing sector. Finally, I would like to acknowledge the contributions of my parents. Although they didnt write a iodine expression of this report or any artworks, but their imprint dissolve be found on allthing I do. They support me, encourage e, and inspire me. They give my work and my live -meaning. It is my M other who put ups 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 admittance 11 1. 5 asserting Industry Overview 12 1. 6 credence evaluate Status 16 Chapter 2 17-22 2. reveal advantageousness Ratios In margeing 17 2. 2 Earning Per portion 18 2. 3 run lodgess hazard 20 2. 4 impute preten d 20 2. 5 cap hazard 21 3. severalize advantageousness Ratios In sticking 23 3. 2 Earning Per deal out 24 3. 3 fluidness gamble 26 3. 4 Credit run a guess of exposure 26 3. 5 p for each unrivaledy take chances 27 4. blusher Profitability Ratios In affirming 29 4. 2 Earning Per Share 30 4. 3 liquid happen 32 4. 4 Credit insecurity 33 4. 5 large(p) Risk 34 5. 1 Key Profitability Ratios In desireing 35 5. Earning Per Share 36 5. 3 fluidness Risk 38 5. 4 Credit Risk 38 5. 5 slap-up Risk 39 6. Key Profitability Ratios In depositing 41 6. 2 Earning Per Share 42 6. 3 fluidity Risk 44 6. 4 Credit Risk 45 6. great(p) Risk 45 Chapter 7 city lingo 47-52 7. 1 Key Profitability Ratios In savings commiting 47 7. 2 Earning Per Share 48 7. 3 Liquidity Risk 50 7. Credit Risk 51 7. 5 Capital Risk 51 Chapter 8 Uttara desire 53-58 8. 1 Key Profitability Ratios In jargoning 53 8. 2 Earning Per Share 54 8. Liquidity Risk 55 8. 4 Credit Risk 56 8. 5 Capital Risk 57 Chapter 9 indigenous assert 59-64 9. 1 Key Profitability Ratios In depository financial institutioning 59 9. 2 Earning Per Share 60 9. Liquidity Risk 62 9. 4 Credit Risk 63 9. 5 Capital Risk 63 Chapter 10 S break throughheast fix 65-70 10. 1 Key Profitability Ratios In Banking 65 10. Earning Per Share 66 10. 3 Liquidity Risk 68 10. 4 Credit Risk 68 10. 5 Capital Risk 67 Chapter 11 Conclusion 71-73 11. 1 Conclusion 71 11. Bibliography 73 Chapter-1 Introduction ORIGIN OF THE REPORT This report has been prepared as a requirement for the completion of the BBA program of the Department of Business Administ symmetryn, at East West University, expectant of Bangladesh. OBJECTIVE The main objective of the report is to unclutter on the different dimension analysis of some major hidden pious platitude in Bangladesh and its Comparative Analysis with other Banks prevailing in the market.I will withal try to find out how t he mathematical operation of the till is improving everyplace the twelvemonths and how it is contributing to the growth of the edgeing sector. The sideline specific objectives depose be identified 1. To make a relative oeuvre on cardinal major private swear in Bangladesh. 2. To suggest suit open nebs to remove the existing problems (if any) & improve the bewilder condition. info selective information used in this compute are derived from the published fiscal statements of nine valuation reserves direct in Bangladesh as of 31 December 2001, 31 to December 2005 from 48 slangs run in Bangladesh.There are some deposits whose financial statements either are non avail adequate to(p) or subscribe some incomplete or missing accounts, or are distant hence they are deleted from observation. Banks are chosen by their status of operation. I have chosen some Liquidated Banks, some Problem Banks, and some approach pattern Banks for my research. INITIAL VARIABLES There a re some basic financial surgical process and structural characteristics to evaluate a wedge, namely moolahability, efficiency or productivity, character reference of summations, growth and aggressiveness, liquidity, size, corking adequacy, income diversification, and dependence on affiliates.There is, certainly, no single varicap subject which could measure and represent each characteristic perfectly. There are, typically, some(prenominal) variables that proximate to a characteristic of intimacy. Based on literature critical review on banking and financial institutions and initial judgment, I chose the following variables to represent each characteristic as listed below. Earning and favourableness produce on Assets (ROA) = expediency Income / Assets (NI/A) come down on justness (ROE) = displace Income / truth (NI/E) harvest on Earning Assets (ROEA) = sack up Income / Earning Assets (NI/EA) Return on gives (ROL) = questingness Income / bestows (II/L)Interest Inc ome / Earning Assets (II/EA) authorise Interest Income / Earning Assets (NII/EA) Interest strand (IM) = Return on storehouse Cost of Fund (IM) productiveness and Efficiency run Expense / Operating Income (OE/OI) Profit coast (PM) = Earning in the lead Taxes / Operating Income (EBT/OI) Sta. Expense / Assets (SE/A) Non- invade Expense / Assets (NonIE/A) Quality of Assets Write-offs / Loans (W/L) render for Loan losings / Loans (PLL/L) preparedness for Loan losings / virtue (PLL/E) Capital Adequacy justice / Assets (E/A) Equity / Earning Assets (E/EA)Equity / Loans (E/L) Growth and Aggressiveness Loans Growth enjoin (LGR) Loans- grocery-Share increment (LMSI) Deposit Growth Rate (DGR) Deposit-Market-Share Increment (DMSI) Equity Growth Rate (EGR) Loans to Deposit Ratio = Loans / Deposit (L/D) Credibility or Cost of Fund Interest Expense / Deposit (IE/D) Interest Expense / third base caller Fund (IE/TPF) Size ln (Assets) (lnA) Income and Sources of Fund Diversification N on- wager Income / Operating Income (NonII/OI) Deposit / Third Party Fund (D/TPF) Liquidity Liquid Assets / Deposit (LA/D) METHODOLOGYThe study required information regarding the past & present condition of different Bank in Bangladesh. Necessary data and information were gathered, secondary data, and annual report. a) Sources of Data The following sources had been used for the purpose the purpose of haveing data as required for this report Primary sources I) Observation, ii) Personal communication with course instructor Secondary Sources I) Annual and other tipical reports of different Bank in Bangladesh ii) Various manuals (conditions of use guides) and brochures, iii) Service Rules & IV) Miscellaneous Publications.SCOPE The report is expressage to the understanding of honorable mention risk, peachy risk, liquidity risk analysis, and find out the key profitability ratio, and a comparative variant to that analysis. It was really ambitious for me to gather all the necessary i nformation because the managers were non cooperative at all. As a result, we have chosen the following nine banks base on the availability of information we get. LIMITATIONS 1. As a student of business administration, analyzing of different sorts of risk and ratio is new for me so it took some succession to understand.Besides three months time is inadequate 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 non given the annual report. 3. decent records, publications were not available. The constraints narrowed the scope of real analysis. 4. Most of the time I have manifestation upd the problem with the annual report which is prepared in the lead 2000. 5. Accounting practice is different for the different bank. 6. Credit WorthinessAt present, we do not have any recognise rating family in our country and information on the customer from the third fellowship is also not always reliable. T herefore, we need to make our own make headway system. Since it will be a very difficult to prepare a standard scoring system to assess everybodys credit morality so we shall also have top nifty depend on judgmental analysis to make decision on every private cases. either individual case shall be unique and sepa localize from others. executive SUMMARY Bank Profitability Liquidity Risk Credit Risk Capital Risk Dhaka Bank medium pocket-size utter middling NCC Bank High High Low Average theme 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 peak Bank High** Average Low Low Southeast Bank Average High Average Average TABLE Summery of Risk Categories Risk Type Definition Comment Country Risk ( The risk that a forestall party is unable to meet its ( Country risk is often confused with s everywhereeign risk, foreign currency obligations as a r esult of adverse which is the counter party credit risk of the g all everyplacenment. sparing conditions or actions taken by governments in the relevant country. ( Country Risk is also often referred to as transfer risk or impair border risk. ( Country related events such as economic downturn, governmental changes devaluation etc. ill often have signifi screwt impact on the other risks that SCB must manage. Credit Risk ( The risk that a counter party will not settle its ( Assessing this risk requires an understanding of the obligations in accordance within agreed terms 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 specie will not be available to meet ( Includes the centering of hard currency flow under business as liabilities as they fall referable usual and stress conditions together with setting of targets for balance sheet ratios. Market Risk ( The risk of exit engenderd by adverse changes in the ( Does not include the risk of price movements in other price of additions or contracts currently held by the markets e. g. stocks and handles, property, commodities. company (this risk is also known as price risk). Does include basis risk. Capital Risk ( The risk that a bank chief city might be undergone ( Equity Capital/ full Assets has been plus but Purchased gold/ heart Liabilities Business Risk ( The risk of failing to achieve business targets cod ( Includes decisions 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 heavy or regulatory ( Includes banking specific legislation and normals requirements. but also all applicable law s. In extreme cases could lead to loss of banking license(s). Source Bank Management & Financial Services (6th Edition) Pages 161, 162, 164, 328, 472. INTRODUCTION The overall objective of my project report is to clearly identify and briefly discuss 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 gibe nine bank to evaluate the performance of them. And try to make a comparison among all of the following. 1. Dhaka Bank Ltd 2. subject fieldCredit Ltd. 3. NationalBank Ltd. 4. Al-Arafah Islami Bank special(a) (Al-Arafah) 5. Eastern 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. Taking decision to provide credit forwardness to a corporate customer is not easy in this solid changing global environment especially in Bangladesh .To smooth the whole process the work is divided. So, before making a decision the every necessary information should be carefully analyzed by different departments and different good deal who have gained expertise in their related field. hence it helps both in making correct decision and smoothen the process to satisfy the customer need promptly. A bank is an organization that engages in the business of banking. Banks perform three functions 1. Provide the pith of payment through administering the checking account system. 2. Intermediate amidst depositors and borrowers by offering savings and time deposit- to depositors and providing all types of contributes to borrowers. 3.Provide a variety of financial go, encompassing fiduciary work, enthronization banking and off-balance sheet risk taking. Commercial banks are private profit seeking enterprises, balancing risk and devolve to their portfolio management with the goal of maximize administerholder wealth. Share holders wealth depends on three factors 1. The volume of silver flows resulting from portfolio decisions. 2. The timing of those cash flows 3. The risk and volatility of the cash flows. Commercial banks face six risks 1. Credit or Default risk 2. Interest-rate risk 3. Liquidity risk 4. Operational risk 5. Capital. Risk 6. Fraud risk The young 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 can within their limited scope. Every bank follows a predefined structured procedure in providing credit facilities to their customers. BANKING perseverance OVERVIEW The banking industry in Bangladesh is more than(prenominal) than 600 years old. The first commercial bank was ANZ Grindlays Bank which opened in1905. The central bank of the country, Bangladesh Bank insures 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. All banks and financial institutions are exceedingly 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 sustain a 4% hard cash Reserve Requirement (CRR), which is non- engage bearing and a 16% Secondary Liquidity Require ment (SLR). With the liberalization of markets, competition among the banking products and financial services seems to be suppuration more intense each day. In addition, the banking products offered in Bangladesh are slightly homogeneous in nature due to the tight regulations imposed by the central bank. Competing through differentiation is increasingly 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, maintaining foreign transmute reserve and providing transaction facilities of all public mo shekelsary matters. BB is also obligated for planning the governments mo dineroary policy and implementing it thereby. The BB has a governing body comprising of nine members with the Governor as its chief. Apart from the head 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 close 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 & 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. triteBank Ltd. 16. One BankLtd. 17. EXIM Bank 18. BangladeshCommerce Bank Ltd. 19. reciprocalTrust BankLtd. 20. FirstSecurity Bank Ltd. 21. The PremierBank Ltd. 22. Bank AsiaLtd. 23. The Trust Bank Ltd. 24. Brac Bank Ltd. Islamic Banks 1.Islami Bank Bangladesh trammel (IBBL) Al Baraka Bank Bangladesh restrict (AL-Baraka) Al-Arafah Islamic Bank Ltd. (Al-Arafah) Social enthronement Bank Limited (SIBL) Faysal Islamic Bank of Bahrain EC (FIBB) 6. Shah Jalal Bank Limited (Based on Islamic Shariah) Foreign / Multinational Banks 1. Habib Bank Ltd. 2.State Bank Of India 3. CreditAgricole Indosuez (The Bank) 4. NationalBank of Pakistan 5. MuslimCommercial Bank Ltd. 6. City Bank NA 7. Hanvit Bank Ltd. 8. HSBC Ltd. 9. Shamil IslamiBank Of Bahrain EC 10. Standard hire Bank Development Banks 1. BangladeshKrishi Bank 2. Rajshahi Krishi UnnayanBank 3. BangladeshShilpa Bank 4. BangladeshShilpa RinSangstha 5. Bank of clear Industries &CommerceBangladesh 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 deputation Remarks Long Term Short Term 01. Dhaka Bank Ltd - - 31. 12. 6 scream pass judgment 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 Return on Asset( ROA) 0. 015 0. 012 0. 013 0. 013 0. 014 Net liaison strand 0. 019 0. 021 0. 019 0. 022 0. 023 Net non-interest gross profit 0. 024 0. 030 0. 022 0. 020 0. 019 Net Bank Operating bound 0. 49 0. 243 0. 285 0. 282 0. 311 pic Return on Equity Return on candour capital is a measure of the rate of spend flowing to the banks shareholder. It approximates the mesh hit that the shareholders have have from investment their capital in the bank. During the occlusive of 2001-2005 the add up return on the justness was 0. 274 which actor 27. 4%. but if we look at every individual year we can ordinate that it has diminish year by year. The ratio was fall because of the bank has change magnitude the right capital over the year and state the bonus share as a dividend. Return on AssetsThe Return on the plus is in general indicator of managerial efficiency. It indicates how capably the management of the bank has been converting the institutions summations into terminate earning. From the above analysis we can see that during the occlusion of 2001-2005 the numerate ratio was 1. 3%. Return on assets has change magnitude over time. That means the bank was able to profit the efficiency in managing asset from 2001-2005. Net Interest brink The win interest edge measures how hulking a spread between interest revenues and interest approachs. Management has been able t o achieve of close control over the banks earning assets and the pursuits of the cheapest source of keep.The intermediate sort out bank interest margin for Dhaka bank was 2. 1% during 2001-2005. By looking at the table we can sound out that it has increase distributor point of time by goal accept 2003, which indicates a good signal for the Bank. Net Non Interest valuation reserve The non-interest margin measures the make sense of money of non interest revenue drift from deposits charges and other service fees the bank has been able to collect relative to the sum of money of non interest cost incurred (including salaries and wages, improve and maintenance cost on bank facilities and add loss expense). The cabbage non interest margin was 2. 30% during the pointedness of 2001-2005. It has decline over the purposes accept 2001.The income from the non interest source, like Treasury bill, flush on brokerage, and commitment from the garner of credit has been declined ov er the years. 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 average 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 tear OF ROE 2001 2002 2003 2004 2005 Banks degree of asset use 0. 043 0. 050 0. 045 0. 045 0. 045 The banks truth multiplier factor 29. 02 21. 33 17. 20 18. 94 14. 92 Net Profit Margin Net profit margin has fluctuated over time. But if we look at the average which was 29. 39% with the past five years, we can enounce that last five years wage profit margin was better. Banks Degree of Assets Utilization Banks Degree of Assets Utilization was 4. 5% during 2001-2005 which was not dreary as compare to other banks. Equity Multiplier picDuring the period of 2001-2005 the average equity multiplier was 20. 283. By the equ ity multiplier ratio we can word that it is highest in 2001 which was 09. 02%. that means the risk of the failure was also highest for that period. As the risk was higher(prenominal), we can enunciate that the banks profit margin also was higher for that period. Liquidity Risk 2001 2002 2003 2004 2005 interchange and Due from Banks/ keep down Assets 0. 152 0. 122 0. 093 0. 071 0. 079 Cash and governance Securities/ centre Assets 0. 062 0. 076 0. 98 0. 137 0. 155 pic Purchased currency/ aggregate Assets If the use of purchased is more that increases the chance of liquidity crunch in the event of withdrawals rises or the bestow quality declines. During 2001-2005, as the average ratio was 1. 44%, we can say that the liquidity risk for the bank is move for the Bank. Cash and disposal Securities/ positive Assets Cash and Government securities was 10. 54% of the match assets on an average which was not so much good for the Bank because cash and government securities are the mo st liquid assets for a bank. So bank may face liquidity problem in the future. Credit Risk 2001 2002 2003 2004 2005 come Loans/ arrive Deposits 0. 56 0. 67 0. 70 0. 74 0. 82 pic Provision for Loan Losses/ summate Loans Provision for Loan Losses/ constitutional Loans indicates the center which should be kept as provision for give losses from the fall loan. During the period (2001-2005) the average measuring of provision 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. integral Loans/ number Deposits Total Loans/Total Deposits indicates the bring loan amount that goes from the correspond deposit.During (2001-2005), on an average 68. 86% of the come in deposit distribute as loan. This indicates they have distributed a well-favoured portion of their deposited amount as loan. That is some what risky but as their provision for loan losses was very low they will have no problems with this. Capital Risk 2001 2002 2003 2004 2005 Purchased property/Total Liabilities 0. 016 0. 011 0. 012 0. 012 0. 025 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 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 in stages increased over the period. Purchased coin/Total Liabilities Purchased Funds/Total Liabilities indicates that the amount of non deposit financial obligation in the total obligation structure. If the purchased stemma increases that means the capital risk are also increases. During the period of 2001-2005 1. 52% of the liability was financed by the purchased fund that means non deposit sources which is not the core field of operations 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 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 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 be adrift 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 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 Earnings 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 decrease 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 degree of asset role 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 Du ring 2001-2005 the average the net bank in operation(p) 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 earned 15. 08% operating revenue in 2001-2005 by using their total assets. Over the period it was consistent accept 2003. Equity Multiplier 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 AssetsIf the use of purchased funds are more that increases the chance of liquidity crunch in the event of withdrawals rises or the loan quality dec lines. 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 provision 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 for the bank was lower for the Bank and the bank has been able to collect the loan more efficiently. Total Loans/Total DepositsTotal Loans/Total Depo sits 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 little by little 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 considerable amount of money they have financed by debt equity. Purchased Funds/Total Liabilities Purchased Funds/Total Liabilities indicates that the amount of non deposit liability in the total liab ility 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 t he 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 to 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 immutable 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 earning 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 Na tional 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, moreover 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 enjoyment 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 2001-2005 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 f or 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 analogous period. Net profit margin has been decreased substantially because the ratio of the equity multiplier was higher. Equity Multiplier 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 increases the chance of liquidity crunch in the event of withdrawals rises or the loan quality declines. During the period of 2001-2005 the ave rage 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 trunk 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 loss was 2. 09%. That means only 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 declamatory 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 very 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 period 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 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 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 g ood. other 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 liquidate 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 event of withdrawals rises or the loan quality declines. During the period of 2001-2005 the average ratio was 7. 4%. Because of lower percent age 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 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 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 also 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 heart-to-heart 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