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

07 August 2007 Md. Mahfuzur Rahman 2003-2-10-187 BBA East West University Dear Mahfuz As the students of business administproportionn are supposed to mug up a Report and submit that at the end of the semester, you are authorized to choose an raiseing issue and construct a formal compensate on that. The issue should be the Analysis of Basel Agreement and Its influence on confides of Bangladesh. The address should accept some key steps such as Executive summary, introduction, conclusion, ascendents of entropy and the analysis. The title should be a statement which leave describe the describe precisely.I depart appreciate if you prepare the report according to the instruction given. Thanks Nikhil Chandra Shil Senior Lecturer & Assistant Proctor East West University 07 August, 2007 Nikhil Chandra Shil Senior Lecturer & Assistant Proctor incision of personal conviction line Administ ration 43 Mohakhali C/A expectant of Bangladesh, Bangladesh Dear Sir Here is the report on the Analysis of Basel Agreement and Its influence on marges of Bangladesh. As you will find that I expect conducted an in-depth investigation and analysis of disparate types ratio and tried to analyze certain circle and displayed our results of analysis and findings in this report.I will reall(a)y appreciate if you go through the report and express your feedback on that. Thanks Sincerely Md. Mahfuzur Rahman 2003-2-10-187 Acknowledgement The report is based on the dandy punishment analysis of different trust in Bangladesh. While any an all errors of fact, omission, and emphasis are solely our responsibility. I would remiss, if I did non find those who helped me to prepare this report. First of all I must humbly acknowledge the contri thation of Nikhil Chandra Shil for the time and effort to help me.I fuddle had the right-hand(a) fortunate of meeting him in personally and share his views and ideas. Next I must thank the University for offering us this project (BUS 498) ra ils and our course instructor for his encouragement and cooperation. I believe it will help us in understanding and identifying different types of encounter in the coasting sector. Finally, I would kindred to acknowledge the contributions of my parents. Although they didnt write a single word of this report or any artworks, but their imprint dissolve be found on e trulything I do. They rear me, encourage e, and inspire me. They give my work and my live -meaning. It is my M new(prenominal) who tenders 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 thickset 09 1. 4 Introduction 11 1. 5 affirming Indus settle Overview 12 1. 6 opinion Rating Status 16 Chapter 2 17-22 2. Key profitability Ratios In believeing 17 2. 2 Earning Per circumstances 18 2. 3 Liquidity venture 20 2. 4 Credit adventure 20 2. 5 seat of g everywherenment take chances 21 3. Key positi vity Ratios In pious platitudeing 23 3. 2 Earning Per function 24 3. 3 Liquidity run a as take of infection 26 3. 4 Credit run a try 26 3. 5 corking happen 27 4. Key Profitability Ratios In savings buzzwording 29 4. 2 Earning Per Share 30 4. 3 Liquidity Risk 32 4. 4 Credit Risk 33 4. 5 Capital Risk 34 5. 1 Key Profitability Ratios In Banking 35 5. Earning Per Share 36 5. 3 Liquidity Risk 38 5. 4 Credit Risk 38 5. 5 Capital Risk 39 6. Key Profitability Ratios In Banking 41 6. 2 Earning Per Share 42 6. 3 Liquidity Risk 44 6. 4 Credit Risk 45 6. Capital Risk 45 Chapter 7 urban center Bank 47-52 7. 1 Key Profitability Ratios In Banking 47 7. 2 Earning Per Share 48 7. 3 Liquidity Risk 50 7. Credit Risk 51 7. 5 Capital Risk 51 Chapter 8 Uttara Bank 53-58 8. 1 Key Profitability Ratios In Banking 53 8. 2 Earning Per Share 54 8. Liquidity Risk 55 8. 4 Credit Risk 56 8. 5 Capital Risk 57 Chapter 9 Prime Bank 59-64 9. 1 Key Profitabili ty Ratios In Banking 59 9. 2 Earning Per Share 60 9. Liquidity Risk 62 9. 4 Credit Risk 63 9. 5 Capital Risk 63 Chapter 10 Southeast Bank 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 closing 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 stemma Administration, at East West University, Dhaka. OBJECTIVE The main objective of the report is to illuminate on the different ratio analysis of some major private bank in Bangladesh and its Comparative Analysis with other Banks prevailing in the market.I will similarly try to find out how the performance of the bank is improving over the familys and how it is contributing to the growth of the banking sector. The next specific objectives chiffonier be identified 1. To make a comparative reputation on nine major private bank in Bangladesh. 2. To suggest suimesa measures to remove the existing enigmas (if any) & improve the present condition. DATA Data utilize in this project are derived from the published fiscal statements of nine banks operate in Bangladesh as of 31 December 2001, 31 to December 2005 from 48 banks operating in Bangladesh.There are some banks whose financial statements either are not avail sufficient or contain some incomplete or deficient accounts, or are contradictory hence they are deleted from observation. Banks are chosen by their status of operation. I sop up chosen some Liquidated Banks, some occupation Banks, and some Normal Banks for my research. INITIAL VARIABLES There are some basic financial performance and structural feature films to evaluate a bank, namely profitability, efficiency or productivity, quality of assets, growth and aggressiveness, liquidity, size, keen adequacy, income diversification, and dependence on affiliates.There is, certainly, no single vari satisfactory which could measure and represent each characteristic perfectly. There are, typically, several(prenominal) vari adapteds that proximate to a characteristic of enkindle. Based on literature review on banking and financial institutions and initial judgment, I chose the following variables to represent each characteristic as listed below. Earning and profitability retrovert on Assets (ROA) = exonerate Income / Assets (NI/A) retrogress on lawfulness (hard roe) = Net Income / faithfulness (NI/E) reelect on Earning Assets (ROEA) = Net Income / Earning Assets (NI/EA) Return on gives (ROL) = Interest Income / Loans (II/L)Interest Income / Earning Assets (II/EA) Net Interest Income / Earning Assets (NII/EA) Interest boundary line (IM) = Return on Fund Cost of Fund (IM) Productivity and Efficiency Operating write down / Operating Income (OE/OI) Profit margin (PM) = Earning Before Taxes / Operating Income (E BT/OI) Sta. Expense / Assets (SE/A) Non- elicit Expense / Assets (NonIE/A) Quality of Assets Write-offs / Loans (W/L) preparedness for Loan Losses / Loans (PLL/L) Provision for Loan Losses / right (PLL/E) Capital Adequacy Equity / Assets (E/A) Equity / Earning Assets (E/EA)Equity / Loans (E/L) Growth and Aggressiveness Loans Growth Rate (LGR) Loans-Market-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 / trey Party Fund (IE/TPF) Size ln (Assets) (lnA) Income and Sources of Fund Diversification Non- saki Income / Operating Income (NonII/OI) Deposit / Third Party Fund (D/TPF) Liquidity Liquid Assets / Deposit (LA/D) METHODOLOGYThe discover required information regarding the past & present condition of different Bank in Bangladesh. Necessary data and information were gathered, secondary data, an d annual report. a) Sources of Data The following sources had been calld for the purpose the purpose of collecting data as required for this report Primary sources I) Observation, ii) Personal communication with course instructor auxiliary Sources I) yearbook and other tipical reports of different Bank in Bangladesh ii) Various manuals (conditions of usance guides) and brochures, iii) Service Rules & IV) Miscellaneous Publications.SCOPE The report is limited to the understanding of book of facts risk, capital risk, liquidity risk analysis, and find out the key profitability ratio, and a comparative 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 get. LIMITATIONS 1. As a student of business administration, analyzing of different sorts of risk and ratio is new for me so it took s ome time 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 not given the annual report. 3. capable records, publications 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. invoice practice is different for the different bank. 6. Credit WorthinessAt present, we do not have any reference work rating company in our countrified and information on the customer from the third society is alike not always reliable. Therefore, we need to make our own scoring system. Since it will be a very difficult to prepare a standard scoring system to assess everybodys credit worthiness so we shall also have outstrip substantially depend on judgmental analysis to make decision on every individual cases. Every individual case shall be p reposterous and separate from others. EXECUTIVE SUMMARY Bank Profitability Liquidity Risk Credit Risk Capital Risk Dhaka Bank middling economic crisis Low norm NCC Bank advanced-pitched High Low Average discipline 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 Comment Country Risk ( The risk that a counter troupe is unable to meet its ( Country risk is often confused with sovereign risk, foreign currency obligations as a result of adverse which is the counter party credit risk of the government. economic conditions or actions taken by governments in the relevant country. ( Country Risk is also often referred to as transfer risk or cross border risk. ( Country related events such as economic dow nturn, political changes devaluation etc. ill often have significant electrical shock 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 cash in hand will not be available to meet ( Includes the counselling of cash flow under business as liabilities as they fall due usual and stress conditions together with setting of targets for balance sheet ratios. Market Risk ( The risk of loss generated by adverse changes in the ( Does not include the risk of apostrophize movements in other price of assets or contracts currently held by the markets e. g. stocks and shares, 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/ essence Assets has been change magnitude but Purchased currency/ agree Liabilities Business Risk ( The risk of failing to achieve business targets due ( 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 legal or regulatory ( Includes banking specific legislation and regulations requirements. but also all applicable laws. 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 differ ent 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 nitty-gritty nine bank to evaluate the performance of them. And try to make a comparison among all of the following. 1. Dhaka Bank Ltd 2. NationalCredit Ltd. 3. NationalBank Ltd. 4. Al-Arafah Islami Bank Limited (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 facility to a corporate customer is not easy in this fast changing global environment especially in Bangladesh.To liquified 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 people who have gained expertise in their related field. Thus it helps both in making correct decision and smoothen the process to reward the customer need quickly. A bank is an organization that engages in the business of banking. Banks perform three functions 1. Provide the essence of payment through administering the checking account system. 2. intermediate between clingors and borrowers by offering savings and time deposit- to depositors and providing all types of brings to borrowers. 3.Provide a variety of financial services, encompassing fiduciary services, investment banking and off-balance sheet risk taking. Commercial banks are private profit seeking enterprises, balancing risk and bribe to their portfolio management with the goal of maximizing shareholder wealth. Share holders wealth depends on three factors 1. The volume of cash 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 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 can within their limited scope. Every bank follows a predefined structured procedure in providing credit facilities to their customers. BANKING INDUSTRY OVERVIEW The banking labor in Bangladesh is more than 600 years old. The first commercial bank was ANZ Grindlays Bank which undefendable 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. All banks and financial institutions are highly 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 maintain a 4% bullion Reserve Requirement (CRR), which is non-interest 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 somewhat homogeneous in nature due to the tight regulations imposed by the central bank. Competing through differentiation is i ncreasingly difficult and other banks quickly reproduction 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 exchange reserve and providing deed facilities of all public mo electronic networkary matters. BB is also responsible for planning the governments monetary policy and implementing it thereby. The BB has a governing body comprising of nine members with the Governor as its chief. by 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 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 & 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. 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 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 / 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 Chartered Bank Developme nt Banks 1. BangladeshKrishi Bank 2. Rajshahi Krishi UnnayanBank 3. BangladeshShilpa Bank 4. BangladeshShilpa RinSangstha 5. Bank ofSmall 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 Agency Remarks Long Term 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 Eas t 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 interest Margin 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 Return on Equity Return on rightfulness 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 commit their capital in the bank. During the full point of 2001-2005 the meat return on the righteousness was 0. 274 which means 27. 4%. But if we look at every individual year we can recite that it has decreased year by year. The ratio was decreased because of the bank has change magnitude the righteousness capital over the year and declared th e bonus share as a dividend. Return on AssetsThe Return on the asset is primarily power 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 see that during the current of 2001-2005 the fair ratio was 1. 3%. Return on assets has increased over time. That means the bank was able to increase the efficiency in managing asset from 2001-2005. Net Interest Margin The net interest edge measures how elephantine a spread between interest tax incomes and interest courts. Management has been able to achieve of secretive control over the banks earning assets and the pursuits of the cheapest source of documentation.The total net bank interest border for Dhaka bank was 2. 1% during 2001-2005. By looking at the table we can say that it has increased boundary by layover accept 2003, which indicates a good signal for the Bank. Net Non Interest Margin The non-interest marg in measures the add together of non interest revenue streaming from deposits charges and other service fees the bank has been able to collect relative to the criterion 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 2. 30% during the boundary of 2001-2005. It has decline over the heads accept 2001.The income from the non interest source, like treasury bill, commission on brokerage, and commission from the letter of credit has been declined over 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. break Down OF ROE 2001 2002 2003 2004 2005 Banks degree of asset utili zation 0. 043 0. 050 0. 045 0. 045 0. 045 The banks fairness multiplier 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 say that last five years net profit margin was break dance. Banks compass point of Assets Utilization Banks Degree of Assets Utilization 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 faithfulness multiplier was 20. 283. By the comeliness multiplier ratio we can say 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 say that the banks profit margin also was higher for that period. Liquidity Risk 2001 2002 2003 2004 2005 Cash and Due from Banks/ heart Assets 0. 152 0. 122 0. 093 0. 071 0. 079 Cash and government activity Securities/ tot ality Assets 0. 062 0. 076 0. 98 0. 137 0. 155 pic Purchased finances/Total Assets If the use of purchased is more that increases the chance of liquidity crunch in the event of withdrawals rises or the loan quality declines. During 2001-2005, as the average ratio was 1. 44%, we can say that the liquidity risk for the bank is lower for the Bank. Cash and Government Securities/Total Assets Cash and Government securities was 10. 54% of the total 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 Total Loans/Total Deposits 0. 56 0. 67 0. 70 0. 74 0. 82 pic Provision for Loan Losses/Total Loans Provision for Loan Losses/Total Loans indicates the amount which should be kept as preparedness for loan losses from the total loan. During the period (2001-2005) the average amount 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. 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 68. 86% of the total deposit distribute as loan. This indicates they have distributed a big 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 Funds/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 grad ually increased over the period. Purchased Funds/Total Liabilities Purchased Funds/Total Liabilities indicates that the amount of non deposit financial 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 financed 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 return flowing to the banks shareholder. It approximates the net benefit that the sharehold ers 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 c heapest 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 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 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 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 get 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. one hundred ten 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 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 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 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. 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, 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. 0 31 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 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 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 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 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, only 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 perio d 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 2001-2005 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 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 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 gradu ally 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 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 mud 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 2 004 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 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 Asset s 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 ab le 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 sh are 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 hi gher 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 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 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 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