National Credit and Commerce Bank Ltd., popularly known as NCC Bank Ltd.

Started banking operations on 17 May 1993 with an authorized capital of Tk 750 million divided into 7.5 million ordinary shares of Tk 100 each and paid up capital of Tk 195 million. The paid up capital was enhanced to Tk 390 million in 2000. NCCBL is the restructured form of the first investment company in the country, the National Credit Limited (NCL), which started business with a paid up capital of Tk 50 million and survived 8 years before its normal operations were suspended.

Mission, Vision, Objectives

=> Mission:
Mobilize financial resources within home and abroad to contribute to Agricultures, Industry & Socio-economic development of the country and to pay a catalytic role in the formation of capital market. =>Vision: To become the Bank of choice in serving the Nation as a progressive and Socially Responsible financial institution by bringing credit & commerce together for profit and sustainable growth.

=>Objectives: Customer driven focusing Total commitment of quality of services. Ensure quality human resources inside of the organization. Socio economic change through integration of credit and commerce

 Financial Ratio Analysis of the NCC Bank Ltd.

Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a bank's financial statements. The level and historical trends of these ratios can be used to make inferences about a bank's financial condition, its operations and attractiveness as an investment. For this assignment I select NCC Bank to calculate and compare between 2008 and 2009 financial year performance.

# Key Profitability Ratios in Banking:

NIAT 1. Return on Equity = ---------------------------- * 100 Total Equity Capital 1719.50 For 2009 ROE = ------------ *100 6034.44 882.27 For 2008 ROE = ------------ *100 4055.29 = 28.49%

= 21.75%

Interpretation: Usually ratios over 20% are considered attractive. If a company can return its shareholders twenty paisa or more for every taka invested, investors can be reassured that the company is returning wealth to its shareholders. Here, In 2009 & 2008 both ROE more then 20. In 2009 the ROE is 7 paisa greater then the 2008. That mean the bank is doing well. They earn more in 2009 in contrast their equity capital.

NIAT 2. Return on Asset = ---------------------------- * 100 Total Asset For 2009 1719.50 = ------------ *100 65937.49 882.27 = ------------ *100 57365.52 = 2.60%

For 2008

= 1.53%

Interpretation: The ROA figure gives investors an idea of how effectively the bank is converting the money it has to invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment. From here we can say that the NCC Bank has more ROA in 2009 then the 2008. So, the bank is earning more money by investing less money in 2009.

Interest income from loans & securities investment Interest expense on deposit & other debts 3. Net Interest Margin = ----------------------------------------------------------------- * 100 Total Asset For 2009 1527.02 = ------------ *100 65937.49 1349.74 = ------------ *100 57365.52 = 2.31%

For 2008

= 2.35%

Interpretation: Net Interest Margin (NIM) is a measure of the difference between the interest income generated by banks and the amount of interest paid out to their lenders (for example, deposits), relative to the amount of their assets. Here we saw that, in 2008 the NIM is higher then the 2009. So, Banks NIM is going lower because of high competition in the market and the fluctuation of interest rate.

Non Interest Revenue Non Interest Expense 4. Net Non-Interest Margin = --------------------------------------------------------------- * 100 Total Asset For 2009 1610.67 = ------------ *100 65937.49 1013.74 = ------------ *100 57365.52 = 2.44%

For 2008

= 1.76%

Interpretation: In case of NNIM the NCC Bank is performing well rather then the previous year. Because bank provide different types of service to their clients. For this their non interest margin is increasing day by day.

Total Operating Revenue Total Operating Expense 5. Net Bank Operating Margin = -------------------------------------------------------------* 100 Total Asset For 2009 3137.69 = ------------ *100 65937.49 2363.48 = ------------ *100 57365.52 = 4.75%

For 2008

= 4.12%

Interpretation: Net Bank Operating Margin is the combination of both interest & noninterest income. It is shows the total operating income against the total asset. Here in 2009 the NCC Banks NBOM is increasing slightly then the 2008. the reason is their noninterest income is much more higher then the year 2008 but the interest income is slightly less in year 2009 then the previous year.

NIAT 6. Earning Per Share = -----------------------------------------------Common Equity Share Outstanding For 2009 1719.50 = -----------22.84 882.27 = -----------22.84 = 75.26

For 2008

= 38.61

Interpretation: The portion of a bank's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a bank's profitability. As a bank's earnings increase, Earnings per share will look better. Here, the share is remaining same for the both year but the EPS is going to double in 2009 then the 2008. That mean the banks profit is increased dramatically and the price of the share will be more attractive in 2009.

# Risk Ratios:
Classified Loan 1. Credit Risk = ---------------------------- * 100 Total Loans & Lease For 2009 1420.56 = -----------50387.68 1902.58 = -----------46332.68 = 2.81%

For 2008

= 4.10%

Interpretation: The credit risk ratio is the portion of default or classified loan of the total loans & lease. The higher the portion the default loan is also higher. From the analysis we can say that in 2009 the credit risk 2.81% that mean in 100 tk. 2.81 tk. Is the default loan. In case of NCC Bank the credit risk ratio is much more lower then the 2009 from the 2008 financial year. That mean they minimize their classified loan in the recent year.

Net Loans (Cash + Gov. Security) 2. Liquidity Security = ------------------------------------------ * 100 Total Asset For 2009 12837.43 = ------------ *100 65937.49 9034.82 = ------------ *100 57365.52 = 19.46%

For 2008

= 15.74%

Interpretation: The liquidity security is the measure of the portion of loans among total assets which have more liquidity. Such as, cash & Government security. In case of NCC Bank, in 2009 they have 19.46% liquidity security and 15.74% in 2008. That means they can easy liquid their 20% asset in anytime. In comparison of 2008 & 2009 they have more liquidity security in 2009 FY.

# Earning Efficiency:

Total Interest Income 1. Earning Spread = ----------------------------Total Earning Assets For 2009 6487.76 4960.74 = ------------ - -------------60059.21 55037.44 5449.72 4099.98 = ------------ - -------------52859.50 48818.41

Total Interest Expense ---------------------------------------------Total Interest Bearing Bank Liability

= 0.0179

For 2008

= 0.0191

Interpretation: Earning spread measures the effectiveness of banks intermediation funding and also the intensity of competition. The high the competition the less the spread. In 2009 the spread was less then the 2008 that means the completion was higher in 2009. In 2009 the NCC Bank faced lots of competition to grave the market share. For this they need to gave more interest to the depositor and took less interest from the borrowers.

# Analyzing Profitability:
NIAT Total Operating Rev. 1. Return On Asset = ------------------------ * -------------------------- *100 Total Operating Rev. Total Assets NPM 2009 NPM 2008 For 2009 ROA For 2008 ROA = 39.3% = 26.5% = 2.60% = 1.53% AU 2009 AU 2008 = 6.63% = 5.78%

Interpretation: Net profit margin ratio measures the relationship between the net profit and the level of total operating revenue. This used to establish whether the bank has been efficient in controlling its expenses. By comparing two consecutive year we saw that NCC Bank has the more control over its expense in 2009 then the 2008 FY. Asset Utilization ratio offers managers a measure of how well the bank is utilizing its assets in order to generate sales revenue. An increasing AU would be an indication that the firm is using its assets more productively. Here the AU is increased in 2009 then the 2008. Such change may be an indication of increased managerial effectiveness. The increase in NPM & AU makes an increase in ROA.

2. Return On Equity = EM 2009 For 2009 ROE For 2008 ROE = 10.92

Total Assets ROA * -------------------------- *100 Total Equity Capital EM 2008 = 28.49% = 21.75% = 14.14

Interpretation: EM ratio shows a bank's total assets per tk. of stockholders' equity. A higher equity multiplier indicates higher financial leverage, which means the bank is relying more on debt to finance its assets. In case of NCC Bank they are less rely on debt in 2009 then the previous year.

Total Operating Expense # Operating Efficiency = -------------------------------- * 100 Total Operating Revenue 1234.59 = ------------ *100 4372.28 954.169 = ------------ *100 3317.65

For 2009

= 28.23%

For 2008

= 28.76%

Interpretation: Operating efficiency measure the effectiveness of banks operation. The higher the operation efficiency means the bank need to expense more for operating revenue. In 2009 the NCC Bank expensed 28.23 tk. to earn 100 tk. revenue. In contrast they expensed 28.76 tk. to earn 100 tk. operating revenue. Here the banks operating efficiency more or less same for the both year.

Net Operating Income # Employee Productivity = ------------------------------No. of Employee 3137.69 = -----------1496 2363.48 = -----------1400

For 2009

= 2.097

For 2008

= 1.688

Interpretation: Employee productivity means the per employees average contribution in the net operating income. In 2009 per employees contribution was 2.097 million tk. and in 2008 it was 1.688 million tk. So we can easily say that the employee productivity is increase dramatically in 2009 then the FY 2008.

 Conclusion
From the analyze and interpretation of the financial data of the NCC Bank Limited we identified many ratios. From those ratios we can easily understand the performance of the bank at a glance. By comparing those ratios we also saw that the bank is did well in 2009 then the FY 2008. The net profit as well as the EPS is also increased in 2009. So finally we can say that the NCC Bank Ltd. Is doing great job in the banking sector and they are doing well gradually.

Assignment on Financial Ratio Analysis of NCC Bank Ltd.

Course Title Course Code Submitted to:

: Financial Market & :

Institutions FIN- 553 : Dr. Sujit R. Saha

Professor Business Administration Eastern University Dhanmondi, Dhaka.

Submitted By:
Tanvir Ahmed

ID:
101600042

Submission Date: 05 August 2010