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Report Bhaskarpodder

Report Bhaskarpodder

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Sections

  • 2.1 Determinants of Profitability for Commercial Banks
  • 2.2 Internal determinants & external determinants
  • 2.3 Profitability Determinants used in emerging economies of Asia
  • 3.1 Banking Sector in Bangladesh
  • 3.3 Denationalization and Privatization of Banks
  • 3.4 Financial Liberalization under FSRP
  • 3.5 Bank Restructuring under BRC/FSRP
  • 4.1 Private Commercial Banks (PCBs) in Bangladesh
  • 4.2 Generation of Banking Sector in Bangladesh
  • Table 4.1 PCBs in Bangladesh
  • 4.3 Growth of Private Commercial Banks (PCBs) in Bangladesh
  • Table 4.2 Growth of PCBs
  • 4.4 CAGR of selected variables of generation wise PCBs
  • Table 4.3 CAGR of selected variables of Generation wise PCBs
  • 4.5 Comparison of the selected variables of category wise banks
  • Table 4.4 Mean & Standard Deviation of selected variables of category wise banks
  • Table 4.5 CAGR of selected variables of category wise banks
  • 5.1 Bank Profitability
  • 5.2 Model Specification
  • Table 5.1 Correlation Matrix of selected Independent Variables (Year 2010)
  • Table 5.2 Independent variables and expected relation
  • 5.3 Results
  • Table 5.3 Model Summary and ANOVA (F) Results (NI as dependent variable)
  • Table 5.4 Model Summary and ANOVA (F) Results (ROA as dependent variable)
  • Table 5.5 Model Summary and ANOVA (F) Results (ROE as dependent variable)
  • Table 5.7 Regression Coefficients (ROA as dependent variable)
  • Table 5.8 Regression Coefficients (ROE as dependent variable)
  • 5.4 Analysis
  • Table 5.9 Significant Regression Coefficients
  • 6.2 Trend of the profitability determinants of PCBs
  • Table 6.1 Trend of the profitability determinants of PCBs
  • 6.3 Performance of PCBs in respect of profitability determinants
  • Table 6.2 First Generation PCBs in respect of profitability determinants
  • Table 6.3 Second Generation PCBs in respect of profitability determinants
  • Table 6.4 Third Generation PCBs in respect of profitability determinants
  • 6.4 PCBs’ Profitability Determinants and those of SCBs, DFIs & FCBs
  • 6.5 Performance of PCBs in respect of ROA & ROE
  • Table 6.6 Mean, Standard deviation, Trend equation of ROA and ROE of PCBs
  • Table 6.7 ROA & ROE of First Generation PCBs
  • Table 6.8 ROA & ROE of Second Generation PCBs
  • Table 6.9 ROA & ROE of Third Generation PCBs
  • 6.6 ROA & ROE of PCBs’ and those of SCBs, DFIs & FCBs
  • Table 6.10 Comparison of ROA & ROE of PCBs to those of SCBs, DFIs & FCBs
  • 7.1 Conclusions
  • 7.2 Areas for further research
  • REFERENCES
  • APPENDICES

DETERMINANTS OF PROFITABILITY OF PRIVATE COMMERCIAL BANKS IN BANGLADESH: AN EMPIRICAL STUDY

by

Bhaskar Podder

A project submitted in partial fulfillment of the requirements for the degree of Professional Master in Banking and Finance

Examination Committee:

Dr. Sundar Venkatesh (Chairperson) Dr. Winai Wongsurawat Dr. Yuosre Badir

Nationality: Bangladeshi Previous Degree: Master of Business Administration University of Dhaka Dhaka, Bangladesh

Scholarship Donor: Central Bank of Bangladesh

Asian Institute of Technology School of Management Thailand May 2012

i

ACKNOWLEDGEMENT

At the outset, I wish to acknowledge the immeasurable blessings and profound kindness of the Almighty – the supreme authority of the universe. Successful completion of any course requires support from various persons. I am very much grateful to Dr. Sundar Venkatesh, the renowned academician and supervisor of my project work for his untiring and sincere guidance. I would like to express my whole-hearted thanks and sincere gratitude to him. Without his close guidance and valuable suggestions, it would be quite impossible for me to complete the project work. I like to extend my gratitude to the authority of Bangladesh Bank, the central bank of Bangladesh for granting me a scholarship for studying this ‘Professional Master in Banking & Finance’. I would like to express my indebtedness to the officials of Bangladesh Bank for extending their hands in collecting the required data for the project work.

ii

ABSTRACT

With developed banking technologies and client- focused mentality, Private Commercial Banks (PCBs) try to ensure quality services to their customers. For this philosophy, they are becoming able to increase the level of deposits and credits more rapidly than Govt.-owned banks. Moreover, they are becoming successful in decreasing the percentage of nonperforming loan. So their businesses are found quite profitable. This paper is an attempt to analyze the growth of PCBs o f Bangladesh in respect of deposit, advances, total assets, equity and net income, find out the determinants of their profitability and their performance in respect of those determinants. It is observed that PCBs have shown mentionable growth during the pe riod 2001-10. The prominent determinants of profitability are found to be Advance/Deposit ratio, Total Asset, Equity/Total Asset ratio, Non Performing Loan as percentage of total Advance, Business per Employee and Number of Bank Branches. The performance of PCBs in respect of the profitability determinants are found quite satisfactory. This indicates the prospect of PCBs in Bangladesh is bright. With a view to face competition in coming days, PCBs require to concentrate more on the profitability determinants.

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1 Banking Sector in Bangladesh 3.4 CAGR of selected variables of generation wise PCBs 4.1 Determinants of Profitability for Commercial Banks 2.5 Bank Restructuring under BRC/FSRP  Chapter-IV Evolution and Growth of PCBs in Bangladesh 4.2 Internal determinants & external determinants 2.2 Objectives of the study 1.2 Nationalization of Commercial Banks 3.1 Background of the study 1.3 Rational of the study 1.1 Private Commercial Banks (PCBs) in Bangladesh 4.TABLE OF CONTENT Title Title Page Acknowledgement Abstract Table of content List of figures List of table Abbreviation and acronyms  Chapter-I Introduction 1.5 Comparison of the selected variables of category wise banks 4.3 Profitability Determinants used in emerging economies of Asia  Chapter-III An Overview of Banking Sector in Bangladesh 3.4 Financial Liberalization under FSRP 3.4 Methodology  Chapter-II Literature Review 2.3 Growth of Private Commercial Banks (PCBs) in Bangladesh 4.6 Comparison of CAGR  Part-V Determinants of PCBs’ Profitability – A proposed model iv i ii iii iv vi vii viii 1 1 1 2 4 4 6 8 8 9 9 10 11 11 12 14 16 17 .3 Denationalization and Privatization of Banks 3.2 Generation of Banking Sector in Bangladesh 4.

5 Performance of PCBs in respect of ROA & ROE 38 6.4 PCBs’ Profitability Determinants and those of SCBs.1 Bank Profitability 5.1 Conclusions 7. Data and Results 6.1 18 18 19 27 Commercial Bank Performance 30 6.2 Model Specification 5.2 Trend of the profitability determinants of PCBs 30 6. DFIs & FCBs 40  Part-VII Conclusions and areas for further research 7.3 Performance of PCBs in respect of profitability determinants 32 6.2 Areas for further research   Reference Appendices 42 43 44 45 v .3 Results 5.6 ROA & ROE of PCBs’ and those of SCBs.5.4 Analysis  Part-VI Sample. DFIs & FCBs 35 6.

9 Trend of net income of category wise banks Figure 6.7 Trend of total asset of category wise banks Figure 4.6 PCBs’ Business per Employee in respect of other categories of banks Figure 6.3 CAGR of selected variables of Second Generation PCBs Figure 4.5 PCBs’ NPL as % of total advance in respect of other categories of banks 36 Figure 6.1 Performance of PCBs in respect of profitability determinants Figure 6.2 CAGR of selected variables of First Generation PCBs Figure 4.4 CAGR of selected variables of Third Generation PCBs Figure 4.3 PCBs’ total asset in respect of other categories of banks Figure 6.2 PCBs’ Advance-Deposit ratio in respect of other categories of banks Figure 6.5 Trend of deposit of category wise banks Figure 4.6 Trend of advance of category wise banks Figure 4.LIST OF FIGURES Figure 4.10 PCBs’ Return on Equity (ROE) in respect of other categories of banks 37 37 38 40 40 vi .8 Trend of equity of category wise banks Figure 4.1 Trends of the Variables of Growth of PCBs Figure 4.4 PCBs’ equity/total asset ratio in respect of other categories of banks 13 14 15 15 16 16 17 17 17 31 35 36 36 Figure 6.7 PCBs’ No of Bank Branches in respect of other categories of banks Figure 6.8 PCBs’ Return on Asset (ROA) and Return on Equity (ROE) Figure 6.9 PCBs’ Return on Asset (ROA) in respect of other categories of banks Figure 6.

8 Regression Coefficients (ROE as dependent variable) Table 5. DFIs & FCBs 37 Table 6. DFIs & FCBs 38 39 39 40 41 8 11 12 14 16 17 18 19 20 20 21 22 24 26 28 30 32 33 34 vii .1 Banking structure in Bangladesh Table 4. Standard deviation.7 ROA & ROE of First Generation PCBs Table 6.6 Mean.5 Comparison of selected variables of PCBs to those of SCBs.2 Independent variables and expected relation Table 5. Trend equation of ROA and ROE of PCBs Table 6.8 ROA & ROE of Second Generation PCBs Table 6.6 Regression Coefficients (NI as dependent variable) Table 5.10 Comparison of ROA & ROE of PCBs to those of SCBs.9 ROA & ROE of Third Generation PCBs Table 6.1 Correlation Matrix of selected Independent Variables Table 5.3 CAGR of selected variables of Generation wise PCBs Table 4.3 Model Summary and ANOVA (F) Results (NI as dependent variable) Table 5.1 PCBs in Bangladesh Table 4.4 Model Summary and ANOVA (F) Results (ROA as dependent variable) Table 5.2 First Generation PCBs in respect of profitability determinants Table 6.5 CAGR of selected variables of category wise banks Table 5.3 Second Generation PCBs in respect of profitability determinants Table 6.1 Trend of the profitability determinants of PCBs Table 6.5 Model Summary and ANOVA (F) Results (ROE as dependent variable) Table 5.2 Growth of PCBs Table 4.7 Regression Coefficients (ROA as dependent variable) Table 5.9 Significant Regression Coefficients Table 6.LIST OF TABLES Table: 3.4 Third Generation PCBs in respect of profitability determinants Table 6.4 Mean & Standard Deviation of selected variables of category wise banks Table 4.

ABBREVIATION AND ACRONYMS

BB BCA BRC CAGR CBRP CBSP CIB DFI FCB FSRP GDP NCB NI PCB ROA ROE SCB

Bangladesh Bank Bank Company Act, 1991 Bank Restructuring Committee Cumulative Average Growth Rate Commercial Bank Restructuring Project Central Bank Strengthening Project Credit Information Bureau Development Financial Institute Foreign Commercial Bank Financial Sector Reform Program Gross Domestic Product Nationalized Commercial Bank Net Income Private Commercial Bank Return on Asset Return on Equity State owned Commercial Bank

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CHAPTER I INTRODUCTION 1.1 Background of the study Bangladesh has a mixed banking system comprising State-owned Commercial Banks (SCBs), Development Financial Institutions (DFIs) or Specialized Commercial Banks (SBs), private commercial banks (PCBs) and foreign commercial banks (FCBs). Bangladesh Bank is the central bank of the country and is in charge of formulating and implementing monetary policies and regulator of the banking sector of the country. After the independence in 1971, the govt. of Bangladesh initially nationalized the total domestic banking system and reorganized and renamed the various banks. In nineteen eighties, the decision of privatization of the commercial banks revolutionizes the entire banking system of the country. At present the banking systems of Bangladesh as a whole, consists of four state owned commercial banks, four specialized commercial banks, thirty private commercial banks and nine foreign commercial banks. Private Commercial Banks (PCBs) started their journey in Bangladesh in 1982. Since then, they play a vital role in the economic development of the country. With the help of developed banking technologies and client- focused mentality, they try to ensure quality services in quick time to their customers as per their expectation. Their prudence in selecting appropriate borrowers and sector of providing loans and monitoring them closely has decreased the percentage of non-performing loan. Besides, the prudent regulatory measure of the central bank including guidance regarding prudential norms of capital adequacy, classification of loans, on-site and off- site supervision have made the PCBs sound in Banking operation. For these reasons, they are found profitable in their business. Their performance in respect of the profitability determinants shows their potentiality in the banking industry. An effectively functioning financial system requires a banking system that can earn a reasonable return by taking an acceptable level of risks. 1.2 Objectives of the study The objectives of the study are as follows: (a) Provide an overview of banking sector in Bangladesh with a focus on evolution and growth of PCBs. (b) Compare performance of PCBs and other categories of banks such as SCBs, DFIs and FCBs. (c) Analyze the determinants of PCBs’ profitability.

1.3 Rational of the study In order to survive in the long run, it is important for a bank to find out what are the determinants of profitability so that it can take initia tives to increase its profitability managing the dominant determinants. Bank performance is also vitally important for all stake holders, such as the owners, the investors, the debtors, the creditors, the depositors, the managers of banks, the regulators and the government. The performance of banks gives
1

directions to the stake holders in their decision making. It gives direction to the debtors and the investors to make decision whether they should invest money in bank or invest somewhere else. It also flashes direction to bank managers whether to improve its deposit service or loan service or both to improve its finance. Regulatory agencies and government are also interested in financial performance for the regulation purposes. 1.4 Methodology The following methodology has been followed in the study: 1.4.1 Sample Design The sample of the study represents all 4 category wise schedule banks in Bangladesh, especially focusing on all 30 Privatized Commercial Banks. The banks categorized into ownership pattern like State-owned Commercial Banks, Specialized Banks, Privatized Commercial Banks and Foreign Commercial Banks. 1.4.2 Data Collection The secondary data on deposits, advance, total assets, equity, net income, number of branches, number of employees and non performing loan of all the scheduled banks in the study have been collected from various departments of Bangladesh Bank. 1.4.3 Time Reference The time reference of the study was 2001-2010. This period was selected mainly because all the 30 PCBs are in operation during this period. There are 3 PCBs that started operation in 2001. So the data prior to this period may not reflect a total scenario. 1.4.4 Hypothesis of the Study H1 : Profitability (considered as Net Income) of a private commercial bank is positively and significantly related to its advance/deposit ratio, total assets, equity/total asset, number of branches, Business per Employee (BPE) calculated as Deposit + Advances/ Number of Employees and negatively and significantly related to its NPL/Advance ratio. H2 : Profitability (considered as Return on Asset) of a private commercial bank is positively and significantly related to its advance/deposit ratio, total assets, equity/total asset, number of branches, Business per Employee (BPE) calculated as Deposit + Advances/ Number of Employees and negatively and significantly related to its NPL/Advance ratio. H3 : Profitability (considered as Return on Equity) of a private commercial bank is positively and significantly related to its advance/deposit ratio, total assets, equity/total asset, number of branches, Business per Employee (BPE) calculated as Deposit + Advances/ Number of Employees and negatively and significantly related to its NPL/Advance ratio.

2

6 Limitation: i. f. Advance. These have been calculated as follows: a. c.4. Cumulative Average Growth rate (CAGR) of various variables: CAGR= (Value of the parameter in the year 2010/ Value of the parameter in the year 2001)1/10-1 ii.1. Time Constraint: The obtained duration for the project work was very limited. Among these variables. ii. Trend analysis: For trend analysis. The statistical tools that have been used in the study are.5 Data Analysis Calculation of the following: i. there are several ratios.4. b. The performance of the banks has been measured by several variables: ROA.Deposit ratio = Total Advance/Total Deposit. d. ROE = Net Income/Total Equity. e. a. 1. ROE and the prominent variables that have been found to have significant impact on profitability. Business Per Employee (BPE) = (Deposit + Advances)/ Number of Employees iii. Equity/Total Asset ratio = Equity/Total Asset NPL as percentage of total advances= Non-performing Loans /Total Advances. Correlation and Regression: These have been used to identify the relationship among the variables. b. time series analysis has been used. 3 . Scarcity of published work: Research work and publication on the concern area in Bangladesh have not yet been done extensively. c. Standard deviation: It has been used for measuring dispersion from the mean result. ROA = Net Income/Total Asset.

current account deposits and capital reserves and money supply also play a major role in influencing the profitability. non-performing loans and overhead expenditure. L and B. Other determinants such as savings. loans. such as internal determinants and external determinants. the higher the 4 . banks in a liquid situation as indicated by low loans-deposit ratio or recent inflows of deposit would tend to offer lower loan rates compared to banks in a less liquid situation. investment in subsidiaries. The Financial statement variables are related to the decisions that directly affect the items of a balance sheet and profit & loss accounts where the nonfinancial statement variables are those factors that do not have a direct impact on the financial statements. S (1998). given the relationship between liquidity and loan rates.  Liquidity Steven J. the pioneers of the bank profitability studies.D Roderick (1992). the relationship between bank liquidity and profitability would depend on the interest rate elasticity of demand for loans.1 The inte rnal determinants  Financial and Non-Financial State ments variables Guru and Bala. classified the internal determinants into two sub-categories Financial Statement variables and Non-Financial Statements variables. net income before taxes. 2. fixed deposits. used net current operating income. 2. The higher the ratio. Slovin and Sushka (1984) also found evidence that banks with rapid growth in deposit and hence higher liquidity set lower loan rates. investment in securities. which include demand. Similarly. external determinants are those factors which are beyond the control of management of these institutions such as inflation rates. Thus. suggested that as the loans to deposit ratio rises and hence liquidity falls. H. and Graham.2. The internal determinants are management controllable factors. banks would be reluctant to lend that leads to higher loan rates. market share and market growth and. time and savings deposits were found negatively related to profits.2 Inte rnal determinants & external determinants Bourke (1986) divided the profitability determinants for commercial banks into two main categories. (1993). and net income after taxes as the dependent variable and found that the changes in asset and liability portfolios (items in the balance sheet) produced positive and negative results on banks’ earnings.CHAPTER II LITERATURE REVIEW 2. Again. Hester and Zoellner (1966). Bourke (1989) used the ratio of liquid assets to total assets as a measure of liquidity. interest rates. liquidity.1 Determinants of Profitability for Comme rcial Banks There is a vast body of empirical literature on what are the determinants of profitability for commercial banks. for example. All asset items are found to have a significant positive relationship and all liability items.

Gilbert (1984) found that many researchers failed to recognize regulation as one of the bank profitability determinants.versa. For example. a bank would increase its earnings which would increase its profitability. mergers and acquisitions. This is an indication that the market power of an individual bank usually increases with the degree of monopoly. Athanasoglou P. (1994) showed that the banking industry is among the most heavily regulated industries in the world. several studies by Fraser and Rose.  Competition Heggested and Mingo (1976) believed that when the degree of monopoly in a market is high. the greater will be its control over its prices and services it offers. and D.2 External determinants  Regulation Frame et al. The greater the market share. Bigger market share also means more power to the bank in controlling the prices and services it offers to customers (Heggested and Mingo. Boyd. Direct regulations on bank management cover the lending policy. J. ventures. and Rhoades (1979).  Bank Size and Economies of Scale The size of a bank is considered as an internal determinant on the assumption that management of the bank is responsible for expanding their organization by acquiring additional assets and liabilities. They tested the relationship between concentration and eleven performance measures that included facilities available to customers and charges for using those facilities and found that eight of the 11 performance measures were significantly affected by at least one specification of concentration. Delis M. As a result. and liquidity requirements. found that market concentration had no effect on the interest rate paid on time and savings but offer no explanation. 2. Rose and Fraser (1976). Staikouras (2006).. interest rates. deposit policy. It is usually assumed that large banks enjoy economies of scale. the larger the firm’s potential for profits. indicated that as a result of gaining market share. Regulations on the banking system as a whole include regulation on the condition of entry. so they are able to produce their outputs or services more cheaply and efficiently than smaller banks. 5 . Bourke’s results indicated a significant positive relationship between liquidity and profitability. Gilbert (1984) believed that the results were caused by the Regulation.2. (1972). larger banks will earn higher rates of profit if entry is restricted. and C.E. 1976). bank prices will be higher and fewer facilities will be provided by the bank.  Market Share Market share is considered as one of the potential determinants of profitability since the bigger the market.H. establishment of new branches. Runkle (1993) showed that size of a bank is also associated with the concept of economies of scale.liquidity and vice.

the annual inflation rate. log of total deposits. 2.3.4 Indonesia Fadzlan Sufian and Muzafar Shah Habibullah (2010) used the return on assets (ROA) and/or the return on equity (ROE) expressed as a function of internal and external determinants in measuring bank profitability.S. Muzafar Shah Habibullah (2009) found bank specific variables . This is based on the assumption that an expanding market would produce greater potentials for banks to achieve higher profits. Market Growth Smirlock (1985). loans loss provisions divided by total loans. They found bank-specific variables .1 India P.3. Bourke (1989) and Molyneux and Thornton (1992) found market growth as an external determinant of bank profitability.5 Bangladesh 6 . total overhead expenses divided by total assets. Non-Interest Income.natural log of GDP. other income. interest income. log of total assets.3 China Fadzlan Sufian. loans loss provisions divided by total loans. Ganesan (2001) determines profitability of Indian banks using profit function model which showed that interest cost. Business per Employee.total loans divided by total assets. B. 2. credit to tota l assets.3. total overhead expenses divided by total assets. non-interest income divided by total assets. 2. deposits. Operating Expenses. and book value of stockholders’ equity as a fraction of total assets as Internal determinants and natural log of GDP. and book value of stockholders’ equity as a fraction of total assets and external determinants . Bodla & Richa Verma (2007) found Credit/Deposit Ratio.log of total assets. Provision and Contingencies. NPA as percentage to Net Advances.3.2 Thailand Saovanee chantapong (2006) emphasizes on Return on Assets (net income after tax/total assets) that indicates managerial efficiency and Commitment to Domestic Economy (LR: loans to clients/total assets) which presents consumer lending activities and bank commitment to the domestic economy as profitability determinants of banks. 2. log of total deposits. noninterest income divided by total assets. Profit per Employee and Net Profit as determinants of profitability of banks in India.3 Profitability Determinants used in e merging economies of Asia 2. proportion to priority sector advances and interest income loss as the significant determinants of profit and profitability of banks. 2. the three largest banks asset concentration ratio. Spread.3. and money supply growth as External determinants of bank profitability.

Md. Profit expense ratio (PER). Profit growth and EPS. 7 . Return on equity (ROE). Safiullah (2010) judged profitability on the basis of Return on asset (ROA).

091.1 Banking structure in Bangladesh Bank Types SCBs DFIs PCBs FCBs Total Number of B anks 4 4 30 9 47 Number of Branches 3.93% 100% Total Assets (Crore Tk. specially rural savings more effectively.00 % of Industry Assets 28.01% 59.25 22.59% 100% Deposits (Crore Tk.28 29. it was expected that the banks would be playing their role for social benefit and in the economic de velopment process. c) Providing credit to the priority sector such as agriculture.408.80% 5.CHAPTER III AN OVERVIEW OF BANKING SECTOR IN BANGLADESH 3. as a result. The lending rate on priority sector credit was very low and they were bound to operate in the rural areas.182.) 101.828 72 7.2 Nationalization of Comme rcial Banks Before liberation of Bangladesh. the there are 4 SCBs. The following Table shows the current (December.380. 8 . small scale and cottage industries etc.625.. the quality of customer service has been deteriorated and commercial consideration of profitability.03 % of Deposits 27. b) Mobilization of domestic savings. d) Ensuring balanced regional development.93% 6. Private Commercial Banks (PCBs) and Foreign Commercial Banks (FCBs).14 18.) 135. Table: 3. the government took different measures to achieve the macroeconomic objectives by ensuring a sound and vibrating financial system as this can only lead to proper intermediation. 2010) banking structure in Bangladesh.1 Banking Sector in Bangladesh Banking sector in Bangladesh comprises of State Owned Commercial Banks (SCBs).357. government-owned Development Financial Institutions (DFIs) or Specialized Banks (SBs) dealing with development finance.75 31.677. The main objectives of the nationalization of commercial banks were: a) Branch expansion for providing services to the rural people.06% 6. After the independence.416.88% 36. Currently.447 1. 30 PCBs and 9 FCBs in Bangladesh. 4 DFIs. removal of control of banks by few individuals.22 222.60% 17.942.34% 6.59% 0.40 484. the ownership of the commercial banks was vested to the private sector.929.42 364.382 2.57 287.729 % of Branches 44. safety and efficiency were sacrificed in favor of social profitability. After the nationalization of banks in 1972.22% 100% Source: Bangladesh Bank 3.05% 60.

The main objectives of the FSRP were to: a) Remove gradually the distortions in the interest rate structure with a view to improving the allocation of resources. 3. by denationalization of two NCBs .Uttara Bank and Pubali Bank. Privatization was meant to signify the return to profitable private motivation of anything that had declined through unprofitable state ownership. Restructuring of NCBs and PCBs. Sonali Bank. Janata Bank Limited and Agrani Bank Limited respectively. 1991) Based on these findings and recommendations Bangladesh initiated a Financial Sector Reform Project in 1990 to overcome from the repressed economy. The World Bank also made an in. Now these three banks and Rupali Bank Ltd. b) Provide increase market oriented incentive for priority sector lending c) Make subsidies in those more transparent sectors d) Adopt appropriate monetary tools to control inflation e) Establish appropriate accounting policies and modes of recapitalization. are considered as State-owned banks (SCBs). Janata Bank and Agrani Bank have been renamed as Sonali Bank Limited. Rupali Bank was partly denationalized through selling 49% share to the public and also permitting a number of private commercial banks to come into existence to increase competition in the financial market. making a more competitive and market oriented financial sector. the problems in the financial sector were becoming so severe that the Government formed a committee on “Money. The objectives of the privatization of banks were to: a) Reduce the deficit of the government to meet the continuous loss of the public enterprises b) Improve the efficiency of the banking sector c) Introduce competition in all spheres of economic activities d) Slack the flow of credit to different economic sector beyond the priority sector e) Improve the customer service of the bank f) Run towards the way of globalization of financial sector Recently the government has turned the remaining NCBs into corporation under the Bank Company Act to gain efficiency. Market orientation of banking transaction (Task Force Report. This process in the financial sector was initiated in 1982.3.4 Financial Liberalization under FSRP By the mid 1980’s. Consequently. Banking and Credit” headed by the then Finance Minister to suggest ways and means to improve the operational efficiency of the banking system. transparency and accountability and eventually to viably compete with private and foreign commercial banks. They suggested reform in the following fields: a) b) c) d) Fixation of interest rates on deposits and advances.3 Denationalization and Privatization of Banks A retransfer of ownership and control from public to private sector can be termed as denationalization. Denationalization refers to the term privatization. Classification of overdue loans.depth study on Bangladesh’s financial sector in the mid 80’s. f) Improve debt recovery process g) Expand and strength the capital market 9 .

5 Bank Restructuring under BRC/FSRP Just before the expiry of FSRP term. the government formed one Banking Restructuring Committee (BRC) to evaluate the situation arising in NCBs and recommendations to the government for bringing back financial discipline and improving efficiency of NCBs. competition among banks. a Commercial Bank Restructuring Project (CBRP). to effectively handle problem banks f) Precluding crony (insider) lending and ensuring credit discipline All the above measures and actions have taken by BRC/CBRP to achieve the goals: a) The three pillars of banking . 1972 to give Bangladesh Bank legal autonomy over its affairs b) Reforms of supervision system of Bangladesh Bank to bring back financial discipline. In May 1997. has also been undertaken to take stock of progress on key issues and identify urgent actions that need to be taken for the development of commercial banks in Bangladesh. good management and effective Central Bank b) Emphasis on the core aspects (dominance of market forces. to give autonomy to NCB’s board so that NCB’s could run on commercial consideration d) Deposit insurance scheme to protect depositor’s interest e) Amendments to Bank Company Act. it has taken following actions: a) The amendment of Bangladesh Bank Order. The measures taken are: a) b) c) d) e) f) g) h) i) j) k) An aggressive institutional renewal program for Bangladesh Bank Fundamental reforms of NCBs Strengthening the legal process and institution of expending recovery of debt Better internal governance both in NCB’s and PCB’s Compliance with capital standards Penalties for imprudent lending Announcement of banking policy statement Hiring of auditors of valuation audits of NCB’s Formation of a Bank Supervision Committee Special recovery efforts A committee on “Union problem” has been taken Along with the above measures since the formation of BRC in 1996. These are: a) Lending Risk Analysis b) Financial Spread Sheet c) Performance Planning System d) Large Loan Reporting System e) New Loan Ledger Card 3. financial discipline through broad based legal and regula tory base and operational efficiency) rather the peripheral aspects (privatization).Other than the regulatory and legal measures FSRP introduced some manual for operation and guidance of reporting system. c) Reforms of Bangladesh Banks (Nationalization) Order. 1972. 10 . funded by the World Bank. 1991.effective legal system.

All banks licensed since 2000 are classified as third generation banks. These thirty banks are now operating as Private Commercial Banks (PCBs) in Bangladesh. 14. 2. 4. 11. These banks were merged and grouped into six commercial banks.1 Private Commercial Banks (PCBs) in Bangladesh After liberation. the banks operating in Bangladesh (except those incorporated abroad) were nationalized. 12. founded in 1982 was renamed as Social Islami Bank Ltd. No. eighteen banks during 1990s and three more banks in 2001. Of the total six commercial banks. 5. 21. 8. 1. Seven banks obtained licenses to run their operation as Private Commercial Banks during 1980s. was renamed as AB Bank Ltd in 2008 and Social Investment Bank Ltd. 18. 15. Name of PCB Arab B angladesh B ank Li mited IFIC Ban k Limited Uttara Bank Limited Pubali Ban k Limited National Bank Limited Islami Bank Bangladesh Limited The City Ban k Limited United Co mmercial Bank Limited ICB Islami Bank Limited Eastern Bank Limited NCC Bank Limited Prime Bank Limited Dhaka Bank Limited Al-Arafah Islami Bank Limited Southeast Bank Limited Social Islami Ban k Ltd Dutch-Bangla Bank Limited Trust Bank Limited Bank Asia Limited EXIM Ban k Limited First Security Islami Bank Mutual Trust Bank Year of Foundation/ Denationalization* 1982 1983 1983* 1983* 1983 1983 1983 1983 1987 1992 1993 1995 1995 1995 1995 1995 1996 1999 1999 1999 1999 1999 Generation of B anking Sector First Generat ion Ban k First Generat ion Ban k First Generat ion Ban k First Generat ion Ban k First Generat ion Ban k First Generat ion Ban k First Generat ion Ban k First Generat ion Ban k First Generat ion Ban k Second Generat ion Bank Second Generat ion Bank Second Generat ion Bank Second Generat ion Bank Second Generat ion Bank Second Generat ion Bank Second Generat ion Bank Second Generat ion Bank Second Generat ion Bank Second Generat ion Bank Second Generat ion Bank Second Generat ion Bank Second Generat ion Bank 11 . in 2009.2 Generation of Banking Sector in Bangladesh The banking sector of Bangladesh is usually classified into three generations. founded in 1982. 20. Banks incorporated from the period of 1971-1990 are classified as first generation banks. Table 4. 22.an Islamic private bank founded in 1987 was renamed as ICB Islamic Bank Ltd.1 PCBs in Bangladesh Sl. 9. were subsequently transferred to the private sector with effect from January 1983. Pubali Bank Ltd. . and Uttara Bank Ltd. Arab Bangladesh Bank Ltd. 13. 16. 6. The Oriental Bank Ltd. Second generation banks were licensed in the period of 1991-2000.CHAPTER IV EVOLUTION AND GROWTH OF PCBS IN BANGLADESH 4. 19. 17. 10. 7. in 2008. 4. 3.

868 0. 2.9786 + 25106x Yc = . total asset.0) Equation for trend line Yc = a+bx Yc = . 3.1 (1. Shahjalal Islami Bank Limited 2001 Third Generation Ban k *Uttara Bank and Pubali Bank were denationalized to operate as Private Co mmercial Bank (PCB) Source: Bangladesh Bank Sl. Here ‘X’ variable represents time. The value of r lies between 0 and 1.811. The higher the r2 .396.925 0.13172 + 20775x Yc = .15115 + 18771x Yc = . that is.3x r2 0.7 (59. r2 is greater than 0.909 0.3417 + 2405x Yc = .934.122. Standard Bank Limited 1999 Second Generat ion Bank 27.2 Growth of PCBs Sl.4 (79. 4. ‘b’ represents the slope of the line of the amount of change in Y variable that associated with the change of one unit in X variable. Jamuna Bank Limited 2001 Third Generation Ban k 30. It is reflected from the above table that the trend equations of all the selected variables are positive and goodness of fit as in case of all the equations.816. 12 .677 Source: Bangladesh Bank The straight line trend is represented by the equation Yc = a + b.7) 1. ‘a’ is the Y intercept or the value of the Y variable when X = 0. Vari ables Deposit Advance Total asset Equity Net inco me Mean & Standard Deviation (Figures in crore) 101. Yc denotes the trend values to distinguish them from the actual Y values. total equity and net income of PCBs. standard deviatio n. the greater the percentage of the variation of Y as explained by the regression model. 5. trend equation and r2 of deposit. 1. Table 4.8 (7. the worse the fit. The coefficient of correlation is denoted by r. ONE Bank Limited 1999 Second Generat ion Bank 25. The Premier Bank Limited 1999 Second Generat ion Bank 26.9 + 444. the better the “goodness of fit” of the regression mode l to the sample observations. equity and net income of Private Commercial Banks (PCBs) shows their increasing trend over the period.298. The following table shows the mean. The square of correlation coefficient (r2 ) is called the squared multiple correlation coefficients.5) 9.911 0. advance.091. total asset. advance.1 (65.509.529. Bangladesh Co mmerce Ban k 1999 Second Generat ion Bank 28. Mercantile Bank Limited 1999 Second Generat ion Bank 24.693. No.3 Growth of Private Comme rcial Banks (PCBs) in Bangladesh Last ten years aggregate data on the deposit. BRAC Bank Limited 2001 Third Generation Ban k 29.635. Again r2 .50. Name of PCB 4.Year of Foundation/ Generation of B anking Denationalization* Sector 23.4) 128. the closer to zero. No.7) 88. Where.

Figure 4.1 Trends of the Variab les of Growth of PCBs Source: Bangladesh Bank 13 .

59% Generation (20.78% (6.4 CAGR of selected variables of generation wise PCBs The following table shows the mean and standard deviation of Cumulative Average Growth Rate (CAGR) of deposit.2 CA GR of selected variables of First Generation PCBs Source: Bangladesh Bank 14 .08% (6.75%) Mean & Std Dev of CAGR of Net Income 13.01%) Source: Bangladesh Bank Generation of B anks Mean & Std Dev of CAGR of Advance 15. advance. Figure 4.64%) Third 71.80%) Second 28.53%) 82.4.47%) Mean & Std Dev of CAGR of Total Asset 13. Moreover.03% (7.75%) 90.13%) 25. advance.77% Generation (5.81%) 53.08% (6.56%) The above table shows that the CAGR of deposit.75% (6.75%) Mean & Std Dev of CAGR of Equity 24.02% (20. total asset.80%) 22.67% (7.79% (5. the standard deviation shows that the PCBs of first generation than second generation and PCBs of second generation than those of third generation have least deviation from the mean.89% (6.95% (39.89% Generation (6. total equity and net income of the PCBs of second generation is higher than that of first generation and CAGR of those variables of third generation is mention ably higher than that of second generation respectively.07% (23.64%) 28.3 CAGR of selected variables of Generation wise PCBs Mean & Std Dev of CAGR of Deposit First 14. total equity and net income of generation wise PCBs: Table 4.94%) 39. total asset.64%) 29.69% (10.

4 CA GR of selected variables of Th ird Generation PCBs Source: Bangladesh Bank 15 .Figure 4.3 CA GR of selected variables of Second Generat ion P CBs Source: Bangladesh Bank Figure 4.

4. Advance.847.0) 655.1) 19.7) 2.877.080.2) 633.530.091.0) 18.6 (59.2) 1.352.5 Comparison of the selected variables of category wise banks Table 4.5) Mean & Std Dev of Net Income 1.122.3 (3.8 (68.4 (2.6) Mean & Std Dev of Equi ty 9.327.780. Equity and Net Income of PCBs are higher in every respect than those of SCBs.9 (25.529. Asset.014.693.635.263.6) 13.513.7 (12.396.4) 47.7) Mean & Std Dev of Advance 88.8 (7.7) 68.8 (4.018.4 Mean & Standard Deviation of selected variables of category wise banks (Figures in crore) Category of B anks PCBs SCBs DFIs FCBs Source: Bangladesh Bank Mean & Std Dev of Deposit 101.2) Mean & Std Dev of Asset 128. This shows PCBs’ dominance in the banking sector of Bangladesh.708.7 (4.6 Trend of advance of category wise banks Source: Bangladesh Bank 16 .7 (8. Figure 4.757.207.207.845.9 (1.636.2) 10.1 (65.8) 10.1 (560.3) 13.479.4) 2.298.095.4) 19.811.816.5 (532.934.5) 85.2) The above table shows that PCBs are dominating in the banking sector of Bangladesh as the mean of Deposit.0 (6.316.883.5 Trend of deposit of category wise banks Source: Bangladesh Bank Figure 4.321.4 (79.573.4 (18.8 (5.4 (215. DFIs & FCBs over time at aggregate level.1 (1.

5 CAGR of selected variables of category wise banks Category of B anks PCBs SCBs DFIs FCBs Source: Bangladesh Bank CAGR of Deposit 22. Asset.07% 13.31% CAGR of Asset 20.24% 14.43% 6.96% 13. Equity and Net Income of PCBs is higher in almost every respects that that of SCBs.35% CAGR of Net Income 16.59% 8.68% 0.7 Trend of total asset of category wise banks Source: Bangladesh Bank Figure 4.43% CAGR of Advance 22.39% 8.8 Trend of equity of category wise banks Source: Bangladesh Bank Figure 4. Table 4.Figure 4. Advance.76% During 2001-2010. the PCBs are found to achieve mentionable growth in the above selected variables.61% 6.78% 19.40% 20.87% 6. DFIs & FCBs over time. This reflects their gradual expansion of business and earning increasing amount of profit over the period.6 Comparison of CAGR The following table shows that CAGR of Deposit.54% 16.62% -1.28% 8. 17 .83% 20.83% CAGR of Equi ty 26.9 Trend of net inco me of category wise banks Source: Bangladesh Bank 4.

324 0. Total Asset (TA). 5. It can be measured in several ways. Through this intermediation function. of Branches -0.189 BPE 0.235 0.174 1. profitability is the most important indicator.1 Bank Profitability Banks are involved in the function of mobilization of deposit and deployment of credit. Banks are engaged in the banking system with a motive to earn profit and it is the most important element in the competition among the banks.601 1. 18 .324 -0.000 0.152 -0.220 0. Business Per Employee (BPE) calculated as (Deposit + Advances)/ Number of Employees. Table 5. It measures a bank's profitability revealing how much profit it generates with the money shareholders have invested.033 -0. Net income of a bank expresses the volume of profit in a year. Net Income. Return on Equity (ROE) is the amount of net income returned as a percentage of shareholders equity. For example.174 -0. Multiple Regression Model has been applied.220 0. In this connection.046 0. Profit is the absolute term.000 0.000 0.1 Correlation Matrix of selected Independent Variables (Year 2010) Vari ables Adv/ Dep Total Asset No. For the purpose of comparing operational efficiency of the banks. of Branches NPL/Adv Equi ty/Asset Adv/ Dep 1.601 -0. Number of Bank Branches (NBB) and dependent variables are Net Income (NI).189 1. Non Performing Loan/Total Advance (NPL/A). They are not highly correlated.909 -0.174 -0.323 Source: Bangladesh Bank Profitability of a bank is the efficiency of a bank at generating earnings. These independent variables are selected as they are independent of each-other.323 0.447 NPL/Adv 0.033 No.CHAPTER V DETERMINANTS OF PCBS’ PROFITABILITY – A PROPOSED MODEL 5. Again Return on Asset (ROA) indicates how profitable a bank is relative to its total assets.447 -0. ROA is calculated by dividing a bank's net income by its total assets.309 Equi ty/Asset -0. which creates ambiguity for comparison.235 Total Asset 0.152 -0. In order to identify the prominent variables that affect the profitability of banks as described Log of Net Income. Equity/Total Asset (E/TA). ROA provides an idea that how efficient management is at using its assets in generating earnings.046 0.909 1. banks contribute a lot toward the development of the economy.000 -0.153 -0.153 1.000 BPE 0.000 -0. Return on Asset (ROA) and Return on Equity (ROE).309 0.2 Model Specification The independent variables considered for the model include natural log of Advance/Deposit (A/D).174 0. Return on Asset (ROA) and Return on equity (ROE) have been considered as measure of PCBs’ profitability. Return on Asset (ROA) and Return on equity (ROE). ROE is calculated by dividing a bank's net income by the shareholder's Equity.

while the rest x1 to x6 are independent variables.Mathematically the equation is as follows: Y= a+b1 x1 +b2 x2 +b3 x3 +b4 x4 +b5 x5 +b6 x6 +μ Where. Almost every year. the highest in 2009. Return on Asset (ROA) and Return on Equity (ROE)] is the dependent variable. x6 = Log of Number of Bank Branches (NBB). one can see that the independent variables have explanatory powers above 80 19 . x3 = Log of Equity/Total Asset (E/TA). the found correlation is very high.e.01 level almost in every year during the last 10 years. The expected relationships between the dependent variables (i. Here. The same is further confirmed by values of R square and Adjusted R square. This clearly indicates that the variation caused by independent variables in the net income is significant and cannot be left to chance factors. Y= Log of Net Income (Income after Tax). The value of Correlation Coefficient (R) and Coefficient of Determination (R square and Adjusted R square) of the model are shown in the Table. Return on Asset (ROA) and Return on Equity (ROE) a= constant term. the lowest in the year 2004 to . x5 = Log of Business Per Employee (BPE) calculated as Deposit + Advances/ Number of Employees.3 Results  Model Summary (Considering Net Income as dependent variable) The following table reveals that F value is significant at .699. Y [i. b1 to b6 = Regression coefficients for the respective variables. ROA and ROE) and any of the selected independent variables considered for the model are as follows: Table 5. x1 = Log of Advance/Deposit (A/D). x4 = Log of Non Performing Loan/Total Advance (NPL/A). This shows that the independent variables under reference have high degree of correlation with profitability (Net Income). Log of Net Income. Log of Net Income.2 Independent variables and expected relation Independent Variables Log of Advance/Deposit (A/D) Log of Total Asset (TA) Log of Equity/Total Asset (E/TA) Log of Non Performing Loan/Total Advance (NPL/A) Log of Business Per Emp loyee (BPE) calculated as (Deposit + Advances)/ Number of Employees Log of Nu mber of Bank Branches (NBB) Expected Relati on + + + + + 5.944. From the results of Coefficient of Determination. μ = Error Term. x2 = Log of Total Asset (TA). This test has been used to find out whether there is a linear relationship between dependent variable and any of the independent variables under consideration. The values of correlation coefficient ranges from .e. Collected data has been processed and analyzed with the help of SPSS software.

386 .737 .103 6.287 .000 .036 .342 .789 R S quare . Table 5.550 .749 2. 2003.976 2.742 .622 Adjusted R S quare .892 . The value of Correlation Coefficient (R) and Coefficient of Determination (R square and Adjusted R square) of the model are shown in the Table. Almost every year.488 . From the results of Coefficient of Determination. the found correlation is high except 2010.001 .936 . it is 20 .949 Significance .560 .000  Model Summary (Considering ROA as dependent variable) The following table reveals that F value is significant at .9 percent and 78.811 .812. The values of correlation coefficient ranges from . This clearly indicates that the variation caused by independent variables on ROE is significant.812 . This shows that the independent variables under reference have high degree of correlation with ROE.891 .000 .305 .01 level in maximum years during the last 10 years.304 .029 .453. the lowest in the year 2010 to .592 6.478 .576 .580 3.895. The value of Correlation Coefficient (R) and Coefficient of Determination (R square and Adjusted R square) of the model are shown in the Table. From the results of Coefficient of Determination.875 .3 Model Summary and ANOVA (F) Results (NI as dependent variable) Year 2001 2002 2003 2004 2005 R .4 Model Summary and ANOVA (F) Results (ROA as dependent variable) Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 R .944 .627 .799 2.210 .659 .703 .803 .050 2.678 .725 7.453 R S quare .658 .084 .667 .011 F 5.460 .514 F 21. the lowest in the year 2010 to . 2006-10) and between 69.161 4.680 .824 .691 .677 .815 6.002 .593 .206 Adjusted R S quare .354 2.817 .325 .494 .585 .023 7.477 .018 .861 .795 .000 . Table 5.347 30. it is found that the independent variables have explanatory powers above 65 percent in case of 8 years (2001-03.002 . The same is further confirmed by values of R square and Adjusted R square.446 .9 percent in case of rest of the years (2002. 2005-09).783 . the highest in 2001.01 level in maximum years during the last 10 years.000 .645 .045 .699 .668 .428 -.545 . Almost every year.000 .525 .792 .000 .percent in case of 7 years (2001. This shows that the independent variables under reference have high degree of correlation with ROA.487 . 2004-05).543 .823 .834 .770 .197 5.001 2006 2007 2008 2009 2010 .036 .001 .004 .759 Significance . the highest in 2001. The values of correlation coefficient ranges from . This clearly indicates that the variation caused by independent variables on ROA is significant.345 7.342 5.621 .930 13.492. The same is furthe r confirmed by values of R square and Adjusted R square. the found correlation is high except 2010.481  Model Summary (Considering ROE as dependent variable) The following table reveals that F value is significant at .

TA. E/TA and in 2008.085 -1.6 Regression Coefficients (NI as dependent variable) Year 2001 Vari able (Constant) Log of Advance/Deposit Log of Total Asset Log of No.554 .000 .071 Standardized Coefficient Beta -.359 1. In 2005.228 .5 Model Summary and ANOVA (F) Results (ROE as dependent variable) Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 R . BPE for 2 years and A/D for only 1 year out of a total of 10 years.049 -.653 .161 .123 -.756 . TA.094 .000 .895 .276 .649 . Table 5.862 .001 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No. In 2003.933 .570 .709 .007 .779 . E/TA and NPL/A have significant impact. contrary to the expectation.635 .035 F 12.496 1. 2005-06.099 1.641 1. another two variables namely E/TA and NPL/A are found as having significant impact on net income. 2008-09).492 R S quare .224 .128 .231 -.926 . Regression coefficient for TA and E/TA are found significant for 6 years. BPE are found to have positive and NPL/A has negative relationship with net income in all (in case of TA and NPL/A) or in maximum cases (in case of NBB and BPE).146 .935 t -5. But in case of E/TA.333 . E/TA & NPL/A and in 2010 only TA have significant impact on net income.598 1.045 4. NBB for 3 years. only NPL/A has significant impact on profitability.049 .335 1.421 . In 2002.242 Adjusted R S quare .002 .808 . In 2007.730 1.661 5.478 -.395 6. in 2001.397 Significance .363 .797 .390 -.001 .011 . Table 5.306 -.367 . six independent variables have exerted influence on profitability (net income) of the PCBs.472 -.503 3. BPE and NBB have significant impact where in 2004.567 .051 -3. This is observed that during 2001-2010.144 -.487 . NBB.180 .545 .297 .482 6.090 . In 2006. A/D) have turned as significant influencer among them. the relationship is observed negative in case of A/D in 2001.639 .631 -3. of Branches Unstandardized Coefficients B Std.004 . However.799 1.710 1. As expected. NPL/A for 5 years. Error -8.179 2002 21 .820 .322 . During the remaining years. only two variables (TA.996 .052 .755 .742 -2.357  Regression Coefficients (Considering NI as dependent variable) The following table presents regression coefficients obtained from the Multiple Regression Model. A/D has not been found to have significant impact on Net Income.384 3.205 . However.503 .233 . E/TA and NBB have significant impact. In 2009.494 . among 6 significant results. 2003.found that the independent variables have explanatory powers above 70 percent in case of 6 years (2001. it has been found to have positive impact for three times and negative impact for remaining three times. all variables except A/D and TA are found to have significant influence.146 .105 . TA.434 -.194 1.176 1. TA.840 . TA.000 .735 .607 .074 2.536 .106 .447 .801 .171 Significance .756 .097 .179 4.

of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee -.672 .356 .895 3.006 .872 .754 .195 -65.327 -.901 1.005 .482 -5.752 -1.487 .275 .2003 2004 2005 2006 2007 Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.974 .140 -1.867 .591 -.082 .359 .165 3.593 -.324 .346 .177 .587 10.463 3.245 .626 1.649 3.381 .398 -1.279 .351 -.380 .013 .041 .830 .471 20.318 .639 -.877 -2.286 -.290 4.341 13.006 .020 .873 1.344 12.051 .109 .894 -2.849 1.091 5.081 .000 .671 8.651 -.076 .406 -.707 .024 .581 .115 .302 .721 7.679 2.974 .026 .026 .653 -1.246 1.033 3.211 .310 .163 1.123 -.616 15.236 .523 1.072 .944 1.704 .445 .079 .755 .172 -.386 .932 -3.578 -.745 .279 .648 .950 .095 .711 -4.384 2.757 .155 -.617 .519 -2.492 1.002 .164 -.316 -4.689 -.010 1.663 .058 1.221 .330 -.437 -.036 -.000 .148 .387 -4.119 .391 -.537 -1.303 4.665 2.035 .492 .558 .026 .390 .319 -5.186 -.635 5. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.070 .049 .537 -. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.628 .281 -4.068 1.597 .214 .948 .363 1.065 .200 .359 .418 .106 .077 .231 .081 .870 4.217 -.524 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.297 .260 2.316 1.510 -17.428 .747 -11.286 .614 -13.138 -.703 -2.836 -.009 .195 -1.428 -.755 .359 1.943 .008 .560 1.749 .154 -.836 3.532 .389 .324 -2.313 2.314 1.489 22 .189 .048 -.284 -92.779 3.880 -.435 -1.752 1.

314 .073 .033 . BPE for 2 years and A/D for only 1 year out of a total of 10 years.085 .060 .819 . However.420 .457 .873 .958 -4.632 -14. TA.273 .466 .250 2. the relationship is observed negative in case of A/D in 2001.511 .802 -1.Year 2008 Vari able (Constant) Log of Advance/Deposit Log of Total Asset Log of No.115 .109 .269 -2.632 . it has been found to have positive impact for three times and negative impact for remaining three times.297 .186 -3.389 . In 2006.140 . NBB and TA for 3 years.885 .482 1.000 .213 -.984 .143 .369 .431 .014 . A/D has not been found to have significant impact on ROA.000 .227 2.708 1.962 .048 -4.490 1. As expected.218 -8.018 . BPE and NPL/A) or in maximum cases (in case of NBB).224 .289 . However.986 2. 23 .124 .858 2.037 t -5.620 12.667 1.790 . During the remaining years.883  Regression Coefficients (Considering ROA as dependent variable) The following table presents regression coefficients obtained from the Multiple Regres sion Model.000 .179 -.135 .601 1. NBB.635 .090 .493 Standardized Coefficient Beta -. another two variables namely E/TA and NPL/A are found as having significant impact on profitability. This is observed that during 2001-2010. E/TA and NBB have significant impact. In 2008 and 2009.164 .000 .077 -.192 .175 .797 .000 . In 2002. NPL/A for 5 years.149 .162 7.799 -1. Regression coefficient for E/TA are found significant for 6 years.149 Significance .915 5. six independent variables have exerted influence on ROA of the PCBs as found in case of considering Net Income as dependent variable also.957 -5. A/D) have turned as significant influencer among them.557 -1. In 2010 no variables has significant impact on profitability.758 17. among 6 significant results.773 -. In 2005. E/TA and NPL/A have found to have significant impact.853 1. TA. only two variables (TA.880 .174 1.142 2. In 2007.091 .330 .010 . in 2001.000 .218 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee 2009 2010 Unstandardized Coefficients B Std.038 .223 .120 .239 .208 .433 .775 1.077 . BPE are found to have positive and NPL/A has negative relationship with ROA in all (in case of TA. In 2003.000 . Error -89.114 .948 -. all variables except A/D and TA are found to have significant influence. contrary to the expectation. But in case of E/TA.097 -. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.797 2.539 7. only NPL/A has significant impact on profitability. only E/TA has significant influence. BPE and NBB have significant impact where in 2004. TA. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.281 1.010 .443 -.418 -.249 .

206 .732 .881 -2.595 .675 5.092 .547 .Table 5.053 1.549 .106 .280 .361 10.568 .065 .072 .492 1.050 -3.115 .177 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.662 4.633 -3.879 1. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.701 -3.850 1.949 .877 -2.328 -2.394 -1.649 .750 -.663 -.026 .445 -.366 .644 .130 .348 -4.153 1.709 .309 20.388 .012 .100 1.705 3.668 .975 .802 1.066 .212 .052 .347 -.280 1.659 -.973 .079 .757 .841 .131 .428 -.749 1.907 -.781 -4.292 -5.358 1.114 -1.835 -1.477 7.245 .268 .034 .895 -2.035 .510 .260 .533 .383 -5.670 -1.090 -11.297 1.072 -.144 .000 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.077 .539 -1.016 .313 .331 .639 3.081 .510 1.640 3.020 .306 -.816 1.237 .400 -.006 .002 .106 .318 -4.473 -.702 Significance .171 -.868 -.284 3.357 .165 8.329 .026 .379 1.533 -.252 .418 .746 .013 .756 .003 .521 -2.495 1.024 .242 .484 .758 -.279 .000 .201 -1.179 .120 .175 .387 -4.216 1.754 .078 .165 -.947 -.944 .181 -.204 -.317 .525 .050 -.584 .462 .630 3.007 .452 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.208 .737 .509 .439 -1.359 13.469 -.729 1.7 Regression Coefficients (ROA as dependent variable) Year 2001 Vari able (Constant) Log of Advance/Deposit Log of Total Asset Log of No.314 2. Error -8.037 -.490 2002 2003 2004 2005 2006 2007 24 .628 -.445 -.378 .935 .241 .875 11.218 -.316 .421 1.187 .318 .678 .061 3.085 .374 2.010 -2.144 .942 .227 -.722 -17.836 -.715 -.470 -92.757 1.671 .830 .959 -1.214 .595 .180 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.894 5.304 -13.625 4.158 -.529 .275 .017 .077 1.304 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee Unstandardized Coefficients B Std.358 .081 .475 .081 .183 t -5.435 -.926 .823 .196 -1.427 .591 .385 .196 .280 1.668 15.392 Standardized Coefficient Beta -.706 -1.000 .379 .516 3.585 2.746 -2. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.390 .068 -.902 2.016 1.080 -.595 1.281 .617 -65.026 .362 .261 2.761 .340 -.005 .537 -.639 -.719 4.397 -1.317 -1.027 .560 1.

078 .168 Significance . BPE are found to have positive and NPL/A has negative relationship with ROA in all (in case of BPE and NPL/A) or in maximum cases (in case of TA.431 .354 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.511 .255 .803 -1.145 .033 . in 2001.082 -.024 .177 .137 2. In 2005.191 1.032 . E/TA and NBB have significant impact.165 .144 .963 .983 .494 Standardized Coefficient Beta -. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.868  Regression Coefficients (Considering ROE as dependent variable) The following table presents regression coefficients obtained from the Multiple Regression Model. This is observed that during 2001-2010.011 .223 . However. In 2006.915 4. BPE for 2 years and A/D for only 1 year out of a total of 10 years. NBB.006 .641 .431 .000 .193 . NBB). E/TA and NPL/A have and in 2009 only NPL/A has found to have significant impact.487 .948 -.852 2. the relationship is observed negative in case of A/D (in 2001) and E/TA are found to be negative (2001.632 -14.443 -.000 .441 .330 .033 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee 2009 2010 Unstandardized Coefficients B Std.957 -5.262 .598 1.285 1.813 .060 . In 2007 and 2010 no variables has significant impact on profitability.943 .135 . only NPL/A has significant impact on ROE.760 .231 2. However.153 . 2003.435 -.380 -.222 .065 t -5. In 2002.882 .172 . Regression coefficient for E/TA and NPL/A are found significant for 5 years. TA.851 .124 . In 2003.010 .175 1. In 2008.046 -4.958 -4.006 .072 .139 . TA.803 2.179 -.217 -8.421 . As expected. only NPL/A is found as having significant impact on ROE. all variables except A/D and TA are found to have significant influence.532 7. 2005-06).802 -1. NBB and TA for 3 years. contrary to the expectation. three variables (TA.213 -.149 .398 .862 .314 . E/TA. BPE and NBB have significant impact where in 2004. TA.164 .866 1.458 .240 .329 . Error -89.Year 2008 Vari able (Constant) Log of Advance/Deposit Log of Total Asset Log of No.271 -2.309 .668 1.186 -3.789 .499 1.632 12.173 . 25 .707 . six independent variables have exerted influence on ROE of the PCBs as found in case of considering net income and ROA as dependent variables also.083 .750 17.120 . A/D and E/TA) have turned as significant influencer among them.199 -.018 .993 2.468 .363 .981 .558 -1.116 .254 .315 .

438 -.019 .391 Standardized Coefficient Beta -.303 .631 -3.313 .670 -1.857 .316 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.509 1.245 .329 .020 .015 3.391 .325 .704 3.077 .564 1.756 .508 .243 .126 .066 .661 15.703 -.017 .562 -.491 -.940 .732 .279 .189 .757 .696 -.389 2.741 -2.324 -2.717 4.178 .521 -2.177 -.399 .578 .731 1.010 -2.180 .106 .365 -.483 2002 2003 2004 2005 2006 2007 26 .370 1.396 -1.722 -18.868 -.031 .196 -1.115 -.472 .749 .054 -.433 -.826 1.037 -.358 13.005 .004 -2.895 -2.674 .022 .156 -.027 1.627 4.636 .940 .627 -.968 -1.012 .421 .754 1.065 .390 .508 .486 .164 8.023 .064 .835 .317 -4.212 .535 -1.378 1. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.347 -.429 .465 .072 .230 -.806 -.002 .280 .071 -.183 -.640 3.282 .597 .358 .471 -.536 -1.314 2.968 . Error -8.120 -1.462 -1.297 .928 .041 .056 -.999 -.129 .166 -.284 3.487 1.465 -.616 -65.205 -.384 .244 .316 -1.326 .294 .762 .000 .872 11. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.104 .735 1.474 .265 .749 1.678 .106 -.346 -.835 -1.283 1.203 -.015 .981 .494 .755 .057 .387 -4.495 1.007 .545 .653 -.069 -3.584 2. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.714 Significance .418 .344 -4.212 -.803 1.877 .8 Regression Coefficients (ROE as dependent variable) Year 2001 Vari able (Constant) Log of Advance/Deposit Log of Total Asset Log of No.894 5.756 -.877 -2.027 -2.145 .013 .470 -92.538 -.864 -2.176 -1.698 -1.033 3.674 .198 .524 .606 1.305 -.199 .645 3.357 10.530 3.Table 5.291 -5.479 7.279 .454 2.055 .052 .598 .754 .024 .081 .582 .647 .218 -.421 1.730 .780 -4.000 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.821 .005 .664 4.748 -.211 -.317 .172 .957 .397 .403 -.210 t -5.210 .000 .532 -.303 -13.604 .277 .901 2.968 .365 .434 -.696 -. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.696 -.100 1.186 .943 .323 20.078 -.196 .830 .090 1.026 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee Unstandardized Coefficients B Std.383 -5.662 .099 1.675 5.702 -3.090 -12.213 .360 .

296 .187 -3. total asset.145 .210 -. Advance – Deposit ratio of a bank should be such that can ensure required liquidity as well as can ensure adequate utilization of funds without keeping idle fund.259 .078 .329 . positive coefficients are found and in other cases. a bank can attain more competitive advantages that can help to earn more profit.126 . So it is found that profitability of PCBs in Bangladesh increases as total asset.506 .864 1. Contrary to the expectation.018 .861 .037 . a bank can get scope to expand its business. ROA and ROE).592 1.146 .435 -.217 -8.634 .231 2. But in some cases.770 . otherwise it can affect profitability adversely.494 Standardized Coefficient Beta -.055 t -5.178 1.316 .153 . It is expected that equity/total asset will have positive and significant impact on profitability.760 17.394 .271 -2.180 -. Total asset can be considered to measure the size of a bank. Advance/Deposit ratio is found to have negative impact on profitability.978 2. Business per Employee and No.223 .957 -5.004 .422 .429 . This expansion of business increases profitability.421 . of Branches and Business per Employee increase.Year 2008 Vari able (Constant) Log of Advance/Deposit Log of Total Asset Log of No.632 -15.272 .223 .165 .468 . total asset.046 -4.240 -.253 .145 Significance .175 1.138 .135 2.186 .191 . So PCBs should be prudent in maintaining this ratio to ensure maximum profitability.072 .806 -1. of Branches. This ratio should also be justified.065 . Big banks can provide services to their customers in cheaper rate than small ones.114 .512 .321 .124 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No.886 5.666 1.986 . Through increasing number of branches.005 -.499 1.802 2. of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee (Constant) Log of Advance/Deposit Log of Total Asset Log of No. of Branches are found to have positive and significant impact and non performing loan as percentage of total advance is found to have negative and significant impact on profitability.487 . Business per Employee and non-performing loan as percentage of total advance are the determinants of profitability (considering Net income.964 .376 -. negative coefficients are found.948 -. Error -89.438 -.010 .818 -1.158 .846 -.146 .371 -.333 .081 -.143 .018 -1.213 -.035 . as expected.538 7.000 .558 -2.605 12.958 -4. No. 27 .302 .698 .789 .633 .033 .120 .711 .000 .309 1.121 -. No. The reason is that Equity-Total asset ratio should be justified and only this well justified Equity-Total asset ratio can enhance profitability. Among the variables.046 . of Branches Log of NPL/Advance Log of Total Equity/Total Asset Log of Business Per Emp loyee 2009 2010 Unstandardized Coefficients B Std. equity/total asset.4 Analysis The above result has revealed that Advance/Deposit.915 4.165 .937 .458 .126 .081 . As total asset increases.

As non-performing loan as percentage of total advance is an important determinant of profitability. NPL reduces the loan able fund of a bank that ultimately affects the income source. it will get more business that can earn more profit. there are some deviations. So there must be some deviation also. profitability of the bank also increases.10 level The above table shows that in maximum cases. So it is found as Business per Employee increases. a bank can increase its profitability.05 level *** Significant at . The reason is that net income affected by those independent variables must have great influence over ROA (net income/total asset) or ROE (net income/equity) as net income comes in all three cases but both ROA and ROE are two separate ratios with different denominators. If the employees of a bank can satisfy the customers more than its competitors. Through reducing NPL. independent variables are found to be significant irrespective of all three dependent variables but in some cases.9 Significant Regression Coefficients Year Profitability Net Inco me ROA ROE Net Inco me ROA ROE Net Inco me ROA ROE Net Inco me ROA ROE Net Inco me ROA ROE Net Inco me ROA ROE Net Inco me ROA ROE Net Inco me ROA ROE Net Inco me ROA ROE Net Inco me ROA ROE A/D * * * TA * ** ** E/ TA NPL/A BPE NBB 2001 2002 * *** *** *** *** *** * * * * * * * * * * * * 2003 * * ** 2004 2005 2006 * * * * 2007 ** ** * ** * * *** *** ** ** ** * * * * * *** *** *** * * * *** 2008 * 2009 * * * *** *** *** ** 2010 * Significant at . managing them efficiently becomes very essential. Table 5. 28 .There is a close relationship between customer satisfaction and bank profitability.01 level ** Significant at .

The frequency of the independent variables being significant shows their level of influence over profitability. For example. In case of dependent variable ROA. BPE for 2 years and A/D for only 1 year out of a total of 10 years. Regression coefficient for E/TA are found significant for 6 years. BPE for 2 years and A/D for only 1 year out of a total of 10 years. In case of dependent variable net income. NBB and TA for 3 years. NPL/A for 5 years. This proves that increase or decrease of A/D does affect little on profitability as prudent use of A/D with high E/TA and low NPL/A affect the profitability more significantly. Regression coefficient for TA and E/TA are found significant for 6 years. BPE for 2 years and A/D for only 1 year out of a total of 10 years. some independent variables are found to be significant in some years and not in others.Again. when one dependent variable is considered. E/TA and NPL/A. NBB and TA for 3 years. This is because all independent variables had not equal influence over profitability in all the years. the more they have influence over dependent variable. 29 . NPL/A for 5 years. Regression coefficient for E/TA and NPL/A are found significant for 5 years. A/D ratio is found to be significant impact on profitability for only one year. The more the independent variables are significant. The most frequently significant independent variables are TA. In case of dependent variable ROE. NBB for 3 years.

9.004x Yc = – 9786 + 25106x Yc = 0. Table 6.98% (5. 30 .015x Yc = 1. 10.11% (3. 6. Here ‘X’ variable represents time. The performance of banks is important to the individual consumers of bank deposit and loan services.34%) 7.376 + 0.298 (79. 11.475x Yc = 1026 + 145.163 . Because of close relationship between economic and financial development. No.1 Trend of the profitability determinants of PCBs (Figures other than percentage and ratio are in crore) Sl. Total Asset (TA). 8.07%) 3.2 Trend of the profitability determinants of PCBs Last ten years aggregate data on the Advance/Deposit (A/D). ‘b’ represents the slope of the line of the amount of change in Y variable that assoc iated with the change of one unit in X variable.1 Commercial Bank Performance Banks are the foundation of the financial system of any country. 6.046 + 0.834 + 0. Yc denotes the trend values to distinguish them from the actual Y values.99 (1.825 (467) Equation for trend line Yc = a+bx Yc = 0. Equity/Total Asset (E/TA). a bank being a service entity is no less an exception. management and to the entire economy.0. effective bank management strategies and prudential financial regulations are the means to ensure the appropriate contribution of banks to the growth and development of a country. 7. Any organization is born to serve the interests of not only the people who make up it. employees.94% (1. ‘a’ is the Y intercept or the value of the Y variable when X = 0. the banking system must be made robust. An economy belonging to either developed or developing zones of the globe is significantly influenced by how well its banking industry performs. stockholders.2x Source: Bangladesh Bank The straight line trend is represented by the equation Yc = a + b. but also those who are outside the organization and hence.004x Yc = 0. sound macro-economic environment.CHAPTER VI SAMPLE. Business Per Employee (BPE) calculated as Deposit + Advances/ Number of Employees and Number of Bank Branches (NBB) of Private Commercial Banks (PCBs) show their increasing trend where Non Performing Loan/Total Advance (NPL/A) show its decreasing trend over the period.85%) 128. DATA AND RESULTS 6. Vari ables Advance/Deposit (A/D) Total Asset (TA) Equity/Total Asset (E/TA) Non Performing Loan/Total Advance (NPL/A) Business Per Emp loyee (BPE) Nu mber of Ban k Branches (NBB) Mean & Standard Deviation 86.693) 6. government regulators. Where. For that reason. resilient and sound for efficient intermediation of financial resources.45) 1.

1 Perfo rmance of PCBs in respect of profitability determinants Source: Bangladesh Bank 31 .Figure 6.

23 94 (0. The mean is highest in case of National Bank Ltd. IFIC Ban k Ltd.063 0.07 203 (0.69 (0.64% 6.92% 10.74% -17.98 80 (0.066 0.51% 1. It is found to have highest CAGR in case of UCBL (21.408. (16. (2.49) (5.16 (2.44% 5.028) (0.480.909.6.10) -1.99% 15.311. The City Ban k Ltd. The mean is highest for Islami Bank Ltd.098 4. Mean & Std Dev of Mean & Mean & Std Dev NPL/A Std Dev of Std Dev of E/ TA BPE of NBB 11.87) (12. Mean & CAGR.024) (0.78) (49.98 362 (0.026) (0.13% 11.72) 3.589 Crore) where the lowest one is for ICB Islami Bank Ltd.88% -14.58% 5.05) 0.94) 8.51% 8.21) (24.48% 0.70% 0.2 First Generation PCBs in respect of profitability determinants CAGR.27% 7.69 (in case of Uttara Bank Ltd.175) (0.81 165 (0.04) (1.952.05) -1.047 3.58% 1.107) (1.86% 6.096) (0.934. The CAGR for Total Asset is positive for all 9 banks.422 4.70 (1.33% 3.32) 20.87% 0. Non Performing Loan as percentage of Advance is found to have decreasing trend with only exception to ICB Islami Bank Ltd.29% 8.36 86 (0.15% 0.80% -18.90 (0.3 Performance of PCBs in respect of profitability determinants Table 6.448.17% 3.23% 0. Mean & Std Dev of TA 16. U.67 (3747.66) 9.01) 1.103) (1.97 (in case of ICB Islami Bank Ltd.012) (0.67) (5. Islami Bank Ltd.72% 2.44) 5.61%) and lowest in case of ICB Islami Bank Ltd. Ban k Ltd.129) (0.93% 4.50) 21.48 (476.123 2.80) 12.27% 0.) and 0.027) (0.07) 15.34%). (7. The CAGR for Equity/Total Asset is positive for all banks except ICB Islami Bank Ltd.578.84 (0.150 2.08% 0.61% -17.134 3.44% -24. CAGR.15) CAGR.74 69 (0. Uttara Bank Ltd.057 0. (2.589.19% -18. Mean & Std Dev of A/D 1.08% 0.499.09) (4.065 0.066 0.83% 18.20% 0.88% 0.66 (1.78 (0.31) 10.65 (2.02%).B. ICB Islami Bank Ltd.029) (0.059 0.61% 4.91% 16.6%) and this is negative in case of ICB Islami Bank Ltd.076 0.023) (0. (-.35% 0. Pubali Ban k Ltd.18% 0.87) (17.07) 1.82% 11.68) 15.37) 15.).54% 0.93) (9.66) 9.96 (0. Source: Bangladesh Bank The above table demonstrates that CAGR of Advance/Deposit is positive for 5 banks and negative for 4 banks.177 2.082) (2.09) -0.30% -0.958.97 (0. The mean stands between 0.81% 0.78 (0.17 (9.061 0.53 32 (0.81% 0.952.007) (0.310) (1.23% -0.09) -1.53% 5.014) (0.102 3.153 1.82 (0.10) 2.53 (3. Ban k Ltd.C.67) (Figures other than percentage and ratio are in crore) CAGR.55 70 (0.631.34% 2.53 (3.79% 0.25) N/C 15.77% -15.03) 0.02% 3.22) 9.118) (0. 32 .80 (0.244.990.38% 7.43) 2.97% 5.76) Name of PCB A.104) (1.34% 0.002 0.57% -26.096 Crore).096. National Bank Ltd.64% 0.

013 7.636 (1.85% -0.20) 3.960 (2.63) (16.98% 12.111 0.069 0.44) 8.471 (2.073 0.35% 16.637 (4.74) (29.82) (24.61% 0.67% 23.829 (4.73% 4.26% 0.49% 0.023) (0.022) (0.16) -1.06) -4.44% 21.97) 1.010) (3.29% 0.58% 11.30% 4.498 (1.21% 0.43% -15.20) (18.03% 8.31% 1.637) 23.10) 0.45% 2.061 0.Business per Employee is found to have increasing trend for all 9 banks.98).021 4.009) (0.042) (2.20 33 (0.23) (14.66% 10.34% 0.03) -0.07% 2.37% 0.34) 4.58% 0.60) 1.13% 15.85% 11.77 (0. Dhaka Bank Ltd.84% 0.73% 0.015) 17. Exim Bank Ltd.91 (0.09% 0.91 (0.028 8.37% 0.077 0.88% 3.142) 30.87) (19. Mean & Std Dev of A/D -1.603 (1.079 0.016) (0.09) 1.39% 3.013) (0.46% N/C 6.018 7.43% 9.84 26 (0.082 0.001% 0.82% 0.93 (0. The Trust Bank Ltd.668 (2.05) 0.66) (12.48) Eastern Bank Ltd.020) (0.74) (15. 33 .88 (0.024) (0.012) (0.686 (2.64% -12.53 25 (0.95 (0.79) 2.61) (13.044 3.12) -0.06% 1.05) -0.85) (9. The mean is highest for AB Bank Ltd (4.34 52 (0. Mean & CAGR. Al-Arafa Ban k Ltd.07) 2.016) (0.48% 0.84) 0.017) (1.26% 4.95% -21.05) 2.19% 0.62 33 (0.009) (2.908 (2.270) 22.59 46 (0.656 (3. NCC Bank Ltd.11% 2.75 29 (0.059 4.88 (0.024 6.66 48 (0.12% 19.059 0.045 (2.69% 25.49 31 (0.42% 8.94 (0.89 (0. The CAGR is highest in case of UCBL (18.060 0.34) (16. First Security Ban k Ltd.080 6.34) 11.84% 9.92 24 (0.015) (0. Dutch Bangla Bank Ltd.441) (Figures other than percentage and ratio are in crore ) CAGR.003) (2.72% 5.024) (1.85 36 (0.63) 5.009) (2.014) (3.40) (14.852) 16.22% 14. No.009) (0.75 (0.43% 0.151) 24.081 0.014) (1.87) -1.91% 0.51% 2.09) -0.42% 0.038) (1.95% 4.012 7.25% 11.139) 17.71% 0. Social Investment Ltd.010) 36.551 (3.27% 1. CAGR.014) (1. Mercantile Bank Ltd.55) and lowest for Pubali Bank Ltd.06) -0. (362) and lowest for ICB Islami Bank Ltd.43 27 (0.12% 14. Prime Bank Ltd.915) 33.87% 2.01% 6.31% 0.3 Second Generation PCBs in respect of profitability determinants Name of PCB CAGR.90 (0.88 (0.96% 6.016) (0.39% 14.95) 4.35% N/C 14. The mean is highest for Pubali Bank Ltd.34% 0.94% 8.86% 0.854) 29.04 41 (0.59 29 (0.058) (3. Mutual Trust Bank Ltd.12) 0.399) 30. (1.30% 61.75) (18.52% 6.034 7.078 0.36) 9.34% 0.029) (0.04 (0.13% 0.48% 17. Bank Asia Ltd.016 6.027) (1. Mean & Std Dev of Mean & Mean & Std Dev NPL/A Std Dev Std Dev of E/ TA of BPE of NBB 2.058 4.03% 18.63) 5.065 7.24% 19.069 0.66% 0.83 (0.26% 4.078 0.91% 3.063 0.020 8.59% 0. (32).454 (2.76% 13.93% 36.33%) and lowest in case of ICB Islami Bank Ltd.06) CAGR.007) (1.13) (14. Southeast Bank Ltd.009) (0.307) 25. of Bank Branches is found to have an increasing trend except ICB Islami Bank Ltd.55% 24. Mean & Std Dev of TA 16. Table 6.71% 9.98% 0.23%).898) 20.10% 20. (3.

92) 19.50 (2. Mean & Std Dev of TA 79. Standard Bank Ltd. of Bank Branches is found to have an increasing trend for all 18 banks.41% 62. Mean & Std Dev of NBB 25.35% 2. (20.68) 0. (52) and lowest for One Bank Limited (23).88 (0. Business per Employee is found to have increasing trend for all 9 banks.601 (2.80 (0.161 (0.35% 0.29% 0.86 (0. Mean & Std Dev of BPE 0.492 (1.22% 26 (14.67%) and lowest in case of One Bank Limited (0.93) (Figures other than percentage and ratio are in crore) CAGR.141 0. Mean & Std Dev of A/D 5. Mean & Std Dev of E/ TA 7.050) Mean & Std Dev of NPL/A 25.12% 0.41% 25 (0.006) -15. The CAGR for Total Asset is positive for all 18 banks.251.86 35 (0.06).60% 0.32) The above table demonstrates that CAGR of Advance/Deposit is positive for 6 banks and negative for 12 banks.085 (0. 34 .41 (4.93 (0.19 (0.046) 32.49% 2.39%) and lowest in case of Eastern Bank Limited (16.637 Crore) where the lowest one is for Commerce Bank Limited (753 Crore).32% 0.28% 0.78% 1.53) and lowest for Commerce Bank Ltd.029 1. Among these banks.013) 3. Al Arafa Bank Ltd is found to have highest decreasing trend (-21.92) (39. Mean & Std Dev of A/D -1. CAGR. The mean is highest for Prime Bank Ltd.067 (0.) and 1.49) CAGR.12) CAGR.12% 0.12%) where Bank Asia is found to have highest increasing trend (61. Mean & Mean & Mean & Mean & Std Dev Std Dev of Std Dev of Std Dev of E/ TA NPL/A BPE of NBB -18. Table 6.Name of PCB One bank Ltd. Premier Ban k Ltd. The mean stands between 0.73% 6.). CAGR.023) 9.06) -1.72% 753 (341) CAGR. The mean is highest for Prime Bank Ltd (6.89% 23 (14. Non Performing Loan as percentage of Advance is found to have decreasing trend for 5 banks and increasing trend for 11 banks.158.26%).32% 0.19 (in case of Commerce Bank Ltd.144) CAGR.54% 0.58%). The CAGR for Equity/Total Asset is positive for all banks except Trust Bank Limited and Commerce Bank Ltd. (2. This trend is highest in case of First Security Bank Ltd.21% 25 (12.663) 34.81% N/C 31. It is found to have highest CAGR in case of Bank Asia (36. The mean is highest for Bank Asia Ltd (8.71) 14.12 (2.61% 2.05) -1.9%).71% 6.030 (0.97) 16.33) BRAC Bank Ltd.06) -8.011 (0.71%).11% 0.318 (0.085) 16. (16. The mean is highest in case of Commerce Bank Ltd. CAGR.022) (0.45 (0. Co mmerce Bank Ltd.14% 4.96% 2.48% 0.4 Third Generation PCBs in respect of profitability determinants Name of PCB CAGR.13% 0.101 (0. No.81% 5.79% 0.26) 18.90) CAGR.014) 0. Source: Bangladesh Bank CAGR.1%) and lowest in case of First Security Bank Limited (5. Mean & Std Dev of TA 22.028) -5.75 (in case of The Trust Bank Ltd.82) 22.194) (0.023) 22.306 (2.033 (0.06 (0.

Business per Employee is found to have high increasing trend for all 3 banks. 6. (1.18) CAGR.697.Name of PCB Jamuna Bank Ltd.20% 24 (20. 35 .88 (in case of Shahjalal Bank Ltd. DFIs & FCBs At aggregate level.298 Crores). CAGR.017 (0.96) 24.87) and lowest for Brac Bank Ltd.073 (0.39%). Mean & Std Dev of A/D 3. this ratio is highest in case of PCBs (86.1%) and lowest in case of Jamuna Bank Ltd (7. The mean stands between 0.84) 47.27% 0.86).2 PCBs’ Advance -Deposit ratio in respect of other categories of banks Source: Bangladesh Bank Total Asset has an increasing trend for all categories of banks. The mean are 2.7% and 0.005 (0.66% 2.01% 28 (19. No.5% for Brac Bank Ltd.017) -4.35% 5.103. and Shahjalal Bank Ltd. The mean is highest in case of Brac Bank Ltd.49% 0. Mean & Std Dev of NBB 36. Neglecting the imprudent ratio of DFIs (138%).09) 9.77% 0.63) CAGR. Figure 6.01% 0.68 (2.73) CAGR. respectively.40 (2. 1.085 (0.9%.019) N/C 0. DFIs & FCBs over time.75 (0.483. This is because in 2001..42% 2.88 (0. Mean & Std Dev of E/ TA -0. Shahjalal Bank Ltd. The Total Asset is found to have high increasing trend for all 3 banks.87 (2. The mean is also highest for PCBs (128. Mean & Std Dev of NPL/A N/C 0. of Bank Branches is found to have a high increasing trend because of the gradual expansion of businesses.).3%). The mean is highest for Shahjalal Bank Ltd (5.022) CAGR.21) 41. Advance/Deposit ratio has an increasing trend for all categories of banks except DFIs.) and 0.4 PCBs’ Profitability Determinants and those of SCBs. Non Performing Loan as percentage of Advance is found to have low amount for all three banks. So in the following years they expand their businesses hugely in compare to that of starting year. The CAGR for Equity/Total Asset is negative for all these banks.006) CAGR. all these three banks started their operation. Jamuna Bank Ltd.609. (14. Mean & Std Dev of BPE 24. Mean & Std Dev of TA 32.03) Source: Bangladesh Bank The above table demonstrates that CAGR of Advance/Deposit is positive for all 3 banks. PCBs are performing better in respect of profitability in maximum cases than that of SCBs.02 (1.55% 4.1%).75 (in case of Jamuna Bank Ltd. The CAGR of total asset is highest for PCBs (20.

The mean of NPL/A is lowest for FCBs (1. Figure 6. Figure 6.1% respectively.42%).27%).3 PCBs’ total asset in respect of other categories of banks Source: Bangladesh Bank Equity/Total Asset has an increasing trend for all categories of banks except DFIs.99) stand next to them. The CAGR is lowest for PCBs (-15.4 PCBs’ equ ity/total asset ratio in respect of other categories of banks Source: Bangladesh Bank Non Performing Loan as percentage of Advance is found to have decreasing trend for all categories of banks. This proves their efficiency in credit management.34). This means PCBs are getting gradual success in handling NPL. 5 PCBs’ NPL as % of total advance in respect of other categories of banks Source: Bangladesh Bank In respect of other category of banks. This ratio is highest in case of FCBs (13. 36 .Figure 6. PCBs are also found prudent in achieving gradual success in increasing Business per Employee as CAGR is highest for PCBs (12.8%) and PCBs stand next to FCBs having 6. Though the mean is highest for FCBs (10.3% and 37. PCBs (3.9%.8%) and PCBs stand next to FCBs having 8% where SCBs and DFIs stand far behind having 26.

27% 3.46% 3428 (73. Total Asset has an increasing trend for all categories of banks.756 (0.83% 1825 (467. DFIs & FCBs (Figures other than percentage and ratio are in crore) Category of Banks PCBs SCBs DFIs FCBs Source: Bangladesh Bank CAGR.131) -1.298 (79.79% 48 (13.1) 7. this ratio is highest in case of PCBs (86.058 (0.709 (25. Mean & Std Dev of NBB 7.335 (1.60% 1.18% 0.25% 0. 37 .693) 8.84% 0.065) -9.42% 0. Figure 6. Mean & Std Dev of E/TA 5.026) 5.020) -6.5 Comparison of selected variables of PCBs to those of SCBs. of Branches has an increasing trend for all categories of banks except DFIs.06% 0.83% 18.378) 2. Mean & Std Dev of A/D 0. Mean & Std Dev of TA 20.846 (4.14% 0.144 (0.069 (0.87% 85.013) 10. Mean & Std Dev of BPE 12. The mean is also highest for PCBs (128.061) CAGR.1%).01% 0.96% 19.Figure 6.723) 10.23% 0.454) 10.051) -8. The CAGR of total asset is highest for PCBs (20.39%).263 (0.1) 0.573) 13.080 (0.39% 128.95% 10. The CAGR is highest for PCBs.5) -0.883) 6.028) CAGR.7 PCBs’ No of Ban k Branches in respect of other categories of banks Source: Bangladesh Bank Table 6.580) CAGR.039) 0.73% 0.35% 0.382 (0.328) CAGR.88% 1. Mean & Std Dev of NPL/A -15.4) The above table shows that Advance/Deposit has an increasing trend for all categories of banks except DFIs.298 Crores).861 (0.6 PCBs’ Business per Employee in respect of other categories of banks Source: Bangladesh Bank No.018 (0.989 (1.54% 2.54% 0.138 (0.039) -6. Neglecting the imprudent ratio of DFIs (138%).504 (0.554) 5.371 (0.010) CAGR.027 (0.692 (0.63% 1340 (28.878 (8.

38 . Trend equation of ROA and ROE of PCBs Sl.1% respectively.3% and 37. Non Performing Loan as percentage of Advance is found to have decreasing trend for all categories of banks.0.5 Performance of PCBs in respect of ROA & ROE Figure 6. PCBs are also found prudent in achieving gradual success in increasing Business per Employee as CAGR is highest for PCBs (12. PCBs are performing better in maximum cases than those of SCBs.6 Mean.6% (10. The CAGR is highest for PCBs.6E-05x Yc = 0.27%). This proves their e fficiency in credit management.9%) Equation for trend line Yc = a+bx Yc = 0. In fine. Vari ables Return on Asset (ROA) Return on Equ ity (ROE) Mean & Standard Deviation 1.42%).9%. This means PCBs are getting gradual success in handling NPL.99) stand next to them. No.6%) 21. This ratio is highest in case of FCBs (13. 6.8%) and PCBs stand next to FCBs having 6.016x The average ROA and ROE show soundness in profitability over time. The CAGR is lowest for PCBs (-15.34).8 PCBs’ Return on Asset (ROA) and Return on Eq uity (ROE) Source: Bangladesh Bank Last ten years aggregate data on the ROA & ROE of PCBs show their decreasing trend over the period.306 . Standard deviation.8%) and PCBs stand next to FCBs having 8% where SCBs and DFIs stand far behind having 26. No. The mean of NPL/A is lowest for FCBs (1. Table 6. DFIs & FCBs over time at aggregate level. Though the mean is highest for FCBs (10. 2.014 . In respect of other category of banks. of Branches has an increasing trend for all categories of banks except DFIs.4% (0. The equation for trend line shows that both ROA and ROE are having decreasing trend due to the gradual increase of competition.Equity/Total Asset has an increasing trend for all categories of banks except DFIs. 1. PCBs (3.

83% 1.79% 29.96% 27.22% 20.31% Mean 17. The Trust Bank Ltd.35% 2.98% 1. Both ROA and ROE are lowest for Commerce Bank Ltd.08% ROE Standard Deviation 16.65% 20.57% 11.68% 1.Table 6. ROA is highest for Exim Bank Ltd. Table 6.68% 0.69% 0.47% 23.C.77%).40% 1.84% 31.34% 22.B. Dutch Bangla Bank Ltd.19% Standard Deviation 0.71% 21.17% 0.29% The above table shows that both ROA and ROE are positive for all banks.29% 13.73% 0.34% 1. The City Ban k Ltd.21% 17.8 ROA & ROE of Second Generation PCBs Name of PCBs Eastern Bank Ltd.63% 1. Pubali Ban k Ltd.55% 1.76% 23.45% 22.46% 1. Prime Bank Ltd.07% 9.74%).20% 10.56% 1.78% 15. Co mmerce Bank Ltd. Islami Bank Ltd. IFIC Ban k Ltd. Premier Ban k Ltd.66% 3. ROA is highest for National Bank Ltd.92% 1.35% -3.52% 1.35% 0.26% The above table shows that both ROA and ROE are positive for all banks except ICB Islami Bank Ltd.01%) where ROE is highest for Bank Asia Ltd. Social Investment Bank Ltd.84% 1.57% 15.82% 0. First Security Ban k Ltd. Ban k Ltd. Source: Bangladesh Bank ROA Mean 1. Standard Bank Ltd.90% 1. NCC Bank Ltd.91% 1.63% 13.59% 13.57% -44.88% 1.11% 0.14% 5.80% 23.27% 13. U.54% Mean 25.47% 0. (1.68% 0.63% 0.17% 0.15% 23.01% 2. Mutual Trust Bank Ltd.55% 9.50% 26.91% 10.36% 15.46% 25.34% 1.54% 1.74% 18.68% 2. 39 .60% 0.39% 1.69% 1.25% ROE Standard Deviation 6.90% 6.65% 14. Uttara Bank Ltd. Ban k Ltd.93% 1. Al-Arafa Ban k Ltd. Mercantile Bank Ltd.7 ROA & ROE of First Generation PCBs Name of PCBs A.47% 0.74% 29.46% 27. Bank Asia Ltd.58% 0.55% 26.64% Standard Deviation 1. ICB Islami Bank Ltd.95% 11.99% 0.31% 15. Source: Bangladesh Bank ROA Mean 1.88% 14.43% 14.72% 1.45% 0.01% 0.69% 1. Southeast Bank Ltd. Dhaka Bank Ltd.03% 29. National Bank Ltd.91% 0. (29.62% 0.54% 24.87% 0.87% 1.46% 77.65% 21. Exim Bank Ltd.77% 25.41% 18. One Bank Ltd.64% 0.44% 7.45% 1.92%) and ROE for Uttara Bank Ltd.22% 0.39% 4. (29. (2.01% 21.94% 0.

FCBs (having ROA 3. Shahjalal Bank Ltd.6 ROA & ROE of PCBs’ and those of SCBs.81% respectively and lowest for Brac Bank Ltd.65% and 20.97% 8.Table 6.9 PCBs’ Return on Asset (ROA) in respect of other categories of banks Source: Bangladesh Bank Figure 6.64% 1. Figure 6.72% respectively. Both ROA and ROE are highest for Shahjalal Bank Ltd. 6.81% ROE Standard Deviation 10.7% & ROE 29.10 PCBs’ Return on Equ ity (ROE) in respect of other categories of banks Source: Bangladesh Bank 40 .64% and 9. Source: Bangladesh Bank ROA Mean 0.05% 1. having 0.9 ROA & ROE of Third Generation PCBs Name of PCBs BRAC Bank Ltd.4% & ROE 21.67% Mean 9.3%) are in best position and PCBs (having ROA 1.72% 15.6%) are next to FCBs. Jamuna Bank Ltd. DFIs & FCBs In respect of the mean of ROA and ROE.65% Standard Deviation 0.80% The above table shows that both ROA and ROE are positive for all banks.64% 20.93% 11. having 1.99% 0.74% 0.

DFIs & FCBs CA GR.00% -14.6%) -8.1% (0.6% (10. This is because the ROA and ROE of all category of banks in 2001were very high in respect of the other years.7% & ROE 29.7% (0.6%) -2.9%) -0.4% & ROE 21.3% (18.7% (1. the competition in banking industry is increasing gradually and this may cause the reduction in profitability.6%) 9.29% 29.00% PCBs 1. 41 .6%) are next to FCBs.20% FCBs 3.0% (217. Mean & Std Dev of ROE -7.87% SCBs 0.6%) Source: Bangladesh Bank Category of Banks CA GR. Moreover.Table 6.8%) The above table shows that CAGR of ROA and ROE of a ll categories of banks is found to be negative.8% (54.4%) -11.87% -22.93% 21.01% DFIs 0.10 Comparison of ROA & ROE of PCBs to those of SCBs. FCBs (having ROA 3. with only exception in case of ROA of SCBs.3%) are in best position and PCBs (having ROA 1. In respect of the mean of ROA and ROE.4% (0.4%) -6. Mean & Std Dev of ROA -3.

total asset. But it is obvious that the competition among the commercial banks will be more severe in course of time. Asset. selecting borrowers and monitoring them. In order to expand the business. PCBs should concentrate on customer needs and satisfaction. a bank can attain more competitive advantages that can help it to earn more profit. More professional approach to management and attitudinal change among bank employees can make the clients more satisfied. Through increasing number of bank branches. To ensure smooth functioning of a bank.CHAPTER VII CONCLUSIONS AND AREAS FOR FURTHER RESEARCH 7. Keeping pace with the time. Their licensing process is under active consideration of Bangladesh Bank. Equity-Total asset ratio also should be justified and only this well justified Equity-Total asset ratio can enhance profitability. So in order to survive. it is necessary to increase number of branches also. Advance. CAGR of Deposit. Profitability depends on the size of banks. So PCBs should concentrate to increase its assets to be more competitive. This shows PCBs’ dominance in the banking sector of Bangladesh. Through increasing its total assets. equity and net income of Private Commercial Banks (PCBs) are found to have their increasing trend over the period. If a PCB can increase business per employee (BPE). Several new PCBs are coming soon. CAGR of deposit. Large banks can provide services to their customers in cheaper rate than small ones. advance. This reflects their gradual expansion of business and earning increasing amount of profit over the period. total equity and net income of the PCBs of second generation is higher than that of first generation and CAGR of those variables of third generation is mention ably higher than that of second generation respectively. In this connection. a bank can expand its services more geographically. a bank should be potential enough to face the coming challenges. So PCBs should be prudent in maintaining this ratio to ensure maximum profitability. Post lending regular monitoring should be rigorous. advance. The most acute challenge is to manage the NPL. they should be more technology driven to serve the customers. the PCBs are found to achieve mentionable growth in the above selected variables. During 2001-2010. it can be able to enhance its profitability. As non-performing loan reduces the loan able fund of 42 . Equity and Net Income of PCBs is higher in almost every respects that that of SCBs. PCBs have to face continuous challenges in scrutinizing credit proposals. PCBs should be innovative in launching their various new deposit schemes according to the changing demand of the customers. total asset. The deposit. Advance – Deposit ratio of a bank should be such that can ensure required liquidity as well as can ensure adequate utilization of funds without keeping idle fund. DFIs & FCBs over time. PCBs have to find out new avenues of businesses through selecting appropriate locations of new branches to expand the volume of customers.1 Conclusions The PCBs in Bangladesh are performing well. To collect more deposit. Total asset of a bank can be considered to measure its size. Borrowers’ credit-worthiness should be judged very carefully without compromising to any pressure.

managing them efficiently becomes very essential. banks are reliable source of financial intermediation. 43 . profitability determinants and performance of Private Commercial Banks of Bangladesh.is an issue of further research. what the appropriate ratio of these two variables should be at what context . Their potentiality in terms of growth and performance is vitally req uired for their smooth functioning. a bank can increase its profitability. This paper mainly focuses on growth. It is found that Advance/Deposit and Equity/Total asset ratios should be well justified to ensure profitability. 7. Through reducing NPL.a bank that ultimately affects the income source.2 Areas for further research In Bangladesh. In this connection. Moreover. further comprehensive research work can be initiated to find out various pros and cons of each category of banks as well as of the entire banking sector of Bangladesh as a whole.

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4 50.6 80.6 34.7 61.7 1.4 55.4 29.8 32.0 31.7 78.7 11. Name of PCBs 1 The City Ban k Ltd 2 U.2 167.4 7.9 -206.4 22.7 Sl.3 98.2 94.7 -2.1 62.7 25.4 282.B.4 77.6 37.2 158.0 9.5 188.9 9.5 142.4 20.7 78.8 136.8 61.4 0.4 237.L.5 69.6 16.9 23.6 82.6 22.1 59.3 251.9 276.0 0.3 11.2 37.9 1. No.9 218.1 6.0 Maxi mum 184.0 59.5 -11.9 54.0 78.2 14.8 175.2 Mi ni mum 0.8 0. 6 Uttara Bank Ltd 7 Pubali Ban k Ltd 8 Eastern Bank Ltd 9 NCCBL 10 Dhaka Bank Ltd 11 Southeast Bank 12 Prime Bank 13 Dutch Bangla 14 Mercantile 15 One bank 16 Exim Bank 17 Premier Ban k 18 Standard Bank 19 First Security Ban k 20 Co mmerce Bank 21 Mutual Trust Bank 22 The Trust Bank 23 Bank Asia 24 Al-Arafa Ban k 25 Al-Baraka Bank 26 Islami Bank 27 Social Investment 28 BRAC Bank 29 Jamuna Bank 30 Shahjalal Bank Source: Bangladesh Bank 45 .2 109.1 96.APPENDICES Appendices 1: Net Income (2001-2010) (Figures in crore) Mean 59.8 209.3 17.8 5.1 130.B.8 127.6 55.2 68.0 181.5 51.6 207.3 323.4 100.7 6.8 26.1 33.4 687.9 6.9 53.1 58.3 200.7 48.4 77.3 106.8 Median 49.6 16. 3 A.7 56.5 193.0 56.1 154.8 6.4 33.6 49.3 27.8 345.5 45.9 145.6 166.6 9.5 -71.9 448.5 17.3 23.7 -59.2 59.8 0.8 25.C.6 7.0 139.6 39.5 -3.4 20.7 81.3 1.6 64. Ban k 4 IFIC Ban k Ltd 5 National Bank Ltd.0 369.0 47.2 12.1 36.0 44.4 67.

74% 3.53% 2.55% 1.B.90% 0.46% 1.01% 1.69% 1.B.67% 2.10% 1.41% 3.46% 1.49% 1.46% Sl.46% 1.05% 0.64% 1.09% 3.79% Maxi mum 2.83% 0. Ban k 4 IFIC Ban k Ltd 5 National Bank Ltd.25% 1.98% 1.34% 0.05% 2.84% 1.64% 1.25% 1.45% 1.00% 1.65% 2.04% 0.76% 1.85% 3.08% 0.97% 2.68% -3.16% 1.74% 3. 3 A.25% 0.61% 1.40% 0.18% 0.52% 0.22% 3.82% 1.35% 0.26% 1. No.76% 1.47% 2.34% 1.57% -0.05% 1.56% 1.73% 1.01% 1.80% 2.62% 1.00% 2.98% 2.64% 0.91% 1.51% 1.60% 1.00% 3.41% 3.66% 1.00% 0.08% -1.64% 1.83% 1.56% 0.40% 4.21% 1.39% 1.00% 0.79% -10. Name of PCBs 1 The City Ban k Ltd 2 U.45% 0.32% 1.C. 6 Uttara Bank Ltd 7 Pubali Ban k Ltd 8 Eastern Bank Ltd 9 NCCBL 10 Dhaka Bank Ltd 11 Southeast Bank 12 Prime Bank 13 Dutch Bangla 14 Mercantile 15 One bank 16 Exim Bank 17 Premier Ban k 18 Standard Bank 19 First Security Ban k 20 Co mmerce Bank 21 Mutual Trust Bank 22 The Trust Bank 23 Bank Asia 24 Al-Arafa Ban k 25 Al-Baraka Bank 26 Islami Bank 27 Social Investment 28 BRAC Bank 29 Jamuna Bank 30 Shahjalal Bank Source: Bangladesh Bank 46 .85% 0.77% 1.82% 1.99% 0.69% 1.67% 1.35% 1.65% Median 1.19% 1.45% 2.20% 0.35% 0.L.92% 1.60% 2.74% 1.Appendices 2: Return on Asset (ROA) (2001-2010) Mean 1.60% 0.54% 0.38% 0.10% 4.40% 1.63% 1.78% 0.48% 1.82% 1.79% 1.00% 1.77% -3.26% 0.37% 2.63% Mi ni mum 0.56% 2.35% 2.66% 5.67% 0.33% 0.64% 2.26% 1.95% 3.25% 2.06% 0.23% -0.05% 1.20% 1.

2% 5.220 Maxi mum 80.1% 4.0% 40.7% 31.5% 41.3% -10.0% 29.7% 14.4% 20.9% 66.2% 20.2% 26.B.5% 9.9% 69.2% 17.7% 105.7% 29.L.208 Median 15.7% 9.8% 25.7% -25.9% 19.7% 25.7% 8.7% 62.5% 67.2% 0.1% 13.6% 1.6% 25.7% 59.2% 20.6% 24.6% 16.1% 15.5% -44.9% 10.6% 1.8% 18.5% 64.2% 15.0% 15.8% 9.Appendices 3: Return on Equity (ROE) (2001-2010) Mean 27.7% 52.5% 23.2% 21.2% 15.8% 28.8% 0.3% 10.8% 55.9% 19.8% 37. 6 Uttara Bank Ltd 7 Pubali Ban k Ltd 8 Eastern Bank Ltd 9 NCCBL 10 Dhaka Bank Ltd 11 Southeast Bank 12 Prime Bank 13 Dutch Bangla 14 Mercantile 15 One bank 16 Exim Bank 17 Premier Ban k 18 Standard Bank 19 First Security Ban k 20 Co mmerce Bank 21 Mutual Trust Bank 22 The Trust Bank 23 Bank Asia 24 Al-Arafa Ban k 25 Al-Baraka Bank 26 Islami Bank 27 Social Investment 28 BRAC Bank 29 Jamuna Bank 30 Shahjalal Bank Source: Bangladesh Bank 47 .5% 23.2% 10.3% 21.7% 21.6% 21.8% 23.1% 1.9% 28.7% 11.5% 25. 3 A.9% 17.8% 21.0% 26.5% 4.0% 0.6% 17.1% 56.0% 12.8% 23.1% 0.6% 4.4% 17.7% 26.C.6% 18.2% -2.6% 22.0% 32.4% 11.5% 7.8% 18.0% 20.035 Sl.9% 49.8% 21.7% 18.340 Mi ni mum 0.9% 26.7% 3.5% 18.3% 29. Ban k 4 IFIC Ban k Ltd 5 National Bank Ltd. No.4% 45.0% 14.5% 24.5% 39.6% 21.6% 0.7% 19.6% 9. Name of PCBs 1 The City Ban k Ltd 2 U.6% 0.6% 22.7% 19.0% 46.5% 55.1% 21.8% 21.0% 11.0% 10.4% -17.0% 21.7% 36.7% 0.6% 46.1% -179.B.8% 66.6% 38.7% 15.

61 0.00 -0.20 -0.00 0.55 -0.18 -0.Appendices 4: Correlation matrix of independent variables (Year 2001) Independent Vari ables Advance/Deposit Total Asset No.15 1.27 -0.00 -0.36 -0.30 -0.00 0.23 -0.64 -0. of Branches NPL/Adv Equi ty/Asset BPE Advance/ Deposit 1.51 1.15 1. of Bank Branches NPL/Adv Equi ty/Asset BPE 1.74 0.00 -0.00 0.70 0.14 0.11 0.09 0.59 1.36 -0. of Branches NPL/Adv Equi ty/Asset BPE Advance/ Deposit 1.00 0.38 1. of Branches NPL/Adv Equi ty/Asset BPE Advance/ Deposit 1.22 1.00 Appendices 5: Correlation matrix of independent variables (Year 2002) Independent Vari ables Advance/Deposit Total Asset No.10 1.00 0.00 0.46 -0.00 0.00 0.21 0.07 -0.65 1.31 1. of Branches NPL/Adv Equi ty/Asset BPE Advance/ Deposit 1.22 1.28 0.00 0.39 -0.34 0.07 -0.45 1.00 -0.11 -0.00 Total Asset No.02 -0.08 1.00 0.63 -0.47 1. of Bank Branches NPL/Adv Equi ty/Asset BPE 48 . of Bank Branches NPL/Adv Equi ty/Asset BPE Appendices 7: Correlation matrix of independent variables (Year 2004) Independent Vari ables Advance/Deposit Total Asset No.43 1.52 -0.75 0.34 -0.33 -0.00 Total Asset No.00 -0.41 -0.48 -0.63 1.60 0.63 -0.48 -0.48 -0.33 -0.05 1.05 1.21 1.00 0.00 0. of Bank Branches NPL/Adv Equi ty/Asset BPE Appendices 6: Correlation matrix of independent variables (Year 2003) Independent Vari ables Advance/Deposit Total Asset No.00 -0.00 Total Asset No.00 -0.14 1.00 -0.18 -0.21 -0.00 0.17 Total Asset No.18 0.

00 0.14 -0.05 -0.00 Total Asset No.03 1.45 0.04 0.00 Total Asset No. of Bank Branches NPL/Adv Equi ty/Asset BPE Appendices 11: Correlati on matrix of independent variables (Year 2008) Independent Vari ables Advance/Deposit Total Asset No.00 -0.22 0.09 -0.20 1.30 0.13 1.00 Total Asset No.06 -0.01 1. of Branches NPL/Adv Equi ty/Asset BPE Advance/ Deposit 1.00 -0.09 -0.00 -0.00 -0.00 0.44 1.45 1.29 1.03 -0.00 0.00 -0.28 1.16 1.24 -0.51 -0.00 0.49 0.47 1.95 -0.00 Total Asset No.00 -0.00 -0.33 -0. of Branches NPL/Adv Equi ty/Asset BPE Advance/ Deposit 1.16 1. of Bank Branches NPL/Adv Equi ty/Asset BPE Appendices 10: Correlati on matrix of independent variables (Year 2007) Independent Vari ables Advance/Deposit Total Asset No.00 1.15 -0.44 1. of Bank Branches NPL/Adv Equi ty/Asset BPE 49 .37 -0.20 -0.00 0.09 -0.00 0.16 0.11 0.01 -0.00 0.56 -0.00 0. of Branches NPL/Adv Equi ty/Asset BPE Advance/ Deposit 1.30 -0.29 0.52 -0.54 1.00 -0. of Bank Branches NPL/Adv Equi ty/Asset BPE Appendices 9: Correlation matrix of independent variables (Year 2006) Independent Vari ables Advance/Deposit Total Asset No.00 -0.00 -0.26 -0.Appendices 8: Correlation matrix of independent variables (Year 2005) Independent Vari ables Advance/Deposit Total Asset No. of Branches NPL/Adv Equi ty/Asset BPE Advance/ Deposit 1.39 -0.17 1.29 -0.15 -0.27 1.18 0.00 0.15 -0.52 -0.06 1.19 -0.28 0.51 1.21 -0.00 -0.00 -0.24 -0.03 -0.06 -0.17 1.10 1.

35 -0.32 1.91 -0.29 0.03 1.31 1.32 0.29 0.19 1.00 0.15 -0.00 -0.17 -0.Appendices 12: Correlati on matrix of independent variables (Year 2009) Independent Vari ables Advance/Deposit Total Asset No.12 0.43 1.00 Total Asset No. of Bank Branches NPL/Adv Equi ty/Asset BPE Appendices 13: Correlati on matrix of independent variables (Year 2010) Independent Vari ables Advance/Deposit Total Asset No.22 0.00 0.12 -0.00 -0.17 0.00 0.00 0.00 Total Asset No.06 -0.11 1.21 1.05 0.33 -0.45 1. of Branches NPL/Adv Equi ty/Asset BPE Advance/ Deposit 1.15 -0.00 0.34 1.02 1. of Bank Branches NPL/Adv Equi ty/Asset BPE 50 .23 0.00 -0.20 -0. of Branches NPL/Adv Equi ty/Asset BPE Advance/ Deposit 1.91 -0.60 -0.00 -0.00 -0.24 0.

91 0.C.78 0.80 0.93 0.66 0.04 0.83 0. 4 IFIC Ban k Ltd 5 National Bank Ltd.77 0.86 0.00 0.05 1.81 0.86 0.88 0.84 0.88 0.03 1.88 Median 0.91 0.74 0.86 0.78 0.90 0.89 0.79 0.91 0.93 0.94 0.88 0.89 0.92 1.75 0.71 0.01 0.99 0.95 0.93 0.01 0.79 0.84 0.19 0.68 0.98 0.95 0.88 0.84 0.97 0.80 0.98 1.64 0.93 0.01 Mi ni mum 0.78 1.11 0.90 0.B.90 0.60 0.55 0.40 Name of PCBs 1 The City Ban k Ltd 2 U.96 1. No.83 0.88 0.94 1.84 0.71 0.81 0.76 0.66 0.90 0. Ban k Ltd.Appendices 14: Sl.08 1.00 0.89 0.86 0.83 0.77 0.66 0.81 0.90 0.80 0.96 1.71 0.75 0.78 0.79 0.68 0.57 0.95 0.03 0.93 Maxi mum 0.88 0.76 0.92 0.85 1.04 0.95 1.60 0.02 2.31 0.90 1.B.69 0.94 0.82 0.91 0.93 0.91 0.74 0.17 0. 3 A.21 1.76 0.97 0.91 0.68 0.77 1.96 0.84 0.L.97 1.92 0. 6 Uttara Bank Ltd 7 Pubali Ban k Ltd 8 Eastern Bank Ltd 9 NCCBL 10 Dhaka Bank Ltd 11 Southeast Bank 12 Prime Bank 13 Dutch Bangla 14 Mercantile 15 One bank 16 Exim Bank 17 Premier Ban k 18 Standard Bank 19 First Security Ban k 20 Co mmerce Bank 21 Mutual Trust Bank 22 The Trust Bank 23 Bank Asia 24 Al-Arafa Ban k 25 ICB Islami Bank Limited 26 Islami Bank 27 Social Investment 28 BRAC Bank 29 Jamuna Bank 30 Shahjalal Bank Source: Bangladesh Bank 51 .95 1. Advance/Deposit Rati o (2001-2010) Mean 0.69 0.71 0.

Ban k 4 IFIC Ban k Ltd 5 National Bank Ltd. 52 .B. 6 Uttara Bank Ltd 7 Pubali Ban k Ltd 8 Eastern Bank Ltd 9 NCCBL 10 Dhaka Bank Ltd 11 Southeast Bank 12 Prime Bank 13 Dutch Bangla 14 Mercantile 15 One bank 16 Exim Bank 17 Premier Ban k 18 Standard Bank 19 First Security Ban k 20 Co mmerce Bank 21 Mutual Trust Bank 22 The Trust Bank 23 Bank Asia 24 Al-Arafa Ban k 25 Al-Baraka Bank 26 Islami Bank 27 Social Investment 28 BRAC Bank 29 Jamuna Bank 30 Shahjalal Bank Source: Bangladesh Bank Sl.C. No.B.L. 3 A.Appendices 15: Total Asset (2001-2010) (Figures in crore) Mean 4500 4935 5910 3959 5953 5312 6952 4045 3908 4668 5829 6637 4471 3960 2492 4551 2601 2306 2498 753 2636 2454 3656 2686 2096 16589 2603 4158 2484 2697 Median 4129 3540 4003 3314 4937 5005 5909 3569 3001 4083 4975 5134 3922 3362 2229 3775 2047 1566 2035 734 2276 1806 2693 1835 1961 14604 2188 3078 1851 1829 Maxi mum 9090 12977 13299 7084 13475 8145 12846 8249 8355 9014 13178 15280 10078 8714 5870 11305 6676 6660 6362 1558 5825 5828 10520 7401 2918 33079 5467 12280 7106 7880 Mi ni mum 2073 1835 2841 2552 3166 3591 3907 1813 1609 1910 1447 1574 1346 1308 743 804 345 404 446 332 439 315 472 876 1480 4955 1130 36 421 162 Name of PCBs 1 The City Ban k Ltd 2 U.

077 0.059 0.161 0.130 0.002 0.061 0.141 0. No.063 0.077 0.114 0.058 0.074 0.086 0.056 0.149 0.050 0.073 0.082 0.114 0.084 0.029 0.044 0.063 0.066 0.059 0.049 0.081 0.046 0.108 0.046 0.B.092 0.083 0.068 0.343 0.069 0.085 Median 0.112 0.070 0.061 0.250 0.093 0. Ban k 4 IFIC Ban k Ltd 5 National Bank Ltd.061 0.061 0.077 0.037 0.078 0.072 0.066 0.078 0.063 0.085 Maxi mum 0.147 0.078 0.033 0.089 0.128 0.079 -0.106 0.046 0.055 Name of PCBs 1 The City Ban k Ltd 2 U.106 0.104 0.029 0.110 0.042 0.057 0.056 0.B.092 0.690 0.032 0.066 0.058 0. 6 Uttara Bank Ltd 7 Pubali Ban k Ltd 8 Eastern Bank Ltd 9 NCCBL 10 Dhaka Bank Ltd 11 Southeast Bank 12 Prime Bank 13 Dutch Bangla 14 Mercantile 15 One bank 16 Exim Bank 17 Premier Ban k 18 Standard Bank 19 First Security Ban k 20 Co mmerce Bank 21 Mutual Trust Bank 22 The Trust Bank 23 Bank Asia 24 Al-Arafa Ban k 25 Al-Baraka Bank 26 Islami Bank 27 Social Investment 28 BRAC Bank 29 Jamuna Bank 30 Shahjalal Bank Source: Bangladesh Bank 53 .045 0.L.076 0.111 0.138 0.044 0.077 0.039 0.053 0.060 0.055 0.085 0.Appendices 16: Sl.087 0.073 0.066 0.068 0.064 0. Equi ty/Total Asset (2001-2010) Mean 0.049 0.C.059 0.046 0.064 0.101 0.099 0.077 0.058 0.075 0.079 0.076 0.075 0.048 0.127 0.073 0.076 0.067 0.142 0.311 0. 3 A.026 0.129 Mi ni mum 0.036 0.079 0.065 0.042 -0.112 0.069 0.110 0.042 0.075 0.130 0.051 0.

67% 9.68% 3.37% 13.10% 4.57% 4.30% 0.22% 86.68% 6.25% 1.16% 0.68% 0.62% 15.52% 2.92% 0.48% 1.41% 1.70% 1.14% 12.00% 4.98% 1.68% 5.84% 67.94% 1.21% 2.85% 2. 6 Uttara Bank Ltd 7 Pubali Ban k Ltd 8 Eastern Bank Ltd 9 NCCBL 10 Dhaka Bank Ltd 11 Southeast Bank 12 Prime Bank 13 Dutch Bangla 14 Mercantile 15 One bank 16 Exim Bank 17 Premier Ban k 18 Standard Bank 19 First Security Ban k 20 Co mmerce Bank 21 Mutual Trust Bank 22 The Trust Bank 23 Bank Asia 24 Al-Arafa Ban k 25 Al-Baraka Bank 26 Islami Bank 27 Social Investment 28 BRAC Bank 29 Jamuna Bank 30 Shahjalal Bank Source: Bangladesh Bank 54 .02% 3.86% 0.96% 16.77% 4.39% 3.27% 1.40% 1.90% 7.05% 31.78% 3.19% 0.00% 0.28% 2.39% 4.98% 1.31% 12.25% 4.10% 1. 3 A.78% 8.Appendices 17: Sl.00% 0.04% 1.L.58% 3.43% Maxi mum 31.50% 2.29% 35.18% 3.50% 5.04% 5.83% 2.39% 0.40% 11.04% 1.33% 6.C.05% 29.86% 2.45% 32.B.65% 2.09% 34.01% 0.99% 2.40% 2.08% 0.28% 1.46% 43.90% 2.37% 0.00% 1.96% 5.31% 6.49% 27.43% 2.22% 0.95% 29.09% 8.91% 4.88% 2.16% 2.44% 17.33% 25.00% 0.24% 4.77% 1.80% 2.20% 2.38% 3.78% 3.41% 6. No.20% 4.51% Median 7.43% 42.32% 10.14% 0. NPL as % of Total Advances (2001-2010) Mean 12.B.26% 1.85% 5.00% 0.42% 9. Ban k 4 IFIC Ban k Ltd 5 National Bank Ltd.42% 1.33% 2.08% 2.82% 2.84% 5.75% 4.00% 1.91% Mi ni mum 4.96% 13.81% 11.82% 14.81% 3.00% Name of PCBs 1 The City Ban k Ltd 2 U.22% 9.10% 3.82% 0.66% 15.17% 7.18% 6.

Ban k 4 IFIC Ban k Ltd 5 National Bank Ltd.26 8.27 4.98 2.96 Maxi mum 4.C.72 5.23 2.77 0.73 7.42 11.98 3.62 6.74 3.61 2.43 4.57 1.84 8.06 7.06 2.12 5.90 9.04 7.53 3.81 4.B.92 2. 6 Uttara Bank Ltd 7 Pubali Ban k Ltd 8 Eastern Bank Ltd 9 NCCBL 10 Dhaka Bank Ltd 11 Southeast Bank 12 Prime Bank 13 Dutch Bangla 14 Mercantile 15 One bank 16 Exim Bank 17 Premier Ban k 18 Standard Bank 19 First Security Ban k 20 Co mmerce Bank 21 Mutual Trust Bank 22 The Trust Bank 23 Bank Asia 24 Al-Arafa Ban k 25 Al-Baraka Bank 26 Islami Bank 27 Social Investment 28 BRAC Bank 29 Jamuna Bank 30 Shahjalal Bank Source: Bangladesh Bank 55 .04 6.94 1.53 3.33 6.09 2.12 5.65 6.11 1.09 7.57 2.59 4.36 4.89 1.90 1.66 3.38 2.92 1.95 4.85 7.46 7.66 4.34 7.86 4.62 6.59 4.09 4.80 4.00 6.98 12.59 8.67 4.42 3.70 8.09 12. Business Per Employee (2001-2010) Mean 2.68 0.47 1.47 5.70 9.82 2.75 1.47 6.75 1.50 6.75 11.39 10.02 1.07 4.45 9.58 7.88 Name of PCBs 1 The City Ban k Ltd 2 U.02 5.98 7.Appendices 18: Sl.23 9.59 1.53 1.14 10.71 Mi ni mum 1.B.92 4.80 6.28 6.62 3.07 1.45 8.30 11. No.43 2.66 9.18 10.49 6.50 8.58 2.59 3.36 4.25 0.L.46 3.41 2.27 3.13 3.20 7.04 3.55 2. 3 A.92 8.46 3.87 7.81 0.87 Median 3.10 4.08 3.65 4.50 6.22 6.45 6.99 1.63 3.05 5.38 13.32 6.

Appendices 19: Sl.C. Number of B ank Branches (NBB) (2001-2010) Mean 80 86 70 69 94 203 362 29 46 33 36 52 41 33 23 31 25 26 24 25 27 26 25 48 32 165 29 35 28 24 Median 78 83 70 65 84 200 353 24 44 31 31 44 32 30 20 28 24 23 14 25 22 21 22 43 32 157 24 20 24 17 Maxi mum 88 107 81 95 145 211 399 49 70 56 76 94 96 65 50 59 52 58 66 25 67 59 49 78 34 281 64 127 65 63 Mi ni mum 76 79 63 54 75 198 349 22 29 17 13 26 11 14 5 10 7 10 8 24 7 11 7 40 30 117 15 1 3 2 Name of PCBs 1 The City Ban k Ltd 2 U. 3 A. No.L. Ban k 4 IFIC Ban k Ltd 5 National Bank Ltd.B.B. 6 Uttara Bank Ltd 7 Pubali Ban k Ltd 8 Eastern Bank Ltd 9 NCCBL 10 Dhaka Bank Ltd 11 Southeast Bank 12 Prime Bank 13 Dutch Bangla 14 Mercantile 15 One bank 16 Exim Bank 17 Premier Ban k 18 Standard Bank 19 First Security Ban k 20 Co mmerce Bank 21 Mutual Trust Bank 22 The Trust Bank 23 Bank Asia 24 Al-Arafa Ban k 25 Al-Baraka Bank 26 Islami Bank 27 Social Investment 28 BRAC Bank 29 Jamuna Bank 30 Shahjalal Bank Source: Bangladesh Bank 56 .

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