Professional Documents
Culture Documents
Page | 1
Acknowledgement
First and foremost, we would like to thank the Almighty for giving us the moral integrity,
devotion, patience, and the ability to carry out this comprehensive research oriented project.
We are greatly indebted to our course instructor, Mr. Mokhdum Morshed for his direction,
assistance, encouragement, and guidance. His suggestions, in particular, have been invaluable
for the improvement of this project.
We are also greatly thankful to the DSE, and Lanka Bangla Finance Ltd., particularly to
Prime Bank Ltd. who was kind enough to share with us important information about their
company. Without them, the completion of this project could not have been possible.
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Table of Contents
Executive Summary ................................................................................................................... 5
Introduction ................................................................................................................................ 6
Objective .................................................................................................................................... 6
Methodology .............................................................................................................................. 6
Limitation ................................................................................................................................... 7
Company overview .................................................................................................................... 7
Prime bank: ............................................................................................................................ 7
Lanka Bangla Finance Ltd.: ................................................................................................... 8
Liquidity ratio ............................................................................................................................ 9
1. Cash Position Indicator: .................................................................................................. 9
2. Liquid Securities Indicator:........................................................................................... 10
3. Capacity Ratio:.............................................................................................................. 12
Profitability Ratio..................................................................................................................... 14
1. Return on Equity (ROE) ............................................................................................... 14
2. Return on Assets (ROA) ............................................................................................... 16
3. Net Interest Margin ....................................................................................................... 18
4. Net Non- Interest Margin .............................................................................................. 20
5. Net Operating Margin ................................................................................................... 22
6. Net Profit Margin .......................................................................................................... 24
7. Earnings per Share ........................................................................................................ 26
8. Retention Ratio ............................................................................................................. 28
Financial Risk Ratio ................................................................................................................. 30
1. Equity Multiplier/ Fund Management Ratio ................................................................. 30
2. Leverage Ratio .............................................................................................................. 32
3. Interest Coverage Ratio (Times Interest Earned Ratio) ................................................ 34
Efficiency Ratio ....................................................................................................................... 36
1. Tax Management Efficiency Ratio ............................................................................... 36
2. Expense Control Efficiency Ratio ................................................................................ 38
3. Asset Utilization Ratio .................................................................................................. 40
4. Operating Efficiency Ratio ........................................................................................... 42
5. Employee Productivity Ratio ........................................................................................ 44
6. Earning Spread Ratio .................................................................................................... 46
Market Ratios ........................................................................................................................... 48
1. Price/Earnings Ratio ..................................................................................................... 48
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Executive Summary
This report contains a short overview of the financial condition and performance of Prime
Bank Ltd. based on the financial ratios of the bank from the year 2008 to 2013.
The report contains five types of ratio analysis and the ratios are liquidity, financial risk,
efficiency, profitability and stock market ratios. These ratios will give a very detailed
presentation of the banks financial performance and the conditions. The values and
interpretation of the ratios will give a very clear picture and will also provide information in
which areas the bank needs to improve. These ratios are then compared with the financial
ratios of another Non Bank Financial Institution, Lanka Bangla Finance Ltd. Graphical
representations are also given of each ratios over last six years via two methods Time series
analysis and Cross-functional analysis.
After all the ratios are calculated and interpreted, recommendations are provided as to where
the bank can improve from how it is performing right now. Net Income was going low owing
to a few reasons. The probable reasons are cited in the recommendations part as well. After
that we also included the CAMELS rating of Prime Bank taken from different websites.
Lastly, we have shown all the calculations of the ratios in the appendix part and have added
in text citations and references to avoid plagiarism.
Page | 5
Introduction
The purpose of this report is to analyze the financial ratios for Prime Bank Ltd. and a non
bank financial institution, which we chose to be Lanka Bangla Finance Ltd. The financial
ratios of the two financial institutions will have to be compared and analysis of their
performance will be shown based on the comparison. The analysis using financial ratios are
the oldest tools of analyzing financial position of any organization. Doing analysis of
financial position is difficult for these two financial institutions as the formats of their
financial reports are quite different. This is due to two reasons: first they are service oriented
and second they are highly leveraged. The basic financial statements containing (income
statement, balance sheet, the statement of stockholders` equity and the statement of cash
flow) of quantitative and qualitative information can be used in the analysis of financial and
economic decision making. Financial ratios can be divided into five basic categories:
liquidity, efficiency, debt, profitability, and market ratio. Each type of these ratios has its
unique appeal and is used extensively by the analyst to understand an organizations position
in a given industry. For example for financial service institution liquidity ratio, and efficiency
ratio is tremendously important because of their nature of the service as they are highly
leveraged and hence riskier.
This report would also try to explain what the difference are and why these difference exist
between bank and nonbank financial institution.
Objective
The objective of this study is to highlight the key difference between bank and nonbank
financial institution. Although bank and nonbank financial institutions provide similar service
they are quite different in structure. These can be understood at least up to a level from the
ratio analysis of these two organizations. Highlighting on these things by ratio analysis and
providing probable explanation is the key purpose of this term paper.
Methodology
Although we tried to use both qualitative and quantitative method in our report as the mixture
of these two would yield the best outcome but due to various constrain it was not possible.
We go for quantitative research method.
Among primary data we use financial statements of these institutions and as a secondary data
we use websites and looked into other media to get our desired data.
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Limitation
Primary limitation was time constraint. Overcoming these hurdles was not an easy task.
Especially lack of data gives us much hard time as some of the data were confidential and
some of the data were only available for the insider. Because of these factors, significant
ratios like hot money ratio and several other liquidity ratios could not be found. We found
necessary values for three liquidity ratios only.
Company overview
Prime bank: Started its journey in 17th April 1995 it was a dream coming into existence of
a group of highly successful local entrepreneurs. They conceived an idea of floating a
commercial bank with different outlook.
As a fully licensed commercial bank, Prime Bank Ltd. is being managed by a highly
professional and dedicated team with long experience in banking. They constantly focus on
understanding and anticipating customer needs. As the banking scenario undergoes changes
so is the bank and it repositions itself in the changed market condition.
Being a second generation bank in the competitive banking industry of Bangladesh Prime
Bank Ltd. has done excellently well to climb up to the position they are now. Prime Bank
launched ATM on 2008 and started internet banking on the following year. Now Prime Bank
has 116 branches and more than 150 ATM terminals throughout the country.
Prime Bank Ltd. has already made significant progress within a very short period of its
existence. The bank has been graded as a top class bank in the country through internationally
accepted CAMELS rating. The bank has already occupied an enviable position among its
competitors after achieving success in all areas of business operation.
Prime Bank Ltd. offers all kinds of Commercial Corporate and Personal Banking services
covering all segments of society within the framework of Banking Company Act and rules
and regulations laid down by our central bank. Diversification of products and services
include Corporate Banking, Retail Banking and Consumer Banking right from industry to
agriculture, and real state to software (About Us: Prime Bank Ltd., 2014).
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Lanka Bangla Finance Ltd.: Lanka Bangla Finance Limited (LBFL) a joint venture
financial institution established with multinational collaboration is in operation since 1997
having license from Bangladesh Bank under Financial Institutions Act, 1993. With
institutional shareholding structure, educated & motivated human resources, friendly working
environment & dynamic corporate culture has enabled LBFL to be a diversified financial
services providing institution of the country. Technical support provided by Sampath Bank
Limited, Sri Lanka has been working as a catalyst to emerge LBFL as most innovative
financial solution provider strictly in compliance with the rules & regulations of Bangladesh
Bank.
In recent time, Lanka Bangla Finance Ltd. has taken a series of growth policy which they
achieved through establishing branches countrywide. They also envisioned green banking
policy to be maintaining more intimate relationship with their customer and stake holder.
Its goal is to be the nation's most sought after facilitator in creating, nurturing and
maximizing value to the stakeholders, the society, the environment, and thereby, GROWING
TOGETHER.
Its mission to lead by example through a committed team of nurtured resources fostering
ownership that motivates thriving towards excellence in knowledge, systems, processes and
procedures, thereby empowering the organization on at every level to deliver the highest
quality of product, customer care, and stakeholder value keeping environmental safety a
priority (Corporate Profile: Lanka Bangla Finance Ltd., 2014).
Page | 8
Liquidity ratio
1. Cash Position Indicator:
It measures the cash position out of the total assets of a bank or any non-bank financial
institution. It equals to a fiscal years cash deposits divided by its total assets, expressed as a
percentage.
Cash Position Indicator=
2008
2009
2010
2011
2012
2013
Prime Bank
79.65%
85.58%
80.06%
79.51%
76.44%
82.24%
Lanka Bangla
10.45%
8.10%
9.62%
9.57%
6.62%
7.94%
Prime bank
76.00%
74.00%
72.00%
70.00%
2008
2009
2010
2011
2012
2013
40.00%
lanka bangla
30.00%
20.00%
10.00%
0.00%
2008
Page | 9
2009
2010
2011
2012
2013
Interpretation:
In 2013 in every TK. 100 worth of assets, there are Tk.82.24worth of cash for Prime Bank
Ltd. For 2008, 2009, 2010, 2011 and 2012 it was Tk.79.65, Tk.85.58, Tk.80.06, Tk.79.51,
Tk.76.44 respectively for every Tk. 100 worth of assets of Prime Bank Ltd.
The cash position indicator for Prime Bank Ltd. was quite stable in these six years from
2008- 2013 with a bit higher in 2009 and 2013. If we look at the time series analysis graph
we can see that for 2009 and 2013 the proportionate increase in cash deposits were more than
that of Total Assets and so the figures in these 2 years were higher. Overall the cash position
is good for Prime Bank Ltd as all of them are more than 70% of the total assets.
If we look at the cross sectional analysis we can see the Lanka Banglas cash position
indicator is way lower than that of Prime Bank Ltd. That means Prime Bank has more cash in
their hand which indicates that the cash liquidity for Prime Bank is way higher than the
Lanka Bangla and Prime Bank is in stronger position to handle immediate cash needs.
2009
2010
2011
2012
6.07%
0.00%
0.15%
2.55%
0.69%
2.14%
0.00%
5.46%
6.96%
8.05%
4.38%
3.15%
Prime Bank
2.00%
1.00%
0.00%
2008
Page | 10
2013
2009
2010
2011
2012
2013
4.00%
Lanka Bangla
3.00%
2.00%
1.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013 in every TK. 100 worth of assets, there are Tk.2.14worth of government securities
for Prime Bank Ltd. For 2008, 2009, 2010, 2011 and 2012 it was Tk.6.07, Tk.0.00, Tk.0.15,
Tk.2.55, Tk.0.69 respectively for every Tk. 100 worth of assets of Prime Bank Ltd.
The liquid securities indicator for Prime Bank Ltd. was not too stable in these six years from
2008- 2013 with the highest in 2008. If we look at the time series analysis graph we can see
that for 2008, the bank had the most amount of government securities than any other years
and the total assets at that time was also lower than any other years, so the ratio was the
highest in 2008.
If we look at the cross sectional analysis we can see the Lanka Banglas liquid securities
indicator is higher than the Prime Banks for all the years except year 2008. This means that
compared to the Prime Bank, Lanka Bangla is in greater position regarding its liquidity in the
usual manner.
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3. Capacity Ratio:
It measures how much proportion of loans and leases are there in regarding of the total assets
of the banks and any non-bank institutions. It is a negative liquidity indicator because loans
and leases are often the most illiquid assets of an entity. So the greater is the indictor, the
lower liquid is the institution. It equals to a fiscal years net loans and leases divided by it
total assets, expressed as a percentage.
Capacity Ratio=
Prime Bank
Lanka Bangla
2008
2009
2010
2011
2012
2013
68.00%
71.41%
71.48%
70.55%
69.30%
62.56%
71.95%
59.97%
49.02%
46.64%
73.54%
77.47%
Page | 12
2009
2010
2011
2012
2013
40.00%
Lanka Bangla
30.00%
20.00%
10.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013 in every TK. 100 worth of assets, there are Tk.62.56 worth of government securities
for Prime Bank Ltd. For 2008, 2009, 2010, 2011 and 2012 it was Tk.68.00, Tk.71.41,
Tk.71.48, Tk.70.55, Tk. 69.30 respectively for every Tk. 100 worth of assets of Prime Bank
Ltd.
The liquid securities indicator for Prime Bank Ltd. was quite stable in these six years from
2008- 2013 with the higher amount in year 2009 and 2010. If we look at the time series
analysis graph we can see that for 2009 and 2010, the proportionate increase in net loans and
leases was more than that of Total Assets and so the figures in these 2 years were higher.
If we look at the cross sectional analysis we can see the Lanka Banglas capacity ratio has
more fluctuation than that of Prime Banks and for 3 years, Lanka Banglas capacity ratio is
higher and for the other 3 years, Prime Bank has higher capacity ratio. Therefore, the
liquidity regarding the net loans and leases for these 2 institutions are not that much
differences and Lanka Banglas uncertainty of taking loans and leases are higher than the
Prime Bank.
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Profitability Ratio
1. Return on Equity (ROE)
It measures the rate of return on the ownership interest (shareholders' equity) of the common
stock owners. ROE is viewed as one of the most important financial ratios. It measures a
firm's efficiency at generating profits from every taka of net assets (assets minus liabilities),
and shows how well an organization uses investment taka to generate earnings growth.
ROE is equal to a fiscal year's net income (after preferred stock dividends but before common
stock dividends) divided by total equity (excluding preferred shares), expressed as a
percentage.
Net Income
Total Equity Capital
2008
2009
2010
2011
2012
2013
Prime Bank
18.36%
23.93%
17.76%
19.11%
12.88%
7.83%
Lanka Bangla
40.94%
35.42%
38.40%
15.02%
5.38%
13.96%
Prime Bank
30.00%
25.00%
20.00%
15.00%
Prime Bank
10.00%
5.00%
0.00%
2008
Page | 14
2009
2010
2011
2012
2013
20.00%
LankaBangla
15.00%
10.00%
5.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013 every common shareholders have earned Tk. 7.83 for every Tk. 100 invested. For
2008, 2009, 2010, 2011 and 2012 it was Tk. 18.36, Tk. 23.93, Tk. 17.76, Tk. 19.11 and Tk.
12.88 respectively for every Tk. 100 invested in Prime Bank Ltd.
For these six years from 2008- 2013, ROE was highest in 2009 with a 23.93% and lowest in
2013 with 7.83%. If we look at the time series analysis graph we can see that it has been
decreasing after the year 2009. The reason for this decline is that the proportionate increase in
Total Equity Capital was more than the Net Income for the bank after 2009. This is showing
bad performance of the bank after 2009. It is a very important ration in showing if the bank is
profitable or not and bad performance here is not good for the bank.
Compared to Lanka Bangla Finance, which is a Non Bank Financial Institution, Prime Bank
Ltd. showed better performance in the years 2011 and 2012. In the other years, Lanka Bangla
Finance showed way better performance than Prime Bank Ltd. Lanka Bangla had excellent
ROE results except for the years 2008-2010. In the years 2011 and 2012 proportionate
increase in Total Equity Capital was more than the Net Income by a huge margin. So the
ROE came down to 15.02% and 5.38% in 2011 and 2012 respectively.
Page | 15
Net Income
Total Assets
2008
2009
2010
2011
2012
2013
Prime Bank
1.13%
2.26%
1.99%
1.85%
1.13%
0.75%
Lanka Bangla
4.64%
5.54%
9.52%
3.84%
1.37%
2.98%
Prime Bank
2.50%
2.00%
1.50%
Prime Bank
1.00%
0.50%
0.00%
2008
Page | 16
2009
2010
2011
2012
2013
Prime Bank
4.00%
LankaBangla
3.00%
2.00%
1.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013 ever TK. 100 worth of assets generated a return of Tk. 0.75 for Prime Bank Ltd. For
2008, 2009, 2010, 2011 and 2012 it was Tk. 1.13, Tk. 2.26, Tk. 1.99, Tk. 1.85 and Tk. 1.13
respectively for every Tk. 100 worth of assets of Prime Bank Ltd.
The ROA for Prime Bank Ltd. was quite stable in these six years from 2008- 2014 with a bit
higher ROA in 2009 and 2010. For the other years it was almost the same. If we look at the
time series analysis graph we can see that for 2009 and 2010 the proportionate increase in Net
Income was more than that of Total Assets and so the ROA was higher. Overall the ROA is
not good for Prime Bank Ltd. A ROA ratio of .75%- 2.26%% does not show very good
utilization of assets in making profit for the bank. It shows average performance.
If we look at Lanka Bangla Finance, the ROA is better than that of Prime Bank Ltd. if we
look at the cross sectional analysis we can see that their asset utilization was way better than
that of Prime Bank Ltd. in making profit. Though Lanka Bangla Finance did a little bad in the
last two years but still their performance was better than Prime Bank Ltd. throughout the
period.
Page | 17
2008
2009
2010
2011
2012
2013
Prime Bank
2.28%
2.95%
4.21%
3.19%
3.61%
2.75%
Lanka Bangla
2.93%
3.06%
3.03%
4.30%
2.09%
2.45%
Prime Bank
4.50%
4.00%
3.50%
3.00%
2.50%
2.00%
Prime Bank
1.50%
1.00%
0.50%
0.00%
2008
Page | 18
2009
2010
2011
2012
2013
Prime Bank
2.00%
LankaBangla
1.50%
1.00%
0.50%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013, every Tk. 100 worth of Total Assets generated Tk. 2.75 of Net Income. For 2008,
2009, 2010, 2011 and 2012 it was Tk. 2.28, Tk. 2.95, Tk. 4.21, Tk. 3.19 and Tk. 3.61
respectively for every Tk. 100 worth of assets of Prime Bank Ltd.
In 2010 Prime Bank Ltd. had the highest Net Interest Margin ratio of 4.21%. In the other
years it was in the range of 2.28%-3.61%. In 2010 the Net Interest Income increased
proportionately more than Total Assets for Prime Bank Ltd. For the other years the
proportionate change of Net Interest Income and Total Assets were almost same. so the ratios
did not fluctuate much.
Even for Lanka Bangla Finance, NIM ratio is close to that of Prime Bank Ltd. It was within
2.45%- 4.30%. So both the financial institutions performed almost same incase of NIM ratio.
**NB: This ratio does not show proper results since Total Assets do not generate
Interest Income. Only Interest Sensitive Assets (ISA) generate Interest Income.
Miscellaneous Assets do not generate Interest Income.
Page | 19
2008
2009
2010
2011
2012
2013
Prime Bank
2.17%
2.72%
1.50%
2.12%
1.60%
1.48%
Lanka Bangla
4.08%
4.86%
10.75%
1.90%
0.26%
1.69%
Prime Bank
3.00%
2.50%
2.00%
1.50%
Prime Bank
1.00%
0.50%
0.00%
2008
Page | 20
2009
2010
2011
2012
2013
Prime Bank
LankaBangla
4.00%
2.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
For every Tk. 100 worth of Total Assets the bank generated Tk.1.48 Net Non Interest
Income. For 2008, 2009, 2010, 2011 and 2012 it was Tk. 2.17, Tk. 2.72, Tk. 1.50, Tk. 2.12
and Tk. 1.60 respectively for every Tk. 100 worth of assets of Prime Bank Ltd.
For this ratio as well, Prime Banks performance did not vary much over the years. Net Non
Interest Margin was highest in the year 2009 with a 2.72% and lowest in 2013 with a 1.48%.
In 2013 the proportionate increase in Net Non Interest Income was less than the increase in
Total Assets.
If we look at the cross sectional analysis we can see that, for Lanka Bangla Finance, the Net
Non Interest Margin ratio is better than that of Prime Banks one. Apart from 2011 and 2012,
for all the other years from 2008- 2013, for Net Non Interest Margin Prime Bank Ltd.
performed badly compared to Lanka Bangla Finance.
Page | 21
2008
2009
2010
2011
2012
2013
Prime Bank
3.48%
4.26%
4.52%
4.06%
3.71%
3.15%
Lanka Bangla
7.01%
7.92%
13.78%
6.20%
2.35%
4.13%
Prime Bank
5.00%
4.50%
4.00%
3.50%
3.00%
2.50%
Prime Bank
2.00%
1.50%
1.00%
0.50%
0.00%
2008
Page | 22
2009
2010
2011
2012
2013
Prime Bank
6.00%
LankaBangla
4.00%
2.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
For every Tk. 100 worth of Total Assets the bank generated Tk. 3.15 Net Operating Income.
This Net Operating Income is the difference of Operating Revenue and Operating Expense of
a financial institution. For 2008, 2009, 2010, 2011 and 2012 it was Tk. 2.17, Tk. 2.72, Tk.
1.50, Tk. 2.12 and Tk. 1.60 respectively for every Tk. 100 worth of assets of Prime Bank Ltd.
Prime Banks performance has been quite constant throughout the six years. The Net
Operating Margin ranged from 3.15%- 4.52%. The highest was in 2010 with a 4.52% and the
lowest being in 2013 with a 3.15%. Possible reason for fluctuation is that proportionate
change in Net Operating Income was less than that of change in Total Assets.
For comparing the Net Operating Margin Ratio of Lanka Bangla Finance and Prime Bank
Ltd. we will have to look at the cross sectional analysis. Lanka Bangla Finance outperformed
Prime Bank Ltd. in this profitability ratio as well. Lanka Bangla Finance had high Net
Operating Margin ratio of 13.78%, while Prime Bank Ltd. Just had highest NPM of 4.52%..
Prime Bank Ltd. performed poor here as well compare to Lanka Bangla Finance.
Page | 23
2008
2009
2010
2011
2012
2013
Prime Bank
9.54%
16.92%
16.46%
14.42%
8.44%
5.77%
Lanka Bangla
24.48%
30.66%
44.04%
25.19%
9.84%
19.29%
Prime Bank
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
Prime Bank
6.00%
4.00%
2.00%
0.00%
2008
Page | 24
2009
2010
2011
2012
2013
Prime Bank
20.00%
LankaBangla
15.00%
10.00%
5.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013 every Tk. 100 worth of Operating Revenue generated a profit of Tk. 5.77. For 2008,
2009, 2010, 2011 and 2012 it was Tk. 9.54, Tk. 16.92, Tk. 16.45, Tk. 14.42 and Tk. 5.77
respectively for every Tk. 100 worth of Total Operating Revenues.
Compared to the previous years the Net Profit Margin is low in 2013. The reason behind that
is Total Operating contributed less to the Bet Income in 2013 compared to other years.
Possible reasons might be that the difference of Net Operating Income and Net Operating
Expense increased compared to the previous years. This led to the proportionate increase of
Total Operating Margin to be more than that of NI. So the Net Profit Margin decreased in
2013.
If we compare Prime Bank Ltd. with Lanka Bangla Finance, we can see that Lanka Bangla
Finance had an upper hand in this ratio for the years 2008-2013. So this shows poor
performance of Prime Bank Ltd. for Net Profit Margin compared to Lanka Bangla Finance.
**NB: NPM also equals to the product of Expense Control Efficiency ratio and Tax
Management Efficiency ratio. Since, ECE and TME ratios deals with how efficiently
bank is managing operating expense and tax expense respectively, the product of this
two equals NPM ratio. Even mathematically the product of the formulas of ECE and
TME equals to the NPM ratios formula.
Page | 25
2008
2009
2010
2011
2012
2013
Prime Bank
Tk. 43.92
Tk. 79.43
Tk. 58.77
Tk. 4.79
Tk. 2.86
Tk. 1.98
Lanka Bangla
Tk. 10.79
Tk. 21.26
Tk. 34.62
Tk. 10.43
Tk. 1.84
Tk. 4.58
Prime Bank
90
80
70
60
50
40
Prime Bank
30
20
10
0
2008
Page | 26
2009
2010
2011
2012
2013
40
LankaBangla
30
20
10
0
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013, for Prime Bank Ltd. common shareholders had earnings of Tk. 1.98/share. For 2008,
2009, 2010, 2011 and 2012 the earnings per share was Tk.43.92, Tk. 79.43, Tk. 58.77, Tk.
4.79 and Tk. 2.86 respectively for every Tk. 100 worth of Total Operating Revenues.
The EPS for Prime Bank Ltd. took a sharp downturn from 2011because Prime Bank Ltd.
undertook new project for which they issued huge number of shares in the share market,
named Dhaka Stock Exchange. So, proportionate increase in number of common shares
outstanding increased by a great deal compared to proportionate increase in NI after tax.
Compared to Lanka Bangla Finance, Prime Bank Ltd. performed bad in this particular sector.
Earnings from the common shares were more for Prime Bank than Lanka Bangla till 2010.
But from 2011, since around 250 million new shares were issued in the stock market for
Prime bank, the EPS went down. So for now Lanka Bangla is showing better performance in
EPS than Prime Bank Ltd.
Page | 27
8. Retention Ratio
The ratio that shows future growth potential of a financial organization is called retention
ratio. Higher is the retention ratio better is the future reinvestment capacity of a bank or any
financial institution.
Retention ratio = 1- Dividend payout ratio
2008
2009
2010
2011
2012
2013
Prime Bank
99.42%
99.27%
99.32%
99.37%
93.07%
92.97%
Lanka Bangla
69.42%
79.17%
91.83%
65.98%
17.70%
56.35%
prime bank
92.00%
90.00%
88.00%
2008
Page | 28
2009
2010
2011
2012
2013
60.00%
lanka bangla
40.00%
20.00%
0.00%
2008
2009
2010
2011
2012
Interpretation:
In 2013 for Prime Bank Ltd. out of total earnings 92.97% was retained for reinvestment. For
2008, 2009, 2010, 2011 and 2012 the retained earnings were 99.42%, 99.27%, 99.32%,
99.37% and 93.07%.
The retention ratio for Prime Bank Ltd. took a sharp downturn from 2012 because from that
year they started retaining more of the Net Income for reinvesting in the new project they
undertook in the year 2011. For that reason retention ratio graph of Prime Bank Ltd. took a
very sharp downturn after 2011.
Compared to Lanka Bangla Finance, Prime Bank Ltd. had better retention ratio. This shows
that Prime Bank had better future investment potentials than Lanka Bangla Finance.
Page | 29
Total Assets
2008
2009
2010
2011
2012
2013
Prime Bank
16.47 times
10.59 times
8.90 times
10.41 times
11.36 times
10.51 times
Lanka Bangla
8.82 times
6.40 times
4.03 times
3.91 times
3.91 times
4.69 times
Prime Bank
20
15
10
Prime Bank
5
0
2008
Page | 30
2009
2010
2011
2012
2013
LankaBangla
6
4
2
0
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013 for Prime Bank Ltd. Equity Multiplier was 10.51 times means, Total Assets were
financed by liability equal to 10.51 times equity. For 2008, 2009, 2010, 2011 and 2012 debt
financing was 16.47 times, 10.59 times, 8.9 times, 10.41 times and 11.36 times of equity
capital respectively.
This ratio was really high for Prime Bank Ltd. in 2013 which was 16.47 times. 16.47 times of
equity capital financing is debt capital financing. This shows high leverage of the bank and
indicates poor capital structure of the bank. This condition improved a little overtime. In 2013
the EM for Prime Bank Ltd. was 10.51 times.
Comparing Prime Bank Ltd. with Lanka Bangla Finance we can see that Lanka Bangla
Finance had less financial leverage than Prime Bank Ltd. for the all the years. This shows that
Prime Bank Ltd. is riskier of the two and is more leveraged financially. The reason for Prime
Bank Ltd. to have a high EM is that their capital structure has more debt financing than
equity financing.
Page | 31
2. Leverage Ratio
This describes the amount of equity in comparison to debt or the amount of earnings in
comparison to debt.
Leverage Ratio =
Total Libabilities
Total Assets
2008
2009
2010
2011
2012
2013
Prime Bank
94%
91%
89%
90%
91%
90%
Lanka Bangla
89%
84%
73%
73%
74%
78%
Prime Bank
0.95
0.94
0.93
0.92
0.91
0.9
0.89
0.88
0.87
0.86
Prime Bank
2008
Page | 32
2009
2010
2011
2012
2013
Prime Bank
0.4
LankaBangla
0.3
0.2
0.1
0
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013, for Prime Bank Ltd., 90% of the assets were financed by debt. For 2008, 2009, 2010,
2011 and 2012 debt financing was 94%, 91%, 89%, 90% and 91% respectively in financing
total assets.
Prime Bank Ltd. was highly leveraged financially throughout the period. This also indicates
that the bank is very risky. We know banks are more dependent on debt financing more but
having 90% of total assets being financed by debt is highly not recommended and very risky
for any type of organization. Debt financing was very high all the six years in financing total
assets.
Compared to Lanka Bangla Finance, Prime Bank Ltd. had more financial leverage. So we can
say that Prime Bank Ltd. was more risky than Lanka Bangla Finance from the perspective of
Leverage ratio.
Page | 33
Operating Income
Interest Expense
2008
2009
2010
2011
2012
2013
Prime Bank
0.81times
0.98 times
1.38 times
0.99 times
0.80 times
0.76 times
Lanka Bangla
1.18 times
1.59 times
3.11 times
1.44 times
0.65 times
0.81 times
Prime Bank
1.60
1.40
1.20
1.00
0.80
Prime Bank
0.60
0.40
0.20
0.00
2008
Page | 34
2009
2010
2011
2012
2013
LankaBangla
1.00
0.50
0.00
2008
2009
2010
2011
2012
2013
Interpretation:
In 2012, Operating Income of Prime Bank Ltd. was 0.76 times its interest expense. For 2008,
2009, 2010, 2011 and 2012 the operating income was 0.81 times, 0.98 times, 1.38 times, .99
times and 0.80 times of its interest expense respectively.
The graph from time series analysis shows that Prime Bank Ltd. had Interest Coverage ratio
of 0.81times in 2008 then it went upto 1.38 times in 2010 and then again dropped to 0.76
times in 2013. The performance degraded compared to the previous years.
Comparing Lanka Bangla Finance and Prime Bank Ltd. we can see that Lanka Bangla had
better Interest Coverage ratio compared to Prime Bank. This shows poor performance of
Prime Bank Ltd. compared to Lanka Bangla Finance. Higher the Interest Coverage ratio,
better off a financial institution is.
Page | 35
Efficiency Ratio
1. Tax Management Efficiency Ratio
This is related to the amount of tax paid by the bank. When the tax rate is lower the net profit
after tax will be higher and vice versa. The higher the tax management efficiency the better is
for Prime Bank Ltd.
Net Income After Tax
2008
2009
2010
2011
2012
2013
Prime Bank
50.35%
60.99%
56.29%
52.25%
48.96%
55.06%
Lanka Bangla
79.97%
81.94%
78.90%
65.88%
68.20%
95.73%
Prime Bank
70.00%
60.00%
50.00%
40.00%
Prime Bank
30.00%
20.00%
10.00%
0.00%
2008
Page | 36
2009
2010
2011
2012
2013
Prime Bank
LankaBangla
40.00%
20.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013, for Prime Bank, Net Income after tax was 55.06% of Net Income before tax. For
2008, 2009, 2010, 2011 and 2012 the Net Income after taxes were 50.35%, 60.99%, 56.29%,
52.25% and 48.96% of Net Income before taxes respectively.
For Prime Bank Ltd. the ratio fluctuated by a little amount over these six years. The graph
from the time series analysis reached its peak in the year 2009 and then came down till 2012
and again went up in 2013. The reason behind these fluctuations is that the NI before tax and
NI after tax did no change proportionally.
Comparing Lanka Bangla Finance with Prime Bank Ltd. we can see that, for all the six years
Lanka Bangla Finance had better managed its tax policies than Prime Bank. For this ratio
Prime Banks performance is poor compared to Lanka Bangla Finance.
Page | 37
2008
2009
2010
2011
2012
2013
Prime Bank
42.94%
56.03%
59.97%
56.78%
39.39%
27.58%
Lanka Bangla
68.31%
71.43%
84.25%
68.87%
42.90%
59.78%
Prime Bank
70.00%
60.00%
50.00%
40.00%
30.00%
Prime Bank
20.00%
10.00%
0.00%
2008
Page | 38
2009
2010
2011
2012
2013
40.00%
LankaBangla
30.00%
20.00%
10.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013, for Prime Bank Ltd., Total Operating Income was 27.58% of Total Operating
Revenue. For 2008, 2009, 2010, 2011 and 2012 the Total Operating Incomes were 50.35%,
60.99%, 56.29%, 52.25% and 48.96% of Total Operating Revenues respectively.
For Prime Bank Ltd. the graph of this ratio went up from where it started in 2008 and came
down after 2010.It declined significantly in 2013. The reason behind this decline is because
Operating expense for 2013 was very high. So after covering operating expense only 27.58%
of the operating revenue contributed to the Operating Income.
Comparing Lanka Bangla Finance with Prime Bank Ltd. we can see that, for all the six years
Lanka Bangla Finance had better managed its operating expense than Prime Bank Ltd. For
this ratio Prime Banks performance is poor compared to Lanka Bangla Finance since its
Expense Control Efficiency ratio was very poor compared to Lanka Bangla Finance
Page | 39
Total Assets
2008
2009
2010
2011
2012
2013
Prime Bank
5.23%
6.61%
6.94%
6.23%
5.88%
5.47%
Lanka Bangla
10.26%
11.09%
16.35%
9.00%
5.49%
6.92%
Prime Bank
8.00%
7.00%
6.00%
5.00%
4.00%
Prime Bank
3.00%
2.00%
1.00%
0.00%
2008
Page | 40
2009
2010
2011
2012
2013
8.00%
LankaBangla
6.00%
4.00%
2.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013, Tk. 100 worth of assets generated Tk. 5.47 operating revenue. For 2008, 2009, 2010,
2011 and 2012 Tk. 100 worth of assets generated Tk. 5.23, Tk. 6.61, Tk. 6.94, Tk. 6.23 and
Tk. 5.88 of operating revenues respectively.
For Prime Bank Ltd. the graph of this ratio went up from where it started in 2008 and came
down after 2010. It declined and reached 5.47% in 2013. The reason behind this decline is
because compared to the previous years the mix and yield of assets was not proper in
generating operating revenues. Asset portfolio was not good enough in 2013 compared to the
previous years.
Comparing Lanka Bangla Finance with Prime Bank Ltd. we can see that, for all the six years
Lanka Bangla Finance had better managed its asset portfolio than Prime Bank. For this ratio,
Prime Banks performance is poor compared to Lanka Bangla Finance since its mix and yield
of assets was not as good as that of Lanka Bangla Finances one.
Page | 41
Operating Expense
Operatin Revenue
2008
2009
2010
2011
2012
2013
Prime Bank
33.42%
35.51%
34.93%
34.84%
36.87%
42.39%
Lanka Bangla
31.69%
28.57%
15.75%
31.13%
57.10%
40.22%
Prime Bank
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
Prime Bank
15.00%
10.00%
5.00%
0.00%
2008
Page | 42
2009
2010
2011
2012
2013
Prime Bank
LankaBangla
20.00%
10.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013, 42.39% of the operating revenue was operating expense. For 2008, 2009, 2010, 2011
and 2012 33.42%, 35.51%, 34.93%, 34.84% and 36.87% of operating revenue was operating
expense.
For Prime Bank Ltd. the graph of this ratio went up from where it started in 2008 and reached
42.39% in 2013. The higher is the ratio the worse it is. The reason for this ratio to be the
highest in 2013 is because the interest expense and non interest expense was very high in
2013. Comparatively the interest income and non interest income did not increase
proportionately. So, operating expense was 42.39% of operating revenue.
Comparing Lanka Bangla Finance with Prime Bank Ltd. we can see that, for all the six years
Lanka Bangla Finance had better managed its interest expense and non interest expense than
Prime Bank Ltd.. For the case of this ratio, Prime Bank Ltd. is showing bad performance
compared to Lanka Bangla Finance since Prime Banks operating expenses are going up.
Page | 43
2008
2009
2010
2011
2012
Prime Bank
Tk.1600577
Tk.2510471
Tk.3025662
Lanka Bangla
Tk.2769642
Tk.5168371
Tk.12924202
Prime Bank
3500000
3000000
2500000
2000000
1500000
Prime Bank
1000000
500000
0
2008
Page | 44
2009
2010
2011
2012
2013
2013
LankaBangla
4000000
2000000
0
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013, each employee contributed Tk. 1366090 to the operating income of Prime Bank Ltd.
For 2008, 2009, 2010, 2011 and 2012 each employee contributed Tk. 1600577, Tk. 2510471,
Tk. 3025662, Tk, 3103818 and Tk. 2168196.
For Prime Bank Ltd. the graph of this ratio went up from where it started in 2008 and reached
peak in 2011. From there the graph declined significantly and reached the lowest value in
2013. This is a very important ratio for the management of the bank to check the efficiencies
of the employees of the bank. Prime Bank Ltd. started underperforming in this ratio after
2011.
Comparing Lanka Bangla Finance with Prime Bank Ltd. we can see that, for all the six years
Lanka Bangla Finances employees performed better than Prime Banks employees. Lanka
Bangla Finances employees contributed more to the operating income that that of the
employees of Prime Bank Ltd. So the employees of Prime Bank Ltd. are underperforming
compared to the employees of Lanka Bangla Finance.
Page | 45
Interest Income
Interest Sensitive Assets
Interest Expense
Interest Sensitive Liabilities
2008
2009
2010
2011
2012
2013
Prime Bank
5.03%
4.46%
7.13%
6.20%
7.63%
4.98%
Lanka Bangla
9.49%
9.42%
7.53%
10.35%
6.55%
7.47%
Prime Bank
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
Prime Bank
3.00%
2.00%
1.00%
0.00%
2008
Page | 46
2009
2010
2011
2012
2013
Prime Bank
LankaBangla
4.00%
2.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013, interest yield on earning assets minus interest rates paid on borrowed funds was
4.98%. For 2008, 2009, 2010, 2011 and 2012 interest yield on earning assets minus interest
rates paid on borrowed funds were 5.03%, 4.46%, 7.13%, 6.2% and 7.63%.
For Prime Bank Ltd. the graph of this ratio shows ups and downs. The ratio was highest in
2012 and lowest in 2013. The reason for this ratio to decline from 2012 is because
proportionate increase of interest yield from interest sensitive assets were lower than
proportionate increase in interest rates paid on borrowed funds. This shows that assets are not
being utilized properly to contribute to make profits for Prime Bank Ltd. in 2013
Comparing Lanka Bangla Finance with Prime Bank Ltd. we can see that, for all the six years
Lanka Bangla Finances earnings spread ratio is better than Prime Banks one. Lanka Bangla
Finances assets are being utilized properly in contributing to make profits whereas; Prime
Banks assets are not being utilized properly. So Prime Bank should be more watchful in
utilizing their assets.
Page | 47
Market Ratios
1. Price/Earnings Ratio
This ratio measures the amount that investors are willing to pay for each dollar of firms
earnings. The level of price/earnings ratio indicates the degree of confidence that investors
have in the firms future performance
P/E Ratio =
2008
2009
2010
2011
2012
2013
Prime Bank
1.23
0.82
24.28
9.29
12.94
13.08
Lanka Bangla
18.22
14.76
14.38
16.32
32.11
12.89
Prime Bank
30
25
20
15
Prime Bank
10
5
0
2008
Page | 48
2009
2010
2011
2012
2013
LankaBangla
10
5
0
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013 the shareholders of Prime Bank Ltd. were willing to pay Tk. 13.08 for every Tk. 1 of
reported earnings. For 2008, 2009, 2010, 2011 and 2012 shareholders were willing to pay Tk.
1.23, Tk. 0.82, Tk. 24.28, Tk. 9.29 and Tk. 12.94 respectively.
This ratio for Prime Bank was very low for the first two years. In 2010 the ratio went up
24.28 since in that year proportionate increase in market price of Prime Banks share was
more than that of the earnings per share. Moreover for the next three years the EPS went
down since a lot of new shares were issued in the market.
Compared to Lanka Bangla Finance, Prime Bank showed better PE ratio only in the year
2010. For the rest years Lanka Bangla showed better performance in PE ratio. So Prime Bank
performed badly compared to Lanka Bangla Finance.
Page | 49
2008
2009
2010
2011
2012
2013
Prime Bank
0.23times
0.20 times
0.33 times
1.81 times
1.67 times
1.16 times
Lanka Bangla
7.46 times
5.23 times
5.52 times
2.45 times
1.73 times
1.80 times
Prime Bank
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Prime Bank
2008
Page | 50
2009
2010
2011
2012
2013
Prime Bank
LankaBangla
3
2
1
0
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013 the market value per share was 1.16 times the book value. For 2008, 2009, 2010,
2011 and 2012 the market value per share was .23times, .20times, .33times, 1.81times and
1.67times.
This ratio for Prime Bank was very low for the three two years. In 2011 the ratio went up
1.81times. Since, in 2011 Prime Bank undertook a new project; they issued millions of new
shares. So the Book value per share went down. As a result, from 2011 to 2013 the Market to
Book ratio went up for Prime Bank.
Compared to Lanka Bangla Finance, Prime Bank showed better Market to Book ratio for all
these six years. Even in this volatile market conditions, Lanka Bangla Finance did a good job
in keeping their market share prices quite good. Prime Bank did not perform well compared
to Lanka Bangla Finance.
Page | 51
Prime Bank
Lanka Bangla
2008
2009
2010
2011
2012
2013
Tk0.25/
Tk0.40/
Tk0.40/
Tk0.30/
Tk0.20/
Tk0.13/
share
share
share
share
share
share
Tk3.30/
Tk4.43/
Tk2.83/
Tk3.55/
Tk1.51/
Tk2.00/
share
share
share
share
share
share
Prime Bank
0.45
0.4
0.35
0.3
0.25
0.2
Prime Bank
0.15
0.1
0.05
0
2008
Page | 52
2009
2010
2011
2012
2013
Prime Bank
LankaBangla
2
1.5
1
0.5
0
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013 the common shareholder got a dividend of Tk. 0.13/share. For 2008, 2009, 2010,
2011 and 2012 the dividend per share was 0.25times, 0.40times, 0.40times, 0.30times and
0.13times.
This ratio for Prime Bank was low inh 2008. It went up in 2009 and 2010. Since, in 2011
Prime Bank undertook a new project; they issued millions of new shares. So the bank was
underperforming
Compared to Lanka Bangla Finance, Prime Bank showed better Dividend per share ratio for
all these six years. Even in this volatile market conditions, Lanka Bangla Finance did a good
job in giving dividends to the common shareholders than Prime Bank. Prime Bank did not
perform well compared to Lanka Bangla Finance.
Page | 53
4. Dividend Yield
It is a financial ratio that shows how much a company pays out in dividends each year
relative to its share price. It is one of the important ratios the investors will look into before
they decide which stock to invest. It equals to one fiscal years dividends per share divided by
its price per share of that year, expressed in percentage.
Dividend Yield=
2008
2009
2010
2011
2012
2013
Prime Bank
0.463%
0.613%
0.423%
0.674%
0.541%
0.483%
Lanka Bangla
1.68%
1.41%
0.57%
2.08%
2.56%
3.39%
Page | 54
2009
2010
2011
2012
2013
Prime Bank
LankaBangla
1.50%
1.00%
0.50%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013 in every TK. 100 worth of price per share provided Tk.0.48 worth of dividends for
Prime Bank Ltd for their investors. For 2008, 2009, 2010, 2011 and 2012 it was Tk. 0.46, Tk.
0.88, Tk. 0.42, Tk. 0.07, Tk. 0.54 respectively for every Tk. 100 worth of price per Prime
Bank Ltd stock share.
The dividend yield ratio for Prime Bank Ltd. was not stable for the past 6 years from 20082013 with the highest amount of 0.88% and the lowest amount of 0.07%. However, the
overall amount of the ratio was really minor.
If we look at the cross sectional analysis we can see the Lanka Banglas dividend yield ratio
is way higher than that of Prime Banks, even it also did fluctuate a lot over the past 6 years
from 2008-2013. It indicated that the investors in Lanka Bangla were able to earn more than
the investors in Prime Bank in the form of dividends in related to the money they have
invested. So as a result, the investors are probably more into investing in Lanka Bangla than
Prime Bank regarding this ratio.
Page | 55
Dividends Paid
Net Income
2008
2009
2010
2011
2012
2013
Prime Bank
0.57%
0.73%
0.68%
0.63%
6.93%
7.03%
Lanka Bangla
30.58%
20.83%
8.17%
34.02%
82.30%
43.65%
Prime Bank
8.00%
7.00%
6.00%
5.00%
4.00%
Prime Bank
3.00%
2.00%
1.00%
0.00%
2008
Page | 56
2009
2010
2011
2012
2013
40.00%
LankaBangla
30.00%
20.00%
10.00%
0.00%
2008
2009
2010
2011
2012
2013
Interpretation:
In 2013 in every TK. 100 worth of net income after tax, there are Tk.7.03 worth of dividend
for Prime Bank Ltd paid to their shareholders. For 2008, 2009, 2010, 2011 and 2012 it was
Tk. 0.58, Tk. 0.73, Tk. 0.68, Tk. 0.63, Tk. 6.93 respectively for every Tk. 100 worth of assets
of Prime Bank Ltd.
The dividend payout ratio for Prime Bank Ltd. was quite stable in those 4 years from 20082011 and increased drastically at 2012 and remained almost same in the year 2013. The
reason for this is that if we look at the table from which we calculated the value, we can see
that the proportionate increase in dividends in 2012 has increased drastically higher than the
proportionate increase in net income after tax of that year and the same logic for 2013.
If we look at the cross sectional analysis we can see the Lanka Banglas dividend payout ratio
is way higher than that of Prime Banks, even it also did fluctuate a lot over the past 6 years
from 2008-2013. It indicate that the shareholders in Lanka Bangla were able to earn more
than the shareholders in Prime Bank in the form of dividends, and Lanka Bangla was in the
better shape than Prime Bank to earn the net income every year in the past 6 years.
Page | 57
CAMELS Rating
CAMELS is an international bank rating system in which bank supervisory authorities rate
institutions according to six factors. The six areas examined are represented by the acronym
CAMELS. The six factors are:
Capital Adequacy
Asset Quality
Management
Earnings
Liquidity
Sensitivity to Market
Performance of the banking sector under CAMELS involves analysis and evaluation of these
six crucial dimensions of banking operations. The CAMELS methodology was originally
adopted by North American bank regulators to evaluate the financial and managerial
soundness of U.S. commercial lending institutions.
In Bangladesh, since the early nineties, the same 5 components of CAMEL have been used to
evaluate the five crucial dimensions of a banks operations that reflect in a comprehensive
fashion an institutions financial condition, compliance with banking regulations and statuses
and overall operating soundness. Recently, Bangladesh Bank has upgraded the CAMEL into
CAMELS effective from June, 2006. After inserting S or Sensitivity to market risk, it is
presumed that this off-site supervision technique of central bank would make it a more
effective tool in rating banks. The present system requires that a banks condition and
performance be regularly appraised according to predetermined stress testing on asset and
liability and foreign exchange exposures, procedures, rules and criteria and on the basis of the
results obtained through risk-based audits under core risk management guidelines. A single
CAMELS rating for each bank is the result of both off-site monitoring, which uses monthly
financial statement information, and an on-site examination, from which bank supervisors
gather further private information not reflected in the financial reports. These examinations
results in the development of Credit Points ranging from 0 to 100. As noted above, the six
key performance dimensions- Capital adequacy, asset quality, management, earnings,
liquidity and sensitive to market riskare to be evaluated on a scale of 1 to 5 in ascending
order. Following is a description of the graduations of rating:
Page | 58
According to CAMELS rating Prime Bank Ltd. is rated 1 (one) or this bank falls under
A-class or Strong Banks, which shows the stability and growth it has managed over the
small time frame. There are only seven banks under this class and Prime Bank is one of
them and it is indeed one of their greatest achievements. The bank has already occupied
an enviable position among its competitors after achieving success in all areas of
business operation (ReportBd, 2011).
The Net Income decreased in the years after 2012. The banks finance department
should look into this issue and try to increase the Net Income as early as possible.
The Operating Expense also went up after 2011. If this expense can be kept in control
then Net Profit will also go up automatically.
The Bank is under high financial leverage. This shows greater risk as a financial
institution. If this financial leverage can be decreased then the risk factor for the bank
would go down
The assets of the bank are not properly utilized to generate enough revenue. So net
Income is less as a result.
**NB: These above stated recommendations are given keeping in mind the types of
ratios analyzed in this report. If the industry average was available a better analysis and
a better recommendation of for the bank to improve could have been given. These
recommendations are purely based on the financial ratio analysis of Prime Bank Ltd.
from 2008 to 2013.
To conclude we can say that there are a lot of sectors for Prime Bank to improve upon. The
Finance department of this bank should look closely into these issues and try to sort it out.
These ratios partially reflect the condition of the bank. To know the actual financial condition
of the bank we can apply other tools for analyzing financial condition of financial institution.
Page | 59
Bibliography
About Us: Prime Bank Ltd. (2014). Retrieved April 29, 2014, from Prime Bank Ltd. website:
https://www.primebank.com.bd/index.php/home/about_prime_bank
Blogs: Report Bd. (2014). Retrieved April 22, 2014, from Report Bd web site:
http://www.reportbd.com/blogs/448/Bangladesh-Bank-CAMELS-Rating-2011.html
Corporate Profile: Lanka Bangla Finance Ltd. (2014). Retrieved April 22, 2014, from Lanka
Bangla Finance Ltd. website: http://www.lankabangla.com/corporate_profile.php
Investopedia. (2014). Retrieved April 2014, from www.investopedia.com
Islam, S. (2013, March 22). First Page: The financial express bd. Retrieved April 22, 2014,
from
the
financial
express
bd
website:
http://www.thefinancialexpressbd.com/old/index.php?ref=MjBfMDNfMjJfMTNfMV8xXzE2NDA1Nw%3D%3D
Page | 60
Appendix
Calculations
2008
indicator
formula:
2009
2010
2011
2012
2013
cash deposits/total
assets
88,02 106,9 124,5 159,8 182,0 201,9
cash deposits
6704
2. liquid securities
indicator
BD govt.
formula:
securities/total
assets
BD govt. securities
3649
Page | 61
,479,
,648,
,989,
34
346
489
603
0.00
0.15
2.55
0.69
2.14
3. capacity ratio
net
formula:
loans&leases/total
assets
75,15 89,25 111,1 141,8 165,0 153,5
net loans&leases
,489
profitability ratio:
1. return on
equity(ROE)
formula:
NI after tax
Page | 62
,832,
,473,
,398,
,952,
,992,
,495,
174
302
900
436
305
239
,227,
542
,214
,176
,326
7.83
,365
,169
2. return on asset
formula:
NI after tax
,832,
,473,
,398,
,952,
,992,
,495,
174
302
900
436
305
239
2.26
1.99
1.84
1.13
0.75
interest
expense)/total
assets
interest income
Page | 63
683
,605
,976
,286
,522
,865
,596,
,698,
,100,
990
978
451
,824
,591
,701
1.94
2.99
2.25
2.44
1.77
3,808
5765
5472
7556
8182
9081
,000,
0000
0000
0000
0627
8606
000
00
00
00
48
95
interest
expense)/total
assets
,000,
,000,
,000,
,000,
,220,
,098,
000
000
000
000
245
440
Page | 64
2.29
1.19
1.67
1.27
1.38
income/total
assets
3,846 5,328 7,022 8,164 8,839 7,732
,854,
,807,
,938,
,891,
,961,
,067,
496
974
721
533
434
419
4.26
4.52
4.06
3.71
3.15
formula:
NI after tax
total revenue
,832,
,473,
,398,
,952,
,992,
,495,
174
302
900
436
305
239
12,90
1669
1883
2557
3198
3169
7,407
1558
9706
6409
9811
7509
,287
400
584
679
270
560
8.44
5.77
9.54
%
Page | 65
tax/no. of c.s.
outstanding
1,231 2,823 3,101 3,688 2,698 1,829
NI after tax
,832,
,473,
,398,
,952,
,992,
,495,
174
302
900
436
305
239
,348,
616
4.73
2.88
1.78
7109
2048
2110
2339
1871
1286
375
5008
9611
4287
5429
6857
1231
2823
3101
3688
2698
1829
8321
4733
3989
9524
9923
4952
74
02
00
36
05
39
0.58
0.73
0.68
0.63
6.93
7.03
formula:
dividends
NI after tax
9. retention ratio
Page | 66
dividends/NI after
tax
formula:
1-dividend payout
ratio
0.58
0.73
0.68
0.63
6.93
7.03
dividends/no.of
shares outstanding
total dividends
,375
no. of shares
outstanding
187,1 128,6
54,29 68,57
4
,348,
616
0.25
0.58
0.40
0.03
0.20
0.13
0.25
0.58
0.40
0.03
0.20
0.13
share/price per
share
0.46
0.88
0.42
0.07
0.54
0.48
formula:
total assets/total
equity capital
110,5 124,9 155,5 200,9 238,1 245,5
total assets
total equity
6708
1179
1746
1930
2096
2335
2275
6677
6599
6395
1807
8519
42
214
365
169
176
326
16.47 10.59
8.90
7,214 11,34
1418
1628
1867
2503
,122,
1,578
9045
8099
2073
5397
131
,659
611
826
402
623
2. leverage ratio
formula:
total liability
total liability/total
assets
Page | 68
0.09
0.09
0.08
0.08
0.10
3. Interest Coverage
Ratio
operating
formula:
revenue/interest
expense
5,777 8,262 10,79 12,52 14,00 13,42
operating revenue
,810,
,859,
297
422
,133
,855
,679
,859
,596,
,698,
,100,
990
978
451
,824
,591
,701
0.81
0.98
1.34
0.96
0.78
0.73
efficiency ratio:
1. Tax Management
Efficiency Ratio
NI after tax/NI
formula:
before
tax&securities
gains or losses
1,231 2,823 3,101 3,688 2,698 1,829
NI after tax
NI before
,832,
,473,
,398,
,952,
,992,
,495,
174
302
900
436
305
239
tax&securities gains or
,893,
,307,
,891,
,950,
,889,
,103,
losses
665
974
167
267
483
053
Page | 69
2. Expense Control
Efficiency Ratio
total operating
formula:
income/total
operating revenue
3,846 5,328 7,022 8,164 8,839 7,732
,854,
,807,
,938,
,891,
,961,
,067,
496
974
721
533
434
419
,810,
,859,
297
422
,133
,855
,679
,859
3. Asset Utilization
Ratio
total operating
formula:
revenue/total
assets
5,777 8,262 10,79 12,52 14,00 13,42
total assets
,810,
,859,
297
422
,133
,855
,679
,859
Page | 70
6.61
6.94
6.23
5.88
5.47
4. Operating Efficiency
Ratio
operating
formula:
expense/operating
revenue
1,930 2,934 3,769 4,364 5,162 5,689
operating expense
,955,
,051,
,667,
,978,
,220,
,098,
801
448
412
322
245
440
,810,
,859,
297
422
,133
,855
,679
,859
5. Employee
Productivity Ratio
operating
formula:
income/total
number of full
time employees
3,846 5,328 7,022 8,164 8,839 7,732
operating income
Page | 71
,854,
,807,
,938,
,891,
,961,
,067,
496
974
721
533
434
419
1550
1844
2139
2292
2544
2710
2481
2889
3283
3562
3474
2853
9095
1085
1269
1757
2380
2261
8916
6114
5374
4814
7748
5648
83
605
976
286
522
865
7491
8953
1004
1331
1512
1732
2425
7964
9862
9396
4690
1278
327
220
0872
9191
4327
6491
1931
2907
3618
4190
5162
5689
0000
0000
0000
0000
2202
0984
00
00
00
00
45
40
1002
1099
1421
1809
2147
2188
6137
0507
2959
0790
6311
4906
6209
4986
6571
5366
2205
0030
10.22
9.48
interest income
ISA
interest expense
ISL
Page | 72
II/ISA-IE/ISL
price per
formula:
share/earnings per
share
4.73
2.88
1.78
1.25
0.82
1.61
9.41
12.83 14.57
53.98
65.3
94.45
44.5
37
25.9
6708
1179
1746
1930
2096
2335
2275
6677
6599
6395
1807
8519
42
214
365
169
176
326
2. Market to Book
Ratio
formula:
market price per share
book value per share=
total common
eaquity/no. of shares
outstanding
no.of shares
0.23
Page | 73
0.20
0.29
,348,
616
1.80
1.65
1.14
2008
indicator
formula:
2009
2010
2011
2012
2013
1,08
1,85
2,14
1,67
2,54
9,03
8,38
1,61
6,72
5,24
4,70
4,44
6,38
5,34
7,76
8,13
13,4
19,3
22,3
25,3
32,0
6,60
42,1
22,2
79,9
38,6
64,8
8,22
28,5
42,8
97,4
82,7
92,0
53
11
49
62
92
10.4
8.10
9.62
9.57
6.62
7.94
5%
734,
1,34
1,80
1,10
1,00
369,
5,69
1,81
9,10
9,10
cash deposits/total
assets
850,
cash deposits
586,
715
total assets
2. liquid securities
indicator
BD govt.
formula:
securities/total
assets
BD govt. securities
Page | 74
986
total assets
3,01
0,59
0,00
0,00
8,13
13,4
19,3
22,3
25,3
32,0
6,60
42,1
22,2
79,9
38,6
64,8
8,22
28,5
42,8
97,4
82,7
92,0
53
11
49
62
92
0.00
5.46
6.96
8.05
4.38
3.15
5,85
8,06
9,47
10,4
18,6
24,8
4,22
1,34
2,16
37,8
33,8
41,1
0,43
2,53
5,11
17,8
45,1
42,8
44
50
50
8,13
13,4
19,3
22,3
25,3
32,0
6,60
42,1
22,2
79,9
38,6
64,8
8,22
28,5
42,8
97,4
82,7
92,0
53
11
49
62
92
71.9
59.9
49.0
46.6
73.5
77.4
5%
7%
2%
4%
4%
7%
3. capacity ratio
net
formula:
loans&leases/total
assets
net loans&leases
total assets
profitability ratio:
1. return on
equity(ROE)
Page | 75
formula:
NI after tax
377,
744,
640,
082,
621
808
9,32
4,24
2
859,
348,
954,
059,
018,
552,
881
182
560
2,10
4,79
5,72
6,47
6,83
0,52
0,04
0,16
3,96
9,91
6,95
1,22
5,43
0,23
1,82
40.9
35.4
38.4
15.0
5.38
13.9
4%
2%
0%
2%
6%
377,
744,
859,
348,
954,
640,
082,
059,
018,
552,
621
808
881
182
560
8,13
13,4
19,3
22,3
25,3
32,0
6,60
42,1
22,2
79,9
38,6
64,8
8,22
28,5
42,8
97,4
82,7
92,0
53
11
49
62
92
4.64
5.54
9.52
3.84
1.37
2.98
922,
total equity
1,83
475,
947
2. return on asset
formula:
NI after tax
total assets
Page | 76
interest
expense)/total
assets
945,
interest income
328,
196
interest expense
total assets
4. net non-interest
margin
(non-interest
income-nonformula:
interest
expense)/total
assets
Page | 77
1,34
1,60
2,35
2,67
3,51
7,78
1,10
8,58
7,49
6,03
4,28
2,08
6,87
3,73
3,09
1,01
1,39
2,14
2,73
6,08
6,56
7,51
0,92
2,77
8,66
7,28
3,42
707,
936,
161,
612,
262
528
8,13
13,4
19,3
22,3
25,3
32,0
6,60
42,1
22,2
79,9
38,6
64,8
8,22
28,5
42,8
97,4
82,7
92,0
53
11
49
62
92
2.93
3.06
3.03
4.30
2.09
2.45
total assets
597,
1079
2575
1051
8599
1432
012,
2845
0052
7444
3504
8031
307
57
44
63
58
264,
419,
495,
626,
791,
892,
611,
726,
682,
840,
675,
079,
420
267
449
582
348
847
8,13
13,4
19,3
22,3
25,3
32,0
6,60
42,1
22,2
79,9
38,6
64,8
8,22
28,5
42,8
97,4
82,7
92,0
53
11
49
62
92
4.09
4.91
10.7
1.90
0.27
1.69
6%
1,06
2,66
1,38
4,68
2,38
6,92
4,51
5,67
2,09
8,13
13,4
19,3
22,3
25,3
32,0
6,60
42,1
22,2
79,9
38,6
64,8
8,22
28,5
42,8
97,4
82,7
92,0
53
11
49
62
92
7.01
7.92
13.7
6.20
2.35
4.13
8%
formula:
net operating
income/total assets
570,
net operating income
546,
348
total assets
Page | 78
596,
259,
991
1,32
5,83
2,98
3
formula:
NI after tax
377,
744,
640,
082,
621
808
1,54
9,32
4,24
2
859,
348,
954,
059,
018,
552,
881
182
560
2427
4176
3410
3537
4948
0688
1073
3313
4287
8362
46
27
43
80
53
24.4
30.6
44.0
25.1
9.84
19.2
8%
6%
4%
9%
9%
377,
744,
859,
348,
954,
640,
082,
059,
018,
552,
621
808
881
182
560
35,0
35,0
53,1
82,3
189,
208,
00,0
00,0
30,0
51,5
408,
349,
00
00
00
00
450
295
10.7
21.2
34.6
10.4
1.84
4.58
2,34
total revenue
1,83
0,50
3
tax/no. of c.s.
outstanding
NI after tax
Page | 79
1,83
9,32
4,24
2
115,
154,
150,
292,
286,
416,
500,
962,
210,
215,
429,
698,
000
500
233
000
532
591
3776
7440
1839
8590
3480
9545
4062
8280
3242
5988
1818
5256
42
30.5
20.8
8.17
34.0
82.3
43.6
8%
3%
2%
0%
5%
30.5
20.8
8.17
34.0
82.3
43.6
8%
3%
2%
0%
5%
69.4
79.1
91.8
65.9
17.7
56.3
2%
7%
3%
8%
0%
5%
formula:
dividends/NI after
tax
dividends
NI after tax
9. retention ratio
formula:
1-dividend payout
ratio
dividends/no.of
shares outstanding
Page | 80
total dividends
115,
154,
150,
292,
286,
416,
500,
962,
210,
215,
429,
698,
000
500
233
000
532
591
35,0
35,0
53,1
82,3
189,
208,
00,0
00,0
30,0
51,5
408,
349,
00
00
00
00
450
295
3.30
4.43
2.83
3.55
1.51
2.00
3.30
4.43
2.83
3.55
1.51
2.00
196.
313.
497.
170.
1.68
1.41
0.57
2.08
2.56
3.39
8136
1344
1932
2237
2533
3206
6082
2128
2242
9997
8682
4892
20
553
811
449
762
092
share/price per
share
59
59.0
5
formula:
total assets
Page | 81
total assets/total
equity capital
total equity
9224
2100
4790
5720
6473
6839
7594
5269
0412
1654
9602
9118
50
21
36
31
24
8.82
6.40
4.03
3.91
3.91
4.69
7,21
11,3
4,12
41,5
1418
1628
1867
2503
2,13
78,6
9045
8099
2073
5397
59
611
826
402
623
8136
1344
1932
2237
2533
3206
6082
2128
2242
9997
8682
4892
20
553
811
449
762
092
0.89
0.84
0.73
0.73
0.74
0.78
1,49
3,16
2,01
1,38
2,21
0,45
0,02
3,76
9,91
7,91
6,31
4,55
2,68
1,49
2,83
2. leverage ratio
formula:
total liability/total
assets
total liability
total assets
3. Interest Coverage
Ratio
operating
formula:
revenue/interest
expense
835,
operating revenue
179,
241
Page | 82
interest expense
707,
936,
161,
612,
262
528
1.18
1.59
377,
744,
640,
082,
621
808
472,
908,
213,
066,
951
038
79.9
7%
1,01
1,39
2,14
2,73
6,08
6,56
7,51
0,92
2,77
8,66
7,28
3,42
3.11
1.44
0.65
0.81
859,
348,
954,
059,
018,
552,
881
182
560
510,
997,
309,
135,
775
949
efficiency ratio:
1. Tax Management
Efficiency Ratio
NI after tax/NI
formula:
before
tax&securities
gains or losses
NI after tax
NI before tax&securities
gains or losses
2. Expense Control
Efficiency Ratio
formula:
total operating
income/total
Page | 83
1,83
9,32
4,24
2
2,33
1,30
1,10
4,04
1,64
4,19
81.9
78.9
65.8
68.2
95.7
4%
0%
8%
0%
3%
operating revenue
1,06
2,66
1,38
4,68
2,38
6,92
4,51
5,67
2,09
1,49
3,16
2,01
1,38
2,21
0,45
0,02
3,76
9,91
7,91
6,31
4,55
2,68
1,49
2,83
68.3
71.4
84.2
68.8
42.9
59.7
1%
3%
5%
7%
0%
8%
1,49
3,16
2,01
1,38
2,21
0,45
0,02
3,76
9,91
7,91
6,31
4,55
2,68
1,49
2,83
8136
1344
1932
2237
2533
3206
6082
2128
2242
9997
8682
4892
20
553
811
449
762
092
10.2
11.0
16.3
9.00
5.49
6.92
6%
9%
5%
570,
total operating income
546,
348
835,
total operating revenue
179,
241
596,
259,
991
1,32
5,83
2,98
3
3. Asset Utilization
Ratio
total operating
formula:
revenue/total
assets
835,
total operating revenue
179,
241
total assets
4. Operating Efficiency
Page | 84
Ratio
operating
formula:
expense/operating
revenue
operating expense
264,
425,
497,
626,
793,
892,
632,
771,
638,
840,
651,
079,
893
807
875
582
503
847
1,49
3,16
2,01
1,38
2,21
0,45
0,02
3,76
9,91
7,91
6,31
4,55
2,68
1,49
2,83
31.6
28.5
15.7
31.1
57.1
40.2
9%
7%
5%
3%
0%
2%
1,06
2,66
1,38
4,68
2,38
6,92
4,51
5,67
2,09
206
206
206
206
206
206
2769
5168
1292
6732
2894
6436
835,
operating revenue
179,
241
5. Employee
Productivity Ratio
operating
formula:
income/total
number of full
time employees
570,
operating income
546,
348
Page | 85
596,
259,
991
1,32
5,83
2,98
3
642.
371.
4202
631.
465.
082.
47
41
.33
54
98
44
9453
1347
1601
2358
2677
3516
2819
7842
1020
5868
4937
0330
89
83
79
37
94
6914
9778
1353
1602
2354
3070
4004
8957
7759
9752
3064
7882
05
13
421
140
972
207
2646
4197
4956
6268
7916
8920
1142
2626
8244
4058
7534
7984
6328
9758
1157
1436
1645
2242
1902
8130
2834
8950
3241
4643
77
81
905
999
743
019
9.49
9.48
7.54
10.3
6.56
7.47
5%
196.
313.
497.
170.
59
59.0
II/ISA-IE/ISL
interest income
ISA
interest expense
ISL
share/earnings per
share
Page | 86
10.7
21.2
34.6
10.4
18.2
14.7
14.3
196.
1.84
4.58
16.3
32.1
12.8
313.
497.
170.
9224
2100
4790
5720
6473
6839
7594
5269
0412
1654
9602
9118
50
21
36
31
24
35,0
35,0
53,1
82,3
189,
208,
00,0
00,0
30,0
51,5
408,
349,
00
00
00
00
450
295
7.46
5.23
5.52
2.45
1.73
1.80
59
59.0
5
no.of shares
Page | 87
Financial Statement
Page | 88
Page | 89
Page | 90
Page | 91
Page | 92
Page | 93
Page | 94
Page | 95
Page | 96
Page | 97
Page | 98
Page | 99
Page | 100
Page | 101
Page | 102
Page | 103
Page | 104
Page | 105
Page | 106
Page | 107
Page | 108