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CHAPTER 01 ORIENTATION OF THE STUDY

Introduction: 1.1 History of the Banks in Bangladesh


Bank system was practiced in Indian subcontinent by the Indian subcontinent merchants; Goldsmith Moneylenders were the primary bankers. During the mughal period banking and credit business was enchanted rapidly. Indigenous banking in Bangladesh is as old as banking in other parts of the world. During mughal period, indigenous banking flourished. The Subarna Banik, the bullion trading community used to do banking in the then Bengal. Banking in Bangladesh was gradually taken over by the upcountry bankers who were known as Seth, Shah etc. But Subarna Banik continued to operate in rural Bengal. The British gradually came to Bengal and operated banking in the form of agency house and exchanging houses banking started in the part of this started to flourish in Calcutta. Entry of the Bengalese into century especially in the period of the Swadeshi movement. In 1700 AD Hindustan bank was established as the first joint stock bank. In 1784 Bengal bank and in 1786 general bank of India were launched. Then both the banks absolved respectively in 1793 and 1832. During the early period of nineteenth century the three banks Bank of Bombay, Bank of Madras and Bank of Bengal merged to Imperial bank of India. In 1947 after the separation of Bengal, bank business faced a severe disaster as non-Muslim bankers migrated to India. In order to rebuild the bank business State bank of Pakistan was established as a central bank of Pakistan in 1948. In 1971 Bangladesh became independent. After liberation Bangladesh bank was automated with the assets and liabilities of former State bank of Pakistan.

1.1.

The Banking System of Bangladesh

The banking system at independence consisted of two branch offices of the former State Bank of Pakistan and seventeen large commercial banks, two of which were controlled by Bangladeshi interests and three by foreigners other than West Pakistanis. There were fourteen smaller commercial banks. Virtually all banking services were concentrated in urban areas. The newly independent government immediately designated the Dhaka branch of the State Bank of Pakistan as the central bank and renamed it the Bangladesh Bank. The bank was responsible for regulating currency, controlling credit and monetary policy, and administering exchange control and the official foreign exchange reserves. The Bangladesh government initially nationalized the entire domestic banking system and proceeded to reorganize and rename the various banks. Foreignowned banks were permitted to continue doing business in Bangladesh. The insurance business was also nationalized and became a source of potential investment funds. Cooperative credit systems and postal savings offices handled service to small individual and rural accounts. The new banking system succeeded in establishing reasonably efficient procedures for managing credit and foreign exchange. The primary function of the credit system throughout the 1970s was to finance trade and the public sector, which together absorbed 75 percent of total advances. The government's encouragement during the late 1970s and early 1980s of agricultural development and private industry brought changes in lending strategies. Managed by the Bangladesh Krishi Bank, a specialized agricultural banking institution, lending to farmers and fishermen dramatically expanded. The number of rural bank branches doubled between 1977 and 1985, to more than 3,330. Denationalization and private industrial growth led the Bangladesh Bank and the World Bank to focus their lending on the emerging private manufacturing sector. Scheduled bank advances to private agriculture, as a percentage of sectoral GDP, rose from 2 percent in FY 1979 to 11 percent in FY 1987, while advances to private manufacturing rose from 13 percent to 53 percent. The transformation of finance priorities has brought with it problems in administration. No sound project-appraisal system was in place to identify viable borrowers and projects. Lending institutions did not have adequate autonomy to choose borrowers and projects and were often instructed by the political authorities. In addition, the incentive system for the banks stressed disbursements rather than recoveries, and the accounting and debt collection systems were inadequate to deal with the problems of loan recovery. It became more common

for borrowers to default on loans than to repay them; the lending system was simply disbursing grant assistance to private individuals who qualified for loans more for political than for economic reasons. The rate of recovery on agricultural loans was only 27 percent in FY 1986, and the rate on industrial loans was even worse. As a result of this poor showing, major donors applied pressure to induce the government and banks to take firmer action to strengthen internal bank management and credit discipline. As a consequence, recovery rates began to improve in 1987. The National Commission on Money, Credit, and Banking recommended broad structural changes in Bangladesh's system of financial intermediation early in 1987, many of which were built into a three-year compensatory financing facility signed by Bangladesh with the IMF in February 1987. One major exception to the management problems of Bangladeshi banks was the Grameen Bank, begun as a government project in 1976 and established in 1983 as an independent bank. In the late 1980s, the bank continued to provide financial resources to the poor on reasonable terms and to generate productive self-employment without external assistance. Its customers were landless persons who took small loans for all types of economic activities, including housing. About 70 percent of the borrowers were women, who were otherwise not much represented in institutional finance. Collective rural enterprises also could borrow from the Grameen Bank for investments in tube wells, rice and oil mills, and power looms and for leasing land for joint cultivation. The average loan by the Grameen Bank in the mid-1980s was around Tk2,000 (US$65), and the maximum was just Tk18,000 (for construction of a tin-roof house). Repayment terms were 4 percent for rural housing and 8.5 percent for normal lending operations. The Grameen Bank extended collateral-free loans to 200,000 landless people in its first 10 years. Most of its customers had never dealt with formal lending institutions before. The most remarkable accomplishment was the phenomenal recovery rate; amid the prevailing pattern of bad debts throughout the Bangladeshi banking system, only 4 percent of Grameen Bank loans were overdue. The bank had from the outset applied a specialized system of intensive credit supervision that set it apart from others. Its success, though still on a rather small scale, provided hope that it could continue to grow and that it could be replicated or adapted to other development-related priorities. The Grameen Bank was expanding rapidly, planning to have 500 branches throughout the country by the late 1980s. Beginning in late 1985, the government pursued a tight monetary policy aimed at limiting the growth of domestic private credit and government borrowing from the banking system. The policy was largely successful in

reducing the growth of the money supply and total domestic credit. Net credit to the government actually declined in FY 1986. The problem of credit recovery remained a threat to monetary stability, responsible for serious resource misallocation and harsh inequities. Although the government had begun effective measures to improve financial discipline, the draconian contraction of credit availability contained the risk of inadvertently discouraging new economic activity. Foreign exchange reserves at the end of FY 1986 were US$476 million, equivalent to slightly more than 2 months worth of imports. This represented a 20-percent increase of reserves over the previous year, largely the result of higher remittances by Bangladeshi workers abroad. The country also reduced imports by about 10 percent to US$2.4 billion. Because of Bangladesh's status as a least developed country receiving concession loans, private creditors accounted for only about 6 percent of outstanding public debt. The external public debt was US$6.4 billion, and annual debt service payments were US$467 million at the end of FY 1986.

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Objective of the study:

General Objectives of the study: The main objective of this report is to evaluate the overall performance analysis of five commercial bank along with how efficiently the Bank perform their activities and providing services to their customer. Specific objectives of the study: To present an overview of five commercial bank. To make comparison on the basis of ratio analysis.

To apply theoretical knowledge in the practical field remedial measures for the smooth development of the Bank.

Critically analyze the functions and the operations of each level of Bank and to suggest

To make a study of the facts in order to arrive at certain conclusion about overall Banking operation and the growth, expansion and profitability of a private sector Bank.

1.3.

Methodology of the Study

This report is prepared mainly on the extensive use of secondary data available in different texts, annual reports, journal, Banking related books etc as well as primary data. The inputs are collected from two sources: Primary Sources: Discussion with Bank Executives & Officials. Personal observation and assessment. Secondary Sources: Annual report of the Banks. Consultation of related books, journals and publications. Different statements of Banks. File; Balance sheets and various documents. Dhaka Stock Exchange Library.

Data Processing: Collected information is processed through data processing software. Different analysis, working variables and working definitions is embodied in the report. Using performance indicators: To evaluate the performance of the Bank following indicators/ factors are considered: Capital of the Bank Deposits of the Bank Operational Income of the Bank Operational profit of the Bank Earning Assets of the Bank Earnings per share of the Bank Number of Branches of the Bank Number of employees of the bank Percentage of classified loans of the Bank

Limitations of the report


Difficult to obtain data from the annual report. Because some data are not available in the annual report. As some of the fields of banking are still not covered by our courses, there was difficulty in understanding some activities. Another limitation of this report is Banks policy of not disclosing some data and information for obvious reason, which could be very much useful. Because of the limitation of information, some assumption was made. So there may be some personal mistake in the report Although the scope of the study was required to include more numbers of Private Commercial Banks for measuring performance evaluation which may also be a limitation of my study.

CHAPTER 02 AN OVERVIEW OF BANKING SECTOR IN BANGLADESH

2.0 Overview of The Bank


2.1. History of Brac Bank Limited BRAC Bank is a scheduled commercial bank established under the Banking Companies Act, 1991 and incorporated as a public company limited by shares on 20 May, 1999 under the Companies Act, 1994 in Bangladesh. The primary objective of the Bank is to carry on all kinds of banking business. The Bank could not start its operation till 03 June, 2001 since the activity of the Bank was suspended by the High Court of Bangladesh. Subsequently, the judgment of the High Court was set aside and dismissed by the Appellate Division of Supreme Court on 04 June, 2001 and accordingly, the Bank has started operations from 04 July, 2001. BRAC Bank has a unique institutional shareholding between BRAC, the largest DFO in the world, the International Finance Corporation (IFC), the commercial arm of the World Bank Group, and Shore Cap International, a concern of Shore Bank Corporation, America's first and leading community development and environmental banking corporation. A fully operational Commercial Bank, BRAC Bank focuses on pursuing unexplored market niches in the Small and Medium Enterprise Business, which hitherto has remained largely untapped within the country. Almost 40% of BRAC Banks clients had no prior experience with formal banking. The Bank has 313 regional marketing unit offices offering services in the heart of rural and urban communities and employs about 1,800 business loan officers around 70% of total staff. BRAC Bank Limited, a full service commercial bank with Local and International Institutional shareholding, is primarily driven by creating opportunities and pursuing market niches not traditionally met by conventional banks. BRAC Bank has been striving to provide "Best-in-theclass" services to its diverse range of customers spread across the country under an on-line banking platform. The reason BRAC Bank is in business is to build a profitable and socially responsible financial institution focused on markets and businesses with growth potential, thereby assisting BRAC and stakeholders to build a "just, enlightened, healthy, democratic and poverty free Bangladesh." Which means to help make communities and economy of the country stronger and to help people achieve their dreams? We fulfill the purpose by reaching for high standards in everything we do: For our customers, our shareholders, our associates and our communities, upon which the future prosperity of our

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company rests. As such a career in the BRAC Bank Limited requires one to be versatile, to have genuine love and understanding towards others and to be able to take on different roles. Remarkably, BRAC Bank, despite being one of the newest Banks in the country, has attained a reputation for being in the forefront of the industry. Our retail business and corporate business have gained new ground over the last two years and today BRAC Bank can claim itself to be among the top financial service providers. BRAC Bank began its operations with a mind to provide formal banking services to all levels of people in the urban, semi-urban and rural spectrum, and through the nearly 429 unit offices across the country, the Bank has seen that goal a long way through - providing Bangladesh with a degree of service and professionalism that the traditionally underserved class could ever dream of. The issue manager, in addition to the issuer company, shall ensure due compliance of the above mentioned conditions and shall submit compliance report thereon to the Commission within seven days of expiry of the aforesaid fifteen days time period allowed for refund of the subscription money. Since inception in July 2001, the Bank's footprint has grown to 71 branches, 429 SME unit offices and 200 ATM sites across the country, and the customer base has expanded to 210,000 deposit and 55,000 borrowers through 2010. In the last four and half years of operation, the Bank has disbursed over BDT 2,100 crore in loans to nearly 50,000 small and medium entrepreneurs. The management of the Bank believes that this sector of the economy can contribute the most to the rapid generation of employment in Bangladesh. The Bank operates under a "double bottom line" agenda where profit and social responsibility go hand in hand as it strives towards a poverty-free, enlightened Bangladesh.

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2.2.

History of Premier Bank Limited


Prime Bank Ltd. was established on 17th April 1995 with an authorized capital of Tk.1000 million and paid up capital of Tk.100 million (raised to Tk.200 million in 1997) by a group of highly successful entrepreneurs from various fields of economic activities such as shipping, oil, finance, garments, textiles and insurance etc. It is a full licensed scheduled Commercial bank set up in the private sector in pursuance of the policy of the Government to liberalize banking and financial services. The Founder Chairman of the bank, Dr. R.A Ghani is a doctorate in science. He was a member of the board of directors of Bangladesh Bank (Central Bank) and a former minister of the state Government of Bangladesh. The former governor of Bangladesh Bank Mr. Lutfar Rahman Sarkar was the first managing director of the bank. Highly professional people having wide experience in domestic and international banking are managing the bank. The present managing director Mr. E.Ehsanul Haque has long experience in domestic and international banking. The bank has made significant progress within a very short time due to its very competent board of directors, dynamic management and introduction of various customers friendly deposit and loan products. During the year under review, the network of branches increased to 71. The bank is providing commercial and investment banking services to all types of customers ranging from small enterprises to big business loans. Besides, investment in trade and commerce, the bank actively participates in socioeconomic development of the priority sectors like industry, housing and selfemployment. The Bank made satisfactory progress over the years after its starting. Despite difficult circumstances it became able to sustain with some achievements. The bank further expected and consolidated its customer base in both of its core business and retail banking. Since the very inception PBL is working with the philosophy of serving the nationals as an ideal and unique financial house. Every organization has some objectives of its own. The prime objective of PBL is to earn profit throw undertaking the responsibility of providing financial help for the development of the countrys commercial and industrial sector.

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2.3.

History of AB bank Limited

AB Bank Limited, the first private sector bank under Joint Venture with Dubai Bank Limited, UAE incorporated in Bangladesh on 31st December 1981 and started its operation with effect from April 12, 1982. Dubai Bank Limited (name subsequently changed to Union Bank of the Middleast Limited) decided to off-load their investment in AB Bank Limited with a view to concentrate their activities in the UAE in early part of 1987 and in terms of Articles 23A and 23B of the Articles of Association of the Company and with the necessary approval of the relevant authorities, the shares held by them in the Bank were sold and transferred to Group "A" Shareholders, i.e. Bangladeshi Sponsor Shareholders. As of December 31, 2007; the Authorized Capital and the Equity (Paid up Capital and Reserve) of the Bank are BDT 2000 million and BDT 4511.59 million respectively. Authorized Capital of the Bank has been increased to BDT 3000 million in the Extra Ordinary General Meeting held on July 16, 2008. Since beginning, the bank acquired confidence and trust of the public and business houses by rendering high quality services in different areas of banking operations, professional competence and employment of the state of art technology. During the last 26 years, AB Bank Limited has opened 74 Branches in different Business Centers of the country, one foreign Branch in Mumbai, India and also established a wholly owned Subsidiary Finance Company in Hong Kong in the name of AB International Finance Limited. To facilitate cross border trade and payment related services, the Bank has correspondent relationship with over 220 international banks of repute across 58 countries of the World. AB Bank Limited, the premier sector bank of the country is making headway with a mark of sustainable growth. The overall performance indicates mark of improvement with Deposit reaching BDT 53375.35 million, which is precisely 26.85% higher than the preceding year. On the Advance side, the Bank has been able to achieve 30.76% increase, thereby raising a total portfolio to BDT 40915.35 million, which places the Bank in the top tier of private sector commercial banks of the country. On account of Foreign Trade, the Bank made a significant headway in respect of import, export and inflow of foreign exchange remittances from abroad.

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2.4.

History of Standard Bank Limited

Standard Bank Limited (SBL) was incorporated in Bangladesh as a public limited company with limited liability under the companies act, 1994 on 11th may 1999 and Commenced commercial operation on 3rd June 1999. The bank went for the public issue of shares on in 2003 and its shares are listed with Dhaka stock exchange and Chittagong stock exchange. Now it has 47 branches all over Bangladesh. The commercial banking activities of the bank encompass a wide range of services including accepting deposits, making loans, discounting bills, conducting money transfer and foreign exchange transactions and performing other related services such as safe keeping, collections, issuing guarantees, acceptances and letter of credit. The bank would serve as partner and advisor of the clientele to trade, commerce and industry.
Standard Bank mission is to be utmost trustworthy stakeholder, careful, committed for equitable

and sustainable growth based on diversified deployment of fund/resources leading the bank to the peak of healthy and wholesome financial institution. To be a dynamic leader in the financial market in innovating new products as to the needs of the society. To earn positive economic value addition (EVA) each year to come. To top the list in respect of cost efficiency of all the commercial Banks. To become one of the best financial institutions in Bangladesh economy participating in the most significant segments of business market that we serve.

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2.5.

History of United Commercial Bank Limited

United commercial Bank Ltd. is one of the leading private commercial bank in Bangladesh. It Sponsored by some dynamic and reported entrepreneurs and eminent industrialists of the country and also participated by the eminent. UCBL started its operation in the mid 1983. It renders banking services to its customers. With an outstanding lance, the company is heading towards the new millennium though focusing on leadership, service innovations and all other is required for earning excellence and continued growth. This is offering service-keeping harmony with the changing demands customers and is getting customer satisfaction by assuring quality and by delivery better service value comparing with its competitors. The emergence of UCBL in private sector is an important event in the arena of Bangladesh. It has been able to establish the network of 99 (another one is on going) branches throughout the country. A team of highly qualified and experienced professionals headed by the Managing Director of the Bank who has vast banking experience bank and at the top there is an efficient Board of Directors for making policies. With its firm commitment to the economic development of the country, the Bank has already made a distinct mark in the realm of Private Sector Banking through personalized service, innovative practices, dynamic approach and efficient Management. The Bank, aiming to play a leading role in the economic activities of the country, is firmly engaged in the development of trade, commerce and industry thorough a creative credit policy. UCBL currently works with 329 correspondents covering 102 countries. Moreover, the Bank has arrangement with a number of Exchange House at Singapore, U.A.E, Oman, Qatar, and Kuwait to facilitate remittances form expatriate Bangladeshis. UCBL offers various types of products and services include Western Union money transfer, SMS banking, and online services, debit card, credit card, dual currency VISA credit card, various deposit schemes etc.

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CHAPTER 03 LOAN APPRAISAL PROCESS

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3.0 Bangladesh Bank Loan Appraisal Process


3.1. POLICY ON LOAN CLASSIFICATION AND PROVISIONING The process of gradually upgrading the policies on loan classification and provisioning to the international level is going on. Measures have been taken to strengthen the credit discipline and the process of classification has been simplified. The following revised policies on loan classification and provisioning has been issued amending the previous circulars in this regard: 1. Categories of Loans All loans and advances will be grouped into 4(four) categories for the purpose of classification, namely (a) Continuous Loan (b) Demand Loan (c) Fixed Term Loan and (d) Short-term Agricultural and Micro Credit. (a) Continuous Loan: - The loan Accounts in which transactions may be made within certain limit and have an expiry date for full adjustment will be treated as Continuous Loans. Examples are: CC, OD etc. (b) Demand Loan: The loans that become repayable on demand by the bank will be treated as Demand Loans. If any contingent or any other liabilities are turned to forced loans (i.e. without Any prior approval as regular loan) those too will be treated as Demand Loans. Such as: Forced LIM, PAD, FBP, and IBP etc. (c) Fixed Term Loan: the loans, which are repayable within a specific time period under a specificrepayment schedule, will be treated as Fixed Term Loans. (b) Short-term Agricultural Credit will include the short-term credits as listed under the Annual Credit Program issued by the Agricultural Credit Department of Bangladesh Bank. Credits in the Agricultural sector repayable within less than 12 months will also be included herein. Short-term Micro-Credits will include any micro-credits for less than Tk.25,000/= and repayable within less than 12 months, be those termed in any names such as Non-agricultural credit, Self-reliant Credit, Weaver's Credit or Bank's individual project credit.

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2. Basis for Loan Classification


(A) Objective Criteria: Any Continuous Loan if not repaid/renewed within the fixed expiry date for repayment will be treated as past due/overdue from the following day of the expiry date. This loan will be classified as Sub-standard if it remains past due/overdue for 6 months or beyond but less than 9 months, as Doubtful' if for 9 months or beyond but less than 12 months and as `Bad-Debt' if for 12months or beyond. Any Demand Loan if not repaid/rescheduled within the fixed expiry date for repayment will be treated as past due/overdue from the following day of the expiry date. This Loan will be classified as Sub-standard if it remains past due/overdue for 6 months or beyond but not over 9 months from the date of claim by the bank or from the date of creation of the forced loan; likewise the loan will be classified as "Doubtful' and Bad/loss if remains past due/overdue for 9 months or beyond but not over 12 months and for 12 months and beyond respectively. (1) In case any installment(s) or part of installment(s) of a Fixed Term Loan is not repaid within the due date, the amount of unpaid installment(s) will be termed as `defaulted installment'. (3.1) In case of Fixed Term Loans, which are repayable within maximum five years of time: If the amount of `defaulted installment' is equal to or more than the amount of installment(s) due within 6 months, the entire loan will be classified as ``Sub-standard''. If the amount of 'defaulted installment' is equal to or more than the amount of installment(s) due within 12 months, the entire loan will be classified as ''Doubtful. If the amount of 'defaulted installment' is equal to or more than the amount of installment(s) due within 18 months, the entire loan will be classified as ''Bad -Loss.''

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(3.2) In case of Fixed Term Loans, which are repayable in more than five years of time: (a) If the amount of `defaulted installment' is equal to or more than the amount of installment(s) due within 12 months, the entire loan will be classified as 'Sub-standard.' (b) If the amount of `defaulted installment ' is equal to or more than the amount of installment(s) due within 18 months, the entire loan will be classified as 'Doubtful'. (c) If the amount of 'defaulted installment 'is equal to or more than the amount of installment(s) due within 24 months, the entire loan will be classified as 'Bad-Debt'. (B) Qualitative Judgment: If any uncertainty or doubt arises in respect of recovery of any Continuous Loan, Demand Loan or Fixed Term Loan, the same will have to be classified on the basis of qualitative judgment be it classifiable or not on the basis of objective criteria. If any situational changes occur in the stipulations in terms of which the loan was extended or if the capital of the borrower is impaired due to adverse conditions or if the value of the securities decreases or if the recovery of the loan becomes uncertain due to any other unfavorable situation, the loan will have to be classified on the basis of qualitative judgment. Besides, if any loan is illogically or repeatedly re-scheduled or the norms of re-scheduling are violated or instances of (propensity to) frequently exceeding the loan-limit are noticed or legal action is lodged for recovery of the loan or the loan is extended without the approval of the proper authority, it will have to be classified on the basis of qualitative judgment. Despite the probability of any loan's being affected due to the reasons stated above or for any other reasons, if there exists any hope for change of the existing condition by resorting to proper steps, the loan, on the basis of qualitative judgment, will be classified as 'Sub-standard '. But even if after resorting to proper steps, there exists no certainty of total recovery of the loan, it will be classified as ' Doubtful ' and even after exerting the all-out effort, there exists no chance of recovery, it will be classified as ' Bad-Debt ' on the basis of qualitative judgment. The concerned bank will classify on the basis of qualitative judgment and can declassify the loans if qualitative improvement does occur. But if any loan is classified by the Inspection Team of Bangladesh Bank, the same can be declassified with the approval of the Board of Directors of the bank. However, before placing such case to the Board, the CEO and concerned branch manager shall have to certify that the conditions for declassification have been fulfilled.

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3. Accounting of the interest of classified loans: If any loan or advance is classified as 'Sub-standard' and 'Doubtful', interest accrued on such loan will be credited to Interest Suspense Account, instead of crediting the same to Income Account. In case of rescheduled loans the unrealized interest, if any, will be credited to Interest Suspense Account, instead of crediting the same to Income Account. As soon as any loan or advance is classified as 'Bad Debt', charging of interest in the same account will cease. In case of filing a law-suit for recovery of such loan, interest for the period till filing of the suit can be charged in the loan account in order to file the same for the amount of principal plus interest. But interest thus charged in the loan account has to be preserved in the 'Interest Suspense ' account. If any interest is charged in any 'Bad-Debt' account for any other special reason, the same will be preserved in the 'Interest Suspense' account. If classified loan or part of it is recovered i.e., real deposit is effected in the loan account, first the interest charged and not charged is to be recovered from the said deposit and the principal to be adjusted afterwards. Interest accrued on "Special Mention Account (SMA)'' will be credited to Interest Suspense Account, instead of crediting the same to Income Account. 4. Maintenance of provision: (a) (i) Banks will be required to maintain General Provision in the following way : (1) @ 1% against all unclassified loans (other than loans under Consumer Financing and Special Mention Account.) (2) @ 5% on the unclassified amount for Consumer Financing whereas it has to be maintained @ 2% on the unclassified amount for (i) Housing Finance and (ii) Loans for Professionals to set up business under Consumer Financing Scheme. (3) @ 5% on the outstanding amount of loans kept in the 'Special Mention Account' after netting off the amount of Interest Suspense. (b) (i) Banks will maintain provision at the following rates in respect of classified Continuous, Demand and Fixed Term Loans: (1) Sub-standard 20% (2) Doubtful 50% (3) Bad/Loss 100% (ii) Provision in respect of Short-term Agricultural and Micro-Credits is to be maintained at the following rates:

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(1) All credits except 'Bad/Loss'(i.e. 'Doubtful', 'Sub-standard', irregular and regular credit accounts) : 5% (2) 'Bad/Loss': 100% (c) Banks are required to maintain general provision against Off-balance sheet exposures in the following manner: (i)@ 0.5% provision effective from December 31, 2007 and (ii)@ 1% provision effective from December 31, 2008. * Considering the scope for further contribution of SMEs to the economy of Bangladesh and in order to boost up financing to the Small and Medium Enterprises (SMEs) sector, banks are required to maintain 1% General provision instead of 2% against unclassified loan amount for SMEs. Also, the word stipulated as Small Enterprise Financing (SEFs) has been renamed Small and Medium Enterprise (SMEF) effecting from June 30, 2008. (Ref. BRPD Circular #05 dated April 29, 2008).
6 BRPD Circular No. 10, dated September 18, 2007)

5. Base for Provision: Provision will be maintained at the above rate on the balance to be ascertained by deducting the amount of 'Interest Suspense' and value of eligible securities from the outstanding balance of classified accounts. 6. Eligible Securities: In the definition of 'Eligible Securities' as mentioned in the above paragraph the following securities will be included as eligible securities in determining base for provision: -100% of deposit under lien against the loan -100% of the value of government bond/savings certificate under lien. -100% of the value of guarantee given by Government or Bangladesh Bank -100% of the market value of gold or gold ornaments pledged with the bank. -50% of the market value of easily marketable commodities kept under control of the bank -Maximum 50% of the market value of land and building mortgaged with the bank -50% of the average market value for last 06 months or 50% of the face value, whichever is less, of the shares traded in stock exchange.

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7. Determination of Market Value of Eligible Securities In determining market value of easily marketable commodities, land and building, banks are advised to follow the instructions mentioned below: (a) Easily marketable goods will mean pledged, easily encashable/saleable goods that remain under full control of the bank. However, while the concerned bank branch official will conduct periodic inspection to verify as to whether issues such as the suitability of goods for use, expiry period, appropriateness of documentary evidences, up to date insurance cover, same will have to be assessed by the professional assessor from time to time. (b) For land and building, banks will have to ensure whether title documents are in order and concerned land and building will have to be valued by the professional valuation firm along with completion of proper documentation in favour of the bank. In absence of professional valuation firm, certificate in favour of such valuation will have to be collected from the specialized engineer. Nevertheless, temporary houses including tin-shed structure shall not be shown as building. (c) In order to facilitate the on-site inspection by our Department of Bank Inspection, banks are also advised to maintain complete statement of eligible securities on a separate sheet in the concerned loan file. Information such as description of eligible securities, their assessment by recognized firm, marketability of the commodity, control of the bank, and reasons for considering eligible securities etc. will have to be included in that sheet. In terms of the above policies, the banks will conduct their classification- activities on quarterly basis. Detailed statements in respect of classification, provision and 'Interest suspense' accounts will have to be submitted to Bangladesh Bank within 30 days from the reference date.

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3.2. Credit Categories of Banking Sectors


As initiated by Bangladesh Bank vide BCD Circular No. 33 dated 16-11-89 different kinds of lending were subdivided into 11 categories i.e. 01-01-90 which was subsequently reduced to 9 vide BCD Circular No. 23 dated 09-10-93 and again to 7 sectors vide BCD Circular No.8 dated 25.04.94 for fixation of rates of interest by the individual banks on competitive basis depending on the cost of Funds, prevailing market condition and monetary trend of the country. Loan and advances have primarily been divided into two major groups: a) Fixed term loan: These are the advances made by the Bank with fixed repayment schedules. The term of loan are defined as follows: Short term Medium term Long Term : : : Up to 12 months More than 12 and up to 36 months More than 36 months

b) Continuing credits: These are the advances having no fixed repayment schedule, but have an expiry date at which it is renewable on satisfactory performance. Further all categories of loans are accommodated under the 7 sectors as under I. Agriculture: Credit facilities to the agricultural sector falls under this category. It is subdivided into two major heads: a) Loans to primary producers: This sector of agricultural financing refers to the credit facilities allowed to production units engaged in farming, fishing, forestry or livestock. Loans to processors or traders of agricultural products are not to be categories as agricultural loans. Loans to tea gardens for production are treated as agricultural loan, but loans to tea gardens for export should be treated under the category "Export Credit". Similarly medium and long-term loans to tea gardens are categorized as industrial term lending. b) Loans to input dealers/distributors: It refers to the financing allowed to input dealers and (or) distributors in the agricultural sectors. Agricultural loans may include short, medium and long fixed term loans as well as continuing credits. As such, it may fall under the head "Loan (Gen)/Hire-Purchase/Lease Financing". II. Term Loan for Large & Medium Scale Industry (Large Industry is defined to include all industrial enterprises whose total fixed cost / replacement cost excluding land and factory building is over Tk. 100 million. Medium Industry is defined to include all industrial enterprises

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whose total fixed cost/ replacement cost excluding value of land and factory building is between Tk.15 million to Tk. 100 million.) This category of advances accommodate the medium and long term financing for acquiring capital machinery of new Industries or for BMRE of the existing units who are engaged in manufacturing goods and services. Term financing to tea gardens may also be included in this category depending on the nature and size. As the financing under this category have fixed repayment schedule it falls under the head "Loan (Gen)/Hire-Purchase/Lease Financing". III. Term Loans to Small & Cottage Industries: (Small Industry will mean enterprises whose total fixed cost / replacement cost excluding land and factory building is not more than 15 million.) No short term or continuing credits are to be included in this category. Medium & Long term credits are also included under this category. Like the Large & Medium Scale Industry it is also allowed in the form of "Loan (Gen)/Hire Purchase/Lease Financing". IV. Working Capital: Loans allowed to the manufacturing units to meet their working capital requirements, irrespective of their size - big, medium or small, fall under the category. These are usually continuing credits and as such fall under the head "Cash Credit" V. Export Credit: Credit facilities allowed to facilitate export of all items against Letter of Credit and/or confirmed export orders fall under this category. It is accommodated under the heads "Export Cash Credit (ECC)", Packing Credit (PC), Foreign Documentary Bills Purchased (FDBP), Local Export Bills Purchased etc. However, bills discounted / purchased against supply of goods and services to companies / industries which are located in the country and not involved in export / deemed export shall not fall under export credit. VI. Commercial Lending: Short-term loans and continuing credits allowed for commercial purposes other than exports fall under this category. It includes import financing, financing for internal trade, service establishment, etc. No medium and long-term loans are accommodated here. This category of advances are allowed in the form of (I) Loan against imported merchandise (LIM), (ii) Loan against trust receipt (LTR),

24

(iii) Payment against import documents (PAD), (iv) Secured Overdrafts (SOD), (v) Cash Credit (CC), (vi) Loan (Gen), etc. for commercial purposes. VII. Others: Any loan that does not fall in any of the above categories is considered under the category "Others". It includes loan to (I) transport equipments, (ii) Construction works including housing (commercial/residential), (iii) Work order finance, (iv) Personal loans, etc. VIII. SME Financing: Bangladesh Bank vides BRPD Circular No. 07 dated 03.11.2004 has given prudential regulatory guidelines for Small Enterprise Financing. The role of Small and Medium Enterprise is very crucial in the economic development of the county. Jamuna Bank Limited has separate SME Financing Scheme duly approved by the Board. There are several products, modalities and loan ceiling for SME financing. SME Cell within Corporate Division handles SME loans.

25

3.3. Criteria for Loan Classification


Loan Continuous Demand Loan Classificatio Loan Stages Special Mention Account Sub-Standard Fixed term loan Short Term Term loan for Term loan for Agricultural And within 5 more than 5 Micro Credit years years

Loan Irregular for 3 Irregular for Irregular for Irregular for 3 Irregular for 3 to to 6 months 3 to 6 3 to 6 months to 12 months 12 months months Irregular for 6 Irregular for Irregular for Irregular to 9 months 6 to 9 6 to 12 12 to months months months Irregular for 9 Irregular for Irregular for Irregular to 12 months 9 to 12 12 to 18 18 to months months months for Irregular for Irregular for Irregular 12 months months months

for Irregular for 12 18 to 36 months for Irregular for 36 24 to 60 months for Irregular than months for 60

Doubtful

Bad & Loss

Irregular months

more than 12 more

than more than 18 more than 24 more

3.4. Treatment of Interest of Classified Loans:

26

The charging of interest suspended whenever a loan classified as Bad /Loss (BL). If legal Action is taken to realize the loan, the suit filed for the total component of principal loan amount and the interest charged thereof up to the date of legal suit. However, the charged interest remains in suspense account. If a classified loan is adjusted or a partial amount of the same is recovered, the adjustment procedure will be thus i) ii) iii) To Interest in Suspense account To Interest currently due. To Principal Loan Amount.

- In recent years Bangladesh Bank has been trying to bring the prudential norms in line with best international practices. International best practices require that a loan be classified as nonperforming if its principal and / or interest are three months or more in arrears. ABBL are allowed to classify non-performing loans based on a time frame of six months. Early recognition of non-performing loans stimulates collection efforts and helps reduce the possibility of loss of such assets. A continuous credit, Demand Loan or a Term Loan which will remain overdue for a period of 90- days or more, will be put into the Special Mention Account and interest accrued on such loan will be credited in Interest Suspense Account, instead of crediting the same to Income Account. This will help banks to look at accounts with potential problems in a focused manner and it will capture early warning signals for accounts showing first signs of weakness. Loans in the Special Mention Account will not be treated as default loan for the purpose of section 27 Ka (3) of the Banking Companies Act, 1991 and the status of loan (Special Mention) need not be reported to the Credit Information Bureau (CIB) of Bangladesh Bank.

1. Brac Bank Ltd

(Figure in million tk)

27
Sector Agriculture, fishing, forestry, and dairy farm Industry Working Capikal Overdrafts Demand Loans Term Loans Lease receivables Small medium enterprise Credit Cards Staff loans & 2006 1001.91 2007 1185.29 2008 1337.54 2009 726.99 2010 2741.14

803.39 1845.96 1601.91 1883.39 4845.96 360.65 1647.73

1175.07 5324.84 1893.17 2421.19 7231.60 442.61 19718.16

3256.04 2489.43 2187.39 3721.75 11441.17 490.36 33019.12

11027.21 869.34 1760.73 8918.28 14481.21 602.92 35972.07

12368.78 3204.67 1730.90 17169.08 20278.85 585.324 41738.91

460.28 136.54

590.33 149.00

1519.53 285.87

1901.85 447.26

1958.24 597.38

Graphical Presentation:

2. Premier Bank Ltd


Sector 2006 2007 2008

(Figure in million tk)


2009 2010

28

Agricultural industries Textile & RMG industries Cement and ceramic industries

1988.43 501.74 281.86

3564.18 2073.16 504.99

2690.13 2183.80 446.60

97.51 2942.40 366.78

122.76 8016.50 718.31

Food and allied industries Transport & Communication industries Iron & steel industries Other industries

224.56 311.93 255.99 400.47

672.90 339.00 1186.54 5670.58

1646.30 708.90 1540.50 3575.20

2716.50 1108.40 1914.90 2424.26

1717.31 2536.60 1276.22 1586.66

Graphical Presentation:

3. AB Bank Ltd
Sector 2006 2007 2008

(Figure in million tk)


2009 2010

29
Agriculture Large & medium scale industry Working capital Export Commercial lending Small & cottage industry Others 211.30 2604.70 4952.50 870.60 12300.73 41.60 8504.79 850.50 5139.18 6105.93 2236.60 17813.30 36.60 7121,78 802.00 8169.30 10614.58 3035.43 20614.60 32.90 11143.53 1067.12 11528.20 1233.50 2448.90 28009.20 40.10 14305.52 2159.30 15497.10 16915.70 1505.30 37549.07 96.90 14575.45

Graphical Presentation:

4.Standard Bank Ltd


Sector Agricultural 2006 66.10 2007 73.70 2008 75.80 2009 309.70

(Figure in million tk)


2010 357.80

30
Industries Textile Industries Food & Industries allied 479.30 163.90 153.50 275.70 & & 88.00 64.50 1012.10 1159.90 1129.87 3417.60 664.70 104.00 234.00 4967.40 1106.00 384.10 314.70 6833.40 495.70 610.50 155.20 10287.78 775.30 469.80 144.20

Pharmaceuticales Industries Leather, Chemical Cosmetics etc Cement Ceramic Industries

Service Industries Transport & Communication Industries Other Industries

511.60 67.90

605.50 851.00

495.70 1996.00

2038.40 1366.50

3281.90 2483.70

2130.30

356.50

4147.27

8226.10

9498.30

Graphical Presentation:

5.United Commercial Bank Ltd

(Figure in million tk)

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Sector Agriculture, fisheries and forestry Industry Construction Transport & communication Storage Business Consumer financing Miscellaneous 2006 58.93 5741.07 648.62 189.52 48.75 10563.27 2845.69 4723.41 2007 66.25 6136.60 721.32 221.60 56.41 11859.82 3011.78 6403.59 2008 88.95 7492.00 488.17 971.69 59.27 16288.47 3657.06 8095.73 2009 348.09 5749.90 809.44 612.84 67.88 19012.31 4599.91 8250.96 2010 1088.14 5416.10 1320.00 684.40 73.02 28173.40 4788.45 7129.16

Graphical Presentation:

CHAPTER 04

32

CREDIT RISK DISBURSEMENT

Concept of Risk Disbursement

33

4.1. Definition of 'Disbursement' The act of paying out or disbursing money. Disbursements can include money paid out to run a business, spending cash, dividend payments, and/or the amounts that a lawyer might have to pay out on a person's behalf in connection with a transaction. The possibility that a loss may occur from the failure of another party to perform according to the terms of a contract. Credit risk is most simply defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maximize a banks risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. Banks need to manage the credit risk inherent in the entire portfolio as well as the risk in individual credit or transactions. Banks should also consider the relationships between credit risk and other risks. The effective management of credit risk is a critical component of a comprehensive approach to risk management and essential to the long-term success of any banking organization.
-Articles Principal for the management of credit risk, July 1999, Banks for international settlement (BIS)

The probability that some of banks assets, especially its loans will decline in value and perhaps become worthless is known as credit risk. Banks make loans and take on securities that are nothing more than promises to pay. When borrowing customers fail to make some or all of their promised interest and principal payments, theses defaulted loans and securities in losses that can eventually erode the banks capital. Because owners capital is usually no more than 10% of the volume of bank loans and risky securities and often much less than that, it does not absorb too many defaults on loans and securities before bank capital simply becomes inadequate to absorb further losses. At this point bank fails and will close unless the regulatory authority elect to keep it afloat until a buyer can be found. In Bangladesh banks are facing problems because they are to maintain capital for both performing and non performing assets. Banks nonperforming assets are generating nothing but blocking a portion of their capital. 4.2. Concept of Credit Risk Management In finance, credit risk management is the process of assessing risk in an investment. When the risk has been passed, investment decision can be made and the risk vs. return balance considered from a better position. The main way to reducing credit risk is by monitoring the behaviors of clients who wish apply for credit in the business. These clients may be businesses, individuals or sovereigns.

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The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Essentially, risk management occurs anytime an investor or fund manager analyzes and attempts to quantity the potential for losses in an investment and then takes the appropriate action given their investment objectives and risk tolerance. Credit risk management needs to be robust processes that enable bank too proactively manage loan portfolios in order to minimize losses and earn an acceptable level of return for shareholders. Central to this is comprehensive IT system, which should have the ability to capture all key customers data, risk management and transaction information including trade & Force. Given the fast changing, dynamic global economy and the increasing pressure of globalization, liberalization, consolidation and disintermediation, it is essential that banks have robust credit risk management policies and procedures that are sensitive and responsive to these changes. The word credit comes from the word credit comes from the Latin word credo meaning I believe. It is a lenders trust in a persons firms company s ability to potential ability and intention to repay. In other words, credit is the ability to command goods or service of another in return for promise to pay such goods or service at some specified time in future. For a bank it is the main sources of profit and on the overhand, the wrong use of credit would bring disaster not for the bank but also for the economy as a whole. The objective of credit management is to maximize the performing asset and the minimization of the non-performing asset as well as ensuring the optimal point of loan and advance and their efficient management. Credit management is a dynamic field where a certain standard of long range planning needed to allocate the fund is diverse field and to minimize the risk and maximizing the return on the invested fund. Continuous supervision, monitoring and followup are highly are highly required for ensuring the timely repayment and minimizing the default. Actually the credits not only constituted the banks asset portfolio is not only construed the banks asset structure but also a vital factor of the banks success. The overall success in credit management depends on the banks credit policy, portfolio of credit, monitoring, supervision and follow-up of the loan and advance. Therefore, while analyzing the credit management of any bank, it is required to analyze its credit policy, credit procedure and quality of credit portfolio. They provide directional guidelines to the banking sector that will improve the risk management culture, establish minimum standard for segregation of duties and responsibilities, and assist in the ongoing improvement of the banking sector in Bangladesh. Credit risk management is of utmost importance to Banks, and as such,

35

policies and procedures should be endorsed and strictly enforced by the MD\CEO and the board of the Bank.

4.3. Credit Risk Measurement

36

Credit risk grading is an important tool for credit risk measurement as it helps the bank and the financial institutions to understand various dimensions of risk involved in different credit transactions. The aggregation of such grading across the borrowers , activities and the lines of business can provide better assessment of the quality of credit port folio of a bank or branch . Well managed credit risk grading system promotes bank safety and soundness by facilitating informed decision making. Grading system measure credit risk and differentiate individual Functions of credit credits and group of credits byadministration This allows banks management to manage risk the risk they pose. department to optimize returns. The credit risk grading is done by assessing wightage accordance to the gravity of risk. The
Credit Administration Division

primary risk areas are financial risk, business/ industry risk, management risk, security risk and
Disburseme relationship risk. These are components are future sub-divided. Custodian Monitoring

The credit risk components and key parameters are presented in a chart.
CREDIT Obtaining RISK Conditions & Security Security risk Covenant Approval Documentati Breach from CRM Business Management Levera on as per risk Monitoring risk ge approval Age of Securit
busines s Size of busines s Experien ce y coverag risk e Collater Monitoring of al Past Due, coverag Limit,e Expiry

nt

Compliance

Financial Risk

Account

Returns to BB, CIB Reporting, Relationship risk default list circulation

Successi Safely Storing on Profitabil of Security Loans/Securit ity Team Documentati Busines s out y Documents Work on Covera look (fire proof) ge Industr y growth

Liquidi ty Completion

Suppo & Documents rt Deficiency

condu ct Maintain BB Utilizati on of Circulars & limit ensure Complia compliance nce of covenan all Depts. by
ts Person al deposi Ensure all ts values, lawyers, insurers are approved

Ensure Periodic adherence to Market Audit, compet review of approve Internal/BB ition terms & otherBarrier documentati Inspection s to on* requirements iance Busines before s Figure: The credit risk components disbursement. Ensure 4.4. Limit Creation Credit Administration Flowchart & Complying Disbursement Check List Collateral is Insured & Properly Valued.

Disbursement

37

Figure: Functions of credit administration department

4.5. Credit Categories


As initiated by Bangladesh Bank vide BCD Circular No. 33 dated 16-11-89 different kinds of lending were subdivided into 11 categories i.e. 01-01-90 which was subsequently reduced to 9 vide BCD Circular No. 23 dated 09-10-93 and again to 7 sectors vide BCD Circular No.8 dated

38

25.04.94 for fixation of rates of interest by the individual banks on competitive basis depending on the cost of Funds, prevailing market condition and monetary trend of the country. Loan and advances have primarily been divided into two major groups:
a) Fixed term loan: These are the advances made by the Bank with fixed repayment schedules.

The term of loan are defined as follows: Short term Medium term Long Term : : : Up to 12 months More than 12 and up to 36 months More than 36 months

b) Continuing credits: These are the advances having no fixed repayment schedule, but have an expiry date at which it is renewable on satisfactory performance. Further all categories of loans are accommodated under the 7 sectors as under I. Agriculture: Credit facilities to the agricultural sector falls under this category. It is subdivided into two major heads: a) Loans to primary producers: This sector of agricultural financing refers to the credit facilities allowed to production units engaged in farming, fishing, forestry or livestock. Loans to processors or traders of agricultural products are not to be categories as agricultural loans. Loans to tea gardens for production are treated as agricultural loan, but loans to tea gardens for export should be treated under the category "Export Credit". Similarly medium and long-term loans to tea gardens are categorized as industrial term lending. b) Loans to input dealers/distributors: It refers to the financing allowed to input dealers and (or) distributors in the agricultural sectors. Agricultural loans may include short, medium and long fixed term loans as well as continuing credits. As such, it may fall under the head "Loan (Gen)/Hire-Purchase/Lease Financing".
II. Term Loan for Large & Medium Scale Industry (Large Industry is defined to include all

industrial enterprises whose total fixed cost / replacement cost excluding land and factory building is over Tk. 100 million. Medium Industry is defined to include all industrial enterprises whose total fixed cost/ replacement cost excluding value of land and factory building is between Tk.15 million to Tk. 100 million.)

39

This category of advances accommodate the medium and long term financing for acquiring capital machinery of new Industries or for BMRE of the existing units who are engaged in manufacturing goods and services. Term financing to tea gardens may also be included in this category depending on the nature and size. As the financing under this category have fixed repayment schedule it falls under the head "Loan (Gen)/Hire-Purchase/Lease Financing". III. Term Loans to Small & Cottage Industries: (Small Industry will mean enterprises whose total fixed cost / replacement cost excluding land and factory building is not more than 15 million.) No short term or continuing credits are to be included in this category. Medium & Long term credits are also included under this category. Like the Large & Medium Scale Industry it is also allowed in the form of "Loan (Gen)/Hire Purchase/Lease Financing". IV. Working Capital: Loans allowed to the manufacturing units to meet their working capital requirements, irrespective of their size - big, medium or small, fall under the category. These are usually continuing credits and as such fall under the head "Cash Credit" V. Export Credit: Credit facilities allowed to facilitate export of all items against Letter of Credit and/or confirmed export orders fall under this category. It is accommodated under the heads "Export Cash Credit (ECC)", Packing Credit (PC), Foreign Documentary Bills Purchased (FDBP), Local Export Bills Purchased etc. However, bills discounted / purchased against supply of goods and services to companies / industries which are located in the country and not involved in export / deemed export shall not fall under export credit. VI. Commercial Lending: Short-term loans and continuing credits allowed for commercial purposes other than exports fall under this category. It includes import financing, financing for internal trade, service establishment, etc. No medium and long-term loans are accommodated here. This category of advances are allowed in the form of (I) Loan against imported merchandise (LIM), (ii) Loan against trust receipt (LTR), (iii) Payment against import documents (PAD), (iv) Secured Overdrafts (SOD),

40

(v) Cash Credit (CC), (vi) Loan (Gen), etc. for commercial purposes. VII. Others: Any loan that does not fall in any of the above categories is considered under the category "Others". It includes loan to (I) transport equipments, (ii) Construction works including housing (commercial/residential), (iii) Work order finance, (iv) Personal loans, etc. VIII. SME Financing: Bangladesh Bank vides BRPD Circular No. 07 dated 03.11.2004 has given prudential regulatory guidelines for Small Enterprise Fiancing.The role of Small and Medium Enterprise is very crucial in the economic development of the county. Jamuna Bank Limited has separate SME Financing Scheme duly approved by the Board. There are several products, modalities and loan ceiling for SME financing. SME Cell within Corporate Division handles

4.6. Guide lines of Credit policy:


The guidelines contained outline general principles that are designed to govern the implementation of more detailed lending procedures and risk grading system within individual banks. Lending Guidelines: All banks have an established Credit Policies that clearly outline the business development priorities and the terms and conditions that should be adhered to in order for loans to be approved. AB Bank Ltd has such type of guideline through which it manages the credit operation. This lending guideline is updated regularly in response to Bangladesh Banks guidelines to reflect changes in the economic outlook and the evolution of the banks loan portfolio, and distributed to all lending/marketing officers. The lending Guidelines are approved by the Managing Director/ CEO & Board of Directors of the bank based on the endorsement of the banks Head of Credit Risk Management and the Head of Corporate/ Commercial Banking. Any departure or deviation from the Lending Guidelines is explicitly identified in credit applications and justification for approval provided. The lending guidelines provide the key functions for relationship managers to formulate their recommendations for approval incorporating the following:

41

Industry and Business Segment Focus

The Lending Guidelines clearly identify the business/ industry sectors that constitute the majority of the banks loan portfolio. For each sector, a clear indication of the banks appetite for growth is indicated (as an example, Textiles: Grow, Cement: Maintain, Construction: Shrink). This will provide necessary direction to the banks marketing staff. Types of Loan Facilities Indication of the type of loan that are permitted, such as working capital, Trade Finance, Term Loan, etc. Single Borrower /Group Limits/ Syndication Details of the banks Single Borrower/ Group limits are included as per Bangladesh Bank guidelines. ABBL establish more conservative criteria in this regard. Lending Caps The Bank establishes a specific industry sector exposure cap to avoid over concentration in any one-industry sector. Discouraged Business Types ABBL outline industries or lending activities that are discouraged. As a minimum, the following is discouraged: (a) Military Equipment/ Weapons Finance (b) Highly Leveraged Transactions (c) Finance of Speculative Investments (d) Logging, Mineral Extraction/ Mining, or other activity that is ethically or environmentally sensitive (e) Lending to companies listed on CIB black list or known defaulters (f) Counter parties in countries subject to UN sanctions (g) Share Lending (h) Taking an Equity Stake in Borrowers (i) Lending to Holding Companies (j) Bridge Loans relying on equity/ debt issuance as a source of repayment. Loan Facility Parameters Facility parameters (e.g. maximum size, maximum tenor, and covenant and security requirements) clearly stated. As a minimum, the following parameters are adopted:

42

(a) Bank does not grant facilities where the banks security position is inferior to that of any other financial institution. (b) Assets pledged, as security is properly insured. (c) Valuations of property taken, as security performed prior to loans being granted. A recognized third party professional valuation firm appointed to conduct valuations. Cross Border Risk Risk associated with cross border lending. Borrowers of a particular country may be unable or unwilling to fulfill principle and /or interest obligations. Distinguished from ordinary credit risk because the difficulty arises from a political event, such as suspension of external payments (a) Synonymous with political & sovereign risk (b) Third world debt crisis For example, export documents negotiated for countries like Nigeria.

4.7. Credit Assessment & Risk Grading


Credit Assessment A thorough credit and risk assessment conducted prior to the granting of loans, and at least annually thereafter for all facilities. The results of this assessment are presented in a Credit Application that originates from the relationship manager/ account officer (RM), and is approved by Credit Risk Management (CRM). The RM is the owner of the customer relationship, and responsible to ensure the accuracy of the entire credit application submitted for approval. RMs must be familiar with the banks Lending Guidelines and conduct due diligence on new borrowers, principals, and guarantors. It is essential that RMs know their customers and conduct due diligence on new borrowers, principals, and guarantors to ensure such parties are in fact who they represent themselves to be. Credit Applications summaries the result of the RMs risk assessment and includes, as a minimum, the following details: -Amount and type of loans proposed. Purpose of loans. -Loan structure (Tenor, Covenants, Repayment Schedule, and Interest) -Security Arrangements. In addition, the following risk areas are being addressed by the Bank:

43

Borrower Analysis: The majority shareholders, management team and group or affiliate companies are assessed. Any issues regarding lack of management depth, complicated ownership structures or inter-group transactions are being addressed, and risks mitigated. Industry Analysis: The key risk factors of the borrowers industry need to be assessed. Any issues regarding the borrowers position in the industry, overall industry concerns or competitive forces is being addressed and the strengths and weaknesses of the borrower relative to its competition are identified. Supplier/Buyer Analysis: Any customer or supplier concentration is being addressed, as these have significant impact on the future viability of the borrower. Historical Financial Analysis: An analysis of a minimum of 3 Years historical financial statement of the borrower is presented. Where reliance is placed on a corporate guarantor, analysis of guarantor financial .The analysis addresses the quality and sustainability of earnings, cash flow and the strength of the borrowers balance sheet. Specifically, cash flow, leverage and profitability are being analyzed. Projected Financial Performance: Where term facilities (tenor>1year) are proposed, a projection of the borrowers future financial performance need to be provided, indicating an analysis of the sufficiency of cash flow to service debt repayments. Loans do not granted if projected cash flow is insufficient to repay debts. Account Conduct: For existing borrowers, the historic performance in meeting repayment obligations (trade payments, cheques, interest and principal payments, etc) is being assessed. Adherence to Lending Guidelines: Credit Applications clearly state whether or not the proposed application is in compliance with the banks Lending Guidelines. The Banks Head of Credit or Managing Director/CEO approved credit Applications that do not adhere to the banks Lending Guidelines

44

Mitigating Factors: Mitigating factors for risks identified in the credit assessment are being identified. Possible risks include, but are not limited to margin sustainability and/or volatility, high debt load (leverage/gearing), overstocking or debtor issues; rapid growth, acquisition or expansion; new business line/product expansion; management changes or succession issues; customer or supplier concentrations; and lack of transparency or industry issues; Loan Structure: The amounts and tenors of proposed financing are being justified based on the projected repayment ability and loan purpose. Excessive tenor or amount relative to business needs increases the risk of fund diversion and may adversely impact the borrowers repayment ability. Security: Obtaining a current valuation of collateral and the quality and priority being proposed need to be. Loans do not grant based solely on security. Adequacy and the extent of the insurance coverage are also assessed. Name Lending: Credit proposals do not be unduly influenced by an over reliance on the sponsoring principals reputation, reported independent means, or their perceived willingness to inject funds into various business enterprises in case of need. These situations are discouraged and treated with great caution. Rather, credit proposals and the granting of loans are based on sound fundamentals, supported by a through financial and risk analysis.

Risk Grading All banks should adopt a risk grading system. Risk grading is a key measurement of a Banks asset quality, and as such, it is essential that grading is a robust process. All facilities should be assigned a risk grade. Where deterioration in risk is noted,

45

the Risk Grade assigned to a borrower and its facilities should be immediately changed. Borrower Risk Grades should be clearly stated on Credit Applications. The Early Alert Report completed by the bank in a timely manner by the RM and forward to CRM for approval to affect any downgrade. After approval the report forwarded to Credit Administration, who is responsible to ensure the correct facility/ borrower Risk Grades are updated on the system. The downgrading of an account done immediately when adverse information is noted, and do not postpone until the annual review process. 4.8. Approval of Authority The authority to sanction/ approve loans clearly delegated to senior credit executives by the Managing Director/ CEO & Board based on the executives knowledge and experience. Approval authority delegated to individual executives and not to committee to ensure accountability in the approval process. The following guidelines are normally applied in the approval/ sanctioning of loans: Credit approval authority delegated in writing from the MD /CEO & Board (as appropriate), acknowledged by receipts, and records of all delegation retained in CRM. Delegated approval authorities reviewed annually by MD/CEO /Board. The credit approval function separated from the marketing/relationship management (RM) function The role of credit committee may be restricted to only review of proposals i.e. recommendations or review of banks loan portfolios. Approvals must be evidenced in writing, or by electronic signature. Approval records must be kept on file with the Credit Applications. All credit risks must be authorized by executives within the authority limit delegated to them by the MD/CEO. The pooling or combining of authority limits should not be permitted. Credit Approval should be centralized within the CRM function. Regional credit centers may be established, however, all large loans must be approved by the Head of Credit and Risk Management or managing Director/ CEO/Board or delegated Head Office Credit executives The aggregate exposure to any borrower or borrowing group must be used to determine the approval authority required.

46

Any credit proposal that does not comply with Lending Guidelines, regardless of amount, should be referred to Head Officer for Approval MD / Head of Credit Risk Management approve and monitor any cross- border exposure risk. Any breaches of lending authority should be reported to MD/CEO, Head of Internal Control, and Head of CRM. It is essential that executives charged with approving loans have relevant training and experience to carry out their responsibilities effectively. As a minimum, approving executives should have: -At least 5 years experience working in corporate/ commercial banking as a relationship manager or account executives. -Training and experience in financial statement, cash flow and risk analysis. -A thorough working knowledge of accounting. -A good understanding of the local industry/ market dynamics. -Successfully completed an assessment test demonstrating adequate knowledge of the following areas: Introduction of accrual accounting. Industry /Business Risk Analysis. Borrowing Causes. Financial reporting and full disclosure. Financial Statement Analysis The Asset Conversion /Trade Cycle Cash Flow Analysis Projections Loan Structure and Documentation Loan Management.

A monthly summary of all new facilities approved, renewed, enhanced, and a list of proposals declined stating reasons thereof reported by CRM to the CEO /MD.

47

CHAPTER 05 ANALYSIS AND FINDING

48

Credit Disbursement Performance Evaluation


5.1. Status of Loans Unclassified These are the loans with which the bank satisfied about repayment. No doubt exists up till now about their recovery.

49

Classified These are the loans which the bank finds overdue after the due date. The bank applies its predefined policy and procedures, after a loan becomes classified. Special Mention Account When a loan installment is first missed by the borrower, the loan account is classified as a Special Mention Account (SMA). The tenure of SMA varies with the category of loans. Sub-Standard If a loan is not repaid or reschedule within the SMA period, it becomes sub-standard loan. From this stage the loan is treated as defaulted. Interest is treated the same way as in SMA. Doubtful If a loan is not repaid or reschedule within the sub-standard period, it becomes a doubtful loan Interest will be treated as before in this stage. Bad & Loss If a loan is not repaid or reschedule within the doubtful stage, it is termed as bad & loss. Serious doubts exist as to the recovery of such loans.

5.2. Criteria for Loan Classification


Continuous Loan Stages Loan Demand Loan Fixed term loan Short Term Term loan for Term loan for Agricultural And within 5 more than 5 Micro Credit

50 years years Loan Irregular for 3 Irregular for Irregular for Irregular for 3 Irregular for 3 to to 6 months 3 to 6 3 to 6 months to 12 months 12 months months Irregular for 6 Irregular for Irregular for Irregular to 9 months Doubtful 6 to 9 6 to 12 12 to months months months Irregular for 9 Irregular for Irregular for Irregular to 12 months Bad & Loss Irregular months 9 to 12 12 to 18 18 to months months months for Irregular for Irregular for Irregular 12 months months months

Special Mention Account Sub-Standard

for Irregular for 12 18 to 36 months for Irregular for 36 24 to 60 months for Irregular than months for 60

more than 12 more

than more than 18 more than 24 more

1. BRAC BANK LIMITED Calculation:


Year 2006 2007 2008 2009 2010

(Figure in million tk)


Disbursed 19557.17 32461.10 52676.71 64150.83 84302.78 Doubtful 176.66 317.04 286.68 990.85 1430.87 Classified 594.78 1444.77 2473.01 3877.66 4929.55

Graphical Presentation:

51

100000 80000 60000 40000 20000 0

l f t b u o D

2006

d e r u b s i D

2007

2008

2009

2010

(Sources: Five years annual report of Brac Bank Ltd.)

Figure (1): Five years Credit Disbursement of Brac Bank Ltd

Analysis: From the graph it has seen that the amounts of Brace Bank Ltd disbursed in 2006 were 19557.17 million, 2007 were 32461.10 million, 2008 were 52676.71 million, 2009 were 64150.83 million and 2010 were 84302.78 million. So, we can see disbursed year to year increases. It indicates positive signal for the bank. In doubtful 2006 were 176.66 million, 2007 were 317.04 million, 2008 were 286.68 million, 2009 were 990.85 million and 2010 were 1430.87 million. It indicates negative sign or bad signal for the bank. Again we see that the amounts of classified loan 2006 were 594.78 million, 2007 were 1444.77 million, 2008 were 2473.01 million, 2009 were 3877.66 million and 2010 were increased to 4929.55 million. It indicates negative sign or bad signal for the bank.

2. PREMIER BANK LIMITED Calculation: (Figure in million tk) Year Disbursed Graphical Presentation:
2006 2007 2008 2009 2010 20677.68 23637.61 30319.53 33664.59 46400.57

Doubtful 97.752 56.592 169.280 6.117 302.691

d e f i s a l C
Classified 360.830 1245.021 1378.660 122.547 7.875

52

Prem B ier ank L td


46400.57 33664.59 30319.53 23637.61 1378.66 7.875 6.117 122.547 169.28 103.69 56.592 1245.021 360.83

2067.68

97.752

2006 (Sources:

2007

2008

2009

2010

Five years annual report of Premier Bank Ltd.)

Figure (2): Five years Credit

Disbursement of Premier Bank Ltd Analysis: From the graph it has seen that the amounts of Premier Bank Ltd disbursed in 2006 were 20677.68 million, 2007 were 23637.61 million, 2008 were 30319.53 million, 2009 were 33664.59million and 2010 were 46400.57 million. So, we can see disbursed year to year increases. It indicates positive signal for the bank.

3. AB BANK LIMITED Calculation: (Figure in million tk)


Year Disbursed Graphical Presentation: 2006 2007 2008 2009 2010 31289 40915 56709 70880 88299 Doubtful 81.458 231.123 132.596 521.036 129.040 Classified 1258.515 1762.636 1695.381 1949.168 1852.480

53
100000 80000 60000 40000 20000 0

l f t b u o D

Sources: Five years annual report of AB Bank Ltd.)

d e r u b s i D

Figure (3): Five years Credit Disbursement of AB Bank Ltd

Analysis: From the graph it has seen that the amounts of AB Bank Ltd disbursed in 2006 were 31289 million, 2007 were 40915million, 2008 were 56709 million, 2009 were 70880 million and 2010 were 88299 million. So, we can see disbursed year to year decreases. It indicates positive signal for the bank. In doubtful 2006 were 81.458 million, 2007 were 231.123 million, 2008 were 132.596 million, 2009 were 521.036 million and 2010 were 129.040 million. So we can see that doubtful 2006 to 2009 it was increases that was negative impact of the bank. And 2010 were 129.040 million so it was decreases year to year increase so this is also the negative or bad signal for the bank. Again we see that classified loan 2006 were 1258.515 million, 2007 were 1762.636 million, 2008 were 1695.381 million, 2009 were 1949.168 million and 2010 were increased to 1852.480 million. It indicates negative sign or bad signal for the bank.

4. STANDARD BANK LIMITED Calculation: (Figure in million tk)


Year 2006 2007 2008 2009 2010 Disbursed 12634 17311 27190 38056 51758 Doubtful 27.800 1.298 47.422 59.073 302.691 Classified 12634.122 17310.869 27189.943 38055.753 51757.689

Graphical Presentation:

d e f i s a l C

54

S tandardB ank L td
60000 51758 50000 51757.689

40000

38056

38055.753
2006 2007 2008 2009

30000

27190

27189.943

20000

17311 12634

17310.869 12634.122

2010

10000 302.691 27.81.29847.422 59.073 Disbursed Doubtful Classified

(Sources: Five years annual report of Standard Bank Ltd.) Figure (4): Five years Credit Disbursement of Standard Bank Ltd Analysis: From the graph it has seen that the amounts of Standard Bank disbursed of in year 2006 were 12634 million, 2007 were 17311 million, 2008 were 27190 million, 2009 were 38056 million and 2010 were 51758 million. We can see that disbursed year to year increases and it indicates positive sign for the Bank. In doubtful 2006 were 27.800 million, 2007 were 1.298 so it is decreases and positive sign of the Bank. Again 2008 were 47.422 million, 2009 were 59.073 million and 2010 were 302.691 million. So we can see that doubtful last two year increases so this is also the negative or bad signal for the bank. Again we see that classified loan of Standard Bank Ltd in year 2006 to 2010. In 2006 were 12634.122 million, 2007 were 17310.869 million, 2008 were 27189.943 million, 2009 were 38055.753 million, and 2010 were 51757.689 million. So, we can say that it is negative sign for the Bank.

55

5. UNITED COMMERCIAL BANK LIMITED Calculation: (Figure in million tk)


Year Disbursed Graphical Presentation: 2006 2007 2008 2009 2010 26110.09 37566.02 44446.33 61692.21 93560.70 Doubtful 67.19 1118.46 539.46 236.78 145.98 Classified 921.20 1846.38 2051.38 61692.21 93560.70

56
100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0

l b f t u o D

2006 (Sources: Five years annual report of UCBL.)

d e s r b u i D

2007

2008

2009

2010

Figure (5): Five years Credit Disbursement of UCBL

Analysis: From the graph it has seen that the amounts of United Commercial Bank Ltd disbursed in 2006 were 26110.09 million, 2007 were 37566.02million, 2008 were 44446.33 million, 2009 were 61692.21 million and 2010 were 93560.70 million. So, we can see disbursed year to year decreases. It indicates positive signal for the bank. In doubtful 2006 were 67.19 million, 2007 were 1118.46 million, 2008 were 539.46 million. We can see 2006 to 2008 year indicate 2009 were 236.78 million and 2010 were 145.98 million. So we can see that doubtful 2006 to 2009 it was increases that was negative impact of the bank. And 2010 were 129.040 million so it was decreases year to year increase so this is also the negative or bad signal for the bank. Again from the graph it has seen that the amounts of classified loan 2006 were 921.20 million, 2007 were 1846.38 million, 2008 were 2051.38 million, 2009 were 61692.21million and 2010 were increased to 93560.70 million. It indicates negative sign or bad signal for the bank.

e i f d s a l C

57

5.3. Ratio analysis


Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated quotient of two mathematical impressions and as the relationship between two or more things. In financial analysis, a ratio is used as benchmark for evaluating the financial position and performance of a firm. We are describing some ratios for the measurement of the performance of financial statement of the National Bank Limited. 5.4. PROFITABILITY RATIOS A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a

58

previous period is indicative that the company is doing well. The profitability ratios include in followingBank profitability ratios 1. ROA=return on assets 2. ROE=return on equity 3. PM=profit margin 4. ROD=return on deposits 5. ROSC=return on shareholder capital 6. NOM=net operating margin Bank efficiency ratios 7. IEE=interest income to expenses 8. OEA=operating expense to assets 9. OIA=operating income to assets 10. OER=operating expenses to revenue 11. ATO=asset turnover 12. NIM=net interest margin 13. NNIM=net non-interest margin Asset-quality indicators 14. WRL=write-off ratio 15. LR=loan ratio 16. LTD=loans to deposits Liquidity ratios 17. CTA=cash to assets 18. CTD=cash to deposits 19. DTA=deposits to assets 20. EM=equity multiplier 21. ETD=equity to deposits 22. TLE=total liabilities to equity 23. TLSC=total liabilities to shareholder capital 24. RETA=retained earnings to total assets

5.1.1. Brac Bank Ltd


A. Bank Profitability Ratios:

1. Return On Assets (ROA): Return on Assets (ROA) = Net Income/ Average Total Assets
Year Graphical Presentation: Particular Net Income Average Total Assets Return On Assets 334261127 30011815073 1.113% 618335637 46382595418 1.333% 973450830 72441893391 1.343% 1303588940 95127222246 1.370% 1664354981 119150087964 1.396% 2006 2007 2008 2009 2010

59

1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 2006
Source: Annual report 2006 to 2010

1.33% 1.11%

1.34%

1.37%

1.40%

2007

2008

2009

2010

Analysis: The above figure represents the Return on Assets (ROA) Ratio of Brac Bank Limited & we see that in the year 2010 Brac Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

2.

Return On Equity (ROE):

Return On Equity (ROE)= Net Income/ Average Stockholders Equity


Year 2006 Particular Net Income Average Stockholders Equity Return On Equity 334261127 217193037 1.539004802 618335637 3072028674 0.201279253 973450830 5437525651 0.179024595 1303588940 8150954413 0.159930834 1664354981 9411885556 0.176835446 2007 2008 2009 2010

Graphical Presentation:

60

1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

1.539004802

0.201279253 2006 2007

0.179024595 2008

0.159930834 0.176835446 2009 2010

Source: Annual report 2006 to 2010

Analysis: The above figure represents the Return On Equity (ROE) Ratio of Brac Bank Limited & we see that in the year 2006 Brac Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

3. Profit Margin (PM) = Net Income / Operating Income


Year Particular Net Income Operating Income Profit Margin 334261127 2077425522 16.090% 618335637 3543149882 20.127% 973450830 6036183837 17.902% 1303588940 7404626805 15.993% 1664354981 10399476002 17.683% 2006 2007 2008 2009 2010

Graphical Presentation:

61

25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2006


Source: Annual report 2006 to 2010

20.13% 16.09%

17.90%

15.99%

17.68%

2007

2008

2009

2010

Analysis: The above figure represents the Profit Margin Ratio of Brac Bank Limited & we see that in the year 2007 Brac Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

4. Return on Deposits (ROD) =Net Income/ Average Total Customer Deposits


Year 2006 Graphical Presentation: Particular Net Income Average Total Customer Deposits Return On Deposits 334261127 23001921689 618335637 37368407774 973450830 58006887010 1303588940 75219615155 1664354981 88157908331 2007 2008 2009 2010

0.014531878

0.016547016

0.016781642

0.017330439

0.018879248

62

0.02 0.018 0.016 0.014 0.012 0.01 0.008 0.006 0.004 0.002 0 2006
Source: Annual report 2006 to 2010

0.018879248 0.016547016 0.014531878 0.016781642 0.017330439

2007

2008

2009

2010

5. Return on Shareholder Capital (ROSC) = Net Income/ Shareholder Contributed Capital


Year Graphical Presentation: 2006 Particular Net Income Shareholder Contributed Capital Return On Shareholder Capital 334261127 217193037 1.539004802 618335637 3072028674 0.201279253 973450830 5437525651 0.179024595 1303588940 8150954413 0.159930834 1664354981 9411885556 0.176835446 2007 2008 2009 2010

63

1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2006


Source: Annual report 2006 to 2010

1.539004802

0.201279253 2007

0.179024595 2008

0.159930834 0.176835446 2009 2010

Analysis: The above figure represents the Return on Shareholder Capital Ratio of Brac Bank Limited & we see that in the year 2006 Brac Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

6. Net Operating Margin (NOM) = Operating Income/ Interest Income


Year 2006 Graphical Presentation: Particular Operating Income Interest Income Net Operating Margin 2077425522 2831285394 0.733739356 3543149882 4633346578 0.764706422 6036183837 8021101674 0.752538003 7404626805 9475836900 0.781421935 10399476002 10841370974 0.959239936 2007 2008 2009 2010

64

1.2 1 0.8 0.6 0.4 0.2 0 2006


Source: Annual report 2006 to 2010

0.959239936 0.733739356 0.764706422 0.752538003 0.781421935

2007

2008

2009

2010

Analysis: The above figure represents the Net Operating Margin Ratio of Brac Bank Limited & we see that in the year 2010 Brac Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

Bank efficiency ratios 7. Interest Income to Expenses (IEE) = (Interest IncomeInterest Expenses) / Average Total loans & advances
Year 2006 Graphical Presentation: Particular Interest Income Interest Expenses Average Total loans & advances Interest Income to Expenses 2831285394 1634640822 19557165380 0.06118705 4633346578 2571236238 32461102180 0.06352558 8021101674 4865091805 52676716740 0.059912805 9475836900 6073232757 64150835159 0.053040683 10841370974 5777663177 84302789317 0.06006571 2007 2008 2009 2010

65

0.066 0.064 0.062 0.06 0.058 0.056 0.054 0.052 0.05 0.048 0.046

0.06352558 0.061187015 0.059912805 0.060065721

0.053040683

2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure represents the Interest Income to Expenses (IEE) Ratio of Brac Bank Limited & we see that in the year 2007 Brac Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

8. Operating Expense to Assets (OEA) = Operating Expenses/ Average Total Assets


Year Particular Operating Expenses Average Total Assets Operating Expense to Assets 1027018495 30011815073 0.034220473 1597657356 46382595418 0.034445191 2862277587 72441893391 0.039511358 3603569533 95127222246 0.037881581 4880383156 119150087964 0.040959963 2006 2007 2008 2009 2010

Graphical Presentation:

66

0.042 0.04 0.038 0.036 0.034 0.032 0.03 2006


Source: Annual report 2006 to 2010

0.040959963 0.039511358 0.037881581 0.034220473 0.034445191

2007

2008

2009

2010

Analysis: The above figure represents the Operating Expense to Assets (OEA) Ratio of Brac Bank Limited & we see that in the year 2006 Brac Bank was in most profitable position. In 2010 the Bank was in lowest profitable position. In 2010 it was increased again.

9. Operating Income to Assets (OIA) = Operating Income / Average Total Assets Graphical Presentation: Ye 2006 ar Particular Operating 2077425522 Income Average 30011815073 Total Assets Operating 0.069220256 Income to Assets 2007 2008 2009 2010

3543149882 4638259541 8 0.076389642

6036183837 72441893391 0.08332449

7404626805 95127222246 0.077839199

10399476002 119150087964 0.087280473

67

0.1 0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0

0.069220256

0.076389642

0.08332449

0.087280473 0.077839199

2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure represents the Operating Income to Assets (OIA) Ratio of Brac Bank Limited & we see that in the year 2010 Brac Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

10. Operating Expenses to Revenue (OER) =Operating Expenses/ Operating Income


Year Particular Operating Expenses Operating Income Operating Expenses to Revenue 1027018495 2077425522 0.494370789 1597657356 3543149882 0.450914415 2862277587 6036183837 0.474186616 3603569533 7404626805 0.486664572 4880383156 10399476002 0.469291256 2006 2007 2008 2009 2010

Graphical Presentation:

68

0.5 0.49 0.48 0.47 0.46 0.45 0.44 0.43 0.42

0.494370789 0.486664572 0.474186616 0.469291256

0.450914415

2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure represents the Operating Income to Assets (OIA) Ratio of Brac Bank Limited & we see that in the year 2006 Brac Bank was in most profitable position. In 2007 the Bank was in lowest profitable position. In 2010 it was decreased again.

11. Asset Turnover (ATO) = Interest Income/ Average Total Assets


Year Particular Interest Income Average Total Assets Asset Turnover 2077425522 30011815073 0.069220256 3543149882 46382595418 0.076389642 6036183837 72441893391 0.08332449 7404626805 95127222246 0.077839199 10399476002 119150087964 0.087280473 2006 2007 2008 2009 2010

Graphical Presentation:

69

0.1 0.08 0.06 0.04 0.02 0 2006


Source: Annual report 2006 to 2010

0.069220256

0.076389642

0.08332449

0.087280473 0.077839199

2007

2008

2009

2010

Analysis: The above figure represents the Asset Turnover (ATO) Ratio of Brac Bank Limited & we see that in the year 2010 Brac Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

12. Net Interest Margin (NIM) = (Net Interest IncomeNet Interest Expenses) / Average Total Assets
Year 2006 Graphical Presentation: Particular Net Interest Income Net Interest Expenses Average Total Assets Net Interest Margin 1634640822 1643199307 30011815073 -0.000285171 2062110340 2575990112 46382595418 -0.011079151 3156009869 4871751454 72441893391 -0.023684384 3433314674 6090454947 95127222246 -0.027932491 5141630210 5805431613 119150087964 -0.005571136 2007 2008 2009 2010

70

0 -0.005 -0.01 -0.015 -0.02 -0.025 -0.03

-0.000285171 2006 2007

2008

2009

2010 -0.005571136

-0.011079151

-0.023684384 -0.027932491

Source: Annual report 2006 to 2010

Analysis: The above figure represents the Net Interest Margin (NIM) Ratio of Brac Bank Limited & we see that in the year 2006 Brac Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

13. Net Non-Interest Margin (NNIM) = (Net Non-Interest IncomeNet Non-Interest Expenses) /Average Total Assets
Year 2006 Graphical Presentation: Particular Net NonInterest Income Net NonInterest Expenses Average Total Assets Net NonInterest Margin 880780950 1027018495 1481039542 1597657356 2880173968 2862277587 3971312132 3603569533 5257845792 4880383156 2007 2008 2009 2010

30011815073 -0.004872666

46382595418 -0.002514258

72441893391 0.000247045

95127222246 0.003865798

119150087964 0.003167959

71

0.005 0.004 0.003 0.002 0.001 0 -0.001 -0.002 -0.003 -0.004 -0.005 -0.006
Source: Annual report 2006 to 2010

0.003865798

0.003167959

0.000247045 2006 2007 -0.002514258 2008 2009 2010

-0.004872666

Analysis: The above figure represents the Net Non-Interest Margin (NNIM) Ratio of Brac Bank Limited & we see that in the year 2009 Brac Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was decreased again.

Asset-quality indicators 14. Write-off ratio (WRL) = Write-off of loans during the year / Average total loans and advances
Year Particular Write-off of loans during the year Average total loans and advances Write-off ratio 142057889 19557165380 481126842 32461102180 783975496 52676716740 1382674637 64150835159 2355885993 84302789317 2006 2007 2008 2009 2010

0.007263726

0.014821642

0.014882771

0.021553494

0.027945528

Graphical Presentation:

72

0.03 0.025 0.02 0.015 0.01 0.005 0 2006


Source: Annual report 2006 to 2010

0.027945528 0.021553494 0.014821642 0.007263726 0.014882771

2007

2008

2009

2010

Analysis: The above figure represents the Write-off ratio (WRL) Ratio of Brac Bank Limited & we see that in the year 2010 Brac Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

15. Loan Ratio (LR) =Average total loans and advances / Average total assets
Ye ar Particula r Average total loans and advances Average total assets Loan Ratio 2006 2007 2008 2009 2010

19557165380

32461102180

52676716740

64150835159

84302789317

30011815073

46382595418

72441893391

95127222246

119150087964

0.65164887

0.699855234

0.727158199

0.674368847

0.707534428

Graphical Presentation:

73

0.74 0.72 0.7 0.68 0.66 0.64 0.62 0.6 2006


Source: Annual report 2006 to 2010

0.727158199 0.699855234 0.674368847 0.65164887 0.707534428

2007

2008

2009

2010

Analysis: The above figure represents the Loan Ratio (LR) Ratio of Brac Bank Limited & we see that in the year 2008 Brac Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

16. Loans to Deposits (LTD) = Average total loans and advances / Average total customer deposits
Year Particular Average total loans and advances Average total customer deposits Loans To Deposits 19557165380 32461102180 52676716740 64150835159 84302789317 2006 2007 2008 2009 2010

23001921689

37368407774

58006887010

75219615155

88157908331

0.850240499

0.868677691

0.908111424

0.85284716

0.956270299

Graphical Presentation:

74

0.98 0.96 0.94 0.92 0.9 0.88 0.86 0.84 0.82 0.8 0.78

0.956270299 0.908111424 0.868677691 0.850240499

0.85284716

2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure represents the Loans to Deposits (LTD) Ratio of Brac Bank Limited & we see that in the year 2010 Brac Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

Liquidity ratios 17. Cash To Assets (CTA) = Cash / Average total assets
Year Particular Cash Average total assets Cash To Assets 2172387439 30011815073 0.072384407 3114571471 46382595418 0.067149573 4315888000 72441893391 0.059577239 6619001730 95127222246 0.069580521 9582975642 119150087964 0.080427768 2006 2007 2008 2009 2010

Graphical Presentation:

75

CashT Assets o
0.1 0.08 0.06 0.04 0.02 0 2006
Source: Annual report 2006 to 2010

0.072384407

0.067149573

0.059577239

0.069580521

0.080427768

2007

2008

2009

2010

Analysis: The above figure represents the Cash To Assets (CTA) Ratio of Brac Bank Limited & we see that in the year 2010 Brac Bank was in most profitable position. In 2008 the Bank was in lowest profitable position. In 2010 it was increased again.

18. Cash to Deposits (CTD) = Cash / Average total customer deposits


Year Particular Cash Average total customer deposits Cash To Deposits 2172387439 23001921689 0.094443737 3114571471 37368407774 0.083347717 4315888000 58006887010 0.074403027 6619001730 75219615155 0.087995687 9582975642 88157908331 0.108702394 2006 2007 2008 2009 2010

Graphical Presentation:

76

0.12 0.1 0.08 0.06 0.04 0.02 0 2006


Source: Annual report 2006 to 2010

0.108702394 0.094443737 0.083347717 0.074403027 0.087995687

2007

2008

2009

2010

Analysis: The above figure represents the Deposits to assets (DTA) Ratio of Brac Bank Limited & we see that in the year 2010 Brac Bank was in most profitable position. In 2008 the Bank was in lowest profitable position. In 2010 it was increased again.

19. Deposits to assets (DTA) = Average total customer deposits / Average total assets
Year Particular Average total customer deposits Average total assets Deposits to assets 23001921689 30011815073 37368407774 46382595418 58006887010 72441893391 75219615155 95127222246 88157908331 119150087964 2006 2007 2008 2009 2010

0.766428876

0.805655816

0.80073676

0.790726496

0.739889578

Graphical Presentation:

77

0.82 0.8 0.78 0.76 0.74 0.72 0.7 2006


Source: Annual report 2006 to 2010

0.805655816

0.80073676

0.790726496

0.766428876 0.739889578

2007

2008

2009

2010

Analysis: The above figure represents the Deposits to assets (DTA) Ratio of Brac Bank Limited & we see that in the year 2007 Brac Bank was in most profitable position. In 2010 the Bank was in lowest profitable position. In 2010 it was decreased again.

20. Equity Multiplier (EM) =Average total assets / Average stockholders' equity
Year Particular Average total assets Average stockholders' equity Equity Multiplier 30011815073 217193037 138.180373954 46382595418 3072028674 15.09836018 72441893391 5437525651 13.32258421 95127222246 8150954413 13.32258421 119150087964 9411885556 12.65953429 2006 2007 2008 2009 2010

Graphical Presentation:

78

160 140 120 100 80 60 40 20 0 2006


Source: Annual report 2006 to 2010

138.180374

15.09836018 2007

13.32258421 2008

13.32258421 12.65953429 2009 2010

Analysis: The above figure represents the Equity Multiplier (EM) Ratio of Brac Bank Limited & we see that in the year 2006 Brac Bank was in most profitable position. In 2010 the Bank was in lowest profitable position. In 2010 it was decreased again.

21. Equity to Deposits (ETD) = Average shareholders' equity / Average customer total deposits
Year Particular Average shareholders' equity Average customer total deposits Equity To Deposits 217193037 23001921689 0.009442387 3072028674 37368407774 0.082209247 5437525651 58006887010 0.093739312 8150954413 75219615155 0.108362086 9411885556 88157908331 0.10676167 2006 2007 2008 2009 2010

Graphical Presentation:

79

0.12 0.1 0.08 0.06 0.04 0.02 0 0.009442387 2006


Source: Annual report 2006 to 2010

0.108362086 0.093739312 0.082209247

0.10676167

2007

2008

2009

2010

Analysis: The above figure represents the Equity to Deposits (ETD) Ratio of Brac Bank Limited & we see that in the year 2010 Brac Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

22. Total Liabilities to Equity (TLE) = Average total liabilities / Average stockholders' equity
Year Particular Average total liabilities Average stockholders' equity Total Liabilities to Equity 27894622036 217193037 128.4323955 43310566744 3072028674 14.09836018 67004367740 5437525651 14.09836018 86976267833 8150954413 10.6706851 109738202407 9411885556 11.65953429 2006 2007 2008 2009 2010

Graphical Presentation:

80

140 120 100 80 60 40 20 0

128.4323955

14.09836018 2006 2007

14.09836018 2008

10.6706851 2009

11.65953429 2010

Source: Annual report 2006 to 2010

Analysis: The above figure represents the Total Liabilities to Equity (TLE) Ratio of Brac Bank Limited & we see that in the year 2006 Brac Bank was in most profitable position. In 2010 the Bank was in lowest profitable position. In 2010 it was decreased again.

24. Retained Earnings to Total Assets (RETA) = Retained earnings / Average total assets
Year Particular Retained earnings Average total assets Retained Earnings to Total Assets 365943241 365468510 568760664 874871152 1081235987 2006 2007 2008 2009 2010

30011815073 0.012193306

46382595418 0.007879432

72441893391 0.007851267

95127222246 0.009196854

119150087964 0.009074571

Graphical Presentation:

81

0.014 0.012 0.01 0.008 0.006 0.004 0.002 0 2006


Source: Annual report 2006 to 2010

0.012193306 0.009196854 0.007879432 0.007851267 0.009074571

2007

2008

2009

2010

Analysis: The above figure represents the Retained Earnings to Total Assets (RETA) Ratio of Brac Bank Limited & we see that in the year 2006 Brac Bank was in most profitable position. In 2008 the Bank was in lowest profitable position. In 2010 it was decreased again.

5.1.2. Premier Bank Ltd


B. Bank Profitability Ratios: 1. Return On Assets (ROA): Return on Assets (ROA) = Net Income/ Average Total Assets Calculation:

82
2006 Year Particu lar Net Income Averag e Total Assets Return On Assets 2007 2008 2009 2010

368677624 27170445933 1.35%

78756227 32573186557 0.241%

650745468 38723491477 1.680%

1088317560 47343235844 2.29%

1757512666 66759120328 2.632%

Graphical Presentation:
3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2006
Source: Annual report 2006 to 2010

2.29% 1.35% 0.24% 2007 2008 2009 1.68%

2.63%

2010

Analysis: The above figure represents the Return on Assets (ROA) Ratio of Premier Bank Limited & we see that in the year 2010 Standard Bank was in most profitable position. In 2007 the Bank was in lowest profitable position. In 2010 it was increased again.

2. Return On Equity (ROE): Return On Equity (ROE) = Net Income/ Average Stockholders Equity Calculation:
Year 2006 Graphical Presentation: Particular Net Income Average Stockholders Equity Return On Equity 368677624 1626109953 22.672% 78756227 2465361210 3.194% 650745468 3116106678 20.883% 1088317560 4638044157 23.465% 1757512666 6262610235 28.063% 2007 2008 2009 2010

83

30.00% 20.00% 10.00% 0.00% 2006


Source: Annual report 2006 to 2010

22.67%

20.88%

23.47%

28.06%

3.19% 2007 2008 2009 2010

Analysis: The above figure shows that in the year 2010 Premier Bank was in most profitable position. In 2007 the Bank was in lowest profitable position but in 2008 it was increased. In 2009 it is increase again.

3.

Profit Margin (PM) = Net Income / Operating Income


Year 2006 2007 2008 2009 2010

Calculation:

Particular Net Income Operating Income Profit Margin 368677624 1461676087 25.222% 78756227 1656458124 4.754% 650745468 2163300692 30.081% 1088317560 2453404622 44.359% 1757512666 4761945913 36.907%

Graphical Presentation:

84

50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2006


Source: Annual report 2006 to 2010

44.36% 25.22% 4.75% 2007 2008 2009 2010 30.08% 28.06%

Analysis: The above figure shows that in the year 2009 Premier Bank was in most profitable position. In 2007 the Bank was in lowest profitable position but in 2008 it was increased. In 2010 it is decrease again.

4. Return on Deposits (ROD) =Net Income/ Average Total Customer Deposits Calculation:
Year Particular Net Income Average Total Customer Deposits Return On Deposits 368677624 24199009928 0.015235236 78756227 27114465606 0.002904583 650745468 32059617665 0.02029798 1088317560 37381956159 0.029113446 1757512666 53977802766 0.032559915 2006 2007 2008 2009 2010

Graphical Presentation:

85

0.035 0.03 0.025 0.02 0.015 0.01 0.005 0 2006


Source: Annual report 2006 to 2010

0.032559915 0.029113446 0.02029798 0.015235236

0.002904583 2007 2008 2009 2010

Analysis: The above figure shows that in the year 2010 Premier Bank was in most profitable position. In 2007 the Bank was in lowest profitable position but in 2008 it was increased. In 2009 it is increase again.

5. Return on Shareholder Capital (ROSC) = Net Income/ Shareholder Contributed

Capital:
Year Particular Net Income Shareholder Contributed Capital Return On Shareholder Capital 2006

Calculation:
2007 2008 2009 2010

368677624 1626109953 0.226723675

78756227 2465361210 0.031945107

650745468 3116106678 0.208832859

1088317560 4638044157 0.234650107

1757512666 6262610235 0.280635805

Graphical Presentation:

86

0.3 0.25 0.226723675 0.2 0.15 0.1 0.05 0 2006


Source: Annual report 2006 to 2010

0.280635805 0.234650107 0.208832859

0.031945107 2007 2008 2009 2010

Analysis: The above figure shows that in the year 2010 Premier Bank was in most profitable position. In 2007 the Bank was in lowest profitable position but in 2008 it was increased. In 2009 it is increase again.

6. Net Operating Margin (NOM) = Operating Income/ Interest Income Calculation:


Year Particular Operating Income Interest Income Net Operating Margin 1461676087 2810660610 0.520047167 1656458124 3180721570 0.520780611 2163300692 3837254457 0.563762637 2453404622 4243638170 0.57813709 4761945913 4950670894 0.961878908 2006 2007 2008 2009 2010

Graphical Presentation:

87

1.2 1 0.8 0.6 0.4 0.2 0 2006


Source: Annual report 2006 to 2010

0.961878908

0.520047167

0.520780611

0.563762637

0.57813709

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2010 Premier Bank was in most profitable position. In 2006 the Bank was in lowest profitable position but in 2008 it was increased. In 2009 it is increase again.

Bank efficiency ratios


7. Interest Income to Expenses (IEE) = (Interest IncomeInterest Expenses) / Average

Total:
Year Particular Interest Income Interest Expenses Average Total loans & advances Interest Income to Expenses

Calculation:
2006 2007 2008 2009 2010

2810660610 2160378829 20677680180 0.031448488

3180721570 2529873769 23637609419 0.027534417

3837254457 2906739580 30319527312 0.030690283

4243638170 3309515842 33664587265 0.027747922

4950670894 3460411259 44939342042 0.033161581

88

Graphical Presentation:
0.035 0.03 0.025 0.02 0.015 0.01 0.005 0 2006
Source: Annual report 2006 to 2010

0.031448488 0.027534417

0.030690283 0.027747922

0.033161581

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2010 Premier Bank was in most profitable position. In 2007 the Bank was in lowest profitable position but in 2008 it was increased and in 2009 it is decrease. In 2010 it was increase again.

8. Operating Expense to Assets (OEA) = Operating Expenses/ Average Total Assets Calculation:
Year Particular Operating Expenses Average Total Assets Operating Expense to Assets 519606932 27170445933 0.019123975 658350453 32573186557 0.020211423 890365205 38723491477 0.022992896 1061539508 47343235844 0.0224222 1916467143 66759120328 0.028707196 2006 2007 2008 2009 2010

Graphical Presentation:

89
0.04 0.03 0.02 0.01 0 2006
Source: Annual report 2006 to 2010

0.028707196 0.019123975 0.020211423 0.022992896 0.0224222

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2006 Premier Bank was in most profitable position. In 2010 the Bank was in lowest profitable position but in 2008 it was increased and in 2009 it is decrease. In 2010 it was increase again.

9. Operating Income to Assets (OIA) = Operating Income / Average Total Assets Calculation:
Year Particular Operating Income Average Total Assets Operating Income to Assets 1461676087 27170445933 0.053796544 1656458124 32573186557 0.050853426 2163300692 38723491477 0.055865332 2453404622 47343235844 0.051821651 4761945913 66759120328 0.071330268 2006 2007 2008 2009 2010

90

Graphical Presentation:
0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2006
Source: Annual report 2006 to 2010

0.071330268 0.053796544 0.055865332

0.050853426

0.051821651

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2010 Premier Bank was in most profitable position. In 2007 the Bank was in lowest profitable position but in 2008 it was increased and in 2009 it is decrease. In 2010 it was increase again.

10. Operating Expenses to Revenue (OER) =Operating Expenses/ Operating Income Calculation:
Year Particular Operating Expenses Operating Income Operating Expenses to Revenue 519606932 1461676087 0.355487058 658350453 1656458124 0.39744467 890365205 2163300692 0.411577183 1061539508 2453404622 0.432680161 1916467143 4761945913 0.402454622 2006 2007 2008 2009 2010

Graphical Presentation:

91

0.5 0.4 0.355487058 0.3 0.2 0.1 0


Source: Annual report 2006 to 2010

0.39744467

0.411577183

0.432680161 0.402454622

2006

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2009 Premier Bank was in most profitable position. In 2006 the Bank was in lowest profitable position but in 2008 it was increased and in 2009 it is decrease. In 2010 it was decrease again.

11. Asset Turnover (ATO) = Interest Income/ Average Total Assets Calculation:
Year Particular Interest Income Average Total Assets Asset Turnover 2810660610 27170445933 0.103445509 3180721570 32573186557 0.097648462 3837254457 38723491477 0.099093711 4243638170 47343235844 0.109588211 4950670894 66759120328 0.074157222 2006 2007 2008 2009 2010

Graphical Presentation:

92

0.12 0.1 0.08 0.06 0.04 0.02 0 2006


Source: Annual report 2006 to 2010

0.103445509

0.097648462

0.099093711

0.109588211

0.074157222

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2009 Premier Bank was in most profitable position. In 2010 the Bank was in lowest profitable position but in 2008 it was increased and in 2009 it is decrease. In 2010 it was decrease again.

12. Net Interest Margin (NIM) = (Net Interest IncomeNet Interest Expenses) / Average Total Assets Calculation:
Year Particular Net Interest Income Net Interest Expenses Average Total Assets Net Interest Margin 811394306 2163027537 27170445933 -0.04974645 1005610323 2533294656 32573186557 -0.046900058 1232785815 2910893144 38723491477 -0.04333564 1519282294 3312710605 47343235844 -0.037881405 3271686278 3462494238 66759120328 -0.950992669 2006 2007 2008 2009 2010

93

Graphical Presentation:
0 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 -0.7 -0.8 -0.9 -1
Source: Annual report 2006 to 2010

-0.037881405 -0.04333564 -0.046900058 -0.04974645 2006 2007 2008 2009 2010

-0.950992669

Analysis: The above figure shows that in the year 2006 Premier Bank was in most profitable position. In 2010 the Bank was in lowest profitable position but in 2008 it was increased and in 2009 it is decrease. In 2010 it was decrease again.

13. Net Non-Interest Margin (NNIM) = (Net Non-Interest IncomeNet Non-Interest Expenses) /Average Total Assets Calculation:
Year Particular Net Non-Interest Income Net Non-Interest Expenses 811394306 519606932 1005610323 658350453 1232785815 890365205 1519282294 1061539508 3271686278 1916467143 2006 2007 2008 2009 2010

Average Total Assets Net Non-Interest Margin

27170445933 0.010739146

32573186557 0.010660912

38723491477 0.00884271

47343235844 0.009668599

66759120328 0.020300135

94

Graphical Presentation:

0.025 0.02 0.015 0.01 0.005 0 2006


Source: Annual report 2006 to 2010

0.020300135

0.010739146

0.010660912 0.00884271

0.009668599

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2010 Premier Bank was in most profitable position. In 2008 the Bank was in lowest profitable position but in 2008 it was increased and in 2009 it is decrease. In 2010 it was increase again.

Asset-quality indicators 14. Write-off ratio (WRL) = Write-off of loans during the year / Average total loans and advances Calculation:
Year Particular Write-off of loans during the year Average total loans and advances Write-off Ratio 647796000 20677680180 0.031328273 1245021000 23637609419 0.052671189 958519000 30319527312 0.031613916 555838000 33664587265 0.016511059 873587770 44939342042 0.019439265 2006 2007 2008 2009 2010

95

Graphical Presentation:
0.06 0.05 0.04 0.03 0.02 0.01 0 2006
Source: Annual report 2006 to 2010

0.052671189

0.031328273

0.031613916 0.019439265

0.016511059

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2007 Premier Bank was in most profitable position. In 2009 the Bank was in lowest profitable position but in 2008 it was increased and in 2009 it is decrease. In 2010 it was increase again.

15. Loan Ratio (LR) =Average total loans and advances / Average total assets Calculation:
Year Particular Average total loans and advances Average total assets Loan Ratio 20677680180 27170445933 0.761035731 23637609419 32573186557 0.725676912 30319527312 38723491477 0.782975041 33664587265 47343235844 0.711074912 44939342042 66759120328 0.673156594 2006 2007 2008 2009 2010

Graphical Presentation:

96

0.8 0.75 0.7 0.65 0.6 2006


Source: Annual report 2006 to 2010

0.782975041 0.761035731 0.725676912 0.711074912 0.673156594

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2008 Premier Bank was in most profitable position. In 2010 the Bank was in lowest profitable position but in 2009 it was decreased. In 2010 it was decrease again.

16. Loans to Deposits (LTD) = Average total loans and advances / Average total customer deposits Calculation:
Year Particular Average total loans and advances Average total customer deposits Loans To Deposits 20677680180 24199009928 0.854484553 23637609419 27114465606 0.871771171 30319527312 32059617665 0.945723297 33664587265 37381956159 0.900557133 44939342042 53977802766 0.832552267 2006 2007 2008 2009 2010

97

Graphical Presentation:
0.96 0.94 0.92 0.9 0.88 0.86 0.84 0.82 0.8 0.78 0.76 0.945723297 0.900557133 0.871771171 0.854484553 0.832552267

2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2008 Premier Bank was in most profitable position. In 2010 the Bank was in lowest profitable position and in 2009 it was decreased. In 2010 it was decrease again.

Liquidity ratios 17. Cash To Assets (CTA) =Cash / Average total assets Calculation:
Year Particular Cash Average total assets Cash To Assets 2186912207 27170445933 0.080488639 1954844410 32573186557 0.060013914 3020328932 38723491477 0.07799733 3603115809 47343235844 0.076106243 3706403939 66759120328 0.055519065 2006 2007 2008 2009 2010

Graphical Presentation:

98

1 0.95 0.9 0.85 0.8 0.75 2006


Source: Annual report 2006 to 2010

0.945723297 0.900557133 0.854484553 0.871771171 0.832552267

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2008 Premier Bank was in most profitable position. In 2010 the Bank was in lowest profitable position but in 2010 it was decreased.

18. Cash to Deposits (CTD) = Cash / Average total customer deposits Calculation: Year Particular Cash Average total customer deposits Cash To Deposits 2006 2186912207 24199009928 2007 1954844410 27114465606 2008 3020328932 32059617665 2009 3603115809 37381956159 2010 3706403939 53977802766

0.09037197

0.072095996

0.094209761

0.096386497

0.068665336

Graphical Presentation:

99

0.12 0.1 0.09037197 0.08 0.072095996 0.06 0.04 0.02 0 2006


Source: Annual report 2006 to 2010

0.094209761

0.096386497

0.068665336

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2009 Premier Bank was in most profitable position. In 2010 the Bank was in lowest profitable position and in 2008 it was decreased. In 2010 it was decrease again.

18. Deposits to assets (DTA) = Average total customer deposits / Average total assets Calculation:
Year Particular Average total customer deposits Average total assets Deposits to assets 24199009928 27170445933 0.890637201 27114465606 32573186557 0.832416735 32059617665 38723491477 0.827911339 37381956159 47343235844 0.789594448 53977802766 66759120328 0.808545746 2006 2007 2008 2009 2010

Graphical Presentation:

100

0.9 0.88 0.86 0.84 0.82 0.8 0.78 0.76 0.74 0.72

0.890637201

0.832416735

0.827911339 0.808545746 0.789594448

2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2006 Premier Bank was in most profitable position. In 2009 the Bank was in lowest profitable position and in 2008 it was increased. In 2010 it was increase again.

19. Equity Multiplier (EM) =Average total assets / Average stockholders' equity Calculation:
Year Particular Average total assets Average stockholders' equity Equity Multiplier 27170445933 1626109953 16.70886147 32573186557 2465361210 13.21233839 38723491477 3116106678 12.42688248 47343235844 4638044157 10.20758627 66759120328 6262610235 10.65995133 2006 2007 2008 2009 2010

Graphical Presentation:

101

18 16 14 12 10 8 6 4 2 0

16.70886147 13.21233839 12.42688248 10.20758627 10.65995133

2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2009 Premier Bank was in most profitable position. In 2006 the Bank was in lowest profitable position and in 2008 it was decreased. In 2010 it was increase again.

20. Equity to Deposits (ETD) = Average shareholders' equity / Average customer total deposits: Calculation:
Year Particular Average shareholders' equity Average customer total deposits Equity To Deposits 1626109953 24199009928 0.067197375 2465361210 27114465606 0.090924204 3116106678 32059617665 0.09719725 4638044157 37381956159 0.124071735 6262610235 53977802766 0.116021956 2006 2007 2008 2009 2010

Graphical Presentation:

102

0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 2006


Source: Annual report 2006 to 2010

0.124071735 0.09719725

0.116021956

0.090924204 0.067197375

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2009 Premier Bank was in most profitable position. In 2006 the Bank was in lowest profitable position and in 2008 it was increased. In 2010 it was decrease again.

21. Total Liabilities to Equity (TLE) = Average total liabilities / Average stockholders' equity: Calculation:
Year Particular Average total liabilities Average stockholders' equity Total Liabilities to Equity 25544335980 1626109953 15.70886147 30107825347 2465361210 12.21233839 35607384799 3116106678 11.42688248 42705191687 4638044157 9.207586267 60496510093 6262610235 9.659951334 2006 2007 2008 2009 2010

Graphical Presentation:

103

20 15 10 5 0 2006
Source: Annual report 2006 to 2010

15.70886147 12.21233839 11.42688248

9.207586267 9.659951334

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2006 Premier Bank was in most profitable position. In 2009 the Bank was in lowest profitable position and in 2008 it was increased. In 2010 it was increase again.

22. Retained Earnings to Total Assets (RETA) = Retained earnings / Average total assets Calculation:
Year Particular Retained earnings Average total assets Retained Earnings to Total Assets 237349093 27170445933 0.008735561 125574414 32573186557 0.003855147 555892595 38723491477 0.09719725 813546932 47343235844 0.017184016 1395711645 66759120328 0.020906681 2006 2007 2008 2009 2010

Graphical Presentation:

104

0.12 0.1 0.08 0.06 0.04 0.02 0 0.008735561 2006


Source: Annual report 2006 to 2010

0.09719725

0.017184016 0.003855147 2007 2008 2009

0.020906681 2010

Analysis: The above figure shows that in the year 2008 Premier Bank was in most profitable position. In 2007 the Bank was in lowest profitable position and in 2009 it was decreased. In 2010 it was increase again.

5.1.3. AB Bank Ltd


C. Bank Profitability Ratios:

1. Return On Assets (ROA): Return On Assets (ROA) = Net Income / Average Total Assets
Year Particular Net Income Average Total Assets Return On Assets 532186349 47989337222 1.108% 1903493845 63549864403 2.995% 2300621640 84053612585 2.737% 3362556000 106912312384 3.145% 3696017104 132988258593 2.779% 2006 2007 2008 2009 2010

105

Graphical Presentation:
3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2006
Source: Annual report 2006 to 2010

3.00%

3.15% 2.74% 2.78%

1.11%

2007

2008

2009

2010

Analysis: The above figure represents the Return on Assets (ROA) Ratio of Premier Bank Limited & we see that in the year 2009 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was decreased again.

2. Return On Equity (ROE): Return On Equity (ROE) = Net Income/ Average Stockholders Equity
Year Particular Net Income Average Stockholders Equity Return On Equity 532186349 2582762912 20.605% 1903493845 4511589265 42.191% 2300621640 6722505347 34.222% 3362556000 10157639819 33.103% 3696017104 13866508216 26.654% 2006 2007 2008 2009 2010

Graphical Presentation:

106

50.00% 40.00% 30.00% 20.00% 10.00% 0.00%


Source: Annual report 2006 to 2010

42.19% 34.22% 20.61% 33.10% 26.65%

2006

2007

2008

2009

2010

Analysis: The above figure represents the Return On Equity (ROE) Ratio of Premier Bank Limited & we see that in the year 2009 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was decreased again.

3. Profit Margin (PM) = Net Income / Operating Income


Yea r Particular Net Income Operating Income Profit Margin 532186349 2650166074 20.081% 1903493845 4656581245 40.877% 2300621640 6149025878 37.414% 3362556000 8268590576 40.666% 3696017104 10897913834 33.914% 2006 2007 2008 2009 2010

Graphical Presentation:

107

50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2006


Source: Annual report 2006 to 2010

40.88%

37.41%

40.67% 33.91%

20.08%

2007

2008

2009

2010

Analysis: The above figure represents the Profit Margin Ratio of Premier Bank Limited & we see that in the year 2009 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was decreased again.

4. Return on Deposits (ROD) =Net Income/ Average Total Customer Deposits


Year Particular Net Income Average Total Customer Deposits Return On Deposits 532186349 42076995417 0.012647917 1903493845 53375348391 0.035662415 2300621640 68560474323 0.033556093 3362556000 83087129113 0.040470239 3696017104 95701894525 0.038620104 2006 2007 2008 2009 2010

Graphical Presentation:

108

0.05 0.04 0.03 0.02 0.01 0 2006


Source: Annual report 2006 to 2010

0.035662415

0.040470239 0.038620104 0.033556093

0.012647917

2007

2008

2009

2010

Analysis: The above figure represents the Return on Deposits Ratio of Premier Bank Limited & we see that in the year 2009 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was decreased again.

5. Return on Shareholder Capital (ROSC) = Net Income/ Shareholder Contributed Capital


Year Particular Net Income Shareholder Contributed Capital Return On Shareholder Capital 532186349 2582762912 0.206053117 1903493845 4511589265 0.421912043 2300621640 6722505347 0.342226822 3362556000 10157639819 0.331037137 3696017104 13866508216 0.266542741 2006 2007 2008 2009 2010

Graphical Presentation:

109

0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2006
Source: Annual report 2006 to 2010

0.421912043 0.342226822 0.331037137 0.266542741 0.206053117

2007

2008

2009

2010

Analysis: The above figure represents the Return On Shareholder Capital Ratio of Premier Bank Limited & we see that in the year 2007 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was decreased again.

6. Net Operating Margin (NOM) = Operating Income/ Interest Income


Year Particular Operating Income Interest Income Net Operating Margin 2650166074 3378338544 0.784458407 4656581245 5269904660 0.88361774 6149025878 7366847213 0.834688938 8268590576 9047169208 1.107480371 10897913834 9840277194 1.107480371 2006 2007 2008 2009 2010

Graphical Presentation:

110

1.2 1 0.8 0.6 0.4 0.2 0 2006


Source: Annual report 2006 to 2010

1.107480371 1.107480371 0.784458407 0.88361774 0.834688938

2007

2008

2009

2010

Analysis: The above figure represents the Return On Shareholder Capital Ratio of Premier Bank Limited & we see that in the year 2007 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was decreased again.

Bank efficiency ratios 7. Interest Income to Expenses (IEE) = (Interest IncomeInterest Expenses) / Average Total loans & advances
Year Particular Interest Income Interest Expenses Average Total loans & advances Interest Income to Expenses 3378338544 2762833939 31289251217 0.019671439 5269904660 3830623489 40915352218 0.035177045 7366847213 5336153274 56708771906 0.035809168 9047169208 6139114500 70879933446 0.041027898 9840277194 6358862124 88298823481 0.03942765 2006 2007 2008 2009 2010

111

Graphical Presentation:
0.045 0.04 0.035 0.03 0.025 0.02 0.015 0.01 0.005 0

0.041027898 0.035177045 0.035809168

0.03942765

0.019671439

2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure represents the Interest Income to Expenses Ratio of Premier Bank Limited & we see that in the year 2009 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was decreased again.

8. Operating Expense to Assets (OEA) = Operating Expenses/ Average Total Assets


Year Particular Operating Expenses Average Total Assets Operating Expense to Assets 1939479724 47989337222 0.040414805 1331287400 63549864403 0.020948706 1850637722 84053612585 0.022017349 2466194321 106912312384 0.023067449 3488601046 132988258593 0.026232399 2006 2007 2008 2009 2010

Graphical Presentation:

112

0.05 0.04 0.03 0.02 0.01 0 2006


Source: Annual report 2006 to 2010

0.040414805 0.026232399

0.020948706

0.022017349

0.023067449

2007

2008

2009

2010

Analysis: The above figure represents the Operating Expense to Assets Ratio of Premier Bank Limited & we see that in the year 2010 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

9. Operating Income to Assets (OIA) = Operating Income / Average Total Assets


Year Particular Operating Income Average Total Assets Operating Income to Assets 2650166074 47989337222 0.055224061 4656581245 63549864403 0.073274448 6149025878 84053612585 0.073155998 8268590576 106912312384 0.077339928 10897913834 132988258593 0.081946436 2006 2007 2008 2009 2010

Graphical Presentation:

113

0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2006
Source: Annual report 2006 to 2010

0.073274448 0.055224061

0.073155998

0.077339928

0.081946436

2007

2008

2009

2010

Analysis: The above figure represents the Operating Income to Assets Ratio of Premier Bank Limited & we see that in the year 2010 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

10. Operating Expenses to Revenue (OER) =Operating Expenses/ Operating Income


Year Particular Operating Expenses Operating Income Operating Expenses to Revenue 1939479724 2650166074 0.731833278 1331287400 4656581245 0.285893734 1850637722 6149025878 0.300964374 2466194321 8268590576 0.298260544 3488601046 10897913834 0.320116409 2006 2007 2008 2009 2010

Graphical Presentation:

114

0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

0.731833278

0.285893734

0.300964374

0.298260544

0.320116409

2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure represents the Operating Expenses to Revenue Ratio of Premier Bank Limited & we see that in the year 2006 Standard Bank was in most profitable position. In 2007 the Bank was in lowest profitable position. In 2010 it was increased again.

11. Asset Turnover (ATO) = Interest Income/ Average Total Assets


Year Particular Interest Income Average Total Assets Asset Turnover 3378338544 47989337222 0.070397691 5269904660 63549864403 0.082925506 7366847213 84053612585 0.087644623 9047169208 106912312384 0.084622332 9840277194 132988258593 0.073993579 2006 2007 2008 2009 2010

Graphical Presentation:

115

0.1 0.08 0.070397691 0.06 0.04 0.02 0 2006


Source: Annual report 2006 to 2010

0.082925506

0.087644623

0.084622332 0.073993579

2007

2008

2009

2010

Analysis: The above figure represents the Asset Turnover Ratio of Premier Bank Limited & we see that in the year 2008 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was decreased again.

12. Net Interest Margin (NIM) = (Net Interest IncomeNet Interest Expenses) / Average Total Assets

116
Year Particular Net Interest Income Net Interest Expenses Average Total Assets Net Interest Margin 615504605 2764106243 47989337222 -0.04477248 1439281171 3832535592 63549864403 -0.037659473 2030693938 5340562614 84053612585 -0.039378066 2908054708 6148919809 106912312384 -0.030313301 3481415070 6636332278 132988258593 -0.023723276 2006 2007 2008 2009 2010

Graphical Presentation:
0 -0.005 -0.01 -0.015 -0.02 -0.025 -0.03 -0.035 -0.04 -0.045 -0.05
Source: Annual report 2006 to 2010

2006

2007

2008

2009

2010

-0.023723276 -0.030313301 -0.037659473 -0.04477248 -0.039378066

Analysis: The above figure represents the Net Interest Margin Ratio of Premier Bank Limited & we see that in the year 2010 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

13. Net Non-Interest Margin (NNIM) = (Net Non-Interest IncomeNet Non-Interest Expenses) /Average Total Assets

117
Year Particular Net Non-Interest Income Net Non-Interest Expenses 2034661469 1939479724 3217300074 1331287400 4118331939 1850637722 5409909854 2504651427 7919739055 3771864400 2006 2007 2008 2009 2010

Average Total Assets Net Non-Interest Margin

47989337222 0.001983394

63549864403 0.029677682

84053612585 0.02697914

106912312384 0.027174217

132988258593 0.031189781

Graphical Presentation:
0.035 0.03 0.025 0.02 0.015 0.01 0.005 0 0.001983394 2006
Source: Annual report 2006 to 2010

0.029677682 0.02697914

0.031189781 0.027174217

2007

2008

2009

2010

Analysis: The above figure represents the Net Non-Interest Margin Ratio of Premier Bank Limited & we see that in the year 2010 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

Asset-quality indicators

118

14. Write-off ratio (WRL) = Write-off of loans during the year / Average total loans and advances
Year Particular Write-off of loans during the year Average total loans and advances Write-off ratio 1120586000 31289251217 0.035813769 1330891000 40915352218 0.032527913 1334088577 56708771906 0.02352526 779148078 70879933446 0.010992506 1633338771 88298823481 0.018497854 2006 2007 2008 2009 2010

Graphical Presentation:
0.04 0.035 0.03 0.025 0.02 0.015 0.01 0.005 0

0.035813769

0.032527913 0.02352526 0.018497854 0.010992506

2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure represents the Write-off ratio of Premier Bank Limited & we see that in the year 2006 Standard Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

15. Loan Ratio (LR) =Average total loans and advances / Average total assets

119
Year Particular Average total loans and advances Average total assets Loan Ratio 31289251217 47989337222 0.652004237 40915352218 63549864403 0.643830677 56708771906 84053612585 0.67467382 70879933446 106912312384 0.662972598 88298823481 132988258593 0.663959544 2006 2007 2008 2009 2010

Graphical Presentation:
0.68 0.67 0.66 0.65 0.64 0.63 0.62 2006
Source: Annual report 2006 to 2010

0.67467382 0.662972598 0.652004237 0.643830677 0.663959544

2007

2008

2009

2010

Analysis: The above figure represents the Loan Ratio of Premier Bank Limited & we see that in the year 2008 Standard Bank was in most profitable position. In 2007 the Bank was in lowest profitable position. In 2010 it was increased again.

16. Loans to Deposits (LTD) = Average total loans and advances / Average total customer deposits

120
Year Particular Average total loans and advances Average total customer deposits Loans To Deposits 31289251217 42076995417 0.743618952 40915352218 53375348391 0.766558972 56708771906 68560474323 0.827135058 70879933446 83087129113 0.853079583 88298823481 95701894525 0.922644467 2006 2007 2008 2009 2010

Graphical Presentation:
1 0.8 0.6 0.4 0.2 0 2006
Source: Annual report 2006 to 2010

0.743618952

0.766558972

0.827135058

0.853079583

0.922644467

2007

2008

2009

2010

Analysis: The above figure represents the Loans to Deposits of Premier Bank Limited & we see that in the year 2010 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

Liquidity ratios

121

17. Cash To Assets (CTA)=Cash / Average total assets


Year Particular Cash Average total assets Cash To Assets 3247071614 47989337222 0.067662356 4299269940 63549864403 0.067651914 4096044155 84053612585 0.048731328 5354881576 106912312384 0.050086669 6615119969 132988258593 0.049742135 2006 2007 2008 2009 2010

Graphical Presentation:
0.08 0.06 0.04 0.02 0 2006
Source: Annual report 2006 to 2010

0.067662356

0.067651914 0.048731328 0.050086669.049742135 0

2007

2008

2009

2010

Analysis: The above figure represents the Cash To Assets of Premier Bank Limited & we see that in the year 2006 Standard Bank was in most profitable position. In 2008 the Bank was in lowest profitable position. In 2010 it was decreased again.

18. Cash to Deposits (CTD) = Cash / Average total customer deposits

122
Year Particular Cash Average total customer deposits Cash To Deposits 3247071614 42076995417 0.077169759 4299269940 53375348391 0.080547857 4096044155 68560474323 0.059743521 5354881576 83087129113 0.06444899 6615119969 95701894525 0.069122142 2006 2007 2008 2009 2010

Graphical Presentation:
0.09 0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0

0.077169759

0.080547857 0.059743521 0.06444899 0.069122142

2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure represents the Cash to Deposits of Premier Bank Limited & we see that in the year 2008 Standard Bank was in most profitable position. In 2007 the Bank was in lowest profitable position. In 2010 it was increased again.

19. Deposits to assets (DTA) = Average total customer deposits / Average total assets

123
Year Particular Average total customer deposits Average total assets Deposits to assets 42076995417 47989337222 0.876798844 53375348391 63549864403 0.839897125 68560474323 84053612585 0.815675522 8308712911 3 1069123123 84 0.77715211 95701894525 132988258593 0.719626646 2006 2007 2008 2009 2010

Graphical Presentation:
1 0.8 0.6 0.4 0.2 0 2006
Source: Annual report 2006 to 2010

0.876798844

0.839897125

0.815675522

0.77715211

0.719626646

2007

2008

2009

2010

Analysis: The above figure represents the Deposits to assets of Premier Bank Limited & we see that in the year 2006 Standard Bank was in most profitable position. In 2010 the Bank was in lowest profitable position. In 2010 it was decreased again.

20. Equity Multiplier (EM) =Average total assets / Average stockholders' equity

124
Year Particular Average total assets Average stockholders' equity Equity Multiplier 47989337222 2582762912 18.58062039 63549864403 4511589265 14.08591533 84053612585 6722505347 12.50331658 106912312384 10157639819 10.52531044 132988258593 13866508216 9.590609007 2006 2007 2008 2009 2010

Graphical Presentation:
20 15 10 5 0 2006
Source: Annual report 2006 to 2010

18.58062039 14.08591533

12.50331658 10.52531044 9.590609007

2007

2008

2009

2010

Analysis: The above figure represents the Equity Multiplier of Premier Bank Limited & we see that in the year 2006 Standard Bank was in most profitable position. In 2010 the Bank was in lowest profitable position. In 2010 it was decreased again.

21. Equity to Deposits (ETD) = Average shareholders' equity / Average customer total deposits

125
Year Particular Average shareholders' equity Average customer total deposits Equity To Deposits 2582762912 42076995417 0.061381828 4511589265 53375348391 0.084525711 6722505347 68560474323 0.0980522 10157639819 83087129113 0.122252868 13866508216 95701894525 0.144892724 2006 2007 2008 2009 2010

Graphical Presentation:
20 15 10 5 0 2006
Source: Annual report 2006 to 2010

18.58062039 14.08591533

12.50331658 10.52531044 9.590609007

2007

2008

2009

2010

Analysis: The above figure represents the Equity to Deposits Ratio of Premier Bank Limited & we see that in the year 2006 Standard Bank was in most profitable position. In 2010 the Bank was in lowest profitable position. In 2010 it was decreased again.

22. Total Liabilities to Equity (TLE) = Average total liabilities / Average stockholders' equity

126
Year Particular Average total liabilities Average stockholders' equity Total Liabilities to Equity 45406574310 2582762912 17.58062039 59038275138 4511589265 13.08591533 77331107238 6722505347 11.50331658 96801106577 10157639819 9.529881774 119857000957 13866508216 8.643632491 2006 2007 2008 2009 2010

Graphical Presentation:
20 18 16 14 12 10 8 6 4 2 0 2006
Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure represents the Total Liabilities to Equity Ratio of Premier Bank Limited & we see that in the year 2006 Standard Bank was in most profitable position. In 2010 the Bank was in lowest profitable position. In 2010 it was decreased again.

23. Retained Earnings to Total Assets (RETA) = Retained earnings / Average total assets

127
Year Particular Retained earnings Average total assets Retained Earnings to Total Assets 829586776 47989337222 0.017286898 1242095494 63549864403 0.019545211 1714238278 84053612585 0.020394582 648982575 106912312384 0.006070232 1455275811 132988258593 0.010942889 2006 2007 2008 2009 2010

Graphical Presentation:

0.025 0.02 0.015 0.01 0.005 0 2006


Source: Annual report 2006 to 2010

2007

2008

2009

2010

Analysis: The above figure represents the Retained Earnings to Total Assets Ratio of Premier Bank Limited & we see that in the year 2008 Standard Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

5.1.4.Standard Bank Ltd


D. Bank Profitability Ratios:

128

1. Return On Assets (ROA): Return on Assets (ROA) = Net Income/ Average Total Assets Calculation:
Particular 2006 2007 2008 2009 2010

Net Income Average Total Assets

351926727 16860450329

346693758 22949164262

656596012 34210399888

764249513 49002321693

1369069153 66612938096

Return On Assets

18.916%

1.511%

1.919%

1.559%

2.055%

Graphical Presentation:
20.00% 15.00% 10.00% 5.00% 0.00% 2006 1.51% 2007 1.92% 2008 1.56% 2009 2.06% 2010

18.92%

Source: Annual report 2006 to 2010

Analysis: The above figure represents the Return on Assets (ROA) Ratio of Standard Bank Limited & we see that in the year 2006 Standard Bank was in most profitable position. In 2007 the Bank was in lowest profitable position. In 2010 it was increased again.

2 . Return on Equity (ROE): Return on Equity (ROE) = Net Income/ Average Stockholders Equity

129

Calculation:
Particula r Net Income Average Stockholders Equity Return On Equity 351926727 17642824883 1.994% 346693758 2766752241 12.530% 656596012 3425969101 1.917% 764249513 4230535354 18.065% 1369069153 5641982331 24.265% 2006 2007 2008 2009 2010

Graphical Presentation:

30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 1.99% 2006 2007 1.92% 2008 2009 2010 12.53% 18.07% 24.27%

Source: Annual report 2006 to 2010

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2008 the Bank was in lowest profitable position but in 2009 it was increased. In 2010 it is increase again.

3. Profit Margin (PM) = Net Income / Operating Income

Calculation:

130
2006 Particular Net Income Operating Income Profit Margin 351926727 1056197267 33.320% 2007 346693758 1052741678 32.932% 2008 656596012 1911570177 34.3485% 2009 764249513 2191807587 34.868% 2010 1369069153 3657526058 37.4315%

Graphical Presentation:
38.00% 37.00% 36.00% 35.00% 34.00% 33.00% 32.00% 31.00% 30.00% 37.43% 34.87%

34.35% 33.32% 32.93%

2006

2007

2008

2009

2010

Source: Annual report 2006 to 2010

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2007 the Bank was in lowest profitable position but in 2008 it was increased. In 2009 it is increase again.

4. Return on Deposits (ROD) =Net Income/ Average Total Customer Deposits Calculation:

131
2006 Particular Net Income Average Total Customer Deposits Return On Deposits 351926727 14220795934 2007 346693758 19213753840 2008 656596012 29304739597 2009 764249513 42548116057 2010 1369069153 58344441292

0.02474733

0.018044041

0.022405796

0.017962006

0.023465289

Graphical Presentation:
0.03 0.025 0.02 0.015 0.01 0.005 0 2006
Source: Annual report 2006 to 2010

0.02474733 0.018044041

0.022405796

0.023465289 0.017962006

2007

2008

2009

2010

Analysis: Return on Deposit ratio indicates the banks usual performance in response of fund utilization. That is how efficiently the fund invested by the bank. Because of the idle fund incurs cost. The Standard Bank has invested the fund efficiently even though the deposit advance ratio has increased more than the previous years.

5. Return on Shareholder Capital (ROSC) = Net Income/ Shareholder Contributed Capital Calculation:

132
2006 Particular Net Income Shareholder Contributed Capital Return On Shareholder Capital 351926727 17642824883 346693758 2766752241 656596012 3425969101 764249513 4230535354 1369069153 5641982331 2007 2008 2009 2010

0.0199473

0.125307121

0.191652637

0.18065078

0.242657469

Graphical Presentation:
0.3 0.25 0.2 0.15 0.1 0.05 0 0.0199473 2006 2007 2008 2009 2010 0.125307121 0.191652637 0.18065078 0.242657469

Source: Annual report 2006 to 2010

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position but in 2008 it was increased & 2009 it was decreased. In 2010 it is increase again.

6. Net Operating Margin (NOM) = Operating Income/ Interest Income Calculation:

133
2006 Particular 2007 2008 2009 2010

Operating Income Interest Income Net Operating Margin

1056197267 1705587132 0.61925729 1

1052741678 2152959044 0.488974317

1911570177 3226936767 0.592379187

2191807587 4433634888 0.494359063

3657526058 5849984579 0.625219778

Graphical Presentation:
0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2006 2007 2008 2009 2010 0.619257291 0.488974317 0.592379187 0.494359063 0.625219778

Source: Annual report 2006 to 2010

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2007 the Bank was in lowest profitable position but in 2008 it was increased & 2009 it was decreased. In 2010 it is increase again.

Bank efficiency ratios 7. Interest Income to Expenses (IEE) = (Interest IncomeInterest Expenses) / Average Total

134

Calculation:
Particular 2006 2007 2008 2009 2010

Interest Income Interest Expenses Average Total loans and advances Interest Income to Expenses

1705587132 1149930719 12633999050

2152959044 1745140888 17310869454

3226936767 2252643548 27189943132

4433634888 3351065292 38055753147

5849984579 4126218727 51757689073

0.04398104

0.023558502

-0.08284841

0.028446937

0.033304537

Graphical Presentation:
0.06 0.04 0.02 0 -0.02 -0.04 -0.06 -0.08 -0.1 -0.08284841 2006 2007 2008 2009 2010 0.04398104 0.023558502 0.028446937 0.033304537

Source: Annual report 2006 to 2010

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2008 the Bank was in lowest profitable position but in 2009 it was increased. In 2010 it is increase again.

8. Operating Expense to Assets (OEA) = Operating Expenses/ Average Total Assets Calculation:

135
Particular 2006 2007 2008 2009 2010

Operating Expenses Average Total Assets Operating Expense to Assets

323148672 16860450329 0.019166076

355600242 22949164262 0.015495128

443073504 34210399888 0.012951427

563218702 49002321693 0.011493715

878582556 66612938096 0.013189368

Graphical Presentation:
0.025 0.02 0.015 0.01 0.005 0 2006 2007 2008 2009 2010 0.019166076 0.015495128 0.012951427 0.011493715 0.013189368

Source: Annual report 2006 to 2010

Analysis: The above figure shows that in the year 2009 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position and 2010 it is increase again.

9. Operating Income to Assets (OIA) = Operating Income / Average Total Assets Calculation:

136
Year Particular Operating Income Average Total Assets Operating Income to Assets 1056197267 16860450329 1052741678 22949164262 1911570177 34210399888 2191807587 49002321693 3657526058 66612938096 2006 2007 2008 2009 2010

0.062643479

0.045872768

0.055876873

0.044728648

0.054907142

Graphical Presentation:
0.07 0.06 0.05 0.04 0.03 0.02 0.01 0

0.062643479 0.045872768

0.055876873 0.044728648

0.054907142

2006

2007

2008

2009

2010

Source: Annual report 2006 to 2010

Analysis: The above figure shows that in the year 2006 Standard Bank was in most profitable position. In 2009 the Bank was in lowest profitable position but in 2010 it was increased.

10. Operating Expenses to Revenue (OER) = Operating Expenses/ Operating Income Calculation:

137
Year Particular Operating Expenses Operating Income Operating Expenses to Revenue 323148672 1056197267 0.305954846 355600242 1052741678 0.3377849 443073504 1911570177 0.23178511 563218702 2191807587 0.256965395 878582556 3657526058 0.240212248 2006 2007 2008 2009 2010

Graphical Presentation:
0.4 0.3 0.2 0.1 0 2006
Source: Annual report 2006 to 2010

0.305954846

0.3377849 0.23178511 0.256965395 0.240212248

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2007 the Bank was in lowest profitable position but in 2008 it was increased. In 2010 it is increase again.

11. Asset Turnover (ATO) = Interest Income/ Average Total Assets Calculation:

138
Year Particular Interest Income 1705587132 2152959044 3226936767 4433634888 5849984579 2006 2007 2008 2009 2010

Average Total Assets Asset Turnover

16860450329

22949164262

34210399888

49002321693

66612938096

0.10115905

0.093814268

0.094326193

0.090478058

0.087820546

Source: Annual report 2006 to 2010

Graphical Presentation:
0.105 0.1 0.095 0.09 0.085 0.08 2006 2007 2008 2009 2010 0.10115905 0.093814268 0.094326193 0.090478058 0.087820546

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position but in 2006 it was increased. In 2010 it is increase again.

12. Net Interest Margin (NIM) = (Net Interest IncomeNet Interest Expenses) / Average Total Assets Calculation:

139
Year Particular Net Interest Income Net Interest Expenses Average Total Assets 555656413 4126218727 0.134664798 407818156 3351065292 0.12169803 974293219 2252643548 0.43511047 1082569596 1745140888 0.620333638 1723765852 1149930719 1.499017135 2006 2007 2008 2009 2010

Source: Annual report 2006 to 2010

Graphical Presentation:
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 1.499017135

0.620333638 0.432511047 0.134664798 2006 0.121698063 2007 2008 2009 2010

Analysis: From the table we see that the interest margin has an increasing trend but start to be declined slightly in year 2006. Higher this ratio indicates higher interest and discount income over similar expenses, which will result in higher revenue for the bank and vice versa. But in 2010 the ratio was net interest margin is high.

13. Net Non-Interest Margin (NNIM) = (Net Non-Interest IncomeNet Non-Interest Expenses) /Average Total Assets Calculation:

140
Year Particular Net NonInterest Income Net NonInterest Expenses Average Total Assets 500540854 323148672 644923522 355600242 937276958 443073504 1111700883 563218702 1945263610 878582556 2006 2007 2008 2009 2010

1.548949129

1.813619469

2.115398347

1.973835171

2.21409314

Source: Annual report 2006 to 2010

Graphical Presentation:
2.5 2 1.5 1 0.5 0 2006 2007 2008 2009 2010 1.548949129 2.115398347 1.813619469 1.973835171 2.21409314

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position but in 2008 it was increased. In 2010 it is increase again.

Asset-quality indicators 14. Write-off ratio (WRL) = Write-off of loans during the year / Average total loans and advances: Calculation:

141
Year Particular Write-off of loans during the year Average total loans and advances Write-off ratio 123897060 188561000 458391000 607109000 713607868 2006 2007 2008 2009 2010

12633999050

17310869454

27189943132

38055753147

51757689073

0.009806638

0.010892636

0.016858844

0.015953146

0.013787475

Source: Annual report 2006 to 2010

Graphical Presentation:
0.018 0.016 0.014 0.012 0.01 0.008 0.006 0.004 0.002 0 0.016858844

0.015953146 0.013787475

0.009806638

0.010892636

2006

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2008 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position but in 2007 it was increased. In 2010 it is decrease again.

15. Loan Ratio (LR) =Average total loans and advances / Average total assets Calculation:

142
Year Particular Average total loans and advances 12633999050 17310869454 27189943132 38055753147 51757689073 2006 2007 2008 2009 2010

Average total assets Loan Ratio

16860450329 0.749327497

22949164262 0.75431372

34210399888 0.79478589

49002321693 0.776611226

66612938096 0.776991536

Source: Annual report 2006 to 2010

Graphical Presentation:
0.8 0.79 0.78 0.77 0.76 0.75 0.74 0.73 0.72 0.79478589 0.776611226 0.749327497 0.75431372 0.776991536

2006

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2008 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position but in 2007 it was increased. In 2009 it is decrease again.

16. Loans to Deposits (LTD) = Average total loans and advances / Average total customer deposits: Calculation:

143
Year Particular Average total loans and advances 12633999050 17310869454 27189943132 38055753147 51757689073 2006 2007 2008 2009 2010

Average total customer deposits Loans To Deposits

14220795934

19213753840

29304739597

42548116057

58344441292

0.888417154

0.900962383

0.92783432

0.894416878

0.887105745

Source: Annual report 2006 to 2010

Graphical Presentation:
0.94 0.93 0.92 0.91 0.9 0.89 0.88 0.87 0.86 2006 2007 2008 2009 2010 0.888417154 0.900962383 0.894416878 0.887105745 0.92783432

Analysis: The above figure shows that in the year 2008 Standard Bank was in most profitable position. In 2010 the Bank was in lowest profitable position but in 2007 it was increased. In 2009 it is increase again & 2010 it was decrease.

Liquidity ratios 17. Cash to Assets (CTA) = Cash / Average total assets

144

Calculation:
Year Particular Cash Average total assets Cash To Assets 1532614535 16860450329 1820843740 22949164262 2406442979 34210399888 3068753069 49002321693 4751389579 66612938096 2006 2007 2008 2009 2010

0.090899976

0.079342486

0.070342439

0.062624646

0.071328329

Source: Annual report 2006 to 2010

Graphical Presentation:
0.1 0.08 0.06 0.04 0.02 0 2006 2007 2008 2009 2010 0.090899976

0.079342486

0.070342439

0.062624646

0.071328329

Analysis: The above figure shows that in the year 2006 Standard Bank was in most profitable position. In 2009 the Bank was in lowest profitable position but in 2008 it was increased. In 2010 it is increase again.

18. Cash to Deposits (CTD) = Cash / Average total customer deposits Calculation:

145
Year Particular Cash Average total customer deposits Cash To Deposits 15326 14535 14220795934 1820843740 19213753840 2406442979 29304739597 3068753069 42548116057 4751389579 58344441292 2006 2007 2008 2009 2010

0.107772768

0.094767725

0.082117876

0.0721243

0.081436885

Source: Annual report 2006 to 2010

Graphical Presentation:
0.12 0.1 0.08 0.06 0.04 0.02 0 2006 2007 2008 2009 2010 0.107772768 0.094767725 0.082117876 0.0721243 0.081436885

Analysis: The above figure shows that in the year 2006 Standard Bank was in most profitable position. In 2009 the Bank was in lowest profitable position but in 2008 it was increased. In 2010 it is increase again.

19. Deposits to assets (DTA) = Average total customer deposits / Average total assets Calculation:

146
Yea r Particular Average total customer deposits Average total assets Deposits to assets 14220795934 19213753840 29304739597 42548116057 58344441292 2006 2007 2008 2009 2010

16860450329 0.84344105

22949164262 0.837231091

34210399888 0.856603246

49002321693 0.868287758

66612938096 0.87587251

Source: Annual report 2006 to 2010

Graphical Presentation:

0.88 0.87 0.86 0.85 0.84 0.83 0.82 0.81

0.868287758 0.856603246 0.84344105 0.837231091

0.87587251

2006

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2007 the Bank was in lowest profitable position but in 2008 it was increased. In 2010 it is increase again.

20. Equity Multiplier (EM) =Average total assets / Average stockholders' equity Calculation:

147
Year Particular Average total assets 16860450329 22949164262 34210399888 49002321693 66612938096 2006 2007 2008 2009 2010

Average stockholders' equity Equity Multiplier

17642824883

2766752241

3425969101

4230535354

5641982331

0.955654802

8.294622092

9.985612502

11.58300725

11.80665486

Source: Annual report 2006 to 2010

Graphical Presentation:
14 12 10 8 6 4 2 0 0.955654802 2006 2007 2008 2009 2010 8.294622092 9.985612502 11.58300725 11.80665486

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position and in 2008 it was increased . In 2010 it is increase again.

21. Equity to Deposits (ETD) = Average shareholders' equity / Average customer total deposits: Calculation:

148
Year Particular Average shareholders' equity Average customer total deposits Equity To Deposits 17642824883 2766752241 3425969101 4230535354 5641982331 2006 2007 2008 2009 2010

14220795934

19213753840

29304739597

42548116057

58344441292

1.240635543

0.143998526

0.116908362

0.09942944

0.096701283

Source: Annual report 2006 to 2010

Graphical Presentation:
1.4 1.2 1 0.8 0.6 0.4 0.2 0 2006 2007 0.143998526 0.116908362 2008 0.09942944 2009 0.096701283 2010 1.240635543

Analysis: The above figure shows that in the year 2006 Standard Bank was in most profitable position. In 2010 the Bank was in lowest profitable position and in 2009 it was increased. In 2010 it is decrease again.

22. Total Liabilities to Equity (TLE) = Average total liabilities / Average stockholders' equity Calculation:

149
Year Particular Average total liabilities Average stockholders' equity Total Liabilities to Equity 15096167846 17642824883 20182412021 2766752241 30784430787 3425969101 44779175662 4230535354 60970955765 5641982331 2006 2007 2008 2009 2010

0.855654803

7.294622092

8.985612502

10.58475392

10.80665486

Source: Annual report 2006 to 2010

Graphical Presentation:
12 10 8 6 4 2 0 0.855654803 2006 2007 2008 2009 2010 7.294622092 10.58475392 8.985612502 10.80665486

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position and in 2008 it was increased. In 2009 it is increase again.

23. Total Liabilities to Shareholder Capital (TLSC) = Average total liabilities / Shareholder contributed capital: Calculation:

150
Year Particular Average total liabilities Shareholder contributed capital 15096167846 17642824883 20182412021 2766752241 30784430787 3425969101 44779175662 4230535354 60970955765 5641982331 2006 2007 2008 2009 2010

Total Liabilities to Shareholder Capital

0.855654803

7.294622092

8.98561250246

10.58475392

10.80665486

Source: Annual report 2006 to 2010

Graphical Presentation:
12 10 8 6 4 2 0 0.855654803 2006 2007 2008 2009 2010 8.985612502 7.294622092 10.58475392 10.80665486

Analysis: The above figure shows that in the year 2010 Standard Bank was in most profitable position. In 2006 the Bank was in lowest profitable position and in 2008 it was increased. In 2009 it is increase again.

24. Retained Earnings to Total Assets (RETA) = Retained earnings / Average total assets Calculation:

151
Year Particular Retained earnings Average total assets Retained Earnings to Total Assets 233865360 16860450329 0.013870647 239389950 22949164262 0.010431315 443106916 34210399888 0.012952404 516874255 49002321693 0.010547954 908330212 66612938096 0.013635943 2006 2007 2008 2009 2010

Source: Annual report 2006 to 2010

Graphical Presentation:
0.016 0.014 0.012 0.01 0.008 0.006 0.004 0.002 0

0.013870647 0.010431315

0.012952404

0.013635943 0.010547954

2006

2007

2008

2009

2010

Analysis: The above figure shows that in the year 2006 Standard Bank was in most profitable position. In 2007 the Bank was in lowest profitable position and in 2008 it was increased and in 2009 it was decreased. In 2010 it is increase again.

5.1.5. United Commercial Bank Ltd


E. Bank Profitability Ratios:

152

1. Return On Assets (ROA): Return on Assets (ROA) = Net Income/ Average Total Assets
Year Particular Net Income 581756931 815123487 764745570 932897890 2179795853 2006 2007 2008 2009 2010

Average Total Assets

38547620445

50180583526

64794864487

90483781843

129774429670

Return On Assets

1.509%

1.624%

1.180%

1.031%

1.679%

Source: Annual report 2006 to 2010

Graphical Presentation:
2.00% 1.50% 1.00% 0.50% 0.00% 2006 2007 2008 2009 2010 1.51% 1.62% 1.18% 1.03% 1.68%

Analysis: The above figure represents the Return on Assets (ROA) Ratio of United Commercial Bank Limited & we see that in the year 2010 United Commercial Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

2. Return On Equity (ROE): Return On Equity (ROE)= Net Income/ Average Stockholders Equity

153
Year Particular Net Income Average Stockholders Equity Return On Equity 581756931 2322099917 815123487 3137223404 764745570 4384243099 932897890 5705466765 2179795853 7814632323 2006 2007 2008 2009 2010

25.053%

25.982%

17.443%

16.350%

27.893%

Source: Annual report 2006 to 2010

Graphical Presentation:
30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2006 2007 2008 2009 2010 25.05% 25.98% 17.44% 16.35% 27.89%

Decision: The above figure represents the Return On Equity (ROE) Ratio of United Commercial Bank Limited & we see that in the year 2010 United Commercial Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

3. Profit Margin (PM) = Net Income / Operating Income

154
Year Particular Net Income Operating Income Profit Margin 581756931 1992619170 29.195% 815123487 3324474795 24.518% 764745570 4109442039 18.609% 932897890 5192054616 17.967% 2179795853 7855748978 27.747% 2006 2007 2008 2009 2010

Source: Annual report 2006 to 2010

Graphical Presentation:
35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2006 2007 2008 2009 2010 29.20% 24.52% 18.61% 17.97% 27.75%

Analysis: The above figure represents the Profit Margin (PM) Ratio of United Commercial Bank Limited & we see that in the year 2006 United Commercial Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

4. Return on Deposits (ROD) =Net Income/ Average Total Customer Deposits

155
Year Particular Net Income Average Total Customer Deposits Return On Deposits 581756931 33015843862 0.017620538 815123487 42285996837 0.01927644 764745570 54485266725 0.014035823 932897890 21070433332 0.044275211 2179795853 37358099448 0.058348682 2006 2007 2008 2009 2010

Source: Annual report 2006 to 2010

Graphical Presentation:
0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2006 2007 2008 2009 2010 0.017620538 0.01927644 0.014035823 0.044275211 0.058348682

Analysis: The above figure represents the Return on Deposits (ROD) Ratio of United Commercial Bank Limited & we see that in the year 2010 United Commercial Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

5. Return on Shareholder Capital (ROSC) = Net Income/ Shareholder Contributed Capital

156
Year Particular Net Income Shareholder Contributed Capital Return On Shareholder Capital 581756931 2322099917 815123487 3137223404 764745570 4384243099 932897890 5705466765 2179795853 7814632323 2006 2007 2008 2009 2010

0.250530533

0.25982322

0.174430467

0.163509478

0.278937737

Source: Annual report 2006 to 2010

Graphical Presentation:
0.3 0.25 0.2 0.15 0.1 0.05 0 2006 2007 2008 2009 2010 0.250530533 0.25982322 0.174430467 0.163509478 0.278937737

Analysis: The above figure represents the Return on Shareholder Capital (ROSC) Ratio of United Commercial Bank Limited & we see that in the year 2010 United Commercial Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

6. Net Operating Margin (NOM) = Operating Income/ Interest Income

157
Year Particular Operating Income Interest Income Net Operating Margin 1992619170 3036805368 0.656156365 3324474795 4354735652 0.763415982 4109442039 5749293669 0.714773375 5192054616 6965321635 0.745414912 7855748978 9468361424 0.829684105 2006 2007 2008 2009 2010

Source: Annual report 2006 to 2010

Graphical Presentation:
1 0.8 0.6 0.4 0.2 0 2006 2007 2008 2009 2010 0.656156365 0.763415982 0.714773375 0.745414912 0.829684105

Analysis: The above figure represents the Net Operating Margin (NOM) Ratio of United Commercial Bank Limited & we see that in the year 2010 United Commercial Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

Bank efficiency ratios

158

7. Interest Income to Expenses (IEE) = (Interest IncomeInterest Expenses) / Average Total


Year Particular Interest Income Interest Expenses Average Total loans & advances Interest Income to Expenses 3036805368 1749735770 26110094793 4354735652 2727030152 37566020031 5749293669 3740765703 44446332765 6965321635 4348234862 61692218339 9468361424 5632947436 93560701744 2006 2007 2008 2009 2010

0.049293946

0.043329197

0.043329197

0.042421667

0.040993857

Source: Annual report 2006 to 2010

Graphical Presentation:
0.06 0.05 0.04 0.03 0.02 0.01 0 2006 2007 2008 2009 2010 0.049293946 0.043329197 0.043329197 0.042421667 0.040993857

Analysis: The above figure represents the Interest Income to Expenses (IEE) Ratio of United Commercial Bank Limited & we see that in the year 2006 United Commercial Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was decreased again.

8. Operating Expense to Assets (OEA) = Operating Expenses / Average Total Assets

159
Year 2006 Particular Operating Expenses Average Total Assets Operating Expense to Assets 1047806352 38547620445 0.027182128 1306637363 50180583526 0.026038704 1659543161 64794864487 0.025612264 2066885136 90483781843 0.022842603 3125255599 129774429670 0.024082214 2007 2008 2009 2010

Source: Annual report 2006 to 2010

Graphical Presentation:
0.028 0.027 0.026 0.025 0.024 0.023 0.022 0.021 0.02

0.027182128 0.026038704 0.025612264 0.024082214 0.022842603

2006

2007

2008

2009

2010

Analysis: The above figure represents the Interest Income to Expenses (IEE) Ratio of United Commercial Bank Limited & we see that in the year 2009 United Commercial Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

9. Operating Income to Assets (OIA) = Operating Income / Average Total Assets

160
Year Particular Operating Income Average Total Assets Operating Income to Assets 1992619170 38547620445 0.051692404 3324474795 50180583526 0.066250222 4109442039 64794864487 0.063422342 5192054616 90483781843 0.057381052 7855748978 129774429670 0.060533874 2006 2007 2008 2009 2010

Source: Annual report 2006 to 2010

Graphical Presentation:
0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2006 2007 2008 2009 2010 0.051692404 0.066250222

0.063422342

0.057381052

0.060533874

Analysis: The above figure represents the Operating Income to Assets (OIA) Ratio of United Commercial Bank Limited & we see that in the year 2007 United Commercial Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

10. Operating Expenses to Revenue (OER) =Operating Expenses/ Operating Income

161
Year Particular Operating Expenses Operating Income Operating Expenses to Revenue 1047806352 1992619170 0.525843758 1306637363 3324474795 0.393035726 1659543161 4109442039 0.403836615 2066885136 5192054616 0.39808617 3125255599 7855748978 0.39783038 2006 2007 2008 2009 2010

Source: Annual report 2006 to 2010

Graphical Presentation:
0.6 0.5 0.4 0.3 0.2 0.1 0 2006 2007 2008 2009 2010 0.525843758 0.393035726 0.403836615 0.39808617 0.39783038

Analysis: The above figure represents the Operating Expenses to Revenue (OER) Ratio of United Commercial Bank Limited & we see that in the year 2006 United Commercial Bank was in most profitable position. In 2007 the Bank was in lowest profitable position. In 2010 it was increased again.

11. Asset Turnover (ATO) = Interest Income/ Average Total Assets

162
Year Particular Interest Income 1992619170 3324474795 4109442039 5192054616 7855748978 2006 2007 2008 2009 2010

Average Total Assets Asset Turnover

38547620445

50180583526

64794864487

90483781843

129774429670

0.051692404

0.066250222

0.063422342

0.057381052

0.060533874

Source: Annual report 2006 to 2010

Graphical Presentation:
0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 2006 2007 2008 2009 2010 0.051692404 0.066250222

0.063422342

0.057381052

0.060533874

Analysis: The above figure represents the Asset Turnover (ATO) Ratio of United Commercial Bank Limited & we see that in the year 2007 United Commercial Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

12. Net Interest Margin (NIM) = (Net Interest IncomeNet Interest Expenses) / Average Total Assets

163
Year Particular Net Interest Income Net Interest Expenses Average Total Assets Net Interest Margin 1287069598 1756419790 38547620445 -0.012175854 1627705500 2732462221 50180583526 -0.022015621 2008527966 3751315734 64794864487 -0.026897005 2617086773 4353757970 90483781843 -0.019193177 3835360138 5644042861 129774429670 -0.013937127 2006 2007 2008 2009 2010

Source: Annual report 2006 to 2010

Graphical Presentation:
0 2006 -0.005 -0.01 -0.012175854 -0.015 -0.02 -0.022015621 -0.025 -0.026897005 -0.03 -0.013937127 -0.019193177 2007 2008 2009 2010

Analysis: The above figure represents the Net Interest Margin (NIM) Ratio of United Commercial Bank Limited & we see that in the year 2010 United Commercial Bank was in most profitable position. In 2008 the Bank was in lowest profitable position. In 2010 it was increased again.

13. Net Non-Interest Margin (NNIM) = (Net Non-Interest IncomeNet Non-Interest Expenses) /Average Total Assets

164
Year Particular Net Non-Interest Income Net Non-Interest Expenses 1081305663 1047806352 1696769295 1306637363 2100914073 1659543161 2574967843 206688136 4020334990 3125255599 2006 2007 2008 2009 2010

Average Total Assets Net Non-Interest Margin

38547620445 0.000869037

50180583526 0.007774559

64794864487 0.006811819

90483781843 0.026173527

129774429670 0.006897194

Source: Annual report 2006 to 2010

Graphical Presentation:
0.03 0.025 0.02 0.015 0.01 0.007774559 0.005 0 0.000869037 2006 2007 2008 2009 2010 0.006811819 0.006897194 0.026173527

Analysis: The above figure represents the Net Non-Interest Margin Ratio of United Commercial Bank Limited & we see that in the year 2009 United Commercial Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was decreased again.

Asset-quality indicators 14. Write-off ratio (WRL) = Write-off of loans during the year / Average total loans and advances

165
Year Particular Write-off of loans during the year Average total loans and advances Write-off ratio 810685000 1118462000 1124258000 985578000 726606000 2006 2007 2008 2009 2010

2611009479 3 0.031048719

37566020031

44446332765

6169221833 9 0.022174563

93560701744

0.029773237

0.02529473

0.007766145

Source: Annual report 2006 to 2010

Graphical Presentation:
0.035 0.03 0.025 0.02 0.015 0.01 0.005 0 2006 2007 2008 2009 2010 0.007766145 0.031048719 0.029773237 0.02529473 0.022174563

Analysis: The above figure represents the Write-off ratio (WRL) Ratio of United Commercial Bank Limited & we see that in the year 2006 United Commercial Bank was in most profitable position. In 2010 the Bank was in lowest profitable position. In 2010 it was decreased again.

15. Loan Ratio (LR) =Average total loans and advances / Average total assets

166
Year Particular Average total loans and advances Average total assets Loan Ratio 26110094793 37566020031 44446332765 61692218339 93560701744 2006 2007 2008 2009 2010

38547620445 0.677346474

50180583526 0.748616644

64794864487 0.68595456

90483781843 0.681804154

129774429670 0.720948664

Source: Annual report 2006 to 2010

Graphical Presentation:
0.76 0.74 0.72 0.7 0.68 0.66 0.64 2006 2007 2008 2009 2010 0.677346474 0.68595456 0.681804154 0.748616644 0.720948664

Analysis: The above figure represents the Loan Ratio (LR) of United Commercial Bank Limited & we see that in the year 2007 United Commercial Bank was in most profitable position. In 2007 the Bank was in lowest profitable position. In 2010 it was decreased again.

16. Loans to Deposits (LTD) = Average total loans and advances / Average total customer deposits

167
Year Particular Average total loans and advances Average total customer deposits Loans To Deposits 26110094793 37566020031 44446332765 61692218339 93560701744 2006 2007 2008 2009 2010

33015843862

42285996837

54485266725

21070433332

37358099448

0.677346474

0.748616644

0.68595456

0.681804154

0.720948664

Source: Annual report 2006 to 2010

Graphical Presentation:
0.76 0.74 0.72 0.7 0.68 0.66 0.64 2006 2007 2008 2009 2010 0.677346474 0.68595456 0.681804154

0.748616644 0.720948664

Analysis: The above figure represents the Loans to Deposits Ratio (LR) of United Commercial Bank Limited & we see that in the year 2007 United Commercial Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was increased again.

168

Liquidity ratios 17. Cash to Assets (CTA) = Cash / Average total assets
Year Particular Cash 2812472933 4116910463 4745904417 7003756028 1029475236 2006 2007 2008 2009 2010

Average total assets Cash To Assets

38547620445 0.072961

50180583526 0.082041901

64794864487 0.07324507

90483781843 0.077403441

129774429670 0.007932805

Source: Annual report 2006 to 2010

Graphical Presentation:
0.1 0.08 0.06 0.04 0.02 0 2006 2007 2008 2009 0.007932805 2010 0.072961 0.082041901 0.07324507 0.077403441

Analysis: The above figure represents the Cash to Assets (CTA) Ratio of United Commercial Bank Limited & we see that in the year 2007 United Commercial Bank was in most profitable position. In 2010 the Bank was in lowest profitable position. In 2010 it was decreased again.

18. Cash to Deposits (CTD) = Cash / Average total customer deposits

169
Year Particular Cash Average total customer deposits Cash To Deposits 2812472933 33015843862 4116910463 42285996837 4745904417 54485266725 7003756028 21070433332 1029475236 37358099448 2006 2007 2008 2009 2010

0.085185553

0.097358719

0.087104362

0.332397342

0.027556949

Source: Annual report 2006 to 2010

Graphical Presentation:
0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2006 2007 2008 2009 0.085185553 0.097358719 0.087104362 0.027556949 2010 0.332397342

Analysis: The above figure represents the Cash to Deposits (CTD) Ratio of United Commercial Bank Limited & we see that in the year 2009 United Commercial Bank was in most profitable position. In 2010 the Bank was in lowest profitable position. In 2010 it was decreased again.

19. Deposits to assets (DTA) = Average total customer deposits / Average total assets

170
Year Particular Average total customer deposits Average total assets Deposits to assets 33015843862 42285996837 54485266725 21070433332 37358099448 2006 2007 2008 2009 2010

38547620445 0.856494992

50180583526 0.842676467

64794864487 0.840888659

90483781843 0.232864198

129774429670 0.287869494

Source: Annual report 2006 to 2010

Graphical Presentation:
1 0.8 0.6 0.4 0.2 0 2006 2007 2008 2009 2010 0.232864198 0.287869494 0.856494992 0.842676467 0.840888659

Analysis: The above figure represents the Deposits to assets (DTA) Ratio of United Commercial Bank Limited & we see that in the year 2006 United Commercial Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

20. Equity Multiplier (EM) =Average total assets / Average stockholders' equity

171
Year Particular Average total assets Average stockholders' equity Equity Multiplier 38547620445 50180583526 64794864487 90483781843 129774429670 2006 2007 2008 2009 2010

2322099917

3137223404

4384243099

5705466765

7814632323

16.60032807

15.99522159

14.77903096

15.85913749

16.60659444

Source: Annual report 2006 to 2010

Graphical Presentation:
17 16.5 16 15.5 15 14.5 14 13.5 2006 2007 2008 2009 2010 14.77903096 16.60032807 15.99522159 15.85913749 16.60659444

Analysis: The above figure represents the Equity Multiplier (EM) Ratio of United Commercial Bank Limited & we see that in the year 2010 United Commercial Bank was in most profitable position. In 2008 the Bank was in lowest profitable position. In 2010 it was increased again.

21. Equity to Deposits (ETD) = Average shareholders' equity / Average customer total deposits

172
Year Particular Average shareholders' equity 2322099917 3137223404 4384243099 5705466765 7814632323 2006 2007 2008 2009 2010

Average customer total deposits Equity To Deposits

33015843862

42285996837

54485266725

21070433332

37358099448

0.070332896

0.074190598

0.08046658

0.270780704

0.209181742

Source: Annual report 2006 to 2010

Graphical Presentation:
0.3 0.25 0.2 0.15 0.1 0.05 0 2006 2007 2008 2009 2010 0.070332896 0.074190598 0.08046658 0.270780704 0.209181742

Analysis: The above figure represents the Equity to Deposits (ETD) Ratio of United Commercial Bank
Limited & we see that in the year 2009 United Commercial Bank was in most profitable position. In 2006 the Bank was in lowest profitable position. In 2010 it was decreased again.

22. Total Liabilities to Equity (TLE) = Average total liabilities / Average stockholders' equity

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Year Particular Average total liabilities Average stockholders' equity Total Liabilities to Equity 36225520528 2322099917 47043360122 3137223404 60410621388 4384243099 84778315078 5705466765 121959797250 7814632323 2006 2007 2008 2009 2010

15.60032807

14.99522159

13.77903096

14.85913749

15.60659443

Source: Annual report 2006 to 2010

Graphical Presentation:
16 15.5 15 14.5 14 13.5 13 12.5 2006 2007 2008 2009 2010 13.77903096 15.60032807 14.99522159 14.85913749 15.60659443

Analysis: The above figure represents the Total Liabilities to Equity (TLE) Ratio of United Commercial
Bank Limited & we see that in the year 2010 United Commercial Bank was in most profitable position. In 2008 the Bank was in lowest profitable position. In 2010 it was increased again.

23. Retained Earnings to Total Assets (RETA) = Retained earnings / Average total assets

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Year Particular Retained earnings Average total assets Retained Earnings to Total Assets 829586776 38547620445 0.021521089 1242095494 50180583526 0.024752512 1714238278 64794864487 0.026456391 648982575 90483781843 0.007172364 1455275811 129774429670 0.011213887 2006 2007 2008 2009 2010

Source: Annual report 2006 to 2010

Graphical Presentation:
0.03 0.025 0.02 0.015 0.01 0.005 0 2006 2007 2008 2009 2010 0.007172364 0.011213887 0.021521089 0.024752512 0.026456391

Analysis: The above figure represents the Retained Earnings to Total Assets (RETA) Ratio of United Commercial Bank Limited & we see that in the year 2008 United Commercial Bank was in most profitable position. In 2009 the Bank was in lowest profitable position. In 2010 it was increased again.

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CHAPTER 06 RECOMMENDATIONS AND CONCLUTION

6.1. FINDINGS

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After analyzing all the parts of the study finally, I review the following points as on summary and findings:

The principal activities of Sample Bank are to provide all kinds of commercial banking products and services to the customers including project finance, working capital finance and trade finance for corporate customers, SME loans to small traders & businesses; and house building loan car loan and wide range of life style and need based loans for retail customers. These Banks are most innovative and technologically advanced bank

The bank maintains liquid assets to carry out the day-to-day operations and fulfill the statutory requirements imposed by the regulator The Sample Bank stands to give the most innovative and affordable banking products to Bangladesh. Amongst banks, these five Banks are the largest donor in to social causes in Bangladesh. It stands as one of the largest private donors involved in improving the country. The Bank is proud to be associated with helping Bangladesh as well as being a leader in the country's banking sector. The bank is mindful of mobilizing the scarce resources such as capital, deposits and borrowings at attractive terms. by offering more attractive interest rates, and lowering the minimum balances eligible for interest, the bank can attract a lot of the old customers. The bank provides fast and efficient customer service. And maintain high standard of business ethics. To prepare this term paper, I had to gone through a number of different loan classifications, disbursement, & different banks ratio analysis. After that some findings have come to view that the countrys banking sector has recovered its strength significantly by cutting down its spiraling bad assets by nearly a half governments reform measures.

Considering some banking parameters and growth trends, the top executives of both the Central bank and commercial banks hope that banking system would be able to find a sound financial footing within a couple of years if the ongoing reform measures continue.

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Recently we have seen that Brac Bank Ltd disbursed tk84302.78 million, Premier Bank Ltd disbursed tk46400.57million, AB Bank Ltd disbursed tk88299 million, Standard Bank Ltd disbursed tk51758million, and United Commercial Bank Ltd disbursed tk93560.70 million.

So we can see that United Commercial Bank Ltd disbursed position is good that is indicates positive sign of bank. Again if we see ratio analysis of Return On Assets (ROA): Brac Bank Ltd 1.396%, Premier Bank Ltd 2.632%, AB Bank Ltd 2.779%, Standard Bank Ltd 2.055, United Commercial Bank Ltd 1.679%.

So, we can see that AB Bank Ltd Return on Assets (ROA) is high that is 2.779% and it indicates positive sign of the bank.

6.2 Recommendations On the basis of my orientation and practical working at different Bank Limited the following recommendations may be put forwarded:

Loan should be given to borrower depending on his creditworthiness, past performance etc.

The management should impart more imphasis on the advertisement of the bank in different electronic and printing media about their credit facilities. Since decision making is the fundamental of all business operations, the management should be bold and quick in making decision considering the internal efficiency and external market competitiveness. The spread out mechanism of the bank should be faster and progressive as well. The mode of extension is much slower than other contemporary and equivalent banks. More credit facilities of varied interests should be introduced for the diversified client group.

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It seemed to me that the bank having a large amount of deposit is not encouraging the large scale producers that much of long term industrial loans to accelerate the economy as well as to help the economy to solve unemployment problem. All the lending and savings packages should offered to the Premium customers are same as offered to the general customers, excepting the waiver of service charges for Premium Ones. The interest rates on several loan and credit schemes should be differentiated for the Premium customers. Loan cases filed by the banks against the defaulters remain pending with the courts for a long time due to several reasons. The Government may consider setting up a commercial court for expeditious disposal of Loan cases. Computer will be useful to banks particularly in developing Management Information System (MIS). Credit Information system, reconciliation of their inter branch accounts and processing the employees pay roll and provident fund.

6.3 Conclusion

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Performance means doing a job effectively and efficiently. Performance Evaluation System means a mechanism for improving the likelihood of the organization successfully implementing its strategy. It is a process to have the goal of strategy implementation. In this process senior management selects a series of measures that best represent the organizations strategy.

The current report has been aimed at critically examining the Performance of a private commercial bank. The main objective of this report is to evaluate the overall performance of a sample Bank along with how efficiently the Bank is providing services to its customer. With this objective a comparative study was also done with the performances of sample Bank. After analyzing in details of the performances a comprehensive recommendations have been made to overcome the limitations of Banks performances.

This paper used both primary and secondary data. After analyzing all available data it was observed that Bank is in better position in all respects.

Despite hard competition among banks operating in Bangladesh, both local and international, the sample Bank has made tremendous and remarkable progress practically in every sphere of its activities. The bank is maintaining its position as one of the leading new generation private Banks in the country both in terms of capital base and good governance. This bank has been able to continue its overall progress. This success has been made possible due to dynamic leadership of its management as well as devotion and sincerity of all categories of officers and executives.

Bibliography

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Annual Report of Brac Bank Limited Annual Report of Premier Bank Limited Annual Report of AB Bank Limited Annual Report of Standard Bank Limited Annual Report of UCBL Bank Limited Articles of the Bank Web site of Bank www.bracbank.com Web site of Bank www.premierbank.com Web site of Bank www.abbank.com Web site of Bank www.Standardbank.com Web site of Bank www.ucblbank.com