Profitability Analysis of National Bank

Limited
National Bank one of the largest and oldest private-sector commercial bank in Bangladesh, with years of
experience. Adaptation of modern technology both in terms of equipment and banking practice ensures
efficient service to clients. 147 branches at home and 29 affiliates worldwide create efficient networking
and reach capability. National Bank is a bank that serves both clients and country.

This report, “Profitability Analysis of National Bank Limited”, has been prepared to fulfill the partial
requirement of BBA program as a mean of Internship Program. While preparing this report, I had a great
opportunity to have an in depth knowledge of all the banking activities of National Bank Ltd.

1.2. Significance of the Report:

Education will be the most effective when theory and practice blends. Theoretical knowledge gets its
perfection with practical application. And the internship is designed to bridge the gap between the
theoretical knowledge and real application. We all know that there is no alternative of practical
knowledge which is more beneficial than theoretical aspects. The prime reason of this study is to become
familiar with the practical business world and to attain practical knowledge about the overall Banking
and Corporate world, which is so much essential for each and every student to meet the extreme growing
challenges in job market.

1.3. Scope of the report:

In order to maintain the speed of development now Banks must compete in the market place both with
local institution as well as foreign ones. The presentation of the organizational structure and policy of
National Bank Limited and investigating the strategies applies by it provide the scope of this report. An
infrastructure of the organization has been detailed and looks into the future. The scope of this report is
limited to the overall description of the company, its services, its position in the industry, its financial
performance analysis the practical progress of its operation. The scope of the study is limited to
organizational setup, functions and performances.

 Recent performance of NBL in terms of deposit, investment and foreign exchange.

 To analyze the banks current financial flows performed by NBL.
 To obtain practical experience about general banking activities by involving such type of
program.
 To build professional carrier in the banking sector as well as any credit providing institution.

1.4. Objectives:
1.4.1. General Objective

The prime objective of the report is to “Profitability Analysis of National Bank Limited”
1.4.2. Specific Objectives

The following aspects can be listed as the specific objectives for this practical orientation in National
Bank Limited:

To calculate the financial ratios and identify the areas of concern.

To identify and assess the present financial performance of National Bank Limited.
To understand the implications in analyzing and interpreting the financial ratios.
To compare the financial situation of National Bank Limited with the two other promising banks-
Uttara Bank Limited and Mercantile Bank Limited.
To identify the findings and raise possible recommendations for National Bank Limited.
1.5. Methodology:

1.5.1. Research Design

This report is a descriptive type of research which briefly reveals the overall activities performed by
National Bank Ltd. It has also been administered by collecting secondary data. Annual ports of NBL
were the major secondary data sources in this regard. Ratio analysis and trend analysis have also been
used as major tools for the financial performance analysis. The study is performed based on the
information extracted from different sources collected by using a specific methodology. This report is
analytical in nature. The methodology is

1.5.2. Sources of data:

Secondary data:
 Annual Report of NBL.
 Different text book & journals.
 Various reports & articles related to study.
 Some of my course elements as related to this report.
 Web base support from the internet & intranet.

For the “Profitability Analysis of National Bank Limited” I mainly used Secondary data. Besides this I
also collect some information by taking expert opinion from the officers and direct observation while I
doing the internship program at the bank.

Collection of Secondary Data:

Secondary data are collected basically from Annual reports, journals, brochures, paper, magazines,
publications, book & other form of publications & official website
1.5.4. Instruments Used For Analysis:

A. Ratio Analysis
B. Trend Analysis

Ratio Analysis:

The quantitative (such as ratio analysis) tools are used to analyze the gathered data & different types of
computer software are used for reporting the gathered information from the analysis such as- Microsoft
Word, Microsoft Excel etc. Ratio can be classified into four broad groups-
1) Liquidity Ratio.
2) Activity Ratio.
3) Debt Ratio.
4) Profitability Ratio.
Trend analysis:

It is really important to analysis trends in ratios as well as their absolute levels. This analysis informs us
whether a company’s financial condition improving or deteriorating.
1.6. Limitations

Observing and analyzing the broad performance of a bank and one of its Branches are not that easy.
Moreover due to obvious reasons of scrutiny and confidentiality, the bank personnel usually don’t want
to disclose all the statistical information about their organization. Time is another major limitation s the
duration of the program was ten weeks only and being a temporary member of the organization, it was
not possible on my part to notice or express some of the sensitive issues and other aspects.

However the some of the limitations I have face while preparing this Report are listed as follows:

 Time Limitation: To complete the study, time was limited by three months. It was really very
short time to know details about an organization like National Bank Ltd.
 Inadequate Data: Lack of available information about export & import business operations of
National Bank Ltd. Because of the unwillingness of the busy key persons, necessary data
collection became hard. The employees are extremely busy to perform their duty.
 Lack of Record: Large-scale research was not possible due to constrains and restrictions posed
by the organization. Unavailability of sufficient written documents as required making a
comprehensive study. In many cases up-to-date information was not available.
 Lack of experiences: Lack of experiences has acted as constraints in the way of meticulous
exploration on the topic. Being a member of the organization; it was not possible on my part to
express some of the sensitive issues. Lack of adequate knowledge about export & import
business of any organization.
2.0. Overview of National Bank Limited

2.0. Background:
National Bank Limited has its prosperous past, glorious present, prospective future and under processing
projects and activities. Established as the first private sector Bank fully owned by Bangladeshi
entrepreneurs, NBL has been flourishing as the largest private sector Bank with the passage of time after
facing many stress and strain. The member of the board of directors is creative businessman and leading
industrialist of the country. To keep pace with time and in harmony with national and international
economic activities and for rendering all modern services, NBL, as a financial institution automated all
its branches with computer network in accordance with the competitive commercial demand of time.
Moreover, considering its forth-coming future the infrastructure of the Bank has been rearranging. The
expectation of all class businessman, entrepreneurs and general public is much more to NBL. Keeping
the target in mind NBL has taken preparation to open 15 new branches & 10 SME by the year
2009.National Bank got license to open 10 branches & 5 SME center during 2010.

The emergence of National Bank Ltd. in the private sector is an important event in the Banking arena of
Bangladesh. When the nation was in the grip of severe recession, Govt. took the farsighted decision to
allow in the private sector to revive the economy of the country. Several dynamic entrepreneurs came
forward for establishing a bank with a motto to revitalize the economy of the country.

National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private
sector. From the very inception it is the firm determination of National Bank Limited to play a vital role
in the national economy. National Bank is determined to bring back the long forgotten taste of banking
services and flavors. National Bank wants to serve each one promptly and with a sense of dedication and
dignity.

2.1. History and Heritage:

National Bank Limited has its prosperous past, glorious present, prospective future and under processing
projects and activities. Established as the first private sector bank fully owned by Bangladeshi
entrepreneurs, NBL has been flourishing as the largest private sector Bank with the passage of time after
facing many stress and strain. The members of the board of directors are creative businessmen and
leading industrialists of the country. To keep pace with time and in harmony with national and
international economic activities and for rendering all modern services, NBL, as a financial institution,
automated all its branches with computer networks in accordance with the competitive commercial
demand of time. Moreover, considering its forth-coming future, the infrastructure of the Bank has been
rearranging. The expectation of all class businessmen, entrepreneurs and general public is much more to
NBL. At present we have 145 branches under our branch network. In addition, our effective and
diversified approach to seize the market opportunities is going on as continuous process to accommodate
new customers by developing and expanding rural, SME financing and offshore banking facilities. We
have opened 10 branches and 5 SME/Agri branches during 2010.

The emergence of National Bank Limited in the private sector was an important event in the Banking
arena of Bangladesh. When the nation was in the grip of severe recession, the government took the
farsighted decision to allow the private sector to revive the economy of the country. Several dynamic
entrepreneurs came forward for establishing a bank with a motto to revitalize the economy of the country.

National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private
sector. From the very inception, it was the firm determination of National Bank Limited to play a vital
role in the national economy. We are determined to bring back the long forgotten taste of banking
services and flavors. We want to serve each one promptly and with a sense of dedication and dignity.

The then President of the People's Republic of Bangladesh Justice Ahsanuddin Chowdhury inaugurated
the bank formally on March 28, 1983 but the first branch at 48, Dilkusha Commercial Area, Dhaka
started commercial operation on March 23, 1983. The 2nd Branch was opened on 11th May 1983 at
Khatungonj, Chittagong.

At present, NBL has been carrying on business through its 130 branches and 15 SME / Agri Branches
(total 145 service locations) spread all over the country. Since the very beginning, the bank has exerted
much emphasis on overseas operations and handled a sizable quantum of home bound foreign remittance.
It has drawing arrangements with 415 correspondents in 75 countries of the world, as well as with 37
overseas Exchange Companies located in 13 countries. NBL was the first domestic bank to establish
agency arrangements with the world famous Western Union in order to facilitate quick and safe
remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. This has
meant that the expatriates can remit their hard-earned money to the country with much ease, confidence,
safety and speed.

NBL was also the first among domestic banks to introduce international Master Card in Bangladesh. In
the meantime, NBL has also introduced the Visa Card and Power Card. The Bank has in its use the latest
information technology services of SWIFT and REUTERS. NBL has been continuing its small credit
programmes for disbursement of collateral free agricultural loans among the poor farmers of Barindra
area in Rajshahi district for improving their livelihood.
The Transparency and accountability of a financial institution are reflected in its Annual Report
containing its Balance Sheet and Profit & Loss Account. In recognition of this, NBL was awarded Crest
in 1999 and 2000, and Certificate of Appreciation in 2001 by the Institute of Chartered Accountants of
Bangladesh.

The bank has a strong team of highly qualified and experienced professionals, together with an efficient
Board of Directors who play a vital role in formulating and implementing policies.

2.2. Vision:

Ensuring highest standard of clientele services through best application of latest information technology,
making due contribution to the national economy and establishing ourselves firmly at home and abroad
as a front ranking bank of the country have been our cherished vision.

2.3. Mission:

Our mission is to continue our support for expansion of activities at home and abroad by adding new
dimensions to our banking services which have been ongoing in an unabated manner. Alongside, we are
also putting highest priority in ensuring transparency, account ability, improved clientele service, as well
as our commitment to serve the society through which we want to get closer to the people of all strata.
Winning an everlasting seat in the hearts of the people as a caring companion in uplifting the national
economic standard through continuous up gradation and diversification of our clientele services in line
with national and international requirements is the desired goal we want to reach.

2.4. Brand Image:

A bank for performance with potential. Our prime objective is to uphold the slogan in all activities of the
bank.

2.5. Goals of the Bank:

 Develop a realistic deposit mobilization plan.

 Develop appropriate lending risk assessment system.
 Develop capital plan.
 Develop a system to make good advances.
 Develop a recruitment, compensation training and orientation plan.
 Develop a plan for offering better customers service.
 Develop appropriate management structure, systems, procedures and approaches.
 Develop scientific MIS to monitor bank’s activities.
2.6. Objective of the Bank:

 Build up a low cost fund base.

 Make sound loans and investments.

 Meet capital adequacy requirement at all the time.

 Ensure 100% recovery of all loans and advances.

 Ensure a satisfied workforce.

 Focus on fee-based Income.

 Adopt an appropriate management technology.

 Install a significant MIS to monitor bank’s activities

All these were set during formation stage mainly for the planning purpose. As we know planning is a
continuous process, all these needs are to be updated and reset commensuration the need of the time. The
main objective of the NBL is to blend in its operation traditional, commercial banking with modern
international banking. With the new and varied demands of modern customers, the bank has been
pursuing a policy of achieving harmony in transactions between the bank and its customer living up to
the high standards of a free market economy.

2.7. NBL’s Core values:

NBL’s core values consist of 6 key elements. These values bind people together with an emprises that is
people are essential to everything being done in the Bank.

2.7.1. Integrity:

 NBL protects and safeguards all customer information.

 NBL treats everyone in an equitable and consistent manner.
 NBL creates an environment, which earns and maintains customer trust.

2.7.2. Open Communication:

 NBL builds customer relationship based on integrity and respect.

 NBL offers a full line of products and excellent service.
 NBL is committed to the prosperity of the customer and shareholders.
2.7.3. Performance Derive:

 In NBL, customers’ and employees are judged in terms of their performance.

2.7.4. Continuous Self Improvement:

 Continuous learning, self-challenge and strive make ways for self improvement of workforce at
NBL.

2.7.5. Quality:

 NBL offers hassle free better service timely.

 NBL builds-up quality asset s in the portfolio.

2.7.6. Teamwork

Interaction, open communication, and maintain a positive attitude reflect NBL’s commitment to a
supportive environment based on teamwork.

2.8. Core business principles:

Outstanding customer service.

Effective and efficient operation.
Strong capital and liquidity.
Prudent lending policy.
Strict expense discipline.
National Bank Limited also operates according to certain key business values.
Hands on management at all levels.
A minimum of bureaucracy.
Fast decision and implementation.
Putting the team’s interest ahead of the individual.
The appropriate delegation of authority with accountability.
Fair and objective employer.
A diverse team.
The highest personal standard of integrity at all levels.
2.9. Branches of National Bank Limited:

Figure2.1. Branches of NBL

2.10. Organogram:

Organogram of the NBL in Broadly

Chairman

Board of Director

Board Committees

Research Budget Managing Monitoring Special

& Exp. Control director Implementation
Audit &
Planning

Loan & DMD admin DMD

recovery Establishment

EVP SVP
SVP EVP EVP
EVP
EVP SVP
AVP
AVP SVP SVP

AVP
AVP AVP AVP
AVP
VP VP AVP
AVP
VP VP AVP
AVP
AVP
VP
VP
Public
Public AVP
relation
relation
Computer
Compute AVP
AVP

VP
VP AVP
AVP
AVP,
AVP, NBL
NBL AVP,
AVP,
Train.
Train. Ins
Ins admin
admin AVP
AVP
Develop
Develop
AVP
AVP

EVP
EVP
AVP
AVP
AVP
AVP
Establish
Establish

Figure2.2. Organogram of NBL

2.11. Financial Highlights of the Company

(BDT in millions)
Sl. Particulars 2007 2008 2009 2010
No. Taka Taka Taka Taka
1 Paid-up-Capital 1,208.20 1,872.72 2,846.54 4412.13
2 Authorized Capital 2,450.00 2,450.00 7,450.00 17500.00
3 Total Assets 56,526.96 72,205.50 92,084.79 134732.31
4 Total Deposits 47,961.22 60,187.89 76,838.64 102471.83
5 Total Investment 7,760.38 9,156.61 12,315.20 24993.33
6 Total Loans & Advances 36,475.74 50,665.70 65,129.29 92003.56
7 Total Shareholders’ Equity 4,568.39 6,126.27 8,916.76 19105.60
8 Reserve fund/Surplus 3,360.19 4,253.55 6,070.22 14693.47
9 Interest Income 4,288.80 5,786.71 6,821.40 9616.14
10 Interest Expense 2,833.45 3,594.84 4,490.34 5577.09
11 Profit before Tax & Provision 2,215.10 3,123.83 3,397.70 8940.60
12 Profit after Tax 1,238.11 1,517.43 2,070.47 6860.34
13 Price Earning Ratio (Times) 28.03 13.95 13.77 12.32
14 Net Asset Value Per Share 378.12 327.13 313.25 43.30
15 Cost of fund (%) 6.35 6.76 6.45 6.52
16 Return on Assets (ROA)% 2.40 2.36 2.52 6.05
17 Return on Equity (ROE) % 31.57 28.38 27.53 48.96
18 Debt/Equity Ratio (Times) 6.77 6.99 9.31 6.05
19 Cost/Income Ratio (%) 69.16 64.87 69.13 31.41
20 Market Price Per Share 1,494.00 1,014.25 646.25 191.60
21 Remittance 27,560.80 39,877.80 44,381.50 49145.30

Source: Annual Report of NBL (2008 & 2010)

2.12 Business Performance over the last few Decades

Capital Management of the Bank is to maintain an adequate capital base to support the projected business
and regulatory requirement. NBL always maintains a prudent balance between Tier-I and Tier-2 capital.
Total capital as on December 31, 2010 was Tk. 19,190.79 million and capital adequacy ratio was 12.29
%. Maintenance of adequate capital enhanced the Bank's single borrower's exposure limit up to a high
level to cope with the corporate customers demand.

Figure 2.4: Deposit performance

The deposit base of the bank registered a growth of 33.37 percent in the reporting year over the last year
and stood at Tk.102, 471.83 million. Expansion of branch network, competitive interest rate and deposit
products contributed to the growth. The customers of the bank were individuals, corporations, financial
institutions, government and autonomous bodies etc.
 Figure 2.5: Foreign Trade over the last 5 years

In harmony with earlier years' trend, National Bank Limited was intensely active in international trade
during the year 2010. The Bank put forth every possible attempt to expand its external business by
establishing LC, undertaking export bill negotiations, realization of export proceeds, foreign remittance
etc.

Figure 2.6: Net Profit after Tax over the last few decades

The Bank opened a total 24,775 LCs amounting to USD 1,390.03 million for facilitating import trade in
2010. The main commodities were capital machinery, raw cotton, scrap vessels, rice, wheat, edible oil,
petroleum products, yarn, fabrics, garment accessories and other consumer items.

The Bank has been nurturing the export business enthusiastically since its inception. In 2010 it handled
22,135 export documents valuing USD 691.79 million with a growth of 24 percent over the last year's
volume of USD 559.78 million. Export finances were extended mainly to readymade garments, knitwear,
frozen food and fish, tanned leather, handicraft, tea,jute goods tc.
Efficient Board and management, strong capital base, wide branch network, support from other
stakeholders helped NBL in revenue earnings and profit maximization. During the period NBL earned an
operating profit of Tk. 8,940.60 million in 2010 which was Tk 3,397.50 million in 2009 registering a
growth of 163.15 percent. Net Profit after tax grew by 231.34 percent to Tk. 6,860.34 million in 2010
after making provision for loan loss and taxation.

Figure 2.7: Loans & Advance

National Bank Limited formulated befitting credit risk management criteria and strategies for creation of
balanced lending mix in it's portfolio both for short and long term with the bottom line objective to
ensure risk adjusted rate of return in it's credit transactions. Loan and advances in the year 2010
registered an increase by 41.26% to BDT 92,003.56 million from BDT 65,129.29 million in 2009. During
the year 2010, the credit expansion mainly was in bilateral project finance, syndicate finance, export,
import and trade finance as well as SME and Agri finance. The bank as a matter of policy prioritizes to
make lending in the thrust sectors of the economy so as to make distinctive value addition in overall
economic uplift of the country.

Figure 2.8: Remittance over the five years

National Bank Limited exerted highest emphasis on overseas operation and handling a sizeable quantum
of homebound foreign remittance since beginning. By this time, it has earned a reputation as the leader in
providing such remittances not only among the customers but also among the regulators. In 1985 the
Bank established exchange house with equity ownership and management in Oman. Subsequently many
arrangements have been made with different exchange houses and also by establishing subsidiaries
abroad for expanding the Bank's overseas network in places with high concentration of Bangladeshi
expatriates.
National Bank Limited in 1993 introduced Western Union Money Transfer, a global leader in money
transfer services in Bangladesh remained lone agent till 2002. It was a breakthrough in getting prompt
payment of foreign remittances by the beneficiaries which encouraged remitters to use legal channel. As
a contributor of national economy, NBL is relentlessly working to ease the flow of inward foreign
remittance. The bank introduced different products and technology including Online Banking, EFT and
other automated devices for uninterrupted speedy payments. Furthermore, NBL entered into a deal with
ASA, a leading NGO having 3,000 outlets throughout the country and also with Social Islamic Bank
Limited (SIBL) to provide inward remittance products on behalf of NBL. In 2010, foreign remittance
brought through NBL was USD 708.67 million with an increase of USD 62.70 million over the previous
year showing a growth of 9.70%.

2.13. Credit Rating:

Year Long Term Rating Short Term Rating

June, 2010 AA3 ST-1
2009 A1 ST-2

Credit Rating Agency of Bangladesh Limited has upgraded the credit rating of the Bank to AA3
(Pronounced Double A Three) in the Long Term and ST-1 in the Short Term in recognition of its strong
financial position, excellent operational performance, capital adequacy and commendable growth in all
business areas. A Commercial Bank rated AA3 is judged to be of very high quality, is subject to very low
credit risk and has strong capacity to meet its financial commitments. A Commercial Bank rated ST-1 is
considered to have the highest capacity for timely repayment of obligations, and are characterized with
excellent position in terms of liquidity, internal fund generation, and access to alternative sources of
funds. National Bank Limited takes this opportunity to thank its regulators, customers, stakeholders,
staff, and well wishers for achieving this rating.
2.14. Basel-II:
The recommendations on the banking laws and regulations issued by the Basel Committee on banking
supervision under second phase Basel Accords and adopted by the Bangladesh bank is known as Basel.
The purpose of Basel-ii is to create an international standard that banking regulations can use when
creating regulations about how much capital banks need to put aside to guard against the types of
financial and operations risks banks face. Advocates of Basel ii believe that such an international
standard can help protect the international financial system from the types of risks that might arise for
which major banks may be collapsed.
In practices, Basel ii attempts to accomplish this by setting up rigorous risk and capital management
requirements designed to ensure that a bank holds capital reserves appropriate to the risk the bank
exposes itself through its lending and investment practices.

2.15. Different types of service:

2.15.1. Savings Account:

National Bank Limited offers customers a hassle free and low charges savings account through the
branches all over Bangladesh.

Benefits (Condition Apply) Account Opening

Interest rate of 6.00% on minimum monthly

2 copies of recent photograph of account
balance.
holder.
Minimum balance Tk.1000.
Nominee's Photograph.
Maintenance charge yearly Tk. 400.
No hidden costs. Valid photocopy of Voter ID Card.
Standing Instruction Arrangement are
available for operating account

2.15.2. Current Account:

National Bank Limited offers customers current deposit facility for day-to-day business
transaction without any restriction.
Benefits (Condition Apply) Account Opening

 Minimum balance Tk.2000.

 Mini mum maintenance charge yearly  2 copies of recent photograph of account
Tk.800 holder.
 No hidden costs  TIN certificate.
 Standing Instruction Arrangement are  Nominee's Photograph.
available for operating account  Valid photocopy of Voter ID Card
 Easy access to our other facilities.

2.15.3. Short Term Deposit:

National Bank Limited offers interest on customer's short term savings and gives facility to withdraw
money any time.
 Benefits (Condition Apply) Account Opening

 2 copies of recent photograph of account

 Minimum balance Tk. 2000
 Minimum maintenance charge yearly Tk. holder
 Nominee's Photograph
800
 Valid photocopy of Voter ID Card.
 Standing Instruction Arrangement are
available for operating account

2.15.4. Fixed Deposit:

National Bank Limited offers fixed term savings that will scale up your savings amount wtih the time.

Benefits (Condition Apply) Account Opening

Any amount can be deposited. 1 copy of recent photograph of account

Premature encashment facility is holder.
available. Nominee's Photograph.
Overdraft facility available against term
receipt
2.15.5. RFC Deposit:

National Bank Limited gives opportunity to maintain foreign currency account through its Authorized
Dealer Branches. Bangladesh nationals residing abroad or foreign nationals residing abroad or
Bangladesh and foreign firms operating in Bangladesh or abroad or Foreign missions and their expatriate
employees.

Benefits (Condition Apply) Account Opening

 No initial deposit is required to open the
 2 copies of recent photograph of account
account.
 Interest will be offered 1.75% for US holder
 Nominee's Photograph.
Dollar Account, 3.00 % for EURO
 Passport Copy.
Account and 3.25% for GBP Account.  ID of residence in abroad
 They will get interest on daily product
basis on the credit balance (minimum
balance of US$ 1,000/- or GBP 500/- at
least for 30 days) maintaining in the
account.

2.15.6. NFC Deposit:

National Bank Limited gives opportunity to maintain foreign currency account through it's Authorized
Dealer Branches. All non– resident Bangladeshi nationals and persons of Bangladesh origin including
those having dual nationality and ordinarily residing abroad may maintain interest bearing NFCD
Account.

Benefits (Condition Apply) Account Opening

 NFCD Account can be opened for One

month, Three months, Six months and One  2 copies of recent photograph of account
Year through US Dollar, Pound Starling, holder.
Japanese Yen and Euro.  Nominee's Photograph.
 Passport Copy.
 The initial minimum amount of $1000 or
500 Pound Starling or equivalent other
designated currency.

 Interest is paid on the balance maintain in

the Account. This interest is tax free in
Bangladesh.
2.15.7. Monthly Deposit:

National Bank Limited offers monthly savings scheme for its retail customers.

Benefits (Condition Apply) Account Opening

 Monthly installments of deposit will be
 1 copy of your recent photograph.
Tk.500/-, Tk.1,000/- , Tk.2,000/-
 Nominee's Photograph.
,Tk.3,000, Tk.4000/- , Tk.5,000/- and Tk.
10,0000
 Account may be opened for any
installment and term, which is not
changeable.
 A person is allowed to open more than one
account for different installment in a
Branch/ Bank.

Sl no Monthly Installments Amount to be paid on completion of Term

(Taka) 3(Three) years @9.00% 5(Five) years@9.25% 8(Eight) years @9.50%
02 1,000/- 41,255/- 75,791/- 1,41,691/-
03 2,000/- 82,510/- 1,51,583/- 2,83,394/-
04 3,000/- 1,23,765/- 2,27,374/- 4,25,091/-
05 4,000/- 1,65,020/- 3,03,166/- 5,66,788/-
06 5,000/- 2,06,274/- 3,78,957/- 7,08,485/-
07 10,000/- 4,12,549/- 7,57,914/- 14,16,970/-
3.0. Theoretical Aspect:

Financial performance analysis of a company is very important to get an overall view about an
organization. It generally consists of interpretation of balance sheet and interpretation of income
statement. By using these two sources one can perform the ratio analysis and trend analysis which are the
major tools for analyzing the financial performance of a bank.

3.1. Ratio Analysis:

Ratio analysis involves methods of calculating and interpreting financial ratios to assess the bank’s
performance and status. The basic inputs to ratio analysis are the bank’s income statement and balance
sheet.

3.2. Types of Ratio Comparisons:

Ratio analysis is not merely the application of a formula to financial data to calculate a given ratio. More
important is the interpretation of the ratio value. To answer such questions as is it too high or too low? Is
it good or bad? Two types of ratio comparisons can be made: Cross-sectional & Time-series analysis.
Time-series Analysis:

Time-series analysis evaluates performance over time. Comparison of current to past performance, using
ratios, allows the firm to determine whether it is progressing as planned. Additionally, time-series
analysis is often helpful in checking the reasonableness of a firm’s projected financial statements.
Cross-Sectional Analysis:

Cross-Sectional analysis evaluates performance of different firms` financial ratios at the same point in
time.
Combined Analysis:

The most informative approach to ratio analysis is one combines cross-sectional and time-series analysis.
A combined view permits assessment of the trend in the behavior of ratio in relation to the trend for the
industry.
3.3. Cautions about Ratio Analysis:

Before discussing specific ratios, we should consider the following cautions:

 A single ratio does not generally provide sufficient information from which to judge the overall
performance of the firm.
 Be sure that the dates of the financial statements being compared are the same.
 It is preferable to use audited financial statements for ratio analysis.
 Be certain that the data being compared have all been developed in the same way.

3.4. Groups of Financial Ratios:

Financial ratios can be divided into four basic groups or categories:

i. Liquidity ratios
ii. Activity ratios
iii. Debt ratios &
iv. Profitability ratios
Liquidity, activity, and debt ratios primarily measure risk, profitability ratios measure return. In the near
term, the important categories are liquidity, activity, and profitability, because these provide the
information that is critical to the short-run operation of the firm. Debt ratios are useful primarily when the
analyst is sure that the firm will successfully weather the short run.
 Financial
Ratios

Liquidity Activity Debt Ratio Profitability

Ratio Ratio Ratio

Net Inventory Gross

Working Turnover Profit
Capital Degree of The Ability Margin
Indebtedne to Service
Average ss Debt Operating
Collectio Debt
Current Profit
n Period Time
Ratio Ratio Margin
Interest
Average Earned Net Profit
Debt-
Payment Margin
Quick Equity Fixed
Period
(Acid-Test) Ratio Payment Returns on
Ratio Coverag Investmen
Fixed e Ratio t
Asset
Turnover Return on
Equity
Total
Asset Earning
Turnover Per Share

Price/Earn
ing Ratio

Figure 3.1: Groups of Financial Ratios

3.4.1. Analyzing Liquidity:

The liquidity of a business firm is measured by its ability to satisfy its short term obligations as they
come due. Liquidity refers to the solvency of the firm’s overall financial position. The three basic
measures of liquidity are-

3.4.1. a. Net Working Capital:

Net Working Capital, although not actually a ratio is a common measure of a firm’s overall liquidity. A
measure of liquidity is calculated by subtracting total current liabilities from total current assets.

Net Working Capital =Total Current Assets –Total Current Liabilities.

3.4.1. b. Current Ratio:

One of the most general and frequently used of these liquidity ratios is the current ratio. Organizations
use current ratio to measure the firm’s ability to meet short-term obligations. It shows the banks ability to
cover its current liabilities with its current assets.

Current Ratio = Current Asset/Current Liabilities

Standard ratio: 2:1

3.4.1. c. Quick Ratio:

The quick ratio is a much more exacting measure than current ratio. This ratio shows a firm’s ability to
meet current liabilities with its most liquid assets.

Quick Ratio=Cash + Government Securities + Receivable / Total Current Liabilities.

Standard ratio: 1:1

3.4.1. d. Operating Cost to Income Ratio:

It measures a particular Bank’s operating efficiency by measuring the percent of the total operating
income that the Bank spends to operate its daily activities. It is calculated as follows:

Cost Income Ratio = Total Operating Expenses / Total Operating Income

3.4.2. Analyzing Activity:

Activity ratios measure the speed with which accounts are converted into sale or cash. With regard to
current accounts measures of liquidity are generally inadequate because differences in the composition of
a firm’s current accounts can significantly affects its true liquidity.
A number of ratios are available for measuring the activity of the important current accounts which
includes inventory, accounts receivable, and account payable. The activity (efficiency of utilization) of
total assets can also be assessed.

3.4.2. a. Total Asset Turnover:

The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate
sales.
Total Asset Turnover = Sales/ Total Asset

3.4.2. b. Investment to Deposit Ratio:

Investment to Deposit Ratio shows the operating efficiency of a particular Bank in promoting its
investment product by measuring the percentage of the total deposit disbursed by the Bank as long &
advance or as investment. The ratio is calculated as follows:

Investment to Deposit Ratio = Total Investments / Total Deposits

3.4.2. c. Inventory turnover:

A ratio showing how many times a company's inventory is sold and replaced over a period.

Inventory Turnover= Cost of good sold/ Average Inventory

The days in the period can then be divided by the inventory turnover formula to calculate the days it
takes to sell the inventory on hand or "inventory turnover days". This ratio should be compared against
industry averages.
A low turnover implies poor sales and, therefore, excess inventory.
A high ratio implies either strong sales or ineffective buying. High inventory levels are unhealthy because
they represent an investment with a rate of return of zero. It also opens the company up to trouble should
prices begin to fall.
3.4.2. d. Average Collection Period:

Average collection period is useful in evaluating credit and collection policies. This ratio also measures
the quality of debtors. It is arrived at by diving the average daily sales into the accounts receivable
balance:

Average Collection Period=Accounts receivable/ (Credit sales/365)

A short collection period implies prompt payment by debtors. It reduces the chances of bad debts.
Similarly, a longer collection period implies too liberal and inefficient credit collection performance. It is
difficult to provide a standard collection period of debtors.

3.4.2. e. Average Payment Period:

Average payment period ratio gives the average credit period enjoyed from the creditors that means it
represents the number of days by the firm to pay its creditors. A high creditor’s turnover ratio or a lower
credit period ratio signifies that the creditors are being paid promptly. This situation enhances the credit
worthiness of the company. However a very favorable ratio to this effect also shows that the business is
not taking the full advantage of credit facilities allowed by the creditors. It can be calculated using the
following formula:

Average Payment Period=Accounts payable/ Average purchase per day

3.4.2. f. Fixed Asset Turnover:

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability
to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) -
net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective
in using the investment in fixed assets to generate revenues. The fixed-asset turnover ratio is calculated
as:

Fixed Asset Turnover=Gross Turnover/ Net fixed assets

3.4.3. Analyzing Debt:

The debt position of that indicates the amount of other people’s money being used in attempting to
generate profits. In general, the more debt a firm uses in relation to its total assets, the greater its financial
leverage, a term use to describe the magnification of risk and return introduced through the use of fixed-
cost financing such as debt and preferred stock.

3.4.3. a. Debt Ratio:

The debt ratio measures the proportion of total assets provided by the firm’s creditors.

Debt Ratio = Total Liabilities / Total Assets

3.4.3. b. Equity Capital Ratio:

The ratio shows the position of the Bank’s owner’s equity by measuring the portion of total asset
financed by the shareholders invested funds and it is calculated as follows:

Equity Capital Ratio = Total Shareholder’s Equity / Total Assets

The ability to service debt:
It refers the ability of a firm to meet the contractual payments required on a scheduled basis over the life
of a debt. The firm’s ability to meet certain fixed charges is measured using coverage ratios.

3.4.3. c. Time Interest Earned Ratio:

This ratio measures the ability to meet contractual interest payment that means how much the company
able to pay interest from their income.

Time Interest Earned Ratio=EBIT/ Interest

3.4.4. Analyzing Profitability:

These measures evaluate the bank’s earnings with respect to a given level of sales, a certain level of
assets, the owner’s investment, or share value. Without profits, a firm could not attract outside capital.
Moreover, present owners and creditors would become concerned about the company’s future and
attempt to recover their funds. Owners, creditors, and management pay close attention to boosting profits
due to the great importance placed on earnings in the marketplace.

3.4.4. a. Operating Profit Margin:

The Operating Profit Margin represents what are often called the pure profits earned on each sales dollar.
A high operating profit margin is preferred. The operating profit margin is calculated as follows:

Operating Profit Margin = Operating Profit / Sales

3.4.4. b. Net profit Margin:

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including
taxes, have deducted. The higher the net profit margin is better. The net profit margin is calculated as
follows:

Net profit Margin = Net profit after Taxes / Sales

3.4.4. c. Return on Asset (ROA):

Return on asset (ROA), which is often called the firms return on total assets, measures the overall
effectiveness of management in generating profits with its available assets. The higher ratio is better.

Return on Asset (ROA) = Net profit after Taxes / Total Assets

3.4.4. d. Return on Equity (ROE):

The Return on Equity (ROE) measures the return earned on the owners (both preferred and common
stockholders) investment. Generally, the higher this return, the better off the owners.

Return on Equity (ROE) = Net profit after Taxes / Stockholders Equity

3.4.4. e. Price/ Earnings ratio (PE ratio):

The Price/ Earnings ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share
relative to the income or profit earned by the firm per share.

P/E ratio - Price per share / earnings per share

3. 4.4. f. Earnings per share (EPS):

Earnings per share (EPS) are the earnings returned on the initial investment amount.

EPS= Net income/no. of share outstanding

4.0. Quantitative Analysis of National Bank Limited:
Ratio Analysis:

4.1. Analyzing Liquidity Ratio: The liquidity of a business firm is measured by its ability
to satisfy its short term obligations as they come due. Liquidity refers to the solvency of the firm’s overall
financial position. The three basic measures of liquidity are-
a. Current ratio:

The current ratio, one of the most commonly cited financial ratios, measures the firm’s ability to
meet its short term obligations. It is expressed as

Current Ratio=Current Asset/Current Liabilities

Current Ratio
Year 2007 2008 2009 2010
1.12 1.23 1.01 1.08
Source: Annual Report of NBL

Graphical Presentation:

Figure 4.1 Current Ratio

Interpretation:

In this analysis it has seen that in 2008 NBL’s current ratio was highest and 2009 it was lowest among all
the year. Normally banks maintain current ratio 1:1 and we have seen that NBL maintain current ratio
more than 1:1 ratios. It indicates that NBL’s liquidity position is not bad.
 b. Net Working capital :

Net working capital, although not actually a ratio is a common measure of a firm’s overall
Liquidity a measure of liquidity ratio calculated by

Net Working capital=Current Asset-Current Liabilities

Ne Working capital
Year 2007 2008 2009 2010
25197646993 29917888519 14723220089 26874345787
Source: Annual Report of NBL

Graphical Presentation:

Figure 4.2: Net Working Capital

Interpretation:
Net working capital of NBL is fair, in 2008 it is decreased but in 2009 it is improving. However, the bank
is able to meet up its current obligations.
 c. Cost Income Ratio:

It measures a particular Bank’s operating efficiency by measuring the percent of the total
operating income that the Bank spends to operate its daily activities. It is calculated as follows:

Cost Income Ratio=Total operating Expenses/Total Operating Income

Cost Income ratio

Year 2007 2008 2009 2010
49.17% 41.03% 47.96% 31.62%
Source: Annual Report of NBL

Graphical Presentation:

Figure 4.3 Cost Income Ratios

Interpretation
We know that this ratio measures the operating efficiency of the bank by measuring the portion if the
total operating costs relative to the total operating income of that bank and the higher the ratio, the lower
the operating efficiency. In 2008 the operating cost of NBL is low but in 2009 it is high. So it can be said
that the efficiency of the NBL has been unable to minimize its operating cost during the time period. But
in year 2010 Cost Income Ratios of NBL lower than previous few years. In 2010 NBL’s Cost Income
Ratio was lowest it indicates positive sign.
4.2. Analyzing Activity Ratio:
Activity ratios measure the speed with which accounts are converted into sale or cash. With regard to
current accounts measures of liquidity are generally inadequate because differences in the composition of
a firm’s current accounts can significantly affects its true liquidity.
A number of ratios are available for measuring the activity of the important current accounts which
includes inventory, accounts receivable, and account payable. The activity (efficiency of utilization) of
total assets can also be assessed.

a. Total Asset Turnover Ratio:

The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate
sales.

Total Asset Turnover= Operating Income/Total Asset

Total Asset Turnover

Year 2007 2008 2009 2010
.077 .073 0.071 0.097
Source: Annual Report of NBL

Graphical Presentation:

Figure 4.4 Total Asset Turnovers

Interpretation: The banks total asset turnover ratio fluctuates from .077-.097 which means 7.7 to 9.7
times. We know the greater the total asset turnover; it is more efficient. In year 2007 to 2009 total asset
turnover ratio of NBL decreasing but at 2010 it’s higher than previous which is better for NBL.
 b. Investment to Deposit ratio:
Investment to Deposit Ratio shows the operating efficiency of a particular Bank in promoting
its investment product by measuring the percentage of the total deposit disbursed by the Bank as
long & advance or as investment. The ratio is calculated as follows:

Total investment/Total Deposit

Investment To Deposit Ratio

Year 2007 2008 2009 2010
.162 .160 .152 0.244
Source: Annual Report of NBL

Graphical Presentation:

Figure 4.5 Investment to Deposit ratio

Interpretation
Investment to deposit ratio shows that which amount of deposit is used to as investment. NBL’s
investment to deposit ratio is decreasing in years 2007 to 2009 which conveys negative signal for the
bank. But in 2010 it’s again increasing.

4.3. Analyzing Debt Ratio:

The debt position of that indicates the amount of other people’s money being used in attempting
to generate profits. In general, the more debt a firm uses in relation to its total assets, the greater
its financial leverage, a term use to describe the magnification of risk and return introduced
through the use of fixed-cost financing such as debt and preferred stock.

a. Debt Ratio:

The debt ratio measures the preparation of total assets provided by the firm’s creditors.

Debt ratio= Total Liabilities/Total Assets

Debt Ratio
Year 2007 2008 2009 2010
.92 .91 .90 0.855
Source: Annual Report of NBL

Graphical Presentation:

Figure 4.6 Debt Ratio

Interpretation:

The debt ratio of the firm’s decreasing from .092 to 0.855 .Debt ratio indicates how much portion of total
assets is financed by the debt. When debt capital increases the cost of capital also increase and which
decrease the firm’s value. In case of decreasing debt capital the situation is vice versa. So every
organization should give more emphasize on equity capital than debt capital. So lower the ratio, it is less
risky. So the bank works hard to decrease this ratio.

b. Time Interest Earned Ratio:

The times interest earned ratio, sometimes called the interest coverage ratio, measures the firm’s ability
to make contractual interest payments.

Time Interest Earned Ratio =Earnings before interest & Taxes/Interest

Time Interest Earned Ratio Interest Earned Time Ratio

Year 2007 2008 2009 2010
TIE ratio 1.39 1.29 1.37 1.716
Source: Annual Report of NBL

Graphical Presentation:

Figure 4.7 Time Interest Earned Ratio

Interpretation:

From the analysis it has seen that NBL’s TIE ratio were fluctuating and in 2010 it was highest which
indicates positive sign that mans NBL’s interest payment capacity were increasing trend.
4. 4. Analyzing Profitability:

These measures evaluate the bank’s earnings with respect to a given level of sales, a certain level
of assets, the owner’s investment, or share value. Without profits, a firm could not attract outside
capital. Moreover, present owners and creditors would become concerned about the company’s
future and attempt to recover their funds. Owners, creditors, and management pay close
attention to boosting profits due to the great importance placed on earnings in the marketplace.

a. Net Profit Margin

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including
taxes, have deducted. The higher the firm’s net profit margin is better. The net profit margin is a
commonly cited measure of the company’s success with respect to earnings on sales.

Net Profit Margin=Net profit after tax/operating income

Net Profit Margin

Year 2007 2008 2009 2010

2007 .28 .29 .32 0.530

Source: Annual Report of NBL

Graphical Presentation:

Figure 4.8 Net Profit Margin

Interprétation: In the year 2007 to 2010 NBL’s net profit margin increasing year by year which
indicate that the bank’s operating result were improving. In this figure it has seen that in 2010 NBL’s net
profit margin was 53% which indicates very good operating result of the bank.
b. Return on Asset (ROA):

The return on asset (ROA), which is often called the firm’s return on total assets, measures the overall
effectiveness of management in generating profits with its available assets. The higher the ratio is better.

Return on Asset (ROA) =Net Profit after tax/Total Asset

Return On Asset
Year 2007 2008 2009 2010
2.40 2.36 2.52 5.17
Source: Annual Report of NBL

Graphical Presentation:

Figure 4.9 Returns on Asset

Interpretation:

From the analysis it has seen that NBL’s Returns on Asset were gradually increasing and in 2010 it was
highest 5.17 times that means that year bank utilize their assets properly compare to other years.
 c. Return on Equity (ROE):

The return on equity measures the return earned on the owner’s (both preferred and common
stockholders’) investment. Generally the higher the return the better of the owner’s.

Return on Equity=Net Profit after Tax/ Shareholders equity

Return on Equity
Year 2007 2008 2009 2010
27.53 28.38 27.53 35.9%
Source: Annual Report of NBL

Graphical Presentation:

Figure 4.10 Returns on Equity

Interpretation:

The banks return on equity deviates from 27.53 to 35.90 in the preceding 4 years and the highest value
can be observed in year 2010 and the lowest value can be observed during the EY 2009, which is not
desirable. So the management should work hard to increase the return associated with equity.
 d. Earnings per Share

The firm’s Earning per share (EPS) are generally of interest to present or prospective stockholders and
management. The Earning per share represent the number of dollars earned on behalf of each outstanding
share of common stock. The earnings per share is calculated as follows

Earnings per Share =Earnings available for common stock holder/No of shares of common stock
outstanding

Earning Per Share

Year 2007 2008 2009 2010
EPS 6.61 5.33 4.69 15.55
Source: Annual Report of NBL

Graphical Presentation:

Figure 4.11 Earnings per Share

Interpretation

The bank’s earnings per share is increasing from 6.61 to 15.55 But in 2009 EPS was decrease from 6.11
to 4.69 but in 2010 again NBL’s EPS remain increase. Therefore, earning per share of NBL should be
increase to attract investors.
 e. Price Earnings Ratio-

The price or earning (P/E) ratio is commonly used to assess the owners’ appraisal of share value. The P/E
represents the amount investors are willing to pay for each dollar of the firm’s earnings. The higher the
P/E ratio, the greater the investor confidence in the firm’s future. The price Earning (P/E) ratio is
calculated as follows

Price Earning Ratio=Market price per share of common stock/Earning per share

Price Earnings Ratio (times)

Year 2007 2008 2009 2010
P/E 28 13.95 13.77 12.32
Source: Annual Report of NBL

Graphical Presentation:

Figure 4.11 Price Earnings Ratio

Interpretation:

The firm’s price earnings ratio fluctuates from 28.03 to 12.32 times in the preceding 4 years. The bank’s
price earning ratios were decreasing trend. It indicates bank’s market price of share were not too high,
any investor can invest in NBL’s share.
5.0. Comparative Quantitative Analysis of NBL with MBL & UBL:

5.1. Liquidity Ratio:

a. Current Ratio

Current Ratio
Year NBL UBL MBL
2008 1.23 1.16 1.10
2009 1.01 1.15 1.04
2010 1.08 1.12 1.05
Source: Annual Report of NBL, UBL & MBL
Graphical Presentation:

Figure 5.1: Current Ratio

Interpretation

The current ratio measures a firm’s liquidity by measuring the portion of its current asset relative to its
current liabilities and the higher the ratio, the higher the liquidity of the firm. So, after observing the
graph shown above, it can be said that all the banks have the standard level of liquidity position. In 2010
UBL has the highest current assets (1.12) than NBL (1.08) & MBL (1.05).
 b. Operating Cost to Income Ratio:

Operating Efficiency Ratio

Year NBL UBL MBL
2008 41.03% 45.10% 44.15%
2009 47.96% 45.42% 42.35%
2010 31.62% 46.1% 40.38%
Source: Annual Report of NBL, UBL & MBL

Graphical Presentation:

Figure 5.2: Operating Cost to Income Ratio

Interpretation

Cost to income ratio measures the operating efficiency of a particular bank by measuring the portion of
the total operating costs relative to the total operating income of that bank and the higher ratio, the lower
the operating efficiency. So after observing the figure drawn above, this ratio for NBL and UBL is
fluctuating and this ratio for MBL is decreasing year by year. In 2010 NBL (31.62%) has the lowest cost
to income ratio than UBL (46.10) and MBL (40.38%). So it can be said that NBL is in the better position.
5.2. Analyzing Activity:

a. Total Asset Turnover Ratio:

Total Asset Turnover

Year NBL UBL MBL
2008 0.073 0.07 0.051
2009 0.071 0.06 0.053
2010 0.097 0.03 0.055
Source: Annual Report of NBL, UBL & MBL

Graphical Presentation:

Figure 5.3: Total Asset Turnover Ratio

Interpretation:

After observing the given graph, over the three years the total asset turnover ratio of MBL is in same
level. On the other hand, UBL’s total assets turnover ratio is decreasing and NBL’s turnover ratio is
increasing. So in 2010 the turnover ratio of NBL (0.097 times) is in better position than UBL (0.055
times) and MBL (0.03 times).
 b. Investment to Deposit Ratio:

Investment To Deposit Ratio

Year NBL UBL MBL
2008 0.160 0.22 0.15
2009 0.152 0.38 0.67
2010 0.244 0.30 .15
Source: Annual Report of NBL, UBL & MBL

Graphical Presentation:

Figure 5.4: Investment to Deposit Ratio

Interpretation:

As we know that the ratio measures the bank’s efficiency in promoting its investment products the
customer and in using its funds collected from the customers to by measuring the percentage of total
deposit that the bank has disbursed as loan and advances and the higher the ratio the higher the banks
efficiency and vice-versa. All the banks’ investment to deposit ratio is fluctuating over the year. In 2010
the investment to deposit ratio of UBL (30%) is in better position than MBL (15%) and NBL (24%).
5.3. Analyzing Debt

a. Debt Ratio:
Debt Ratio
Year NBL UBL MBL
2008 0.91 0.94 0.94
2009 0.90 0.91 0.94
2010 .855 0.90 0.92
Source: Annual Report of NBL, UBL & MBL
Graphical Presentation:

Figure 5.5: Debt Ratio

Interpretation

Every organization should give more emphasize on equity capital than debt capital. Here, we can see that
the Mercantile Bank has all most same level of debt ratio over the year 2008 to 2010. On the other hand,
the debt ratio for NBL & UBL is decreasing. In 2010 the debt ratio for NBL (58%) was lower than UBL
(90%) and MBL (92%).
5.4. Analyzing Profitability:

a. Net Profit Margin:

Net Profit Margin
Year NBL UBL MBL
2008 0.29 0.28 0.22
2009 0.32 0.24 0.23
2010 0.53 0.31 0.30
Source: Annual Report of NBL, UBL & MBL

Graphical presentation:

Figure 5.6: Net Profit Margin

Interpretation

From the above graph, it can be said that the MBL and NBL profit margin is increasing year to year and
UBL’s profit margin is fluctuating. In 2010 NBL’ (53%)s profit margin is in better position than UBL
(31%) and MBL (30%).
b. Return on Asset:

Return On Asset
Year NBL UBL MBL
2008 2.36 1.95 1.10
2009 2.52 1.54 1.22
2010 5.17 1.37 1.64
Source: Annual Report of UBL & MBL

Graphical Presentation:

Figure 5.7: Return on Asset

Interpretation:

After having a careful view on the graph, over the three years NBL has maximum return on asset than
UBL & MBL. After the comparison, NBL is more efficient to generate additional ROA than the UBL &
MBL.
 c. Return on Equity (ROE):

Return on Equity
Year NBL UBL MBL
2008 28.38% 30.86% 17.03%
2009 27.53% 17.81% 18.80%
2010 35.9% 23.12% 19.84%
Source: Annual Report of UBL & MBL

Graphical Presentation:

Figure 5.8: Return on Equity (ROE)

Interpretation:

From the above graph, it can be said that the ROE of UBL is decreasing year to year and MBL’s ROE is
increasing and NBL’s ROE is increasing year by year. In 2010 NBL’s (35.90%) ROE is in better position
than MBL (19.84%) & UBL (23.12%).
 d. Earnings Per Share

Earnings Per Share(Consider face value taka 10)

Year NBL UBL MBL
2008 5.33 14.25 2.85
2009 4.69 6.91 3.06
2010 15.55 5.32 4.10

Source: Annual Report of UBL & MBL

Graphical Presentation:

Figure 5.9: Earning Per Share (EPS)

Interpretation:

In this figure we have seen that, the UBL’s EPS is Decreasing, MBL’s and NBL’s EPS is increasing year
by year. In 2010 the earnings per share for NBL was tk 15.55, for UBL was tk 5.32 and for MBL was tk
4.1. So it can be said that NBL is in better position than UBL and MBL.
Price Earning Ratio:-

Price Earning Ratio (Times)

Year NBL UBL MBL
2008 13.95 23.81 12.21
2009 13.77 20.96 12.88
2010 12.32 20.32 14.14
Source: Annual Report of UBL & MBL

Graphical presentation:

Figure 5.10: Price Earning Ratio

Interpretation: In this figure, we have seen National Bank P/E ratio is gradually decreasing which is
negative sign for the Bank. In 2010 we have seen that UBL’s (20.32 times) P/E ratio is better position
than NBL ((12.32 times) and MBL (14.14 times).
6.1. Major Findings

 In the analysis it has seen that in 2008 NBL’s current ratio was highest and 2009 it was lowest
among the years. Normally banks maintain current ratio 1:1 and it has seen that NBL maintain
current ratio more than 1:1 ratios. It indicates that NBL’s liquidity position is not bad.
 In 2010 NBL’s Cost Income Ratio was lowest it indicates positive sign. We know that the
lowest the ratio, the higher the operating efficiency.
 The greater the total asset turnover; it considered more efficiency. From the analysis it has
seen that in year 2007 to 2009 total asset turnover ratio of NBL decreasing but at 2010 it’s
higher than previous which indicate better efficiency of NBL.
 NBL’s investment to deposit ratio is decreasing in years 2007 to 2009 which conveys negative
signal for the bank. But in 2010 it’s again increasing.

 From the analysis it has seen that NBL~s debt ratio were satisfactory range in compare to
other banks and also it was decreasing trend.
 In the year 2007 to 2010 NBL’s net profit margin increasing year by year which indicate that
the bank’s operating result were improving. it has seen that in 2010 NBL’s net profit margin
was 53% which indicates very good operating result of the bank.
 From the analysis it has seen that NBL’s Returns on Asset were gradually increasing and in
2010 it was highest 5.17 times that means that year bank utilize their assets properly compare
to other years.
 The bank’s earnings per share is fluctuating from tk6.61 to tk15.55 and in 2010 NBL’s EPS
were highest. It indicates positive sign.
 From the analysis it has seen that NBL’s TIE ratio were fluctuating and in 2010 it was highest
which indicates positive sign that mans NBL’s interest payment capacity were increasing
trend.
 It has also seen that NBL’s price earning ratios were decreasing trend. It indicates bank’s
market price of share was not too high, and it is less risky. Investor confidence is low.

 The Total Assets Turnover of NBL is higher than both of Uttara Bank & Mercantile bank.that
means NBL efficienly used their total assets incompare to Uttara Bank & Mercantile bank.
 Over the three years NBL has maximum return on asset than UBL & MBL. After the
comparison, NBL is more efficient to generate additional ROA than the UBL & MBL.

 Finally, it has seen that National Bank Ltd Financial performance in 2010 were very good.
6.2 Conclusion:

National Bank Limited (NBL) setting new standards in the banking arena in the time of turbulent
economic conditions. As part of the long term financial reform and modernization plan of the
government, the bank had been converted into a public limited company. NBL helps to mobilize the
resources to stay strong in the key areas of operation. In the areas of treasury operation, NBL remains the
key player in the country’s foreign exchange and money market enhancing profitability through careful
pricing and assessment of risk and return on investment, the treasury dealing is being strengthened to
facilitate transactions requiring more sophisticated products and services for larger institutional and
corporate clients. Though it has a wide range of network and confidence from the customers but it has
some problems those problems reduce it income .It is PLC but the authority is not that flexible and it
takes time to take decision.

From the practical point of view I can declare boldly that I really have enjoyed my Internship at this bank
from the very first day. Moreover, this internship program that is mandatory for my B.B.A program,
although short-date, obviously has helped my farther thinking about my career. I have tried my soul to
incorporate the research report with necessary relevant information in my report.

Although excellence in Banking is the Moto of National Bank Limited meeting the demand of the
discerning customer is not the sole objective of the Bank. Customer relation should be increased to give
appropriate service to them. And treat them as an asset of the company. Despite of these problems
National Bank Limited trying to improve this condition and take some necessary measure to improve its
condition.
6.3. Some Recommendation for National Bank Limited

It is not unexpected to have problems in any organization. There must be problems to operate an
organization. But there must be remedies to follow. The following commendations can be suggested to
solve the above mentioned problems:

 As we have seen that Current Ratio of NBL was satisfactory range so our first
recommendation is, NBL should maintain this ratio for smoothly operate their bank.
 As, Total Asset Turnover shows the efficiency of the company, NBL should also try to
improve their Total asset turnover although their total assets turnover is higher than that
of Uttara Bank & Mercantile bank.
 As, NBL’s Time interest ratio is not satisfactory they should increase their EBIT or
reduce the debt capital in order to smoothly satisfy the interest obligations.
 As, we have seen debt to equity ratio of NBL is satisfactory range they should try to
maintain this ratio.
 Although NBL net profit margin is increasing trend they try to more for increasing their
operating efficiency.
 From the trend analysis we have seen ROE of NBL is decreasing trend. They should try
improving this.
 In our country the average P/E ratio of banking industry is 11times at this time and NBL
P/E ratio is 12.32 times which indicates good sign. They should try to maintain this ratio.
 From the trend analysis we have seen operating cost of NBL is decreasing year by year,
so they should try to keep it up otherwise it will adversely affect the profitability.
BIBLIOGRAPHY

i. Books
 “Managerial Finance”, Ninth Edition – Lawrence J. Gitman
 “Financial Management” – M Y Khan & P K Jain

ii. Publications
 Booklets published by National Bank.
 National bank Bangladesh annual report 2007-2010.
 Chowdhury, T.A., Modes of Payment in International Trade, Reading Materials on International
Trade & Finance (E-102), BIBM, 2000.
 Varshney P.N. and Sarker H.S., Banking Law and Practice, 19 th edition, Sultan Chan & Sons,
Education Publishers, New Delhi, 2001
 CIB Manual of Bangladesh Bank, 2006

iii. Internet
 Web Site: www.nationalbank-bd.com
 Web Site: www.mercantilebank.com
 Web Site: www.uttarabank.com