Chapter 1

Introduction

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1.1 Introduction
Bangladesh's financial sector is dominated by the banking sector as we have an under developed
capital market. The supremacy of the banking sector makes the financial sector vulnerable on the
one hand, but highlights the vital importance of the sector in resource mobilization and economic
growth, on the other. The role of the banking sector in accelerating growth is reliant upon the
soundness and depth of the sector.
The capital structure is how a firm finances its overall operations and growth by using different
sources of funds. Debt comes in the form of bond issues or long-term notes payable, while equity
is classified as common stock, preferred stock or retained earnings. Short-term debt such as
working capital requirements is also considered to be part of the capital structure.

1.2 Objective of the Study

General objectives:

 To analyze the impact of capital structure and corporate attributes on corporate financial
performance using annual reports starting from 2013 to 2017.
Secondary Objectives

 To recognize the various product and services of NRB Commercial Bank

 To know the general banking activities of NRB Commercial Bank.
 To get an overview of the existing credit approval and monitoring process of NRB
Commercial Bank Ltd.
 To suggest recommendations on the basis of findings.

1.3 Scope of the Study

The study is only related to NRB Commercial Bank Limited and it mostly emphasizes on the
capital structure on bank’s profitability and also the study is based on the annual reports of NRB
Commercial Bank Ltd starting from 2013 to 2017. Moreover, it focuses on the “Ratio Analysis”
of NRB Commercial Bank Ltd.

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1.4 Methodology of the Study
Data Collection
For conducting the study I have used secondary data. The sources are given below:
Secondary sources of data
 Annual Report of NRB Commercial Bank Ltd
 Record of credit disbursements
 Bank websites
Data Analysis
 To attain the objectives of this study collected data have been plotted in the table and
analyzed by using ratios.
 Tabular data were shown further in graphical charts
 Desired data were gathered from the aforementioned sources and then were analyzed to
get an overview of the capital structure.

1.5 Limitations of study

From the intention to make the report realistic and properly accepted, this report has been
conducted. However, many problems appeared in the way of conducting the study. All the given
information is not fully complete. Some of the information is company secret and important and
only provided to some persons to know about it. However, I try my best to settle and pass up the
Report before the due date and hoping it was satisfactory. The study considers following
limitations:
 Lack of in-depth knowledge and analytical ability for writing such report.
 Another limitation of this study is bank’s policy of not disclosing some data and
Information for obvious reason, which could be very much useful.
 In case of the secondary data collection, there were very few secondary information was
available. There were few supporting books, report, journals etc.

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 Chapter 2

Organizational Overview

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2.1 History of NRB Commercial Bank Limited
NRB Commercial Bank Limited (NRBC Bank) having its Registered Office at 114 Motjheel
Commercial Area, Dhaka-1000, Bangladesh, was incorporated on February 20, 2013 as a Public
Limited Company under the Companies Act, 1994 and also is governed by the Bank Company
Act 1991 with Authorized Capital of Tk.10000 million and having strong capital base of
Tk.444.60 core (Paid up Capital) by converting the hard earned foreign currency of fifty three
qualified NRBs from business persons, community leaders, scientists, educationists, living in
across the globe which includes USA, Canada, UK, Russia, Italy, Germany, UAE and Kuwait.
NRBC Bank started its journey from 2 April 2013 after getting permission dated 10 March 2013
as a scheduled Bank. The Bank commenced its business on April 18, 2013. That very first day
the first branch of the Bank was inaugurated at Motijheel Commercial Area. Presently NRBC
Bank has 68 Branches in rural and urban area of Bangladesh and, recently, formed a subsidiary
company NRBC Bank Securities Limited.
NRBC Bank gets direction in its corporate governance practices mainly from two regulatory
bodies:
 Bangladesh Bank (Central Bank of Bangladesh) and
 Bangladesh Securities and Exchange Commission (BSEC) as an incorporated
organization in Bangladesh

2.2 Vision
“To become a peerless bank” in terms of providing efficient & innovative banking services,
safeguarding depositor’s interest, fulfilling shareholders desire, supporting economic growth of
the country with particular attention to channelize regular inflow of foreign remittance of
Bangladeshi expatriates working abroad and also the inflow of idle and less remunerative fund
held with wealthy NRBs.

2.3 Mission
 The bank shall devote in creating confidence for investment among the Bangladeshi
expatriates offering them desired services, attractive profitability and secured investment
through our various financial products.
 The bank shall create extra-ordinary opportunities to the intending wage earners in
getting jobs abroad through our dependable and reliable intermediary services.
 The bank shall arrange need based effective training and education programme for the
intending FC wage earners of Bangladesh to survive against competitors of other
countries.
 The bank shall deliver service excellence through providing existing & innovative
products in cost & time efficient manner, to its all retail & corporate customers.

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  The bank shall constantly focus and monitor the changing needs and aspirations of its
customers, to develop new and reengineer the process of service delivery.
 The bank shall always be vigilant to maintain banking business risks within its tolerable
limit in order to protect depositor’s interest and ensure highest return to the shareholders.
 The bank shall be the forerunner in exploiting new sources of fund such as assets
securitization, issuance of mutual fund etc., for addressing the needs of newly emerged
financing areas such as SME financing, factoring, micro finance, IT based products,
housing financing etc. with a view to furthering the economic growth of the country.
 The bank shall create an enabling environment, adopt and nurture carefully a team-based
culture where people will be motivated to accept banking challenges and to face other
competitors.

2.4 Strategic Objectives

 Create opportunities for NRBs to invest their earnings, utilize their professional expertise
for development of Bangladesh.
 Channelize idle and less remunerative fund of NRB.
 Attract FDI of NRBs through diverse products and projects.
 Balanced and sustainable growth.
 Maximization of Shareholders’ Wealth.
 Accomplish the long cherished desire and dream of NRBs to have a bank of their ‘own’.
 Excellence of manpower efficiency through attractive compensation package, promoting
staff moral through training, development and career plan.
 To invest in the thrust sector for the overall economic development, technology transfer
with the help of the well educated professionals and experienced sponsors of the bank to
have a green banking practice.
 Ensure best corporate Social Responsibility (CSR) practice.
 Promise to make the world of NRBC Bank a little bigger, everyday.

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2.5 Organizational Hierarchy

MANAGING DIRECTOR
Additional Managing Director
Deputy Managing Director
Senior Executive Vice President
Executive Vice President
Senior Vice President
Vice President
First Vice President
Assistant Vice President
First Assistant Vice President
Principal Officer
Senior Executive Officer
Executive Officer
Probationary Officer
Officer
Assistant Officer
Junior Officer
Trainee Junior Officer

2.6 Products and Services

Asset Products
 Bill
 Discounting Term loan Overdraft
 Cash
 Credit
 Hire
 Purchase
 L.T.R
 Green
 Finance
 Import
 Finance

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Liability Products
 Priority Deposit Scheme
 Monthly Benefit Scheme
 Fixed Deposit Receipt
 Millionaire Scheme
 Corporate Money Maker
 Triple Benefit Deposit Scheme (TBDS)
 Lakhpoti Deposit Scheme
 Shohoj Sanchay Deposit
Services
 Internet Banking
 SMS Banking
 ATM Card
 Dual Currency Card
 Locker
 Utility Bill Services

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 Chapter 3

Data Analysis and Findings

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3.1 Capital Structure of NRB Commercial Bank Ltd.
Capital serves as a buffer to absorb unexpected losses as well as to fund ongoing activities of the
bank. The Capital structure of the bank is categorized into two tiers.
1. Tier-1 Capital (Going-concern capital)
a) Common Equity Tier-1
b) Additional Tier – 1
2. Tier- 2 Capital (Gone- concern capital)

3.1.1 Tier-1 Capital (Going-concern Capital)

Going concern Capital is the capital which allows a bank to continue its activities and keep it
solvent. Going- Concern Capital/Common Equity Tier 1 (CET1) capital shall consist of sum of
paid up capital, statutory reserve, general reserve, retained earnings and minority interest in
subsidiaries after netting regulatory adjustments applicable on CET1 as mentioned in RBCA
guideline.
 Paid up Capital: Issued, subscribed and fully paid up share capital of the bank. It
represents paid up capital, right shares as well as bonus shares issued from time to time.
 Statutory Reserve: As per Section 24(1) of the Bank Companies Act, 1991, an amount
equivalent to 20% of the profit before taxes for each year of the bank has been transferred
to the statutory reserve fund.
 General reserve : Any reserve created through Profit and Loss Appropriation Account
for fulfilling any purpose
 Retained Earnings: Amount of profit retained with the banking company after meeting
up all expenses, provisions and appropriations.
Additional Tier 1 (AT1) capital shall consist of Minority Interest i.e. AT1 issued by consolidated
subsidiaries to third parties (for consolidated reporting only). The bank does not hold any
Additional Tier 1 (AT1) capital.

3.1.2 Tier-2 Capital (Gone-concern Capital)

Gone-Concern Capital is the capital which will absorb losses only in a situation of liquidation of
the bank. Gone-Concern Capital/ Tier 2 (CET1) capital shall consist of sum of General
Provisions, Subordinated debt / Instruments issued by the banks that meet the qualifying criteria
for Tier 2 capital.
 General provision maintained against unclassified loans and off-balance sheet exposures:
As per BB directive, amount of provision maintained against unclassified loans and off-
balance sheet exposures as of the reporting date has been considered.

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 Capital Measure Matrix
Million Taka Otherwise Specified

Particulars 2017 2016 2015 2014 2013

Risk Weighted 49,922.72 45,942.09 28,768.03 16,415.32 5,535.00
Assets
Core Capital 6,235.42 5,690.30 5,106.67 4,581.57 4,395.88
(Tier I)
Supplementary 545.13 510.30 338.09 214.00 55.88
Capital (Tier
II)
Total Capital 6,780.55 6,200.60 5,444.76 4,760.57 4,451.76

3.2 Financial Data Analysis

3.2.1 Long Term Debt to Total Asset Ratio

Long Term Debt to Total Asset Ratio is the ratio that represents the financial position of the
company and the company’s ability to meet all its financial requirements. It shows the
percentage of a company’s assets that are financed with loans and other financial obligations that
last over a year. As this ratio is calculated yearly, decrease in the ratio would denote that the
company is doing well, and is less dependent on debts for their business needs. Long Term Debt
to Total Asset Ratio of NRB Commercial Bank Ltd for 2013 to 2017 are as follows:
Table 3.2.1: LTDTA

Year Long Term Debt to Total Asset Ratio

2017 28%
2016 24%
2015 26%
2014 29%
2013 37%

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 Long Term Debt to Total Asset Ratio
40.00%
35.00%
30.00%
Percentage

25.00%
20.00%
37.00%
15.00% 29.00% 28.00%
26.00% 24.00%
10.00%
5.00%
0.00%
2013 2014 2015 2016 2017

Year
Long Term Debt Ratio

Figure 3.2.1: LTDTA

3.2.2 Short Term Debt to Total Assets Ratio

The short-term debt-to-total-assets ratio is a measurement representing the percentage of a
corporation's assets financed with short-term debt, which encompasses loans or other debt
obligations lasting less than one year. This ratio provides a general measure of the short-term
financial position of a company, including its ability to meet its financial obligations for
outstanding loans. Short Term Debt to Total Asset Ratio of NRB Commercial Bank Ltd for 2013
to 2017 are as follows:
Table 3.2.2: STDTA

Year Short Term Debt to Total Asset Ratio

2017 72%
2016 75%
2015 74%
2014 63%
2013 48%

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 Short Term Debt to Total Asset Ratio
80.00%

70.00%

60.00%
Percentage

50.00%

40.00%
74.00% 75.00% 72.00%
30.00% 63.00%
48.00%
20.00%

10.00%

0.00%
2013 2014 2015 2016 2017

Year

Short Term Debt Ratio

Figure 3.2.2: STDTA

3.2.3 Debt Ratio

The debt ratio is a financial ratio that measures the extent of a company’s leverage. The debt
ratio is defined as the ratio of total debt to total assets, expressed as a decimal or percentage. It
can be interpreted as the proportion of a company’s assets that are financed by debt.
A ratio greater than 1 or 100% shows that a considerable portion of debt is funded by assets. In
other words, the company has more liabilities than assets. A high ratio also indicates that a
company may be putting itself at a risk of default on its loans if interest rates were to rise
suddenly. A ratio below 1 or 100% translates to the fact that a greater portion of a company's
assets is funded by equity. Debt Ratio of NRB Commercial Bank Ltd for 2013 to 2017 are as
follows:
Table 3.2.3: Debt Ratio

Year Debt Ratio

2017 89%
2016 89%
2015 86%
2014 81%
2013 54%

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 Debt Ratio
90.00%
80.00%
70.00%
Percentage

60.00%
50.00%
89.00% 89.00% 86.00%
40.00% 81.00%
30.00% 54.00%
20.00%
10.00%
0.00%
2013 2014 2015 2016 2017

Year

Debt Ratio

Figure 3.2.3: Debt Ratio

3.2.4 Equity Ratio

The shareholder equity ratio shows how much of the company's assets are funded by equity
shares. The lower the ratio result, the more debt a company has used to pay for its assets. It also
shows how much shareholders would receive in the event of a company-wide liquidation.
The ratio, expressed as a percentage, is calculated by dividing total shareholders' equity by total
assets of the firm, and it represents the amount of assets on which shareholders have a residual
claim. The figures used to calculate the ratio are taken from the company balance sheet. Equity
Ratio of NRB Commercial Bank Ltd for 2013 to 2017 are as follows:
Table 3.2.4: Equity Ratio

Year Equity Ratio

2017 11.14%
2016 10.6%
2015 14.21%
2014 18.46%
2013 46.12%

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 Equity Ratio
50.00%
45.00%
40.00%
35.00%
Percentage

30.00%
25.00%
46.12%
20.00%
15.00%
10.00% 18.46%
14.21% 11.14%
5.00% 10.60%
0.00%
2013 2014 2015 2016 2017

Year

Equity Ratio

Figure 3.2.4 Equity Ratio

3.2.5 Return on Assets – ROA

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
ROA gives a manager, investor, or analyst an idea as to how efficient a company's management
is at using its assets to generate earnings. Return on assets is displayed as a percentage. Return
on Assets of NRB Commercial Bank Ltd for 2013 to 2017 are as follows:
Table 2.2.5: Return on Assets (ROA)
Year ROA
2017 1.67%
2016 1.93%
2015 1.83%
2014 0.46%
2013 0.28%

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 Returen on Assets (ROA)
2.00%
1.80%
1.60%
1.40%
Percantage

1.20%
1.00% 1.93%
1.83%
0.80% 1.67%
0.60%
0.40%
0.20% 0.46%
0.28%
0.00%
2013 2014 2015 2016 2017

Year

Return on Asstes (ROA)

Figure 3.2.5: Return on Assets (ROA)

3.2.6 Return on Equity (ROE)

Return on equity (ROE) is a measure of financial performance calculated by dividing net income
by shareholders' equity. Because shareholders' equity is equal to a company’s assets minus its
debt, ROE could be thought of as the return on net assets. ROE is considered a measure of how
effectively management is using a company’s assets to create profits. ROE is expressed as a
percentage and can be calculated for any company if net income and equity are both positive
numbers. Net income is calculated before dividends paid to common shareholders and after
dividends to preferred shareholders and interest to lenders. Return on Equity of NRB
Commercial Bank Ltd for 2013 to 2017 are as follows:
Table 3.2.6: Return on Equity

Year ROE
2017 15.30%
2016 15.97%
2015 11.55%
2014 1.75%
2013 0.51%

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 Returen on Equity (ROE)
16.00%
14.00%
12.00%
Percantage

10.00%
8.00% 15.97% 15.30%
6.00% 11.55%
4.00%
2.00%
0.51% 1.75%
0.00%
2013 2014 2015 2016 2017

Year

Return on Equity (ROE)

Figure 3.2.6: Return on Equity

3.2.7 Return on Investment (ROI)

Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an
investment or compare the efficiency of a number of different investments. ROI tries to directly
measure the amount of return on a particular investment, relative to the investment’s cost. To
calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment.
The result is expressed as a percentage or a ratio. Return on Investment of NRB Commercial
Bank Ltd for 2013 to 2017 are as follows:
Table 3.2.7 Return on Investment
Year ROI
2017 15.30%
2016 15.97%
2015 11.55%
2014 1.75%
2013 0.51%

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 Returen on Investment (ROI)
16.00%
14.00%
12.00%
Percantage

10.00%
8.00% 15.97% 15.30%
6.00% 11.55%
4.00%
2.00%
0.51% 1.75%
0.00%
2013 2014 2015 2016 2017

Year

Return on Investment (ROI)

Figure 3.2.7 Return on Investment

3.2.8 Earnings per Share (EPS)

Earnings per share (EPS) is the portion of a company's profit allocated to each share of common
stock. Earnings per share serve as an indicator of a company's profitability. It is common for a
company to report EPS that is adjusted for extraordinary items and potential share dilution.
Earnings per Share of NRB Commercial Bank Ltd for 2013 to 2017 are as follows:
Table 3.2.8: Earnings per Share

Year ROI
2017 1.89
2016 1.90
2015 1.26
2014 0.19
2013 0.05

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 Earnings Per Share (EPS)
2
1.8
1.6
1.4
1.2
Taka

1 1.9 1.89
0.8
0.6 1.26
0.4
0.2
0 0.05 0.19
2013 2014 2015 2016 2017

Year

Earnings per Share (EPS)

Figure 3.2.8: Earnings per Share (EPS)

3.2.9 Asset Tangibility

A tangible asset is an asset that has a physical form. Tangible assets include both fixed assets,
such as machinery, buildings and land, and current assets, such as inventory. Asset Tangibility of
NRB Commercial Bank Ltd for 2013 to 2017 are as follows:
Table 2.2.9: Asset Tangibility
Year TANG
2017 0.0084 times
2016 0.0104 times
2015 0.0128 times
2014 0.0137 times
2013 0.0152 times

Asset Tangibility (TANG)

0.02
0.01
0.01
0.01
Times

0.01 0.02
0.01 0.01 0.01
0.01
0 0.01
0
0
2013 2014 2015 2016 2017

Year

Asset Tangibility

Figure 3.2.9: Asset Tangibility

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3.2.10 Effective Tax Rate
The effective tax rate is the average tax rate paid by a corporation or an individual. The effective
tax rate for individuals is the average rate at which their earned income, such as wages, and
unearned income, such as stock dividends, are taxed. The effective tax rate for a corporation is
the average rate at which its pre-tax profits are taxed. Effective tax rate of NRB Commercial
Bank Ltd for 2013 to 2017 are as follows:
Table 3.2.10: Tax Rate
Year Tax Rate
2017 0.25 times
2016 0.28 times
2015 0.25 times
2014 0.29 times
2013 0.17 times

Tax Rate
0.30

0.25

0.20
Times

0.15 0.29 0.28

0.25 0.25
0.10
0.17
0.05

0.00
2013 2014 2015 2016 2017

Year

Tax

Figure 3.2.10: Tax Rate

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3.2.11 Liquidity Ratio
The current ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations or those due within one year. It tells investors and analysts how a company can
maximize the current assets on its balance sheet to satisfy its current debt and other payables. .
Liquidity Ratio of NRB Commercial Bank Ltd for 2013 to 2017 are as follows:
Table 3.2.11: Liquidity Ratio
Year Liquidity
2017 0.95 times
2016 0.88 times
2015 0.89 times
2014 0.68 times
2013 0.13 times

Liquidity
1.00
0.90
0.80
0.70
0.60
Times

0.50 0.95
0.89 0.88
0.40
0.68
0.30
0.20
0.10
0.13
-
2013 2014 2015 2016 2017

Year

Liquidity

Figure 3.2.11: Liquidity Ratio

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3.3 Major Findings
After analyzing capital structures and financial data of NRB Commercial Bank Ltd, the findings
are given below:
 Strong financial performance compare to contemporary competitors
 The liquidity condition of the bank is much better that the sign of continues
improvement.
 Return on assets ratio is higher that, indicates the effective managerial performance of the
NRB Commercial bank.
 The earning of the shareholders is much higher that is proven by return on equity.
 Asset tangibility is getting lower every year which is a sign of improvement
 Long term debt ratio got lower in years 2013 to 2016 which shows that NRBC is getting
less dependent on debt but in 2017, it got higher than previous year.
 Debt ratio suggests that considerable portion of debt is funded by assets
 Return on investment is higher that indicates the return is getting higher each year
 Earnings per share shows that NRBC is making more profit each year

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 Chapter 4

Recommendation and
Conclusion

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4.1 Recommendations
Credit management is one of the core functions of any bank and it needs proficient approach
from every one working in the Credit Department of any bank. There are some short
recommendations from what I observed during my analysis and findings to improve the
profitability of NRBC Commercial Bank Ltd. Those are:
 NRBC should try to overcome its dependency on specific type of credit facilities by
diversifying funds into different types of loans.
 They should invent other type of deposit to attract more customers which is different
from other banks.
 NRBCB should maintain more cash and deposit balances with other banks. Because it is
desirable that banks keep their cash and balance with other bank to such extent so that it
can minimize the chance of liquidity crunch.
 Should develop more strategic planning as to compete with its rival banks.
 Reducing the interest rates on advances can give the bank a great opportunity to grab a
good number of new customers.

4.2 Conclusion
The financial sector of Bangladesh is dominated by the banking sector and NRB Commercial
Bank has been one of the great performers of this sector. After starting its journey in 2013, NRB
Commercial Bank has already developed goodwill among its customers by offering its brilliant
services by different divisions. This success has resulted from the commitment and dynamic
leadership among its management over the periods.
Despite stiff competition among banks operating in Bangladesh both foreign and local, NRB
Commercial Bank has achieved satisfactory progress in areas of its credit operations and
maintained a low amount of classified loans since 2013. The bank hopes to achieve a satisfactory
level of development in all regions of its operations including the target of profitability compare
to its contemporaries.

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References
 Annual report-2017, The NRBC Bank Limited
 Annual report-2016, The NRBC Bank Limited
 Annual report-2015, The NRBC Bank Limited
 Annual report-2014, The NRBC Bank Limited
 Annual report-2013, The NRBC Bank Limited
 NRB Commercial Bank Limited (NRBCB). [ONLINE] Available at:
http://www.nrbcommercialbank.com/. [Accessed 25 March 2019]
 Investopedia. Financial Ratio Tutorial | Investopedia. [ONLINE] Available at:
http://www.investopedia.com/university/ratios/. [Accessed 03 April 2019].

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