“PERFORMANCE

COMPARATIVE ANALYSIS
OF SCB, MTB AND EXIM
BANK THROUGH CAMEL
RATING”
Bank Management and Electronic Banking

Bank Management and Electronic Banking

FIN 441: Section: 01
Fall, 2020

GROUP PROJECT
On
“Performance Comparative analysis of SCB, MTB and Exim Bank through
CAMEL rating”
Submitted to:

Sohana Wadud Ahmad

Lecturer, BRAC Business School
BRAC University
Submitted by

Name ID
Omar Farhan Fuad 17304174
Sajid Shariar 17204089
MoonMoon Siddique 17104063
Toahera Rahman 18304143
Nabila Joairiah 17104103

Date of submission: 23rd December, 2020

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Bank Management and Electronic Banking

Abstract

The aim of every bank, like all other business organizations, is to maximize shareholder equity. To
ensure sustainable progress through different operations, the bank needs to have sufficient capital,
a strong asset quality, refined management system, boost up earnings, and decrease the financial
risk. Banks usually have some frameworks by which they can have a clear idea of their position in
the industry and find their strong and weak points. The indicators have a massive impact on the
modern banking system since it shows the improvements of the banks, CAMEL frameworks one of
those. Though a perfect assessment cannot be made by only analyzing the CAMEL frameworks,
but this indicator can give a brief idea of the banks' improvement over time. Our goal here is to
determine how the CAMEL framework can be used to interoperate a bank's performance. The
different parameters have specific indications to show the performance of a Bank. The CAMEL
model indicators are Capital, Asset, Management, Earning, and Liquidity of a bank, and this
indicator is enough to have an idea of the Banks position and performance. We have applied the
framework to assess three Banks from Bangladesh. The Banks are - Exim Bank, Mutual Trust
Bank, Standard Chartered Bank. All these banks are private banks. The data was derived from the
respective bank's annual report. The ratios and other calculations related to the banks have been
calculated from the data available in the annual reports.

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Bank Management and Electronic Banking

Reasons for doing the study

The term paper gives us the opportunity to apply the CAMELS rating system on three renowned
banks of Bangladesh: EXIM bank LTD, Standard Chartered Bank Bangladesh, and Mutual Trust
Bank. The CAMELS rating usually uses the bank's supervisory authorities to evaluate the banking
performance. They assign a score on a Scale for each bank, which starts one to five, which means
score one for the excellent position as the number increases it showing chronologically weakness,
and rating five indicates the decline. Additional information is that less than the two rating scales
are usually considered high-quality institutions, and less than three are considered less than
satisfactory institutions. Overall this remote assessment depicts the financial institution's position.
In the CAMELS framework Capital adequacy, which determines the institution's strength over a
year or several years based on credit union plans and underlying assumption. Asset Quality helps
to understand the financial institutions' ability to handle the risk factor and reflects the efficiency
of investment policy and practices. Management ensures the bank's operation safely. Earning
shows the bank's ability to exist in the long run of business. Liquidity deals with interest rate risk
sensitivity to convert the asset into cash to beat the interest risk. Sensitivity is the market risk
sensitivity. The monitoring management of credit concentrations usually determines the market
sensitivity. The CAMELS rating system is internationally recognized and accepted by financial
institution supervisory authorities. We get this opportunity to learn this systematic process.
This term paper helps us make a bridge between the theory and practical life working experience
in this competitive world. This project gives us professional life experience, and learning from this
term paper would help us in the future.

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Bank Management and Electronic Banking

Acknowledgment

First, we would like to thank our course instructor Sohana Wadud Ahmed whose valuable guidance
and informative instruction help us implement this term paper. Without her guidance it’s seems
like impossible for us to complete this term paper. Then we would like to thankful to our each
team members. Without their cooperation, it was also not possible for us to complete this term
paper. Finally we would like to express our gratitude towards individuals for helping and
supporting us.

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Bank Management and Electronic Banking

Table of Contents

Abstract........................................................................................................................................................ 2
Reasons for doing the study ....................................................................................................................... 3
Acknowledgment ......................................................................................................................................... 4
1. Introduction ......................................................................................................................................... 6
1.1 Standard Chartered Bank (SCB) .................................................................................................... 6
1.2 Mutual Trust Bank Limited (MTBL) ............................................................................................. 7
1.3 EXIM Bank........................................................................................................................................ 8
2. CAMELS rating analysis: ................................................................................................................ 10
2.1 Capital Adequacy: .......................................................................................................................... 10
2.2 Asset Quality: .................................................................................................................................. 12
2.3 Management Efficiency: ................................................................................................................. 15
2.4 EARNINGS ..................................................................................................................................... 17
2.5 Liquidity Management ................................................................................................................... 20
2.6 CAMELS Composite Rating: ........................................................................................................ 23
3. Recommendation: ............................................................................................................................. 25
4. Conclusion: ........................................................................................................................................ 26
5. Reference: .......................................................................................................................................... 27
6. Appendix:........................................................................................................................................... 29

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Bank Management and Electronic Banking

1. Introduction
As a developing third world economy, Bangladesh enabled its banking sector to prosper in favour
of economic development. During these last three decades, the banking industry in the country has
expanded tremendously. The sector has also progressed with the aid of microfinance and
microcredit to stimulate financial participation for poor rural citizens. This has increased the
monetization of the rural part of the economy, making it more business-oriented for the banking
industry. The industry benefitted from this market orientation strategy of the rural economy, for
instance – the movement of capital from rural areas through urban areas. State-owned banks are
currently building obstacles to economic development that continue. This is because Bangladesh
has adopted globally recognized banking standards, such as the Basel III Agreement.

The expanded financing of the Bangladesh economy has created an atmosphere in which a portion
of the wealthy has gathered gigantic wealth in some government banks. It is widely advised that
stock advertisement tricks in Bangladesh are very often connected with the extreme intent of
securing control of various reported companies by bankrupting small speculators in this money
related aspects. After independence with six nationalized business banks, Bangladesh developed
its banking industry, three specialized state-owned banks, and nine foreign banks. The two most
popular types of banks in Bangladesh are scheduled and non-scheduled banks. Scheduled banks
shall be the banks controlled by the 1972 Ordinance of the Bangladesh Bank. Non-Scheduled
banks are banks which, but not scheduled banks, are formed for extraordinary and particular
purposes and functions. These banks are unable to fulfil all the functions of scheduled banks. There
are sixty scheduled banks in the banking industry, and these scheduled banks are further spread in
six state-owned and partially owned by the Bangladesh government. The three specialized banks
are specialised in functions such as the agricultural and industrial production.

1.1 Standard Chartered Bank (SCB)

In 1948 in Chittagong, SCB began its first subsidiary in Bangladesh. This bank was founded in
1905, and the bank acquired Grindlays Bank in Bangladesh in August 2000. In 2006, SCB also
acquired American Express Bank's commercial banking business. The bank provides full banking
services in all divisions. Its services consist of deposit products and asset services, overdrafts,
personal loans, credit cards, auto finance, and mortgages in retail segments and small and medium-

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Bank Management and Electronic Banking

sized enterprises. They also represent corporate and corporate customers provide business finance,
cash management, credit, equity services, foreign exchange, debt capital markets, and corporate
finance. Standard Chartered Saadiq, the Islamic Banking division of the group, provides a
complete range of products and services allowable for the Shariah. In Bangladesh, Standard
Chartered Bank has a strong presence in numerous cultural and social justice concerns other than
conventional banking. The Bank supports the organisation and involvement in the multinational
marathon competition of national school cricket, national school chess competitions, and national
school kabadi. It has strongly advocated setting up the Young Learner Corner in the British Council
and in raising funds for Islamia Eye Hospital and Infant Hospital. Standard Chartered Bank also
aims to collect funds for seeing is believing. Under this new program, US$ 20 million will be built
in the cities of 20 countries with poor income for organized eye care and treatment of 20 million
citizens. The third Financial Express Standard Chartered Corporate Social Responsibility Award
was presented to Rahim Afroz Bangladesh and the Vialatex Company as part of this program. It
is also hosting a nationwide competition with the National Newspaper Affiliate for video,
photography, and lyrics composition. [Abdul Mazid, Mohammed]

1.2 Mutual Trust Bank Limited (MTBL)

It was established as a public limited company in 1999 under Companies Act 1994 and was divided
into 10 million ordinary shares of BDT 100, each with approved equity capital of BDT 1000
million. Currently, the bank's approved equity is BDT 10,000,000 million, divided into 1,000
million ordinary shares of BDT 10 per share.

On October 05, 1999, a Bangladesh Bank license under the Banking Company Act 1991, was
issuing and commencing its banking activities on October 24, 1999, the bank also issued its
Business Beginning Certificate. As envisaged in the Association Memorandum and approved in
compliance with the provisions laid down in the Banking Companies Act 1991by Bangladesh
Bank, the company began banking and was entitled to conduct banking activities as follows:

• Company wholesale

• Company Retail

• International trade finance

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Bank Management and Electronic Banking

• Banking for small and medium-sized enterprises (SMEs)

• Banks of the NRB

• Banking rights

• Programs for Cards

• Financial transactions

It operates in its Dhaka Headquarters and 95 subsidiaries. The bank conducts foreign transactions
through a global correspondent banking network. Internet banking is very convenient in MTBL, a
comprehensive and improved software they are offering that provides the flexibility of having the
same user name to manage all the accounts even though they are already accessed with separate
user codes.

Their latest version of online banking service is user friendly for customers, such as -

• Summary of all accounts and account details for entry

• Chequebook Request (s)
• Shift funds to any account with MTB
• Make transfers (in MTBs) customers periodically pass funds to
• See information of the payment card and reimburse the MTB credit card account.
• Bills for banking services
• Give details to your profile.

1.3 EXIM Bank

The Export-Import Bank of Bangladesh (EXIM Bank) was formed in 1999 by Mr. Shahjahan
Kabir, Founder President, who had a long imagination of coasting a company bank, which would
add financial improvement for our country. The Export-Import Bank of Bangladesh was founded
in 1999. As a good investor, he had a long meeting. Together with the author boss, an incredibly
qualified and successful gathering of business visionaries made his imagination come true. Each
of them confirmed their company, insight, determination, and capacity as the best star in their own
industry. Amongst them was Mr. Nazrul Islam Mazumder, a trained business tycoon for the RMG

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Bank Management and Electronic Banking

sector in Bangladesh; after the death of the remarkable Founder Chairman, he became the
respectable Boss. He is also Bangladesh's Head of Banking Ties (BAB). BAB has emerged under
his authority as a strong rally for business views in matters covered by Bangladesh's financial
sector and the preparation of fundamental strategy rules for dealing with these issues.

The bank starts operating as Bengal Export-Import Bank Limited on 3 August 1999. In addition
to Mr. Alamgir Kabir as Founder Advisor and Mr. Mohammad Lakiotullah as Founding Managing
Director, it was renamed Export-Import Bank of Bangladesh Limited on 16 November 1999. Both
have had a long association with our nation's monetary sector. This bank has taken on a certain
role in the financial sector in terms of execution, growth and astonishing administration with its
down to earth and manager's mandates in operational exercises. The bank shifted the entire usual
financial operation in Shariah-based Islamic Banking in July 2004, on the initiative of Mr.
Lokiotullah. Corporate Social Responsibility in our countries and in other countries worldwide is
becoming an extremely necessary practice. Many organizations have increasingly realized the
advantages of offering CSR services at multiple places. CSR has been a fundamental corporate
activity in recent years and all the businesses involved in our nation have paid a great deal of
interest. EXIM Bank claims a significant factor in achieving good management practice and
leadership is a successful CSR program. The economic, social and environmental influence of an
entity affects directly its connections with stakeholders, especially customers, staff, clients,
business associates, government and communities. The EXIM Bank is well revered for its enduring
values of reverence for social and family networks, and for its strong regard for ties, social peace
and education.

EXIM Bank, in a broader inclusive context, believes in the endless search of glory and prosperity
along with all its stakeholders. The word "social responsibility" has been stressed even more since
it was established in 1999 than the term "profit maximisation." In order to mitigate the desolation
in the country's weak and troubled sector, EXIM Bank still provides resilient help. EXIM Bank
set up the EXIM Bank Foundation in 2006 in a scheduled and orderly manner to carry out CSR
operations.

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2. CAMELS rating analysis:

This is an evolution techniques, which is used to assess the financial soundness of a bank. Based
on the CAMELS ratings the central bank or the regulatory authority gets to identify that which
banks are heading for trouble and need supervision. Also, the condition of a bank can be understand
through this analysis.

2.1 Capital Adequacy:

This parameter tells us about the inner strength of a bank, and through it, the management can
predict how capable a bank would be at the time of its crisis moment to face its potential loss.
However, many ratios can be used to do the capital adequacy parameter. Furthermore, for our
project, we are following two ratios to determine the ranking of this parameter. What are – Capital
Adequacy Ratio (CAR) and Debt Equity Ratio.

Capital Adequacy

Parameter
CAR TL/TE
Bank's Name Ranking

Ratio Rank Ratio Rank Average Rank

SCB 23.15% 1 5.01 1 1.00

Mutual TRUST Bank 12.86% 2 15.08 3 2.50

EXIM Bank 12.62% 3 13.81 2 2.50

I. Capital adequacy ratio: Our assigned banks are- SCB, Mutual TRUST Bank (MTB), and
Exim Bank. Here, for this ratio, the higher it is indicating, the better rank. It means the
bank has a strong capacity to handle any losses. According to our calculation, SCB has the
highest capital adequacy ratio of 23.15%. On the other hand, with a little fluctuations, the
other two banks CAR is 12.86% and 12.62%. According to the rules, SCB got rank 1, MTB
got rank 2, and for Exim Bank, it is 3.

Analysis: Now, a question might arise: How can SCB maintain the highest CAR ratio than the
other 2 banks? By analysing the bank's annual report, we have found that SCB maintains a high

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degree of Tire 1 and Tire 2 capital than the two banks. Here, Tire 1 capitals are the capital that is
permanent and can be easily available in terms of crisis. Besides, Tire 2 capitals are the undisclosed
reserve. It means that, the banks are maintaining a reserve fund that can be used to absorb losses
at the problematic moment. Also, for SCB, the risk-weighted asset is lesser than the two banks.
So, as a result, SCB has a higher capital adequacy ratio than the other two banks. According to
Bangladesh Bank's rules, all banks should maintain a 12.5% (Hasan, Banks in Bangladesh
maintain lowest capital than other South Asian nations 2020 Dhaka Tribune) capital adequacy
ratio. So, in that case, these three banks position is pretty well; they maintain a higher CAR ratio
than the central bank's requirements.

II. Debt to Equity ratio: The second ratio under this parameter is the Debt to Equity ratio. It
is used to measures a firm's financial leverage. That means how much debt a company is
using to finance its assets relative to the amount of value represented in shareholders'
equity. Here. The bank with the lower value of this ratio will be considered in a better
position because it indicated that the company is using less debt to finance its asset portion
and lower the financial risk. However, for SCB, this ratio is 5.01%; for Trust Bank, it's
15.08%, and for EXIM Bank, it is 12.62%. As SCB scores lower in this ratio, so they got
rank 1.

Analysis: By analysing the three banks' annual reports, we have found that SCB maintains the
highest shareholder's equity portion than the other two banks. Because of the large equity, this
Bank can control this ratio very effectively. On the other hand, Exim Banks' equity is more than
the Mutual Trust Banks. For this reason, in this ratio, they score lower than the Mutual Trust Banks.
However, Exim bank is using more debt than the other two banks. Here, SCB is a multinational
bank and runs its operations in many countries; thus, it might be a credible and ideal place for the
investor or shareholders to invest. That is why they might be able to maintain high shareholder's
equity.

Parameter Ranking Analysis:

For the Capital Adequacy parameter, SCB got the average ranking of 1. According to the
composite rating chart, it indicates Rating 1. As SCB got the rating 1, it means they have a solid

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capital base that will meet all the obligations and central bank's requirement. However, in its future
needs, it has the ability to raise more capital.

For MTB, it got the average rank of 2.50, which indicates the rating 2. According to our
calculation, they have maintained a pretty well CAR and Total Debt to Equity ratio, but they should
focus more on increasing their shareholder's equity. The management willingness can easily solve
this problem. If the banks can finance a large amount of capital on their own, it will not need to
depend on outside sources. Rather than these items, other factors are all right for MTB

For EXIM Banks, it got an average ranking of 2.50. According to our analysis, we also give this
bank rating 2 scales. This bank's debts amount is pretty higher than the other two banks. If they
cannot control their debt, there is a possibility for them to fall into a riskier position.

2.2 Asset Quality:

This parameter determines what kinds of assets a bank is holding and what it's quality. A bank's
assets quality is correlated with its credit risk. Three types of ratios are used to determine a bank's
quality of assets.

Asset Quality
NPL/ Total Total Loan/ ALL/ Total Parameter
Bank's Name Loan Total Asset Loans Ranking
Ratio Rank Ratio Rank Ratio Rank Average Rank
SCB 1.69% 1 64.25% 2 4.00% 1 1.33
Mutual TRUST Bank 7.61% 3 52.51% 3 1.52% 2 2.67
EXIM Bank 4.52% 2 76.15% 1 0.61% 3 2.00

I. NPL to Total Loan Ratio: It determines that out of the 100% of total loans, how much is
non-performing or defaulting. Less scores in this ratio will be beneficial for the bank. Here,
from our three assigned banks, SCB scores 1.69%, MTB scores 7.61%, and Exim Banks
score 4.52% in this ratio. Non- performing Loan does not add value to the asset part but

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Bank Management and Electronic Banking

reduces a bank's loan revenue. Because these loans no longer earning any interest.
Normally a bank records its accrued interest payments in its account, even though it will
not be received yet. If this kind of loan becomes non-performing then the advance
recording of this interest must be deducted from the loan revenue. So, for this reason, NPL
is bad for banks, and it reduces the asset portion of a bank. Based on our calculations, SCB
got rank 1, Exim Bank got rank 2, and MTB got rank 3.

Analysis: In 2019, for Bangladeshi banks, the industry average of NPL's is 9.32%, and for only
private commercial banks (PCB), the average is 5.78% (Islam, NPL and its impact on the banking
sector of Bangladesh 2020 Financial Express). Here, if we look at the industry average of PCB,
then we can say that the condition of SCB and Exim banks is much better than the MTB. The
reason behind that the MTBs NPL is higher than its industry average. MTB might give a large
number of loans without proper documentation, and it might become uncollectable. Because out
of these three banks, MTBs bad loan amount is much higher. This is a kind of loan that never be
collected, and because of it, their NPL's ratio is remaining up.

II. Total Loan to Total asset: A bank use this ratio to see how much assets are financed by
the loans. In terms of asset perspective, higher this ratio indicates a bank is utilizing its
money to gain more profit. From the loan bank can earn interest payments, and the loan is
one of the most important assets for a bank. Exim banks score the highest 76.15% in terms
of this ratio, then SCB 64.25% and the last one is MTB 52.51%.

Analysis: According to our calculations, we have seen that Exim Bank has financed most of its
assets from its loan portion. Most of the loans they give are commercial or industrial loans. That
is why their loan portion is much bigger than the other two banks. On the other hand, the other two
banks maintain an adequate amount of loans to finance their asset. However, as Exim Bank
depends more on loans to finance its assets; as a result, it might also lead to financial risk. In terms
of earnings perspective, its better, but it's not good for a bank in terms of risk perspective. Because
more loans mean there are chances to get more loan defaulter. Furthermore, if the loans become
defaulted, then the banks might face liquidity problems. So, a bank should maintain an adequate
amount of loan portion to finance its total assets.

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III. Allowance for Loan Loss Ratio: Through it, a bank can understand how much reserve a
bank is maintaining to cover its non-performing loans. A bank may face uncollectable
loans. So, to cope up with these uncollectable loans, the bank needs to maintain a reserve.
This reserve is called the Allowance for loan loss. So, the more this ratio indicates, a bank
is capable enough to cover its uncollectable loans. According to our calculation, the SCBs
reserve is 4%, MTBs reserve is 1.52%, and for EXIM Banks, it is 0.61%.

Analysis: According to our analysis, SCB and MTB are maintaining an adequate amount of ALL
ratio. However, EXIM is maintaining a very low ALL ratios, which might be riskier for them. For
the loans, SCB allocated more provision than the other two banks. That is why they can maintain
a high number of ALL ratio.

Parameter Ranking Analysis:

In terms of the asset quality parameter, SBC's average ranking is 1.33. According to the composite
rating chart, it got a number 1 rating. It indicates that it has very few trouble assets and can maintain
an efficient loan portfolio. It also has an adequate level of ALL account reserve, which will help
them cover the uncollectable loans.

However, the average ranking of the EXIM Bank is 2. So, its falls under rating scale 2. It means
this bank is facing non- significance weaknesses. Here the problem asset is not exceeding 10%.
This bank is involved with big corporations and helps in their export and import activity.

As a result, they need to give a huge amount of loan to the corporations, but they are maintaining
a very minimum ALL account reserve in comparison to their loan amount. So, during a crisis
situation, they might be facing a liquidity problem if they do not maintain an adequate amount of
ALL reserve. The management address on this issue might bring a probable solution for this bank.

Then, MTB's average rank in this parameter is 2.67. it indicates a rating scale of 3. Rating 3 is the
trouble zone for a bank. According to our previous analysis, we have found that MTB's NPL is
more than the industry average. Because of their more overdue loans, they fall under this category.
In this regard, Bangladesh Bank should conduct regular auditing and give this bank guidance about

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how to overcome it. Also, the management should address these issues and cooperate with the
central bank.

2.3 Management Efficiency:

Management efficiency plays an important role in the success of a bank. It drives the banks and
makes them respond quickly to the dynamic and changing financial environment. However, a
bank's success depends heavily on the competencies of its management. So in this parameter, a
bank is calculating 3 ratios in order to determine whether bank management is efficient or not.

Management
Efficiency
Total Business per Profit per Parameter
advance /TD employee employee Ranking
Bank's Name
Rati Ran Ran Ran Average
o k Ratio k Ratio k Rank
968842 641296
SCB 0.01 3 0 1 4 1 1.67
270886 114882
Mutual TRUST Bank 0.27 1 1 2 4 2 2.00
166616
EXIM Bank 0.04 2 4 3 822023 3 2.33

I. Total Advance to Total deposit: This evaluates bank management's efficiency and
capabilities in investing the deposit. It also measures a bank's management's ability
to convert its deposit into high earnings advances. Besides, it also measures how
capable a bank's management is to figure out its own financial problem. In terms of
this ratio, MTB attains top position, with scoring 0.27. However, EXIM bank is in
the second rank with a score of 0.04, and SCB scores lowest with 0.01.

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Bank Management and Electronic Banking

Analysis: By analysing the annual report, we have noticed that MTB got a large number of
advances in returns of their deposits. It has a massive impact on the bank's net profit portions.
However, SCB has less advances in comparison with the following two banks.

II. Business per employee ratio: It measures how efficiently a bank utilizes the
employees to generate revenue. It shows the revenue per employee. In this ratio,
SCB ranked one, MTB ranked as the second position, and for Exim banks its third
position.

Analysis: In this ratio, the condition of SCB is way better than the other two banks. Here, SCB is
a multinational bank, and they have their banking operation in several countries. As a result, they
have more experience and expertise to run their banking activity in Bangladesh. If needed, they
might seek help from their foreign brunch's like- to train their local employees or adopt better
technology. So, as a result, its employees might be able to earn more revenue than the other two
banks.

III. Profit per employee: This ratio shows the profit earned by per employees. Higher
the ratio shows good management efficiencies and higher rating. It also portraits
how well a bank's Human Resource Management is. So, in this regard, SCB also
attained the first position. Then, the following 2 banks are in the second and third
positions accordingly.

Analysis: Like the business per employee ratio here, also SCB is doing well than the two banks.
It indicates that the more skilled and diversified employees than the other two banks. However,
MTB and EXIM Bank are also doing well in this ratio, but their management or employees are not
as efficient as SCB.

Parameter Ranking Analysis:

In this parameter, SCB scores an average rank of 1.67. Its falls under rating two scales. Here the
bank is facing minimal deficiencies, but it can be easily solved with the bank's regulatory
supervision. This bank is doing well in the two ratios like business per employee and profit per

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employee, but its management should focus more on increasing total advances in terms of its
deposit.

However, MTB's average rank is 2. So, it also falls under the rating 2 scale. In all the ratios, we
have noticed a strong financial position. The management has the proper planning and
implementations in all the policies. Though everything is all right but the management should care
more to enhance their employee's skills and capabilities.

Furthermore, EXIM bank's average rank is 2.33, and it also falls under the rating two scale.
However, in comparison to the other two banks, these bank's employees are less efficient.
According to our calculation, these bank profits per employee and business employee are less than
two following banks. Here, also management should focus on upgrading their employee's skills
and capabilities.

2.4 EARNINGS

Earnings are one of the most important components of the CAMEL rating for banks. For evaluating
the earnings of our three assigned banks, we calculate ROA, ROE, and Net Interest Margin of the
three banks. The Return on Assets (ROA) will help us to know how efficiently the bank is utilizing
its assets to make profits, Return on Equity (ROE) will indicate how the bank uses the equity to
generate earnings for the bank, and finally, Net interest margin will indicate whether an investment
will yield profit or incur more costs. The higher the ratios of ROA, ROE, and Net interest margin,
the better it is for the bank.

Earnings Capacity
Parameter
ROA ROE NIM
Ranking
Bank's Name
Average
Ratio Rank Ratio Rank Ratio Rank Rank
SCB 3.32% 1 19.94% 1 4.48% 1 1.00

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Mutual TRUST
Bank 0.49% 3 7.94% 3 2.06% 3 3.00
EXIM Bank 0.56% 2 8.33% 2 2.29% 2 2.00

I. Return on Assets (ROA): Return on Assets is the utilization of assets to make profits. We
calculate the return on assets of the three assigned banks by dividing the net profits by the
respective banks' total assets. If the ROA ratio of a particular bank is high, it implies that
it has better earning potential in the future, which is very attractive to shareholders. After
calculating Return on assets, we find out that Standard Chartered Bank is ranked number
1 as their ROA ratio is 3.32%, EXIM bank has a ROA ratio of 0.56% so it is ranked number
2, and finally, Mutual Trust bank is ranked number 3 as their ROA ratio is the lowest among
three banks which is 0.49%.
Analysis: SCB is ranked number 1 in terms of ROA as they efficiently use their assets to maximize
the return by doing traditional operations. They also initiated non-traditional strategies for
achieving new income sources. SCB initiated the first Blockchain Trade in Bangladesh which will
create more transparency, remove administrative costs, and reduce friction in global trade. (Ting
Peng, Aug 16, 2020).

EXIM Bank is ranked number 2 and can deal with any problem regarding the utilization of assets
and planning without regulatory supervision. There is a mere difference in the ROA ratio between
the banks Mutual TRUST bank and EXIM bank. Both of the banks need to monitor and change
their budgeting and planning process so that their assets are well utilized to generate a stable stream
of profit. Regulatory supervision is needed if they fail to change their policies and planning, which
might lead to a banking disaster.

II. Return on Equity (ROE): This ratio refers to the net income generated by the bank by
using the shareholder's equity. After calculating this ratio, we can conclude whether a bank
is making efficient use of its shareholders' capital to make profits. In a word, it is the return
earned by the bank based on its net worth. We calculate return on equity by dividing net
profit by total equity. After calculating Return on equity, we find out that Standard
Chartered Bank is ranked number 1 as their ROE ratio is 19.4%, EXIM bank has an ROE
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ratio of 8.33% is ranked number 2, and Trust bank is ranked number 3 as their ROE ratio
is the lowest among three banks which is 7.94%.

Analysis: Standard Chartered Bank utilizes the equity portion from their balance sheet to earn
more profits compared to the other two banks, which in turn increases their stock value, ensuring
better returns for its shareholders.

EXIM bank needs to improve the planning and control process to increase its net profit to increase
its stock value, which will yield better returns for the existing shareholders.

The conditions of MTB and EXIM Bank is quite similar as they have little difference in their ROE.
Similarly, they also need to control their planning and control process; otherwise, shareholders
may lose faith or public interest might get hampered towards the bank.

III. Net Interest Margin: By calculating the net interest margin, we learn whether a
bank is making any revenue based on its interest spread, keeping the interest
generating assets in mind. We calculate net interest margin by subtracting Interest
paid from Interest received (vice-versa) and then finally dividing it by average
assets. A positive net interest margin implies the bank is making revenue based on
its interest spread; however, a negative net interest margin implies it incurs more
cost than generating revenue, i.e., it pays more to depositors than earning more from
arranging loans. After calculating net interest margin, we find out that Standard
Chartered Bank is ranked number 1 as their NIM ratio is 4.48%, EXIM bank has a
NIM ratio of 2.29%, so it is ranked number 2 and finally Trust bank is ranked
number 3 as their NIM ratio is the lowest which is 2.06%.

Analysis: Standard Chartered Bank maintains a sufficient income level, which is reflected in their
Report of Income. Their net interest income in terms of the bank's assets is quite satisfactory
compared to the other two banks. This is partly because recently SCB was announced "Excellence
in credit business" in both domestic and international categories, which reflects their stable income
source from the credit business. (Dhaka Tribune, 9th December 2020)

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NIM of EXIM Bank is positive; however, they may face difficulties in the future as they are on
the line. Corrective actions like increasing the interest income and keeping the interest expense at
the minimum level are needed for EXIM bank to not face insolvency in the future.

The NIM of MTB and EXIM bank is quite identical. Despite having a positive NIM, MTB may
face insufficient earning retention, which will compromise their capital in the future. Corrective
actions are needed, and if they fail to do so, they will put their assets in a risky position.

Parameter analysis: According to our calculations, SCB positioned itself as rank 1 among the
other two banks in terms of the parameter Earning Capacity. This is because of, SCB utilizes its
assets and equity portion well to generate more profits for the bank and ultimately increase the
valuation of the bank. In the process, they earn a sufficient net operating income compared to the
other two banks.

EXIM positioned themselves in the middle as rank 2 among the other two banks in terms of the
parameter Earning Capacity. It is positioned ahead of MTB as the bank slightly scored better in
ROA, ROE as well as NIM according to our calculations. In order to improve their rating, a slight
adjustment is needed like budget planning and control.

MTB is positioned last as rank 3 among the other two banks in terms of the parameter Earning
Capacity. It has the least score in ROA, ROE as well as NIM. Such rating poses a huge threat, as
this bank has insufficient earning retention which may harm the capital.

2.5 Liquidity Management

Banks keeping away from a liquidity crisis should put a strong emphasis on the liquidity
management component of the CAMELS rating. A bank must maintain some amount of liquid
cash to fulfill the short-term liabilities. If they cannot fulfill their short-term liabilities, they cannot
pay back the depositor's money, which will put an adverse effect on the bank's profitability. If
existing customers of a certain bank sense that their bank is facing a serious liquidity crisis, they
may withdraw their funds, which will compound the problem. We evaluate a certain bank's

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liquidity management by looking at two ratios, mainly: Credit Deposit Ratio and Liquidity ratio.
The higher the liquidity ratio, the better; however, the credit deposit ratio should be adequate.

Liquidity Management
Total Loans / Parameter
CA / CL
Bank's Name TD Ranking
Ratio Rank Ratio Rank Average Rank
SCB 1.17 1 0.29 1 1.00
TRUST Bank 0.70 3 0.22 2 2.50
EXIM Bank 0.93 2 0.10 3 2.50

I. Credit Deposit Ratio: We calculate the credit deposit ratio by dividing total loans by total
deposits. The credit deposit ratio of a particular bank should not be high or low; it should
be adequate. A high credit deposit ratio indicates that the bank is taking an excessive risk
by giving excess loans in compared to its deposits; on the other hand, a low credit deposit
ratio implies that the bank is being conservative in giving out loans, which will, in turn,
generate less revenue for the bank. After calculating credit deposit ratio, we find out that
Standard Chartered Bank is ranked number 1 as their credit deposit ratio is about 1.17,
EXIM bank has a credit deposit ratio of 0.93, so it is ranked number 2 and finally Trust
bank is ranked number 3 as their credit deposit ratio is the lowest among three banks which
is about 0.70.

Analysis: SCB maintains an adequate credit deposit ratio, giving an adequate amount of loans
against their deposits to earn a good source of income. They take the adequate risk possible to turn
their deposits to give out loans to earn more interest income. However, with little risks, there will
be some default loans that the banks need to address early so that their earnings do not get
hampered.

The credit deposit ratio of EXIM bank is less than 1, which implies they are conservative in giving
out loans against their deposit, earning less interest income compared to SCB. During the

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economic crisis, banks tend to be conservative in giving out loans in the fear of default loans.
However, it is also wrong to say that they do not give any loans. They are known for giving out
loans to the Bangladesh Government for social and infrastructure projects facilitated by EXIM
Bank of India. (Press Trust of India, April 05, 2018)

MTB is also conservative which will incur them more costs instead of earning interest income
compared to the other two banks.

II. Liquidity Ratio: We calculate the liquidity ratio by dividing current assets by current
liabilities. By this ratio, we determine whether a bank can repay its short-term creditors
and maintain a reserve in compliance with the central bank. The liquidity ratio generally
shows the number of times the short-term liabilities are covered by the cash. If the value is
greater than 1.00, it means the short-term liabilities are fully covered by the bank's present
liquid cash. After calculating liquidity ratio, we find out that Standard Chartered Bank is
ranked number 1 as their liquidity ratio is 0.29, Trust bank has a liquidity ratio of 0.22, so
it is ranked number 2, and EXIM bank is ranked number 3 as the liquidity ratio is the lowest
among three banks which is 0.11

Analysis: Standard chartered bank is positioned well compared to other banks in terms of liquidity.
In the present, they are trying even better to increase the bank's liquidity as they are not in a
satisfactory position. They recently issued a zero-coupon bond in Bangladesh's bonds market,
which will be a significant step towards developing the country's debt capital market. (SCB to
pioneer in issuing 850C zero-coupon bond, Oct 23rd, 2020)

MTB experiences a little liquidity problem compared to SCB as their liquidity ratio is below 1 i.e.,
they partially cover their short-term liabilities with their assets.

Among the three banks, EXIM bank faces the most liquidity problem, as they are on the line. To
tackle the problem, they are issuing Subordinated bonds, which is a significant step towards
Bangladesh's bonds market. This will increase the liquidity for the bank; otherwise, they might
need regulatory supervision, only if they are facing a liquidity problem. According to our
calculations from the data, they partially fulfil their short-term liabilities with their assets.

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Parameter Analysis: According to our calculations, SCB positioned themselves as rank 1 among
the other two banks in terms of the parameter Liquidity management. This is because they have a
good credit deposit ratio as well as liquidity ratio compared to the other two banks. It reflects they
have sufficient liquid assets and they are little reliant on the interbank market for any loan
purposes.

EXIM is positioned as rank 2.5 among the other two banks in terms of the parameter Liquidity
management. So, we will keep this bank on a rating 3 scale. According to the parameter rating,
they are facing little liquidity problems as their liquidity ratio is less than 1, being the lowest.
Regulatory supervision is needed if such problems continue.

MTB is positioned as rank 2.5 among the other two banks in terms of the parameter Liquidity
management. So, we will keep this bank into a rating 3 scale. Management may be unaware of the
appropriate planning and controlling process, which poses a liquidity problem for the bank,
causing such problems to occur. Due to such liquidity problems, they are also conservative in
giving out loans causing them to earn less interest income.

2.6 CAMELS Composite Rating:

COMPOSITE
Rating

Composite
Bank's Name C A M E L Average
Rating

SCB 1.00 1.33 1.67 1.00 1.00 1.20 1

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Mutual TRUST
2.50 2.67 1.67 3.00 2.50 2.47 3
Bank

EXIM Bank 2.50 2.00 2.67 2.00 2.50 2.33 2

SCB is ranked number 1 after finding out the composite ratings between the other two banks,
which are EXIM bank and MTB. After doing a thorough analysis, we can say that SCB is in a
strong position. They do not need any regulatory supervision. SCB has ranked ahead of MTB as
well as EXIM bank because the bank has a strong capital base with very few trouble assets and an
efficient loan portfolio. They also maintain an adequate level of ALL accounts, and the
management is efficient than the other two banks. They are also ahead in terms of earning capacity
as well as liquidity management.

EXIM Bank is ranked number 2 after finding out the composite ratings between the other two SCB
and MTB banks. After doing the rating analysis, we can say that EXIM bank is in a sound position.
They have a modest correctible weakness with limited regulatory supervision needed. EXIM bank
is behind SCB because their debt amount is pretty higher, and they maintain a low ALL account
reserve. Moreover, their employees are also less efficient. However, they slightly performed better
than MTB in terms of Earning capacity as well as Liquidity management.

MTB is ranked number 3 after finding out the composite ratings between the other two banks,
which are EXIM bank and SCB. MTB is under the watch category after doing the rating analysis.
Corrective actions are needed, or they will be in a severe position. Regularity supervision is
needed. MTB has a pretty well CAR and total debt to equity ratio; however, they are facing the
problem of more loan overdue, management planning, and implementation of policies. They are
also earning less compared to the other two banks and are illiquid.

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3. Recommendation:

From our analysis, we have some findings or suggestion for some banks:

1. From the annual report of EXIM Bank, we have found that they depend very much on their
debt to finance their equity portion. The bank should reduce its dependency on the debt;
otherwise, it will face liquidity problems at the pandemic or crisis moment. If the investor
sees that the banks' debt is higher, they might lose their confidence on the bank and start
withdrawing their deposited money. If such things happen, then the bank will face a serious
problem. So to avoid this kind of circumstance, the bank should reduce their dependency
on the debt.

2. MTB should focus on reducing the amount of their NPL because it can hamper their asset
portion. This bank should be more careful at the time of approving loans. Besides, they
should intensely check the borrower's creditworthiness and collateral asset when approving
the loans. If the bank becomes assured that the borrower can repay the loans, then they
should approve the loan. In that way, the bank can reduce their non-performing loans.

3. EXIM Bank should increase their ALL account reserve. This bank is helping the big
corporations in their export and import activity. So, in the asset part, their loan portion is
higher than the other following banks. In comparison to their loan amount, their ALL
reserve is inadequate. For this reason, to ensure more privacy, this bank should concentrate
on increasing its ALL account balance.

4. MTB and Exim bank should give more focus to gain an adequate amount of return from
their assets. If they become unable to collect a healthy amount of asset, they might face a
financial crisis in the near future.

5. Exim bank should give more focus on to increase their current asset portion. This is
important to meet their short term obligations. In the future, if the bank cannot meet its
short term obligations, then the investor or depositors will not invest anymore. So, it might
be a serious risk for the bank.

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4. Conclusion:

To conclude, SBC is in number 1 ranking in composite rating compared to MTBL bank EXIM
bank. As a result, SBC is in a very strong position in the banking sector. The core reason behind
this is that the SBC has a gigantic capital base with a lower amount of default assets and an
economic loan portfolio. Moreover, SBC bank has efficient management, which makes them
bosses in the banking sector. Since they are able to responsible and dynamic in the financial
market, on the other hand, EXIM bank and MTBL need to improve their banking operation. Also,
MTB should be needing regulatory supervision.

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5. Reference:

• Islam, T. (2020, July 21). NPL and its impact on the banking sector of Bangladesh. NPL
and Its Impact on the Banking Sector of Bangladesh. Retrieved December 22, 2020, from
https://www.thefinancialexpress.com.bd/views/npl-and-its-impact-on-the-banking-sector-
of-bangladesh-1595343188
• Murtuza, H. (Ed.). (2019, August 26). Defaulted loans go up. Defaulted Loans Go up.
Retrieved December 23, 2020, from https://www.newagebd.net/article/82566/defaulted-
loans-go-up
• Standard Chartered keeping ahead of the curve in card business. (2020, December 08).
Retrieved December 23, 2020, from
https://www.dhakatribune.com/business/banks/2020/12/09/standard-chartered-keeping-
ahead-of-the-curve-in-card-business
• Standard Chartered to pioneer in issuing 850C zero-coupon bond. (2020, October 3).
Standard Chartered to Pioneer in Issuing 850C Zero-coupon Bond. Retrieved December
23, 2020, from https://www.dhakatribune.com/business/banks/2020/10/03/scb-to-
pioneer-in-issuing-850c-zero-coupon-
bond#:~:text=Standard%20Chartered%20Bangladesh%20(SCB)%20is,according%20to
%20a%20press%20release.
• Fe Online Report |. (n.d.). Exim Bank to issue Tk 5.0b mudaraba subordinated bond.
Retrieved December 23, 2020, from
https://thefinancialexpress.com.bd/stock/bangladesh/exim-bank-to-issue-tk-50b-
mudaraba-subordinated-bond-1608525371
• India, P. (2018, April 05). Exim Bank extends $4.5 bn loan to Bangladesh for social,
infra projects. Retrieved December 23, 2020, from https://www.business-
standard.com/article/pti-stories/exim-bank-extends-4-5-bn-loan-to-bangladesh-for-social-
infra-projects-118040500830_1.html
• Mahmood, M. (2019). The current state of the banking industry in Bangladesh. The
Financial Express, 27.
• Retrieved from: Bangladesh Bank website, https://www.bb.org.bd/fnansys/bankfi.php
• Retrieved from: Standard Chartered Bank website, https://www.sc.com/bd/about-us/

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• Retrieved from: Mutual Trust Bank website, https://www.mutualtrustbank.com/about-us/

• Retrieved from: EXIM Bank website,
https://www.eximbankbd.com/about/about_exim_bank
• Mazid, M.A., (2015), Standard Chartered Bank,
http://en.banglapedia.org/index.php?title=Standard_Chartered_Bank
• Mutual Trust Bank website, retrieved from: https://www.mutualtrustbank.com/internet-
banking/
• EXIM Bank website, Pioneer in Innovative Banking, retrieved from:
https://www.eximbankbd.com/about/Exim_Bank_Foundation
• (2020, January 2). Retrieved December 23, 2020, from
https://av.sc.com/bd/content/docs/bd-standard-chartered-financial-statements.pdf
• EXIM Bank: Annual Reports. (n.d.). Retrieved December 22, 2020, from
https://www.eximbankbd.com/report/Annual_Reports
• Annual Report. (n.d.). Retrieved December 23, 2020, from
https://www.mutualtrustbank.com/investor-relations/annual-report/

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6. Appendix:

Capital Adequacy

CAR TL/TE Parameter Ranking

Bank's Name
Ratio Rank Ratio Rank Average Rank
SCB 23.15% 1 5.01 1 1.00
Mutual TRUST Bank 12.86% 2 15.08 3 2.50
EXIM Bank 12.62% 3 13.81 2 2.50

Asset Quality
NPL/ Total Total Loan/ ALL/ Total Parameter
Bank's Name Loan Total Asset Loans Ranking
Ratio Rank Ratio Rank Ratio Rank Average Rank
SCB 1.69% 1 64.25% 2 4.00% 1 1.33
Mutual TRUST Bank 7.61% 3 52.51% 3 1.52% 2 2.67
EXIM Bank 4.52% 2 76.15% 1 0.61% 3 2.00

Management
Efficiency
Total Business per Profit per Parameter
advance /TD employee employee Ranking
Bank's Name
Rati Ran Ran Ran Average
o k Ratio k Ratio k Rank
968842 641296
SCB 0.01 3 0 1 4 1 1.67
270886 114882
Mutual TRUST Bank 0.27 1 1 2 4 2 1.67

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166616
EXIM Bank 0.04 2 4 3 822023 3 2.67

Earnings Capacity
Parameter
ROA ROE NIM
Bank's Name Ranking
Ratio Rank Ratio Rank Ratio Rank Average Rank
SCB 3.32% 1 19.94% 1 4.48% 1 1.00
Mutual TRUST Bank 0.49% 3 7.94% 3 2.06% 3 3.00
EXIM Bank 0.56% 2 8.33% 2 2.29% 2 2.00

Liquidity Management
Parameter
Total Loans / TD CA / CL
Bank's Name Ranking
Ratio Rank Ratio Rank Average Rank
SCB 1.17 1 0.29 1 1.00
Mutual TRUST Bank 0.70 3 0.22 2 2.50
EXIM Bank 0.93 2 0.10 3 2.50

COMPOSITE Rating

Composite
Bank's Name C A M E L Average
Rating
SCB 1.00 1.33 1.67 1.00 1.00 1.20 1
Mutual TRUST Bank 2.50 2.67 1.67 3.00 2.50 2.47 3
EXIM Bank 2.50 2.00 2.67 2.00 2.50 2.33 2

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