Jagannath University

Department of Finance

Assignment
on
The role of investment bank as a key participant in equity market
in Bangladesh: A study on Mutual Trust Bank Limited

Submitted to:
Dr. Md. Monzur Morshed Bhuiya
Professor and Chairman
Department of Finance, JnU

Submitted by:
Group No - 08
Course Title: Lease Finance and Investment Banking
Course Code: FIN-6404
Department of Finance
Jagannath University

Date of Submission
12th February, 2022
 Group Members Information

Assessment Total
Seria Work
Student ID’s Student Name Write Presentation- Mark-
l No Load
Up-15 5 20
Khadija Begum
1 M19170203531 20%
Sunny (C)
2 M19160203343 Sharmin Akter 20%

3 M20190203305 Farjana Rahman 20%

Md. Mozammell
4 M20190203339 20%
Hossain
Md Ekramul
5 M20190203314 20%
Hossain

Acknowledgment
First and foremost, praises and thanks to Allah, the almighty, for his showers of blessings
throughout our work to complete the report successfully.

We would like to express our deep and sincere gratitude to Dr. Md. Monzur Morshed Bhuiya
sir, Professor and Chairmen, Department of Finance, Jagannath University, for giving us the
opportunity to do the assignment and providing invaluable guidance throughout this research.

We wish to express our gratitude towards the group members for their huge supports and
cooperation during the preparation of this report. We are very thankful to each group member
because every one of them contributed their full efforts during this time. We also thankful to
different articles and specially google for making things easier.
 Table of Content
Particular Page Number
Cover Page -
Acknowledgment -
Executive Summary -
1. Introduction
2. Objectives of the Study
3. Scope of the Study
4. Limitations of the Study
5. Methodology of the Study
6. Analysis of Data
7. Findings and Recommendations
8. Conclusion
References
 Executive Summary
An investment bank is a financial services company or corporate division that engages in
advisory-based financial transactions on behalf of individuals, corporations, and
governments. Essentially, investment banks serve as middlemen between a company and
investors when the company wants to issue stock or bonds. In this report we tried to find out
the role/participation of Mutual Trust Bank Ltd. in the equity market in Bangladesh.

We have used qualitative method to collect our data for the purpose of making this report
complete. We have used secondary sources of data mainly which includes different articles,
websites and web pages, online journals and online newspapers.

This report consists with very useful information which we have collected from different
sources. This report mainly starts with the introduction parts where a brief information has
given about the report title and the Mutual Trust Bank Ltd. The later part of the report
consists with scope of the report, objective of the report, limitations, methodology of the
report. After that most important part which is data analysis is also given. From the analysis
we have provided some important recommendations according to the findings. The report is
ended with the conclusion.
1. Introduction
Ever since the passage of the Glass-Steagall Act, investment banking has been narrowly
defined as financial services associated with the issuance of new securities. Investment bank
is a financial institution that helps individuals, organizations and governments to raise capital
and money by underwriting and acting as agent of clients issuing of securities. Unlike
commercial and retail bank, investment bank does not take deposits. This banking system is
concerned with the allocation of financial resources, basically, how & why money is moved
from those who have it (investors) to those who need it (issuers). Thus, it plays an important
intermediary role in resource allocation. An investment bank is usually involved when a
startup company prepares for its launch of an initial public offering (IPO) and when a
corporation merges with a competitor. It also has a role as a broker or financial adviser for
large institutional clients such as pension funds.

In the Bangladesh context, financial institutions that carry out some distinct activities are
being addressed as merchant banks. The core functions of merchant banks in Bangladesh
include issue management, underwriting and Portfolio management services. The securities
and exchange commission, based on SRO No 59 of 24 April 1996, and a decision taken by it
on 17 August 1997, invited letters of intent from 14 institutions for registration of merchant
banks. Prior to this decision, 7 institutions submitted such letters of intent and SEC gave
registration to a total of 19. Presently, a total of 50 merchant banks are operating in the
country, and their aggregate paid-up capital amounts to about Tk 36 billion. Among them 43
are full-fledged merchant banks. Merchant banks in Bangladesh are actively governed by the
Securities and Exchange Commission (SEC) and submissively by the Bangladesh Bank.

Mutual Trust Bank operates as an investment bank in Bangladesh and they play a vital role in
the equity market as a key participant. That will be discussed in the observation in the later
part.

Mutual Trust Bank Ltd.

Mutual Trust Bank Ltd. (MTB) is a third-generation private commercial bank, based in
Dhaka, Bangladesh and has been adjudged as the Best Financial Institution of 2014 at the
DHL-Daily Star Business Awards 2015. Earlier, MTB had also received the first-ever best
“SME Bank of the Year” and best “Women Entrepreneurs’ Friendly Bank of the Year” by
Bangladesh Bank and SME Foundation. MTB has recently been awarded the Best Presented
Annual Report-2018 (3rd position) in the Private Banks category by The Institute of
Chartered Accountants of Bangladesh (ICAB). MTB aspires to be one of the most admired
banks in the nation and recognized as an innovative and client-focused company. With our
current network of 119 branches & 33 Sub branches, 200 Agent Banking Centers, 18 kiosks,
310 modern ATMs including 6 CRM Booths, 4 Air Lounges, over 3,220 Point of Sales
(POS) machines, located in prime commercial, urban and rural areas, MTB offers fully
integrated real time Online Banking Services, Internet and SMS Banking to its clientele,
through a dedicated Team of experienced Relationship Managers and Alternate Delivery
Channels (ADC).”

Registered Name of The Company

  Mutual Trust Bank Limited.
Legal Form
The Company was incorporated as a Public Limited Company on September 29, 1999, under
the Companies Act 1994, with an Authorized Share Capital of BDT 1,000,000,000 divided
into 10,000,000 ordinary shares of BDT 100 each. At present, the Authorized Share Capital
of the company is BDT 10,000,000,000 divided into 1,000,000,000 ordinary shares of BDT
10 each.

The Company was also issued Certificate for Commencement of Business on the same day
and was granted license on October 05, 1999 by Bangladesh Bank under the Banking
Companies Act 1991 and started its banking operation on October 24, 1999.

Activities of Investment Bank

An investment bank is a financial services company or corporate division that engages in
advisory-based financial transactions on behalf of individuals, corporations, and
governments. Traditionally associated with corporate finance, such as:
 An investment bank may also assist companies involved in mergers and acquisitions
(M&A).
 Provide ancillary services such as market making, trading of derivatives and equity
securities, and FICC services (fixed income instruments, currencies, and
commodities).
 A bank might assist in raising financial capital by underwriting or acting as the
client's agent in the issuance of securities.
 Most investment banks maintain prime brokerage and asset management departments
in conjunction with their investment research businesses. As an industry, it is broken
up into the Bulge Bracket (upper tier), Middle Market (mid-level businesses), and
boutique market (specialized businesses).

However, all investment banking activity is classed as either "sell side" or "buy side".

The "sell side" involves trading securities for cash or for other securities (e.g., facilitating
transactions, market-making), or the promotion of securities (e.g., underwriting, research,
etc.).
And the "buy side" involves the provision of advice to institutions that buy investment
services. Private equity funds, mutual funds, life insurance companies, unit trusts, and hedge
funds are the most common types of buy-side entities.

An investment bank can also be split into private and public functions with a screen
separating the two to prevent information from crossing. The private areas of the bank deal
with private insider information that may not be publicly disclosed, while the public areas,
such as stock analysis, deal with public information. An advisor who provides investment
banking services in the United States must be a licensed broker-dealer and subject to U.S.
Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority
(FINRA) regulation.

Mutual Trust Bank Limited offers two products under their retail investment. These are-
  Yaqeen Home Finance
 Yaqeen Auto Finance

2. Objectives of the Study

The main objectives of this education are to acquire knowledge. There are some more
objectives such as:
 To evaluate the performance of MTB towards as a key participant in equity market in
Bangladesh.
 To find out the present condition of Bangladesh equity market.
 To examine the operational procedure of MTB.
 To evaluate the effectiveness of MTB in the equity market.
 To analysis the role of investment bank as a key participant in equity market in
Bangladesh.

3. Scope of the Study

The scope of the report was basically the functions and performance as well as the role of
investment bank as a key participant in equity market in Bangladesh. The scope of the study
was limited only on report analysis, published information of MTB and their official
websites. The data comparison was based on published information and additional research to
get in depth information as it was the part of the objective of the report.

4. Limitations of the Study

There were some limitations while making this report. They are:
 As we've done this type of report for the first time and the subject matter is very
complex that's why it was difficult to organize the report in a simple manner.
 Scarcity of sufficient written documents.
 Collecting the information and interpreting on the basis of our understanding and then
implement it.
 Time constraint.

5. Methodology of the Study

A research design is a method and procedure for acquiring information needed to solve the
problem. A research design is the basic plan that helps in the data collection or analysis. It
specifies the type of information to be collected the sources and data collection procedure.
The present study is qualitative and it is a fact-finding investigation with an adequate
interpretation. To prepare this report all required information collected from secondary
sources of data due to lack of reliability of primary sources of data.

Secondary Sources of Data Collection:

Annual reports of Mutual Trust Bank, other published documents of the bank, Mutual Trust
Banks website are the internal sources from where we collected data. The external sources of
data collection include- books, articles, journals, online newspaper and websites from where
we have collected data to prepare this report.

6. Analysis of Data
In developing countries like Bangladesh, to collect data is a troublesome task. Our study
mainly considers Mutual Trust Bank Limited (MTBL) listed in Dhaka Stock Exchange
(DSE). We exclude all financial institutions, other banks (Without MTBL) and insurance
companies from our sample because concentration of this study is only on MTBL. Finally,
our sample consists of mutual trust Bank Limited including two most important variables like
credit and deposit. This firm is observed over 2017-2021 periods, allowing me to form a
regression model. All data are amassed from secondary sources; i.e., annual reports of the
sample firm.

A company profit and loss are included in the performance on the ratio analysis. Ratio
analysis compares line-item data from a company's financial statements to reveal insights
regarding profitability, liquidity, operational efficiency, and solvency. Ratio analysis can
mark how a company is performing over time, while comparing a company to another within
the same industry or sector. Analysts rely on current and past financial statements to obtain
data to evaluate the financial performance of a company. They use the data to determine if a
company’s financial health is on an upward or downward trend and to draw comparisons to
other competing firms.

Ratio’s analysis involves methods of calculating financial ratios to analyze and monitor the
firm’s performance so any individual public wanted to know company performance they can
see the company ratio analysis of the Mutual Trust Bank Ltd. Some important ratio analysis
is given bellow:

Return Analysis

01.Returrn on Equity=Net income/Total Equity capital

02.Return on Assets= Net income/Total Assets

Debt Analysis

03.Debt to Equity Ratio=Total Debt/Total Equity

04.Debt to Asset Ratio= Total Debt/Total Asset
Per share Figure

05.Earning Per Share= Profit After Tax/No of Share

1. Return on Equity

Return on Equity
8.00%

6.00%
5.78%

4.00% 4.63%

2.00%

1.09%
0.00%
2017 2018 2019 2020 2021
-2.14%
-2.00%
-3.06%

-4.00%

Comments: The Return on Common Equity (ROE) measures the return earn on the common
stockholders’ investment in the firm. Generally, the higher this return the better off are the
owners. The calculated ROE of 4.63%,5.78%, -3.06,1.09% & -1.41% percent indicates that
during 2017 to 2021 Mutual Trust Bank Ltd. Earned 4.63%,5.78%, -3.06,1.09% & -1.41%
percent on each dollar of common stock equity.

2. Return on Assets

Return on Asset
4.00%
3.00% 3.20%
2.00% 2.28%
1.00%
0.00%
2017 2018 2019 0.06%
2020 2021
-1.00%
-1.78%
-2.00%
-3.00%
-4.00%
-5.00%
-5.00%
-6.00%
Comments: The Return on Total Assets (ROA), often called the return on investment (ROI),
measures the overall effectiveness of management in generating profits with its available
assets. This value indicates that the firm earned 3.20%,2.28%, -1.78%,0.06% & -0.05% cent
on each dollar of assets investment. From this percentage highest value show in 2017 which
is 3.20%.

3. Debt to Equity Ratio

Debt to Equity Ratio

180.00% 168.25%
160.00% 145.77% 147.22%
139.26% 142.95%
140.00%
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
Comments: Debt2017to Equity Ratio2018 2019 debt of Mutual
means the long-term 2020 Trust Bank2021
Investment
during 2017 to2021 is 168.25%,145.77%,147.22%,139.26% & 142.95%of equity it indicates
long term solvency of the Mutual Trust Bank investment which is better for debt holder but
not equity holder. Where the company highest rate 168.25% in the year of 2017 and the
lowest 139.26% in the year 2020.

4. Debt to Assets Ratio:

Debt to Asset Ratio

74.00%
72.41%
72.00%

70.00%
68.28%
68.00% 67.29% 67.26%
65.80%
66.00%

64.00%

62.00%
2017 2018 2019 2020 2021
Comments: Debt to Asset Ratio means total debt of Mutual Trust Bank Investment during
2017 to 2021 is 72.41%,68.28%,67.29%,65.80% & 67.26% on total asset. Where the
company highest rate 61.13% in the year 2017 and lowest 65.80% in the year 2020.

5. Earnings Per Share (EPS):

Earning Per Share (EPS)

1
0.78
0.8
0.63
0.6

0.4

0.2
0.04
0
2017 2018 2019 2020 2021
-0.2 -0.17
-0.4

-0.6
Comments: Earnings per share represents the -0.51
dollar amount earned on behalf of each share-
not the amount of earnings actually distributed to shareholders. The Mutual Trust Bank
Investment earned during 2017 to 2021 is 0.78,0.63, -0.51,0.04, & -0.17 as per profit share.
Where The Mutual Trust Bank Investment earned highest profit per shar in 2017 and the
lowest is -0.51 in the year 2019.

7. Findings and Recommendations

Findings

Like all other forms of banking, investment banking is currently going through some
threatening challenges and transformations. Almost all businesses across the world are trying
their best to recover from the adverse effects of the global pandemic of Covid-19, but the
companies operating in the investment banking sectors are facing difficulties to regain their
pre-pandemic levels. The coronavirus pandemic compelled the investment banking industry
to restructure its strategies.
When it comes to achieving client-focused experiences in B2C and B2B models, it is
completely different. Earlier, the customer came to the bank but today, he wants the bank to
come to him. Thus, the sector is required to consider new & improved delivery models that
can assist today’s customers.
Most individuals & companies aren’t that much interested in investing their money due to the
global pandemic of Covid-19. In this case, MTB is not an exception to this situation. They
have suffered during this period.
Companies operating in Banking, financial services, and insurance (BFSI) are constantly
evolving their program & policies to achieve sustainable cost efficiency. The prices of goods
& services are getting lower, leading to fewer margins & reduced cost of capital with banks,
making investors not willing to invest.
In this report we have used ratio analysis as a prime method for data analysis process. We
have analyzed 5years data and found out some issues which we will be addressed in this
section.
1. If we look closely, we can see that ROE is falling during the period of 2019-2021. A
fall in ROE means that the return on common stockholder’s investment is also falling.

2. Capital market acts as an intermediary to transfer fund from people to who need the
fund. This task is performed by investment banks through selling securities in the
capital market after setting a price considering potential buyers. But considering the
last 5years data from 2017-2021 the ROA is noticeably decreased over the period.

3. Earnings per share of MTB drastically falls in 2019 which is -0.51 that means the
company is losing money or spending more money than it is earning.

Recommendations
Investment banks act as a bridge between large enterprises and investors. The primary role of
an investment bank is to advise government and businesses on how to meet their financial
needs and help procure their finances.
Investment banks help corporations obtain debt financing by finding investors for corporate
bonds. Investment banks guide corporations when going public, raising capital, and through
mergers and acquisitions.
In this case, we have developed our study based on the perspective of Mutual Trust Bank Ltd.
As we have seen on the data analysis part the ROE of MTB is decreasing if we look closely
of their last 5 years data which is not good. MTB should focus on their ROE to increase as
much as possible.
Although MTB recovers their EPS positively in 2020 which is a great achievement compared
to the 2019’s negative EPS. But the EPS again falls in 2021 where they should focus. They
have to put more effort to make a positive EPS to attract more investment.
Investment banks like MTB faces significant challenges driven by COVID-19 impacts,
evolving financial regulations, market democratization, increased client sophistication, a shift
to remote working arrangements and rapid technology advances. There are opportunities for
banks to drive toward higher levels of return; however, to achieve this, they likely will need
to retool certain business models and operational platforms.
Though the establishment of ICB was a major step in a series of measures undertaken by the
government to accelerate the pace of industrialization and to develop a well-organized and
vibrant capital market, particularly the securities market in Bangladesh but according to last 5
years data MTB is not gaining a profit if we look into earning per share of MTB.

8. Conclusion
 References
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https://www2.deloitte.com/global/en/pages/financial-services/articles/bank-of-2030-future-
of-investment-banking.html

Current Investment Banking Challenges & Their Solutions. (2021, August 06).
EmirioBanque. https://www.emeriobanque.com/blogs/current-investment-banking-
challenges-and-their-solutions

The prospect of investment banking in Bangladesh. (2014, September 14). Academia.

https://www.academia.edu/8324827/Final_assignment_on_investment_banking_1_

Investment Banking in USA and Bangladesh Scope for Innovation. (2014, April 26).
ResearchGate.
https://www.researchgate.net/publication/262601652_Investment_Banking_in_USA_and_Ba
ngladesh_Scope_for_Innovation

Report on Investment Bank in Bangladesh. (2019, July 20). PDFCOFFEE.

https://pdfcoffee.com/report-on-investment-bank-in-bangladesh-pdf-free.html

The Role of Investment Corporation of Bangladesh in the Development of Capital Market of

Bangladesh. (2018, July 01). https://osderpublications.com/uploads/1568727114.PDF