Debt Ratio:

Debt ratio is a solvency ratio that measures a bank’s total liabilities as a percentage of its total
asset. In a sense, the debt ratio shows a bank’s ability to pay off its liabilities. This ratio
measures the financial leverage of a bank. Banks with higher levels of liabilities compared with
assets are considered highly leveraged and risker for lenders.

Formula: Total Liability / Total Asset

Calculation:
Ban 2017 2018 2019 2020
k
EBL 0.915 0.918 0.923 0.913
NBL 0.885 0.890 0.894 0.901
Interpretation:
In Eastern Bank Limited, the debt ratio in 2017-2020 shows that for every BDT 1.00 of the
asset, EBL had BDT 0.915, 0.918, 0.923, 0.913 of debt accordingly.

In National Bank limited, the debt ratio implies that for every BDT 1.00 of the asset, CBL had
BDT of debt during 2017-2020 are 0.885, 0.890, 0.894, and 0.901 accordingly.

Time Series Analysis:

In Eastern Bank Limited, according to debt ratio, we can see that in 2017, EBL had 0.915 BDT
against 1 BDT of the asset. The debt ratio had increased by 0.918 in the next year and reached
0.923 BDT in 2019.But in 2020 it decreased and reached 0.913. We can say that due to the
decrease of the liabilities or increase in the assets, the value of the debt ratio has decreased over
the given period. This indicates the bank has a good debt ratio.
In National Bank Limited, according to debt ratio, we can see that in 2017, EBL had 0.885 BDT
against 1 BDT of the asset. The debt ratio had gradually increased to 0.890 in the next year and
reached 0.901 BDT in 2020. We can again state that due to the increase of the liabilities or
decrease in the assets, the value of the debt ratio has increased over the given period. This
indicates the bank has a bad debt ratio.

Cross-Sectional Analysis:

The calculation suggests that in from 2017 to 2020 EBL bank performed well against NBL.

In conclusion, we can say that EBL had a lower debt ratio in 2020 and NBL had higher debt
ratio, which indicates that EBL was able to manage their liabilities in terms of assets and
National Bank did not able to manage their liabilities in terms of assets.

Debt to Equity Capital:

The debt to equity ratio is a financial ratio that compares a company’s total debt to total equity.
The debt to equity ratio shows the percentage of company financing that comes from creditors
and investors. A higher debt to equity ratio indicates that more creditor financing (loans) is used
than investor financing (shareholders).

Formula: Total Liability / Total Equity Capital

Calculation:

Bank 2017 2018 2019 2020

EBL 10.70 11.21 12.02 10.52
NBL 12.97 12.28 11.73 10.86
Interpretation:
For Eastern Bank Limited, the debt to equity capital ratio shows that the bank has 10.70, 11.21,
12.02, and 10.52 of debt out of each 1 BDT of equity financing during 2017-2020 accordingly.

For National Bank Limited, the debt to equity capital ratio shows that the bank has BDT 12.97,
12.28, 11.73, and 10.86 of debt out of each 1 BDT of equity financing during 2017-2020
accordingly.

Time Series Analysis:

In Eastern Bank Limited, according to debt to equity ratio, we can see that in 2017, EBL had
10.70 BDT against 1 BDT of the asset. The debt ratio had increased 11.21 in the next year and
reached 12.02 BDT in 2019 which is the maximum point. And then decreased to 10.2 in 2020.
We can say that due to the decrease of the liabilities or increase in the equity, the value of debt
to equity ratio has decreased over the given period. This indicates the bank has a good debt to
equity ratio.
In National Bank Limited, according to debt to equity ratio we can see that in 2017, NBL had
12.97 BDT against 1 BDT of the asset. The debt ratio had gradually decreased to 12.28 in the
next year and reached 10.86 BDT in 2020 which is the minimum point. We can again state that
due to the decrease of the liabilities or increase in the equity, the value of debt to equity ratio has
decreased over the given period. This indicates the bank has a good debt ratio.

Cross-Sectional Analysis:

By analyzing over the four year’s data calculation for both the bank’s ratio, we can conclude that
both the bank follows the decreased trend and they were able to manage their liabilities in term
of equity. Although EBL has maintained a good ratio over NBL for debt to equity capital ratio in
2020.

Interest Coverage Ratio:

Interest coverage ratio can be referred to as debt ratio that measures a financial risk of a bank.
It determines the ability to pay interest from a company’s existing outstanding debt. Interest
coverage ratio shows how many times a bank can pay interest to its depositors by its available
earning. So, a stable interest coverage ratio is highly needed for a bank to preserve a good
outlook before the investor. Formula: EBIT / Interest Expense
Calculation:
Bank 2017 2018 2019 2020
EBL
NBL

Financial Risk Ratios Overall Comparison:

In conclusion, based on analysis, we can say that both the bank are very close to each other in
terms of the financial risk ratio. But between this two, obviously, EBL has maintained a slightly
better financial risk ratio than NBL.
Profitability Ratios:
How efficiently the bank is generating profit from its services is measured with these ratios.
Whether the profits are enough or not is measured by profitability ratios.

Return on Asset:
The return on assets often called the return on investment (ROI), measures the overall
effectiveness of management in generating profits with its available assets. The higher the firm’s
return on total assets, the better is the company’s performance. It is expressed in percentage.
ROA is calculated as,

Formula: Net Income After-tax / Total Asset

Calculation:
Bank 2017 2018 2019 2020
EBL 0.95% 1.09% 1.17% 1.23%

NBL 1.36% 0.94% 0.88% 0.68%

In Eastern Bank Limited, ROA 0.95%, 1.09%, 1.17%, and 1.23% shows that from 2017 to 2020
the bank gradually generated 0.95, 1.09, 1.17, and 1.23 net profit for every Tk.100 investment in
total assets accordingly.

In National Bank Limited, ROA 1.36%, 0.94%, 0.88%, and 0.68% shows that from 2017 to
2020 the bank gradually generated 1.36, 0.94, 0.88, and 0.68 net profit for every Tk.100
investment in total assets accordingly.

Time Series Analysis:

From the graph, we can see that from the year 2017-2020, the maximum point of EBL is 1.23%
in 2020 and the minimum point is 0.95% in 2017. In recent time, the ratio has been fluctuating
over the year. This ratio implies the utilization of its assets in generating better profit in 2020.

In National Bank Limited, from the graph, we can see that ROA in 2017 is 1.36 % which is the
maximum point and the minimum point is 0.68% in 2020. In recent time, the ratio has been
fluctuating over the given period. This ratio implies the utilization of its assets in generating
better profit in 2017.

Cross-Sectional Analysis:

By analyzing both of the ratios, we can see that Eastern Bank’s ROA was better than NBL.

We can conclude that Eastern Bank has maintained a good ROA ratio than NBL, which indicate
that EBL was able to utilize its assets in generating a better profit than NBL.

Return on Equity:
The return on equity measures the return earned on the common stockholder’s investment in the
firm. Generally, the owners are better off the higher is this return. Return on Equity is calculated
as

Formula: Net Income after Tax / Total Equity Capital

Calculation:

Bank 2017 2018 2019 2020

EBL 11.10% 13.31% 15.37% 14.19%

NBL 11.89% 8.66% 14.56% 6.69%

Interpretation:
In Eastern Bank Limited, ROE 11.10%, 13.31%, 15.37%, and 14.19% indicate that the
shareholders earned BDT 11.10, 13.31, 15.37 and 14.19 profit in terms of their BDT 100
investment over the given period of years.
In National Bank Limited, ROE 11.89%, 8.66%, 14.56% and 6.69% indicate that the
shareholders earned BDT 11.10, 8.66, 14.56 and 6.69 profit in terms of their BDT 100
investment over the given period of years.

Time Series Analysis:

From the graph we can see that for the EBL from 2017 to 2019 it was increasing and then
decreasing in 2020. In 2018, the maximum point of EBL is 15.37 and the minimum point is
11.10 in 2017. Which implies that in 2020, the ability of EBL to generate better profits from its
shareholder's investments.

From the ROA graph we can see that for NBL from 2017 to 2020 it was decreasing and then
increasing in the next one year and again decreased in 2020. In 2019, the maximum point of
NBL is 14.56 and the minimum point is 6.69 in 2020. Which implies that in 2019, the ability of
NBL to generate better profits from its shareholder's investments.

Cross Sectional Analysis:

According to both of the ratio, we can conclude that the ROE for both the banks has been
fluctuating over the given period. For EBL in 2019 is the highest point and 2019 is the highest
for NBL. From this two, EBL has maintained a better ROE ratio which implies that the investor
will be willing to invest more on the national bank for getting a higher return.

Profitability Ratios Overall Comparison:

In the summary, by analyzing both of the bank’s profitability ratios, we can say that Eastern
Bank has maintained a better profitability ratio. Because EBL has a higher ROA and ROE than
NBL. So, it indicates that EBL has a better position in profitability ratios between this two.