A Study on Financial Performance Analysis of Sonali Bank Ltd.
CHAPTER-1
INTRODUCTION
Department of Finance & Banking, Comilla University.
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A Study on Financial Performance Analysis of Sonali Bank Ltd.
This report named “A Study on Financial Performance Analysis of Sonali Bank Ltd.” has
been made as a part of my internship at Sonali Bank Limited (SBL). The report includes my
work experiences at Station Road Branch as an intern.
1.1Origin of the Report:
As a qualification of obtaining Bachelor of Business Administration (BBA) degree,
every student has to go through an internship program. The main reason of this course is to
experience the reality of the corporate life and relate it with the knowledge get from academic
curriculum with practical situation. This course is taken as a three months program which
creates opportunities for every student to work different organizations where they work
different working environment and gather practical knowledge.
1.2 Introduction of the Reports
Banks play the most important role in the economy. Banks collect money from the
individuals and lend them to others. Now banks offer the widest range of financial services
and perform lots of financial functions. Thus banks have proven that they are the key factor
for the business and economy as well.
Sonali Bank Limited is the largest banking institution in Bangladesh, dynamic in
actions, honest in dealings, just in judgment, fair in approaches and devoted to high quality
service to customers and thereby contribute to the growth of GDP of the country throughout
stimulating trade and commerce, boosting up export, poverty alleviation, raising living
standard of limited income group and overall sustainable socio-economic development in the
country.
To achieve the aforesaid objectives of the Bank, different banking activities must play
an active role to provide the financial assistance to the customer who also helps them by
providing them with management assistance when needed. Sonali Bank Limited has played
this role with their experiences in the banking sector where the others are not merely
performed.
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The internship report comprises a brief study on the Sonali Bank Limited during three
months internship. The report is distributed in many parts according to nature and
requirement of organization and according to the instructions of supervisor of report.
1.3 Justification of the Study:
Internship Program is a mandatory program for all students of B.B.A under Public
University. Practical orientation is a positive development in professional area. Recognizing
the importance of practical experience, Department of Business Administration has
introduced a one to three months practical exposure as a part of the curriculum of Bachelor of
Business Administration.
For the completion of this internship program I have chosen a bank named “Sonali
Bank Limited” and my internship report is based on “Financial performance analysis of
Sonali Bank Limited”. I have prepared this report under Mohammad Jashim Uddin, Assistant
Professor, Department of Finance & Banking, Comilla University. In the study period,
mainly student gain theoretical knowledge but now a day, in the job market there is no
substitute of principle work experience. Therefore, before getting into job, students should
have some real world experience in the major field of study on the career choice that interest
him/her.
1.4 Objective of the Study:
The objective of the study is to gather practice of all knowledge regarding business
sector and operations. Theory classes of B.B.A provide us theories regarding business sector
and practical orientation gives us the chance of view those systems and their operations.
More precisely we can identify those objectives:
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General Objective
The general objective of this report is-“To explore Financial Performance of Sonali Bank
Ltd.”.
Specific Objectives
Specific objectives of this report are –
 To evaluate the financial operations & performance of Sonali Bank Limited.
 To gather the practical experience base on the theoretical knowledge.
 To habituated with the corporate environment and culture.
 To observe the functions of general banking system.
 To understand and analyse the financial strength of Sonali Bank Limited.
 To learn and acquainted to fulfil the academic purpose.
 To find out the financial performances of Sonali Bank Limited
1.5 Scope of the Study:
As I was an intern, my scope was limited and restricted for some purpose. I had
maintained some official formality for the collection of data of my report. This study will
give a clear idea about the financial performance of Sonali Bank Limited as well as the
different section of different products and services of Sonali Bank Limited. At last the
financial position of the bank in the banking industry based on its last couple of year’s
performance.
 Information availability.
 Good communication system.
 Have a wide area of gaining knowledge.
 Good working environment.
1.6 Methodology of the Study:
I have designed this report as an expletory research paper. Here I have discussed the
general banking system of Sonali Bank Limited and critically analyze the banking procedure
with the standard one as per theoretical framework. For this purpose I use my personal
observation during my internship program. Through conversation with the different level
officers of the Bank, I also gather knowledge about the general banking system. For
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theoretical framework, I go through a number of credit related books, financial management
books, business communication book, foreign exchange manuals, Bangladesh Bank
guidelines.
1.7 Sources of the Information:
For smooth and accurate study everyone has to follow some rules and regulations.
The study inputs were collected from two sources:
Primary Sources:
 Practical desk work.
 Face to face with officers.
 Face to face conversation with the client.
 Facing some practical situation related with the day to day banking activities.
Secondary Sources:
 Annual Report of Sonali Bank Limited.
 Journals.
 Websites.
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1.8 Limitation of the Study:

Any research work needs high degree of involvement regarding collection of
information, creation of data base, literature review and analysis of data. While doing
so, many limitations arise even though we always put our best effort to avoid them. In
conducting the present study, the following limitation has been faced.

The personnel of the organization did not want to disclose the classified information
to the outsiders. Due to lack of experience, there is a chance of having some mistake
in the report though best effort has been applied to avoid any kind of mistake.

I have faced major limitation in the financial projection as my estimate was rather
informative base than of actual one. Time was not sufficient to make an in depth study
on such issue.

Bank’s policy did not permit to disclose data and information related to project parts
study.

In view of time and resource constraints, conducting a comprehensive study in full
depth and width has not been possible

Sufficient books, publications and figures were not available.
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CHAPTER-2
Literature review
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A Study on Financial Performance Analysis of Sonali Bank Ltd.
Literature review
Many researchers have been conducted to measure the corporate
disclosure of financial as well as non-financial companies. Generally, the
financial performance of banks and other financial institutions has been
measured using a combination of financial ratios analysis, benchmarking,
measuring performance against budget or a mix of these methodologies
(Avkiran, 1995). (Spathis, and Doumpos, 2002) investigated the effectiveness of
the financial position of Greek banks based on their assets size. They used
several criteria in their study to classify Greek banks according to the return and
operational factors. They tried to show the differences of the bank’s profitability
and efficiency between small and large banks.
A research paper in the title of efficiency about customer service and
financing performance among Australian financial institutions (Elizabeth
Duncan, and Elliott, 2004) showed that all financial performance measures as
interest margin, return on assets, and capital adequacy are positively correlated
with customer service quality scores. Bakar and Tahir (2009) in their research
paper used multiple analysis of linear regression technique and simulated neural
network techniques for predicting bank performance. ROA was used as
dependent variable of bank performance and seven variables including liquidity,
credit risk, cost to income ratio, size and concentration ratio, were used as
independent variables. O’Donnell and Van der Westhuizen (2002) measured the
efficiency of a South African bank at branch level. Their main focus was
investigating branches which were performing well and those that were doing
badly, where efficiency could be improved. They found that many branches
were operating on a scale that is too small and could increase their operational
scales thereby improving the overall efficiency of the bank.
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(Raza et al., 2011; Tarawneh, 2006) explained that a company, which has
better efficiency, it does not mean that always it will show the better
effectiveness. However, the literature concerning the asset and liability
management for banks strongly suggests that risk management issues and its
implications must be concentrated by the banking industry. (Jon R.Presely,
1992) concluded from his study that there is a need for greater risk management
in relation to more effective portfolio management, and this 14 requires a
greater emphasis upon the nature of risk and return in bank asset structure, and
greater diversification of assets in order to spread and reduce the bank's risks.
Furthermore, Ho and Zhu (2004) have reported that the evaluation of a
company’s performance has been focusing the operational effectiveness and
efficiency, which might influence the company’s survival directly. Finally, the
performance analysis is a way to measure a company’s overall financial
performance by different ratios that reflects company’ financial position. The
analysis provides an idea about company’s operating efficiency and future
prospects. For financial performance analysis, liquidity, profitability, activity
and debt ratios are common. Ratios are key indicator that the performance of a
company is poor or well.
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CHAPTER-3
BANKING OPERATIONS IN BD
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3.1 Definition of a Bank:
Generally Bank is refers to an Organization that deals with money. The definition of
Bank may be as follows:
As per Bank Companies Act 1991:
Banking Company means any company which transacts the business of banking in
Bangladesh and includes a new bank and specialized bank.
Banking means the accepting for the purpose of lending or institute of deposit of
money from pSBLic repayable on demand or other wise and withdraw able by draft, order o
otherwise.
Provided by Famous Encyclopedia:
A commercial banker is a dealer in money in substitutes for money, such as cheque or
bill of exchange.–New Encyclopedia Britannica.
Establishment for custody of money which it pays out on customers order. – The New
Oxford Encyclopedia Dictionary.
Provided by Banking Institutes:
A bank performs an essentially distributive task, service or acts as an intermediary
between borrowers & lenders. In broader sense, however, a bank can be considered the heart
of a complex financial structure. –American Institute of Banking.
Provided by Famous Economist:
A Bank is an institution whose debts are widely in sell element of other people debts
to each other. – R.S. Sayers.
A Banker is a dealer in debt his own and other peoples. – Crowther.
A Bank is a financial intermediary a dealer in loans and debts. – Cairn Cross.
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3.2 Objectives of a Bank:
The objectives of a Bank can be looked at from 3 different perspectives of the 3 key
parties to the banking activities- Bank owners, the Government and The bank clients.
From the owner’s perspective:
i.
Earning Profit: Just like any owner of a commercial institution, a bank owner’s main
objective is to earn profit, which is achieved mainly through monetary exchanges.
ii.
Rendering Service: Banks Provide Different types of services to the government and
people of the country.
iii.
Goodwill: In order to earn profit through rendering services, banks need to have a lot
of goodwill, may be a bit more than other commercial institutions.
iv.
Raising Efficiency: To earn maximum profit, banks need to provide efficient service,
for which they require expert workforce.
From the Government’s Perspective:
i.
Issue of Notes & Currencies: Since civilizations have moved along from the barter
system, it has been the objective of the Government of different countries to provide
its economy with a proper exchange media through issuance of notes & currencies
through bank, which also take upon the duty of maintaining the system.
ii.
Capital formation: The Government wants that bank assist in the macroeconomic
objective of capital formation by encouraging people to participate in savings.
iii.
Capital Investment & Industrialization: the Government, as a part of their
secondary macroeconomic objective, wants the bank to assist in capital investment &
industrialization by lending out their accumulated capital.
iv.
Money Market Control: Government tries to stabilize the money market through
banks.
v.
Employment: As part of their primary macroeconomic objectives, they expect banks
to provide employment for its people.
vi.
Advice on Financial Matters: Since banks hire a lot of financial experts and
advisors, it often seeks advice from banks to help them develop policies.
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From the Bank Client’s Perspective:
i.
Deposit: One of the bank’s main objectives is to accept its clients’ deposits. Like
bank clients also want to deposit money with a competitive rate of interest.
ii.
Safety: Providing safekeeping of its client’s monetary possessions and valuables is
another one of banks essential objectives.
iii.
Advisors & Consultants: Banks provide its clients with advisors and consultants to
help them chalk out an appropriate savings plan.
iv.
Representatives or Trustees: Both the clients and government rely on the bank to
act as their representatives and trustees of monetary exchange activities.
v.
Raising living standard: By providing interests against their deposits, banks help
their clients to improve their living standards.
3.3 Business of Banking Company (BANK COMPANY ACT 1991):
In addition to the business of banking a bank company may engage in any one or more of
the following forms of business:
 the borrowing, raising or taking up of money;
 the lending or advancing of money either upon or without security;
 the drawing, making, accepting, discounting, buying, selling, collecting and dealing in
bills of exchange, hoondees, promissory notes, coupons, drafts,bills of lading, railway
receipts, warrants, debentures, certificates, participation term certificates, term finance
certificates, musharika certificates, modareka certificates, such other instruments as
may be approved by the Bangladesh Bank, and such other instruments and securities
whether transferable or negotiable or not;
 the granting and issuing of letters of credit, traveller’s checks, and circular notes;
 the buying, selling and dealing in gold and silver coins and coins of other metals;
 the buying and selling of foreign exchange including foreign bank notes;
 the acquiring, holding, issuing on commission, underwriting and dealing in
stocks,funds, shares, debenture stock, obligations, participation term certificates, term
finance certificates, musharika certificates, modareka certificates and such other
instruments and investments of any kind as may be approved by the Bangladesh
Bank;
 the negotiating of loans and advances;
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 the receiving of all kinds of bonds or other valuables on deposit or for safe custody or
otherwise;
 providing vaults for the safety of the deposits;
 the collecting and transmitting of money against securities;
 acting as agents for the Government, local authorities or any other person;
 contracting for pSBLic and private loans and negotiating and issuing the same;
 the carrying on and transacting of every kind of guarantee and indemnity business;
 the buying and acquiring of any kind of property including merchandise, patents,
designs, trademarks and copyrights, in addition to, at the normal business period of a
bank, such or similar transactions as-
1) repurchase by the seller, or
2) selling in the way called purchase on rent, or
3) repayment of outstanding rates, or
4) leases, or
5) sharing out of revenues, or
6) financing in any other way;
 undertaking and executing trusts;
 undertaking the administration of movable and immovable property as executor,
trustee or otherwise;
 for the benefit of employees or ex-employees of the banking company or the
dependants and connections of such persons1) establishing and supporting, or aiding in the establishment and support of
associations, institutions, funds, trusts or any other establishment;
2) granting pensions and allowances;
3) making payments toward insurance;
4) subscribing to any exhibition or any object generally useful;
5) guaranteeing money for all these purposes.
The acquisition, construction, maintenance and alteration of any building or works necessary
or convenient for the purpose of the banking company.
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3.4 An Overview of Banking Operation in Bangladesh:
The development process of a country largely depends upon its economic activities.
Banking is a powerful medium among other spheres of modern socio-economic activities for
bringing about socio-economic changes in a developing country like Bangladesh. Three
different sectors like socio-economic changes in a developing country like Bangladesh. Three
different sectors like Agriculture, commerce, and industry provide the bulk of a country’s
wealth.
With the passage of time the functions of the bank has got a multi-dimensional
configuration. Of all the functions of a modern bank, lending is by far the most important.
They provide both short-term and long term credit. The customers come from all walks of
life, from a small business a multi-national corporation having its business activities all
around the world. The banks have to satisfy the requirements of different customers
belonging to different social groups.
One major exception to the management problems of Bangladeshi banks was the
Grameen Bank, begun as a government project in 1976 and established in 1983 as an
independent bank. In the late 1980s, the bank continued to provide financial resources to the
poor on reasonable terms and to generate productive self-employment without external
assistance. Its customers were landless persons who took small loans for all types of
economic activities, including housing. About 70 percent of the borrowers were women, who
were otherwise not much represented in institutional finance. Collective rural enterprises also
could borrow from the Grameen Bank for investments in tube wells, rice and oil mills, and
power looms and for leasing land for joint cultivation. The average loan by the Grameen
Bank in the mid-1980s was around Tk.2,000 (US$65), and the maximum was just Tk18,000
(for construction of a tin-roof house). Repayment terms were 4 percent for rural housing and
8.5 percent for normal lending operations.
The Grameen Bank extended collateral-free loans to 200,000 landless people in its
first 10 years. Most of its customers had never dealt with formal lending institutions before.
The most remarkable accomplishment was the phenomenal recovery rate; amid the prevailing
pattern of bad debts throughout the Bangladeshi banking system, only 4 percent of Grameen
Bank loans were overdue. The bank had from the outset applied a specialized system of
intensive credit supervision that set it apart from others. Its success, though still on a rather
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small scale, provided hope that it could continue to grow and that it could be replicated or
adapted to other development-related priorities. The Grameen Bank was expanding rapidly,
planning to have 500 branches throughout the country by the late 1980s.
Foreign exchange reserves at the end of FY 1986 were US$476 million, equivalent to
slightly more than 2 months’ worth of imports. This represented a 20-percent increase of
reserves over the previous year, largely the result of higher remittances by Bangladeshi
workers abroad. The country also reduced imports by about 10 percent to US$2.4 billion.
Because of Bangladesh’s status as a least developed country receiving concessional loans,
private creditors accounted for only about 6 percent of outstanding pSBLic debt. The external
public debt was US$6.4 billion, and annual debt service payments were US$467 million at
the end of FY 1986.
3.5 Central Bank and Its Policy:
Bangladesh Bank is the central bank in Bangladesh. It was established on 16 th December
1971 under the Bangladesh Bank (Temporary) Order 1971. Bangladesh Bank (BB), as the
central bank, has legal authority to supervise and regulate all the banks. It performs the
traditional central banking roles of note issuance and being banker to the government and
banks. It formulates and implements monetary policy manages foreign exchange reserves and
supervises banks and non-bank financial institutions. Its regulations Include:
 Minimum capital requirements.
 Limits on loan concentration and insider borrowing.
 Guidelines for asset classification.
 Income recognition.
Bangladesh Bank has the power to impose penalties for non-compliance and also to
intervene in the management of a bank if serious problems arise. It also has the delegated
authority of issuing policy directives regarding the foreign exchange regime. The powers and
functions of Bangladesh Bank are governed by Bangladesh Bank Order 1972 and Banking
Companies Act 1991 to make provisions for streamlining the affair of banking companies to
suite the present day’s socio-economic needs of the country. The function of Bangladesh
Bank may be classified into following:
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Commercial Bank:
The commercial banking system dominates Bangladesh’s financial sector with limited
role of Non-Bank Financial Institutions and the capital market. The Banking sector alone
accounts for a substantial share of assets of the financial system. The banking system is
dominated by the 4 Nationalized Commercial Banks, which together controlled more than
57% of deposits and operated 3390 branches (55% of the total) as of December 31, 2007.
Specialized Banks:
Out of the 5 specialized banks, two (Bangladesh Krishi Bank and Rajshahi Krishi
Unnayan Bank) were created to meet the credit needs of the agriculture sector while the other
two (Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangstha) are for extending term
loans to the industrial sector. BASIC Bank Limited was established as the policy makers of
the country felt the urgency for a bank in the private sector for financing small scale
industries (SSSIs).
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CHAPTER-4
ORGANIZATION OVERREVIEW
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4.1 A Brief Overview of Sonali Bank Limited:
Sonali Bank is a state-owned commercial bank in Bangladesh. It is the largest bank
of the country.[A fully state-owned enterprise, the bank has been discharging its nationbuilding responsibilities by undertaking government entrusted different socio-economic
schemes as well as money market activities of its own volition, covering all spheres of the
economy. Sonali Bank Limited singularly enjoys the prestige of being the agent of the
Central Bank of Bangladesh in such places where the guardian of the money market has
chosen not to act by itself.
4.2 History of Sonali bank Limited:
Sonali Bank was established in 1972 under the Bangladesh Banks (Nationalization)
Order, through the amalgamation and nationalization of the branches of National Bank of
Pakistan, Bank of Bahawalpur and Premier Bank branches located in East Pakistan until the
1971 Bangladesh Liberation War. When it was established, Sonali Bank had a paid up capital
of 30 million taka. In 2001, its authorized and paid up capital were Tk 10 billion and Tk
3.272 billion respectively. Presently, its authorized and paid up capital is Tk 10 billion and Tk
9 billion respectively The bank's reserve funds were Tk 60 million in 1979 and Tk 2.050
billion on 30 June 2000. In 2013, $250,000 was stolen from the bank by Cyber criminals
using the Swift International payments network. In 2016 the Bank signed an Memorandum of
Understanding with PayPal.
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4.3 Corporate Profile of Sonali Bank Limited:
Name of the Company
: Sonali Bank Limited
Chairman
: Mr. Md. Ashraful Moqbul
CEO and Managing
: Obayed Ullah al-Masud
Director
Company Secretary
: Mr. Ataur Rahman
Legal Status
: Public Limited Company
Genesis
:Emerged as Nationalized Commercial Bank in 1972,
following the Bangladesh Bank (Nationalization) Order
No. 1972(PO No.26 of 1972)
Date of Incorporation
: 03 June, 2007
Date of Vendor’s
: 15 November, 2007
Agreement
Registered Office
:35-42, 44 Motijheel Commercial Area, Dhaka, Bangladesh
Authorized Capital
: Taka 6000.00 Crore
Paid-up Capital
: Taka 4130.00 Crore
Number of Employee
: 18,167
Number of Branches
: 1215
Phone-PABX
: 9550426-31, 33, 34, 9552924
FAX
: 88-02-9561410, 9552007
SWIFT
: BSONBDDH
Website
: www.sonalibank.com.bd
E-mail
: itd@sonalibank.com.bd
sbhoitd@btcl.net.bd
Logo:
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4.4 Vision of Sonali Bank Ltd:
Socially committed leading banking institution with global presence.
4.5 Mission of Sonali Bank Ltd:
Dedicated to extend a whole range of quality product that support
divergent needs of people aiming at enriching their lives, creating value for
stakeholders and contributing toward socio –economic development of the
country.
4.6 Slogan:
Your trusted partner in innovative banking.
4.7 Organism Of Sonali Bank Limited:
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4.8 Role of Sonali bank Limited in the National Economy:
Economy and Banking industry go together and are inseparable. Sonali Bank Limited
has been playing an important role in the economic development of the country. As many as
26,085 people are in the employment of the Bank as on December 31, 2008. Besides, Sonali
Bank Limited has generated employments for hundreds of people in the projects and
industries established under finance. The Bank has been financing the trade and commerce of
the country since inception of the Bank in 1997. We have handled a volume of countries
exports and imports. The deposits our Bank mobilized through the outlets of branches helped
in the formation of capital in the country. Our lending to borrower reached Tk. 23163.18
million as on June 30, 2009. It has contributed to the industrialization and improvement of
trade and commerce of the country which ultimately accelerated economic growth and
national welfare through multiplying effect. We have collected VAT and tax on interest/
profit earning of customers of the Bank. For relief and rehabilitation of natural calamity-hit
people of the country in 2007 the bank has donated a denoted amount of money.
Foreign Remittance
To develop national infrastructure and economy of Bangladesh Sonali Bank Limited
has been playing dominant role to bring hard earning of Bangladesh expatriates working/
living abroad through banking channels. For this purpose, Sonali Bank Limited has
established a bank named Sonali Bank (U.K) and an exchange house named Sonali Exchange
Company Inc. (SECI), USA. Our Bank has also established drawing arrangement with
various exchange house / banks in Middle East, Canada and Malaysia. Under this
arrangement, remitters can easily send their hard earning to the beneficiaries in Bangladesh
through 1184 Sonali Bank Limited Branches across the country. They can remit their money
through Demand Drafts (DD), Telegraphic Transfers (TTs), SWIFT and / or Computerized
Payment Instructions (PC to PC via dial up modem) on Sonali Bank Limited selective
branches.
Trade Financing:
Sonali Bank Limited extends multiple credit facilities to boost up trade, commerce
and industry. The credit packages and interest rates are as under:
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 Interest rate: 9.00%
Investment Banking:
Central Accounts & Fund Management Division at Head Office maintains Investment
Portfolio of the Bank. With a view to implementing Government policies & decisions and
accelerating the growth of the capital market of the country, surplus funds of Sonali Bank are
utilized in the following areas:
A) Short Term:
1. Call loans: An overnight investment to other Banks & Financial Institutions.
2. Treasury Bills: Investment made to the Government through Treasury bills.
B)
Long Term:
1. Government/ PSBLic Bonds: Sonali Bank Limited purchases bonds issued by the
Govt. of Bangladesh and other PSBLic Bodies.
2. Shares/ Equity Participation: Sonali Bank Limited participate in the IPO and extend
bridge finance to the equity of pSBLic limited companies, institutions and pSBLic
bodies.
3. Debentures: Sonali Bank Limited purchases debentures issued by the pSBLic bodies
and financial institutions under Government.
4.9 Nature of Business:
The Principle activities of the bank include providing of all kinds of commercial banking
services to its customers. The activities can be classified in the following ways:
 Corporate Banking.
 Project Financing.
 SME Finance.
 Consumer Credit.
 International Trade.
 Trade Finance.
 Loan Syndication.
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 Foreign Exchange Dealing.
 Rural and Micro Credit.
 NGO- Linkage Loan.
 Investment.
 Government Treasury Function.
 Money Market Operation.
 Capital Market Operation.
 Remittance.
4.10 Core Values
Sonali Bank Limited (SBL)’s Core Value proposition consists of ten key elements.
The values would assist the bank in perceiving its employees to work as a team towards
accomplishment of assigned duties and responsibility for achievement of desired objectives.
Team work: Open communication, discussion and interaction amongst the employees
would ensure unification of actions and efforts towards achieving the common goal.
Ethics: Everyone must ensure adherence to ethical practices of banking.
Objectivity: All persons will have definite objective in carrying out their tasks.
Integrity: Protection and safeguard of customers’ interest is a vital element for societal trust.
Excellence: Excellent performance and effectiveness are preconditions to ensure quality
service to the large customer base of the bank.
Innovation: New and innovative products are the needs of the time for which continuous
action oriented researches are carried out.
Commitment: Every employee is committed to work up to the expected level to ensure
satisfaction of valued customers.
Self-Reliance: Each employee will have ownership attitude towards the bank and self
confidence in his work for betterment of the bank.
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Transparency: Information is to be kept open for all so that stakeholders can have proper
ideas about the bank’s activities.
Accountability: All employees are responsible for their activities and will remain accountable
to their respective superior for accomplishment of tasks.
4.11 Core Strengths
 Transparent and Quick Decision Making.
 Efficient Team of Performer.
 Satisfied Customers.
 Internal Control.
 Skilled Risk Management.
 Diversification.
4.12 Core Competencies:
 Knowledge
 Experience & Expertise.
 Customer Orientation/ Focus.
 Transparency.
 Determination.
 Zeal for Improvement.
 Reliability.
4.13 Ethical Principles:
Sonali Bank Limited believes that it will become a leading bank in the government
sector. They believe that their aims and objectives can only be realized fully and sustained
overtime by faithfulness to ethics that cannot always be built into sets of rules and
regulations. In this belief in ethics that motivates the bank in its dealings with customer,
regulators and employees.
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4.14 Commitment to Clients:
Sonali Bank Limited has trying to concentrate on modern banking through continuous
using modern technology. We also trying to help more to customer by providing various
savings schemes like as EDS, MES and DBS etc. Our commitments to the clients are the
following:
Provide service with high degree of professionalism & continuous use of modern
technology through proper use of young generation officers.
 Create long-term relationship based on mutual trust with customers.
 Share customer’s values & beliefs.
 Provide product and service at competitive pricing.
 Ensure safety and security of customer’s valuables in trust with us.
4.15 Corporate Social Responsibility (CSR):
Sonali Bank Limited (SBL) has been rendering various services for attaining greater
social goals and objectives. For this process, we aim to contribute towords sustainable
development of the society as a whole and fulfillment of corporate social obligation in
particular. To reinforce CSR activities, the bank has undertaken fresh initiatives in line with
Bangladesh Bank guidelines in the areas of social services, empowerment of women and
poor, sports & culture, banking for the disadvantaged groups, disaster & relief activities.
Social Services:
SBL has been rendering social services through distribution of various allowances to
the Freedom Fighters, Widows, Old–age citizens, vulnerable groups, Disabled peoples etc. as
per laid down criteria of the government. Besides, the bank has been disbursing pension of
govt. employees, monthly salary of teachers, and govt. and semi govt. officials without
charges.
Empowerment of women and poor:
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SBL has been providing wholesale credit facilities to different micro credit institution who
are in turn lending amongst the women and poor people in different Income Generating
Activities (IGA).
Sports and Cultural Activities:
Sonali Bank Limited has a tradition of patronizing and sponsoring sports and cultural
activities at home and abroad. In 2007, Sonali Bank Limited became Champion in the
Victory Day Hockey Tournament and Runners’ up in the Office Hockey League, Dhaka.
Banking service for the Disadvantaged Groups:
With 1215 branches all over Bangladesh, SBL could reach the banking services to the
disadvantaged groups with the aim to encourage them in mobilization of their hard earned
savings and creation for them investment opportunities.
Employee welfare:
SBL offers annual stipends and scholarships to the brilliant children of the employees
of the bank.
Disaster Relief:
SBL always stands beside the helpless people at the times of natural calamities and
extends helping hands to the sufferers. SBL donated Tk. 10.5 million to help the victims of
cyclone ‘Sidor’ to the relief fund of the Chief Advisor. Sonali Bank Limited has collected
funds from Bangladeshis residing abroad and remitted over Tk. 150 million at free of charge
through Sonali Exchange Company (SECI), USA and Sonali Bank (UK) Limited. SBL has
also donated to establish a Cancer Hospital in Dhaka. It has helped a number of Foundations
and Organisations for raising funds through lottery and other means.
Future Plan:
SBL will continue to patronize sports and culture at home and abroad. Arrangements
will be made for rendering better social services to the community apart from core banking
activities. Specific action plans will be initiated to expand CSR programs in line with the
guidelines of Bangladesh Bank and Securities & Exchange Commission (SEC).
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CHAPTER-5
Theoretical Framework
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5.1 Personal Banking:
Sonali Bank Limited extends all the major personal banking facilities and services to
its customers with its skilled manpower and largest network of around 1187 branches
covering all the urban and remote rural areas of Bangladesh. Sonali Bank Limited provides
Local & Foreign Remittance in quickest possible time. Foreign remittance is available in both
Taka cash. & Taka draft.
Transfer of fund from one branch to another by – Demand Draft Savings A/C – Mail
Transfer Daily Profit A/C – Telegraphic Transfer FDR A/C.
1. Transfer of fund on Standing Instruction Arrangement (Trade Finance).
2. Collection of cheques through clearing house/beyond Clearing House.
3. Issuance of payment Order/Call Deposit.
4. Locker facilities for safe keeping of valuables.
5. Corporate Client Services with computerized system at selective branches.
5.2 Rural Credit:
Bangladesh is primarily an agricultural country. A major portion of her population
(about 85%) live in the rural areas. About 75% of the active rural population depend on
agriculture as the main source of their livelihood. Agriculture contribute about 22% to the
GDP. Majority of the farmers are either small or marginal. So Credit plays a paramount role
to augment the capital base to support agriculture production. With this end in view. Sonali
Bank Limited the largest state owned commercial bank has been playing a vital role in the
socio-economic development & poverty alleviation since 1973. Keeping in view that Credit
is one of the many inputs that complete the cycle of agricultural production Sonali Bank
extending rural credit through 1182 branches over the country.
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Sonali Bank Limited introduced indirect rural credit in 1973 through the then IRDP
(Now BRDB) there after continuing lending in the following programs:
Programs
01)Crop Loan (Special Agricultural Credit Program):
As per Government decision this program was introduced in 1977 to increase crop
production (credit to subsistance and marginal farmers as well as share-cropers for raising
seasonal crops). Now this program is continuing through 707 branches among the farmers
of 1639 unions. Recently Sonali Bank Limited introduced Revolving Crop Credit Limit
System from one branch of each district.
02) Special Investment Program:
This program was introduced in 1993 for creating self-employment by establishing small &
medium farms (Poultry, Dairy & Fishery) through bank finance. Under this program credit
is extended through 236 selected branches over the country. Maximum ceiling of loan is
Tk. 5.00 Lac.
03)Farming & off farming program:
This program was introduced in 1994 to involve unemployed rural people in income
generating activities (Poultry, Dairy, Fishery, Horticulture, Nursery, Beef fattening) by
establishing small & medium farms through bank finance. Credit is extended through all
branches over the country. Maximum ceiling of loan is Tk.15.00 Lac.
04) Krishi Khamar Rin Karmasuchi (Project):
This program was introduced is 1993 for creating new employment, increase national
income & Socio economic development by establishing medium & big project (Poultry,
Dairy & Fishery) through bank finance.
05)Pond Fisheries Credit Program:
This program was designed to extend bank credit for pisciculture in derelict
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ponds/Tanks/water bodies in 1977 Credit is extended through 200 branches over the
country. Maximum ceiling of loan is Tk.5.00 Lac.
06)Fertilizer Dealers Credit Program:
This program was introduced to extend bank credit among the approved fertilizer dealers
operating at primary distribution point of BADC for lifting their quota of Fertilizer from
BADC for ultimate distribution among the farmers in 1981.
07)Sugarcane Production loan Program in Mill Zone Area:
This program was introduced in 1975 to increase sugar production. Under this program
credit is extended to 11 (eleven) sugar mills for ultimate disbursement among their
affiliated farmers.
08)Social Afforestation Program:
This program was introduced in 2004 to increase forestation and to reduce greenhouse
effect. Credit is extended through all branches over the country. Maximum ceiling of this
program is Taka 5.00 lac.
5.3 Micro Credit:
Poverty alleviation has appeared to be the focal point of all policy formulation and
development issues of the nation. As such, it has been globally accepted as an effective
strategy for poverty alleviation in one hand and generating employment opportunities on the
other.
In commitment to reduce poverty in urban, semi-urban and rural areas, Sonali Bank
Limited has started functioning in Micro Credit through a full pledged micro credit division
in its Head Office in the year 2003. Presently, 32 projects/programmes are being run under
the control and supervision of this Division. Among all others programmes, Bank-NGO
Linkage program and Credit for Urban Women Micro Enterprise Development (CUMED) in
Dhaka City, Goat rearing, Lamb rearing, Fruit, Herbal, Medicinal and Nursery Project,
Micro- enterprise program- ‘Unmesh’ in Moulavibazar district, MSFSCIP in Kurigram
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district, Loan for Disable Persons etc. deserve special mention for channelising the financial
resources into the various potential avenues of microfinance.
Up to December 2017, Tk. 6299.47 crore has been disbursed under various project/
programs of this Division whereas this disbursement figure was Tk. 6056.63 crore up to
December 2006. The key features of some running projects/Programs of Micro Credits given
as follows:Sl.
Project/ Programs
Target Group
Loan Size in Tk.
1
Swanirvar Credit Program
Poor Landless people
1,000-15,000
2
Crop Godown Credit Project
Small
No.
&
Medium Highest 10,000
Farmers
3
Sonai Bank -BARD, Comilla Priogik Bittahin rural male & Highest 10,000
Gabesana Rin Prokalpa
4
female
Sonai Bank- RDA, Bogra Priogik Bittahin rural male & Highest 10,000
Gabesana Rin Prokalpa
5
female
Marginal and Small Farms System Marginal,
Crop
Poor
& Highest 10,000
Intensification Small Farmers
program(MSFSCIP)
6
Herbal & Forestry, Medicinal Plant & Bittahin,
Poor 5,000-25,000
Nursery Development Credit program Energetic Youth
7
Grameen
Khudra
Babsa
Rin Poor People
Sahayta
Rin Hard
Highest 50,000
Karmasuchi
8
Daridra
Bimochane
Core
Poor 5,000-10,000
Karmasuchi
People
9
Loans to Disable People
Disabled People
25,000-50,000
10
Unmesh Credit Program
Micro Entrepreneurs
50,000-2,00,000
11
Goat Rearing Credit Program
Small
&Medium Highest 50,000
Entrepreneurs
12
13
Credit for Urban Women Micro Urban
Enterprise Development (CUMED)
Entrepreneurs
Bank-NGO linkage Credit Program
Poor People
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Women Highest 5,00,000
Highest
5000-
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50,000(Loan
Wholesaling
to
NGOs)
14
Khudra Khamar Rin Karmasuchi
Small Entrepreneurs
Highest 50,000
15
Salt Production Credit Program
Actual Salt Producer
5,000-12,500
16
Individual Irrigation / Agriculcural Small,
17
Marginal
Equipment Credit Program
Medium Farmers
BRDB Crop Credit Program
Small,
Marginal
& 10,000-16,500
& 8,000-15,000
Medium Farmers
18
BRDB Integrated Rural Development Co
Program
operative
Male
&
Poor 1,500-20,000
Female
Member
19
BRDB Rural Livelihood Program
Small,
Marginal
& 5,000-20,000
Medium Farmers
20
21
BRDB
-Shrimp
Culture
Credit Small,
Marginal
& 2,333-28,000
Program
Medium Farmers
Special Loan for SIDR affected Area
SIDR affected People
Highest 20,00
5.4 International Banking:
Sonali Bank Limited expertise in International Banking has a record of in-house
growth over more than half a century. Its pioneer role in handling foreign trade and foreign
exchange transactions ever before independence of the country still remains unchallenged.
With wide network of branches at home and also a large number of correspondent banks
world-wide it is singularly handling the largest volume of export-import business including
home-bound remittances.
Products & Services:
 Export Credit (Pre-shipment & Post shipment)
 Facilitating Supplier’s Credit
 LCs (Letters of Credit)
 Guarantees in Foreign Currency
– Bid Bond
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– Performance Guarantee
– Advance Payment Guarantee.
 Bill Purchasing/Discounting
 Remittance, collection, purchases & sales of Foreign Currency & Traveller’s
Cheques.
 NRAT (Non-Resident Account in Taka)
 NFCD A/c (Non-Resident Foreign Currency Deposit)
 RFCD A/c (Resident Foreign Currency Deposit)
 Convertible and Non-convertible Taka Account
 Forward contracts
 Correspondent Banking Relations
5.5 Import Finance:
Sonali Bank Limited supports its customers by providing facilities throughout the import
process to ensure smooth running of their business. The facilities are:
a. Import Letter of Credit.
b. Post Import Financing (LIM,LTR etc).
c. Import collection services & Shipping Guarantees.
 Interest Rate: 9.0%
5.6 Export Finance:
Sonali Bank Limited offers extra cover to its customers for whole export process to
speed up receipt of proceeds. The facilities are:
a. Export Letters of Credit advising.
b. Pre-shipment Export Financing.
c. Export documents negotiation.
d. Letter of Credit confirmation.
 Interest Rate: 7.0%
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5.7 Industrial Financing:
Credit Schemes:
Long term loan for setting up new industrial units and BMRE of existing units
including working capital finance are extended by Sonali Bank Limited to cottage industries,
small-medium-large scale industries and also to self-employed persons with a view to
creating employment opportunities, deployment of resources, increasing GDP and over-all
industrial development of the country. Currently the following credit schemes are on offer by
the bank:
Some of the main Credit Schemes:
 Industrial Financing for Thrust Sectors.
 Sonali Bank Industrial Credit Scheme.
 Special Investment Scheme for Cottage and Small Industries.
 Financing Large Scale Industries through Banks’ Consortium.
 Financing Software Development and Data Processing.
Designated Branches:
About 100 branches including all the corporate and district headquarters branches are
designated to handle industrial credit.
5.8 Other Viable Industrial Sectors:
 Composite textile (woven & knit fabrics).
 Textile / Acrylic Spinning.
 Sweater Industry.
 Garments Accessories & Washing Plant.
 Denim Fabrics (export oriented).
 Tourism / Hotel and Resort facilities.
 Hospital & Clinics.
 Other Export linkage industries.
 Power Generating Plant.
 LPG, CNG Filling & Conversion plant.
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 Pharmaceutical Ind.
 Plastic Ind.
 Tannery/Rubber Foot wear.
 Other highly rewarding appropriate technology based projects.
5.9 Merchant Banking:
Sonali Bank Limited, the largest State owned commercial bank in Bangladesh. Began to
invest in the secondary market from the month of February 2009. Sonali Bank Limited
obtained License from the Securities and Exchange Commission in 23 March 2009, to
operate in the Capital market as a full-fledged Merchant bank. The terms & conditions
imposed by the SEC in operating the Merchant Banking activities are:
1. There shall be separate unit with separate personnel and designed area for the purpose
of Merchant Banking Operation.
2. The Merchant Banking Unit shall maintain separate books of accounts and financial
statements to show clearly the financial position in respect of its Merchant Banking
Operation. Financial statements shall be audited by a chartered accountant firm
certifying that the relevant rules and guidelines by SEC and other relevant authorities
have been strictly adhered to;
3. The Merchant Banking Unit shall be equipped with necessary modern office
equipment for smooth functioning & efficient services to the clients;
4. All other terms & conditions as laid down in the SEC (Merchant Banker & Portfolio
Manager) Regulations 1996, SEO 1969, SEC Rules 1993 and any amendment thereof
from time to time shall be adhered to at all times.
As stipulated in the Securities and Exchange Commission (Merchant Banker and
Portfolio Manager) regulations 1996, the services of issue management, portfolio
management, underwriting of shares and securities and advisory services fall under the
purview of Merchant Banking Operation. Sonali Bank Limited has been going with Merchant
Banking Operation since 14 September 2009 at 11/A, Sara Tower (11th Floor), Toyeenbee
Circular Road, Motijheel, Dhaka. It has a Merchant Banking Management Committee to
manage & take quick decision of merchant banking activities.
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5.10 SME Banking:
To reduce poverty within 2015 Sonali Bank Ltd. Has start a service which is SME
loan. By offering this product Sonali Bank Ltd. Helps government to increase job opportunity
as well as increase GDP.
Objectives of SME Loan Help government to remove poverty.
 Earn much currency by Export Import business to government.
 Helps woman entrepreneur to be self-independent by providing loan.
 Industrialization with employment opportunity.
Requirements for getting Loan Minimum 2 years business experience.
 Entrepreneur must be educated & healthy and age must be within 18-60.
 Women entrepreneur will get first preference.
 Entrepreneur must be Bangladeshi citizen.
Types of product for getting SME loanExport products1. Fringing Plant for fish.
2. Tanaree business.
3. Export furniture.
Import products1. Xining Mill.
2. Garments accessories.
3. Washing plant, Packaging.
Loan LimitDepends on business type loan can be Tk.(50,000-10,00,00,000)
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Duration and Interest rateDuration depends on business type. But in case of current assets 1 year and in case of term
loan 3-7 years. Interest rate is 9%.
5.11 Online Banking:
1) Branch Computerization: 267 branches are on live operation. Out of 1215 branches
at home, 1169 branches have already been entered in the automation network.
2) Foreign Remittance : Bank’s own in-house software “Remittance Management
System” (RMS+), having, among others, the feature of paying foreign remittance
instantly over the counter is being implemented at all branches. This web based
software provides digital services to the expatriates through its unique advantage of
sending confirmation message to the mobile phone of the remitter/beneficiary.
3) ATM: Sonali Bank Limited is a member of Q-Cash ATM network. At present the
bank has 12 ATM booths. Establishment of 43 more ATM is on. Sonali Bank’s ATM
cardholders enjoy the access to the ATMs and POS of Dutch Bangla Bank Ltd. and
Brac Bank Ltd. besides those of Q-Cash consortium. Sonali Bank recently launched
Credit Card.
Features:
 Sonali Bank Ready Cash Card is a Debit Card.
 Cardholder can easily pay utility bills like – Water, Telephone, Gas etc.
 It is easy to remit funds among the participating branches of the Bank.
 Transaction beyond working hours.
 It is a riskless Cash Carrying facility.
 Cashless purchase can be made from specific merchandise points.
 Only computerized Branches of Dhaka City will deal Ready Cash Card.
 Branches of other Cities and Towns will introduce Sonali Bank Ready Cash
Card in due course.
4) Online and SMS Banking: At present
34 branches of Sonali Banks are included
in the Online Any Branch Banking (ABB) network. The bank is seriously working on
connecting all branches in the Real-time Online Banking network gradually. Branches
having ABB facility are also rendering SMS banking services.
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5) SWIFT: SWIFT facilities are available in Bank’s Head Office and in 21 designated
branches.
5.12 Ancillary Services:
Sonali Bank Limited offers multiple special services with its network of branches
throughout the country in addition to its normal banking operations.
Collection:
 Gas bills.
 Electricity bills.
 Telephone bills.
 Water/Sewerage bills.
 Municipal holding Tax.
 Passport fees, visa fees and Travel tax.
 Customs & Excise duties.
 Source tax and VAT.
 Jakat fund.
 Hajj deposit.
 Land development tax.
Payment:
 Pension of employees of Government and other Corporate Bodies.
 Bangladesh Bank employees’ pension.
 Army pension.
 British pension.
 Students’ stipend/scholarship.
 Govt. & Non-Govt. Teachers’ salary.
 Food procurement bill on behalf of the Govt.
Social Services:
 Old age allowances.
 Widows, divorcees and destitute women allowances.
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 Freedom Fighters’ allowances.
 Rehabilitation allowances for acid survival women.
 Maternal allowances for poor women.
 Disability allowances.
Sale & Encashment/Purchase:
 Savings Certificates.
 ICB Unit Certificates.
 Prize Bonds.
 Wage Earner’s Development Bonds.
 US Dollar Premium & Investment Bond.
 Lottery tickets of different Semi-Govt. and Autonomous Bodies.
 Sanchaypatra.
 PSBLic Service Commission’s application form.
 Judicial Service Commission’s application form.
 Exchange of soiled / torn notes.
5.13 Miscellaneous Services:
 Bank A/C information of tax payee client according to demand of NBR.
 Local Governance Support Project.
 Enlist of Non Government Insurance Company.
Locker Service is provided in some branches of Sonali Bank Limited. Customers may
avail this service and secure their valuables.
Locker Size
Yearly Charge (Tk.)
Security Deposit (Tk.)
Small
1,200.00
2,000.00 (Refundable)
Medium
1,500.00
Large
2,000.00
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5.14 Announced interest rate chart of the SBL (Lending Rate):
Category
Interest Rate
(% Per Annum)
Agriculture
(4-9)%
Term loan to Large & Medium Scale Industry
9%
Term loan to Small Industry
9%
Working Capital
9%
Export Financing
7%
Trade Financing
9%
Housing Loan
9%
Consumer Credit
13%
Credit Card
14%
Credit To NBFIs
9%
Others
0%
(Source: Announced Interest Rate of SCBs by BB, November 2018)
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CHAPTER-5
STATISTICAL OVERVIEW (RATIO ANALYSIS)
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6.1Introduction of the Ratio Analysis:
Measuring bank performance is a lot like measuring the performance of a traditional
company. A bank's revenue is the return it makes from investments, and this income comes
from interest or asset appreciation on investments, such as stocks or real estate. Banks must
also consider the cost of the funds used to make these investments. Profits are ultimately
made from the spread between the amount banks pay for the investments and the amount they
receive from borrowers. The most commonly measure of profit for a bank is referred to as net
interest margin.
There are a multitude of measures used to assess bank performance, with each group of
Stakeholders having its own focus of interest. Commonly used techniques to measure
Bank’s performance are Ratio Analysis,
 Economic measures of performance,
 Market-based measures of performance.
For my study I have Selected Ratio Analysis and some Market Based Measures as a
tool of measuring the financial performance of Sonali Bank Limited. The objective of this
report is evaluating Sonali Bank Limited’s financial performance. So that here discuss recent
year’s financial ratio of Sonali Bank Ltd.
A tool used by analysts which utilizes the relationship between accounting figures and
their trends over time to establish values and evaluate risks. Ratio analysis provide analyst
with useful information understand about developing insights into the economic
characteristics of different industries and of different firms in the same economic additional
,different over time in a single firm or between firms due to operation ,financing and
investing decision made by management as well as external economic factor are often
highlighted by common-side statement.
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6.2 Assumption of Ratio Analysis:
The most common mode in which financial statement data are summarized is the ratio
form. Motivations for examining data in ratio form include:
 To control the effect of size differences across the bank overtime.
 To make the data better satisfy the assumptions underlying statistical tools.
 To probe a theory in which a ratio is the variable of interest.
 To exploit an observed empirical regularity between a financial ratio and the
estimation of variable of interest.
I have divided my overall ratio analysis into five separate parts presented as follows:
Calculated Ratios of the Study
Liquidity Analysis
 Current Ratio
 Quick Ratio
 Loans to Deposit Ratio
Earning Performance Analysis
 Return on Assets (ROA)
 Return on Equity (ROE)
 Earnings Per Share (EPS)
 Net Interest Margin (NIM)
 Net Operating Margin (NOM)
 Return on Loan
 Net Income Per Employee
 Cost to Income Ratio
 Payout Ratio
Capital Adequacy Analysis
 Capital Adequacy Ratio
Asset Management Analysis
 Earning Assets to Total Assets
 Fixed Assets Turnover
Solvency Analysis
 Debt to Total Assets Ratio
 Times Interest Earned Ratio
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6.3 Liquidity Analysis of Sonali Bank Limited (2013-2017)
Liquidity means the ability to quick convert of an asset into cash. The liquidity ratios
are being used to determining a company's ability to pay off its short terms debt obligations.
Generally, the higher is the value of the ratio, the larger is the margin of safety that the
company possesses to cover short-term debts. There are a number of formulas to calculate the
liquidity ratio of a particular organization. They are-
i) Current Ratio
ii) Quick Ratio
iii) Loans to Deposit Ratio
(i) Current Ratio:
The current ratio is a liquidity ratio that measures a company's ability to pay shortterm and long-term obligations. To gauge this ability, the current ratio considers the current
total assets of a company (both liquid and illiquid) relative to that company's current total
liabilities.
Formula:
𝑪𝒖𝒓𝒓𝒆𝒏𝒕𝑨𝒔𝒔𝒆𝒕
Current Ratio= 𝑪𝒖𝒓𝒓𝒆𝒏𝒕𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
Calculation:
Year
Current Asset
Current Liabilities
Result
(in millions)
(in millions)
2017
430,681.68
413,955.97
1.04:1
2016
426,636.64
410,503.03
1.04:1
2015
345,385.82
335,978.66
1.03:1
2014
314,186.75
305,702.73
1.03:1
2013
285,730.53
275,583.75
1.04:1
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
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Graphical Presentation:
The change of the cash ratio of Sonali Bank Limited is shown in the graph below-
Current Ratio
1.042
1.04
1.04
1.04
1.04
1.038
1.036
1.034
1.032
1.03
1.03
2015
2014
Current Ratio
1.03
1.028
1.026
1.024
2017
2016
2013
Analysis:
The bank is just able to cover all of its short-term obligations. Though it is satisfactory it
should increase current assets or decrease current liabilities.
The Current ratio shows almost stable results over the years. Over this five years period, the
value of this ratio ranged from 1.03 to 1.04, which demonstrated a small amount of down.
(ii) Quick Ratio:
The quick ratio is a measure of how well a company can meet its short-term financial
liabilities also known as the acid-test ratio.
Formula:
Quick Ratio = 𝑪𝒂𝒔𝒉+𝑴𝒂𝒓𝒌𝒆𝒕𝒂𝒃𝒍𝒆𝒔𝒆𝒄𝒖𝒓𝒊𝒕𝒊𝒆𝒔+𝑨/𝑹
𝑪𝒖𝒓𝒓𝒆𝒏𝒕𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
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Calculation:
Year
Current Asset
Current Liabilities
Result
(in millions)
(in millions)
2017
430,681.68
413,955.97
1.04:1
2016
426,636.64
410,503.03
1.04:1
2015
345,385.82
335,978.66
1.03:1
2014
314,186.75
305,702.73
1.03:1
2013
285,730.53
275,583.75
1.04:1
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
Graphical Presentation:
The change of the quick ratio of Sonali Bank Limited is shown in the graph below-
Quick Ratio
1.042
1.04
1.04
1.04
1.04
1.038
1.036
1.034
1.032
1.03
1.03
2015
2014
Quick Ratio
1.03
1.028
1.026
1.024
2017
2016
2013
Analysis:
If a firm has enough quick assets to cover its total current liabilities, the firm will be
able to pay off its obligations without having to sell off any long-term or capital asset. The
quick ratio of the bank is good. It should sustain the trend.
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(iii) Loans to Deposit Ratio:
Loans to deposit ratio is a commonly used statistic for assessing a bank’s liquidity by
dividing the banks total loans by its total deposits. This number is also known as the LTD
ratio, is expressed as a percentage. In loans to deposits ratio if the ratio is high that means the
bank has low liquidity. That means the bank does not have enough liquidity to meet its
payment requirement. On the other hand, if the liquidity ratio is low that means the bank has
high liquidity. This situation mainly occurs when the bank has more liquidity in their hand to
meet up all payment requirements. The Loans to Deposit Ratio is compared to standard 1.
Formula:
𝑳𝒐𝒂𝒏𝒔
Loans to Deposit Ratio = 𝑫𝒆𝒑𝒐𝒔𝒊𝒕 × 𝟏𝟎𝟎
Calculation:
Year
Total Loans
Total Deposits
Result
(in millions)
(in millions)
2017
459,580.05
649,440.78
0.71
2016
403,037.41
641,819.15
0.63
2015
349,861.30
568,911.14
0.61
2014
319,773.25
516,010.74
0.62
2013
285,747.65
478,535.57
0.60
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
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Graphical Presentation:
The change of the loans to deposit ratio of Sonali Bank Limited is shown in the graph below-
0.72
0.71
Loans to Deposit Ratio
0.7
0.68
0.66
0.63
0.64
0.61
0.62
0.62
0.6
0.6
Loans to
Deposit
Ratio
0.58
0.56
0.54
2017
2016
2015
2014
2013
Analysis:
The Loan to Deposit Ratios of Sonali Bank Limited in the last five years (2013-2017)
were 0.71, 0.63, o.61, 0.62, 0.6 respectively. There was small fluctuation among the years
2016-2013 but in 2017 it is increased.
The loans to deposit ratio is good. It is below 1 that means the bank relied on its own
deposit to make loans to its customers without any outside borrowing. The bank should
maintain its trend to sustain below 1.
6.4 Earning Performance of Sonali Bank Limited:
Profitability is a measure of efficiency. Profitability ratios are used to assess a
business's ability to generate earnings as compared to its expenses and other relevant costs
incurred during a specific period of time. In other words the profitability ratios are designed
to provide answers to questions such as what is the rate of profit. What is EPS? What is the
rate of investment? What is the rate of equity? Is the profit earned by the enterprise adequate?
What is the dividend payout ratio? What is retention ratio and so on? The analysis of the
profitability ratio is important for the shareholders, creditors, prospective investors, bankers
and the government alike.
Some of the ratios are mentioned below to determine the
profitability of Sonali Bank Limited from the year 2017-2013.
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(i) Return on Asset (ROA):
Return on Assets (ROA) is an indicator of how profitable a company is relative to its
total assets. ROA gives an idea as to how efficient management is at using its assets to
generate earnings.
Calculated by dividing a company's annual earnings by its total assets, ROA is
displayed as a percentage.
Formula:
Return on Asset (ROA) =
𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔𝒂𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆𝒇𝒐𝒓𝒄𝒐𝒎𝒎𝒐𝒏𝒔𝒕𝒐𝒄𝒌𝒉𝒐𝒍𝒅𝒆𝒓𝒔
𝑻𝒐𝒕𝒂𝒍𝒂𝒔𝒔𝒆𝒕𝒔
× 𝟏𝟎𝟎
Calculation:
Year
2017
2016
2015
2014
2013
ROA
0.33%
0.33%
0.70%
0.61%
1.42%
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
Graphical Presentation:
The change of the return on asset (ROA) of Sonali Bank Limited is shown in the graph
below-
Return on Asset (ROA)
1.42%
0.70%
0.33%
0.33%
2017
2016
2015
0.61%
2014
Retur
n on…
2013
Analysis:
Return on assets Ratio of Sonali Bank Limited it is noticed that there is fluctuations in
the last five year. In 2013, the ratio increased to great level. This was because in that year
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earnings available for common stockholders in creased to great level. But after that year there
was a decreasing trend in this ratio because of declining rate of increment in earnings.
(ii) Return on Equity (ROE):
Return on Equity is a ratio that measures a corporation's profitability by
revealing how much profit a company generates with the money shareholders
have invested. ROE is the most important indicator of a bank’s profitability and
growth potential. It is the rate of return to shareholders or the percentage return
on each taka of equity invested in the bank. ROE is expressed as a percentage.
Formula:
Return on Equity (ROE) =
𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒂𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆 𝒇𝒐𝒓 𝒄𝒐𝒎𝒎𝒐𝒏 𝒔𝒕𝒐𝒄𝒌𝒉𝒐𝒍𝒅𝒆𝒓𝒔
𝑪𝒐𝒎𝒎𝒐𝒏 𝑺𝒕𝒐𝒄𝒌 𝑬𝒒𝒖𝒊𝒕𝒚
× 𝟏𝟎𝟎
Calculation:
Year
2017
2016
2015
2014
2013
ROE
5.23%
5.22%
9.70%
9.66%
30.09%
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
Graphical Presentation:
The change of the return on equity (ROE) of Sonali Bank Limited is shown in the graph
below-
Return on Equity (ROE)
30.09%
5.23%
5.22%
2017
2016
9.70%
9.66%
2015
2014
Return
on…
2013
Analysis:
The graph exhibits that the ROE ratio of Sonali Bank Limited was highest on 2013.
In 2014 it has been decreased drastically and from then it is decreasing year to year.
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The ROE of Sonali Bank Limited is low. It has increased its provision for loans and
advances. Therefore the return decreased as a result the return on equity ratio decreased.
(iii) Operating Profit Margin:
Operating margin is a measurement which gives analysts an idea of how much a
company makes (before interests and taxes) on each dollar of sales. If a company’s operating
margin is increasing, it’s earning is more per dollar of revenue. The higher the margin, the
better the company.
Formula:
Operating Profit Margin =
𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕
𝑻𝒐𝒕𝒂𝒍 𝑹𝒆𝒗𝒆𝒏𝒖𝒆
× 𝟏𝟎𝟎
Calculation:
Year
2017
2016
2015
2014
2013
ROE
22.46%
20.19%
24.09%
27.90%
44.43%
(Source: Annual Reports of Sonali Bank Limited2013-2017)
Graphical Presentation:
The change of the Operating profit margin of Sonali Bank Limited is shown in the graph
below-
Operating Profit Margin
44.43%
27.90%
22.46%
2017
24.09%
20.19%
2016
Operat
ing…
2015
2014
2013
Analysis:
The Operating profit margin of Sonali Bank Limited in the last five years (2017-2013)
were 22.46%, 20.19%, 24.09%, 27.90%, 44.43% respectively. The operating margin
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of Sonali Bank Limited is between 28% to 20% over 2014-2017. It’s almost stable in earning
profit. Its highest operating profit margin was in 2013 as it decreases its operating expenses.
It should sustain the trend of operating profit margin.
(iv) Earnings per Share (EPS):
The term Earnings per Share represents the potion of a
company’s earnings, net of taxes and preferred stock dividends that is allocated to each share
of common stock. It is carefully scrutinized metric that is often used as a barometer to gauge
a company’s profitability per unit of shareholders ownership. As such, EPS is a key driver of
share prices. Though EPS is widely considered to be the most popular method of quantifying
a firm’s profitability, it’s important to remember that earnings themselves can often be
susceptible to manipulation, accounting changes and restatements.
Formula:
Earnings per Share =
𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒂𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆 𝒇𝒐𝒓 𝒄𝒐𝒎𝒎𝒐𝒏 𝒔𝒕𝒐𝒄𝒌𝒉𝒐𝒍𝒅𝒆𝒓𝒔
𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝒄𝒐𝒎𝒎𝒐𝒏 𝒔𝒕𝒐𝒄𝒌𝒐𝒖𝒕𝒔𝒕𝒂𝒏𝒅𝒊𝒏𝒈
Calculation:
The Earnings per Share of Sonali Bank Limited from 2009-2013 are given belowYear
2017
2016
2015
2014
2013
EPS
14.04
13.61
25.12
19.92
86.31
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
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A Study on Financial Performance Analysis of Sonali Bank Ltd.
Graphical Presentation
The change of the Earnings per Share of Sonali Bank Limited is shown in the graph below-
Earnings Per Share (EPS)
86.31
25.12
14.04
13.61
2017
2016
2015
Earnings
Per…
19.92
2014
2013
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
Analysis:
The Earnings per Share of Sonali Bank Limited in the last five years (2017-2013)
were 14.04, 13.61, 25.12, 19.92, and 86.31 respectively. It was highest in 2013 as it had lower no.
of shares. From 2o14 its no. of shares increased. it is in good position.
(v) Return on Loans:
From the perspective of bank loan is the arrangement between the lender (bank) and
borrower where the lender (bank) gives money to the borrower and borrower agrees to repay
the money along with the interest. Return on loans ratio presents the relationship between the
earnings of loans to the total number of loans in a given year. The formula of the Return on
Loans is-
Formula:
Return on Loans =
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒆𝒂𝒓𝒏𝒆𝒅 𝒐𝒏 𝒍𝒐𝒂𝒏𝒔
𝑻𝒐𝒕𝒂𝒍 𝑳𝒐𝒂𝒏𝒔
×100
Calculation:
The Return on Loans ratio of Sonali Bank Limited from 2009-2013 are given below-
Year
2017
2016
2015
2014
2013
Return on Loans
6.78
7.91
8.76
10.55
12.66
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
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Graphical Presentation:
The change of the Return on Loans of Sonali Bank Limited is shown in the graph below-
Return on Loans
12.66
10.55
7.91
8.76
6.78
Return on
Loans
2017
2016
2015
2014
2013
Analysis:
The Return on loans of Sonali Bank Limited in the last five years (2017-2013) was
6.78, 7.91, 8.76, 10.55, and 12.66 respectively. It is gradually decreasing from 2013.
The bank should increase its return on loans position.
(vi) Net Interest Margin (NIM):
Net Interest Margin is a measure of the difference between the interest income
generated by banks or other financial institution and the amount of interest paid out to their
lenders , relative to the amount of their interest earning assets. It is a ratio that examines how
efficiently an organization can manage its investment decision to its debt situation. It is
usually expressed as a percentage.
Formula:
Net Interest Margin =
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑰𝒏𝒄𝒐𝒎𝒆−𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑬𝒙𝒑𝒆𝒏𝒔𝒆
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒆𝒂𝒓𝒏𝒊𝒏𝒈 𝒂𝒔𝒔𝒆𝒕𝒔
× 𝟏𝟎𝟎
Calculation:
The Net Interest Margin of Sonali Bank Limited from 2009-2013 are given below-
Year
2017
2016
2015
2014
2013
NIM
0.74
0.10
-0.62
-0.47
0.44
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
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Graphical Presentation:
The change of the Net Interest Margin of Sonali Bank Limited is shown in the graph below-
Net Interest Margin(NIM)
0.74
0.44
0.1
2017
2016
Net Interest
Margin(NIM)
2015
2014
2013
-0.47
-0.62
Analysis:
In the year2017 & 2016 the trend is increasing in nature. From the annual reports of
Sonali Bank Limited it is found that the net interest income during these two years has
increased from tk. 1,702.00 million to tk. 2,456.08 million. This increment is greater than the
increment in the interest earning assets during these years.
On the other hand, in the year 2015 & 2014 there is a huge decrease in the net interest
income that is negative. And the amount of interest earning assets has been increased in a
huge amount during these years. During these years the number of deposits also increased. As
result interest expense has been increased and this resulted in a negative net interest income
in the last two years.
(vii) Net Income per Employee (NIPE):
Net Income per Employee is a ratio which measures the amount of revenue generated
by one employee. This is a measure of performance of human resources of a company. It is
an indicator of productivity of a company’s personnel. It is also indicates how efficiently a
company is utilizing its human resources.
Formula:
Net Income per Employee =
𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆 𝒂𝒇𝒕𝒆𝒓 𝒕𝒂𝒙
𝑻𝒐𝒕𝒂𝒍 𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑬𝒎𝒑𝒍𝒐𝒚𝒆𝒆
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Calculation:
The Net Income per Employee of Sonali Bank Limited from 2009-2013 are given below-
Year
2017
2016
2015
2014
2013
Net Income per
0.22
0.20
0.34
0.26
0.62
Employee
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
Graphical Presentation:
The change of the Net Interest Margin of Sonali Bank Limited is shown in the graph below-
Net Income per Employee
0.62
0.34
Net Income per Employee
0.26
0.22
2017
0.2
2016
2015
2014
2013
Analysis:
Net income per staff is mainly calculated to know the productivity of each employee.
The reasons for changing the net income per staff are Increase or decrease the amount of Net Income.
 Increase or decrease the total number of staffs
.
From the trend of Net Income per Employee of JL that is showed in we see that net
income per employee was better in 2013 and 2015. During these years both of the net income
and number of employee increased but that increment rate was higher in case of net income.
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But after 2015 there is a huge fall in net income per employee. During 2017 net income
decreased at a high rate.
(viii) Payout Ratio:
The payout ratio or dividend layout ratio is the percentage of a company’s
earnings paid out to investors as cash dividends. At the end of a specific period, companies
will sometimes pay out dividends for every share owned. Theoretically, the money for these
dividends comes from the company’s earnings from that period. Thus the payout ratio is
calculated as the percentage of earnings paid out as dividends.
Formula:
Payout ratio =
𝑪𝒂𝒔𝒉 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔
𝑵𝒆𝒕 𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒇𝒐𝒓 𝒕𝒉𝒆 𝒑𝒆𝒓𝒊𝒐𝒅
× 𝟏𝟎𝟎
Calculation:
The payout ratio Sonali Bank Limited from 2009-2013 are given below-
Year
2017
2016
2015
2014
2013
Payout ratio
37%
38%
21%
26%
10%
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
Graphical Presentation:
The change of the payout ratio of Sonali Bank Limited is shown in the graph below37%
38%
Payout ratio
26%
21%
10%
2017
2016
2015
2014
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Payout ratio
2013
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Analysis:
From the trend of Payout Ratio showed in table and figure we see that there was
lower ratio in the year of 2013 it indicates that there was lower dividend. The rate was high in
2017 and 2016 with a value of 37% because of higher earnings. But in 2013 there was fall in
the bank’s earnings. For this reason the rate of dividend fallen.
6.5 Capital Adequacy of Sonali Bank Limited (2013-2017):
Capital requirement (also known as regulatory capital or capital requirement) is the
amount of capital a bank or other financial institution has to hold as required by its financial
regulator. This is usually expressed as a capital adequacy ratio of equity that must be held as
a percentage of risk-weighted assets. These requirements are put into place to ensure that
these institutions do not take on excess leverage and become insolvent.
(i) Capital Adequacy Ratio (CAR):
Capital adequacy ratio is the ratio which determines the bank's capacity to meet the
time liabilities and other risks such as credit risk, operational risk etc. In the simplest
formulation, a bank's capital is the "cushion" for potential losses, and protects the bank's
depositors and other lenders. Banking regulators in most countries define and monitor CAR to
protect depositors, thereby maintaining confidence in the banking system. CAR is similar to
leverage; in the most basic formulation, it is comparable to the inverse of debt-to-equity
leverage formulations (although CAR uses equity over assets instead of debt-to-equity; since
assets are by definition equal to debt plus equity, a transformation is required). Unlike
traditional leverage, however, CAR recognizes that assets can have different levels of risk.
Formula:
(𝑻𝑰𝑬𝑹𝟏 𝑪𝒂𝒑𝒊𝒕𝒂𝒍 + 𝑻𝑰𝑬𝑹𝟐 𝑪𝒂𝒑𝒊𝒕𝒂𝒍)
Capital Adequacy Ratio =
𝑹𝒊𝒔𝒌 𝑾𝒆𝒊𝒈𝒉𝒕𝒆𝒅 𝑨𝒔𝒔𝒆𝒕𝒔
× 𝟏𝟎𝟎
Calculation:
The Capital adequacy ratio of Sonali Bank Limited from 2013-2017 are given below-
Year
2017
2016
2015
2014
2013
Capital adequacy
10.06%
10.69%
10.16%
10.30%
10.27%
ratio
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
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Graphical Presentation
The change of the Capital adequacy ratio of Sonali Bank Limited is shown in the graph
below-
Capital adequacy ratio
10.69%
10.30%
10.06%
2017
10.27%
10.16%
Capital…
2016
2015
2014
2013
Analysis:
As per the requirements of BASEL-2 capital framework guideline, every
schedule bank has to maintain a minimum 10% CAR against their risk weighted
assets. It is showed that the bank is maintaining the requirement.
6.6 Asset Management Analysis of Sonali Bank Limited (2013-2017):
Asset management ratios are most notable ratio of the financial ratios analysis. It
measure how effectively a company uses and controls its assets. It is analysis how a company
quickly converted to cash or sale on their resources. It is also called Turnover ratio because it
indicates the asset converted or turnover into sales.
(i) Earning Assets to Total Assets ratio:
From the perspective of a bank, Earning Asset means the assets that produce income.
For example-interest bearing investment, deposits etc. Earning Assets to Total Assets ratio
for a bank means the assets which generate income for the business to total assets owned by
the business. When the ratio is higher that means the bank is really in good condition. On the
other hand when the ratio is lower that means the bank is not in a good situation.
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Formula:
Earning Assets to Total Assets ratio =
𝑬𝒂𝒓𝒏𝒊𝒏𝒈 𝑨𝒔𝒔𝒆𝒕
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
× 𝟏𝟎𝟎
Calculation:
The Earning Assets to Total Assets ratio of Sonali Bank Limited from 2017-2013 are given
belowYear
2017
2016
2015
2014
2013
Earning Assets to
75.68%
77.76%
80.31%
79.05%
78.71%
Total Assets ratio
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
Graphical Presentation:
The fluctuations of the Earning Assets to Total Assets ratio of Sonali Bank Limited is shown
in the graph below-
Earning Assets to Total Assets ratio
80.31%
79.05%
78.71%
77.76%
Earning
Assets to…
75.68%
2017
2016
2015
2014
2013
Analysis:
From the trend we can say that the bank is using its assets properly. In 2015
it was good enough with the ratio of 80%. After that it is decreasing but it still it is in
good position.
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(ii) Fixed Assets Turnover:
The ratio indicates the extent of generating revenues in terms of assets. A higher asset
turnover shows that the company has been more effective in using assets to generate
revenues. There is no standard guideline about the best level of this ratio. It is important to
measure this ratio over the years for the same company. This comparison will tell whether the
company’s performance is improving or deteriorating over the years. If a company has a high
fixed asset turnover ratio, it shows the company is efficient in managing its fixed assets.
Formula:
𝑻𝒐𝒕𝒂𝒍 𝑹𝒆𝒗𝒆𝒏𝒖𝒆
Fixed Assets Turnover = 𝑻𝒐𝒕𝒂𝒍 𝑭𝒊𝒙𝒆𝒅 𝑨𝒔𝒔𝒆𝒕𝒔
Calculation:
Asset turnover of Sonali Bank Limited from 2017-2013 are given below-
Year
2017
2016
2015
2014
2013
Fixed Assets
5.09
5.14
5.54
5.8
5.66
Turnover
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
Graphical Presentation:
The fluctuations of the Fixed Asset turnover of Sonali Bank Limited is shown in the graph
below-
Fixed Assets Turnover
6
5.8
5.8
5.66
5.54
5.6
5.4
5.2
5.09
5.14
5
4.8
4.6
2017
2016
2015
Fixed Assets…
Department of Finance & Banking, Comilla University.
2014
2013
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A Study on Financial Performance Analysis of Sonali Bank Ltd.
Analysis:
From the trend of Fixed Assets Turnover (times) of SBL showed in table and figure,
we see that the highest ratio was in 2014 because in this year the amount of fixed assets was
lower than the other years.
Later there is a shortfall in this ratio during 2015, 2016 and 2017. During these years
the amount if fixed assets increased than the previous years and the increment rate was
greater than the increment rate of total revenue.
6.7 Solvency Analysis of Sonali Bank Limited (2013-2017):
Solvency ratios, also called leverage ratios, measure a company’s ability to sustain
operations indefinitely by comparing debt levels with equity, assets and earnings. In other
words, solvency ratios identify going concern issues and a firm’s ability to pay its bills in the
long term. Many people confuse solvency ratios with liquidity ratios. Although they both
measure the ability of company to pay off its obligations, solvency ratios focus more on the
long-tem sustainability of a company instead of current liabilities payments. Long term
creditors and stockholders are particularly interested in a company’s ability to pay interest as
it comes due and to repay the face value of debt at maturity. Debt to Total Assets and Times
Interest Earned are two ratios that provide information about debt paying ability.
(i) Debt to Total Assets Ratio:
Debt to Total Assets Ratio is laid out the percentage of a company total asset the
change into total debt. This ratio indicated the company’s degree of leverage. It also
provides some indication of the company’s ability to withstand losses without impairing the
interest of creditors. One shortcoming of the total debt to total asset ratio is that it doesn’t
provides any indication of asset quality since it lumps all tangible and intangible assets
together. Like all other ratios, the trend of the total debt to total assets should be evaluated
over time. This will help assess whether the company’s financial risk profile is improving or
deteriorating.
The ratio is calculated as follows:
Formula:
Debt to Total Assets Ratio =
Department of Finance & Banking, Comilla University.
𝑻𝒐𝒕𝒂𝒍 𝑫𝒆𝒃𝒕
𝑻𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔
× 𝟏𝟎𝟎
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Calculation:
Debt to Total Asset Ratio of Sonali Bank Limited from 2017-2013 are given below-
Year
2017
2016
2015
2014
2013
Assets Turnover
93.63%
93.59%
92.83%
93.72%
93.67%
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
Graphical Presentation:
The fluctuations of the Debt to Total Asset Ratio of Sonali Bank Limited is shown in the
graph below-
93.80%
93.60%
93.40%
93.20%
93.00%
92.80%
92.60%
92.40%
92.20%
Debt to Total Asset
Ratio
93.72% 93.67%
93.63%
93.59%
92.83%
2017
2016
2015
2014
2013
Debt to Total Asset Ratio
Analysis:
The higher the percentage of debt to total asset ratio, the greater risk that the company
may unable to meet its maturing obligations. From the trend of Debt to Total Assets Ratio
of SBL showed in table and figure, we see that the bank has financed a large amount of its
total assets with debt. All of the years except 2015, having 93% or more than 93% debt to
total asset ratio.. The main reason behind this high debt to total asset ratio is the increasing
amount of deposits of SBL.
(ii) Time Interest Earned Ratio:
Times Interest Earned Ratio is an indication of the company’s ability to meet interest
payments as they come due. Sometimes, it is called Interest Coverage Ratio. The higher its
value the better able the firm is to fulfil its interest obligations. Failing to meet these
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obligations could force a company into bankruptcy. However, a high ratio can indicate that a
company has an undesirable lack of debt or is paying down too much debt with earnings that
could be used for other projects. The rationale is that a company would yield greater returns
by investing its earnings into other projects and borrowing at a lower cost of capital than what
it is currently paying to meet its debt obligations.
Formula:
Times Interest Earned Ratio =
𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒃𝒆𝒇𝒐𝒓𝒆 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒂𝒏𝒅 𝑻𝒂𝒙𝒆𝒔
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕
Calculation:
Times Interest Earned Ratio of Sonali Bank Limited from 2017-2013 are given below-
Year
2017
2016
2015
2014
2013
Times Interest
1.38
1.5
1.8
2.04
1.9
Earned Ratio
(Source: Annual Reports of Sonali Bank Limited, 2017-2013)
Graphical Presentation:
The change of the Times Interest Earned Ratio of Sonali Bank Limited is shown in the graph
below-
Times Interest Earned Ratio(times)
2.5
2
2.04
1.8
1.5
1.38
1
1.9
1.5
Times Interest Earned
Ratio(times)
0.5
0
2017
2016
2015
2014
2013
(Source: Annual Reports of Sonali Bank Limited, 2013-2017)
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Analysis
The trend of Times Interest Earned Ratio of SBL showed in Table no: 23 and
Figure no: 23 says that there is gradual decrease in this ratio except during the year 20132014. Because during this year the amount of interest paid on deposits and borrowing was
lower than the other years.
The reason behind gradual decrease in this ratio is because of the gradual increase in the
amount deposits in every year. In 2017 the amount of deposits increased up to tk. 111,300.1
million which was highest among these five years. The earnings also increased in every year
but the rate was lower the increment in deposits amount. As a result the interest paid on
deposits had also increased and the ratio declined.
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CHAPTER-7
Findings, Recommendations & Conclusion
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A Study on Financial Performance Analysis of Sonali Bank Ltd.
Findings
After collecting and analyzing data, I have got some findings. These findings are
completely from my personal point of view. Those are given below.
 To tell specifically, the liquidity position was well previous years but last
year’s current ratio was not up to the mark. The higher the ratio, the more the
liquidity. But excess liquidity reduces profitability. A manager must offset
between liquidity and profitability. Last year (2017) the liquidity ratio was
1.04 with maintaining on an average link with previous years. Without this,
cash ratio and net working capital was good enough. I think the liquidity
position is enough to run operations.
 In Debt ratio, the debt position of a firm indicates the amount of other people’s
money being used to generate profit. In general, the financial analyst is most
concerned with long term debts, because these commit the firm to a stream
payments over the long run. Because creditors claim must be satisfied before
the earnings can be distributed to shareholders, current and prospective
shareholders pay close attention to the firm’s to repay debts. Here, the debt
ratio is spread by (94%-97%).That means 94-97% is leverage on the total
assets. But the times interest ratio is good enough to meet up the fixed
financial charges. My analysis shows that the bank took deposits from the
customer at a low rate but invested the funds at high rate.
 To prove this, I can give a reference that Sonali Bank already declared that
they collected 1 trillion deposits from the customers. A great achievement for
them compering to all national commercial banks. 48 In activity ratio, we can
see that the ratio fluctuates among the years. Cost to income ratio measures
that how much expenses are incurred to generate profit. The ratio of 2016 was
high than 2015. I found some reasons behind that increasing in Rent, Tax, and
Electricity and employee salary are the main elements. The same reason is
applicable to total asset turnover ratio. A good sign is found in investment to
deposit ratio because the bank collected idle deposits from the customers and
invested properly. The bank recovered from the poor positions in 2013 to rich
position in 2017.
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 In profitability ratio, as per my analysis, I saw that sharp decrease in profit in
2013 was caused by the large flow of deferred tax payment and other
provisions. The diminution of investment in 2016 causes a large cash flow out
side of the bank for this the profit was low. But in 2017 somewhat there no
such large cash out flow. Everything was normal and the profit margin was
well. Hence, the ROA and EPS was consistent with the net profit margin. But
the equity loan and ROE ratio was low because of the bank’s ability to raise a
well collection of deposit from the Customer.
 In summary, as a largest commercial bank and the agent of Bangladesh Bank
Sonali Bank has to do various types of work without thinking about the profit.
For this reason we have seen that in some cases bank has doing loss, but
though loss we cannot directly say that its bank’s failure. This is happening
only for helping the nation. On the other hand we have seen that the bank
profit increasing rate is poor but increasing. The bank is highly liquid and
earns much profit on owner’s equity. Bank’s operating efficiency is good. EPS
is becoming double per year and earning spread is also increasing. So, after all
we can say that as a nationalized bank commercial bank Sonali Bank Limited
is a bank which is earning better than other nationalized bank
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Recommendation
 The Top management of Sonali Bank Limited should be more effective to the
employee then current situation. Because they should take care the branch level
employee’s benefits, opportunities etc.
 The bank has highly skilled employee in the branch level. But the bank should be able
to utilize these employees at appropriate way to take out the bank’s output.
 The website design is need to improve. Therefore, the website should be changed and
can put more information about the bank. The existing design cannot capture the
customer’s attention.
 The cheque’s design is poor. The good looking cheque design can motivate the
customer.
 The human resource division can be more effective. Because this human resource
department should think about the employee benefit much.
 In the training institute, the training process should be used latest technology to
provide to the trainee. The bank should give training about the office package, basic
idea on computer and internet.
 In the branch level when employees could transfer to another department during that
time that employee is needed at least ten days training according on the transfer
position.
 The higher management should be more effective about the employee, to take right
strategy, right decision making.
 In the branch level employee is working so many extra time, so management should
provide some extra incentives to motivate the employee.
 On-line banking is coming soon so the responsible employee should be trained
effectively.
 The training evaluation process and form is to be more modernized.
 Physical and technological facilities should be increased in evaluating credit
proposals.
 Infrastructure should be modernized.
 The cost of fund needs to be minimized.
 The gap between employees and customers will be reduced through arranging
meetings.
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Conclusion
The Sonali Bank limited is not only a commercial bank but also a government bank.
As a bank Sonali Bank Limited has to do a lot of things for the betterment of the country. The
Bank is strongly positioned in the market and with its core strengths it can match
shareholders’ expectations and thus raise their wealth in future through ethical banking and
best pricing. Thus, it has to take initiative so that it can fulfill the desire of the govt. as well as
people. It will enhance more public services and build up working teams to provide the best
services to its valuable customers. It must be run in organized way and discipline must be
ensured in all sphere of its performance. Efficient export team, import team and remittance
team must be formed and perform duties properly.
More training, computerization, data collection, market analysis and swiftness in
servicing are essentially required. To do these the recommended suggestions can be used.
Although it is theoretical suggestions, it is not valueless. It has great impact on the banking
business and other sectors of the economy. For this, govt. help is essential and it is expected
that govt. will broaden its hand for implementing the recommendations for the welfare of the
people of Bangladesh.
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performance in South Africa. The South African Journal of Economics 70 (3), p.485-518.
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 Annual Reports :

Annual Report of Sonali Bank Limited,2017

Annual Report of Sonali Bank Limited,2016
 Annual Report of Sonali Bank Limited,2015
 Annual Report of Sonali Bank Limited,2014
 Annual Report of Sonali Bank Limited,2013
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 Web Links
 http://www.sonalibank.com.bd/
 https://www.bb.org.bd/fnansys/interestlending.phphttp://www.sonalibank.co.uk/w
age_earners.asp
 http://www.sonalibank.com.bd/webs/catalog/sonali_bank_bd_ltd.html
 http://www.sonalibank.com.bd/annualreports
 http://www.sonalibank.com.bd/trade_finance.asp
 http://wikipedia.com
 http://www.investorswords.com/401/bank.html
 http://www.bangladesh-bank.org/fnansys/bankfi.html
 http://www.reportbd.com
 http://www.Bangladeshtrades.com
Department of Finance & Banking, Comilla University.
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