CHAPTER-ONE
Introduction
Page 1
1.0. Introduction of the Report
The internship program is an integral part of Bachelor of Business Administration (BBA).This
program creates a unique opportunity for the student to apply their theoretical knowledge into
practice and gain valuable real world business experience. During the program, student can also
realize existing business condition apart from having opportunities to solve the problem using
various analytical tools.
In the age of modern civilization bank is playing its spending role to keep the economic
development wheel moving. The corporation of the bank is needed in every economic activity. In
fact there is hardly any aspect of development activity where state inspired or otherwise where
bank do not have role to play.
Modern banks play an important part in promoting economic development of a country. Banks
provide necessary funds for executing various programmers underway in the process of
economic development. They collect savings of large masses of people scattered through out the
country, which in the absence of banks would have remained ideal and unproductive. These
scattered amounts are collected, pooled together and made available to commerce and industry
for meeting the requirements. Economy of Bangladesh is in the group of world’s most
underdeveloped economies. One of the reasons may be its underdeveloped banking system.
Government as well as different international organizations have also identified that
underdeveloped banking system causes some obstacles to the process of economic development.
So they have highly recommended for reforming financial sector. Since 1990, Bangladesh
Government has taken a lot of financial sector reform measurements for making financial sector
as well as banking sector more transparent, and formulation and implementations of these reform
activities has also been participated by different international organization like World Bank, IMF
etc.
As a part of the internship Program of BBA course requirement, I was assigned to do my
internship in National Bank Limited for a period of three months (5th July, 2009 to 5th October,
2009).
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1.1. Background of the Report
National Bank one of the largest and oldest private-sector commercial bank in Bangladesh, with
years of experience. Adaptation of modern technology both in terms of equipment and banking
practice ensures efficient service to clients. 136 branches at home and 29 affiliates worldwide
create efficient networking and reach capability. National Bank is a bank that serves both clients
and country.
This report, “Performance Evaluation of National Bank Limited”, has been prepared to fulfill the
partial requirement of BBA program as a mean of Internship Program. While preparing this
report, I had a great opportunity to have an in depth knowledge of all the banking activities of
National Bank Ltd.
1.2. Significance of the Report
Education will be the most effective when theory and practice blends. Theoretical knowledge
gets its perfection with practical application. And the internship is designed to bridge the gap
between the theoretical knowledge and real application. We all know that there is no alternative
of practical knowledge which is more beneficial than theoretical aspects. The prime reason of
this study is to become familiar with the practical business world and to attain practical
knowledge about the overall Banking and Corporate world, which is so much essential for each
and every student to meet the extreme growing challenges in job market.
1.3. Scope
In order to maintain the speed of development now Banks must compete in the market place both
with local institution as well as foreign ones. The presentation of the organizational structure and
policy of National Bank Limited and investigating the strategies applies by it provide the scope
of this report. An infrastructure of the organization has been detailed and looks into the future.
The scope of this report is limited to the overall description of the company, its services, its
position in the industry, its financial performance analysis the practical progress of its operation.
The scope of the study is limited to organizational setup, functions and performances.
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 Recent trend in different investment modes.
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 Recent performance of NBL in terms of deposit, investment and foreign exchange.
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 To analyze the banks current financial flows performed by NBL.
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 To obtain practical experience about general banking activities by involving such type of
program.
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 To build professional carrier in the banking sector as well as any credit providing
institution.
1.4. Objectives
1.4.1. General Objective
 The prime objective of the report is to “Financial Performance Evaluation of National
Bank Limited”
1.4.2. Specific Objectives
The following aspects can be listed as the specific objectives for this practical orientation in
National Bank Limited:
 To identify and assess the impact of the present performance of National Bank Limited
 To calculate the financial ratios and identify the areas of concern.
 To understand the implications in analyzing and interpreting the financial ratios.
 To compare the financial situation of National Bank Limited with the two other promising
banks- Uttara Bank Limited and Mercantile Bank Limited and find out their strength and
weakness.
 To identify the findings and raise possible recommendations for National Bank Limited.
 To apply theoretical knowledge in the practical field.
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1.5. Methodology:
1.5.1. Research Design
This report is a descriptive type of research which briefly reveals the overall activities performed
by National Bank Ltd. It has also been administered by collecting both primary and secondary
data. Annual ports of NBL were the major secondary data sources in this regard. Ratio analysis
and trend analysis have also been used as major tools for the financial performance analy The
study is performed based on the information extracted from different sources collected by using a
specific methodology. This report is analytical in nature. The methodology is
1.4.1 Sources of data: Sources of data of this report can be divided into Two categories:
Primary data:
A. Focus group discussion.
B. Take expert opinion from the officers.
C. Direct observation.
D. Informal Discussion.
Secondary data Sources:
A. Annual Report of FSIBL.
B. Different text book & journals.
C. Various reports & articles related to study.
D. Some of my course elements as related to this report.
E. Web base support from the internet & intranet.
1.4.2 Data Collection Procedure & Instruments:
Conducting this report the following procedures have been used to collect data with the
respective instruments.
1.4.2.1 Collection of Primary Data:
All the relevant data & information were mainly collected from the observation, Informal
discussion, group discussion, Conversation & so on.
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1.4.2.2 Collection of Secondary Data:
Secondary data are collected basically from Annual reports, journals, brochures, paper,
magazines, publications, book & other from of publications & official website
1.5 Instruments Used For Analysis:
A. Ratio Analysis
B. Trend Analysis
1.5.1Ratio Analysis
The quantitative (such as ratio analysis) tools are used to analyze the gathered data & different
types of computer software are used for reporting the gathered information from the analysis
such as- Microsoft Word, Microsoft Excel etc. Ratio can be classified into four broad groups1) Liquidity Ratio.
2) Activity Ratio.
3) Debt Ratio.
4) Profitability Ratio.
1.5.2 Trend Analysis
It is really important to analysis trends in ratios as well as their absolute levels. This analysis
informs us whether a company’s financial condition improving or deteriorating.
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1.6. Limitations
Observing and analyzing the broad performance of a bank and one of its Branches are not that
easy. Moreover due to obvious reasons of scrutiny and confidentiality, the bank personnel
usually don’t want to disclose all the statistical information about their organization. Time is
another major limitation s the duration of the program was ten weeks only and being a temporary
member of the organization, it was not possible on my part to notice or express some of the
sensitive issues and other aspects.
However the some of the limitations I have face while preparing this Report are listed as follows:
 Time Limitation: To complete the study, time was limited by three months. It was really
very short time to know details about an organization like National Bank Ltd.
 Inadequate Data: Lack of available information about export & import business
operations of National Bank Ltd. Because of the unwillingness of the busy key persons,
necessary data collection became hard. The employees are extremely busy to perform
their duty.
 Lack of Record: Large-scale research was not possible due to constrains and restrictions
posed by the organization. Unavailability of sufficient written documents as required
making a comprehensive study. In many cases up-to-date information was not available.
 Lack of experiences: Lack of experiences has acted as constraints in the way of
meticulous exploration on the topic. Being a member of the organization; it was not
possible on my part to express some of the sensitive issues. Lack of adequate knowledge
about export & import business of any organization.
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Page 8
CHAPTER- TWO
Overview of National Bank Limited.
Page 9
2.0. Overview of National Bank Limited
National Bank Limited has its prosperous past, glorious present, prospective future and under
processing projects and activities. Established as the first private sector Bank fully owned by
Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the
passage of time after facing many stress and strain. The member of the board of directors is
creative businessman and leading industrialist of the country. To keep pace with time and in
harmony with national and international economic activities and for rendering all modern
services, NBL, as a financial institution automated all its branches with computer network in
accordance with the competitive commercial demand of time. Moreover, considering its forthcoming future the infrastructure of the Bank has been rearranging. The expectation of all class
businessman, entrepreneurs and general public is much more to NBL. Keeping the target in mind
NBL has taken preparation to open 15 new branches & 10 SME by the year 2009.National Bank
got license to open 10 branches & 5 SME center during 2010.
The emergence of National Bank Ltd. in the private sector is an important event in the Banking
arena of Bangladesh. When the nation was in the grip of severe recession, Govt. took the
farsighted decision to allow in the private sector to revive the economy of the country. Several
dynamic entrepreneurs came forward for establishing a bank with a motto to revitalize the
economy of the country.
National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the
private sector. From the very inception it is the firm determination of National Bank Limited to
play a vital role in the national economy. National Bank is determined to bring back the long
forgotten taste of banking services and flavors. National Bank want to serve each one promptly
and with a sense of dedication and dignity.
2.1. History and Heritage:
National Bank Limited has its prosperous past, glorious present, prospective future and under
processing projects and activities. Established as the first private sector bank fully owned by
Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the
passage of time after facing many stress and strain. The members of the board of directors are
creative businessmen and leading industrialists of the country. To keep pace with time and in
harmony with national and international economic activities and for rendering all modern
services, NBL, as a financial institution, automated all its branches with computer networks in
accordance with the competitive commercial demand of time. Moreover, considering its forthcoming future, the infrastructure of the Bank has been rearranging. The expectation of all class
businessmen, entrepreneurs and general public is much more to NBL. Keeping the target in
mind, NBL has taken preparations to open 10 new branches and 5 SME centers by the year 2010.
In addition, we are further expanding our presence through developing and expanding the SME
financing, Any Branch Banking and Off-shore Banking facilities.
Page 10
The emergence of National Bank Limited in the private sector was an important event in the
Banking arena of Bangladesh. When the nation was in the grip of severe recession, the
government took the farsighted decision to allow the private sector to revive the economy of the
country. Several dynamic entrepreneurs came forward for establishing a bank with a motto to
revitalize the economy of the country.
National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the
private sector. From the very inception, it was the firm determination of National Bank Limited
to play a vital role in the national economy. We are determined to bring back the long forgotten
taste of banking services and flavors. We want to serve each one promptly and with a sense of
dedication and dignity.
The then President of the People's Republic of Bangladesh Justice Ahsanuddin Chowdhury
inaugurated the bank formally on March 28, 1983 but the first branch at 48, Dilkusha
Commercial Area, Dhaka started commercial operation on March 23, 1983. The 2nd Branch was
opened on 11th May 1983 at Khatungonj, Chittagong.
At present, NBL has been carrying on business through its 124 branches and 11 SME / Krishi
centers (total 135 service locations) spread all over the country. Since the very beginning, the
bank has exerted much emphasis on overseas operations and handled a sizable quantum of home
bound foreign remittance. It has drawing arrangements with 415 correspondents in 75 countries
of the world, as well as with 37 overseas Exchange Companies located in 13 countries. NBL was
the first domestic bank to establish agency arrangements with the world famous Western Union
in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the
expatriate Bangladeshi nationals. This has meant that the expatriates can remit their hard-earned
money to the country with much ease, confidence, safety and speed. NBL was also the first
among domestic banks to introduce international Master Card in Bangladesh. In the meantime,
NBL has also introduced the Visa Card and Power Card. The Bank has in its use the latest
information technology services of SWIFT and REUTERS. NBL has been continuing its small
credit programmes for disbursement of collateral free agricultural loans among the poor farmers
of Barindra area in Rajshahi district for improving their livelihood.
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Despite shaken domestic economic condition due to global recession, performance of 2009, the
year under review was noteworthy. In 2009, the pretax profit of National Bank stood at 3,197.50
million, registering a growth of 13.03 percent over the previous year and profit after tax & other
provisions stood at Taka 2,070.47 million reflecting a growth of 36.45 percent. Further, bank's
revenue, loans & advances, deposit and assets registered a growth of 22.98, 28.55, 27.66 and
27.53 percent respectively. Capital adequacy maintained at Tk.9,124.62 million, which was
13.56 percent against statutory requirement of 10 percent. The earning per share for the year
2009 was Tk.72.74 compared to Tk.53.31 of previous year. Being a regular tax payer, the bank
made a direct contribution of Tk.1,366.20 million to Government Exchequer in 2009
representing an increase of 79.35 percent over 2008. Detailed facts-figures and disclosures are
available in the financial statements and notes of accounts for the year 2009. National Bank, has
now acquired strength and expertise to support the banking needs of the foreign investors. NBL
stepped into a new arena of business and opened its Off Shore Banking Unit at Mohakhali to
serve the wage earners and the foreign investors better than before.
Since its inception, the bank was aware of complying with Corporate Social Responsibility. In
this direction, we have remained associated with the development of education, healthcare and
have sponsored sporting and cultural activities. During times of natural disasters like floods,
cyclones, landslides, we have extended our hand to mitigate the sufferings of victims. It
established the National Bank Foundation in 1989 to remain involved with social welfare
activities. The foundation runs the NBL Public School & College at Moghbazar where present
enrolment is 1140. Besides awarding scholarship to the meritorious children of the employees,
the bank has also extended financial support for their education. It also provided financial
assistance to the Asiatic Society of Bangladesh at the time of their publication of Banglapedia
and observance of 400 years of Dhaka City.
The Transparency and accountability of a financial institution are reflected in its Annual Report
containing its Balance Sheet and Profit & Loss Account. In recognition of this, NBL was
awarded Crest in 1999 and 2000, and Certificate of Appreciation in 2001 by the Institute of
Chartered Accountants of Bangladesh.
The bank has a strong team of highly qualified and experienced professionals, together with an
efficient Board of Directors who play a vital role in formulating and implementing policies.
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2.2. Vision
Ensuring highest standard of clientele services through best application of latest information
technology, making due contribution to the national economy and establishing ourselves firmly
at home and abroad as a front ranking bank of the country have been our cherished vision.
2.3. Mission
Our mission is to continue our support for expansion of activities at home and abroad by adding
new dimensions to our banking services which have been ongoing in an unabated manner.
Alongside, we are also putting highest priority in ensuring transparency, account ability,
improved clientele service, as well as our commitment to serve the society through which we
want to get closer to the people of all strata. Winning an everlasting seat in the hearts of the
people as a caring companion in uplifting the national economic standard through continuous up
gradation and diversification of our clientele services in line with national and international
requirements is the desired goal we want to reach.
2.4. Brand Image:
A bank for performance with potential
2.4. Goals of the Bank
 Develop a realistic deposit mobilization plan.
 Develop appropriate lending risk assessment system.
 Develop capital plan.
 Develop a system to make good advances.
 Develop a recruitment, compensation training and orientation plan.
 Develop a plan for offering better customers service.
 Develop appropriate management structure, systems, procedures and approaches.
 Develop scientific MIS to monitor bank’s activities.
2.5. Objective of the Bank
 Build up a low cost fund base.
 Make sound loans and investments.
Page 13
 Meet capital adequacy requirement at all the time.
 Ensure 100% recovery of all loans and advances.
 Ensure a satisfied workforce.
 Focus on fee-based Income.
 Adopt an appropriate management technology.
 Install a significant MIS to monitor bank’s activities
All these were set during formation stage mainly for the planning purpose. As we know planning
is a continuous process, all these needs are to be updated and reset commensuration the need of
the time. The main objective of the NBL is to blend in its operation traditional, commercial
banking with modern international banking. With the new and varied demands of modern
customers, the bank has been pursuing a policy of achieving harmony in transactions between
the bank and its customer living up to the high standards of a free market economy.
2.6. Core business principles:














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Outstanding customer service.
Effective and efficient operation.
Strong capital and liquidity.
Prudent lending policy.
Strict expense discipline.
The business principles are supported by loyal and committed employees who
make lasting customer relationship and international teamwork easier to achieve.
National Bank Limited also operates according to certain key business values.
Hands on management at all levels.
A minimum of bureaucracy.
Fast decision and implementation.
Putting the team’s interest ahead of the individual.
The appropriate delegation of authority with accountability.
Fair and objective employer.
A diverse team.
The highest personal standard of integrity at all levels.
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2.7. Organogram:
Organogram of the NBL in Broadly
Chairman
Board of Director
Board Secretariat
Research
&
Planning
Committees
Managing
director
Budget
Exp. Control
Loan
recovery
&
DMD admin
Establishment
EVP
VP
VP
AVP, NBL
Train. Ins
inspection
AVP
EVP
SVP
AVP
EVP
SVP
SVP
AVP
AVP
VP
Public
relation
SVP
AVP
AVP
Special Audit &
DMD Operator
EVP
EVP
Monitoring
Implementation
AVP
AVP
Computer
AVP,
admin
VP
AVP
Develop
EVP
AVP
AVP
AVP
AVP
AVP.
Establish
Page 15
2.8. Financial Highlights of the Company
(BDT in million)
Sl.
Particulars
No.
2007
2008
2009
Taka
Taka
Taka
1
Paid-up-Capital
1,208.20
1,872.72
2,846.54
2
Authorized Capital
2,450.00
2,450.00
7,450.00
3
Total Assets
56,526.96
72,205.50
92,084.79
4
Total Deposits
47,961.22
60,187.89
76,838.64
5
Total Investment
7,760.38
9,156.61
12,315.20
6
Total Loans & Advances
36,475.74
50,665.70
65,129.29
7
Total Shareholders’ Equity
4,568.39
6,126.27
8,916.76
8
Reserve fund/Surplus
3,360.19
4,253.55
6,070.22
9
Interest Income
5,786.71
6,821.40
10
Interest Expense
3,594.84
4,490.34
11
Profit before Tax & Provision
2,215.10
3,123.83
3,397.70
12
Profit after Tax
1,238.11
1,517.43
2,070.47
13
Price Earning Ratio (Times)
22.60
19.03
8.88
14
Net Asset Value Per Share
378.12
327.13
313.25
15
Cost of fund (%)
6.35
6.76
6.45
16
Return on Assets (ROA)%
2.40
2.36
2.52
17
Return on Equity (ROE) %
31.57
28.38
27.53
18
Debt/Equity Ratio (Times)
6.77
6.99
9.31
19
Cost/Income Ratio (%)
69.16
64.87
69.13
20
Market Price Per Share
1,494.00
1,014.25
646.25
21
Remittance
27,560.80
39,877.80
44,381.50
4,288.80
2,833.45
Source: Annual Report of NBL (2009)
Page 16
2.9. Business Performance over the Last Few Decades
Figure 1: Capital Structure
NBL .has a consistent dividend policy. In line with that Stock Dividend of 52 percent was
declared for the year 2008 which strengthened paid-up capital base and it stood at Tk.2,846.53
million 2009 against authorized capital of 7,450.00 million. The statutory reserve enhanced by
35.95 percent to Tk.2,418.37 million in 2009 after transferring 20 percent on pre-tax profit while
it was Tk.1,778.87 million in 2008. At the end of 2009 shareholders' equity increased by 45.55
percent to Tk.8, 916.76 million from Tk.6,126.27 million of 2008. In the year 2010, the
Authorized capital of the Bank has been increased from Tk. 745.00 crore to Tk. 1,750.00 crore.
Capital Management of the Bank is to maintain an adequate capital base to support the projected
business and regulatory requirement. NBL always maintain a prudent balance between Tier- 1
and Tier-2 capital. The Bank has maintained overall capital adequacy at 13.56 percent in 2009 of
which 10.89 percent and 2.67 percent as Tier-1 and Tier-2 capital respectively against
Bangladesh Bank's requirement of 10 percent.
Page 17
Figure 3: Deposit performance over the last five decade
The deposit base of the bank registered a growth of 27.66 percent in the reporting year over the
last year and stood at Tk.76,838.64 million. Expansion of branch network, competitive interest
rate and deposit products contributed to the growth. The customers of the bank were individuals,
corporations, financial institutions, government and autonomous bodies etc.
The Bank opened a total number of 24,385 LCs amounting USD 1,117.61 million in import trade
in 2009. The main commodities were scrap vessels,rice, wheat, edible oil, capital machinery,
petroleum products, fabrics & accessories and other consumer items.
Figure 4: Foreign Trade over the last 5 years
The Bank has been nursing the export finance with special emphasis since its inception. In 2009
it handled 18,761 export 2009 it handled 18,761 export documents valuing USD 559.78 million
with a growth of 5.41 percent over the last year. Export finances were made mainly to
readymade garments, knitwear, frozen food and fish, tanned leather, handicraft, tea etc
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Figure 5: Investment over the last 5 years
The daily average investment of the treasury in local currency was Tk 10,629.10 million in the
from of Call Lending, Term Lending, Reverse Repo, Debentures and Govt. Securities. The yield
was 1.17 percent higher than previous year. Like previous year, inflow of foreign currency of the
current year was higher than the previous year. Treasury was actively participated in interbank
market, both in local and foreign currency.
Figure 6: Net Profit after Tax over the last few decades
National Bank Limited generated profit before provision of Tk.3,397.70 million in 2009 which
was Tk.3,123.82 million in 2008 registering a growth of 8.77 percent. Net Profit after tax grew
by 36.45 percent to Tk.2,070.47 million in 2009 after making provision for loan loss and income
tax for Tk.200.00 million and Tk.1,150.00 million respectively. Interest income increased by
17.88 percent to Tk.6,821.39 million in 2009 from Tk.5,786.71 million in 2008 due to growth of
advances. It accounted 61.98 percent of the total operating income.The income from investment
increased sharply by 89.51 per cent to Tk.1,779.32 million in 2009 from Tk.938.92 million in
2008. Commission and exchange earning decreased by 3.20 percent to Tk.1,463.70 million in
2009 from Tk.1,512.13 million of 2008.Overall increase of deposits pushed up the interest
expenses by 24.91 percent from Tk.3,594.84 million in 2008 to Tk.4,490.34 million in 2009.
Salary & allowances increased by 26.89 percent, Rent & taxes, insurance premium, utility
Page 19
charges etc increased by 23.36 percent. Total operating expenses was Tk.3,118.11 million in
2009 in comparison to Tk. 2,174.40 million in 2008.
Figure 7: Non performing loan over the five years
In spite of taking all out efforts to reduce the non-performing assets of the bank giving top most
priority, the classified loans raised by 42.17 percent to Tk.3,880.31 millions as on 31 December,
2009 from Tk. 2,729.33 millions of previous year. Global recession and internal political
uncertainty of 2007 & 2008 in the country many industries and business enterprises could not
run properly & had to incur huge loss and turned non-performing which is a major cause of
increase in classified loan.
Besides all other activities recovery of classified loans & advance gets top most priority. Though
appropriate action plans taken and relentless efforts exerted to reduce the non-performing assets,
during the year under review, the bank recovered Tk.345.40 million and Tk.97.37 million against
classified loans & advances and written-off respectively. Even then non-performing assets
increased a little bit to 5.96 percent of total loans & advances, which is within a tolerable level.
Moreover, during 2009, bank obtained court verdict of 9 suits valuing the property of Tk.36.23
million under section 33(7) & 33(5) of the Artha Rin Adalat Ain-2003. Necessary formalities are
being done to sell the properties to realize the debts. Bank filed 33 new suits in the year 2009 to
recover Tk.862.47 million and is relentlessly pursuing the suits for early disposal.
Figure 8: Remittance over the five years
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As a contributor of national economy, NBL is relentlessly working to ease the flow of inward
foreign remittance. The bank introduced different products and technology including SWIFT,
(Tk. 620.69 crore) higher than that of 2006 acheving a growth rate of 29.07 percent. Intorduction
of products like Home Delivery Scheme , Electronic Fund Transfer(EFT) and different instant
payment system and mordern technologies like SWIFT and online services have strengthed the
position of the bank. devices for more speedy payments. Further, NBL entered into a deal with
ASA, a leading NGO having 3,000 outlets and also with Social Islamic Bank to expand bank's
domestic network. With the passage of time, NBL earned the confidence and trust
of the wage earners and successfully handling a sizeable volume of remittances, which is
depicting a gradual increasing trend. In 2009, foreign remittance brought through NBL was USD
645.97 million showing an increase of USD 63.50 million over the previous year.
2.10. Different types of service
2.10.1. Savings Account
National Bank Limited offers customers a hassel free and low charges savings account through
the branches all over bangladesh.
Benefits (Condition Apply)
Account Opening
Interest rate of 6.00% on minimum monthly
2 copies of recent photograph of account
balance.
holder.
Minimum balance Tk.1000.
Nominee's Photograph.
Maintenance charge yearly Tk. 400.
Valid photocopy of Voter ID Card.
No hidden costs.
Standing Instruction Arrangement are
available for operating account
2.10.2. Current Account
National Bank Limited offers customers current deposit facility for day-to-day business
transaction without any restriction.
Benefits (Condition Apply)
Minimum balance Tk.2000.
Minimum maintenance charge yearly Tk.800
No hidden costs.
Standing Instruction Arrangement are
available for operating account.
Easy access to our other facilities.
Account Opening
2 copies of recent photograph of account
holder.
TIN certificate.
Nominee's Photograph.
Valid photocopy of Voter ID Card
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2.10.3. Short Term Deposit
National Bank Limited offers interest on customer's short term savings and gives facility to
withdraw money any time.
Benefits (Condition Apply)
Minimum balance Tk. 2000.
Minimum maintenance charge yearly Tk.
800.
Standing Instruction Arrangement are
available for operating account.
Account Opening
2 copies of recent photograph of account
holder.
Nominee's Photograph.
Valid photocopy of Voter ID Card.
2.10.4. Fixed Deposit
National Bank Limited offers fixed term savings that will scale up your savings amount wtih the
time.
Benefits (Condition Apply)
Account Opening
Any amount can be deposited.
1 copy of recent photograph of account
Premature encashment facility is available.
holder.
Overdraft facility available against term
Nominee's Photograph.
receipt
2.10.5. RFC Deposit
National Bank Limited gives oppotunity to maintain foreign currency account thorugh it's
Authorized Delear Branches.Bangladesh nationals residing abroad or Foreign nationals residing
abroad or Bangladesh and foreign firms operating in Bangladesh or abroad or Foreign missions
and their expatriate employees.
Benefits (Condition Apply)
No initial deposit is required to open the
account.
Interest will be offered 1.75% for US Dollar
Account , 3.00 % for EURO Account and
3.25% for GBP Account.
They will get interest on daily product basis
on the credit balance (minimum balance of
US$ 1,000/- or GBP 500/- at least for 30 days)
maintaining in the account.
Account Opening
2 copies of recent photograph of account
holder.
Nominee's Photograph.
Passport Copy.
ID of residence in abroad.
2.10.6. NFC Deposit
National Bank Limited gives opportunity to maintain foreign currency account thorugh it's
Authorized Delear Branches. All non– resident Bangladeshi nationals and persons of Bangladesh
Page 22
origin including those having dual nationality and ordinarily residing abroad may maintain
interest bearing NFCD Account.
Benefits (Condition Apply)
NFCD Account can be opened for One
month, Three months, Six months and One
Year through US Dollar, Pound Starling,
Japanese Yen and Euro.
The initial minimum amount of $1000 or
500 Pound Starling or equivalent other
designated currency.
Interest is paid on the balance maintain in the
Account. This interest is tax free in
Bangladesh.
Account Opening
2 copies of recent photograph of account
holder.
Nominee's Photograph.
Passport Copy.
ID of residence in abroad.
2.10.7. Monthly Deposit
National Bank Limited offers monthly savings scheme for it's retail customers.
Benefits (Condition Apply)
Account Opening
Monthly installments of deposit will be
Tk.500/-, Tk.1,000/- , Tk.2,000/- ,Tk.3,000,
Tk.4000/- , Tk.5,000/- and Tk. 10,0000
1 copy of your recent photograph.
Nominee's Photograph.
Account may be opened for any installment
and term, which is not changeable.
A person is allowed to open more than one
account for different installment in a Branch/
Bank.
Amount to be paid on completion of Term
Sl Monthly Installments
no
(Taka)
3(Three) years @9.00% 5(Five) years@9.25% 8(Eight) years @9.50%
02
1,000/-
41,255/-
75,791/-
1,41,691/-
03
2,000/-
82,510/-
1,51,583/-
2,83,394/-
04
3,000/-
1,23,765/-
2,27,374/-
4,25,091/-
05
4,000/-
1,65,020/-
3,03,166/-
5,66,788/-
06
5,000/-
2,06,274/-
3,78,957/-
7,08,485/-
07
10,000/-
4,12,549/-
7,57,914/-
14,16,970/-
Page 23
2.10.8. Revised Schedule of Interest Rate:
Revised Schedule of Interest Rate
Percentage per annum
Date: September 01, 2010
Deposit Interest Rate
Revised rate of insertest (p.a.)
Sl.
Category Of Deposit
w.e.f June 01, 2010
Below 5 crore
5.00%
1. Savings
5 Crore & avobe
6.00%
Below 1 crore
4.50%
1 Crore to below 25
5.00%
Crore
25 Crore to below 50
2. Special Notice Deposit
5.50%
Crore
50 Crore to below
6.00%
100 Crore
100 Crore & above
6.00%
Below 50.00 lac
5.00%
FDR for 1 months and above but less than 3
3
months
50.00 lac & above
5.50%
Below 50.00 lac
8.00%
50.00 lac & above
8.50%
4 FDR for 3 months & above but less than 6 months
Agreegate Balance 1
Upto - 9.50%
crore & above
Below 50.00 lac
8.00%
50.00 lac & above
8.50%
5 FDR for 6 months & above but less than 1 year
1.00 Crore & above
8.75%
Agreegate Balance 1
Upto - 9.50%
crore & above
Below 1.00 crore
8.50%
6 FDR for 1 year and above
1.00 crore & above
8.75%
1.00 crore & above Upto - 9.50%
Page 24
2.10.9. Credit Rating:
Year
Long Term Rating
Short Term Rating
June, 2010
AA3
ST-1
2009
A1
ST-2
Credit Rating Agency of Bangladesh Limited has upgraded the credit rating of the Bank to AA3
(Pronounced Double A Three) in the Long Term and ST-1 in the Short Term in recognition of its
strong financial position, excellent operational performance, capital adequacy and commendable
growth in all business areas.
A Commercial Bank rated AA3 is judged to be of very high quality, is subject to very low credit
risk and has strong capacity to meet its financial commitments.
A Commercial Bank rated ST-1 is considered to have the highest capacity for timely repayment
of obligations, and are characterized with excellent position in terms of liquidity, internal fund
generation, and access to alternative sources of funds.
National Bank Limited takes this opportunity to thank its regulators, customers, stakeholders,
staff, and well wishers for achieving this rating.
Page 25
CHAPTER-THREE
Theoretical Background
Page 26
3.0. Theoretical Background:
Financial performance analysis of a company is very important to get an overall view about an
organization. It generally consists of interpretation of balance sheet and interpretation of income
statement. By using these two sources one can perform the ratio analysis and trend analysis
which are the major tools for analyzing the financial performance of a bank.
3.1. Ratio Analysis
Ratio analysis involves methods of calculating and interpreting financial ratios to assess the
bank’s performance and status. The basic inputs to ratio analysis are the bank’s income statement
and balance sheet.
3.1.1. Types of Ratio Comparisons
Ratio analysis is not merely the application of a formula to financial data to calculate a given
ratio. More important is the interpretation of the ratio value. To answer such questions as is it
too high or too low? Is it good or bad? Two types of ratio comparisons can be made: Crosssectional & Time-series analysis.
3.1.1. a. Time-series Analysis
Time-series analysis evaluates performance over time. Comparison of current to past
performance, using ratios, allows the firm to determine whether it is progressing as planned.
Additionally, time-series analysis is often helpful in checking the reasonableness of a firm’s
projected financial statements.
3.1.1. b. Cross-Sectional Analysis
Cross-Sectional analysis evaluates performance of different firms` financial ratios at the same
point in time.
Page 27
3.1.1. c. Combined Analysis
The most informative approach to ratio analysis is one combines cross-sectional and time-series
analysis. A combined view permits assessment of the trend in the behavior of ratio in relation to
the trend for the industry.
3.1.2. Cautions about Ratio Analysis
Before discussing specific ratios, we should consider the following cautions:
 A single ratio does not generally provide sufficient information from which to judge the
overall performance of the firm.
 Be sure that the dates of the financial statements being compared are the same.
 It is preferable to use audited financial statements for ratio analysis.
 Be certain that the data being compared have all been developed in the same way.
3.1.3. Groups of Financial Ratios
Financial ratios can be divided into four basic groups or categories:
i. Liquidity ratios
ii. Activity ratios
iii. Debt ratios &
iv. Profitability ratios
Liquidity, activity, and debt ratios primarily measure risk, profitability ratios measure return. In
the near term, the important categories are liquidity, activity, and profitability, because these
provide the information that is critical to the short-run operation of the firm. Debt ratios are
useful primarily when the analyst is sure that the firm will successfully weather the short run.
Page 28
Financial
Ratios
Liquidity
Ratio
Net
Working
Capital
Current
Ratio
Quick
(Acid-Test)
Ratio
Activity
Ratio
Inventory
Turnover
Average
Collectio
n Period
Average
Payment
Period
Fixed
Asset
Turnover
Profitability
Ratio
Debt Ratio
Degree of
Indebtedne
ss
Debt
Ratio
DebtEquity
Ratio
The Ability
to Service
Debt
Time
Interest
Earned
Ratio
Fixed
Payment
Coverage
Ratio
Total
Asset
Turnover
Gross
Profit
Margin
Operating
Profit
Margin
Net Profit
Margin
Returns on
Investment
Return on
Equity
Earning
Per Share
Price/Earni
ng Ratio
Figure 7: Groups of Financial Ratios
Page 29
3.1.3.1. Analyzing Liquidity
The liquidity of a business firm is measured by its ability to satisfy its short term obligations as
they come due. Liquidity refers to the solvency of the firm’s overall financial position. The three
basic measures of liquidity are-
3.1.3. (1.a) Net Working Capital:
Net Working Capital, although not actually a ratio is a common measure of a firm’s overall
liquidity. A measure of liquidity is calculated by subtracting total current liabilities from total
current assets.
Net Working Capital =Total Current Assets –Total Current Liabilities.
3.1.3. (1.b) Current Ratio:
One of the most general and frequently used of these liquidity ratios is the current ratio.
Organizations use current ratio to measure the firm’s ability to meet short-term obligations. It
shows the banks ability to cover its current liabilities with its current assets.
Current Ratio = Current Asset/Current Liabilities
Standard ratio: 2:1
3.1.3. (1.c) Quick Ratio:
The quick ratio is a much more exacting measure than current ratio. This ratio shows a firm’s
ability to meet current liabilities with its most liquid assets.
Quick Ratio=Cash + Government Securities + Receivable / Total Current Liabilities.
Standard ratio: 1:1
3.1.3. (1.d) Operating Cost to Income Ratio:
It measures a particular Bank’s operating efficiency by measuring the percent of the total
operating income that the Bank spends to operate its daily activities. It is calculated as follows:
Cost Income Ratio = Total Operating Expenses / Total Operating Income
Page 30
3.1.3.2. Analyzing Activity
Activity ratios measure the speed with which accounts are converted into sale or cash. With
regard to current accounts measures of liquidity are generally inadequate because differences in
the composition of a firm’s current accounts can significantly affects its true liquidity.
A number of ratios are available for measuring the activity of the important current accounts
which includes inventory, accounts receivable, and account payable. The activity (efficiency of
utilization) of total assets can also be assessed.
3.1.3. (2.a) Total Asset Turnover:
The total asset turnover indicates the efficiency with which the firm is able to use all its assets to
generate sales.
Total Asset Turnover = Sales/ Total Asset
3.1.3. (2.b) Investment to Deposit Ratio:
Investment to Deposit Ratio shows the operating efficiency of a particular Bank in promoting its
investment product by measuring the percentage of the total deposit disbursed by the Bank as
long & advance or as investment. The ratio is calculated as follows:
Investment to Deposit Ratio = Total Investments / Total Deposits
3.1.3. (2.c) Inventory turnover:
A ratio showing how many times a company's inventory is sold and replaced over a period.
Inventory Turnover= Cost of good sold/ Average Inventory
The days in the period can then be divided by the inventory turnover formula to calculate the
days it takes to sell the inventory on hand or "inventory turnover days". This ratio should be
compared against industry averages.
A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either
strong sales or ineffective buying.
High inventory levels are unhealthy because they represent an investment with a rate of return of
zero. It also opens the company up to trouble should prices begin to fall.
Page 31
3.1.3. (2.d) Average Collection Period:
Average collection period is useful in evaluating credit and collection policies. This ratio also
measures the quality of debtors. It is arrived at by diving the average daily sales into the
accounts receivable balance:
Average Collection Period=Accounts receivable/ (Credit sales/365)
A short collection period implies prompt payment by debtors. It reduces the chances of bad
debts. Similarly, a longer collection period implies too liberal and inefficient credit collection
performance. It is difficult to provide a standard collection period of debtors.
3.1.3. (2.e) Average Payment Period:
Average payment period ratio gives the average credit period enjoyed from the creditors that
means it represents the number of days by the firm to pay its creditors. A high creditor’s turnover
ratio or a lower credit period ratio signifies that the creditors are being paid promptly. This
situation enhances the credit worthiness of the company. However a very favorable ratio to this
effect also shows that the business is not taking the full advantage of credit facilities allowed by
the creditors. It can be calculated using the following formula:
Average Payment Period=Accounts payable/ Average purchase per day
3.1.3 (2.f) Fixed Asset Turnover:
A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's
ability to generate net sales from fixed-asset investments - specifically property, plant and
equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the
company has been more effective in using the investment in fixed assets to generate revenues.
The fixed-asset turnover ratio is calculated as:
Fixed Asset Turnover=Gross Turnover/ Net fixed assets
3.1.3.3. Analyzing Debt
The debt position of that indicates the amount of other people’s money being used in attempting
to generate profits. In general, the more debt a firm uses in relation to its total assets, the greater
its financial leverage, a term use to describe the magnification of risk and return introduced
through the use of fixed-cost financing such as debt and preferred stock.
Page 32
3.1.3. (3.a) Debt Ratio:
The debt ratio measures the proportion of total assets provided by the firm’s creditors.
Debt Ratio = Total Liabilities / Total Assets
3.1.3. (3.b) Equity Capital Ratio:
The ratio shows the position of the Bank’s owner’s equity by measuring the portion of total asset
financed by the shareholders invested funds and it is calculated as follows:
Equity Capital Ratio = Total Shareholder’s Equity / Total Assets
The ability to service debt:
It refers the ability of a firm to meet the contractual payments required on a scheduled basis over
the life of a debt. The firm’s ability to meet certain fixed charges is measured using coverage
ratios.
3.1.3. (3.c) Time Interest Earned Ratio:
This ratio measures the ability to meet contractual interest payment that means how much the
company able to pay interest from their income.
Time Interest Earned Ratio=EBIT/ Interest
3.1.3.4. Analyzing Profitability
These measures evaluate the bank’s earnings with respect to a given level of sales, a certain level
of assets, the owner’s investment, or share value. Without profits, a firm could not attract outside
capital. Moreover, present owners and creditors would become concerned about the company’s
future and attempt to recover their funds. Owners, creditors, and management pay close attention
to boosting profits due to the great importance placed on earnings in the marketplace.
3.1.3. (4.a) Operating Profit Margin:
The Operating Profit Margin represents what are often called the pure profits earned on each
sales dollar. A high operating profit margin is preferred. The operating profit margin is
calculated as follows:
Page 33
Operating Profit Margin = Operating Profit / Sales
3.1.3. (4.b) Net profit Margin:
The net profit margin measures the percentage of each sales dollar remaining after all expenses,
including taxes, have deducted. The higher the net profit margin is better. The net profit margin
is calculated as follows:
Net profit Margin = Net profit after Taxes / Sales
3.1.3. (4.c) Return on Asset (ROA):
Return on asset (ROA), which is often called the firms return on total assets, measures the
overall effectiveness of management in generating profits with its available assets. The higher
ratio is better.
Return on Asset (ROA) = Net profit after Taxes / Total Assets
3.1.3. (4.d) Return on Equity (ROE):
The Return on Equity (ROE) measures the return earned on the owners (both preferred and
common stockholders) investment. Generally, the higher this return, the better off the owners.
Return on Equity (ROE) = Net profit after Taxes / Stockholders Equity
3.2. Du Pont Analysis
The Du Pont system of analysis is used to dissect the firm’s financial statements and to assess its
financial condition. It merges the income statement and balance sheet into two measures of
profitability: return on total assets (ROA) and return on common equity (ROE).
The DuPont system of analysis is a diagnostic tools used to find the key areas responsible for the
firms financial Performance.
ROE = Net Profit Margin × Total Asset Turnover × Equity Multiplier
Page 34
CHAPTER-FOUR
Financial Performance of NBL
Page 35
4.0. Qualitative Analysis (SWOT Analysis) of National Bank Ltd.
4.1. SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture or in a system. In this
report SWOT analysis will identify the internal and external factors that are favorable and
unfavorable for the National Bank Limited.
Strengths
 Strong Branch Network.
 Committed to ensure high customer service.
 True Accountability.
 Efficiency and loyalty of all sorts of stakeholders and customers.
 Expanding credit and support services to the SME sector.
 Maintain the most preferred bank status for Trade Finance.
 Performance and to maintain the pre eminent position in the banking industry.
 Adhere to comply with all the regulations.
 Consolidation of the Bangladesh operations by opening more branches.
Weaknesses
 The bank does not go for rural banking.
 Compared to its competitor the Bank does not traditional activities.
 The Bank has only few ATM booths but not in mentionable places. So the scope of use
card is limited.
 There is a lack of motivational factor ti the employees compared to contemporary banks.
Opportunity
 The Banking sector of Bangladesh is growing very fast, so this is an opportunity for
National bank to expand their business.
 In developing country like Bangladesh banking services would be the proper services to
get financing, so this an opportunity for National bank to expand its business.
Page 36
 The Bank diversifies its portfolio by introducing new sector like leasing, introducing
ATM machines on point service and credit cards etc.
 The bank working for increasing employees’ efficiency by giving different training.
 Introducing new branches for giving more service to the customer.
Threats
 Opening the recent permitted new bank, without implementation of the needed reforms,
could lead the unethical competitions & horse-trading in the country’s sector.
 Another threats for the bank come from the competitors. The bank has a chance to lose its
market share to the competitors 9f it does not take necessary action. This problem has
already started.
Page 37
4.2. Quantitative Analysis of National Bank Limited
Ratio Analysis:
1. Current ratio
The current ratio, one of the most commonly cited financial ratios, measures the firm’s
ability to meet its short term obligations. It is expressed as
Current Ratio=Current Asset/Current Liabilities
Year
2007
2008
2009
Current Asset
Current Ratio
Current Liabilities
Current Ratio
1.78
2.68
2.89
Source: Annual Report of NBL
Figure 4.1 Current Ratio
Interpretation:
The current ratio deviates from 1.78 to 2.89 proceeding the last 3 years, we know that, current
ratio 2 is generally acceptable, but it depends on the industry in which the firm operates. In this
Page 38
figure we see NBL’s current ratio is improving day by day. That is the higher the current ratio,
the more liquid the firm is considered to be.
2 .Net Working capital
Net working capital, although not actually a ratio is a common measure of a firm’s overall
liquidity a measure of liquidity ratio calculated by
Net Working capital=Current Asset-Current Liabilities
Year
2007
2008
2009
Current Asset
Net Working Capital
Current Liabilities
Net Working Capital
25197646993
18917888519
24723220089
Source: Annual Report of NBL
Figure 4.2 Net Working Capital
Interpretation:
Net working capital of NBL is fair, in 2008 it is decreased but in 2009 it is improving. However,
the bank is able to meet up its current obligations.
Page 39
3.Cost Income Ratio:
Cost Income Ratio=Total operating Expenses/Total Operating Income
Year
Operating Efficiency Ratio
Total Operating Cost
Total Operating
Income
2007
2008
2009
Cost Income Ratio
49.17%
41.03%
47.96%
Source: Annual Report of UBL
Figure 4.3 Cost Income Ratio
Interpretation
We know that this ratio measures the operating efficiency of the bank by measuring the
portion if the total operating costs relative to the total operating income of that bank and
the higher the ratio, the lower the operating efficiency. In 2008 the operating cost or
maintenance cost of NBL is low but in 2009 it is high. So it can be said that the efficiency
of the NBL has been unable to minimize its operating cost during the time period.
Page 40
4. Total Asset Turnover Ratio:
The total asset turnover indicates the efficiency with which the firm is able to use all its assets to
generate sales.
Total Asset Turnover= Operating Income/Total Asset
Year
2007
2008
2009
Total Asset Turnover
Total Operating Income
Total Asset
Total Asset Turnover
0.77
0.073
0.071
Source: Annual Report of NBL
Figure 4.4 Total Asset Turnover
Interpretation
The banks total asset turnover ratio fluctuates from .077-.071 which means 7.7 to 7.1
times. We know the greater the total asset turnover; it is more efficient and 4 to 6 times is
Slandered position. But NBL’s total asset turnover ratio is decreasing day by day which is
not good .
Page 41
5. Investment to Deposit ratio:
Total investment/Total Deposit
Year
Investment To Deposit Ratio
Total General Investment
Total Deposit
2007
2008
2009
Investment To Deposit
Ratio
.162
.160
.152
Source: Annual Report of NBL
Figure 4.5 Investment to Deposit ratio
Interpretation
Investment to deposit ratio shows that which amount of deposit is used to as investment. NBL’s
investment to deposit ratio is decreasing in years 2007 to 2009.That means NBL depends on its
share capital than the deposits.
6. Net Profit Margin
Page 42
The net profit margin measures the percentage of each sales dollar remaining after all expenses,
including taxes, have deducted. The higher the firm’s net profit margin is better. The net profit
margin is a commonly cited measure of the company’s success with respect to earnings on sales.
Net Profit Margin=Net profit after tax/operating income
Net Profit Margin
Year
Net Profit After Tax
Total Operating Income
Net Profit Margin
2007
.28
2008
.29
2009
.32
Source: Annual Report of NBL
Figure 4.6 Net Profit Margin
Interpretation
We know the standard for net profit margin is 5% to 10%.In year 2007 the net profit margin of
NBL is 28%, which indicates that profit margin is in good situation. And in 2008 to 2009 NBL’s
net profit margin increasing day by day which indicate that the banks profit is increasing day by
day.
Page 43
7. Return on Asset (ROA):
The return on asset (ROA), which is often called the firm’s return on total assets, measures the
overall effectiveness of management in generating profits with its available assets. The higher
the ratio is better.
Return on Asset (ROA) =Net Profit after tax/Total Asset
Return On Asset
Year
Net Profit After Tax
Total Asset
Return on Asset (ROA)
2007
2.40
2008
2.36
2009
2.52
Source: Annual Report of NBL
Figure 4.7 return on Asset
Interpretation
Page 44
The banks return on asset increasing from 2.4 to 2.52 in the preceding 3 years. So the NBL earn
more profit from the assets. This is good for the bank.
8. Return on Equity (ROE):
The return on equity measures the return earned on the owner’s (both preferred and common
stockholders’) investment. Generally the higher the return, the better off the owner’s.
Return on Equity=Net Profit after Tax/ Shareholders equity
Return on Equity
Year
Net Profit After Tax
Shareholders Equity
Return on Equity (ROE)
2007
31.57
2008
28.38
2009
27.53
Source: Annual Report of NBL
Figure 4.8 Return on Equity
Interpretation
Page 45
The banks return on equity deviates from 31.57 to 27.53 in the preceding 3 years and the highest
value can be observed in FY 2007 and the lowest value can be observed during the EY 2009,
which is not desirable. So the management should work hard to increase the return associated
with equity.
9. Debt Ratio:
9. Debt Ratio:
The debt ratio measures the preparation of total assets provided by the firm’s creditors.
Debt ratio= Total Liabilities/Total Assets
Year
2008
2009
2007
Total Liabilities
Debt Ratio
Total Assets
Debt Ratio
.92
.91
.90
Source: Annual Report of NBL
Figure 4.9 Debt Ratio
Interrelation:
Page 46
The debt ratio of the firm’s decreasing from .092 to .90 .Debt ratio indicates how much portation
of total assets is financed by the debt. We know from the MM proposition -II, when debt capital
increases the cost of capital also increase and which decrease the firm’s value. In case of
decreasing debt capital the situation is vise versa. So every organization should give more
emphasize on equity capital than debt capital. So lower the ratio, it is less risky. But it is not
should satisfactory. So the bank works hard to decrease this ratio.
10. Earning Per Share
The firm’s Earning per share (EPS) are generally of interest to present or prospective
stockholders and management. The Earning per share represent the number of dollars earned on
behalf of each outstanding share of common stock. The earnings per share is calculated as
follows
Earning Per Share =Earnings available for common stock holder/No of shares of common
stock outstanding
Year
2007
2008
2009
EPS
66.11
53.31
72.74
Source: Annual Report of NBL
Figure 4.10 Earning Per Share
Page 47
Interpretation
The bank’s earning per share is increasing from 66.11 to 72.74.But in 2008 EPS was decrease
from 66.11 to 53.31 but in FY 2009 again NBL’s EPS remain increase. Therefore, earning per
share of NBL should be increase to attract investors.
11. Price Earning RatioThe price or earning (P/E) ratio is commonly used to assess the owners’ appraisal of share value.
The P/E represents the amount investors are willing to pay for each dollar of the firm’s earnings.
The higher the P/E ratio, the greater the investor confidence in the firm’s future. The price
Earning (P/E) ratio is calculated as follows
Price Earning Ratio=Market price per share of common stock/Earning per share
Year
2007
2008
2009
P/E
23 times
19 times
9 times
Source: Annual Report of NBL
Figure 4.11 Price Earning Ratio
Page 48
Interpretation
The firm’s price earning ratio fluctuates from 23 to 9 times in the preceding 3 years. The bank’s
price earning ratio had in bad position. So the bank work hard to increase this trend.
12. Time Interest Earned Ratio
The times interest earned ratio, sometimes called the interest coverage ratio, measures the firm’s
ability to make contractual interest payments.
Time Interest Earned Ratio =Earnings before interest & Taxes/Interest
Year
2007
2008
2009
TIE
1.39
1.29
1.37
Source: Annual Report of NBL
Figure 4.12 Time Interest Earned Ratio
Page 49
Interpretation
Time Interest earned ratio on NBL’s is highly dissatisfying. Because, in 2008 it is only 1.29 and
in 2009 it was slightly increase 1.37.So NBL should enhance its earnings by its sales by
minimizing its operating costs in order to get adequate earnings.
13. DuPont System of Analysis
In about 1919 the Du Pont Company began to use a particular approach to ratio analysis to
evaluate the firm’s effectiveness. One variation of this Du Pont approach has special relevance to
understanding a firm’s return on investment. Neither the net profit margin nor the total asset
turnover ratio by itself provides an adequate measure of overall effectiveness. The net profit
margin ignores profitability on interest income. Return on equity compares net profit after taxes
with equity that shareholders have invested in the firm. When we multiply the net profit margin
of the firm by the total asset turnover, we obtain the return on investment, or earning on total
assets. To investigate the return more fully, we can utilize a Du Pont Approach
ROE=Net Profit margin*Total Asset Turnover*Equity Multiplier
Year
NPM
TAT
EM
ROE
2007
28
7.1
12.38
31.57
2008
29
7.3
11.79
28.38
2009
32
7.1
10.31
27.53
.
Page 50
Figure 4.13 Du Pont Analysis
Interpretation
We know that net profit margin is used to measure of performance and more the ratio is more the
company’s profitability. From the Du Pont approach, we can see that net profit margin of NBL in
FY 2007 to 2009 is increasing which is good for the bank. In FY 2007, NBL’s total asset
turnover was 7.1 and this ratio is increased by 7.3 but in FY 2009 it was again decrease. We
know the greater the total asset turnover; it is more efficient and 4 to 6 times is slandered
position. So the bank’s total asset turnover is good and the firm should remain this trend .Equity
multiplier is presented by total asset divided by shareholders equity. If we decrease shareholder
equity and total asset remain constraint. Then the equity multiplier will increase. One the other
hand, if we increase shareholder’s equity then the EM is vise versa. Here equity multiplier of
NBL fluctuates from 12.38 to 10.31 in the preceding 3 years. We can see that, between FY 2007
to2009 NBL’s highest EM in year 2007 which is 12.38.That means, in year 2007 they were more
highlight on debt capital than other two years. We know that the Return on Equity (ROE)
measures the return earned on the owner’s (both preferred and common stockholders)
investment. Generally higher this return, the better off the owner’s. ROE often the firm’s
acceptance of strong investment opportunities and effective expense management. Here Return
on Equity fluctuates from 31.57 to 27.53 in the preceding 3 years. In 2007 ROE provides a
highest return than the year 2008 and 2009, because in year 2007, TAT and EM both are
Page 51
increase. But we know that increasing EM indicates that shareholder’s equity can be decreases.
Which results NBL can face financial risk. In year and NPM was increased, in year2009 NBL’s
TAT and EM were decreased. As a result the bank’s ROE also decreased.
Page 52
CHAPTER-FIVE
Comparative Analysis
Page 53
5.1. About Mercantile Bank Limited
Mercantile Bank Limited has been incorporated on May 20, 1999 in Dhaka, Bangladesh as a
Private limited company with the permission of the Bangladesh Bank; Mercantile Bank Limited
commenced formal commercial banking operation from the June 2, 1999. The bank stood 45
branches all over the country up to December, 2008.
Mercantile Bank Limited emerged as a new commercial bank to provide efficient banking
service with a view to improving the socio-economic development of the country.
There are 28 sponsors involved in creating Mercantile Bank Limited. The sponsors of the bank
have a long heritage of trade; commerce and industry. They are highly regarded for their
entrepreneurial competence. The sponsors happen to be members of different professional
groups among whom are also renowned banking professionals having vast range of banking
knowledge. There are also members who are associated with other financial institutions like
insurance companies, leasing company etc.
Vision
 Would make finest corporate citizen.
Mission
 Will become most caring,
 Focused for equitable growth based on diversified deployment of resources, and
 Nevertheless would remain healthy and gainfully profitable Bank.
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5.1. Financial Highlights
Highlights for the year 2007 -2009
(BDT in million)
SL
NO.
PARTICULARS
2007
2008
2009
1
Paid-up Capital
1,498.90
1,798.68
2,158.42
2
Total Capital Fund
3,387.17
4,186.69
4,225.43
3
Capital Surplus/Deficit
483.51
120.41
4
Total Assets
44,940.54
55,928.72
66,16.52
5
Total Deposits
39,348.00
49,538.36
58,033.47
6
Total Loans and Advances
31,877.86
41,993.95
48,295.55
7
Total Contingent Liabilities and
Commitments
18,904.10
19,917.86
8
Credit Deposit Ratio (in %)
81.02
87.65
9
Percentage of Classified Loans
against Total Loans and Advances
(in %)
2.80
2.96
540.50
615.88
10 Profit after Tax and Provision
20,520.56
83.22
3.01
807.52
11
Amount of Classified Loans during
the year
410.98
348.47
12
Provision kept against Classified
Loans
563.85
578.20
-
-
8.75
9.19
9.98
39,497.83
49,941.85
55,420.83
5,442.71
5,986.87
6,865.28
10.98
10.46
1.32
1.22
13 Provision Surplus
14 Cost of Fund (in %)
15 Interest Earning Assets
16 Non-interest Earning Assets
17
Return on Investments (ROI) (in
%)
18 Return on Assets (ROA) (in %)
159.62
159,621,000
10.52
1.22
19 Income from Investments
764.48
20 Earning Per Share (BDT)
36.05
34.24
37.41
21 Net Income Per Share (BDT)
36.05
34.24
37.41
22 Price Earning Ratio (approximate)
12 Times
751.10 696,663,196
10 Times 10.56 Times
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Source: Annual Report of MBL 2009
5.2. Qualitative Analysis of Mercantile Bank Limited compared with NBL:
Strengths
 Mercantile Bank and UBL have already established a favorable reputation in the
banking industry of the country. They are the leading private sector commercial
banks in Bangladesh. They have already shown a tremendous growth in the profits
and deposits sector.
 Mercantile Bank has the reputation of being the provider of good quality services too
its potential customers. But Uttara Bank has some weakness in providing good
quality service to the customer.
 Mercantile Bank is strong interest earning base bank. Where UBL is strong non
interest earning base Bank.
 Both have wide product line.
Weakness
 The decision making of MBL is decentralized. Where decision making of UBL is too
many centralized. No decision is made without the authorization of the head office.
 The portfolio of the MBL is not much diversified because it invests major portion of
its fund on Government securities. Where UBL diversified it’s investment in different
business.
 Both banks has inadequate IT infrastructure.
Opportunity
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 In order to reduce the business risk, MBL diversifies its portfolio by introducing new
sector like leasing, introducing ATM machines on point service and credit cards etc.
 Where UBL has to expand their business portfolio. The management can consider
options of starting merchant banking or diversify into leasing and insurance sector.
 The activity in the secondary financial market has direct impact on the primary
financial market. Banks operate in the primary financial market. Investment in the
secondary market governs the national economic activity. Activity in the national
economy controls the business of the bank.
 For getting higher market share in foreign exchange business, only few branch of
Mercantile Bank is working for foreign exchange business.. Where UBL has to be
swamp efficient and swift in service.
 Both banks have scope of market presentation through diversified products and wide
banking network.
Threats
 The default risks of all terms of loan have to be minimized in order to sustain in the
financial market. Because defaulter risk leads the organization towards bankruptcy,
Mercantile Bank and UBL has to remain vigilant about this problem so that proactive
strategies are taken to minimize this problem if not eliminated.
 The MBL always try to motivate their employees. Where the low compensation
packages of the employees of UBL from mid level to lower level posit threats to the
employee motivation. As a result, good quality employees leave the organization as a
whole.
 Increased competition in the market for public deposits.
 Market pressure for lowering the interest rate.
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5.3. About Uttara Bank Limited
Uttara Bank Limited has a glorious history as a private commercial bank. During 28th, January,
1965. The Eastern Banking Corporation inaugurated its operation in East Pakistan as commercial
bank. After 6 months of its inauguration it has got the status of Schedule bank. It was the first
Bengali Owned Commercial Bank. After liberation the Eastern Banking Corporation was
changed by name as Uttara Bank Ltd. During 1972 it was taken under national ownership. At
that time it’s paid up capital was 69.13 million and profit figure was 42lac. During September
1983 it was privatized under privatization Act. At that time this deposit was 231.03 million and
profit figure was 5.06 million. The bank floated its shares in the year 1984. It has 207 branches
all over Bangladesh through which it carries out all its banking activities. The bank is listed in
the Dhaka Stock Exchange and Chittagong Stock Exchange as a publicly quoted company for
trading of its shares.
Vision
To be the best private commercial bank in Bangladesh in terms of efficiency, capital
adequacy, asset quality, sound management and profitability having strong liquidity.
Mission
Two missions mentioned in the annual reports 2007 are To build Uttara bank limited into an efficient, market driven, customer focused institution
with corporate governance structure.
 Continuous improvement in their business policies, procedures integration of technology
at all levels.
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2.4. Financial Highlights of the Company
(BDT in million)
Sl.
Particulars
No.
2009
2008
2007
Taka
Taka
Taka
1
Paid-up-Capital
1,597,318,400
798,659,200
399,329,600
2
Total Capital
5,829,047,757
4,048,371,732
2,746,737,827
3
Capital surplus/(Deficit)
2,140,806,757
627,910,000
128,924,827
4
Total Assets
71,945,998,489
58,444,332,118
52,860,332,730
5
Total Deposits
59,387,263,182
50,816,975,020
43,586,356,057
6
Total Loans & Advances
39,451,355,571
37,141,342,619
28,477,407,266
7
Total Contingent Liabilities
8,560,482,934
8,806,887,103
8,830,513,784
8
Credit Deposit Ratio (%)
66.43%
73.09%
65.34%
9
Ratio of Classified Loan to total Loans &
Advances (%)
Profit after tax & provision
7.20%
7.09%
12.40%
1,105,226,569
1,138,518,172
409,535,557
1,038,900,000
617,500,000
1,127,300,000
475,526,169
388,219,720
455,901,594
20,443,169
108,051,720
99,312,441
4.94%
4.96%
4.61%
10
12
Amount of classified loan during the
current year
Provision kept against classified loans
13
Provision surplus /(deficit)
14
Cost of Fund (%)
15
Interest earning Assets
59,765,413,539
45,673,440,549
39,379,899,661
16
Interest non-earning Assets
20,741,067,883
12,770,891,569
13,480,433,069
17
Return on Investment (ROI) %
8.18%
7.02%
6.37%
18
Return on Assets (ROA)%
1.54%
1.95%
0.77%
19
Income from Investment
1,840,039,983
784,896,516
921,189,131
20
Earning per Share (Taka)
69.19
142.55
51.28
21
Net income per Share (Taka)
69.19
142.55
51.28
11
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22
Price Earning Ratio (Times)
20.96
23.81
94.67
Source: Annual Report of MBL 2009
5.5. Qualitative Analysis of Uttara Bank Limited compared with NBL :
The overall evaluation of a company’s strengths, weaknesses, opportunities and threats is called
SWOT analysis. The following SWOT analysis captures the key strengths, weaknesses within
the company, and describes the opportunities and threats facing Uttara Bank Limited.
Strengths
 The Bank has earned customer loyalty as organizational loyalty.
 The Bank also has more control in maintaining quality service to meet customer demand.
 The Banking services are easily accessible and feasible
 Formal training program for new employees.
 Formal and Informal training program for existing employees.
Weakness
 Uttara Bank Ltd. does not have much attention to promotional activities. So there is an
image crisis of the Bank. Also people do not know much about the Bank
 Some employees are not smartly groomed and their communication skill is not appealing
enough that today’s banking industry demand.
 There is a lack of motivational factors to the employees compared to contemporary
banks.
 Branch office is not well decorated like Head office.
 There is not sufficient office staff enough for operating the branch.
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Opportunity
 The banking sector of Bangladesh is growing very fast, so this is an opportunity for
Uttara Bank to expand their business.
 In developing countries like Bangladesh banking services would be the proper services to
get financing, so this is an opportunity for Uttara Bank to expand its business.
 There is an opportunity to launch Credit Card in Bangladesh by UBL. Beside this, UBL can
acquire services for cards like VISA, MASTER CARD etc. So that they can enhance market
based card service.
 Customer responsiveness.
 Introducing new branches for giving more service to the customer.
Threats
 The threats for the bank come from the competitors. The bank has a chance to lose its
market share to the competitors if it does not take necessary action. This problem has
already started.
 The Rapid expansion of multinational bank poses a potential threat. Due to the booming
energy sector, more foreign banks are expected to operate in Bangladesh. Moreover, the
existing foreign banks such as HSBC, AMEX, CITI N.A, and Standard Chattered are
now pursing an aggressive branch expansion strategy. Since the foreign banks have
tremendous financial strength, it will pose a threat to local bank to a certain extant in
terms of grabbing the lucrative clients.
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 Need to increase the number of employees is not that much efficient.
5.6. Comparative Quantitative Analysis of NBL with MBL & UBL:
5.6.1. Liquidity Ratio:
Table 5.6.1.1: Current Ratio
Year
2007
2008
2009
Current Ratio
NBL
UBL
MBL
1.78
0.15
1.01
2.68
0.16
.37
2.89
0.15
1.94
Source: Annual Report (2007-2009) of NBL, UBL & MBL
Graphical Presentation:
Figure 5.1: Current Ratio
Interpretation
We know that, the current ratio measures a firm’s liquidity by measuring the portion of its
current asset relative to its current liabilities and the higher the ratio, the higher the liquidity of
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the firm. So, after observing the graph shown above, it can be said that NBL current ratio is
better than UBL & MBL. But both banks (UBL & MBL) current ratio is below the standard
level, where standard level is 2. So it can be said that both the bank is suffering from liquidity
problem but in case of NBL has standard ratio after 2008
Table 5.6.1.2: Operating Cost to Income Ratio:
Year
2007
2008
2009
Operating Efficiency Ratio
NBL
UBL
MBL
49.17%
53.36%
42%
41.03%
45.10%
44%
47.96%
45.42%
45.35%
Source: Annual Report (2007-2009) of NBL, UBL & MBL
Graphical Presentation:
Figure 5.2: Operating Cost to Income Ratio
Interpretation
We know that this ratio measures the operating efficiency of a particular bank by measuring the
portion of the total operating costs relative to the total operating income of that bank and the
higher ratio, the lower the operating efficiency. So after observing the figure drawn above, both
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bank’s cost income ratio is increasing year by year. So, NBL, UBL and MBL’s operating
efficiency is not satisfactory.
5.6.2. Analyzing Activity:
Table 5.6.2.1: Total Asset Turnover Ratio:
Year
2007
2008
2009
Total Asset Turnover
NBL
UBL
MBL
.77
0.06
0.05
.073
0.07
0.05
.071
0.06
0.05
Source: Annual Report (2007-2009) of NBL, UBL & MBL
Graphical Presentation:
Figure 5.3: Total Asset Turnover Ratio
Interpretation
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We know the greater the total asset turn over, it is more efficient and 4 to 6 times is standard
position. After observing the given graph, over the three years the total asset turnover ratio of
MBL is in same level. On the other hand, Uttara Bank has generated maximum level of turnover
in year 2008 which is 0.07 but in 2009 it again become lower which is 0.06 & in case of NBL, it
consistently lower year by year But in case of comparison MBL is more efficient in using their
assets to generate income than the NBL & UBL.
Table 5.6.2.2: Investment to Deposit Ratio:
Year
2007
2008
2009
Investment To Deposit Ratio
NBL
UBL
MBL
.162
0.33
0.19
.160
0.22
0.15
.152
0.38
0.67
Source: Annual Report (2007-2009) of NBL, UBL & MBL
Graphical Presentation:
Figure 5.4: Investment to Deposit Ratio
Interpretation:
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As we know that the ratio measures the bank’s efficiency in promoting its investment products
the customer and in using its funds collected from the customers to by measuring the percentage
of total deposit that the bank has disbursed as loan and advances and the higher the ratio the
higher the banks efficiency and vice-versa National bank had the higher level of investment to
the deposit then the Uttara Bank & Mercantile Bank Limited. So on the view point of investment
to deposit ratio National Bank has the better position from the Uttara Bank & Mercantile Bank.
5.6.3. Analyzing Debt
Table 5.6.3.1: Debt Ratio:
Debt Ratio
Year
2007
NBL
0.92
UBL
0.95
MBL
0.93
2008
0.91
0.94
0.94
2009
0.90
0.91
0.94
Source: Annual Report (2007-2009) of NBL, UBL & MBL
Graphical Presentation:
Figure 5.5: Debt Ratio
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Interpretation
Every organization should give more emphasize on equity capital than debt capital. Here, we can
see that the Uttara Bank & Mercantile Bank has all most same level of debt ratio over the year
2007 to 2009 which is higher than National Bank that means National bank is emphasizing on
equity capital financing. On the other hand, MBL & UBL has more debt and the graph shows
that the bank is more emphasizing on debt capital which is more risky.
5.6.4. Analyzing Profitability
Table 27: Net Profit Margin:
Net Profit Margin
Year
NBL
UBL
MBL
2007
.28
0.13
0.23
2008
.29
0.28
0.22
2009
.32
0.24
0.23
Source: Annual Report (2007-2009) of NBL, UBL & MBL
Graphical Presentation:
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Figure 5.6: Net Profit Margin
Interpretation
From the above graph, it can be said that the MBL profit margin is fluctuating year to year and
UBL’s profit margin in 2008 is increasing but in 2009 it become lower. NBL’s profit margin has
generated maximum amount of net profit margin than MBL & UBL.
Table 28: Return on Asset:
Return On Asset
Year
NBL
UBL
2007
2.40
0.77
2008
2.36
1.95
2009
2.52
1.54
Source: Annual Report (2005-2009) of UBL & MBL
MBL
1.32
1.10
1.22
Graphical Presentation:
Figure 5.7: Return on Asset
Page 68
Interpretation:
After having a careful view on the graph, over the three years NBL has maximum return on asset
than UBL & MBL. After the comparison, NBL is more efficient to generate additional ROA than
the UBL & MBL.
Table : Return on Equity (ROE):
Return on Equity
Year
NBL
UBL
2007
31.57
16.69%
2008
28.38
30.86%
2009
27.53
17.81%
Source: Annual Report (2007-2009) of UBL & MBL
MBL
18.45%
17.03%
18.80%
Graphical Presentation:
Figure 5.8: Return on Equity (ROE)
Page 69
Interpretation:
We know that the ROE means return earned from the owners investments. NBL’s ROE is in
decreasing trend from preceding 3 years. But UBL’s ROE is increasing in 2007 to 2008 but
badly decreasing in 2009. From the graph we can say that the UBL has the better position than
the NBL to earn from the owners investment.
5.3.2. Comparative Du Pont Analysis of NBL, UBL and MBL:
ROE = Net Profit Margin × Total Asset Turnover × Equity Multiplier
Year
NBL
UBL
MBL
NPM
TAT
EM
ROE
NPM
TAT
EM
ROE
NPM
TAT
EM
ROE
2007
0.28
0.77
12.38
31.57
0.13
0.06
21.54
16.69
0.23
0.05
15.46
18.45
2008
0.29
0.073
11.79
28.38
0.28
0.07
15.84
30.86
0.22
0.05
15.34
17.03
2009
0.32
0.071
10.31
27.53
0.24
0.06
11.59
17.81
0.23
0.05
15.40
18.80
Source: Annual Report (2007-2009) of NBL, UBL & MBL
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Interpretation
From this figure we can say that over the three years NBL’s NPM is increasing year by year
wher UBL’s & MBL’s NPM is flactuating that means NBL is more profitable than UBL &
MBL. In case of TAT, the greater the total asset turnover, it is more efficient and 4 to 6 times is
standard position. NBL’s total asset turnover is decreasing year by year where UBL’s TAT is
fluctuating & MBL has same level but after comparison NBL has better position than UBL &
MBL. We know that, higher EM indicates that the bank has less shareholders equity. NBL’s
dependency on debt capital is less than UBL & MBL dependency on debt capital over the three
years. As a result, NBL’s ROE is more than UBL & MBL.
On the other hand, ROE of NBL is decreasing year by year where UBL has higher position in
2008 but in 2009 it decreasing very badly because of decreasing in both NPM & TAT where
MBL is fluctuating. So in case of comparison NBL has better position in all factors. This
indicates more efficiency or earning power of NBL.
**************
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CHAPTER-SIX
Major Findings & Recommendation
Page 72
6.0. Major Findings
6.1. Findings from Performance Evaluation on National Bank Limited.
While working at FSIBL Mohakhali Branch, I have attained a newer kind of experience. After
collecting & analysis data I’ve got some problem of the FSIBL. These problems completely from
my personal viewpoint, which is given below:
 FSIBL Financial performance is increasing/developing quietly.
 The current ratio of the company is decreasing trend.
 Gross Margin and Net Margin ratio both are in up-warding trend.
 Debt Equity Ratio is not in satisfactory range.
 The investment of the FSIBL is increasing year to year. This is very good sign for the
bank. Because if the investment is increased in the bank which help to gain maximum
profit.
 FSIBL, P/E ratio also decreasing year by year.
 Once FSIBL has treated as the problem Bank but gradually the developing their position
in the banking sector of the country.
 Although, FSIBL EPS is increasing trend but their EPS is not as good as other
commercial bank like Dhaka bank and National bank.
 The Total Assets Turnover of FSIBL is lower than both of National Bank & Dhaka bank.
 FSIBL Time interest ratio is not satisfactory because, they have only 1.31 tk. earning
against 1 taka interest obligation which is not good.
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Recommendations:
If their current assets continually decreasing they face trouble for satisfying short
term obligation. So they should increase their current assets.
Although FSIBL net profit margin and gross profit margin is increasing trend they
should try to improve more.
FSIBL Equity capital should be increased as we have seen their debt to equity
capital is not satisfactory.
FSIBL should also try to improve their Total asset turnover because their total
assets turnover is lower in compare to Dhaka bank and National Bank.
If a perfect and hard working officer is recruited then bank may be able to
proceed quickly. For that FSIBL need to be more realistic on HR policy.
FSIBL customer sometimes feels uneasy to use other bank booth. To keep the
customer FSIBL need to introduce own ATM booth.
FSIBL should also try to improve their Total asset turnover because their total
assets turnover is lower in compare to Dhaka bank and National Bank.
Operational cost should be minimized for increasing profitability.
FSIBL should encourage the people about mudaraba and musaraka investment.
Bank should grant investment portfolio to more new entrepreneurs, businessmen
as well as the new companies for increase their profit margin.
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6.2. Findings from Quantitative Analysis
6.2.1. Ratio Analysis
 The liquidity level of the bank is fluctuating year to year and always below the standard
limit. Current ratio of UBL does not reach the standard which is 2:1, so, the bank is not
able to meet up its current obligations.
 The operating cost or maintenance cost of UBL was high. So it can be said that the
efficiency of the UBL has been unable to minimize its operating costs
 The bank’s net profit margin is increasing yearly which indicates that the bank is in
satisfactory situation.
 The bank’s equity capital ratio is increasing which indicates that the bank is emphasizing
in shareholders funds to finance its total assets.
 The bank’s operating cost to income ratio is increasing year by year which is not
desirable.
 The bank’s ROA and ROE are increasing in preceding year 2005 to 2008. So the bank
should keep this trend in future.
6.2.2. Du Pont Analysis
 From Du Pont Analysis, we can say that, UBL is more depends on debt capital than
equity capital in year 2005. In year 2008, ROE provides a highest return than year 2005
and 2007, because in year 2008, TAT and NPM both are increases. EM has no effect on
there ROE. UBL’s ROE increased in year by year.
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6.3. Comparative Findings on National Bank Limited, Uttara Bank Limited & Mercantile
Bank Limited
6.3.1. From Performance Evaluation
 NBL, UBL and MBL also have more control in maintaining quality service to meet
customer demand.
 The Mercantile Bank has joined the share ATM network Bangladesh with a pool of seven
Banks.
 UBL follow the Banking services are easily accessible and feasible
 UBL provide the formal training program for new employees.
6.3.2. Ratio Analysis:
 The liquidity level of both the banks is below the standard level, and both are decreasing
year by year.
 Both the banks are currently operating with moderate operating efficiency and the UBL
has maintained all the issues. UBL and MBL’s operating efficiency is not satisfactory.
But comparatively UBL is more efficient than MBL.
 In case of total asset turnover Uttara bank’s ratio is increase in last year (2008). But MBL
is stable situation in last three years. So comparatively UBL has effective total asset
turnover.
 On the view point of investment to deposit ratio Uttara Bank has the better position from
the Mercantile Bank.
 The operating profit margin of UBL is higher than the Mercantile Bank.
 Net profit margin of MBL is higher than the UBL.
 UBL is more efficient to generate additional ROA than the MBL.
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 Mercantile Bank has the better position than the UBL to earn from the owners
investment.
6.3.3. Du Pont Analysis:
 From Du Pont Approach, in year 2005 MBL’s NPM is comparatively better than UBL.
As a result, ROE of MBL also increase in 2005. In year 2006, MBL’s NPM is in better
situation than UBL. In year 2007, MBL’s NPM and ROE is more than UBL, which
indicates that MBL earning power is more than UBL. But in year 2008 UBL’s NPM,
TAT, EM and ROE is more than MBL. So UBL is better situation than MBL.
6.4. Some Recommendation for Uttara Bank Limited
It is not unexpected to have problems in any organization. There must be problems to operate an
organization. But there must be remedies to follow. The following commendations can be suggested to
solve the above mentioned problems:
Improve the Liquidity:
UBL should improve the overall liquidity situation.
Increasing Profitability:
UBL should try to increase the operating profit margin and net profit margin.
Renovation of customer service
Since a number of new banks are coming to existence with their extended customer service
pattern in a completely competitive manner. Customer services must be made dynamic and
prompt. Now a days, people especially business people have very little time to waste. So the bank
should make its service prompt so that people need not give more time in the banking activities.
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Providing more industrial loans
It seemed to me that the bank having a large amount of deposit is not simply encouraging the
large scale of producers that is this bank is not providing that much of long term industrial loans
to accelerate the economy as well as to help the economy to solve unemployment problem.
Bank should be innovative and diversified in its services
This branch provides only conventional services. Modern banking today is introducing various
kinds of deposit account with different attractive features each of which may attract different
groups of people. For example, Saving Certificate Scheme introduced by Islamic Bank is one of
its unique services in the banking in Bangladesh. Even the bank does not provide any ‘Customer
Loan’ facility, which has been found very much profitable for those banks who have introduced it
in their banking services.
Bank should diversify its banking services and add new features in its services so that it can attract
customers from all groups of people. Financial Engineers of Uttara Bank should be innovative in
developing new banking services, which will attract customers and reduce costs. It can introduce
customer loan scheme, provide bridge loan, or can engage in lease financing. It can also
underwrite shares of newly incorporated public companies.
Bank should immediately enter into the credit card market
This bank does not have any plan to enter into the Credit Card Market. It is well versed that
tomorrow’s payment will be consisted of only plastic money (Credit Card). A large part of
business transaction will be done by credit card in near future. In western world, more than 50%
of transactions are in credit card. If this bank does not prepare from now on, it cannot compete in
the future market. So, the branch should give special attention to the introduction of Credit Card.
Use modern technology
Without using modern technology no bank can even think of remaining in the business in near
future. So the bank must decide right now how it can furnish its branches with modern
technology. Use of modern technology in one sense can increase cost but another sense it
increases productivity highly and it attract big clients. It can introduce ATM services is branch.
Use of automatic machine like cash counter machine, ATM brings speed in banking services.
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Information System should be developed
For information transfer, branch uses primitive ways of telex, messenger and personal visit. It
makes correspondence with the head office by peon or orderly. For international correspondence
the branch uses telex machine, which is very costly. And in the branch, manager has to visit
specific desk for collecting information. Paper communication is too involved between manager
and employees. But branch can use INTERNET for both local and international correspondence.
E-mail can reduce the telex cost substantially. Bank should take urgent decision to create own
WEB Page in INTERNET so that it can communicate with others very quickly.
Development of human resources
Human resource is another sector for the branch to be developed urgently. Human resources, in
the branch, are not equipped with adequate banking knowledge. Majority of the human resources
are lack of basic knowledge regarding money, banking finance and accounting. Without proper
knowledge in these subjects, efficiency cannot be optimized. Bank can arrange training program
on these subjects.
Bank must try to be computerized
There are computers almost in every branch in the Uttara Bank, but it does not mean that the bank
is maintaining a network among them. The networking system obviously charges a high
installation cost, but it will definitely reduce the overhead costs and an error free banking may be
in progress. Moreover by adopting this system the bank can join in modern competition of along
with e-commerce concept. The main problem is that the foreign banks and other private
commercial banks have started providing these facilities, so introduction of these facilities will be
added as modern facilities enhanced, rather it will be a question of survival in the next decade for
the bank.
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CHAPTER-SEVEN
CONCLUSIONS
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6.5. CONCLUSIONS
National Bank Limited (NBL) setting new standards in the banking arena in the time of turbulent
economic conditions. As part of the long term financial reform and modernization plan of the
government, the bank had been converted into a public limited company. NBL helps to mobilize
the resources to stay strong in the key areas of operation. In the areas of treasury operation, NBL
remains the key player in the country’s foreign exchange and money market enhancing
profitability through careful pricing and assessment of risk and return on investment, the treasury
dealing is being strengthened to facilitate transactions requiring more sophisticated products and
services for larger institutional and corporate clients. Though it has a wide range of network and
confidence from the customers but it has some problems those problems reduce it income .It is
PLC but the authority is not that flexible and it takes time to take decision.
From the practical point of view I can declare boldly that I really have enjoyed my Internship at
this bank from the very first day. Moreover, this internship program that is mandatory for my
B.B.A program, although short-date, obviously has helped my farther thinking about my career. I
have tired my soul to incorporate the research report with necessary relevant information in my
report.
In the view of applying ratio analysis and du Pont analysis theory on an organizations financial
activities, I have worked on National Bank Ltd., analysis the data of 2007 to 2009 financial
activities to find out the performance over four years and also the weakness.
Although excellence in Banking is the Moto of National Bank Limited meeting the demand of
the discerning customer is not the sole objective of the Bank. Customer relation should be
increased to give appropriate service to them. And treat them as an asset of the company. Despite
of these problems National Bank Limited trying to improve this condition and take some
necessary measure to improve its condition.
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CHAPTER-EIGHT
BIBLIOGRAPHY
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BIBLIOGRAPHY
i. Books
 “Managerial Finance”, Ninth Edition – Lawrence J. Gitman
 “Financial Management” – M Y Khan & P K Jain
ii. Publications
 Booklets published by Uttara Bank.
 Uttara bank Bangladesh annual report 2005-2008.
 Chowdhury, T.A., Modes of Payment in International Trade, Reading Materials on
International Trade & Finance (E-102), BIBM, 2000.
 Varshney P.N. and Sarker H.S., Banking Law and Practice, 19th edition, Sultan Chan &
Sons, Education Publishers, New Delhi, 2001
 CIB Manual of Bangladesh Bank, 2006
 Bhuiya Bashar Abul, Bangladesh Laws on Banks and Banking, 2nd edition, M/S
Tawakkal Press, Dhaka, 1996
iii. Internet
 Web Site: www.nationalbank-bd.com
 Web Site: www.mercantilebank.com
 Web Site: www.uttarabank.com
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