Financial Performance Analysis of Prime

Bank

Chapter - 1
1.2 BACKDROP OF THE STUDY
Economic history shows that development has stated everywhere with the banking system
and its contribution towards financial development of a country is highest in the initial stage.
As mandatory requirement of the B.B.A program, I was assigned to do my internship in
Prime Bank limited for a period of three months.

This report “Financial Performance Analysis of Prime 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 banking
activities of Prime Bank Limited.

The report is divided mainly into five parts. First part, describes the reports background,
objective, limitations. Second part describes the overview of the bank including history,
vision, mission, backdrop, management, product and services of the bank. Part three
describes the Theoretical Aspects. Part four is describes performance analysis of Prime Bank
limited. Part five describes the major findings, recommendations and conclusion.

1.3 MISSION OF PBL

Its mission is to build Prime bank limited into an efficient, market driven, customer focused
institution with good corporate governance structure. Continuous improvements in its business
policies and procedures and cost reduction through integration of technology at all level.

1.4 VISION OF PBL

To be the best private Commercial Bank in Bangladesh in term of efficiency, capital adequacy,
asset quality, sound management and profitability having strong liquidity.
1.5 OBJECTIVE OF PBL

The objective of the Prime Bank Limited is specific and targeted to its vision and to position itself
in the mindset of the people as a bank with difference. The objectives of the Prime Bank Limited
are as follows:

 To mobilize the savings and channeling it out as loan or advance as the company approve.
 To establish, maintain, carry on, transact and undertake all kinds of investment and
financial business including underwriting, managing and distributing the issue of stocks,
debentures, and other securities.
 To finance the international trade both in import and export.
 To carry on the foreign exchange business, including buying and selling of foreign
currency, traveler’s cheques issuing, international credit card issuance etc.
 To develop the standard of living of the limited income group by providing Consumer
Credit.
 To finance the industry, trade and commerce in both the conventional way and by offering
customer friendly credit service.
 To encourage the new entrepreneurs for investment and thus to develop the country’s
industry sector and contribute to the economic development.

1.6 STRATEGY OF PBL

Banking sector in Bangladesh made very good performance during 2007. Growth of export

and record inward remittances had eased pressure on dollar. However, occasional pressure

on foreign exchange was felt due to rise in international oil prices and repayments of loan by

government and repatriation of profit by mobile operators and power sector. The situation

was controlled through contraction in monetary policy. Besides, the banking and financial

industry experienced further intensification of competitive pressure as the national and

international banks operating in Bangladesh strongly pursued the banking and financing

needs of the Corporate, Retail, SME and Credit Card sector customers through diversification
of products and services and extending automated banking service with ATM, Debit card

facilities, internet Banking, phone banking, SMS Banking.

1.7 CORPORATE PHILOSOPHY

1. For Customers

 To become most caring Bank - by providing the most courteous and efficient service

 To be innovative in the development of new banking products and service

2. For Employees

 By promoting well - being of the members of the staff.

3. For Community

 By assuming role as socially responsible corporate entity in a tangible manner through

close adherence to national policies and objectives.

4. For Shareholder

 By generating return on their investment.

1.8 METHODOLOGY
1.8.1 Design of the report
Exploratory research has been conducted for gathering better information that will give a better
understanding on internet banking both primary and secondary sources of data collection
procedure have been used in the report. Primary data has been collected mainly through the writer’s
observation of the approval process and monitoring techniques, informal interviews of executives,
officers and employees of Prime Bank Limited.

1.8.2 Source of data collection

To make the Report more meaningful and presentable, two sources of data and information have
been used widely.
 SOURCE OF DATA

SECONDARY
DATA

FIGURE 1.1: Sources of data

The "Secondary Sources" of data and information are-

 Annual reports of PBL and UBL

 Different text book and journals

 Various reports and articles related to study

 Some of my course elements as related to this report.

 Web base support from the internet.

1.9 INSTRUMENT USED FOR ANALYSIS:

A. Ratio Analysis

B. Trend Analysis

1.9.1 Ratio Analysis:

The quantitative tools are used to analyze the gathered data and different types of computer
software are used for reporting the gathered information from the analysis such as MS Word, MS
Excel etc. Ratio can be classified into four broad groups-
 1. Liquidity ratio

2. Activity ratio

3. Debt ratio

4. Profitability ratio

1.9.2 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.

1.10 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. However
the some of the limitations I have face while preparing this report are listed follows:
Time limitations: to complete the study, time was limited by three months. It was really very
short time to know details about an organization like Prime Bank Limited.

Inadequate Data: Lack of available information about export and import business operations of
Prime Bank limited. 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 constrain 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 and import
business of any organization.

1.11 OBJECTIVES OF THE STUDY

There are always at least some objectives behind any work, which drives a person towards to work.
As per natural rule I also have some objectives for completing this report. Objectives those drive
me to completing this report is:

PRIMARY OBJECTIVE:
 Submit the report on Financial Performance Analysis on Prime Bank Limited, Gulshan
Branch to complete my internship.
SECONDARY OBJECTIVES

 To identify and assess the present financial performance of Prime 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 Prime Bank Limited with Uttara Bank Limited.

 To identify the findings and raise possible recommendations for improving the
performance of Prime Bank Limited.

2.1 ORGANIZATION OVERVIEW

My main duties and responsibilities in prime bank were to know and support the employees
in their day to day work and to cope up with the banking environment. The whole
environment was much more cooperative and helpful with me which encourage me to
familiar with the banking environment.

Everyone tried to make me understand what to do, when to do and how to handle this and
how these works being done. My working departments basically were ACCOUNTS
DEPARTMENT and GENERAL BANKING where the daily transactions are being done
through customer service.

2.2 FUNCTIONAL STRUCTURE

2.10.1 GENERAL SERVICE DIVISION (GSD)

The functions of GSD are classified as Establishment and General Banking (GB).

(a) Establishment:

The main function of GSD is to procure and supply the tangible goods to branches of PBL. Those
are:

 Tangible functions of opening a branch, for example, interior decoration, making lease
agreement
  Print all security papers and bank stationeries, forms, registers and distribute them to the
branches
 Purchase and distribution of bank’s furniture and fixtures
 Find out the demand of equipment from the branches and divisions and arrange the
purchase and delivery of them to the branches concerned
 Install and maintain different facilities in different branches.

(b) General Banking:

General department performs the majority functions of a bank. It is the core department of any
bank. The activities of GB of PBL are mainly divided into the following categories:

 Account opening section

 Local remittance section
 Islamic Banking Section
 Online branch banking section
 Deposit scheme section
 Clearing section
 Collection section
 Cash section
 Accounts section

2.3 HEAD OFFICE ACCOUNTS

Its deals with the Head Office transactions with banks and its different branches and these are
recorded under the following headings:

 Income and expenditure positioning: It maintain all the income and expenditure
information
 Cash section: It handles cash expenditure for office operations and payments.
 Bills section: It deals with inland bill transactions.
  Salary and wages section: Salary and wages of head office executives are given from this
account.
 Provident fund: Employee provident fund are maintained here.

2.4 CONSOLIDATION OF BRANCH ACCOUNTS

All branches of PBL have to periodically send their income and expenditure, profit and loss
accounts to head office. This division consolidates all these information and makes statements to
submit to Bangladesh Bank.

2.5 CREDIT DIVISION

The main functions of this division are:

 To Manage PBL’s credit portfolio

 Receive credit proposal from branches
 Appraise and approve the proposals
 Sanction letters and send them to branches
 Monitor and follow up the loans and advances provided by the bank
 Set up prices for credits and ensure their effectiveness
 Prepare various statements to submit to Bangladesh Bank

2.6 INTERNATIONAL DIVISION

This division is responsible for monitoring and supervising the foreign exchange dealings of the
bank. It performs the following functions:

 Making guidelines and frameworks for foreign dealings complying the rules of Bangladesh
Bank
 Circulating instructions of Bangladesh Bank
 Maintaining correspondence with foreign banks and exchange houses with which it has
exchange arrangement
 Maintaining NOSTRO accounts with banks in abroad
 Fixing and sending foreign exchange rates to Authorized Dealer (AD) branches and
Bangladesh Bank.
2.7 TREASURY
Treasury is considered to be an important division for income generation purpose within the head
office. The treasury of PBL continues to efficiently manage bank’s cash flow. It optimizes the
investment of the bank’s excess liquidity. Treasury is also expected to provide quality services and
products to meet the demand of the customer needs and play a major role in raising bank’s income.

2.8 COMPUTER DIVISION

This division operates and keeps the record of all transactions, assets, liabilities of PBL by using
integrated software. Though the technology of PBL is not advanced, the computer division tries to
provide the following functions:

 Supply and installation of computer as per requirement

 Design software to support accounts operation
 Train the officers and employees about the operation of different software
 Updating the software if there is any lagging in its operation

2.9 MARKETING DIVISION

There are two types of marketing division. These are:

Asset Marketing: It refers to various kinds of loan and advances. This division maintains
communication with corporate clients gives incentive to take loan from PBL and approaches them
to borrow from PBL in profitable projects

Liability Marketing: This refers to marketing for collecting funds through buying of depository
products from large depositors. The division communicates to the persons or organization having
excess fund of deposit, informs them about the attractive features of the depository products and
convince them to invest in PBL in various deposit scheme.

2.10 HR DIVISION
The Human Resource Division performs the activities related to administration and personnel. The
main functions of HRD are:

 Selection and recruitment of new personnel

  Appropriate placement of human resources
 Maintain the detail about transfer, promotion and leave of personnel
 Training and development of human resource
 Keeping employee records and personal file
 Taking disciplinary action if necessary

2.10.1 Hierarchy of the Management of Prime Bank Limited

Top Level

Executive
Level

Mid-Level

Entry Level

FIGURE 1.2: Hierarchy of management of PBL

2.11 CREDIT CARD DIVISION
In 1999, PBL obtained the membership of Master Card and a separate division has been assigned
to look after the credit card operation. There are four types of credit card, Local Silver Credit Card,
International Silver Credit Card, Local Gold Credit Card, International Gold Credit Card.

2.12 RESEARCH AND DEVELOPMENT

This division is maintained to do the research and development work to innovate new products
and services as well as to improve existing products and services.

2.13 COMMITTEES AND GROUP DIVISION

Prime Bank Ltd. has both democratic and consultative decision-making process. The subordinates
are given chance to participate in the goal and objective setting of the bank. In this regard, there
are three committees functioning in the bank. These are:

Policy Committee: In this case, the committee members are drawn from the Board of Directors.
The committee reviews the principles, policies, rules and gives a decision which later requires the
approval of the Board.

Executive Committee: This committee consists of the members of the Board. To approve the
matters beyond the delegation of the board, this committee exercises the power delegated by the
Board from time to time.

Management Committee: This committee consists of the Managing Directors and Head Office
Executives. They discuss about the progress and improvement on the guidelines regarding deposit,
loans, gives different ideas, decision regarding various issues.

2.14 GENERAL BANKING

Prime Bank offers a range of services to its customer. General Banking involves day to day
banking services. General Banking involves account opening, Deposit Scheme and many other
facilities. Below The diagram is showing different services provided by prime bank at a glance.
FIGURE 1.3: General Banking at a glance
2.14.1 Deposit Premium Scheme
Bank is the largest mobilize of surplus domestic savings. For poverty alleviation, bank needs self-
employment, for self-employment bank need investment and for investment bank need

FIGURE 1.4: Diagram of Deposit Products

Savings. In the other words, savings help capital formations and the capital Industrialization
leading towards of wealth of the country. And the wealth finally takes the country on road to
progress and prosperity. As such, savings is considered the very basis of prosperity of the country.
Among all these scheme contributory, Lakhopati, Double Benefit are very popular. Below the
diagram showing the entire scheme:

2.14.2 Fixed Deposit Receipt (FDR)

FDR is one of the prime sources of collecting money from customers and give loan to other
customers. Through FDR prime bank collect a lot of money and invest it in different sector.
This type of deposit should be kept for a fixed term or period.
Procedure:
 Account holder one copy photo.

 Nominee one copy photo.

 Voter ID card of account Holder.

 No need to open savings account.

 After the duration of FDR account will be automatic renew.

2.14.3 Account Opening

Account opening is the gateway for clients to enter into business with bank. It is the foundation of
banker customer relationship. This is one of the most important sections of a branch, because by
opening accounts bank mobilizes funds for investment. Various rules and regulations are
maintained and various documents are taken while opening an account. A customer can open
different types of accounts through this department. Such as:
a) Current account.
b) Savings account.
c) Online Account.
In my report I will present current account and savings account opening.

2.14.3.1 Current Account

Current account is purely a demand deposit account. There is no restriction on withdrawing money
dorm the account. It is basically justified when funds are to be collected and money is to be paid
at frequent interval.

Requirements

 Two Copies of latest passport size photo of account holder. (Attested by the introducer)

 A/C to be introduced by current / savings account holder.

 Completed account opening form.

 Proof of identification such as national/voter's ID, passport or driving license.

  One copy passport size photograph of nominee. (Attested by the account holder)

 TIN certificate (if applicable)

 5000.00 tk is required to open current deposit account.

 2000.00 tk is required to maintain minimum balance.

 A depositor can deposit and withdrawal from the current account as many times as
required.

2.14.3.2 Savings Account

This deposit is primarily for small-scale savers. Hence, there is a restriction on withdrawals in a
month. Heavy withdrawals are permitted only against prior notice. Some important Points are as
follows-
 Minimum opening deposit of tk.1000.00 is required;
 Minimum Tk.500 balance must always maintain all the time;
Requirements

 Two Copies of latest passport size photo of account holder. (Attested by the introducer)

 A/C to be introduced by current / savings account holder.

 Completed account opening form.

 Proof of identification such as national/voter's ID, passport or driving license.

 One copy passport size photograph of nominee. (Attested by the account holder)

 TIN certificate. (if applicable)

 A depositor can withdraw from his saving bank deposit account twice in a week, 25% of
his balance or 25000.00 whichever is lower. Below the card is showing savings account
signature card of prime bank:

2.14.4 Online Branch Banking Section:

Prime Bank offers four types of accounts that can be showed under online account.
 Figure 1.5: Online Accounts

2.14.4.1 Internet Banking:

Prime bank offers internet banking. Click to do bank transactions wherever customers are, anytime
customers want. It is safe and convenient to access customer account 24/7.
Procedure to Apply:
 Download the internet banking application form this link or collect the internet banking
application form from Prime Bank branch.
 Fill all the account details.
 The internet banking application form must be signed by accountholder.
 Submit the form to respective branch office.
 Prime Bank will send the password to customer by mail.
2.3.4.2 Phone Banking
Account holders of Prime Bank or holding a Prime Bank Debit Card and Credit Card can get this
service. To access this service customer must fill up the Phone Banking Application to access this
facility.
Benefits:

Prime Bank Phone Banking Service provides 24/7 continuous support for Customers.
2.14.4.3 SMS Banking

Prime Bank brings SMS Banking services to ensure instant access to customer account information
at any time with free of cost. Any mobile phone user having account of Prime Bank can get the
service through the mobile phone upon registration. With a very short time customer will get a
message with the requested information.
Services
 Balance Enquiry.
 Mini Statement.
 Exchange Rate.
 PIN Change.
 Requesting Help.

Example
If any customer use PIN 1234 then for
Balance Enquiry

FIGURE 1.6: Balance enquiry by using mobile phone

2.15 Prime Bank debit card

There are two kinds of debit card prime bank offering to customer:
 Debit card
FIGURE 1.7: Debit Card

2.15.1 Prime Bank Master Debit Card

Prime Bank offers Master Debit Card; the fast, secure and convenient way to withdraw cash and
convenient transactions at different MasterCard branded terminals. If customer use SD/CD/STD
account holder of Prime Bank, customer can avail this debit card and can master over 1300 ATMs
all over Bangladesh and can get privilege in the MasterCard branded terminal or MasterCard
branded network.

How to Apply
 Collect the Master Debit card application form from any branch of Prime Bank.
 Fill up the account details.
 Read the instructions properly before signing.
 The application form must be signed by the account holder.
 Submit the form to respective branch offices.
 Prime Bank will provide password and debit card.
2.15.2 Prime ATM Card
Now customer can access to their money 24/7 more easily and conveniently through prime bank
widespread network of ATMs in Bangladesh. ATMs have user-friendly screens and easy to follow
instructions in both Bangla and English languages.
2.16 Prime Bank Credit Card

Prime Bank Ltd. Issues Master Card credit cards to its customers who have the card pay their bill
in to PBL against their card number. Prime bank offers master Card, credit card, which has opened
up new possibilities for improved customer service & for becoming a dominant player in the
market. PBL ensures high level of security by inserting its customer photograph on the card &
provides 24 hours a day & 365 day a year worldwide service. The bank has obtained principle
membership from visa International. There are four types of credit card prime bank offering their
customer. This is describing below:

FIGURE 1.8: Various types of Cards

2.16.1 MasterCard Gold Credit Card

Prime Bank Credit Cards and experience the infinite amusements of life. Customer can choose
wide range of card products of MasterCard brand as per customer requirements to enliven lifestyle.

 Limit > BDT 50,000 -< BDT 500,000

2.16.2 Visa Gold Credit Card

Prime Bank also has visa gold credit card. Many customers are enjoying this facility of this card.

 Local Card.

 Limit > BDT 50,000 -< BDT 500,000.

2.16.3 MasterCard Silver Credit Card

 Local Card.

 Limit < BDT 50,000 Taka.

2.16.4 VISA Classic Credit Card

 Local Card.

 Limit < BDT 50,000 Taka.

2.16.5 Prime Bank International Credit Card

Prime Bank offer both MasterCard and VISA TQ Card with a bundle of value-added services for
customer. Travel Quota Credit Card is issued against the entitlement of foreign Currency Quota
allotted as per Bangladesh Bank guidelines. It has been designed to give customer more liquidity
in terms of USD currency.
Eligibility
 Nationality: Bangladeshi.
 Age: For Basic Card - 21 years to 70 years.
 Supplementary Card - 18 years to 70 years.
 Minimum Income Salaried Group - BDT 20,000/-
 Self Employed Group - BDT 30,000/- (income should be validated).
 Business/Service Tenure Salaried Group - Minimum 6 months.
 Self Employed Group - Minimum 1 year.
 TIN is mandatory.
3.1 FINANCIAL PERFORMANCE:
Financial performance is a subjective measure of how well a firm can use its assets from
business and generate revenues. Financial performance term is also used as a general measure
of a firm’s overall financial situation over a given period of time, and can be used to compare
with similar firms across the same industry or to compare industries or sectors in aggregation.

Financial performance analysis refers to an assessment of the viability, stability and

profitability of a business, sub-business or project. It is performed by professionals who
prepare reports using ratios that make use of information taken from financial statements and
other reports. These reports are usually presented to top level management as one of their
bases in making business decisions. Based on these reports, management may take decisions.
Financial performance analysis is a vital to get a financial overview about a compa ny.
Generally, it is consisting of the interpretation of balance sheet and income statement. Ratio
analysis and trend analysis can be done by using two statements. These analyses are the
major tools for analyzing the company’s financial performance.

3.1.1 BALANCE SHEET ANALYSIS:

In financial accounting, a balance sheet or statement of financial position is a summary of
the financial balances of a sole proprietorship, a business partnership or a company. Assets,
liabilities and ownership equity are listed as of a specific date, such as the end of its financial
year. A balance sheet is often described as a snapshot of a company’s financial condition. Of
the four basic financial statements, the balance sheet is the only statement which applies to
a single point in time of a business’ calendar year. A standard company balance sheet has
three parts: assets, liabilities and ownership equity.

3.1.2 INCOME STATEMENT:

Income statement also referred as profit and loss statement, earnings statement, operating
statement or statement of operations is a company’s financial statement that indicates how
the revenue is transformed into the net income. It displays the revenues recognized for a
specific period, and the cost and expenses charged against these revenues, includin g write-
offs and taxes. The purpose of the income statement if to show managers and investors
whether the company made or lost money during the period being reported.
3.2 RATIO ANALYSIS:
A tool used by individuals to conduct a quantitative analysis of information in a company’s
financial statements. Ratios are calculated from current year numbers and are then compare
to previous year, other companies, the industry, or even the economy to judge the
performance of the company. The basic inputs to ratio analysis are the firm’s income
statement and balance sheet for the periods to be examined. Ratio analysis is predominately
used by proponents of fundamental analysis.

In finance, a financial ratio or accounting ratio is a ratio of two selected numerical values
from an enterprise’s financial statements. There are many standard ratios used to try to
evaluate the overall financial condition of a corporation or other organization. Financial
ratios may be used by managers within a firm, by current and potential shareholders of a
firm, and by a firm’s creditors. Security analysts use financial ratios to compare the strengths
and weaknesses in various companies. If shares in a company are traded in a financial market,
the market price of the shares is used in certain financial ratios. In short, ratio analysis is
essentially concerned with the calculation of relationships which, after proper identification
and interpretation may provide information about the operations and state of affairs of a
business enterprise. The analysis is used to provide indicators of past performance in terms
of critical success factors of a business. This assistance in decision -making reduces reliance
on guesswork and intuition and establishes a basis for sound judgment.

3.2.1 Significance of Using Ratios:

The significance of a ratio can only truly be appreciated when:

1. It is compared with other ratios in the same set of financial statements.

2. It is compared with the same ratio in previous financial statements.

3. It is compared with a standard of performance. Such as standard may be either the ratio
which represents the typical performance of the trade or industry, or the ratio which
represents the target set by management as desirable for the business.

3.3 TYPES OF RATIO COMPARISON:

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 it is too high
or too low? Is it good or bad? Two types of ratio comparisons can be made: cross-sectional and
Time-series analysis.
3.3.1 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.
3.3.2 Cross-Sectional analysis:
Cross-sectional analysis evaluates performance of different firms’ financial ratios at the same point
in time.
3.3.3 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.
3.3.4 Caution about ratio analysis:
Before discussing specific ratios, we should consider the following cautions:

1. A single ratio does not generally provide sufficient information from which to judge the
overall performance of the firm.

2. Be sure that the dates of the financial statements being compared are the same.

3. It is preferable to use audited financial statements for ratio analysis.

4. Be certain that the data being compared have all been developed in the same way.

3.4 GROUPS OF FINANCIAL RATIOS:

Financial ratios can be divided into four basic groups or categories:

1. Liquidity ratios

2. Activity ratios

3. Debt ratios and

4. 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.
3.4.1 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:

1. Current ratios:

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 Assets / Current Liabilities
Standard ratio: 2:1

2. Net working Capital:

Net working capital, although not actually a ratio is a common measure of a firms’ overall liquidity.
A measure of liquidity is calculated by subtracting total current liabilities from current assets.
Net Working Capital = Total Current Assets – Total Current Liabilities.

3. 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

3.4.2 Analyzing Activity Ratios:

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 of total assets can be
also being assessed.

1. 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
 2. Investment to Deposit Ratio:

A ratio showing how many times a company’s inventory is sold and replaced over a period.
Inventory Turnover = Cost of Goods 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.

3. 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 – 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 follows:
Fixed asset Turnover = Gross Turnover / Net fixed assets.

3.4.3 Analyzing Debt Ratio:

1. Debt ratio:

The debt ratio measures the proportion of total assets provided by the firm’s creditors.
Debt ratio = Total Liabilities / Total Assets

2. Equity capital ratio:

The ratio shows the position of the Bank’s owner’s equity by measuring the position of total asset
financed by the shareholders invested funds and it is calculated as follows:
Equity Capital Ratio = Total Shareholder’s Equity / Total Assets

3.4.4 Analyzing Profitability:

These measures evaluate the bank’s earnings with respect to given 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.
 1. Operating Profit Margin:

The operating profit margin represents what are often called the pure earned on each sales
taka. A high operating profit margin is preferred. The operating profit margin is calculat ed
as follows:

Operating Profit Margin = Operating Profit / Sales

2. Net Profit Margin:

The net profit margin measures the percentage of each sales taka 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 / Sales

3. Return on Asset:

Return on asset, 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 = Net profit after taxes / Total Assets

4. Return on Equity:

The return on equity measures the return earned on the owner’s investment. Generally, the higher
this return, the better off the owners.
Return on Equity = Net profit after Taxes / Stockholders Equity

5. Price / Earnings ratio:

The Price / Earnings ratio of a stock is a measure of the price paid for a share relative to the income
or profit earned by the firm per share.
P/E ratio = Price per share / earnings per share

6. Earnings Per Share

Earnings per share are the earnings returned on the initial investment amount. Earning per share
ratio is calculated as follows:
EPS = Net income /no. of share outstanding
4.1 HORIZONTAL ANALYSIS :
Horizontal analysis is used to present the growth of the bank. For Horizontal Analysis of
performance evaluating factor of the bank, following formula has been used:
Change since base period = (Current year amount - Base year amount) / Base year amount

4.1.1 The key factors for horizontal analysis of PBL is as follows: Fig. in Tk. (crore)

Particulars 2010 2009 Change

Total Assets 6956.52 6290.19 10.59%

Deposit 5466.04 5001.80 9.28%

Loans & Advances 4756.34 3779.39 25.85%

Total Import 6246.70 5234.21 19.35%

Total Export 5598.10 4153.86 34.76%

Total Operating Income 635.60 372.44 70.66%

Total Operating Expenses 252.89 176.48 43.30%

Net Profit after Tax 164.71 89.95 83.11%

Total Liabilities 6381.67 5870.44 8.71%

Total Shareholder’s Equity 574.85 419.75

Retained Earnings 130.60 72.83 36.95%

79.32%
Table 4.1: Horizontal Analysis of PBL

Interpretation: Horizontal analysis of key factors of bank shows that the Total Assets increased
by 10.59% and an amount of increase is 666.33 crore taka between the year 2009 and 2010.
Deposit is increased by 9.28% and an amount of increase is 464.24 crore taka in 2010 as compare
to 2009. Total Loan and Advances are increased by 25.85% and an amount of increase is 976.95
crore taka in 2010 from 2009. Total Export is increased by 34.76% and an amount of increase is
1444.24 crore taka in 2010 from 2009. Total Operating Income is increased by 70.66% and an
amount of increase is 263.16 crore taka in 2010 as compare to 2009. Total operating expenses are
increased by 43.30% and an amount of increase is 76.41 crore taka between the year 2009 and
2010. Net Profit after Tax is increased by 83.11% and an amount of increase is 74.76 crore taka
in 2010 as compare to 2009. Total Liabilities are increased by 8.71% and an amount of increase
is 511.23 crore in 2010 from 2009.Total Shareholder’s Equity increased by 36.95% and an amount
of increase is 155.1 crore taka in 2010 from 2009. Retained Earnings are increased by 79.32% and
in amount of 57.77 crore between the year 2009 and 2010.

4.1.2 Horizontal Analysis of key factors of Uttara bank Ltd. is as follows:

Fig. in Tk. (crore)

Particulars 2010 2009 Change

Total Assets 8145.18 7194.60 13.21%

Deposit 6586.80 5938.73 10.91%

Loans & Advances 4867.27 3945.14 23.37%

Total Import 2961.45 2912.93 1.67%

Total Export 1298.67 1509.69 (13.98)%

Total Operating Income 580.83 486.40 19.41%

Total Operating Expenses 274.14 235.01 16.65%

Net Profit after Tax 155.19 110.52 40.42%

Total Liabilities 7284.10 6573.90 10.80%

Total Shareholder’s Equity 861.08 620.70 38.73%

Retained Earnings 99.02 80.69 22.72%

Table 4.2: Horizontal Analysis of Uttara bank Ltd.

Interpretation: Horizontal analysis of key factors of Uttara bank shows that the Total Assets
Increased by 13.21% and an amount of increase is 950.58 crore taka in 2010 as compare to 2009.
Deposit is increased by 10.91% and an amount of increase is 648.07 crore taka in 2010 from 2009.
Total Loan and Advances are increased by 23.37% and an amount of increase is 922.13 crore taka
between the year 2009 and 2010. Total Import is increased by 1.67% and an amount of increase
is 48.52 crore taka in 2010 as compare to 2009. Total Export is decreased by 13.98% and an
amount of decrease is 211.02 crore taka in 2010 from 2009. Total Operating Income is increased
by 19.41% and an amount of increase is 94.43 crore taka between the year 2009 and 2010. Total
Operating expenses is increased by 16.65% and an amount of increase is 39.13 crore taka in 2010
as compare to 2009. Net Profit after Tax is increased by 40.42% and an amount of increase is
44.67 crore taka between the year 2009 and 2010. Total liabilities are increased by 10.80% in
2010 as compare to 2009. Total Shareholder’s Equity increased by 38.73% and an amount of
increase is 240.38 crore taka in 2010 as compare to 2009. Retained earnings are increased by
22.72% and amount of increase is 18.33 crore between the year 2009 and 2010.
Comparison: The comparison between the two banks through Horizontal Analysis gives an idea
about that PBL has a better position in the entire performance sector of bank excluding for Assets,
Deposit, Operating Expenses and Shareholder’s Equity than Uttara Bank

(Each item of Profit & Loss Account/ Total Operating Income) = %

4.2.1 Vertical analysis of Profit & Loss Account of PBL:
2010 2009
Particulars
Amount in Taka Percent Amount in Taka Percent

Net Interest
2,075,782,085 32.66% 1,102,178,581 29.59%
Income

Total Operating
6,356,036,088 100% 3,724,356,154 100%
Income

Total operating
2,528,925,571 39.79% 1,764,837,738 47.39%
Expenses

Profit before
3,827,110,517 60.21% 1,959,518,416 52.61%
provision

Total profit before

3,167,110,517 49.83% 1,649,518,416 44.29%
tax

Net profit after tax 1,647,110,517 25.91% 899,518,416 24.15%

Table 4.3: Vertical analysis of Profit & Loss Account of PBL.

Interpretation: According to vertical analysis of profit & loss statement of PBL. of 2010 shows
that the Net Interest Income as a percentage of total operating Income is 32.66% in 2010, which
was 29.59% in 2009. It shows net interest income is increased by 3.07% between the year 2009
and 2010. Total Operating Expenses as a percentage of total operating Income is 39.79% in 2010,
which was 47.39%in 2009. It shows a decrease of total operating expenses 7.6% in 2010 as
compare to 2009. Profit before provision as a percentage of totals operating Income is 60.21%in
2010, which was 52.61% in 2009. It shows an increase of Profit before provision 7.6% between
the year 2009 and 2010. Total profit before tax as a percentage of totals operating Income is
49.83%in 2010, which was 44.29%in 2009. It shows an increase of 5.54% in 2010 as compare
to 2009. Net profit after tax as a percentage of totals operating Income is 25.91%in 2010, which
was 24.15%in 2009. It shows an increase of 1.76% in 2010 as compare to 2009.
4.2.2 Vertical analysis of Profit & Loss Account of Uttara Bank Limited:
2010 2009
Particulars
Amount in Taka Percentage Amount in Taka Percentage

Net Interest Income 1,881,946,998 32.40% 1,702,005,784 34.99%

Total Operating
5,808,302,210 100% 4,864,013,905 100%
Income

Total Operating
2,741,421,484 47.19% 2,350,137,336 48.32%
Expenses

Profit before
3,066,880,726 52.80% 2,513,876,569 51.68%
provision

Total profit before

2,801,880,726 48.24% 2,188,876,569 45.00%
tax

Net profit after tax 1,551,880,726 26.72% 1,105,226,569 22.72%

Table 4.4: Vertical analysis of Profit & Loss Account of Uttara Bank Ltd

Interpretation: According to vertical analysis of profit & loss statement of Uttara bank of 2010
shows that the Net Interest Income as a percentage of totals operating Income is 32.40% in 2010,
which was 34.99% in 2009. It shows net interest income is decreased by 2.59% between the year
2009 and 2010. Total Operating Expenses as a percentage of total operating Income is 47.19% in
2010, which was 48.32% in 2009. It shows decrease of total operating expenses 1.13% in 2010
as compare to 2009. Profit before provision as a percentage of totals operating Income is 52.80%in
2010, which was 51.68%in 2009. It shows an increase of profit before provision 1.12% between
the year 2009 and 2010. Total profit before tax as a percentage of totals operating Income is
48.24%in 2010, which was 45% in 2009. It shows an increase of 3.24% in 2010 as compare to
2009. Net profit after tax as a percentage of totals operating Income is 26.72%in 2010, which was
22.72%in 2009. It shows an increase of 4% between the year 2009 and 2010.

Comparison: Vertical analysis shows that PBL is not performing better than Uttara Bank Limited;
in considering, the net profit after tax of PBL is increased by only 1.76% whereas the net profit
after tax of Uttara bank is increased by 4%.
4.3 RATIO ANALYSIS:
4.3.1 Liquidity Ratios:
Liquidity refers to the ability of a firm to meet its short-term financial obligations when and as
they come due.
4.3.1.1 Current Ratio: Total Current Assets \ Total Current Liabilities
Year 2007 2008 2009 2010

PBL 1.04 1.12 1.02 0.87

UBL 1.11 1.08 0.98 0.68

Table 4.5: Current Ratio

Graphical Presentation:

Figure 4.1: Current Ratio

PBL: The graph shows that the current ratio is increased from the year 2007 to 2008. But after
that the ratio is decreasing year by year. And 2010 the current ratio is 0.87 that is not a good sign
for the Bank. Bank should give concentration to increase their current ratio.
UBL: That is the higher the current ratio; the more liquid the firm is considered to be. But UBL,
Current ratio is not good because it maintains 0.68tk current assets against 1tk current liabilities in
2010 where as normally banking industry maintains 1: 1 current ratio. This graph shows that, the
current ratio is decreasing from 2007 to 2010.
Comparison: 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 the firm. The graph shows that, UBL current ratio is better than IFICBL in 2007.But it has seen
that 2008 to 2010 where IFICBL are in better position than UBL. So in compare to UBL the current
ratio of IFICBL is much better.

4.3.1.2 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 2010

PBL 1152.32 2364.58 956.23 -428.26

UBL 3611.90 1540.70 -672.82 -605.14

Table-4.6: Net Working capital

Graphical Presentation:

4000
3500
3000
2500
2000
1500 PBL

1000 UBL
500
0
-500
-1000
2007 2008 2009 2010

Figure 4.2: Net Working Capital

PBL: Net working capital of PBL is Fluctuating mode. It is increasing from 2007 to 2008 then
it’s decreasing day by day. So, the Bank should be stable in current asset.

UBL: In the year 2007 the net working capital of UBL is in a good figure. But in 2009 and 2010
the net working capital of UBL is decreasing and it’s in a negative figure.
Comparison: At present the condition of net working capital of both banks is not good. But in
compare to UBL the situation of net working capital of IFICBL has better position.

4.3.1.3 Liquid Securities Indicator: Government Securities/Total Assets

year 2007 2008 2009 2010

PBL 0.142145 0.113456 0.124774 0.099130

UBL 0.362578 0.381561 0.310567 0.226260

Table-4.7: Liquid Securities Indicator

Graphical Presentation:

0.4
0.35
0.3
0.25
0.2 PBL

0.15 UBL

0.1
0.05
0
2007 2008 2009 2010

Figure 4.3: Liquid Securities Indicator

PBL: Liquid Securities Indicator ratio shows that PBL has been consistently maintaining a stable
proportion of government securities compared to the assets except the year 2010. Government
securities are the most marketable and serve as a second line of defense after cash if any liquidity
crisis arises. So, the stability in this ratio will prove to be favorable for the bank.
UBL: The bank has reduced its liquid securities over time significantly. Among all other year 2010
is the lowest one. That means Prime bank has reduced its Government Securities in its’ asset
portfolio.
Comparison: As the ratio UBL is in better position than IFICBL. But the trend of Uttara bank is
declining from year 2008 to 2010. By considering the performance over the years IFIC Bank is
performing well by holding stability in this case.
4.3.1.4 Capacity Ratio: Loans & Advances/Total Assets
year 2007 2008 2009 2010

PBL 0.569734 0.655612 0.600839 0.683725

UBL 0.611278 0.586894 0.548347 0.597564

Table-4.8: Capacity Ratio

Graphical Presentation:

0.7

0.6

0.5

0.4
PBL
0.3 UBL

0.2

0.1

0
2007 2008 2009 2010

Figure 4.4: Capacity Ratio

PBL: PBL bank has been successfully managed its Capacity ratio to increase from year 2009. But
this increasing trend indicates that it is issuing more loans thus decreasing its liquid portion. This
is an alarming indicator for the bank as the liquidity is decreasing.

UBL: There is a declining trend and then an increasing trend in the capacity ratio of UBL. We
know that the more a bank facilitates loans, the more its earnings go up. But at the same time its
liquidity position goes down. The management should maintain a balance between the earnings
and the liquidity.

Comparison: As we know that capacity ratio is a negative liquidity indicator, the trend indicates
that UBL is improving in terms of liquidity. And IFIC bank’s liquidity position is worsening in
this period. So, Uttara Bank Ltd. is in a better position as compare to IFCI Bank Ltd.
4.3.2 Analyzing Activity Ratios:

Activity ratio is that measures a firm's ability to convert different accounts within their balance
sheets into cash or sales.

4.3.2.1 Total Asset Turnover Ratio: Total Operating Income/Total Assets

Year 2007 2008 2009 2010

PBL 0.082 0.069 0.059 0.091

UBL
0.059 0.068 0.064 0.071

Table-4.9: Total Asset Turnover ratio

Graphical Presentation:

0.1

0.08

0.06
PBL
0.04 UBL

0.02

0
2007 2008 2009 2010

Figure 4.5: Total Asset Turnover Ratio

PBL: The graph shows that in 2007 bank’s total asset turnover is 0.082 which means 8.62 times.
After that year the turnover is decreasing day by day. But in 2010 the total asset turnover is
increased again and it’s the highest among the previous three years. It represents that bank using
their asset very efficiently to generate income.
UBL: The banks total asset turnover ratio in 2007 to 2010 is 0.059- 0.071 which means 5.9 to 7.1

times. We know that the greater the total asset turnover; it is more efficient and 4 to 6 times is

slandered position but also depends on industry. But Uttara Bank’s total asset turnover ratio is

increasing day by day.

Comparison: The graph shows that, the total asset turnover of IFIC Bank is higher than Uttara

Bank Ltd. in 2007, 2008 and2010. But we can see that Uttara Bank Ltd. has maintained stability

in their total asset turnover ratio. We know the greater the total asset turnover, it is more efficient

and in compare to 2010, IFIC Bank’s total asset turnover is 9.1 times and Uttara bank is 7.1 times;

so we can say that IFIC Bank Ltd. is performing better than Uttara Bank Ltd.

4.3.2.2 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

Year 2007 2008 2009 2010

PBL 54.45% 48.97% 47.38% 39.78%

UBL
53.36% 45.09% 45.42% 47.20%

Table-4.10: Operating Cost to Income Ratio

Graphical Presentation:

60.00%

50.00%

40.00%

30.00% PBL

UBL
20.00%

10.00%

0.00%
2007 2008 2009 2010

Figure 4.6: Operating Cost to Income Ratio

PBL: From the above graph we see that the operating expenses of PBL Bank is decreasing that is

very good indicator for the bank. Because we know that this ratio measures the operating efficiency

of the bank by measuring the portion of the total operating costs relative to the total operating

income and the higher the ratio, the lower the operating efficiency of the bank.

UBL: The Operating cost to income ratio is fluctuating, but shows an increasing trend. But this

increasing trend does not indicate that the bank is efficiently utilizing its revenue to cover expenses.

This increasing trend reflects that the bank has failed to reduce its expanse and simultaneously

increase its revenue.

Comparison: 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,

UBL and PBL’s cost income ratio is decreasing and in 2010 it is reached only 47.20% & 39.78%

from accordingly 53.36% & 54.45% in 2007, which is satisfactory for the bank. But On the other

hand, Uttara bank’s cost income ratio is increasing from the year 2008 to 2010. That’s why PBL
has held the better position than Uttara Bank Ltd.
4.3.2.3 Investment to Deposit ratio: Total investment/Total Deposit

Year 2007 2008 2009 2010

PBL 0.128 0.145 0.181 0.176

UBL
0.332 0.221 0.379 0.228

Table-4.11: Investment to Deposit Ratio

Graphical Presentation:

0.4
0.35
0.3
0.25
0.2 PBL

0.15 UBL

0.1
0.05
0
2007 2008 2009 2010

Figure-4.7: Investment to Deposit Ratio

PBL: The graph shows that PBL has maintained stability in investment to deposit ratio
that’s a good sign for the bank. But they should increase investment against deposit.

UBL: Investment to deposit ratio shows that which amount of deposit is used to as investment.
From the graph it has seen that investment to deposit ratio is in fluctuating mode. That means UBL
Bank Ltd. depends on deposits than the share capital.

Comparison: As we know that the ratio measures the bank’s efficiency in promoting its
investment products to 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. The graph shows that, UBL is in
better position than PBL.

4.3.3 Analyzing Debt Ratio:

Debt ratio measures 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

4.3.3.1 Debt Ratio: Total Debt/ Total Assets

Year 2007 2008 2009 2010

PBL 0.93 0.93 0.93 0.92

UBL 0.95 0.94 0.91 0.89

Table 4.12: Debt Ratio

Graphical Presentation:

0.95
0.94
0.93
0.92
0.91 PBL
0.9
UBL
0.89
0.88
0.87
0.86
2007 2008 2009 2010

Figure 4.8: Debt Ratio

PBL: PBL Bank has been successfully able to maintain a debt ratio of 0.93(average) all through
the four years. So, the leverage position has not changed much in this time period. We are
observing a very slight increasing trend in the ratio. That means the amount of debt is increasing
at a higher rate than the total assets. Although higher leverage means higher earnings, it also
implies that the bank is exposed to higher risk. During good times when earnings are high, financial
leverage is beneficial for a bank. But when the economy goes through recessionary periods, high
financial leverage can be very risky.

UBL: The debt ratio of Uttara Bank is declining from 0.95 to 0.89 in the year 2007 to 2010. So
they are able to reach in a good leverage position which is a good sign for the bank. The
management should keep a close look in this ratio for to maintain stability in this ratio as we know
that leverage also contributes to risk and the expected return for the bank.

Comparison: As the PBL has been able to maintain a steady debt ratio successfully & it is in a
higher leverage position then Uttara bank Ltd. So PBL’s expected earnings are higher than Uttara
Bank expected earnings. From this graph we see that both bank’s debt ratio is so high, so
management should give more concentration in this sector. Because we know the greater the
amount of other people’s money being used to generate profit, the higher the ratio. The higher the
ratio, the greater the firm’s degree of indebtedness and the more financial leverage it has.

4.3.3.2 Debt to Equity Ratio: Total Debt/Total Equity

Year 2007 2008 2009 2010

PBL 15.61 11.39 13.99 11.10

UBL 9.62 14.84 10.59 8.46

Table 4.13: Debt to Equity Ratio

Graphical Presentation:

16
14
12
10
8 PBL

6 UBL

4
2
0
2007 2008 2009 2010

Figure 4.9: Debt to Equity Ratio

PBL: The chart shows fluctuating trend from the year 2007 to 2010. In the year 2007 the bank
highest equity to debt ratio 15.61, that means PBL’s total equity is decreasing compared to the
amount of debt. This implies that the leverage and overall risk is increasing for the bank. But in
the year bank’s debt to equity ratio is 11.1 that means company has increased its equity.

UBL: Uttara Bank has a declining debt to equity ratio from year 2008 to 2010.It shows that
company has increased its equity.

Comparison: As PBL’s debt to equity ratio is higher than that of Uttara Bank, the cost of capital
as well as the risk is also higher for PBL. So, from the risk perspective Uttara Bank is in a better
position.

4.3.3.3 Time Interest Earned Ratio: Earnings before interest and Taxes (EBIT)/Interest

Year 2007 2008 2009 2010

PBL 1.56 1.88 1.60 2.24

UBL 1.61 1.95 1.78 1.95

Table 4.14: Time Interest Earned Ratio

Graphical Presentation:

2.5

1.5
PBL

1 UBL

0.5

0
2007 2008 2009 2010

Figure 4.10: Time Interest Earned Ratio

PBL: The chart shows an increasing trend in the time interest earned ratio. That means bank is

increasing its earnings by minimizing its operating costs in order to get adequate earnings to

satisfying interest obligations.

UBL: Time Interest earned ratio of UBL’s is slightly satisfying. Because it’s increasing year by

year afterwards it was slightly decreasing from 1.95 to 1.78 in 2009. But in 2010 it again increased

that’s very good symbol for the bank. So UBL should keep stability to enhance its earnings by

minimizing its operating costs in order to get adequate earnings to satisfying interest obligations.

Comparison: We see that in 2010 PBL has better position than Uttara Bank. But if we consider

the preciding last three years we can say that the time interest earned ratio of Uttara Bank Ltd has

better than PBL.

4.3.4 Analyzing Profitability Ratio:

A class of financial metrics that are used to assess a business's ability to generate earnings as

compared to its expenses and other relevant costs incurred during a specific period of time. For
most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a

previous period is indicative that the company is doing well.

4.3.4.1 Gross Profit Margin: (Total Operating Income – Total Operating Expenses)/Total
Operating Income

Year 2007 2008 2009 2010

PBL 51% 49% 53% 60%

UBL 45% 6% 55% 53%

Table 4.15: Gross Profit Margin

Graphical Presentation:

60.00%

50.00%

40.00%

30.00% PBL

UBL
20.00%

10.00%

0.00%
2007 2008 2009 2010

Figure-4.11: Gross Profit Margin

PBL: The average of gross profit margin of PBL is 53%. We know the higher the gross profit
margin, the better. So, 53% gross profit margin is good enough for the bank.

UBL: The chat shows that in 2008 the gross profit margin of UBL is only 6% in 2008. That is very
bad for the bank. They give concentration in this field and it rises to 55% & 53% in 2009 &2010.
That is good sign for the bank. The average of gross profit margin of Uttara Bank is 39.75%. They
should give more concentration in this field to rises their gross profit margin.
Comparison: If we consider the average of gross profit margin of last four years, we see that PBL
has 53% which is better than Uttara Bank (39.75%). Otherwise in 2010 PBL’ gross profit margin
is better than UBL.
4.3.4.2 Operating Profit Margin: Operating Profit / Total Operating Income

Year 2007 2008 2009 2010

PBL 1.23 1.29 1.26 1.00

UBL 1.03 1.14 1.23 1.27

Table 3.16: Operating Profit Margin

Graphical Presentation:

1.4

1.2

0.8
PBL
0.6
UBL
0.4

0.2

0
2007 2008 2009 2010

Figure-4.12: Operating Profit Margin

PBL: The chart shows fluctuating trend in operating profit margin. The bank should give a close
look to keep stability in operating profit margin.

UBL: The chart shows an increasing trend in operating profit margin. That is very good for the
bank. That means Uttara Bank is able to increase operating profit margin by reducing bank’s
operating expenses

Comparison: In comparing both banks’ operating profit margin we can say that UBL has better
position than PBL.
4.3.4.3 Net profit Margin: Net Profit After Taxation / Total Operating Income

Year 2007 2008 2009 2010

PBL 0.27 0.29 0.24 0.26

UBL 0.24 0.27 0.23 0.27

Table 4.17: Net Profit Margin

Graphical Presentation:

0.3

0.25

0.2

0.15 PBL

UBL
0.1

0.05

0
2007 2008 2009 2010

Figure-4.13: Net Profit Margin

PBL: Net profit margin shows an increasing trend, except the year 2009. This trend will increase
the ability of offering attracting loan product and people also will become more interested about
the bank for taking loan and investing in bank’s stock.
UBL: The Net Profit Margin ratio is showing a mixed trend. So, we can deduce that the bank is
struggling to generate a consistent net income from its operating revenue. As we know that the
NPM reflects the effectiveness of expense management (cost control) and service pricing policies,
the management should try to maximize the NPM or minimize the deviations of the ratio.
Comparison: The net profit margin of PBL Bank has higher than Uttara even after all the
fluctuations. So undoubtedly PBL is in a better position than Uttara Bank Ltd.
4.3.4.4 Earnings per Share (EPS): Net Profit after Taxes / No. of Ordinary shares outstanding

Year 2007 2008 2009 2010

PBL 71.89 51.64 41.27 76.56

UBL 59.67 71.28 69.19 46.13

Table 4.18: Earnings per Share

Graphical Presentation:

80
70
60
50
40 PBL

UBL
30
20
10
0
2007 2008 2009 2010

Figure-4.14: Earnings Per Share

PBL: We know that EPS represents the portion of a company's profit allocated to each outstanding
share of common stock. Earnings per share serve as an indicator of a company's
profitability. Here the chart shows that PBL is in fluctuation trend and its increase in 2010. That is
good for the bank. Because this make shareholder interested to buy or hold the share.
UBL: The EPS of Uttara Bank is in fluctuation trend. It has positive relation with the current
market share price. In 2009 the EPS was 69.19 and in 2010 it decreased to 46.13. This decrease of
EPS may result in losing faith of shareholders of the Bank. The top level management should give
a close look to how they can increase their EPS.
Comparison: Here, too much fluctuation in the EPS of both the banks. Therefore it is difficult to
express any conclusive comments made by comparing the EPS of two banks. By considering
increasing trend and current status, PBL is in better position.
4.3.4.5 Return on Assets (ROA): Net profit After Taxes / Total Assets
Year 2007 2008 2009 2010

PBL 0.0167 0.0183 0.0143 0.0237

UBL 0.0185 0.0195 0.0154 0.0191

Table 4.19: Return on Assets

Graphical Presentation:

0.025

0.02

0.015
PBL
0.01 UBL

0.005

0
2007 2008 2009 2010

Figure-4.15: Return on Asset

PBL: The ROA is showing a mixed pattern similar to the ROE. The assets are increasing even at
higher rate than equity. And the net income is not consistently boost throughout the four years. As
a result, the return on assets is being inconsistent. The management should try to reduce the
deviation of the net income in order to achieve a stable growth.
UBL: The ROA is fluctuating during the respective periods. The total assets of the bank are
increasing every year, but the variations in ROA are mainly because of variations in the level of
net profit after tax. Thus, the management is finding difficulties in managing their investments in
assets and generating profit from these assets.
Comparison: Both the banks’ ROA is showing large fluctuations during the periods. At 2010 the
ROA of PBL is increasing and ROA for UBL is declining. But PBL’s ROA is quite lower than
UBL’s ROA. So UBL is in a better position as compare to PBL.
4.4 SWOT ANALYSIS OF PBL
SWOT means overall evaluation of an organization by its activities such as, Strength, Weakness,
Opportunity, and Threat. The SWOT analysis of PBL is as follows:

Strength:

Figure 4.16: Strength of Prime Bank Limited

First Generation Bank:

PBL is the 1st private generation Bank in banking environment in Bangladesh & it provides
customer satisfaction within 27 years. Bangladeshi banking sector has been witnessed the overall
change of some 1st generation banks like The City bank, AB Bank Ltd. in recent years. But PBL
is still standing with its initial identity among them.

Number of branches:

Now there are 95 branches in six division of the country. All branches have been included under
the real time online banking system.

Work force:

There are 2359 numbers of employee’s all over the country & contribute to our economy by their
hard and soul working.
Govt. shares:

35% Govt. share gives customer more confidence.

Weakness:

Figure 4.17: Weaknesses of Prime Bank Limited

Opportunity:

Figure 4.18: Opportunities of Prime Bank Limited

Threat:

Figure 4.19: Treats of Prime Bank Limited

4.5 SWOT ANALYSIS OF UTTARA BANK LIMITED

From the SWOT analysis we can figure out the ongoing scenario of UBL. By doing the SWOT
analysis it is possible to find out the strength, weakness, opportunities and threats of UBL. So
to a better view of the present business practices what is prevailing at UBL. I have done the
SWOT analysis.

Strengths:

 Employees are always ready to provide expected level of services both internal and
external customers so that customers are highly delight.
 Well reputation in the market.
  The relationship between employer and employee is very much appreciable which
increased the productivity of employees.
 Executives are highly qualified and experienced.
 Officer and staffs are prompt in their activities.
 Branch network cover highly geographic area.
 Very good profit margin, interest, and fees income achieved by the last few years and
subsequently bank expanding its business.

Weakness:

 Providing information in due time is being late want of proper technological support.
 Though the bank launched online banking system but 100% online banking is not
possible yet.
 There is not any customer complain desk where customers can give their feedback.
 Customer service is not up to standard and sufficient for want of trained people.
 Unavailability of high-tech electronic facilities.

Opportunities:

 Client reliability on ABBL is increasing day by day with the bank.

 Increasing rate of branches day by day even remote area attracting large number
of people and people are getting facilities for doing business.
 ABBL offers many popular schemes for trade services.
 Foreign remittances are increasing day by day.
 Import and export are increasing gradually so bank can properly exploit this
opportunity.
 Online and SMS banking services are now available in the bank.
 Credit facilities & ATM Booth facility also increasing to meet clients need.
Threats:

 Highly competitive market.

 Entries of new commercial bank, leasing companies, investment and merchant banking
in the market etc. They all are competitors.

 Competitors are offering innovative new products and services based on highly
technological support.
 Government put pressure to reduce interest rate.
 Government imposes tax and Vat on profit.
 Central Bank’s policies sometimes are not in favor of the private bank’s policies.
 Political crisis and lack of trust of the foreign investors
 Frequent fluctuation of domestic currency with US dollar.
 Economic recession.
Summary of Ratio analysis, PBL

Name of the ratio 2oo9 2o1o

1.o2 o.87
1. Current ratio

956.23 -428.26
2. Net working capital

o.124774 o. o9913o
3. Liquid securities indicator

o.6oo839 o.683725
4. Capacity ratio

o. o59 o. o91
5. Total Asset turnover

47.38% 39.78%
6. Operating cost to income ratio

0.181 0.176
7. Invest to deposit ratio
 0.93 0.92
8. Debt ratio

13.99 11.10
9. Debt to equity ratio

1.60 2.24
10. Time interest earned ratio

53% 60%
11. Gross profit margin

1.26 1.00
12. Operating profit marg.

0.24 0.26
13. Net profit margin

41.27 75.56
14. Earnings per share

0.0143 0.0237
15. Return on Asset

Table 5.1: Summary of Ratio analysis

5.1 OVERALL FINDINGS

1. From the current ratio analysis we can see PBL, has not enough current assets to pay their
short term obligations. And the current ratio is decreasing year by year.

2. Net working capital of PBL is in fluctuating mode. It increasing from year 2oo5 to 2oo6
then it’s decreasing but at last 2o1o it’s again increasing.

3. From the analysis we have seen that cost to income ratio is decreasing, so PBL is in good
position that is they are able to minimize their operating cost.

4. Total asset turnover is increasing year by year. So it is a good sing for PBL.

5. PBL from the graphs it has seen that investment to deposit ratio in fluctuating mode. That
means PBL depends o deposits than the share capital.
6. From the graph we have seen that net profit margin is increasing which is good sign for
the organization.

7. From the analysis we have seen that ROA is good position which means PBL earns more
profit from the asset which is good sign for the organization.

8. Although ROE is increasing form 2oo5 to 2oo8 but from that ROE is decreasing which is
not good for the company.

9. From the analysis we have seen that EPS is decreasing day by day. It indicates bad sign
for PBL, which can’t attract investors.

10. In 2o1o, PBL P/E ratio is indicates very good sign. The investor who wants to buy PBL
share they will get the loan margin facility.

11. From the graph we have seen that Debt ratio is decreasing. We knows that lower the debt
lower the risk. So that is good sign for the organization.

12. From the analysis we have seen that the Time interest earned ratio on PBL is slightly
satisfying. Because it’s increasing year by year afterwards it were slighty decreasing form
1.95 to 1.62.

13. Form the graph we have seen that PBL is good position in investment to deposit ratio
then UBL.

14. The bank’s ROA is fluctuating every year. Here UBL is good position then PBL.

15. ROE are decreasing in preceding year 2oo7 to 2oo9 but on an average UBL has better
position from the other.

16. From the analysis we see that in 2oo7 to 2oo9 PBL’s earning per share is better than
other two banks, but in 2o1o it decreases. On an average PBL is better then other bank.

17. Debt ratio PBL is satisfactory range then the other bank because it is decreasing year by
year.
 18. From the analysis we have seen PBL financial performance is better than the other bank
except in some cases.

5.2 CONCLUSION:

The concept of banking business is not new in our country. But the industry flourished
within last few decades. The market is very competitive. The banking organizations are
more active than ever. The banks are using various types of services to attract the cu stomer
as well as survive in the competitive market.

Prime Bank Limited is setting new standards in the banking arena in the time of unstable
economic conditions. As per of the long-term financial reform and modernization plan of the
government, the bank had been converted into a public limited company. PBL helps to
mobilize the resources to stay strong in the key areas of operation. In the areas of treasury
operation, PBL 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.

Although excellence in banking is the Moto of Prime 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.

5.3 SOME RECOMMANDATIONS FOR PRIME 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 recommandations can be
suggested to solve the above-mentioned problems:
 1. From the analysis we have seen that PBL’s current ratio gradually decreasing. So they
should take steps to raise current assets for increasing liquidation.

2. As we have seen that net working capital of PBL is more or less not satisfactory range in
so first it is recommended that, PBL should increased current asset and decreased current
liabilities for smoothly operate their business.

3. From the trend analysis we have seen ROA of PBL is fluctuating. So they should try
improving this and should take necessay steps to increase net profit.

4. ROE are decreasing in preceding year 2oo7 to 2o1o. So they should try to improve the
return earned on total owner’s equity.

5. From the analysis we have seen that in 2oo7 to 2oo9 PBL’s earning per share is better
than the other bank. But in 2o1o it decreases. So PBL should take necessary steps to
increase common stock.

6. In 2o1o, PBL P/E ratio is indicates very good sign. The investor who wants to buy PBL
share they will get the loan margin facility. So for the increasing of confident of the
shareholder they should take step to increase Price earning ratio.

7. From the analysis we have seen that Debt ratio is decreasing year by year. So to hold this
situation bank should take step to decrease liabilities.

8. PBL’s Time earnings ratio is not satistactory because they have only 1.62 tk. Earning
against 1 taka interest obligation which is not good. So bank should take necessary steps
to increse EBIT for making ability to make contractual interest payments.

5.1 SUMMARY
Now Prime Bank won best bank awarded by ICAB and its Prime bank 7th victory in a row. After
stock market crisis on 2010 Prime Bank delivered another year of strong income and profit growth.
Prime Bank has a clear and consistent strategy to become the Bangladesh’s best bank. Prime Bank
remains focused on the basics – maintaining the quality of the balance sheet, anticipating risk,
managing costs tightly. Prime Bank needs to stay true to its values and culture which are very
important to its competitive advantage and have played key role in Prime Bank’s success. The
voices of customer need to be assessed with great creditability. The customers are the ones who
will ultimately enable the Prime Bank to relive and flourish in Bangladesh. With those Prime Bank
also needs to focus on its General Banking division. Because Consumer play an important role in
maintaining the liquidity strength of the prime bank. Banking sectors no more depends on a
traditional method of banking. In this competitive world this sector has trenched its wings wide
enough to cover any kind of financial services anywhere in this world. The major task for banks,
to survive in this competitive environment is by managing its assets and liabilities in an efficient
way. So, in conclusion it can be said that every organization has its positive as well as negatives
and in case of PBL existence of the later one is less than the earlier one and as the management is
determine to reach the pick of success it seems that in near future the negatives will be eliminated.
I wish the bank all success prosperity in their field.