Assignment on: Financial Ratio Analysis of National Credit & Commerce Bank Ltd. (NCCBL) United Commercial Bank Limited (UCBL) & South East Bank Limited (SEBL)

Prepared ForMs. Tanzina HaqueAssociate ProfessorDepartment of A&ISUniversity of Dhaka

Prepared ByPrashanta Saha

ID: 15046MBA 15th Batch

Section: C

Date of Submission: March 30th 2014

ContentsObjective of the Report....................................................................................................................5

Purpose of the Report......................................................................................................................5

Significance of the Study.................................................................................................................5

Methodology....................................................................................................................................6

Secondary sources of data are collected through.........................................................................6

Data Processing and Analysis..........................................................................................................6

Financial Analysis of NCCBL.........................................................................................................7

Profitability ratio..............................................................................................................................7

Return on equity..........................................................................................................................7

Return on asset.............................................................................................................................7

Net interest margin......................................................................................................................7

Earnings per share........................................................................................................................8

Retained earnings per share.........................................................................................................8

Retention Ratio............................................................................................................................8

Operating Profit Margin Ratio.....................................................................................................8

Net profit Margin Ratio...............................................................................................................9

Asset Utilization (AU).................................................................................................................9

Equity Multiplier (EM)................................................................................................................9

Tax Management efficiency Ratio...............................................................................................9

Expense control efficiency ratio (ECE).....................................................................................10

Asset management efficiency ratio (AME)...............................................................................10

Funds Management efficiency ratio (FME)..............................................................................10

Leverage Ratio...............................................................................................................................10

Total debt...................................................................................................................................10

Equity Multiplier (EM)..............................................................................................................11

Efficiency ratio..............................................................................................................................11

Operating efficiency Ratio.........................................................................................................11

Employee productivity ratio......................................................................................................11

Asset Utilization (AU)...............................................................................................................11

Comments on Performance of NCCBL.........................................................................................12

Financial Analysis of UCBL.........................................................................................................16

Current Ratio.............................................................................................................................16

Leverage Ratios.............................................................................................................................16

Long-Term Debt To Equity Ratio.............................................................................................16

Total Debt To Equity Ratio.......................................................................................................17

Total Debt To Total Asset Ratio................................................................................................17

Total Equity To Total Asset Ratio.............................................................................................17

Profitability Ratios.........................................................................................................................18

Net Profit Margin.......................................................................................................................18

Return on Equity........................................................................................................................18

Return on Assets........................................................................................................................18

Other Ratios...................................................................................................................................19

Price Earnings Ratio..................................................................................................................19

Loan To Asset Ratio..................................................................................................................19

Loan to Deposit Ratio................................................................................................................19

Findings & Recommendation........................................................................................................20

Financial Analysis of SEBL..........................................................................................................21

Return on Assets (ROA)............................................................................................................21

Return on Equity (ROE)............................................................................................................21

Return on Deposits (ROD)........................................................................................................21

Return on Shareholder capital...................................................................................................22

Operating expenses to revenue (OER)......................................................................................22

Loans to Deposits (LTD)...........................................................................................................23

Equity Multiplier (EM)..............................................................................................................23

Equity to Deposits (ETD)..........................................................................................................23

Total liabilities to shareholder capital (TLSC)..........................................................................24

Objective of the Report

The report has conducted

To achieve the information regarding the banking environment and its services.

To find out the performance of NCCBL, UCBL & SEBL over years through ratio

analysis.

To estimate the future position of NCCBL, UCBL & SEBL

To find out the reason behind NCCBL, UCBL & SEBL enhancements or pitfalls of

performance over years.

Purpose of the Report

The purpose of this report is to know about the bank properly by analyzing its financial

statements over years.

Significance of the Study

This report is prepared to give a concrete idea about the performance and the condition of

NCCBL, UCBL & SEBL over past three years. I believe that my report will help a lot those who

want to get an overall idea of NCCBL, UCBL & SEBL as well as its financial statement. Bank

management also can be using the information of my observation for their managerial decision if

needed.

Methodology

For this report all data and information are collected from secondary sources.

Secondary sources of data are collected through

• Websites

• Articles

• NCCBL, UCBL & SEBL’s Annual Report 2010, 2009 and 2008

• Many Research Report on ratio analysis

Data Processing and Analysis

The analytical portion of this report is the outcome of numerous numerical data collected mainly

from the external secondary source. Prior to analysis, data collected from the above mentioned

sources were classified further for making them suitable for analysis. In order to get appropriate,

accurate and quick result the use of MS Excel was advantageous.

 

Financial Analysis of NCCBL

Profitability ratio

 

Return on equity

2008 =1,231,832,174/6,696,770,778 =18.39%

2009 =2,784,218,989/11,745,223,217 =23.71%

2010 =3,002,876,567/16,768,521,255 =17.91%

Return on asset

 

2008 =1,231,832,174/110,437,103,311 =1.12%

2009 =2,784,218,989/124,806,383,846 =2.23%

2010 =3,002,876,567/152,796,945,827 =1.97%

 

 

Net interest margin

 

2008 =(9095891683-7126309505)/

110437103311

=1.78%

2009 =(10856416291-8426118565)/

124806383846

=1.95%

2010 =(12023158687-7789506602)/

152796945827

=2.77%

 

 

Earnings per share

 

2008 =1,231,832,175/35,546,875 =34.65

2009 =2,784,218,989/51,212,521 = 54.37

2010 =3,002,876,567/52,774,028 = 56.9

 

Retained earnings per share

 

2008 =1,054,921,127/35,546,875 =29.68

2009 =2,217,834,432/51,212,521 =43.31

2010 =2,691,260,736/52,774,028 =51.00

 

 

Retention Ratio

 

2008 =1,054,921,127/1,547,592,026 =68.17%

2009 =2,217,834,432/3,135,678,230 =70.73%

2010 =2,691,260,736/3,798,836,049 =70.84%

 

Operating Profit Margin Ratio

 

2008 =(5777810297-1930955801)/

110437103311

=3.48%

2009 =(8195606688-2906887699)/

124806383846

=4.24%

2010 =(9680806328-3602929761)/

152796945827

=3.98%

 

Net profit Margin Ratio

 

2008 =1,249,015,183/5,819,245,747 =21.46%

2009 =2,823,473,302/8,262,859,422 =34.17%

2010 =3,798,836,049/9,680,806,328 =39.24%

 

Asset Utilization (AU)

 

2008 =5819245747/110516618171 =5.27%

2009 =8262859422/124984702326 =6.61%

2010 =9680806328/152796945827 =6.34%

 

 Equity Multiplier (EM)

 

2008 =110516618171/6708227542 =16.47

2009 =124984702326/11796677214 =10.59

2010 =152796945827/16769945827 =9.11

 

 

Tax Management efficiency Ratio

 

2008 =1249015183/3864393665 =32.32%

2009 =2823473302/5328807974 =52.99%

2010 =3798836049/6077876567 =62.50%

Expense control efficiency ratio (ECE)

 

2008 =3864393665/5819245747 =66.41%

2009 =5328807974/8262859422 =64.49%

2010 =6077876567/9680806328 =62.78%

 

 Asset management efficiency ratio (AME)

 

2008 =5819245747/110516618171 =5.27%

2009 =8262859422/124984702326 =6.61%

2010 =9680806328/152796945827 =6.34%

 

 Funds Management efficiency ratio (FME)

2008 =110516618171/6708227542 =16.47

2009 =124984702326/11796677214 =10.59

2010 =152796945827/16768521255 =9.11

 

Leverage Ratio

 

Total debt

 

2008 103,740,332,533/110,437,103,311 =93.9%

2009 113,061,160,629/124,806,383,846 =90.6%

2010 136,028,424,572/152,796,945,827 =89.0%

 

Equity Multiplier (EM)

 

2008 =110,437,103,311/6,696,770,778 =.939

2009 =124,806,383,846/11,745,223,217 =.906

2010 =152,796,945,82716,768,521,255 =.890

 

Efficiency ratio

 

Operating efficiency Ratio

 

2008 =1,930,955,801/5,777,810,297 =33.4%

2009 =2,906,887,699/8,195,606,688 =35.5%

2010 =3,602,929,761/9,680,806,328 =37.2%

 

Employee productivity ratio

 

2008 =5,777,810,297/1,551 =3725216.181

2009 =8,195,606,688/1,844 =4444472.174

2010 =9,680,806,328/2,139 =4525856.161

 

 Asset Utilization (AU)

 

2008 =5,777,810,297/110,437,103,311 =5.2%

2009 =8,195,606,688/124,806,383,946 =6.6%

2010 =9,680,806,328/152,796,945,827 =6.3%

 

Comments on Performance of NCCBL

 

Profitability Ratios:

ROE Return on Equity

Measures the fund

management efficiency.

More efficient in 2008 than

others but decreasing trend in

2009.

ROA Return on Assets

measure the asset

management efficiency

for a company

It is seen that NCCBL’s RAO

is fluctuating, shows the poor

performance then 2009.

Net Interest

Margin

How much the company

earns interest by using

each amount of asset.

Shows the better performance

in 2010, gradual increase

from 2008.

EPS EPS represents the

number of currency earn

during the period on

behalf of each

outstanding share of

common stock. Higher

the ratio indicates higher

net income the share of

stock is generating.

In 2008 they earn highest Tk.

On behalf of each outstanding

common stock, In 2010 show

gradual increase of EPS from

2008.

Retain Earning

Per Share

It measures how much of

the net income has been

retaining after paying out

all dividends.

In 2010 they retain 51 Tk.

After paying all dividends

which is gradually increase

after 2008.

Retention Ratio It shows the percentage In 2010 bank has the highest

of net income that is

retained in the bank after

paying of all dividends.

ratio after the big fall after

2008.

Operating Profit

Margin Ratio

Measure how large a

spared between total

operating revenues and

total operating expense

of a bank that

management has been

able to achieve by using

their asset.

In 2009 the bank earn highest

4.24 tk by using 100 tk and

decrease in 2010.

Net profit

margin ratio

Highest the result show the

better performance and in

2010 it shows the best result.

AU It measures the

percentage of each taka

remaining after all cost

and expense including

interest tax and preferred

stock dividend has been

deducted. It reflects the

effectiveness of expense

management cost control

service pricing policies

the higher the Banks

NPM indicates more

percentage is

contributing to profit.

The bank earn highest 6.61 tk

by using 100 tk asset in 2009,

fall down at 2010 (6.34).

EM A higher equity

multiplier indicates

higher financial leverage,

In 2009 and 2010 the bank

use less liability than 2008,

shows the good performance.

which means the

company is relying more

on debt to finance its

assets.

Tax

Management

Efficiency Ratio

The higher ratio indicates

the bank could efficiently

manage its tax expense.

Increasingly shows the good

performance from 2008 to

2010.

Expense Control

Efficiency Ratio

The higher ratio indicates

the bank could efficiently

manage its expense.

Continuously show the bad

performance due to increase

of the man power, increase

branch and other expense.

Leverage Ratios:

Total debt ratio/

leverage ratios

It indicates the

proportion a firm’s total

asset that is financed

with borrowed funds.

That means out of total

how much amount is

financed by liability.

The bank financed more than

its 90% of asset with

borrowed funds but decrease

in 2010.

EM A higher equity

multiplier indicates

higher financial leverage,

which means the

company is relying more

on debt to finance its

assets.

In 2009 and 2010 the bank

relying less liability than

2008, shows the good

performance.

Efficiency Ratios:

Operating

Efficiency Ratio

It measures whatever the

revenue is being

In 2010 the bank cover almost

38% of operating expense

generated by the bank

from operation, whether

it is that enough to cover

all operating expense.

from its revenue shows the

good performance the other

years.

Employee

Productivity

Ratio

It is used to measure the

operating efficiency of

the bank by increasing

the productivity of the

employees through the

use of automated

equipment and improved

employee training.

In 2010 the bank’s employees

provide their best

performance then other years.

Asset Utilization

(AU)

It measures the

percentage of each taka

remaining after all cost

and expense including

interest tax and preferred

stock dividend has been

deducted. It reflects the

effectiveness of expense

management cost control

service pricing policies

the higher the Banks

NPM indicates more

percentage is

contributing to profit.

Financial Analysis of UCBL

Current Ratio

Current Ratio = Current Assets / Current Liabilities

Year 2010 2009 2008

Current Assets / Current Liabilities

121,482,617,208 ÷ 32,910,157,947

84,361,643,673 ÷ 32,704,310,596

60,771,317,505 ÷ 16,875,268,499

Result 3.69 2.58 3.61

Leverage Ratios

Long-Term Debt to Equity Ratio

Long-term Debt to Equity Ratio = Long-term Debt / Total Equity

Year 2010 2009 2008

Long-term Debt / Total Equity

89,149,594,558 ÷ 7816471892

52,074,004,482 ÷ 5705466765

43535352890 ÷ 4384243099

Result

11.41 9.31 9.93

Total Debt To Equity Ratio

Total Debt to Equity Ratio = Total Debt / Total Equity

Year 2010 2009 2008

Total Debt / Total Equity

122059752505 ÷7816471892

84778315078 ÷5705466765

60410621389 ÷4384243099

Result 15.62 14.86 13.78

Total Debt To Total Asset Ratio

Total Debt to Total Asset Ratio = Total Debt / Total Asset

Year 2010 2009 2008

Total Debt / Total Asset

122059752505 ÷129876224397

84778315078 ÷90483781843

60410621389 ÷64794884487

Result 93.98% 93.69% 93.23%

Total Equity To Total Asset Ratio

Total Equity to Total Asset Ratio = Total Equity / Total Asset

Year 2010 2009 2008

Total Equity / Total Asset 7816471892

÷129876224397

5705466765 ÷90483781843

4384243099 ÷64794884487

6.02% 6.31% 6.77%

Result

Profitability Ratios

Profitability Ratios measure the overall earnings performance of an institution and its efficiency

in utilizing assets, liabilities and equity.

Net Profit Margin

Net Profit Margin = Net Profit after Taxation / Net interest Income

Year 2010 2009 2008

Net Profit after Taxation / Net interest Income

2181635425 ÷3835360138

932897890 ÷2617086773

764745570 ÷2008527966

Result 56.88% 35.65% 38.07%

Return on Equity

Return on Equity = Net Profit after Taxation / Equity

Year 2010 2009 2008

Net Profit after Taxation / Equity

2181635425 ÷7816471892

932897890 ÷5705466765

764745570 ÷4384243099

Result 27.91% 16.35% 17.44%

Return on Assets

Return on Assets = Net Profit after Taxation / Total Assets

Year 2010 2009 2008

Net Profit after 2181635425 932897890 764745570

Taxation / Total Assets

÷129876224397

÷90483781843

÷64794884487

Result 1.68% 1.03% 1.18%

Other Ratios

Price Earnings Ratio

Price Earnings Ratio = Stock Price per Share / Earnings per Share (EPS)

Year 2010 2009 2008

Stock Price Per Share / Earnings Per Share (EPS)

226.80 ÷7.50

32.84 ÷3.21

533 ÷42.71

Result 30.24 times 10.23 times 12.48 Times

Loan To Asset Ratio

Loan to Asset Ratio = Total Loans/Total Asset

Year 2010 2009 2008

Total Loans / Total Assets

93460300000 ÷129876224397

61692200000 ÷90483781843

44446000000 ÷64794884487

Result 71.96% 68.18% 68.60%

Loan to Deposit Ratio

Loan to Deposit Ratio = Total Loans/Total Deposits

Year 2010 2009 2008

Total Loans / Total Deposits

93460300000 ÷113070700000

61692200000 ÷77730400000

44446000000 ÷54485000000

Result 82.66% 79.37% 81.57%

Findings & Recommendation

United Commercial Bank Ltd. is an established privatized bank in our country. This bank

is doing well over years. Based on my three months of internship program, my recommendations

towards the UCBL’s operations are

UCBL had fair leverage ratios in where it uses the debt most to increase revenue rather

than the equity. It may increase the risk of the bank. So, to minimize the risk I think

UCBL should finance more equity.

From year 2008 to 2010 there was a lower growth in 2009 compare to 2008 and 2010. It

indicates that UCBL has no consistency in growth over years. UCBL should ensure a

better growth over year to reach a strong position.

UCBL had good liquidity ratios during year 2008 and 2010. In 2009 it had less liquidity

ratios than the others. It should give more concern about these types of fluctuations in

ratios.

UCBL’s most of the works are done with papers where many bank uses computerized

systems. UCBL should use more computerized system to increase the efficiency in work.

UCBL had less supplementary assets in comparison to the Bangladesh Bank’s standard. To

secure the depositors UCBL should give concern to raise its supplementary assets.

Financial Analysis of SEBL

Return on Assets (ROA)

Year Net income Total Assets % of Ratio

2010 2763.13 131943.48 2.26%

2009 1870.19 112676.98 1.66%

2008 887.24 81181.53 1.09%

The above figure represents the Return on Assets (ROA) Ratio of Southeast Bank Limited & we

see that in the year 2010 Southeast Bank was in highest profitable position. In 2008 the Bank

was in lowest profitable position.

Return on Equity (ROE)

Year Net income Total Shareholders’

Equity

% of Ratio

2010 2763.13 17095.90 19.41%

2009 1870.19 9927.16 18.84%

2008 887.24 7657.01 11.59%

The above figure represents the Return on Equity (ROE) Ratio of Southeast Bank Limited & we

see that in the year 2010 Southeast Bank was in most profitable position. In 2008 the Bank was

in lowest profitable position.

Return on Deposits (ROD)

year Net Income Total Deposit Ratio

2010 2763.13 107729.58 2.56%

2009 1870.19 96669 1.93%

2008 887.24 68714.67 1.29%

The above figure represents the Return on Deposit (ROD) Ratio of Southeast Bank Limited &

we see that in the year 2010 Southeast Bank was in most profitable position. In 2008 the Bank

was in lowest profitable position.

Return on Shareholder capital

Year Net Income Shareholder

contribution capital

Ratio

2010 2763.13 17095.90 16.16%

2009 1870.19 9927.16 18.84%

2008 887.24 7657.01 11.59%

The above figure represents the Return on Shareholder Capital (ROSC) Ratio of Southeast Bank

Limited & we see that in the year 2008 Southeast Bank was in most profitable position. In 2009

the Bank was in lowest profitable position.

Operating expenses to revenue (OER)

Year (Amount) Operating expenses

(Amount)

Times

2010 16071.33 9316.39 1.73

2009 13415.21 8800.55 1.51

2008 10250.33 7237.55 1.42

The above figure represents the Operating expenses to revenue (OER) Ratio of SOUTHEAST

Bank Limited & we see that in the year 2008 & 2009 Bank was in most Efficiency position. In

2008 the Bank was in lowest efficiency position. So this is the good sign of the bank.

Loans to Deposits (LTD)

year Total loan and

Advance

Total Deposit Ratio

2010 92452.62 107729.58 85.82%

2009 77497.57 96669 80.17%

2008 60281.26 68714.67 87.73%

The above figure represents the Loans to Deposits (LTD) Ratio of Southeast Bank Limited & we

see that in the year 2009 Southeast Bank was in lowest deposit position. In 2008, the Bank was

in most deposit position.

Equity Multiplier (EM)

Year Total Assets Total Equity Ratio

2010 131943.48 17,095.90 7.72

2009 112676.98 9927.16 11.35

2008 81181.53 7657.01 10.60

The above figure represents the Equity Multiplier (EM) Ratio of Southeast Bank Limited & we

see that in the year 2005 Southeast Bank was in most equity multiplier position. In 2006 the

Bank was fall down but 2008 is the lowest position and 2008 & 2009 bank was also increase his

equity multiplier position & smoothly increasing.

Equity to Deposits (ETD)

Year Shareholder

contribution

capital

Total Deposit Ratio

2010 17095.90 107729.58 15.87%

2009 9927.16 96669 10.27%

2008 7657.01 68714.67 11.14%

The above figure represents the Equity to Deposits (ETD) Ratio of Southeast Bank Limited &

we see that in the year 2008 & 2009 Southeast Bank was in most equity to deposit position. In

2009 the Bank was slightly fall down his equity to deposit position.

Total liabilities to shareholder capital (TLSC)

Year Liabilities Shareholder

contribution

capital

Ratio

2010 131943.48 17095.90 7.72

2009 112677 9927.16 11.35

2008 81181.53 7657.01 10.60

The above figure represents the Total liabilities to shareholder capital (TLSC) Ratio of Southeast

Bank Limited & we see that in the year 2005 Southeast Bank was total liabilities to shareholder

position is higher. But in 2008, the Bank was fall down, again 2009 the bank was his total

liabilities to shareholder capital position is going to increase so this is the good sign of the bank.