Chapter-1

Background of the study

Bangladesh is a developing country of the third world. The economic condition of this country is not
enough. The country is not yet been industrialized. The banking sector of our country is still emerging.
Bank is the protection of people against specific currency or money in exchange for regular transaction,
payment proportionate to the likelihood and cost of the risks involved. Brac Bank Ltd. companies have
become very popular in Bangladesh. Brac bank Ltd, as Bangladesh commercial bank Ltd, has been
started its operations in 26 June, 1983. It is operating its activity successfully in Bangladesh in recent
years. They provide acceptance of loan facility, advancing loan facility, creation of credit facility, clearing
of cheque facility, financing foreign trade facility and remaining of funds facility which help to trigger
our business sectors. This study will help us to understand the current scenario of united commercial bank
(UCBL) in Bangladesh.

Objective of the study

The broad objective of the study is to analyze the productivity analysis, financial performances
of united commercial bank and to analyze the coverage and other aspects of the united
commercial bank products. To achieve this goal the following specific objectives are looked into:

An overview of united commercial bank(UCB)

Ratio analysis of united commercial bank.

Financial performances of united commercial bank.

Rational of the study

This report is prepared to give a concrete idea about the performance and the condition of UCBL
over last 8 years from 2007-2014.We believe that our report will help a lot those who want to get
an overall idea of UCBL as well as its financial statement. Bank management also can be using
the information of our observation for their managerial decision if needed.

Scope of the study

In order to maintain the speed of development now banks must compete in the market place both with

1
local institution as well as foreign ones. The presentation of the organizational structure and policy
united commercial Bank Limited and investigating the strategies applied by them provide the scope of
this report. The scope of this report is limited to the overall description of the banks, their services, their
position in the industry, their financial performance and analysis of the practical progress of their
operation. The scope of the study is limited to organizational setup, functions and performances.

Recent performance of UCBL in terms of deposit, investment and foreign exchange.

To analyze the banks current financial flows performed by UCBL

To obtain practical experience about banking activities by involving such type of program.

To build professional carrier in the banking sector as well as any credit providing institution.

Limitation of the study

a) The lack of experience in the survey field was a limitation factor.

b) Lack of time and resource constraint has also limited the scope to conduct the survey smoothly and
prepare the report.
c) Sufficient report and publications as well as up to date information are not reading available.
d) There is possibility that the information might not provide the actual data due to unconsciousness
and conventional thinking.
e) There was problem of communication as the study area is big.
f) Financial support is essential to conduct a comprehensive study and as student we dont have that
ability to conduct the study in large scale.
g) There is problem of experience as we are not much experience in this type of

Chapter-2
Methodology of the study
This report is the combination of a graphical, numerical & descriptive which is based on just secondary
data. To study and shape the report as the final format the following one main aspect are considered:

2
Data Collection
Data Analysis
Data Presentation
Figure: 01

Data Collection
For the task we have been assigned to work on General profited business in Bangladesh. In preparing
report, a reliable source of collecting data is a vital measurement. In this report, just secondary sources of
information have been used. The work progressed through collection of annual report.

Primary data are observed and recorded as part of an original study but we did not use any
primary source.
Secondary data are collected through the following sources:

Office Record;
Annual Reports;
Internet;
Different books etc.

Data Analyze:
Our main objective is to analyze the productivity of united commercial bank, financial performances of
(UCBL) in Bangladesh. To do so we have done Trend analysis of current ratio, Net working capital, quick
ratio, debt to total asset, debt to equity capital, gross profit margin, net operating margin, net interest
margin, net non interest margin, the net profit margin, time interest earning ratio, the degree of asset
utilization total asset turnover ratio, total equity multiplier, EPS, earning spread, cost income ratio etc We
have also shown ROA, ROE, and ROI through:

MS-Excel
MS-Word

3
Data Presentation
To analyze the united commercial bank we have used some graphical analysis. However, the flowchart
for preparing the report is:

Topic selection &selecting

a site

Data collection Secondary

data

Data Presentation

Submission of
FinalReport

Chapter- 3

Company overview
An overview of banking sector in Bangladesh, where we discus about the banks mission, vision, and
functions.

4
Vision
To be the bank of first choice through maximizing value of our clients, shareholder and employees and
contributing to the national economy with social commitments

Mission
To offer financial solutions that create manage and increase our clients wealth while improving the
quality of life in the communities we serve.

Objective

We put our customers first

We emphasize on professional ethics
We maintain quality at all levels
We believe in being a responsible corporate citizen
We say what we believe in

Board of Directors
1. M. A. Hashem-(chairmen)

2. Sharif Zahir (Vice chairmen)

3. Anisuzzaman Chowdhury (Director & Chairman, Executive Committee)

4. Lt. Gen. Abu Tayeb Muhammad Zahirul Alam, rcds, psc (Retd.)
Independent Director & Chairman, Audit Committee

5. M. A. Sabur
Director & Chairman, Risk Management Committee

6. Showkat Aziz Russell

Director

7. Md. Jahangir Alam Khan

Director

8. Hajee Vunus Ahmed

Director

9. Mr.Showkat Aziz Russell-Doctor

10. Mr. Md Jahangir Alam Khan

5
11. Hajee Younus

12. HajeeMA Kalam

13. MrsNurNaharZaman

14. MrTanvir Khan.

15. Mrs Sultana Rezia Begum

16. Mr Shabbir Ahmed

Chapter 4
Theoretical aspect
Theoretical aspect discuss about financial performance analysis, objectives, Ratio, advantage of ratio
analysis, limitation of ratio analysis and groups of ratio.

Ratio analysis advantage

Financial ratio analysis is a useful tool for users of financial statement. It has following advantages:

1. It simplifies the financial statements.

2. It helps in comparing companies of different size with each other.
3. It helps in trend analysis which involves comparing a single company over a period.
4. It highlights important information in simple form quickly. A user can judge a company by just
looking at few numbers instead of reading the whole financial statements.

Limitation of ratio analysis

Despite usefulness, financial ratio analysis has some disadvantages. Some key demerits of financial ratio
analysis are:

1. Different companies operate in different industries each having different environmental

conditions such as regulation, market structure, etc. Such factors are so significant that a
comparison of two companies from different industries might be misleading.
2. Financial accounting information is affected by estimates and assumptions. Accounting standards
allow different accounting policies, which impairs comparability and hence ratio analysis is less
useful in such situations.

6
 3. Ratio analysis explains relationships between past information while users are more concerned
about current and future information.

Chapter-5

RATIO ANALYSIS AND DECISION MAKING:

2007 2008 2009 2010

current asset 48682930 59322237 80461643 12170609
current liabilities 42617834 54485725 77730401 11297078
current ratio 1.142313568 1.08876659 1.035137372 1.077323623
Net working capital 6065096 4836512 2731242 873531
inventories 37988301 45445518 62998028 9552705
Quick ratio 0.250942575 0.254685406 0.224669046 0.231732843
total liabilities 47043360122 60410621388 84778315078 12195979725
total asset 50180583526 64794864487 90483781843 12977442967
Debt to total asset 0.937481329 0.932336565 0.936944868 0.939782957
total equity 3137223404 4384243099 5705466765 781463232
debt to equity capital 14.99522159 13.77903096 14.85913749 15.60659443
gross profit 1667837432 1463013878 1541864493 3629963500
total operating revenue 3324474795 4109442039 5192054616 7855748978
Gross profit margin 50.1684487 35.60127784 29.69661544 46.20773284
net operating revenue 166783432 1463013878 3125169480 782449337
Net operating margin 0.332366466 2.25791641 3.453844895 6.029302837
Net interest income 1627705500 2008527966 2617088773 383541398
Net interest margin 3.243695839 3.099825861 2.892329122 2.955446608
Noninterest revenue 3324474795 4109442039 2574967843 4020334990
Provision for loan and losses 228378405 817307000 150296400 3532052754
Net non-interest margin 6.169909101 5.080857974 2.679675179 3.762545805
Net income 815123487 764745570 932897890 217979585
Net profit margin 24.518865 18.60947454 17.96779809 2.774777881
EBIT 1667837432 1463013878 1541864493 3629963500

7
Interest charges 2727030152 3740765703 4348234862 5632947438
time interest earned ratio 0.61159479 0.39110011 0.354595495 0.644416363
the degree of asset utilization 0.066250222 0.063422342 0.057381052 0.60533874
total asset turnover 0.066250222 0.063422342 0.057381052 0.60533874
total equity multiplier 15.99522159 14.77903096 15.85913749 16.60659444
ROA 1.624380248 1.180256454 1.031011161 1.679680547
ROE 25.98232201 17.44304667 16.35094776 27.89377364
Common equity shares
179069300 223871650 290622396 29102748
outstanding
earnings per share 4.552000187 3.416000061 3.209999996 7.490000085
total interest income 4354735652 5749293669 6965321635 9468361424
total interest expense 2727030152 3740765703 4348234862 5632947436
total earning asset 50180583526 64794864487 2617086773 3835413988
total interest bearing liabilities 47043360122 60410621388 77730401057 11307078250
earnings spread 22.12 20.05 21.46 19.63
price per share 21.35 25 32.83 61.49
earnings per share 45.52 34.16 3.21 7.49
price earnings ratio 0.469024605 0.731850117 10.22741433 8.209612817
total operating expense 1306637363 1659543161 2066885136 3125255599
cost income ratio 0.393035726 0.403836615 0.39808617 0.39783038

2011 2012 2013 2014

current asset 15673396 19024675 89338564 59223345
current liabilities 13948474 17173055 73498705 54845725
current ratio 1.12366385 1.107821235 1.215512083 1.079816978
Net working capital 1724922 1851620 15839859 4377620
inventories 11879441 15412944 20789441 17414610
Quick ratio 0.271997854 0.210313832 0.932657562 0.762297061
total liabilities 1529253642 1892773750 2058281654 2436091945
total asset 36889117821 20744183623 2263331128 3698117821
Debt to total asset 0.041455414 0.091243588 0.909403679 0.658738327
total equity 1596641224 1811011613 905049667 224915415
debt to equity capital 0.957794161 1.045147219 2.274219558 10.8311471
gross profit 2945804975 1586125517 306540945 271946101
total operating revenue 5972914597 5762216628 1239857921 1520939002
Gross profit margin 49.31938884 27.52630835 24.72387681 17.88014514
net operating revenue 607231812 587613449 71263697 61521688

8
 Net operating margin 1.646100118 2.83266606 3.148620019 1.66359459
Net interest income 896702277 763541398 109495423 261078877
Net interest margin 2.43080434 3.680749322 4.837799544 7.059777153
Noninterest revenue 4143932354 4563951253 1098579211 2547967843
Provision for loan and losses 3021465145 3410442545 1020442281 2502694100
Net non-interest margin 3.042813912 5.560636798 3.452297767 1.224237442
Net income 517291459 373906114 116540945 101297890
Net profit margin 8.660620382 6.488928448 9.399540304 6.660220421
EBIT 5172914597 3739061140 12398579211 154684493
Interest charges 5020321215 5570521123 15919861508 4348324862
time interest earned ratio 1.030395143 0.671222864 0.778812002 0.035573352
the degree of asset utilization 0.161915355 0.277775049 0.547802266 0.411273809
total asset turnover 0.161915355 0.277775049 0.547802266 0.411273809
total equity multiplier 23.10419978 11.454473 2.500781129 16.4422604
ROA 1.402287421 1.802462419 5.14908948 2.739174221
ROE 32.39872873 20.64625711 12.8767458 45.03821581
Common equity shares
128371620 69012472 70285621 32062239
outstanding
earnings per share 4.029640344 5.417949874 1.658105077 3.159414101
total interest income 15351632098 21318920218 22999356931 5749293667
total interest expense 10203211476 14703210208 15919861508 3740765703
total earning asset 5148417337 6613710010 22633313220 64795263387
total interest bearing liabilities 13948474593 17053053781 20582816547 50410621388
earnings spread 20.22 22.02 21.3 20.9
price per share 35 22.6 36.45 32.44
earnings per share 3.52 1.9 3.66 3.15
price earnings ratio 9.943181818 11.89473684 9.959016393 10.2984127
total operating expense 885545631 922549855 827220947 1077665136
cost income ratio 0.14826022 0.160103293 0.667190113 0.708552502

LIQUIDITY RATIOS:
These ratios are used to measure the short term solvency of an organization. These ratios show
the ability of the organization to convert quickly its assets into cash to pay its different types of
short term debts. The higher the ratio the company is more liquid and the lower the ratios, the
less liquid the company is which may experience the company financial distress to pay its short-
term debt.

9
Current Ratio: The ratio is considered to observe the liquidity status of an
organization.

The Formula:

Current Ratio: Total current assets/Total Current Liabilities.

Decision: UCBs current ratio is not balanced. The ratio was high in 2013 and low in
2014.The bank should reduce their current liability and increase current assets.

Net Working Capital: It measures a companys efficiency and its short term financial
health.

The Formula: Net working Capital=Current assets-Current Liabilities

Decision: The bank should increase its working capital.

Quick Ratio: This ratio is also considered to observe the liquidity status of an organization.
This is an important ratio because sometimes a company may have heavy inventory as part of
its current assets which might be obsolete or slow moving. For those reasons eliminating
those inventories from current assets is doing the ratio. It expresses the true working capital
relationship which includes accounts receivables, prepaid and notes receivables available to
meet with the companys current obligations.

The Formula:

Quick Ratio: Current assets-Inventory/Current Liabilities

Decision: The bank should eliminate some inventories that are time consuming to convert
into cash.

DEBT RATIOS:
Debt ratios are used to measure the extent of the companys with debt relative to equity and
its ability to cover interest and other fixed charges. These ratios address the companys long
term ability to meet its financial leverage. The higher the ratios the more indebtedness the
company owes. This higher results signal the possibility the company will be unable to earn
enough to satisfy its debt obligations.

Debt to Total Asset Ratio:

It tells the percentage of total assets that were defined by total debts. The lower the result of
the ratio the better off the company is.

The Formula: Debt To Total Asset Ratio=Total debt/Total asset

10
Decision: The bank should reduce its debts and increase its assets by making more
investments

Total Debt to Total Equity Ratio:

This ratio used to help how much shareholders capital can cover its liabilities.

The Formula: Total Debt to Total Asset Ratio=Total Debt/Total Equity

Decision: UCB used the debt most to earn revenues rather than the equity. It may increase
the risk of the bank .So to minimize the risk they should finance more equity.

Gross Profit Margin: It measures how much of every dollar of revenues is left over after
paying cost of goods sold.

The Formula: (Total Revenue-Cost of Goods Sold)/Total revenue

Decision: The bank should reduce its overhead, loan loss and miscellaneous expenses.

Net Operating Margin: It measures the companys revenue proportion which is left over
after paying for costs.

The Formula: (Total Operating Revenue-Total Operating Expense)/Total Asset

Decision: The bank should reduce operating expenses, increase operating revenue.

Net Interest Margin: It measures how successful a firm

The Formula: Net Interest margin=Net Interest Income/Total Asset

Decision: If the bank can invest more in loans and securities that bear interests it would be
helpful for the bank.

Net Non Interest Margin:

The Formula: Net Non Interest margin= (Net Non-Interest Income-PLL)/Total Asset

Decision: To increase noninterest income the bank can do more fiduciary activities,
insurance services.

Net Profit Margin: It measures the amount of profit that a business can extract from its total
operations.

The Formula: Net Profit Margin=Net Income/Total operating Revenue

11
Decision: The bank can increase its net income by increasing the net yield on each asset
hold, increase fees associated with various services.

Time Interest earned Ratio:

It measures the extent to which operating income can decline before firm is unable to meet its
annual interest costs.

The Formula: Time Interest Earned Ratio=EBIT/Interest Charges

Decision: The firm has to reduce its interest charges or it can increase earnings from that
services that do not bear interests or taxes like fees for managing and protecting customers
property, checking account maintenance fees, savings accounts overdraft fees etc.

Degree of Asset Utilization: Measures the total revenue earned for every dollar of assets a
company owns.

The Formula: Degree of Asset Utilization=Total Operating Revenue/Total Asset

Decision: Investments should be increased, some assets should be disposed or a combination

of these steps should be taken.

Total Asset Turnover Ratio:

It measures the turnover of all the firms assets.

The Formula: Total Asset Turnover=Operating Income/Total Asset

The Equity Multiplier: It measures the extent to which a company finances its assets with
debts.

The formula: The equity Multiplier=Total Asset/Total Equity

Decision:

Return on Assets:

It determines its ability to utilize the assets employed in that company efficiently and
effectively to earn a good return. Return on assets measures the amount of profit that the
company generates as a percentage of its assets.

The Formula: ROA=Net Income/Total assets

12
 Decision: The bank can either increase its income by more basic earnings or reducing high
interest costs resulting from above average use of debt.

Earnings per Share: It measures the amount of profit a company generates from each share.

The Formula: Earning Per Share=Net Income/Common Equity shares standing

Decision: To increase earnings per share the bank has to increase net income by following
the ways as stated before.

Earnings Spread: It measures the effectiveness of a financial firms intermediation function

in borrowing and lending money and also the intensity of competition in the firms market
area.

The Formula: Earnings Spread= (Total Interest Income/Total Earning Assets)-(Total

Interest Expense/Total Interest Bearing liabilities)

Decision: To increase earning spread the bank has to earn more revenues from investments,
loans, service fees and reduce costs of borrowings, employee salaries and benefits.

MARKET VALUE:

Price/ Earnings Ratio: It shows how much investors are willing to pay per amount of
current earnings.

The Formula: Price/Earnings Ratio=Price Per Share/Earnings Per Share.

Decision: To increase this ratio the bank has to increase the value of assets.

Cost Income Ratio: It measures how efficiently a company is being run. The lower the
ratio.it is better for the firm.

The Formula: cost Income Ratio=Total Operating Expense/Total Operating Income

Decision: To reduce this ratio the bank has to reduce its all types of expenses.

Conclusion:

A sustainable business and mission requires effective planning and financial management. Ratio
analysis is a useful management tool that will improve your understanding of financial results
and trend over time, and provides key indicators of organizational performance. Managers will
use ratio analysis to pinpoint strengths and weaknesses from which strategies and initiatives can

13
be formed. Funders may use ratio analysis to measure results against other organizations or make
judgments concerning management effectiveness and mission impact.

14