Banking Industry in Bangladesh A Long de PDF

INTERNSHIP
REPORT
Banking Industry in Bangladesh:

A long decade of growth and Performance
Analysis of Listed Banks in DSE.
DEPARTMENT OF FINANCE
JAGANNATH UNIVERSITY, DHAKA
Md. Arefin Dewan

ID: 07882757
Banking Industry in Bangladesh:
A long decade of growth and Performance
Analysis of Listed Banks in DSE.
Submitted To
Department of Finance
Jagannath University, Dhaka
Report Supervised By
Nafisa Rounok
Assistant Professor
Report Prepared By
Md. Arefin Dewan
ID: 07882757
Reg No. : - 071615
Session: 2007-2008
BBA Program, 2 nd Batch.
D ATE OF SUBMISSION: N OVEMBER 5, 2012

Letter of Transmittal
November 5, 2012
Nafisa Rounok
Assistant Professor
Department of Finance,
Subject: Submission of Internship Report.
Dear Madam,
It is a great pleasure to submit my internship report titled Banking Industry in
Bangladesh: A long decade of growth and Performance Analysis of Listed Banks in
DSE as a partial requirement of BBA program.
I tried my best to gather relevant information for constructing a complete report as outlined.
The preparation of this paper has enabled me to a great extent to complement my theoretical
knowledge with practical analysis. I would like to express my profound gratitude for your
kind and conscious guidance in preparing my report in the given time.
I sincerely believe that you will find this study very constructive, informative and
enlightening. The information of this report came from database, online, print sources,
company annual reports and interviews. I shall be glad to clarify any discrepancy on the
report.
I hope that you would be kind enough to receive this and bless me hearty with respect.
Thank you very much for your heartiest cooperation.
Sincerely Yours,
Md. Arefin Dewan

ID - 07882757
Reg No. : - 071615
Session: 2007-2008
Acknowledgement
Every creative task to be finished successfully needs shared efforts from individuals and
institutions. During the preparation of this report I was supported and encouraged by
many. I would like to express my heartfelt gratitude to them.
First of all, I would like to express my humblest gratitude to my honorable faculty and
supervisor to this study Nafisa Rounok, Assistant Professor, Department of Finance,
Jagannath University. I was enriched by his kind encouragement and cooperation. It
would have been impossible for me to complete this study successfully without his
responsible guidance, instruction, persuasion and advice.
I also pay my regard to Mr. Wali Ul Islam, CEO & Director to give me the opportunity for
doing internship in LBSL. Thanks to my reporting boss Mr. Md. Ashaduzaman Riayadh,
Senior Research Analyst and in charge, Research & Analysis department of LBSL for his
kind and sincere guideline. I also pay my regard to my reporting supervisor in LBSL Mr.
Md. Mahfuzur Rahman, Research Analyst, Research & Analysis department of LBSL, for
his never ending help in the process of creation of this report.
I want to remember Assistant manager and HR in-charge of LBSL Mr. Md. Mahmudul Hasan
Khan for his help. I express my gratitude to all Research Analysts and thanks to all who
have worked for LBSL and tried hard for me to collect these data.
At last but not the least thanks to my parents, my sisters and her family for their support and
encouragement without which this study may not see the light of sun.
Finally, all praise and indebtness to the Almighty Allah, the Lord of Glory and Honor and
his Friend our Prophet Mohammad (SM), for all the blessing showers upon me to make
such a success.
Students Assertion
I hereby announced that the extensive study entitled Banking Industry in Bangladesh: A
long decade of growth and Performance Analysis of Listed Banks in DSE (Conducted
on behalf of LankaBangla Securities Limited, Corporate Office, Research and Analysis
Division) Prepared in partial accomplishment of the requirements for the award of the degree
in Bachelor of Businesss Administration (BBA) From Jagannath University, Dhaka.
This is my practical and individual work. This report was not submitted to require any
degree in past. This report is submitted for academic purpose only.
Md. Arefin Dewan

ID - 07882757
Reg No. : - 071615
Session: 2007-2008
Jagannath University
Certificate of Approval
This is to certify that the Internship Report on Banking Industry in Bangladesh: A long
decade of growth and Performance Analysis of Listed Banks in DSE is done by Md.
Arefin Dewan, ID: 07882757, Department of Finance, Jagannath University; as a partial
fulfillment of the requirement of Bachelor of Business Administration (BBA) degree.
The report is prepared under my guidance and is a record of the authentic work carried
out by him successfully.
Nafisa Rounok
Internship Supervisor
BBA Program
Executive Summary
A develop banking sector plays a vital role for financial stability of a country. Bank is very
old institution that is contributing toward the development of any economy and its
treated as an important service industry in modern world.
The report is originated in result of my internship program which I have done as a

requirement of BBA program. This report is completed based on my three months internship
in The LankaBangla Securities Ltd This report contains the real life experience of my
internship in LBSL and banking sector analysis of Bangladesh.
This report summarizes the work completed on the performance analysis of selected banks.
The study is intended to provide a comparative view on the basis of financial performance,
stock market performance and CAMELS Rating.
For ease of understanding, the report is segmented into five Chapters. In the first chapter
contains Abstract, Literature review, background of the report, significance of the study,
objectives, methodology and variable, sources of information and limitations of the report.
Next chapter of the report demonstrated the profile of the company (LBSL) where I have
completed my intern. The company is a subsidiary of LankaBangla Finance Limited and a
leading equity brokerage house in the country with a diverse clientele of institutions, high net
worth individuals, foreign funds and retail investors, providing a wide range of services. In
the Organization part of the report, a profile along with financial and operational strengths of
LankaBangla Securities Ltd. is detailed out.
The Third chapter contains the details about my job responsibilities in LBSL. Here include
my main responsibilities and observation in LBSL in three months internship period.
In the following chapter, main part of the Report, named project contains details about the
financial performance of selected 30 banks in DSE. Here I divide my analysis into five parts.
In first part overall financial analysis has been conducted. Part two is on the basis of
performance in capital market of the banks. In the following part is CAMELS rating in the
banks based on the guideline of Bangladesh Bank. Part four is about the recent performance
analysis of the banks I used here half yearly data till June 2012 and compare with HY-11. At
the last part, I have tried to find out some relationship among the fundamental variables of
banks using some statistical tools such as trend analysis, Correlation and Multiple
Regression. I give interpretation and findings of each analysis done.
In the last chapter I give suggestions where the banking industry could have scope to
improve. Conclusion, Appendix and Reference of my study also includes in this chapter.
List of Content
Chapter Title Page

Title page
Letter of Transmittal
Acknowledgement
Students Declaration V
Supervisors Certificate V
Certificate From LBSL VI
Executive Summary VII
List of Contents VIII- X
List of Tables X
List of Figures XI
List of Abbreviations XII
1 Introduction 1-7
1.1: Abstract 1
1.2: Literature Review 2
1.3: Background of the study 4
1.4: Significance of the study 5
1.5: Objectives of the study 5
1.6: Methodology and Variables 6
1.7: Sources of information 7
1.8: Limitations of the study 7
2 The Organization 8-27
2.1: Overview of Lankabangla Securities 8
2.2: Corporate Achievement of LBSL 9
2.3: Vision of LBSL 10
2.4: Mission of LBSL 10
2.5: Goals of LBSL 10
2.6: Values of LBSL 11
2.7: Strength of LBSL 12
2.8: Strategic Priorities 13
2.9: Services of LBSL 14
2.10 : Product of LBSL 16
2.11: Share holding Structure 20
2.12: Business Growth analysis 21
2.13: Performance Analysis of LBSL 22
2.13.1: Operating Income Analysis 24
2.13.2: Total Asset Analysis 25
2.13.3: Capital Composition 25
2.13.4: Shareholders Equity 26
2.14: Financial Highlights of LBSL 27
3 Job Responsibilities & Observation 28-29
3.1: Job Responsibilities 28
3.2: Observation and Recommendation 29
Chapter Title Page
4 The Project: Performance Analysis of Selected Banks 30-69
Part 1 Overall Performance Analysis of selected banks 30-36
4.1.1: Growth of Branches of Selected Banks 32
4.1.2: Growth of Employee of Selected Banks 32
4.1.3: Growth of Deposit of Selected Banks 33
4.1.4: Growth of Total Loans & Advances of Selected Banks 33
4.1.5: Classified Loans of Selected Banks 34
4.1.6: Growth of Net Income of Selected Banks 35
4.1.7: Paid Up Capital of Selected Banks 35
4.1.8: Total Assets of Selected banks 36
Part 2 Capital Market Performance 37-39
4.2.1: Shareholding pattern Analysis: 37
4.2.2: Market Value per share 37
4.2.3: Price Earnings Ratio (P/E): 38
4.2.4: Net asset Value per Share: 38
4.2.5: EPS of Selected Banks: 39
Part 3 Performance Analysis By CAMELS Rating 40-48
4.3.1: Capital Adequacy: 40
4.3.2: Asset Quality: 42
4.3.3: Management Soundness: 43
4.3.4: Earnings: 44
4.3.5: Liquidity: 45
4.3.6: Sensitivity to market risk: 45
4.3.7: Composite rating of 30 banks 46
4.3.8: Overall Findings of the Analysis 48
Part 4 Performance Analysis of Selected Banks (Half Yearly-2012) 49-62
4.4.1: Growing net interest income rescue the industry from 51
declining operating income
4.4.2: Policy pressure couldnt lessen the interest spread 52
rather it increased
4.4.3: Low yield treasury facilitates investment income 53
growth
4.4.4:Declining overseas transactions reduce the 54
commissioning and brokerage income:
4.4.5: Operating expense growth has beaten the income 55
growth
4.4.6: Increasing provisioning causes falloffs of the earnings 56
4.4.7: New loan loss classication by Bangladesh bank 58
4.4.8: Provisioning Scenario 2012 60
4.4.9: Assessing the probable impact of increased 61
provisioning requirement
4.4.10: Capital Market Performance 62
Chapter Title Page
4 Part 5 Statistical Analysis of Selected Banks 63-69
A. Trend Equation of selected banks 63
B. Correlation Analysis 66
C. Multiple Regression Analysis 67
5 Recommendation & Conclusion 70-79
Recommendation 70
Conclusion 71
Appendix 72
Reference 78
List of Table
No. Title Page

Table 2.1 LBSL at a glance. 8
Table 2.11 Pattern of shareholding 20
Table 2.14 Financial Highlights 27
Table 4.1 Listed banks in DSE 31
Table 4.1.1 Branch Growth 32
Table 4.1.5 NPL to Total L & A 34
Table 4.1.8 Total Asset Growth 36
Table 4.2.5 EPS of Selected banks 39
Table 4.3.1 CAR of Selected banks 40
Table 4.3.2 NPL to Total L & A of Selected banks 42
Table 4.3.3 Expenditure to income Ratio 43
Table 4.3.7 CAMELS Rating from 2007-2011 46
Table 4.3.7.1 CAMELS Rating 2011 47
Table 4.4.6 Profit Margin scenario 57
Table 4.4.7 Comparison of Loan Classification 59
List of Figure
Figure Title Page

Fig 2.2 Corporate Achievement 9
Fig 2.6 Values of LBSL 11
Fig 2.7 Strength of LBSL 12
Fig 2.9 Services at a glance 14
Fig 2.11 Percentage of Shareholding 20
Fig: 4.1.1 Growth of Branch 32
Fig 4.1.5 Total NPL 34
Fig 4.1.8 Total Asset Growth 36
Fig 4.2.5 EPS of Selected banks 39
Fig 4.3.1 CAR trend of selected banks 41
Fig 4.3.2: NPL to Total L & A of Selected banks 42
Fig 4.3.3 Expenditure to income Ratio 43
Fig 4.3.5 Position of liquidity 45
Fig 4.4.6 Income Distribution 58
Fig 5.C Relationship of net profit with different variables 67
Abbreviation Used
ALM Asset Liability Management

BB Bangladesh Bank
BOD Board of Director
CAMELS Capital Adequacy, Asset Quality, Management Soundness, Earnings
Soundness,
Liquidity, Sensitivity to Market Risk
CAR Capital Adequacy Ratio
CBSP Central Bank Strengthening Project Cell
CEO Chief Executive Officer
CRAR Capital to Risk Weighted Assets Ratio
CRM Credit Risk Management
CY Calendar Year
DFIs Development Financial Institutions
DSE Dhaka Stock Exchange
e.g For Example
etc. and so on
EIR Expenditure Income Ratio
FCBs Foreign Commercial Banks
FEX Foreign Exchange
GDP Gross Domestic Product
IRC Interest Rate Change
IMF International Monetary Fund
i.e that means
L&A Loans And Advance
NAV Net Asset Value
NBFIs Non-Bank Financial Institutions
NIM Net Interest Margin
NPL Non-Performing Loan
NOM Net Operating Margin
PCBs Private Commercial Banks
Qtr quarter
ROA Return on Assets
ROE Return on Equity
RWA Risk Weighted Assets
SCBs State-Owned Commercial Banks
SEC Security Exchange Commission
SLR Statutory Liquidity Reserve
Tk. Taka (Currency of Bangladesh)
Banking Industry in Bangladesh: A Long Decade of Growth and Performance Analysis of Listed Banks in DSE. 1
1.1: Abstract
Banking sector plays an important role in the economic development of a country

specially for Bangladesh, a sound and efficient banking system is one of the most important
preconditions to achieve economic development. In this paper I have tried to analyze the
development and recent growth of listed Commercial Banks of Bangladesh. The paper
attempted to highlight the prospects and opportunities of banking sector in
Bangladesh.
At present, a total of 47 banks (4 SCBs, 4 DFIs, 30 PCBs and 9 FCBs) having 7246
branches are operating in Bangladesh with Tk. 4411.98billion total assets and Tk. 3329.08
billion deposits. The performance of banks needs to be compared with each other as well
as the overall performance of banking sector needs to be compared.
The study tried to furnish the overview of the p erformance anal ys is of list ed 30
banks in DSE on t he basis of financial p erformance, Capit a l mar ket
performance, CAMELS Rat io, rece nt performances of banking sector (HY-12) and
comparison among the various categories of banks with respect to the Profitability. The
study finds out the trend equation of various variable, correlations among them.
Finally, the paper tried to establish the linear relationship among the various variables and
net profit of the banking sector.
1.2: Literature Review
Generally, the financial performance of banks and other financial institutions has been
measured using a combination of financial ratios analysis, benchmarking, measuring
performance against budget or a mix of these methodologies (Avkiran, 1995). Simply
stated much of the current bank performance literature describes the objective of financial
organizations as that of earning acceptable returns and minimizing the risks taken to earn
this return (Hempel et al., 1996). Chien and Danw (2004) showed in their study that most
previous studies concerning company performance evaluation focus merely on operational
efficiency and operational effectiveness, which might directly influence the survival
of a company. By using an innovative two-stage data envelopment analysis model in
their study, the empirical result of this study is that a company with better efficiency does
not always means that it has better effectiveness.
With respect to the Performances of Bangladeshi Commercial Banking sector, foreign and
national experts undertook number of studies. Some of the notable ones are; Bhattacharya
(2007), Chowdhury and Islam (2007), Jahangir, Shill and Haque (2007), Chowdhury (2002),
Siddique and Islam (2001), Al-Shamrnari and Salirni (1998), Avkiran (1997), Bhatt &
Ghosh (1992),Hossain & Bhuiyan (1990), Swamy & Vasudevan (1985), Ahmed &
Jamsheduzzaman (1985).
Bhattacharya (2007) pointed out that six major recent policy measures include: reduction of
bank rate and lending rate, linking classified loans to large loan sanctioning; rationalization
and merger of bank branches, measures for loan recovery, and demarcation of responsibilities
between the management and the board and decision on cash reserve ratio.
Chowdhury and Islam (2007) stated that deposits and loan advances of Nationalized
Commercial Banks (NCBs) are less sensitive to interest changes than those of Specialized
Banks (SBs). So SBs should not make abrupt change in lending or deposit rates by following
the NCBs. If NCBs change their lending or deposit rates, their deposits or loans and advances
will be affected less than those of SBs. Moreover, deposits of NCBs have higher volume and
higher volatility than those of SBs. On the other hand, loans advances of NCBs show a higher
volume and higher volatility than those of SBs. However, SBs offer higher deposit rates and
charge higher lending rates than NCBs. That is why the interest rate spread of SBs was higher
than that of NCBs.
Jahangir, Shill and Haque (2007) stated that the traditional measure of profitability through
stockholders equity is quite different in banking industry from any other sector of business,
where loan-to-deposit ratio works as a very good indicator of banks' profitability as it depicts
the status of asset-liability management of banks. But banks' risk is not only associated with
this asset liability management but also related to growth opportunity. Smooth growth
ensures higher future returns to holders and there lies the profitability which means not only
current profits but future returns as well. So, market size and market concentration index
along with return to equity and loan-to-deposit ratio grab the attention of analyzing the
banks profitability.
Chowdhury (2002) observed that the banking industry of Bangladesh is a mixed one
comprising nationalized, private and foreign commercial banks. Many efforts have been
made to explain the performance of these banks. Understanding the performance of banks
requires knowledge about the profitability and the relationships between variables like
market size, bank's risk and bank's market size with profitability. Indeed, the performance
evaluation of commercial banks is especially important today because of the fierce
competition. The banking industry is experiencing major transition for the last two decades.
It is becoming imperative for banks to endure the pressure arising from both internal and
external factors and prove to be profitable.
Siddique and Islam (2001) pointed out that the Commercial Banks, as a whole, are
performing well and contributing to the economic development of the country. The average
profitability of all Bangladeshi banks collectively was 0.09% during 1980 to 1995 which
means that a profit of TK 0.09 was earned by utilizing assets of TK 100. In every aspect of
profit, banking sector contributes the national economy as well as to the individual
organization. Despite overall growth of the banking sector being positive, the performances
of different categories of banks were not equally attractive.
According to Al-Shamrnari and Salirni (1998) profitability ratio especially return on equity
(ROE) signals the earning capability of the organization. They also suggest that higher return
on equity (ROE) ratio is appreciable as it is the primary indicator of bank's profitability and
functional efficiency.
Avkiran (1997) stated that the details the process whereby multivariate interdisciplinary
measures of potential to perform are integrated with performance measures to develop
models of retail performance for bank branches. The predictive models use the key business
drivers of a major trading bank as dependent variables. Independent variables explaining
business drivers are the theorized potential variables that measure the capacity to generate
retail business. The models allow a comparison between the predicted and actual levels of
key business diverts, thus measuring unrealized performance. Findings can assist decision
making during restructuring, branch closures or downsizing. The variables presented should
be regarded as examples rather than universally accepted measures of branch performance.
Hossain and Bhuiyan (1990) stated that there is no universally accepted operational definition
of performance measures. In broad sense performance level of an enterprise can be
measured by the extent of its organizational effectiveness. In the context of services
rendered towards public the performance of an organization can be viewed as the extent to
which its work is carried out within established specifications for goods and services
produced, to the general satisfaction of the clientele served, within given cost and time
constraints, and in such a manner as to support or contribute to the achievement of the
organization objectives.
In measuring performance level of a bank Swamy and Vasudevan (1985) used per employee,
deposits, advances, profits, etc.
Based on the above literature, I can say that there are some studies about banks in
various countries, however a detailed study has not yet been conducted in Bangladesh
context, especially Banking sectors. Hence the present study is made on Comparative Study
of Banking Industry in Bangladesh: A long decade of growth and Performance
Analysis of Listed Banks in DSE 30 listed banks in Bangladesh.
1.3: Background of the Study
Internship is a partial requirement of graduation. It offers a great opportunity for any student
to get some tremendous and brilliant ideas about the practical field. It is also a challenging
experience to prepare Internship Report which increases intellectual abilities as an efficient
graduate. As par the requirement for the completion of BBA program, I was assigned for
completing my internship at LankaBangla Securities Limited (LBSL) for the period of three
months. As I intend to become a Security Analyst in future, I was determined to do my
BBA Internship in a brokerage house. I felt very lucky when I got response from LBSL, the
topmost brokerage house in Bangladesh.
As Banking sector have emerged as the most important player of our economy and they also
offer a passionate environment for career development so it was my premier objective is to
prepare my internship report on banking industry.
Nowadays the function of bank is not limited to within the same geographical limit
of any country. It is an important source of financing for most businesses. The common
assumption, which underpins much of the financial performance research and
discussions, is that increasing financial performance will lead to improved functions and
activities of the organizations.
Here the analysis has been made on the whole performance Analysis of listed 30 banks in
Dhaka Stock Exchange.
1.4: Significance of the Study
A single bank is highly connected with other banks for payment system and other
functions of bank. The failure of a single bank not only affects its shareholders and
depositors rather it affects rest other banks and even all rest other business. The failure of a
single bank creates an economic turmoil situation and is regarded as a disaster for the
economy. The recent global recession is also an example of economic disaster that
occurred for the failure of banking business. So, the government of any country must have
a high concern about the performance of all banks.
The banking sector of Bangladesh compared to its economic size is moderately bigger than
many other economies of equal level of development and per capita income. There are
forty-seven commercial banks operating in this small economy. Although over the last
thirty years, the country achieved noticeable success regarding the access to banking
services, in 1972 population per branch was 57,700 and in the year of 2011, it was
20,162 per branch. The statistics indicates that getting banking services is not a
significant problem for the country. Being the central bank of the country, Bangladesh
Bank is responsible to regulate, monitor and supervise all the banks operating in the
country.
Findings of this study can append to the existing body of the literature, and can give out as a
starting point on which future studies can be done. On the realistic aspect, this study may
possibly facilitate to understand the performance of listed 30 banks in DSE and based on that
investor can take decision to invest in desired banks.
1.5: Objectives
The objectives are broken down as follow:
Broad Objective:
To complete my BBA degree it is a must.

To match my academic knowledge with the real corporate business set up.
To enlarge my experienced from a real corporate exposure.
To enhance my adaptive quality with the real life situation.
Specific Objectives:
More specifically, this study entails the following aspects:
Present a brief view of LankaBangla Securities Limited, and its operation in

Bangladesh.
To present an overview of Private Commercial Banks of Bangladesh.
To appraise the performance of selected Private Commercial Banks of Bangladesh
To recommend remedial measures for the development of selected Private
Commercial Banks of Bangladesh
1.6: Methodology and Variables

This study has been conducted primarily in theoretical approach and secondarily based on
practical analysis. The present study has been carried out to evaluate the performance of
selected 30 Banks in Bangladesh which are listed in DSE. This study has been based mainly
on data from secondary sources. The relevant data and information were collected from Stock
Exchanges, Annual Reports of different commercial banks of Bangladesh, Bangladesh Bank,
Securities and Exchange Commission and web sites of relevant commercial banks of
Bangladesh etc. Relevant articles and literature in this context have also been consulted. In
this report I analyzed last five years data of listed 30 banks of DSE in Bangladesh. For
evaluating the performance of selected private commercial banks of Bangladesh data has
been analyzed through the various statistical measures like growth percentage, trend
equation, square of correlation coefficient, correlation matrix, multiple regressions etc.
Among the various straight line Trend Methods of Time Series Analysis the method of
Least Square is most popular and widely used in practice. The method of least square can be
used either to fit a straight-line trend or a parabolic trend. The straight line trend is
represented by the equation Yc = a + b. Where, Yc denotes the trend values to distinguish
them from the actual Y values. a is the Y intercept or the value of the Y variable when X
= 0. b represents the slope of the line of the amount of change in Y variable that if
associated with a change of one unit in X variable. X variable in time series analysis
represents time. The square of correlation coefficient (r2 ) is called the multiple
determinations or squared multiple correlation coefficients. The coefficient of correlation is
denoted by r. The value of r lies between 0 and 1. The higher the r2 the greater the
percentage of the variation of Y explained by the regression model, that is, the better the
goodness of fit of the regression model to the sample observations. r2 closer to zero, the
worse the fit.
In this report it was assumed that the relationship among the variables was linear, the
regression model to predict Net Profit is:
Net Profit = + 1 (Number of Employees) + 2 (Number of Branches) + 3 (Amount of

Expenditure) + 4 (Amount of Asset) + 5 (Amount Loans and Advance) + 6 (Amount of
Deposit)
Where,
is Constant
1 is Number of Employees
2 is Number Of Branches
3 is Amount Of Expenditure
4 is Amount Of Asset
5 is Amount Loans And Advance
6 is Amount Of Deposit
1.7: Sources of Information

Relevant data relating to the study was collected from the following two major sources as
permitted by the authority of LBSL:
Primary Sources of data:
The primary data of this report were collected through:
Direct interview & Conversation with the research analyst of the Research
Department.
Practical experiences obtained from the corporate office of LBSL
Experts opinion.
Official records.
Secondary Sources of data:
I have gathered the secondary data via following sources:
Annual Reports of Dhaka Stock Exchange and LankaBangla Securities Limited

Annual Report of listed 30 banks.
Analysis report of LBSL research and analysis department
Relevant books, Journal and Different articles
Monthly Publication of Dhaka Stock Exchange
Market Pulse of LankaBangla Securities Limited.
Website of Lankabangla Finance (http://www.lankabangla.com).
1.8: Limitation of the Study

In spite of my untiring effort, I am sure that there are still some shortcomings prevailing in
the report due to:
The rate of success of this study may be limited due to lack of practical experience
and capabilities
Time frame for this type of extensive study is not enough. I got only three months to
finish the internship that might limit the scope of the study.
Some important data could not be collected because of the confidentiality of HRD of
a highly sensitive organization, the LBSL.
It is therefore, anticipated that the study will be evaluated with an approach subject to the
recognition of the above-mentioned shortcomings.
2.1: Overview of the company
LBSL AT A GLANCE
Name of the company LankaBangla Securities Limited (LBSL)
Date of Incorporation 3 rd July 1997
Year of Commencement 3 rd July 1997
Registration No. C 33276(22)/97
Authorized Capital Tk. 1,000 million
Paid up Capital Tk. 550 million
Financial year January-December
Table 2.1: LBSL at a glance.
LankaBangla Securities Limited (LBSL) is a subsidiary of LankaBangla Finance Limited and

a leading equity brokerage house in the country with a diverse clientele of institutions, high
net worth individuals, foreign funds and retail investors. The company commenced stock
broking activities in 1997 and has over time become the largest stock broking company in the
country having developed a strong team of highly skilled and experienced professionals lead
by its CEO Mr. Wali Ul Islam.
LBSL (Formerly known as Vanik Bangladesh Securities Ltd) started its stock broking
business in 1997 trading on the Chittagong Stock Exchange (CSE) Ltd, while commencing
trading on the Dhaka Stock Exchange (DSE) in1998. The company was renamed
LankaBangla Securities Ltd. with effect from 27 April 2005 following a restructuring of the
company. The company was converter from private to public limited in year 2009.
The company has the distinction of being the largest broking house in terms of transaction
value in the Dhaka Stock Exchange Ltd. for the last four years and the Chittagong Stock
Exchange Ltd. for the last five years. The companys success is underpinned by its strong
network of key clients and its unparalleled standard of service quality, offering clients the
highest level of convenience and reliability in transaction business.
Furthermore the company has earned much recognition for its professionalism in its trade
execution capabilities and settlement procedures from local financial institutions, leading
custodian banks, corporate, international fund managers and broker alike. The companys
ability of fostering a diverse and loyal client base is a result of its commitment toward
building long lasting relationship with its clients based on mutual trust and respect and
providing its services with the utmost professionalism while promptly responding to
customers needs.
2.2: Corporate Achievements of LBSL
LBSL (Formerly known as Vanik Bangladesh Securities Ltd) started its stock
1997 broking business in1997 trading on the Chittagong Stock Exchange (CSE)
Ltd
Commenced trading on the Dhaka Stock Exchange (DSE)

1998
Renamed LankaBangla Securities with effect from 27 April 2005 following a

2005 restructuring of the company.
Inaugurated Integrated Back Office Software System first ever in Bangladesh

2008 Capital Market
Tagged with BDJOBS for stockmarket training as a part of CSR

2009 Achieved Best IT USERS Award-2009 from BASIS
Converted from private limited to public limited company
Sponsor Shareholding of Financial Excellence Limited

2010 Set the landmark of BDT 1530.59 mn net profit after tax
Subscribed for the Bloomberg Professional service as first ever local
company in Bangladesh
Increased paid up capital to BDT 962.5 mn

2011 Top broker in DSE and CSE for consecutive six and seven years
respectively
introducing a full-fledged Financial Web Portal & Order Management

2012 System for the first time in Bangladesh.
Fig 2.2: Corporate Achievement

2.3: Vision of LBSL
Growing together with our stakeholders by implementing the most comprehensive,

efficient and state of the art brokerage platform to maintain the excellence and maximize
the wealth of shareholders.
2.4: Mission of LBSL

Providing Quality Product and Services
Ensuring the Use of State of the Art Technology
Being the Hub of International Investment
Demonstrating Comprehensive Integrity with Market
Maintaining Corporate Governance
Promoting Research and Analysis
Involving in Continuous Process Improvement
2.5: Goals of LBSL
To lead by example through a commitment that empowers the organization at every level to
strive for the highest levels of quality, customer care and stakeholder value. To be the most
sought after facilitator in creating wealth. To optimize the value of being our Customer,
Shareholder or Employee. To establish strong regional presence
2.6: Values of LBSL
Accountability
: Ensuring
responsibility Diversity:
and conformity As inclusive
as our
services Integrity:
Being real with
task and work
force with highest
ethical standards
and fairness in
every event
Leadership:
The courage to
shape a better
future
Quality:
Ensuring the
service with
commitment
Respect:
LBSL honor the rights and
beliefs of their fellow
associates, their investors,
key stakeholders and their
community. They treat
Teamwork: others with the highest
LBSL promote and degree of dignity, equality
support a diverse, yet and trust.
unified, team. They
work together to
meet our common
goals.
Fig 2.6: Values of LBSL

2.7: Strength of LBSL
Exceptional quality and professionalism

in its service offering to clients
An experienced and dedicated senior

management team
A trained and professional sales team
A competent equity market research unit
The widest network of local branches

(Dhaka, Chittagong, Comilla & Sylhet)
Ability to provide a one stop service

offering at all its branches
State of the art technology utilized in

trade execution and back office and
reporting systems
International affiliation with

Bloomberg L.P
Fig 2.7: Strength of LBSL

2.8: Strategic Priorities
LBSL has some strategic priorities which it believes to be maintained in operating the
organization. These are
Offloading share to the equity market as soon as possible.

Expand its business all over the country by opening new branches.
Diversifying operation through strategic investment in other organization and in bond
market.
Further improvement of asset quality.
Smooth penetration in the capital market.
Updating back office software as well as develop new software to support internet trading
and swift data processing.
Arranging different business promotion program such as road show in side as well as
outside of the country, international capital market investor conference etc.
Train up employees through attending in national and international training program to
enrich their competence.
To become cost efficient organization.
Increase intrinsic value of the company by strengthening internal controls through
installation of clearly laid down policies, procedures and processes.
Strengthen risk management.
Increased and focused Corporate Social Responsibility (CSR).
2.9: Services of LBSL

LankaBangla Securities Limited offers various kinds of services all over the country, which
includes the followings:
Brokerage
Services
Trading
Trading
Facility
Execution through
service
NITA
Services
Research Internet
Services Trading
CDBL
Services
Fig 2.9: Services at a glance
1. Brokerage Services:
Trade Execution Service for clients in Dhaka and Chittagong Stock Exchange
Trading of portfolio accounts maintained with the Merchant Banking Division of
LankaBangla Finance Limited and IDLC Finance Ltd.
Custodial Services provided for clients for safe custody of securities.
Extend credit facilities through Margin Trading.
2. Trading Facility through NITA (Non Resident Investors Taka Account)
LBSL has successfully launched services of NITA Trading through which Non-Resident
Bangladeshis (NRBs) are able to transact under Non-resident Investor's Taka Account
(NITA). The Company is also dedicated to use extensive recourses to offer new products and
services to the existing clients and also to attract new clients. Our choice of an object oriented
approach and using the latest technology has given us the flexibility to extend our product &
service range as well as ensuring performance, security and scalability.
3. Internet Trading
Since CSE has introduced Internet Trading System in Bangladesh and simultaneously LBSL
has adopted this trading facilities for its distance clients for trade execution. In addition our
steps toward internet trading through CSE TWS not only enriching the door of potential
clienteles but also ensuring our participation in the development of Bangladesh Capital
Market.
4. CDBL Services
Full Depository Participant (DP) Service.

BO (Beneficial Owner) account opening and maintenance.
Dematerialization and Re-materialization of securities.
Transfers and transmission of securities through CDBL.
Pledging, Un-pledging and confiscation of securities.
Corporate announcement management.
5. Research Services:
LankaBangla Securities Ltd is supported by a competent research team that provides services
among others included:
Economic, market, sector and listed company research reports.

A daily stock market report and market commentary.
A monthly publication on the equity market.
Customized economic and capital market related research.
Designing of training & development sessions related to the capital markets.
6. Trade Execution Service:
LankaBangla Securities Limited provides Trade Execution Service to the clients in the both
Dhaka Stock Exchanges & Chittagong Stock Exchanges.
2.10: Products of LBSL
1. CTA (Cash Trading Account)
Definition:
CTA (Cash Trading Accou nt) is a fac ilit y that is provided to clie nts fo r
trad ing w ith t heir own fina nce.
Features:
Orders can be received through email, telephone or fax.
Trade execution confirmation is provided to
client.
Regular emailing of Portfolio Statement.
Eligibility:
An y cit izen of Banglad es h.

Age mu st be above eighteen.
Docu ment Requirement:

For Institutiona l Trading Accou nt:
Board Resolution.
Memorandum and Articles of association.
Specimen signature of account operators.
Letter of Authorization.
A valid photo ID of the Managing Director.
Valid photo ID of Account Operator(s).
For Ind ividual Trading Account:
Accou nt Op ening Form and Signature Card duly filled up.

Va lid passport or national ID card photo cop y.
Two copies p assport size pho tograph of accou nt holder.
One co p y passport size photo graph of authorized person (if any).
2. FTA(Foreign Trading Account)
Definition:
FTA (Foreign Trading A ccount) is a fa cilit y t hat is provid ed to the foreign
inst itutional clients, compris ing of different funds, internatio nal brokers,
banks etc, who are interested in trading Ba ngladeshi securities.
Features:
Dedicated booth for foreign trades with
access to Bloomberg terminal on the trading
desk.
Orders can be received through email,
Bloomberg EMSX, IB, fax.
Trade execution confirmation can be
provided through email, Bloomberg EMSX,
IB, fax (according to client preference).
Settlement done through DvP RvP basis.
Execution updates are provided time to time.
Eligibility:
F oreign intuit iona l clients only.
Bo ard reso lution authorizing t he acco unt opening and the s ignatories to
sign on behalf of the company.
Specimen Signatu re (inc luded sep arately or in attac hed account opening
fo rm).
Cop y of the Memorandum and Articles of Associat ion.
Cop y of the Certific ate of Incorpo ration.
One Cop y o f a valid photo ID of each account operator.
Va lid photo ID of the CEO/Managing Dire ctor of the company
3. MTA (Margin Trading Account)
Definition:
MTA (Margin Trad ing Accou nt) is a fac ilit y t hat is provided to clients fo r
trad ing wit h margin loan. The mar gin lo an and interest rate ca n be varied wit h
respect to market condition.
Features:
Orders can be received through email,

telephone or fax.
Trade execution confirmat ion is provided to
client.
Regular emailing of Portfolio Statement.
Eligibility:
Any cit ize n of Bangladesh.

Age must be above eighteen.

For Institutiona l Trading Accou nt:
Board Resolution.
Memorandum and Article s o f association.
Specimen signature o f account operators.
Letter of Authorizatio n.
Valid p hoto ID of Account Operator(s).
For Ind ividual Trading Account:
Account Opening F orm and Signature Card duly filled up.

Valid p assport or national ID card photocop y.
Two copies passport size p hotograph o f account holder.
One cop y passport size photograph of authorized p erso n (if any).
4. NITA (Non Resident Investors Taka Account)
Definition:
NITA (Non Resid ent Investo rs Taka Account) is a fac ilit y t hat is provid ed to
non-resident ind ividuals/institutions includ ing non-resident Bangladeshi
nat iona ls who are interested in trading Ba ngladeshi securities a gainst fo reign
exchange remitted from abroad.
Features:
Non-resident portfolio investors have to open a
Non-resident Investors Taka Account (NITA) with
any authorized dealer in Bangladesh funding the
purchase and easy repatriation of the sales and
income proceeds.
Securities can be purchased only through a
member/registered broker of the stock exchange.
E.g. LankaBangla Securities Ltd. (LBSL).
However, public issues not yet listed in a stock
exchange can be bought directly from the issuing
company.
For the purpose of trading securities, investors
need to open a security account/trading account
with stock broker listed with the exchanges. E.g.
LBSL
Funds from NITA can be used to purchase shares
and securities listed in a stock exchange.
The balances in this account are freely remittable abroad in foreign exchange.
Eligibility:
Non-Resident individuals (Foreigners and NRBs).
Foreign intuitions.
Institutions located abroad which are owned by NRBs.
For Institutional Trading Account:
Company NITA A/C number with custodial bank or A/C statement.
Board Resolution.
Memorandum and Articles of association.
Specimen signature of account operators.
Letter of Authorization.
Valid photo ID of Account Operator(s).
For Individual Trading Account:

Account Opening Form and Signature Card duly filled up.
Individual NITA A/C Number with custodial bank or A/C statement.
Valid passport or national ID card photocopy.
Two copies passport size photograph of account holder.
One copy passport size photograph of authorized person(if any).
2.11: Shareholding Pattern of LBSL
Share-outstanding Pattern
Sponsor / Director (LBFL) 90.91%
Government 0
Institute 5.69%
Foreign 0
Public 3.40%
Table 2.11: Pattern of shareholding Fig 2.11: Percentage of Shareholding
Total shares of 96250700 shares 90.91 percentages of shares which is equal to 87501511
numbers of shares is being held by the sponsor director of the company and rest 5.69% which
is equal to5476665 shares is being held by the Institutional investor and remaining 3.40%
which is equal to 3272524 numbers of shares is being held by the general public. The
government holding have no shares in their name. Though it is not a good sign for the
company that institutional investors are reluctant to invest in this company but the company
is fundamentally very strong.
On the basis of Shareholding:
Class interval No. of Share holder No. of Share % of Total paid up capital
00001 - 10000 52 310,619 0.32%
10001 - 20000 45 689,500 0.72%
20001 - 30000 10 269,502 0.28%
30001 - 40000 22 770,000 0.80%
40001 - 50000 4 175,000 0.18%
50001 - 60000 4 213,500 0.22%
60001 - 70000 2 136,500 0.14%
70001 - 80000 0 - 0%
80001 - 90000 1 87,500 0.09%
90001 and above 18 93,598,579 97.24%
Total 158 6,250,700 100%
2.12: Business Growth analysis
Last 5 years LankaBangla Securities Ltd (LBSL) has seen continuous growth. Due to
market fall in 2010, the company has experienced tremendous growth fall in the following
year. But if we give a closer look in the table it can be infer that company is
growing company. It has significantly maintained a good acceleration rate. Despite world
recession and liquidity crisis company has continuously maintained a growth rate
which enumerated that management efficiency of the company is excellent.
Particulars 2007 2008 2009 2010 2011 Growth (CAGR)

Operating income 219.52 397.3 877.84 2096.79 1231.02 464%
Growth 45% 55% 58% -70%
NPAT 126.82 252.82 638.15 1530.59 747.62 399%
Growth 50% 60% 58% -105%
Total Asset 813.68 1076.84 2013.03 5832.23 6911.94 784%
Growth 24% 47% 65% 16%
NAV Per Share 20.66 31.44 40.32 80.04 49.01 131%
Growth 34% 22% 50% -63%
EPS 11.48 16.52 15.95 28.99 7.77 139%
Growth 31% -4% 45% -273%
Future Outlook:
As the market is running bearish so cost of fund is decreasing so the net interest income
will increase significantly. But investment income from investing in share market will
decrease which is a big part of income composition. So overall income growth composing
of all income sources will decrease. And because of low cost of fund the amount of
revenue from Brokerage will increase which will be good for the company
2.13: Performance Analysis of LBSL

Capital market of Bangladesh went through a sheer bearishness in 2011 due to tight liquidity
scenario and overall economic sluggishness. During the period the DGEN index declined by
36.60%.however at the end of half the year 2012 different regulatory efforts have come to
boost up the market actively and DGEN started to pull back.
Turnover and Market Share of LBSL

2011 2010 2009 2008
Turnover in DSE (BDT mn) 199964.07 492422.93 198992.86 99167.2
Turnover in CSE (BDT mn) 29197.55 67943.10 43217.72 28438.22
Total Turnover (BDT mn) 229161.62 560366.03 242210.58 127605.42
Market Share in DSE 6.41% 6.14% 6.75% 7.42%
Market Share in CSE 7.84% 9.96% 13.34% 14.10%
Significant turnover fall in both the bourses and increase in tax and tax provision has resulted
in 51.15% decrease in the net profit for the year 2011. Though growth of brokerage income
has fallen by about 59.80%.other operational income has increase by more than 500% which
heavily attributable to the increase in the interest income on margin loan facility to client.
Margin loan facility to client has significantly increased in the year 2011 and stood BDT
4310.75mn that triggered the interest income as well as the operational income of the
company.
By seeing all the graphical presentation it can be said that due to market crash all the
growth is negative in the year 2011. Which explains that for the market crash or fall public
tends to invest little money i n t he m ar ke t a s t h e y c a n no t g e t m u c h r et u r n fr o m
t he ir i nve s t me nt .
Return on Equity fallen by 55.56% to 15.85% from the year 2007 to 2011 respectively.
Return on Asset was increasing trend from the year 2007 to 2011 but it decline by 10.50% in
2011 due to the market crash of 2010.
2.13.1: Operating Income Analysis:
LBSL had robust operating income growth like most other brokerage company. It had
generated robust operating income growth of 45%, 55%, 58% and 70% in the year of 2008,
2009, 2010 and 2011. Major part of the operating income was contributed from revenue
from brokerage i.e. 61% in 2011. Second best contributor is other operating income i.e. 31%
of total operating income.
Future Outlook:
LBSL has been able to sustain the top position among the stock brokers in the countries both
DSE and CSE for the last six and seven years respectively and thus it has remained the
market leader in brokerage service. Net interest income growth will remain slow due to
increased cost of fund. Brokerage income for LBSL is expected to increase slightly as the
average turnover in DSE and CSE has started to increase after the drastic fall occurred in
FY2010. There will some investment income as the key benchmark index has increased by
more than 25%.
2.13.2: Total Asset analysis:
By analyzing the growth rate of it can be

said that the amount of total asset is
increasing but not at an increasing rate.
Growth rate is lower comparing in the
year of 2010 due to the bearish market
but as the market goes to bullish trend of
total asset growth rate increased.
2.13.3: Capital Composition:
By analyzing the growth rate of it

can be said that the amount of paid
up capital is increasing but not at an
increasing rate. Growth rate is
almost 9 times from the year 2007
to 2011. The growth rate (CAGR) is
almost 540% from the last five
years.
Future outlook:
Total asset and Paid up capital is increasing trend so it can be easily estimate that the
upcoming years the company will grow it asset as well as paid up capital also.
2.13.4: Shareholder Equity:

LBSL has shareholders equity balance of more than BDT 4,500 mn. Such strong equity base
not only gives advantages over its competitors and, more financially solvent but also gives
more risk absorption capacity.
The above figure shows the growth path of equity and return earning over the year.
Future outlook:
The increasing retained earning mainly defines the increase in equity. Large retained earnings
put LBSL in an advantages position to grab attractive investment opportunity in coming
future.
2.14: Financial Highlights of LBSL
BDT in mn
Particulars 2011 2010 2009 2008 2007
Financial Result
Authorized Capital 5000 1000 1000 250 250
Paid up Capital 962.51 550 400 153 110.5
Shareholders equity 4716.76 4,402.27 1612.64 481.09 228.27
Total Asset 7698.24 6,535.55 2012.44 602.93 291.98
Total Liabilities 2981.48 2133.28 1083.42 660.82 627.41
Operational Result
Revenue from brokerage 758.51 1886.9 842.74 376.28 204.10
Capital gain from investment in share 11.94 86.38 9.92 5.37 0.00
Interest Income 82.93 69.19 19.32 14.37 22.39
Total Operating Income 1231.06 2,096.79 877.84 397.30 219.52
Operating expense 126.96 137.34 107.32 80.07 58.63
Profit before tax 1066.57 1811.05 698.27 277.84 140.07
Profit after tax 747.62 1,530.59 638.15 252.82 126.82
Financial Ratios
Current Ratio 2.88 3.4 2.94 1.99 1.44
Debt Equity Ratio 12.82% 13.94% 38.19% 33.93% 38.43%
Return on Average Asset 10.50% 33.16% 33.25% 25.31% 22.02%
Return on Equity 15.85% 34.77% 39.58% 52.55% 55.56%
Share Information
No. of outstanding 96.25 55 40 15.3 11.05
Net Asset Value per Share 49.01 80.04 40.32 31.44 20.66
Earnings Per Share 7.77 28.99 15.95 16.52 11.48
Table 2.14: Financial Highlights
Analysis:
LankaBangla Securities Limited (LBSL) has lost its net profit in 2011. But it earn an
astounding 139.85% growth in Net Profit in 2010 to BDT 1530.58 million largely backed by
a quantum growth of 123.91 percent of Brokerage Income. Further analysis of Net Profit in
2011 decrease by 70% reveals that LBSL has been able to control its operating expenses
which have decreased by 8% percent only. Therefore, Earnings per Share (EPS) has
decreased to BDT 7.77 in 2011 from BDT 28.99 in 2010. In 2011 Return on Equity (ROE)
and Return on Asset (ROA) stood at 15.85% and 10.50% respectively. The balance sheet of
the company strengthened in 2011. Shareholders Equity increased by 7% in 2011. Finally
the Balance Sheet size of LBSL i.e. Net Total Asset increased significantly by 15% and
reached at BDT 7698.24 million as on 31 December, 2011.
My internship program in LBSL in Research and analysis department in the corporate branch.
For first few days I have been provided orientation and familiarization of different jobs of
Research and Analysis department in full detail. Then I was assign to collect information
from different source of different industry in DSE, particularly in Banking,
Pharmaceutical And Mutual Fund. At the time of collecting information I learnt about
the prospect of different industry. I got knowledge about the size, Purpose of the
company, Management body, Subsidiaries, Auditors of the company, growth rate, number
of employees, Branches import export scenario. I also learnt about the financial
information of listed company in DSE, such shareholding pattern, dividend history, turnover
growth, profit growth Right issue etc.
So I had gathered an in-depth knowledge Stock market of Bangladesh.
3.1: Job Responsibilities
The job responsibility in my internship program was the Research and Analysis
Department . The main responsibilities are described below:
Prepare fundamental information for company analysis and equity research findings
from different industry from annual report, LBSL database, DSE website etc.
Organizing the information and producing interim reports on contemporary
macroeconomic issues
Providing assistance in preparing daily news of LBSL, market pulse (monthly issue of
LBSL)
Help in industry analysis.
Uploading information in the LBSL website and LBSL financial portal
(www.lankabangla.duinvest.com)
Help in presenting the report to the key decision makers.
3.2: Observation and Recommendation
There is some critics and observation which I noticed through my internship program. If
those problems are solved, the internship program can be more effective for students willing
to complete their program in LBSL. They are:
A new intern who joins in Research and Analysis department has to spend the whole
program in collecting information for industry analysis. This time period sometimes make
interns feel bored and gets uninterested about the job. There should be more job rotation.
Interns should be given the opportunity to do complex jobs in minimal way to make them
feel that their work is adding significant value to the organization. So, they become more
inspired to work hard.
Many companies dont feel comfortable disclosing their business information to

outsiders. Collecting information from them is a tough task. Addresses of the companies
are collected using internet, and online directory. Sometimes the address turn to be wrong
and therefore it becomes a hassle for interns to make contact with the company.
Interns should have the opportunity to work in all departments to get full overview of
Brokerage Company.
One of the major observations from my program will be the behavior of the officer. They
behave very friendly with the interns and make them feel comfortable and also willing to
provide any type of help regarding job and also in internship report by providing
necessary informations.
The overall treatment with intern in LBSL in terms of behavior was helping, quite
good and friendly. Officers of different dept encourage the intern to their job properly;
also provide help and support of their jobs which is very remarkable.
Part - 1 Overall Performance Analysis of Selected Banks.
Banks have passed through a decade of heydays. During the last decade, banks showed
tremendous growth in their balance sheet size, and prot and protability. Overall qualities of
assets and provision against those assets have improved signicantly. Total balance sheet
sizes (In terms of assets) of the private commercial banks have improved from 1194911.41
Million to 3560533 Million in ve years. Total loan portfolio stood at 2587394 Million here
as it was 846579.9 million in 2006. Banks generated their operating income from four key
sources- net interest income, investment income, commission, exchange and brokerage, and
other operating income.
After 2007 banks got heavily involved in capital market. They increased their exposure in
capital market through acquiring merchant banking license and brokerage license. Banks
heavily increased their direct exposure through proprietary investment. Until 2011, they
heavily benetted from the capital market bonanza. Other fee based incomes were also
increasing with the increased amount of remittance inow and trade nancing growth.
Banks also saw abundant liquidity ow in the money market. In 2010 they saw lowest rate in
interbank repo rate (i.e. call money rate). Banks were able to maintain a widening spread
despite lowering the average lending rate. M2 growth rate in 2010-11 was 21.34% and in
2009-10 it was 22.43%. This high money supply growth created excess into the books of
banks, which found way to capital market. This huge money supply growth created capital
market boom and contributed to the price level hike in the economy. Banks seemed to follow
lax credit policy and persuaded aggressive consumer and trade nancing, which also found
their way into real estate bonanza and capital market boom. When ination rate got up to a
dangerous level, BB decided to pull rein money supply. Economic activities slowed and
capital market fell for the shortage of liquidity, both of the earnings windows became narrow
for the banks.
Under the current scenario bankers are scratching their head how to get out of this messy
situation and continue growth in the coming days. But it seems that banks might have to
consolidate for a while before growing to new high. Recently several regulatory changes have
rocked the short term protability of the banking sector. The Bangladesh Bank has shortened
the time period and asked for more stringent provisioning. This will have a negative impact
on the banks protability.
Here I have tried to analyze the development and growth of 30 Selected Private Commercial
Banks of Bangladesh and make a broad estimate about the protability and bottom line of the
private commercial banks of Bangladesh
Only listed 30 banks in DSE I select for the analysis. These are:
Year Market
Name of Bank of Capitalization
Listing (mn)
1 AB Bank 1983 16366.35
2 Al-Arafah Islami Bank 1998 18184.00
3 Bank Asia 2004 15386.03
4 Brac Bank 2007 13183.49
5 City Bank 1986 18451.16
6 Dhaka Bank 2000 12229.10
7 Dutch Bangla Bank 2001 23720.00
8 Eastern Bank Ltd (EBL) 1993 20719.00
9 Export Import Bank Of Bangladseh (EXIM) 2004 24079.03
10 First Security Islami Bank 2008 7218.88
11 ICB Islami Bank 1990 5450.56
12 International Finance Investment And 1986 12699.94
Commerce Bank (IFIC)
13 Islami Bank 1985 52040.10
14 Jamuna Bank 2006 10321.33
15 Mercantile Bank 2004 12710.37
16 Mutual Trust Bank (MTBL) 2003 6333.31
17 National Bank Ltd. (NBL) 1984 36057.92
18 National Credit And Commerce Bank (NCC) 2004 14390.09
19 One Bank 2003 10321.74
20 Prime Bank 2000 32471.27
21 Premier Bank 2007 8618.61
22 Pubali Bank 1984 31274.23
23 Rupali Bank 1986 15741.00
24 Shahjalal Islami Bank 2007 16252.19
25 Social Islami Bank Ltd (SIBL) 2000 13363.31
26 South East Bank 2000 18251.68
27 Standard Bank 2003 10673.15
28 Trust Bank 2007 8752.45
29 Uttara Bank 1984 13358.05
30 United Commercial Bank Ltd (UCBL) 1984 24429.06
Total 523047.39
Table 4.1: Listed banks in DSE

4.1.1: Growth of Branches of Selected Banks:
Table shows the growth pattern of number

of branches of selected 30 banks. The
growth of branches is highest in First
Security Islami Bank. But Rupali Bank has
highest number of branches i.e. 503. The
lower growth percentage is in ICB Islami
Bank. Till 2011 ICB Islami Bank had 33
branches. Islami bank has the highest
number of branches (266) among the private
commercial bank.
Fig: 4.1.1: Growth of Branch
2007 2008 2009 2010 2011 Growth (CAGR)

Total Branch 2397 2564 2903 3232 3485
9.81%
Yearly Growth 6.97% 13.22% 11.33% 7.83%
Table 4.1.1: Branch Growth
4.1.2: Growth of Employee of Selected Banks:
No of employees of selected banks

have been shown in table: 2. the
highest no of employees are working
in IBBL i.e. 11465 and lowest in
Standard Bank. The growth
percentage is higher in DBBL (75%)
and lowest in Uttara Bank.
2007 2008 2009 2010 2011 Growth (CAGR)

Total Employee 51355 55076 61967 69484 78445
7.25% 12.51% 12.13% 12.90%
11.17%
Yearly Growth
4.1.3: Growth of Deposit of Selected Banks:
Table shows growth pattern of deposits

of selected banks. Total Industry
growth is 24%. It is observed from the
table that the deposit is highest in IBBL
that is TK 341853.67 Million in 2011.
The growth percentage of Standard
Bank is highest that is 42% in 2011.
The lowest growth percentage of
deposit is in ICB Islami Bank Ltd. that
is 8% in 2011. During 2007 to 2011
every year deposit selected bank has
increased from the previous year. So it
is reflected from the table that the
deposit of all the selected banks have
showed an increasing trend during the
period of 2007-2011.
2007 2008 2009 2010

2011 Growth
(CAGR)
Deposit 1,223,538.06 1,521,835.18 1,922,348.47 2,349,977.06 2,876,860.13
24%
Yearly Growth 24.38% 26.32% 22.25% 22.42%
4.1.4: Growth of Total Loans & Advances of Selected Banks:
The growth pattern of total loan and

advances of selected 30 banks of
Bangladesh are reflected from table.
It is reflected from the table that
almost every years loan and
advances of selected banks of
Bangladesh has increased from the
previous year. The highest growth of
loan and advances is more than 41%
in Shahjalal Islami Bank. The lowest
growth observed in ICB Islami Bank.
The industry growth of Loans and
Advance is 18.35% in year 2011.
2007 2008 2009 2010 2011 Growth (CAGR)

Loans & 1007333 1307276 1595493 2082036 2464117 25.06%
Advance
Yearly Growth 29.78% 22.05% 30.49% 18.35%
4.1.5: Classified Loans of Selected Banks:
It is observed from table that the classified loan of AL-Arafah, CITY and PRIME Bank is
very low i.e. about 1.5%. It seems that AL-Arafah, CITY and PRIME is able to manage
credit efficiently as a result recovery is quite good. The percentage of classified loan
is Highst in ICB Islami Bank ie 57.27%. The classified loan of MTBL and Islami bank has
crossed the double digit.
Percentage of NPL to Total Loans and advances

AB BANK 2.82% ICB I BANK 57.27% PREMIER BANK 4.28%
ALARAFA BANK 1.05% IFIC 4.06% PUBALI BANK 2.02%
BANK ASIA 2.72% ISLAMI BANK 28.88% RUPALI BANK 5.94%
BRAC BANK 5.82% JAMUNA BANK 2.86% SHAHJALAL BANK 1.89%
CITY BANK 1.43% MERCANTILE BANK 2.61% SIBL 4.26%
DHAKA BANK 3.45% MTBL 36.62% SOUTH EAST 3.51%
DUTCH BANGLA 2.75% NBL 2.83% STANDARD BANK 2.19%
EBL 1.91% NCC BANK 2.66% TRUST BANK 3.02%
EXIMBANK 4.54% ONE BANK 4.47% UTTARA BANK 5.22%
FIRST S I BANK 1.94% PRIME BANK 1.37% UCBL 1.79%
Table 4.1.5: NPL to Total L & A
Fig 4.1.5: Total NPL

4.1.6: Growth of Net Income of Selected Banks:
It is observed from the analysis that the

net income of most of banks has
increased from the previous year during
2007 to 2011. It is also reflected that all
the selected banks has earned net
income in all the year during 2007 to
2011. Net profit growth of Al- Arafah
Bank is more than 161.10%. But the top
profit gainer is Islami bank through the
five years. Top three banks in respect of
NPAT is Islami, BRAC and NBL. The
growth rate of net income is lower ICB,
Rupali and AB bank; they earn negative
income from the previous year.
2007 2008 2009 2010 2011 Growth

(CAGR)
NPAT 19928.68 24998.4 38586.29 60818.44 56153.69
29.56%
Yearly Growth 25.44% 54.36% 57.62% -7.67%
4.1.7: Paid Up Capital of Selected Banks:
It is observed from the analysis that the

paid up capital of most of banks has
increased from the previous year during
2007 to 2011. It reflects the upward trend
of the paid up capital. The highest Paid
up capital growth is UCBL i.e. 122.07%.
But the top paid up capital in absolute
amount is Islami bank ie BDT 10007.71
mn. Next three banks in respect of
absolute paid up capital is EXIM, NBL
and SouthEast Bank. The growth rate of
paid up capital is lower Rupali, BANK
ASIA, STANDARD Bank.
2007 2008 2009 2010 2011 Growth(CAGR)

Industry Paid 49,419.39 59,670.49 75,476.85 109,424.89 149,894.99
up capital 31.90%
Yearly Growth 17.18% 20.94% 31.02% 27.00%
4.1.8: Total Assets of Selected banks:
Table shows the growth pattern of Total Asset of selected 30 banks. The growth of asset is
highest in Shahjalal Islami Bank ie 39.46%. But Islami Bank has highest Asset till
December 2011 i.e. BDT 502613.05 mn. The lowest asset is Rupali Bank ie BDT 14483.63
mn. The lower growth percentage is in ICB Islami Bank. Till 2011 its lost its .29% of
asset from 2007 to 2011.
Fig 4.1.8: Total Asset Growth
2007 2008 2009 2010 2011 CAGR

Industry Avg Asset 2046579 1858234.77 2320026 2937242 3558886.309 14.83%
Growth -10.14% 19.90% 21.01% 17.47%
Table 4.1.8: Total Asset Growth

Part - 2 Capital Market Performance.

4.2.1: Shareholding pattern Analysis:
From the analysis of 30banks its observed that general Public is the holder of most portion of
share i.e. 43.92%. Sponsor/ Director are the second portion of holding. Recently SEC
introduced a rule that is Sponsor/director must hold 2% of share individually and
cumulatively by 30%. But CITY, EBL, PUBALI, UTTARA bank has below 15%. So these
banks must increase their portion of shareholding.
4.2.2: Market Value per share:
It is observed from the analysis that the Market price of the share is an upward trend till 2010
but in year 2011 it is fallen significantly.
Its indicate the market was overpriced
crash and the banks are lost its value of
share. Its reflected in the following
figure.
In year 2010 the yearly growth of market

price of share is highest i.e. 33.67%.
2011 its reduce to 54.76% from 2010.
So the bank price reduced significantly.
2007 2008 2009 2010 2011 CAGR

Industry Avg Market Price 65.10 57.94 64.76 86.56 39.16 -12%
Growth -11.01% 11.77% 33.67% -54.76%
4.2.3: Price Earnings Ratio (P/E):
P/E ratios depend on the Net profit and

Market price of the share. From the
analysis it is observed that the P/E Ratio
is in highest position in 2010 but in year
2011 it is fallen significantly by 31.21%
from previous year. The reason is the
reducing market value of the share. Its
reflected in the following figure.
2007 2008 2009 2010 2011 CAGR

Industry Avg P/E 19.40 20.12 15.62 17.23 11.85 -12%
Growth 3.69% -22.37% 10.35% -31.21%
4.2.4: Net asset Value per Share:
The net worth available to ordinary

shares divided by the number of
outstanding ordinary shares give net asset
value or book value of share. From the
table it is easily shows that Book value of
share is an increasing trend, only 2009 its
reduced largely by the preceding year.
2007 2008 2009 2010 2011

Industry Avg NAV 23.59 23.94 22.44 23.84 25.71
2.17%
Growth 1.48% -6.28% 6.22% 7.86%
4.2.5: EPS of Selected Banks:
It is reflected from the table that the EPS of all the selected commercial banks are very high
during 2007 to 2008. It is also reflected that average EPS of Jamuna and Islami Bank is
more than 40%. It is indicates the selected private commercial banks are earning very high
profit in year 2008. The selected banks EPS reduced from 2010 to 2011. The EPS of DBBL
is 10.8 it is the highest among the selected bank.
2007 2008 2009 2010 2011 CAGR

Industry Avg EPS 4.13 6.53 5.95 4.87 3.88
-1%
Growth 58.18% -8.80% -18.24% -20.18%
Table 4.2.5: EPS of Selected banks
Fig 4.2.5: EPS of Selected banks

Part - 3 Performance Analysis By CAMELS Rating.
4.3.1: Capital Adequacy:

Presently, a banking company is to maintain 10% of Risk Weighted Assets (RWA) or Tk.
200.00 crore whichever is higher as its minimum required capital. The banks have
already been advised by the Central Bank to increase their capital up to Tk. 400.00 with a
minimum Paid up capital of Tk. 200.00 crore which is to be achieved within 2011.
Capital Adequacy Ratio (%)

BANK 2007 2008 2009 2010 2011
AB BANK 10.75 12.84 11.09 9.91 11.37
ALARAFA BANK 10.92 11.21 11.25 14.49 13.47
BANK ASIA 11.28 11.25 10.01 8.11 14.88
BRAC BANK 12.28 12.76 12.45 12.07 11.6
CITY BANK 12.6 11 11.3 11.2 12.8
DHAKA BANK 10.36 11.84 11.31 10.09 10.7
DUTCH BANGLA 11.8 10.9 11.6 9.6 11.2
EBL 13.53 12.71 11.34 10.81 10.77
EXIMBANK 11.23 10.79 11.18 9.95 10.88
FIRST S I BANK 9.15 9.15 10.91 9.09 9
ICB I BANK 8.05 8.54 8.91 9.17 9.02
IFIC 9.43 8.56 9.21 9.78 10.13
ISLAMI BANK 10.61 10.72 11.65 11.06 13.09
JAMUNA BANK 12.42 11.91 12.83 9.5 11.27
MERCANTILE BANK 11.67 10.17 10.48 9.13 10.6
MTBL 10.19 10.39 9.2 11.49 11.96
NBL 13.11 13.42 8.61 12.29 12.65
NCC BANK 10.61 10.61 13.55 10.91 11.26
ONE BANK 10.25 11.02 10.9 9.69 11.24
PRIME BANK 11.5 10.88 14.71 11.69 12.49
PREMIER BANK 12.66 12.71 15.14 10.01 10.55
PUBALI BANK 9.15 9.57 10.91 9.79 9.89
RUPALI BANK 8.64 8.97 9.24 9.47 11.71
SHAHJALAL BANK 16.62 13.81 9.52 10.08 11.4
SIBL 10.71 10.87 14.97 9.33 13.17
SOUTH EAST 13 11.12 11.72 11.25 11.46
STANDARD BANK 18.61 15.42 13.56 10.32 11.39
TRUST BANK 12.21 12.81 12.66 9.09 11.3
UTTARA BANK 10.13 10.91 13.55 10.91 11.62
UCBL 9.28 10.34 9.22 6.31 10.87
Industry Avg. 11.43 11.24 11.43 10.22 11.46
Table 4.3.1: CAR of Selected banks
Fig 4.3.1: CAR trend of selected banks
From the table, we find that F i r s t Security IslamaiBank, ICB Islami Bank and Pubali
bank are unable to meet the required capital in 2011. Bank Asia, A1-Arafah, Islami Bank and
SIBL achieved a very strong c a p i t a l adequacy percentage over the period. There is an ups
and downs 0f CAR of the industry over the period.
4.3.2: Asset Quality:
The assets composition is basically based on banks' loans and advances. If the assets
concentration is very high compared to capital base then it seems to be vulnerable to
credit risk and it indicates danger when NPL is huge. A huge non performing loan has
been one of the main problems of banks .One of the most key indicators anticipated to
find out troubles with assets quality in loans and advances is the ratio of NPL to loans.
Percentage of NPL to Total Loans and advances

AB BANK 2.82% ICB I BANK 57.27% PREMIER BANK 4.28%
ALARAFA BANK 1.05% IFIC 4.06% PUBALI BANK 2.02%
BANK ASIA 2.72% ISLAMI BANK 3.88% RUPALI BANK 5.94%
BRAC BANK 5.82% JAMUNA BANK 2.86% SHAHJALAL BANK 1.89%
CITY BANK 1.43% MERCANTILE BANK 2.61% SIBL 4.26%
DHAKA BANK 3.45% MTBL 6.62% SOUTH EAST 3.51%
DUTCH BANGLA 2.75% NBL 2.83% STANDARD BANK 2.19%
EBL 1.91% NCC BANK 2.66% TRUST BANK 3.02%
EXIMBANK 4.54% ONE BANK 4.47% UTTARA BANK 5.22%
FIRST S I BANK 1.94% PRIME BANK 1.37% UCBL 1.79%
Table 4.3.2: NPL to Total L & A of Selected banks
Fig 4.3.2: NPL to Total L & A of Selected banks
Most of the bank is in strong position in %of NPL to total loan ratio. ICB Islami bank is the
worst performance of the entire bank. Overall trend of industry asset quality is improving
over the years as the NPL ratio is decreasing. The trend is shown in the above figure.
4.3.3: Management Soundness:
Sound management is the most important pre-requisite for the strength and growth of
any financial institution. Since indicators of management quality are primarily specific to
individual institution, these cannot be easily aggregated across the sector. In addition, it is
difficult to draw any conclusion regarding management soundness based on monetary
indicators, as characteristics of a good management are rather qualitative in nature.
Nevertheless, the total expenditure to total income, operating expenses to total expenses,
earnings and operating expenses per employee, and interest rate spread are generally used to
gauge management soundness. In particular, a high and increasing expenditure to
income ratio indicates the operating inefficiency that could be due to flaws in management.
2007 2008 2009 2010 2011

Expenditure to 91.4 90.4 87.9 72.6 73.1
income ratio
Table 4.3.3: Expenditure to income Ratio
As I have mentioned earlier that management flaws can be detected from the
operational inefficiency and operational inefficiency can be detected from high and
increasing expenditure-income ratio.
Fig 4.3.3: Expenditure to income Ratio

4.3.4: Earnings:
Present and future operation is supported by the strong profitability and earning profile of a
bank. Strong profitability and earning position of a bank also build the capacity to absorb
future losses if any which strengthen the capital adequacy of a bank. Earning and
profitability also helps to expand its network of business and enable to pay satisfactory
dividend to the share holder. To measure earning and profitability of a bank, there are a
number of variab les. Among these variables, Return on Asset (ROA) and Return
on Equity(ROE) are mostly used. Return on asset and Return on equity is anticipated to be
high enough to demonstrate the profit soundness of a bank.
Return on Assets (ROA):

Return on Assets (ROA) indicates the productivity of assets i.e. how much income is earned
from per unit of assets. According to Basel- accord, ROA should be more than 1%.
The analysis shows that ICB Islamic bank achieved nearly zero percent of ROA over
the whole period. The scenario of Rupali, IFIC, MTBL and TRUST Bank is below 1%. In
the year of 2011 time ROA was reduced from the year 2010. The reason behind this worse
scenario is over borrowing from banking sector by the govt, reducing remittance flow etc.
ROA position of BRAC, NBL and PRIME Bank are well strong over the whole period.
Return on Equity (ROE):

Return on Equity (ROE) is another important measure of earning and profitability
determination which indicates net income after tax to total equity. The amount of profit
generation for the equity shareholders is found from the ratio. Higher value of ROE is an
indication of high productivity of equity.
The analysis shows that ROE position of Jamuna, Pubali, and EBL and are well strong
over the whole period on the basis of CAGR growth. ICB Islamic bank achieved negative
growth of ROE over the whole period. In the year of 2011 time ROE was reduced from
the year 2010 in significant portion. The reason behind this worse scenario is over
borrowing from banking sector by the government reducing remittance flow, and crash in
capital market etc. its imply the performance of banking sector on the basis of Return on
Equity is not satisfactory.
4.3.5: Liquidity:
Commercial banks' demand and time liabilities are at present subject to a statutory liquidity
requirement (SLR) of 19.0 percent inclusive of average 6.0 percent (at least 5.5 percent in
any day) cash reserve ratio (CRR) on bi-weekly basis. The CRR is to be kept with the
BB and the remainder as qualifying secured assets under the SLR, either in cash or in
Government securities. SLR for the banks operating under the Islamic Shariah is 11.5
percent. The trend of excess liquidity is shown in below:
2007 2008 2009 2010 2011

Liquid Asset 19.2% 20.8% 16.6% 19.0% 18.1%
Excess Liquidity 6.9% 7.9% 8.4% 9.0% 6.4%
Fig 4.3.5: Position of liquidity
Liquidity indicators measured as percentage of demand and time liabilities (excluding

inter-bank items) of the banks indicate that although all the banks had excess liquidity but
the amount was lower than the previous two years. Selected 30 banks maintain a moderate
liquidity ratio which varies from 10.1% to 6.4% over the whole period. Excess liquidity
indicates available loan able fund at low cost.
4.3.6: Sensitivity to market risk:
Sensitivity to market risk assesses the ability to cope with the adverse situation. Under this
component, it is observed that how the bank is responding to different market risks i.e. how
it is managing/mitigating the market risks, how the bank is reducing the possible negative
impact that may arises from market risks. Bangladesh bank gives much importance on this
component after the first inclusion from 2006. Both questionnaire and numeric rating of
different risk components are done in this component.
4.3.7: Composite rating of 30 banks
CAMELS rating are a supervisory tool to identify those banking companies that are having
problems and require increased supervision. Under this rating system, banking companies
are assigned two sets of ratings-
(i) Performance ratings, based on six individual ratings that address six components of
CAMELS (capital, assets, management, earnings, liquidity and sensitivity to market risk)
(ii) An overall composite rating, based on a comprehensive assessment of the overall

condition of the banking company.
Both the ratings are expressed by using a numerical scale of "1" to "5" in ascending order
of supervisory concern, "1" representing the best rating, while "5" indicating the worst. Any
bank rated 4 or 5 i.e., 'Marginal' or 'Unsatisfactory' under composite CAMELS rating is
generally identified as a problem bank, activities of which are closely monitored by the BB.
Rating Description percentage
1. Strong 1.00-1.49
2. Satisfactory 1.50-2.49
3. Fair 2.50-3.49
4. Marginal 3.50-4.49
5. Unsatisfactory 4.50-5.00
On the basis of six components of CAMELS banks are rated from 2007 to 2011.
Rating 2007 2008 2009 2010 2011

1 or Strong 2 3 4 2 6
2 or Satisfactory 21 17 19 17 15
3 or Fair 6 5 4 5 7
4 or Marginal 3 2 4 1
5 or Unsatisfactory 1 2 1 2 1
Total 30 30 30 30 30
Table 4.3.7: CAMELS Rating from 2007-2011

Table shows that on the basis of CAMELS rating the number of rating in '1' or strong
is much higher from 2007 to 2011; six banks are ranked as 1 or Strong. The ranked 5
is treated as problem bank I C B I s l a m i c b a n k i s t h e o n l y o n e b a n k t h a t
c o nt a i n e d i t s p o s i t i o n i n u n s a t i s f a c t o r y b a n k . Ranked 4 & 5 fall into 'Early
Warning'. So, in 2011, there are two banks which are brought under Early Warning
for close monitoring and supervision to improve their performance
CAMELS Rating 2011

A-class or Strong Banks B-class or Satisfactory Banks
1 Prime Bank Limited 1 Premier Bank Ltd.
2 Standard Bank Limited 2 Southeast Bank Ltd
3 Pubali Bank Limited 3 First Security Bank Ltd.
4 Islami Bank Bangladesh Limited 4 Jamuna Bank Ltd.
5 Dhaka Bank Ltd. 5 AB Bank Ltd.
6 Al-Arafah Islami Bank Ltd. 6 IFIC Bank Ltd.
C-class or Fair Banks 7 Dutch-Bangla Bank Ltd.
1 The City Bank Ltd. 8 Shahjalal Islami Bank Ltd.
2 One Bank Ltd. 9 National Bank Ltd.
3 Eastern Bank Ltd. 10 Bank Asia Ltd.
4 The Trust Bank Ltd. 11 Exim Bank Ltd.
5 BRAC Bank Ltd. 12 NCC Bank Ltd.
6 Mutual Trust Bank Ltd. 13 Mercantile Bank Ltd.
7 Social Islami Bank Ltd. 14 Uttara Bank Ltd.
D-class Banks or Marginal 15 United Commercial Bank Ltd.
1 Rupali Bank Ltd.
E-Class Banks or Unsatisfactory
1 ICB Islamic Bank Ltd.
Table 4.3.7.1: CAMELS Rating 2011
Table shows that on the basis of CAMELS rating in year 2011, there are 6 banks A class or
Strong Bank. 15 banks are B category or satisfactory bank. ICB Islami Bank is the only E-
Class or unsatisfactory bank.
4.3.8: Overall Findings of the Analysis
The journey of Private commercial banks has started in Bangladesh in the year 1982-1983.
After commencement the private commercial play a vital role in the economic
development of the country. The selected private commercial banks create employment
opportunities for more than seventy five thousand people. It has been observed that the net
income of the selected private commercial banks have increased from the previous year
during 2007 to 2011. It is also reflected from the analysis that the EPS of all the selected
commercial banks are high during 2007 to 2011. It indicates the profitability of all the
selected banks is quite satisfactory. Loans recovery rate indicated that the banks are able to
manage their credit efficiently.
Seven trend equations have been tested for different activities of the private commercial
banks. Among them the trend value of branches, employees, deposits and net income
are positive incase of all the selected banks. Square of correlation coefficient (r2) has
also been tested for all trend equations. The r2 of branches deposits and net income is
more than 0.5. It indicates the prospect of private commercial banks in Bangladesh is very
bright.
It has been identified that although almost every years loans and advances of selected
private commercial banks have increased from the previous year.
Part - 4
Performance Analysis of Selected Banks
(Half Yearly-2012).
In the last one and half years, banking industry have seen turmoil in its core and augmented
business segments. After 2011, suddenly the rosy scenario for the banks has reversed. Call
money rate is shooting on a regular basis to the record high level of history. Net interest
income for many banks has gone down sharply. On top of that government is burdening the
balance sheet of the banks by binding the banks to take low yielding treasury bills and bonds.
Central bank has raised the repo rate which is now stabilized at 7.75%. Banks are sitting with
unrealized loss in their proprietary portfolio. Capital market subsidiaries of the banks are
seeing side by side decline in profit, rising non-performing loan in margin loan portfolios.
Due to political pressure bankers are unable to get out of this messy condition.
Here I have tried to examine and make a broad estimate about the protability and bottom
line of the private commercial banks of Bangladesh. In order to do so we have examined the
latest quarterly update, impact of the regulatory changes and future economic scenario for the
banks.
Though the net interest income is expected to shrink, I have seen banks are successfully
increasing their interest income. But we are skeptical how long the banks will be able to
sustain the increasing interest spread without the subsequent rise of underlying loans and
advances growth. Investment Income will feel the blow from stock market. Banks will have
to book loss in capital market investments. I expect that this loss will be partially offset by
excessive investment income from government treasury securities.
Due to the declining trend of export and import and slow capital market operation, I expect
that the banks will show negative growth in commission, exchange and brokerage segment.
Last year, banks boosted their other income segment by different asset sales and revaluation.
This trend is unlikely to continue in 2012. Last year other income showed 38% industry wide
growth. Private commercial banks have large operating leverage of around 38% of total
operating expense. I expect that the operating expense will continue to rise, though the
growth rate (operating expense) will be subdued.
On the other hand, the economy is growing at a decent pace of 6% so even if every aspects
seems gloomy with the increasing economic prosperity banks will be able to bring things
into orders soon. So, hopefully it is expected that with a stable economic environment banks
are likely to turn themselves into positive growth territory from the next scal year.
Banking industry climbing up on superior interest spread:
Another looming period is continuing. Last year (2011) was the toughest year for the banks.
Increasing government borrowing, slumping stock market, declining export -import and
illiquid money market had collectively put pressure on the top line of the bank. Despite that
private banking industry exhibited strong resilience showing around 16% growth in
operating income and relatively meager negative growth (-11%) in net prot in 2011.
Conversely, the year 2012, started with tight monetary policy clearly stating to contain the
interest spread of the bank. To implement that policy and satisfying the IMFs step, BB had
withdrawn interest cap from deposit and lending. Moreover, Bangladesh government had
revised its borrowing target (from 19000 crore to 29000 crore) from the banking channel
during the last half of previous scal year. In addition, economic situation was even worst
compared to the previous half of 2011.
Net Interest Spread Scenario
January 5.63
February 5.68
2012
March 5.58
April 5.55
May 5.45
June 5.6
January 5.2
February 5.15
2011
March 4.93
April 4.96
May 5.14
June 4.87
January 5.2
2010
February 5.24
March 5.21
Source : Bangladesh Bank
intensied the pressure on hard-earned protability of the banks. Generally, a bearish

sentiment has been formed among the investors that whether banking industry could exhibit
growth in earnings or not in the rst half of 2012. Despite all these hurdles, banks have
witnessed reasonable growth in operating income in the rst half of 2012 relying on growing
interest spread. However, the protability growth couldnt sustain in positive zone as due to
increasing provisioning.
The following analysis will recap the half yearly performance (2012) of private banking
industry.
4.4.1: Growing net interest income rescue the industry from declining operating
income:
Operating income of private commercial banks grew by 16%

during the rst half of 2012, which was quite relevant to the
credit or balance sheet growth of the industry. During this
similar period, industrys credit balance grew by 20% and the
total balance sheet size increased by 25% respectively.
Moreover, this reasonable growth in operating income is
mainly facilitated by growing interest spread in the banking
industry. In 2012s half yearly, net interest income comprised
of 53% of total operating income, whereas it was 46% in
2011.
Apparently, this growing contribution attributed to the

superior interest spread. Besides, nine primary dealer banks
performed poorly compared to other private commercial
banks as they had little exibility to expand their credit
growth in high yield segments.
Operating income growth compared to previous quarter (2012-11)

Growth above 20% Growth below 20% Growth below 10%
EXIMBANK 72% MERCANBANK 17% UTTARABANK 9%
SHAHJABANK 52% EBL 16% IFIC 9%
ALARABANK 48% MTBL 13% JAMUNABANK 7%
SIBL 42% CITYBANK 12% UCBL 7%
STANDBANKL 38% RUPALIBANK 12% BRACBANK 7%
PUBALIBANK 30% DHAKABANK 11% NCCBANK 5%
ISLAMIBANK 30% ABBANK 4%
DUTCHBANGL 28% ICBIBANK -4%
FIRSTSBANK 26% NBL -5%
TRUSTBANK 26% PREMIERBAN -6%
PRIMEBANK 21% ONEBANKLTD -11%
BANKASIA 20% SOUTHEASTB -14%
The top growing banks in terms of operating income were EXIMBANK (72%),
SHAHJABANK (52%), ALARABANK (48%), SIBL (67%), STANDBANKL (38%) and
PUBALIBANK (42%) respectively.
Conversely, the worst performers were SOUTHEASTB (-14%), ONEBANK (-11%),
PREMIERBAN (-6%), NBL (-5%) and ICBIBANK (-4%) respectively.
4.4.2: Policy pressure couldnt lessen the interest spread rather it increased:
Net interest income of banking industry has shown resilience
against the tight monetary situation and ongoing economic crisis.
In the rst half of 2012, net interest income of thirty private
commercial banks stood at BDT 60749 million, which was 34%
higher than that of previous half. According to the monetary
policy (Jan-June 2012), Bangladesh bank had planned to squeeze
the interest rate spread below 5% (except for SME lending and
consumer lending). For that reason, BB had drawn back the
interest cap on lending and deposit. Consequently, it had initiated
unhealthy competition in banking business by raising deposit and
lending rate in Unsustainable level. Afterward, ABB (Association
of Bankers of Bangladesh) had self-imposed on their lending and
deposit rate,
Which eventually reined in growing

deposit and lending rate. However, the last
half yearly performance is evident that the
steps taken in monetary policy were hardly
reected in the listed banks performance.
During this period, banking industry had
relished larger interest spread than the
previous half yearly of 2011, which had
helped the industry in recording 34%
growth in net interest income. Moreover,
call money rate was signicantly higher in
last six months (Jan-June, 2012), so having
excess liquidity had helped the bank in
making return from overnight lending.
Net Interest income growth compared to previous quarter (2012-11)

Growth above Growth below Growth below
50% 50% 20%
EXIMBANK 176% STANDBANKL 47% CITYBANK 13%
DHAKABANK 78% TRUSTBANK 44% MERCANBANK 12%
SHAHJABANK 74% ISLAMIBANK 41% NCCBANK 6%
SIBL 67% UCBL 40% ABBANK 4%
BANKASIA 64% ONEBANKLTD 34% RUPALIBANK 3%
ALARABANK 61% PUBALIBANK 34% NBL 2%
EBL 59% IFIC 33% SOUTHEASTB -9%
BRACBANK 54% MTBL 32% PREMIERBAN -13%
DUTCHBANGL 53% FIRSTSBANK 26% ICBIBANK -16%
PRIMEBANK 24% UTTARABANK -24%
JAMUNABANK -40%
Exim Bank was the top performer in terms of net interest income growth in the rst half of
2012, which followed by DHAKABANK, SHAJABANK, SIBL and BANKASIA
respectively. There were nine banks who recorded growth above 50% in 2012 HY.
Moreover, most of the primary dealer banks recorded poorer growth in net interest income
as they had large exposure in low yield government treasury bills and bonds.
4.4.3: Low yield treasury facilitates investment income growth:
Interest income from government treasury bills and bonds,

dividend income and capital gains from sale of shares are the
major contributors in investment income of the banks.
During the rst of 2012, investment income of private
commercial banks stood at BDT 21783 mn, which was 7.4%
higher than that of previous half. Its quiet apparent that
interest income was the prime contributor in investment
income as most of the PD banks recorded superior growth in
this segment. However, this growth came at the cost of net
interest income, as the banks had to support the government
borrowing rather than the private lending. Moreover, stock
market was highly volatile and in waning mode in 2012 as
well, for that reason portfolio income wasnt that much
sufcient to boost up the investment income growth.
Investment income growth compared to previous quarter (2012-11)

ALARABANK 312% PRIMEBANK 37% BANKASIA 9%
EXIMBANK 114% NCCBANK 30% ABBANK 7%
SHAHJABANK 96% PREMIERBAN 27% DUTCHBANGL -8%
STANDBANKL 91% MERCANBANK 24% IFIC -12%
NBL 77% SIBL 23% SOUTHEASTB -21%
UTTARABANK 71% MTBL 22% EBL -23%
FIRSTSBANK 67% TRUSTBANK 19% DHAKABANK -27%
ISLAMIBANK 64% CITYBANK 16% BRACBANK -53%
JAMUNABANK 56% RUPALIBANK 14% UCBL -53%
PUBALIBANK 56% ONEBANKLTD -82%
ALARABANK, EXIMBANK, SHAHJABANK, STANDBANKL, NBL and

UTTARABANK were the top growing banks in terms of investment income.
4.4.4: Declining overseas transactions reduce the commissioning and

brokerage income:
Commissioning and brokerage income recorded negative

growth (-4%) as the countrys overseas transaction were in
sluggish phase during the last scal year (2011-12). In 2010-
11 (scal year), export and import growth was 41% and
41.43% respectively, whereas in 2011-12, export and import
growth declined to 5.9% and 7.08%. Moreover, in next scal
year, BB has targeted only 8% growth in export and import,
which is 7% lower than the targeted growth of previous scal
year. But it is anticipated this growth might be lower as raw
material import is declining over the last couple of months.
Moreover, European economy is far from reaching to the
recovery.
Commissioning and Brokerage income growth compared to previous quarter (2012-11)

FIRSTSBANK 29% ABBANK 6% TRUSTBANK -1%
JAMUNABANK 29% SOUTHEASTB 6% PRIMEBANK -5%
SHAHJABANK 24% BRACBANK 3% PUBALIBANK -10%
ONEBANKLTD 14% EXIMBANK 3% RUPALIBANK -10%
STANDBANKL 13% EBL 3% PREMIERBAN -11%
SIBL 12% ISLAMIBANK 2% IFIC -11%
MERCANBANK 1% UTTARABANK -12%
CITYBANK 1% MTBL -15%
BANKASIA -19%
DUTCHBANGL -21%
NBL -23%
UCBL -23%
ALARABANK -25%
DHAKABANK -26%
NCCBANK -28%
ICBIBANK -57%
4.4.5: Operating expense growth has beaten the income growth:
Operating expense is one of the major components of

banks income statement, on which banks protability
relies considerably. Last year, operating expense growth
took toll on banks protability. Compared to the previous
half yearly, operating expense of private banking industry
grew by 24%, whereas operating income grew by 16%. But
this time, operating expense came up with higher growth
due to realization of portfolio losses or charge of loan
losses as well. For instance, NBLs operating expense
increased by 126% in the rst of 2012, as they have
realized revaluation losses on treasury investment
Operating Expense growth compared to previous quarter (2012-11)

NBL 126% EBL 27% MTBL 20%
FIRSTSBANK 63% NCCBANK 25% ONEBANKLTD 20%
UTTARABANK 45% ABBANK 24% SHAHJABANK 18%
UCBL 44% RUPALIBANK 24% EXIMBANK 16%
ALARABANK 38% PUBALIBANK 22% DHAKABANK 13%
DUTCHBANGL 35% PRIMEBANK 21% SOUTHEASTB 13%
CITYBANK 35% BANKASIA 20% JAMUNABANK 11%
PREMIERBAN 34% BRACBANK 10%
SIBL 31% MERCANBANK 7%
TRUSTBANK 31% ICBIBANK 4%
ISLAMIBANK 3%
STANDBANKL 0%
IFIC -8%
4.4.6: Increasing provisioning causes falloffs of the earnings:
Private banking industry prot decreased by -8% during the

rst half of 2012. This time industry protability is mainly
deteriorated by the increasing provisioning. Moreover,
according to new loan loss classication and provisioning
guideline, banking industry has to come up with higher
amount of NPL and eventually provisioning at the end of this
year. During the rst half of 2012, industry prot stood at
BDT 25000 mn, as against BDT 27145 mn in the rst half of
2011. In terms of prot growth, seventeen banks were in
negative zone and only nine banks were above double digit
growth.
Earnings growth compared to previous quarter (2012-11)

EXIMBANK 82% DUTCHBANGL 9% BRACBANK -3%
STANDBANKL 53% RUPALIBANK 6% ONEBANKLTD -17%
SHAHJABANK 35% FIRSTSBANK 4% UTTARABANK -17%
SIBL 34% PUBALIBANK 4% ABBANK -20%
MTBL 33% SOUTHEASTB -20%
JAMUNABANK 26% EBL -22%
ISLAMIBANK 20% PRIMEBANK -23%
ALARABANK 17% CITYBANK -24%
MERCANBANK 15% NCCBANK -25%
BANKASIA -26%
TRUSTBANK -28%
UCBL -28%
NBL -57%
PREMIERBAN -57%
IFIC -61%
DHAKABANK -69%
ICBIBANK -91%
In addition, the top growing banks (in terms of protability) were EXIMBANK (82%),
STANDBANKL (53%), SHAJABANK (35%), SIBL (34%) and MTBL (33%) respectively.
Operating Income decomposition based on half yearly 2012:
Operating Profit Margin Net Profit Margin

2012 2011 2012 2011
ABBANK 52.12% 59.68% 17.45% 22.66%
ALARABANK 74.93% 73.14% 33.65% 42.32%
BANKASIA 64.96% 65.00% 18.67% 30.20%
BRACBANK 45.82% 47.59% 14.95% 16.47%
CITYBANK 46.48% 55.59% 20.25% 29.72%
DHAKABANK 68.43% 69.04% 8.94% 31.56%
DUTCHBANGL 54.77% 57.25% 22.77% 26.64%
EBL 67.45% 70.26% 20.05% 29.73%
EXIMBANK 67.57% 52.23% 26.24% 24.74%
FIRSTSBANK 48.11% 59.78% 19.82% 24.13%
ICBIBANK -4.83% 3.60% -31.68% -330.20%
IFIC 60.76% 53.63% 7.69% 21.30%
ISLAMIBANK 74.54% 68.01% 33.13% 35.83%
JAMUNABANK 63.57% 64.73% 28.67% 24.47%
MERCANBANK 61.07% 57.46% 21.83% 22.22%
MTBL 39.40% 42.99% 24.06% 20.39%
NBL 46.20% 77.51% 23.40% 51.21%
NCCBANK 65.69% 71.28% 19.52% 27.32%
ONEBANKLTD 63.90% 73.09% 32.47% 34.76%
PRIMEBANK 65.47% 65.53% 17.91% 28.07%
PREMIERBAN 38.89% 57.37% 6.18% 13.50%
PUBALIBANK 64.11% 61.73% 22.08% 27.66%
RUPALIBANK 56.48% 60.73% 23.18% 24.29%
SHAHJABANK 76.67% 69.92% 25.24% 28.41%
SIBL 67.93% 65.40% 21.74% 22.91%
SOUTHEASTB 72.29% 78.77% 28.11% 30.43%
STANDBANKL 75.37% 65.93% 25.67% 23.25%
TRUSTBANK 56.42% 57.92% 17.11% 29.90%
UTTARABANK 39.11% 53.95% 19.91% 26.26%
UCBL 51.95% 64.42% 14.07% 20.89%
Table 4.4.6: Profit Margin scenario

Income Distribution
Net Interest Income Investment Income Commissioning and brokerage income Other income
UCBL 72.39% 7.78% 13.16% 6.67%

UTTARABANK 28.06% 49.88% 12.81% 9.26%
TRUSTBANK 48.88% 25.30% 18.61% 7.21%
STANDBANKL 59.68% 14.46% 19.58% 6.27%
SOUTHEASTB 22.79% 42.66% 29.98% 4.56%
SIBL 63.37% 4.81% 24.57% 7.25%
SHAHJABANK 63.01% 1.29% 28.73% 6.97%
RUPALIBANK 47.41% 25.49% 18.91% 8.20%
PUBALIBANK 70.89% 11.19% 12.67% 5.25%
PREMIERBAN 41.02% 24.31% 19.33% 15.34%
PRIMEBANK 40.80% 30.05% 21.14% 8.01%
ONEBANKLTD 60.42% 7.13% 26.19% 6.26%
NCCBANK 35.45% 44.05% 15.75% 4.75%
NBL 42.60% 36.13% 14.39% 6.88%
MTBL 32.53% 38.17% 20.52% 8.78%
MERCANBANK 23.35% 35.68% 22.28% 18.69%
JAMUNABANK 23.84% 45.83% 24.22% 6.10%
ISLAMIBANK 72.83% 1.47% 21.71% 3.99%
IFIC 43.44% 27.12% 18.35% 11.09%
ICBIBANK 79.94% 0.00%
1.27% 18.80%
FIRSTSBANK 76.17% 4.25% 13.57% 6.01%
EXIMBANK 58.39% 2.02% 28.96% 10.63%
EBL 56.55% 15.52% 25.21% 2.72%
DUTCHBANGL 62.19% 10.89% 11.69% 15.23%
DHAKABANK 56.27% 21.60% 17.22% 4.90%
CITYBANK 58.38% 15.85% 14.95% 10.82%
BRACBANK 56.02% 13.31% 27.19% 3.48%
BANKASIA 50.48% 21.66% 22.22% 5.64%
ALARABANK 70.77% 4.04% 14.75% 10.44%
ABBANK 40.14% 24.45% 32.92% 2.48%
Fig 4.4.6: Income Distribution
4.4.7: New loan loss classication by Bangladesh bank:
Finally, Bangladesh Bank has come up with new loan loss classication and provisioning
guideline, which is seemingly stricter than the previous classication guideline. BB has
issued this circular in order to conrm discipline in the banking sector. But the timing is
really a disputing issue. When banking industry as a whole is struggling in showing prot,
then denitely it will bring additional burden in the industry. Industry stakeholders are
anticipating that the new loan loss classication will increase the non-performing assets of
the industry 200 to 300 basis points. Eventually, it will increase the provisioning amount
signicantly in 2012 reducing banks protability.
This is the immediate impact on banks nancial. But the post impacts are equally important
for the industry. It is expected that capital adequacy ratio may be affected by the declining
protability; consequently it is going to inuence the lending growth negatively. Moreover,
credit rating of the bank may drop, as protability and Non-Performing loan are the
components of that rating. But provisioning coverage ratio and the assets quality of the banks
will improve over the longer period.
The following table has summarized the new loan loss classication guideline
Current classication
Classified in Special Classified in Classified in Doubtful Classified in Bad debt
Loan Types
Mention Account Substandard Category Category Category
If the loan overdue If the loan overdue for If the loan overdue for If the loan overdue
Continuous
for 2 3 Months or beyond, 6 Months or beyond, for 9 Months or
Loan
Months or beyond but not over 6 months but not over 9 months beyond
If the loan overdue
If the loan overdue If the loan overdue for If the loan overdue for
for 9 Months or
Demand Loan for 2 Months or 3 Months or beyond, 6 Months or beyond,
beyond
beyond but not over 6 months but not over 9 months
If the amount of past If the amount of past If the amount of past
due installment(s) is due installment(s) is due installment(s) is
equal to or more than equal to or more than equal to or more than
If the loan overdue
Fixed term the amount of the amount of the amount of
for 2 Months or
Loan installment(s) due installment(s) due Installment due
beyond
within 3 months, the within 6 months, the within 9 months, the
entire loan will be entire loan will be entire loan will be
Classified. Classified. Classified.
Previous classification
Classified in Special Classified in Classified in Doubtful Classified in Bad debt
Loan Types
Mention Account Substandard Category Category Category
Continuous
for 3 Months or 6 Months or beyond, 9 Months or beyond, for 12 Months or
Loan
beyond but not over 9 months but not over 12 months beyond
Demand Loan for 3 Months or 6 Months or beyond, 9 Months or beyond, for 12 Months or
beyond but not over 9 months but not over 12 months beyond
If the amount of past If the amount of past If the amount of past
If the loan overdue due installment(s) is due installment(s) is due installment(s) is
Maturity
for 3 Months or equal to or more than equal to or more than equal to or more than
less than
5 years beyond the amount of the amount of the amount of
installment(s) due installment(s) due installment(s) due
Fixed within 6 months within 12 months within 18 months
term
Loan If the amount of past If the amount of past If the amount of past
If the loan overdue
due installment(s) is due installment(s) is due installment(s) is
Maturity for 3 Months or
equal to or more than equal to or more than equal to or more than
above 5 beyond
years the amount of the amount of the amount of
installment(s) due installment(s) due installment(s) due
within 12 months within 18 months within 24 months
Table 4.4.7: Comparison of Loan Classification

4.4.8: Provisioning Scenario 2012:
Over the years NPL ratio of private commercial banks

decreased due to close monitoring of Bangladesh bank. Once
it was 6%, now it has declined to 3%. But new loan loss
classication guideline will increase the non-performing
loan ratio substantially due to onetime adjustment at year
end. The amount of total NPL of private banking industry
stood at BDT 72.02 billion at the end of 2011 or 12% higher
than that of previous year. In the rst quarter of 2012,
provisioning growth was only 4% compared to previous
quarter. But in half yearly account, banks recorded
signicantly growth in provisioning by 43%. In addition, this
upward trend in provisioning will keep continuing in
forthcoming quarters.
Provisioning growth compared to previous quarter (2012-11)

ALARABANK 981% ABBANK 43% UCBL -1%
TRUSTBANK 467% NCCBANK 33% PREMIERBAN -20%
ISLAMIBANK 266% FIRSTSBANK 32% SOUTHEASTB -22%
EXIMBANK 235% DUTCHBANGL 31% RUPALIBANK -37%
BANKASIA 203% UTTARABANK 20% JAMUNABANK -40%
IFIC 165% CITYBANK 14% ONEBANKLTD -45%
DHAKABANK 162% BRACBANK 1% ICBIBANK -93%
PUBALIBANK 138% STANDBANKL 0% NBL -95%
PRIMEBANK 131% MTBL -142%
SHAHJABANK 113%
SIBL 68%
EBL 66%
MERCANBANK 53%
4.4.9: Assessing the probable impact of increased provisioning

requirement:
Recently the rules made by Bangladesh Bank to limit the scope of the banks from unethical
rampant rescheduling. Now the banks will be able to do rescheduling for only three times.
Rescheduling time horizon will be different for different kinds of loan. This rule will break
down a long cycle of rescheduling culture. This is expected to raise the NPL ratio from the
3rd quarter of 2012, when this is expected to start implementing.
Provisioning Requirement Rule

Special Mention Account (SMA) 5%
Sub-Standard 20%
Doubtful 50%
Bad/Loss 100%
PCBs
Addition Provisioning % of
Possible Scenario Profit
NPL Required profit
in 2011
NPL Increases by 1,331,215.00 5,324.86 10%
100 Basis Point
NPL Increases by 26,624.30 10,649.72 21%
51,062.78
200 Basis Point
NPL Increases by 39,936.44 15,974.58 31%
300 Basis Point
A scenario analysis is created for the

year 2012 and tested what the
probable impact on the bottom line of
the banks. Three scenarios have been
estimated- if the NPL increases by
100 basis point, 200 basis point and
300 basis point. Average
provisioning requirement is estimated
to be 40% of non-performing loan.
According to these estimates total
provisioning requirement will be
20% of net prot of 2011 if the
NPL rises by 100 basis points, 39%
of net prot of 2011 if the NPL
rises by 200 basis points, 59% of net
prot of 2011 if the NPL rises by
300 basis points. This gure is only a
gross estimation of the possible
scenario which can change under
different circumstances.
4.4.10: Capital Market Performance:
Since January 2011 Key market tracking index of Dhaka Stock Exchange , DSE general
Index has witnessed 45% correction up to June 2012. Although the banking sector was
expected to be fundamentally resilient, they seem to have got equally corrected with the
market.
Resilient Performance (in terms of Price correction)

Changes in
Annualized Trailing Annualized P/E
Bank Capitalization
P/E P/E (Dec 2010)
(Jan 11- June 12)
ISLAMI BANK -8% 6 7.6 12.62
DHAKA BANK -31% 7.3 5.8 15.3
EBL -32% 13.3 9.8 15.24
Worst Performance (in terms of Price correction)

Bank Changes in Annualized Trailing Annualized P/E
Capitalization P/E P/E (Dec 2010)
(Jan 11- June 12)
UCBL -66% 11.4 7.2 25.91
ABBANK -62% 8 10.8 11.41
UBL -61% 16.1 9 31.14
Some highly volatile banks felt correction to the larger extent compared to the market. United
Commercial Bank (UCBL) faltered highest 66% since January 2011. Another rst generation
bank AB Bank lost 62% market capitalization and became the second largest looser among
the listed banks followed by Uttara Bank (61% correction).
On the other hand Islami Bank seems to prove its fundamental strength during the last 18
months with only -8% loss compared to 45% decline for the market during the same period.
The stock has successfully provided protection of wealth for the investors against the bearish
downtrend of the market.
In terms of price to earnings ratio banks are trading at signicantly cheaper valuation
compared to their historical average and valuation level one year ago. For example once
UCBL used to trade at a speculative PE of 25.91 times on December 2010 earnings. After
long spell of correction the stock is trading at a reasonable valuation of 7.2 times trailing PE
and 11.4 times annualized PE. Most other banks have also come down to reasonable
valuation compared to the level they were at during the Bull Run. AB bank is trading at 8
times annualized PE compared to 11.41 times and Islami Bank 6.0 times compared to 12.62
times.
To get a view of the current valuation of banks Price to Book Values is a good indicator. The
industry P/BV is now 1.48 times. There are some banks trading below their book value
(P/BV below 1). By the denition of P/BV these banks are trading at cheap prices. Due to the
upcoming uncertainty about how much protability will be hurt due to the new provisioning
rule, banks may take further beating and it may give opportunist investors to buy banks at
signicant discount to their book value.
Part - 5 Statistical Analysis of Selected Banks.
In this section I find out the trend equation of various variables such as branch
expansion, employees growth, deposit, net income, total asset, EPS, and NAV
growth of the selected banks. Then I try to find out the correlation among them.
Finally, the paper tried to establish the linear relationship among the various variables and
net profit of the banking sector in DSE. I used SPSS 16.0 software for the analysis.
A.Trend Equations of Selected Banks
1: Branch Expansion Analysis:
Appendix Table 5.1 shows the summary of trend equation and r2 of Branch expansion of
selected banks. The trend equation of Number of Branches of selected 30 banks is, 2916.2 +
284.4X and The square of correlation coefficient (r2) = .99.
Interpretation:
The trend equation indicates that during the period from 2007 to 2011 branch increase at the
rate of 284.4 per year and 2916.2 is the average branch of the selected bank.
It is reflected from the table that trend equation of all the selected banks are positive and
goodness of fit of all the equations are very high.
2: Employees growth Analysis:
Appendix Table 5.2 shows the summary of trend equation and r2 of employees of selected
30 banks of DSE. The summary result of the trend equation of Number of Employees of
selected banks is, 63265.4 + 6858.8X and The square of correlation coefficient (r2 ) = .98.
Interpretation:
The trend equation indicates that during the period from 2007 to 2011 employee increase at
the rate of 6858.8 per year and 63265.4 is the average employee of the selected bank.
It is reflected from the table that the trend equation of all the selected banks are positive.
Goodness of fit of all the selected banks are high i.e. more than 0.80 .
3: Deposit growth Analysis:

Appendix Table :5.3 shows the summary of trend equation and r2 of Deposit of selected 30
banks of DSE. The summary result of the trend equation of amount of deposit of selected
banks is, 199729.960 + 40274.790X and The square of correlation coefficient (r2) = .98.
Interpretation:
The trend equation indicates that during the period from 2007 to 2011 deposit increase at the
rate of 40274.790 million BDT per year and 199729.960 million is the average deposit of
selected bank.
Goodness of fit of all the selected banks are very high i.e. more than 0.85.
4: Net Income Analysis:
Appendix Table: 5.4 shows the summary of trend equation and r2 of Net Income of selected
banks. The summary result of the trend equation of amount of net income of selected banks
is, 41524.118 + 11357.307X and The square of correlation coefficient (r2) = .889.
Interpretation:
The trend equation indicates that during the period from 2007 to 2011 net income increase at
the rate of 11357.307 million BDT per year and 41524.118 million is the average net income
of selected bank.
Goodness of fit of all the selected banks are very high i.e. more than 0.70.
5: Total Asset Analysis:

Appendix table: 5.5 Table shows the summary of trend equation and r2 of Total asset of
selected banks. The summary result of the trend equation of amount of asset of selected banks
is, 254419.362 + 41036.218X and The square of correlation coefficient (r2) = .86.
Interpretation:
The trend equation indicates that during the period from 2007 to 2011 Total Asset increase at
the rate of 41036.218 million BDT per year and 254419.362 million is the average Total
Asset of selected bank.
Goodness of fit of all the selected banks are high i.e. more than 0.60.
6: Earnings per Share Growth Analysis:
Appendix Table: 5.6 shows the summary of trend equation and r2 of EPS of selected banks.
The summary result of the trend equation of EPS of selected banks is, 5.036 - .215X and The
square of correlation coefficient (r2) = .09.
Interpretation:
The trend equation indicates that during the period from 2007 to 2011 EPS increase at the
rate of - .215 per year and 5.036 is the average EPS of selected bank.
It is reflected from the table that the trend equation of individual either positive or negative
but the industry average EPS all the selected banks are negative. Goodness of fit of all the
selected banks is very i.e. more than 0.09. the trend equation of Dutch Bangla bank and
National bank are positive and goodness of fit of Dutch Bangla Bank is very high i.e. more
than 0.60.
7: Net Asset Value Analysis:
Appendix Table 5.7: shows the summary of trend equation and r2 of NAV of selected
banks. The summary result of the trend equation of NAV of selected banks is,
24.00 + .315X and The square of correlation coefficient (r2) = .18.
Interpretation:
The trend equation indicates that during the period from 2007 to 2011 NAV increase at the
rate of .315 per year and 24.00 is the average EPS of selected bank.
Goodness of fit of all the selected banks is low. the trend equation of Dutch Bangla bank,
Islami Bank, EBL, One Bank and National bank are positive and goodness of fit of Dutch
Bangla Bank is very high i.e. more than 0. 70.
B. Correlation Analysis
Table shows the correlation matrix for estimating interrelationships between chosen
parameters of all the selected banks. Details table shows in appendix table 5.8.
Variable Net income Deposit Loans Branches Employees
Net income 1 .929 .945 .960 .949
Deposit .929 1 .997 .995 .998
Loans .945 .997 1 .995 .998
Branches .960 .995 .995 1 .999
Employees .949 .998 .998 .999 1
From the correlation matrix we have observed the followings;
Net Income has strong correlation with deposit, loans, branches and employees.
Deposit has strong correlation with net income, loans, branches and employees.
Loans have strong correlation with net income, deposit, branches and employees.
Branches have strong correlation with net income, loans, deposits and employees.
Employees have strong correlation with net income, loans, branches and deposits.
C.Multiple Regression Analysis
In the above section trend equation of banks has been discussed. But it was desired to know
about the sensitivity of profit on various variables. Multiple regression analysis has been done
to analyze the relationship between net profit as dependent variable and Employees,
Branches, expenditure, asset, Loans and Advance, Deposit are as independent variables. In
this report it was assumed that the relationship among the variables was linear, which is
Net Profit = + 1 (Number of Employees) + 2 (Number of Branches) + 3 (Amount of

Expenditure) + 4 (Amount of Asset) + 5 (Amount Loans and Advance) + 6 (Amount of
Deposit)
Where,
is Constant
1 is Number of Employees
2 is Number Of Branches
3 is Amount Of Expenditure
4 is Amount Of Asset
5 is Amount Loans And Advance
6 is Amount Of Deposit
The following section expressed the determination of coefficient of the independent

variables, which indicate the degree of influences on net profit by corresponding variables.
Number
of
Employe
es
Amount Number
of of
deposit Branches
Net
Profit
Amount
amount of
of
loans and
Expendit
advanches
ure
Amount
of asset
Fig 5.C: Relationship of net profit with different variables

Regression Result
Based on data provided in appendix table: 5.9, the values of coefficients and constant were
calculated and also found the relationship among them. Multiple linear regression equation is
expressed in equation:
Net Profit = -183357.447 + 0.0021 + 116.724 2 - 0.186 3 + 0.003 4 - .069 5 + 0.1336
Interpretation:
Above linear equation shows that some of the independent variables have positive
relationship and others have negative. Amount of Expenditure and Loans and Advance
accounts all have negative relationship with net profit. On the other hand, number of
employees, number of branches, amount of asset and amount of deposit has positive
relationship with net profit.
Further, the strength of the relationship among the variables measured by the coefficient of
determination (r2). The value was calculated as 0.86, indicating very strong relationship.
Therefore, the independent variables collectively may play important role on earning net
profit in the banking sector as a whole.
Findings of the result:
In the equation, it is evident that some of the independent variables have positive impact on
net profit, though the degree of influences was very low. Net profit may increases by
increasing values, which have positive relations. From equation, it is clear that number of
employee, number of branches, amount of asset and amount of deposit have positive relations
with net profit.
From above relationship, it can be explained that if number of employee increased by

one, the net profit will increase by Tk. 0.002 crores, i.e. every 1,000 employees can
contribute Tk. 2 crores to net profit. This indicated that there might be still
opportunities to generate employment in this sector and can contribute to the national
economy.
Again number of branches has also positive impact on net profit. Equation reflects
that increase in one branch may increase net profit by the amount of Tk. 0.116 crores,
which also testifies that there was still scope to increase branches. In Bangladesh there
were opportunities to establish branches in the rural areas where lots of business
potentials were looking for the banking service.
Another variable Expenditure has negative relationship with the net profit. Equation
reflects that increase in Tk. 1000crore the net profit will decrease by 186 crore. So for
increasing net profit the expenditure of banking industry must be reduced. But it is
quite impossible in real field.
Another variable the amount of asset has positive relationship with net profit. Even it
has very little influences on profit; every Tk. 1,000 crores of assets would increase net
profit by the amount of Tk. 3 crores. Therefore, it was apparent that there was still
room to increase the amount of asset to earn more profit.
Finally, the amount of time deposit was other variable, which has positive influences
on net profit. Coefficient of this variable in was 0.133, this indicated that every Tk.
1,000 crores increase in deposit would increase profit by the amount of Tk. 133
crores.
Analyzing above relationship, deposit has stronger influences on net profit. Therefore,
banking sector as a whole may increase their contribution to national economy if the
amount of deposit is increased.
Analyzing the regression equation it is clear that some of the independent variables have
positive control over the generation of net profit, and also might increase the contribution of
the banking sector to national economy by increasing the values of those variables.
Recommendation
If the performance of selected banks can be improved in a satisfactory level, the overall
industry performance will be compatible with the emerging and developed economy. An
efficient and sound banking system is desirable to ensure sustainable economic growth in
Bangladesh. The performance of banking sector in Bangladesh can be improved if the
following recommendations are taken into worth consideration:
The government should be taken under proper reform programs to ensure a fruitful
banking performance in all respect.
The high NPLs to loan ratio reduces the efficiency banking operation and
increases the lending rate for adding high risk premium which ultimately hampers the
economic growth. It also creates ethical problem for the good borrowers. the
following measures can be taken to reduce NPL to loan ratio:
Introduction of strict legal action against the defaulters.

Financial Loan Courts and Bankruptcy Courts should be empowered with strict
rules and regulations and with high powered autonomy.
Corporate culture within the bank has to be implemented.
Transparency regarding loan documentation has to be ensured.
Cash flow based lending instead of collateral based lending has to be
introduced.
Reward and punishment system has to be introduced.
Bangladesh Bank has to be strict in classification of loan and required
provision maintenance.
Credit information disclosure is to be easily accessible to identify the defaulters.
Banks should give highest priority in loan recovery which will help to increase the net
interest income of these types of banks.
Excess liquidity should be invested to in productive sector to enhance the

economic growth.
Interest rate spread should be reduced at 2% to 3% to increase lending in

productive sector which fasten economic growth.
The banks which fall in CAMELS rating 4 and 5 are monitored under Early
Warning System (EWS). In 2011, two banks were brought under EWS. These banks
have to be closely monitored.
Special attention should be given for innovation, automation and improved
service
Corporate Governance has to be ensured in all type of banks.
Finally, emphasis has to be given in strengthening securities market in Bangladesh

to compete with the Banking sector so that banking sector phases a competition to
develop their efficiency in operation which eventually increases performance.
Conclusion
The performance of types of banks is not equal and there are some banks which are in need of
monitoring closely to enhance sound banking. It is expected that the overall performance will
be improved in near future provided that appropriate actions are taken in some lagged areas.
An efficient operation of banking sector enables the smooth financial resources

intermediation of an economy. Economic growth is contributed greatly by the efficiency of
banking sector in resources generation and its proper allocation. The smooth and efficient
operation of banking sector also helps to reduce risk of failure of an economy. Therefore, the
performance of banking sector is always been a source of interest for researchers to judge the
economic condition of a country. Regulators of the banking sector always monitors the
performance of the banks to ensure efficient financial system based on CAMELS ratio.
Among all f i n a n c i a l p e r fo r m a n c e a n a l y s i s , s t o c k m a r k e t p e r fo r m a n c e
a n a l ys i s , the CAMELS ratio, recent performance analysis, time series data, correlation,
Multiple regression analysis are most significant are analyzed to judge the performance of
the banking industry in Bangladesh.
Performance is a continuous process and it requires continuous innovation and

improvement to cope with the increasing demand. So, the trend of performance of banking
sector in Bangladesh can be improved if all concerns pays due attention and works according
to requirement of time. It is expected that Banking sectors performance will be more
satisfactory in near future.
I am quite optimistic that if the given suggestions of this paper are implemented then the
Banking sector may be able to overcome its present problems and may contribute in the rapid
development of the economy of Bangladesh.
Appendix
Branch Expansion 5.1:
Model Summary
Adjusted R Std. Error of the

Model R R Square Square Estimate
a
1 .995 .990 .987 52.336
a. Predictors: (Constant), X
a
Coefficients
Standardized
Unstandardized Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) 2916.200 23.405 124.595 .000
X 284.400 16.550 .995 17.184 .000
a. Dependent Variable: Branch
5.2: Employees growth
Model Summary

1 .990a .981 .974 1757.803
Coefficientsa
Standardized
1 (Constant) 63265.400 786.113 80.479 .000
X 6858.800 555.866 .990 12.339 .001
a. Dependent Variable: Employee

5.3: Deposit
Model Summary

a
1 .994 .989 .985 7.8147224E3
a
Coefficients
Standardized
1 (Constant) 199729.960 3494.850 57.150 .000
X 40274.790 2471.232 .994 16.297 .001
a. Dependent Variable: Deposit
5.4: Net Income
Model Summary

a
1 .943 .889 .852 7329.675
a
Coefficients
Standardized
1 (Constant) 41524.118 3277.930 12.668 .001
X 11357.307 2317.847 .943 4.900 .016
a. Dependent Variable: Net Income

5.5: Total Asset
Model Summary
Change Statistics
R Adjusted R Std. Error of R Square

Model R Square Square the Estimate Change F Change df1 df2 Sig. F Change
1 a
2.9918112E
.929 .862 .817 .862 18.813 1 3 .023
4
a
Coefficients
Standardized
1 (Constant) 254419.362 13379.787 19.015 .000
X 41036.218 9460.938 .929 4.337 .023
a. Dependent Variable: Total Asset
5.6: EPS Growth
Model Summary
Change Statistics
Std. Error
R Adjusted of the R Square
Model R Square R Square Estimate Change F Change df1 df2 Sig. F Change
a
1 .301 .090 -.213 1.245 .090 .298 1 3 .623
a
Coefficients
Standardized
1 (Constant) 5.036 .557 9.043 .003
X -.215 .394 -.301 -.546 .623
a. Dependent Variable: EPS

5.7: NAV
Model Summary

1 .422a .178 -.096 1.235
Coefficientsa
Standardized
1 (Constant) 24.000 .553 43.437 .000
X .315 .391 .422 .806 .479
a. Dependent Variable: NAV
5.8: Correlation Matrix
Correlations
NetProfit Deposit LoansAdvance Branch Employee
NetProfit Pearson Correlation 1 .929* .945* .960** .949*
Sig. (2-tailed) .022 .015 .010 .014
N 5 5 5 5 5
* ** ** **
Deposit Pearson Correlation .929 1 .997 .995 .998
Sig. (2-tailed) .022 .000 .000 .000
N 5 5 5 5 5
* ** ** **
LoansAdvance Pearson Correlation .945 .997 1 .995 .998
Sig. (2-tailed) .015 .000 .000 .000
N 5 5 5 5 5
** ** ** **
Branch Pearson Correlation .960 .995 .995 1 .999
Sig. (2-tailed) .010 .000 .000 .000
N 5 5 5 5 5
* ** ** **
Employee Pearson Correlation .949 .998 .998 .999 1
Sig. (2-tailed) .014 .000 .000 .000
N 5 5 5 5 5
Correlations
NetProfit Deposit LoansAdvance Branch Employee

* * ** *
NetProfit Pearson Correlation 1 .929 .945 .960 .949
Sig. (2-tailed) .022 .015 .010 .014
N 5 5 5 5 5
* ** ** **
Deposit Pearson Correlation .929 1 .997 .995 .998
Sig. (2-tailed) .022 .000 .000 .000
N 5 5 5 5 5
* ** ** **
LoansAdvance Pearson Correlation .945 .997 1 .995 .998
Sig. (2-tailed) .015 .000 .000 .000
N 5 5 5 5 5
** ** ** **
Branch Pearson Correlation .960 .995 .995 1 .999
Sig. (2-tailed) .010 .000 .000 .000
N 5 5 5 5 5
* ** ** **
Employee Pearson Correlation .949 .998 .998 .999 1
Sig. (2-tailed) .014 .000 .000 .000
N 5 5 5 5 5
*. Correlation is significant at the 0.05 level (2-tailed).
**. Correlation is significant at the 0.01 level (2-tailed).

5.9: Regression
Model Summary
Change Statistics
R Adjusted R Std. Error of R Square

Model R Square Square the Estimate Change F Change df1 df2 Sig. F Change
1 a
2.9918112E
.829 .862 .817 .862 18.813 1 3 .023
4
a
Coefficients
Standardized
1 (Constant) -183357.447 .000 . .
Branch 116.724 .000 2.770 . .
Employee .002 .000 .100 .
Expenditure -.186 .000 -.4.303
Total Asset .003 .000 .100
Loans & Advance -.069 .000 2.106 . .
Deposit .133 .000 1.022

.
.
a. Dependent Variable: Net Profit

References
Newspaper:
1. The Financial Express
2. Daily Bonik Barta
3. Daily Prothom-Alo
4. The Daily Star
Websites:
1. www.lbsl.com
2. www.dsebd.org
3. www.sec.org
4. www.businesstoday.com
5. en.wikipedia.org
6. www.bloomberg.om
7. www.bracepl.com
8. www.stockbangladesh.com
9. www.bdstock.com
10. www.bangladesh-bank.org
Report:
1. LankaBangla Annual Report (2009-2011)
2. Bangladesh Bank Annual Report, (2007-2011).
3. Bangladesh Economic Update, March 2012
4. Major Economic Indicators: Monthly Update September, Volume 09/12
5. Bangladesh Bank Manual for Ratio Analysis and CAMEL Rating System (2006).
6. International Monetary Fund country report, February 2011 no.10/38, Bangladesh: Financial
System Stability Assessment (FSSA) p.4
Journal:
i. Avkirin, N. K. (1995), Developing an Instrument to Measure Customer Service Quality in
Branch Banking, International Journal of Banks Marketing, Vol. 12(6), pp. 10-18.
ii. Mamun Rashid, banking sector in Bangladesh, The Financial Express, VOL 20 NO 320
REGD NO DA 1589 | Dhaka, Tuesday April 17 2012
iii. B. Nimalathasan, A comparative study of financial performance of banking sector in

Bangladesh An application of CAMELS rating / Annals of University of Bucharest,
Economic and Administrative Series, Nr. 2 (2008) 141-152
iv. Tanbir Ahmed Chowdhury and Kashfia Ahmed (2009). Performance Evaluation of
Selected Private Commercial Banks in Bangladesh. International Journal of Business
and Mangement. Vol-4,
v. Mohammad Jahid Iqbal (2012), Banking Sector's Performance In Bangladesh- An

Application Of Selected Camels Ratio
vi. A A Rushdi (2009). Performance Measure for the Commercial Banks in Bangladesh: An
Application of Total Factor Productivity. AIUB Bus Econ Working Paper Series, No 2009-
01, http://orp.aiub.edu/WorkingPaper/WorkingPaper.aspx?year=2009
vii. Salahuddin Ahmad and Dilli Raj Khanal (2007), Services Trade in Developing Asia: A case
study of the Banking and Insurance Sector in Bangladesh. Asia-Pacific Research and
Training Freund, C. (2009). The trade response to globaldownturns. Section II, Article 7, in
The great trade collapse: causes, consequences and prospects, CEPR, November, p.9.
viii. Mohammad Moqbul Hossain Bhuiyan. (1995). Managerial Effectiveness of Private

Commercial Banks : A Comparative Study. Journal of Business Studies, Vol. XVI,
No-1, June 195.
ix. Sujit Ranjan Saha. (1996). Ancillary Business and Profitability of Banks: Trends and
Prospects. Bank Parikrama. Vol. XXI, Nos - 1 & 2, March & June.
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Earning and Loss Incurring Rural Bank Branches in Bangladesh. Bank Parikrama.
Vol. XIX, Nos - 3 & 4, September & December.
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2011.

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INTERNSHIP

Banking Industry in Bangladesh:

Md. Arefin Dewan

D ATE OF SUBMISSION: N OVEMBER 5, 2012

Subject: Submission of Internship Report.

Md. Arefin Dewan

Md. Arefin Dewan

The report is originated in result of my internship program which I have done as a

Chapter Title Page

No. Title Page

Figure Title Page

ALM Asset Liability Management

Banking sector plays an important role in the economic development of a country

1.2: Literature Review

1.3: Background of the Study

1.4: Significance of the Study

To complete my BBA degree it is a must.

More specifically, this study entails the following aspects:

Present a brief view of LankaBangla Securities Limited, and its operation in

1.6: Methodology and Variables

Net Profit = + 1 (Number of Employees) + 2 (Number of Branches) + 3 (Amount of

1.7: Sources of Information

Primary Sources of data:

The primary data of this report were collected through:

Secondary Sources of data:

I have gathered the secondary data via following sources:

Annual Reports of Dhaka Stock Exchange and LankaBangla Securities Limited

1.8: Limitation of the Study

2.1: Overview of the company

Table 2.1: LBSL at a glance.

LankaBangla Securities Limited (LBSL) is a subsidiary of LankaBangla Finance Limited and

2.2: Corporate Achievements of LBSL

Commenced trading on the Dhaka Stock Exchange (DSE)

Renamed LankaBangla Securities with effect from 27 April 2005 following a

Inaugurated Integrated Back Office Software System first ever in Bangladesh

Tagged with BDJOBS for stockmarket training as a part of CSR

Sponsor Shareholding of Financial Excellence Limited

Increased paid up capital to BDT 962.5 mn

introducing a full-fledged Financial Web Portal & Order Management

Fig 2.2: Corporate Achievement

2.3: Vision of LBSL

Growing together with our stakeholders by implementing the most comprehensive,

2.4: Mission of LBSL

2.5: Goals of LBSL

2.6: Values of LBSL

Fig 2.6: Values of LBSL

2.7: Strength of LBSL

Exceptional quality and professionalism

An experienced and dedicated senior

A trained and professional sales team

A competent equity market research unit

The widest network of local branches

Ability to provide a one stop service

State of the art technology utilized in

International affiliation with

Fig 2.7: Strength of LBSL

2.8: Strategic Priorities

Offloading share to the equity market as soon as possible.

2.9: Services of LBSL

Fig 2.9: Services at a glance

2. Trading Facility through NITA (Non Resident Investors Taka Account)

Full Depository Participant (DP) Service.

Economic, market, sector and listed company research reports.