Posted on 29th Dec 2024 11:46:14 PM Banking, Finance
Executive Summary
This research report is based on financial statements of 2010, 2011, 2012, 2013 and 2014 of Dhaka Bank PLC. My faculty supervisor helped me to choose the topic “Financial Performance Analysis of Commercial Banks: A Case Of Dhaka Bank PLC”.
In the new competitive business era, private banking sector is getting more competitive in Bangladesh. In this sector the most used financial statements are the balance sheet and profit and loss account where the balance sheet shows the financial position and profit and loss account shows the net profit or net loss of a bank. Ratio Analysis deals with these statements. Ratio analysis is the most popular trend to evaluate a bank’s performance over years or with other companies in an industry. In my report I had to study Financial Performance Analysis of Dhaka Bank PLC’s financial statements for the period 2010 to 2014 then had to analyze and give significant comments regarding the changes in the financial position. Analysis and interpretation of these financial statements through ratio analysis has now become an important technique for performance appraisal because the investors, financial experts, management executives and the bankers are always rely on these ratios to make important decisions. The management team of any bank, investor and the government agencies always concern about liquidity ratios and adequacy ratios of a bank which interprets the efficiency of a bank.
As a part of my MBA program, I have spent 14 weeks in Financial Performance Analysis of Dhaka Bank PLC. I have analyzed the financial statements of Dhaka Bank PLC to find out its ratios by using its past and current records. After preparing this report I came to know that analysis of financial statements through ratios helps to overcome the past flaws and make the future decisions and strategies. Therefore, it is very necessary for every organization whether the company’s size is to make financial statement and to analyze it by ratios.
1.1 Introduction
The word “Bank” means the financial institution dealing with money. The principal reason of banks chartered by the government and the central bank is to make loans to their customers. Banks are expected to support their communities with an adequate supply of credit for all legitimate business and consumer financial needs and to price that credit reasonably in line with competitively determined interest rates. Indeed, making loans is the principal economic function of banks to fund consumption and investment spending by businesses, individuals, and units of government. How well a bank performs its function has a great deal to do with the economic health of fits region, because banking performance support the growth of new businesses and jobs within the banks trade territory and promote economic vitality. Moreover, bank loans often seem to convey positive information to the marketplace about a borrower’s credit quality, enabling a borrower to obtain more and perhaps somewhat cheaper funds from other sources. In the 80’s for the first time a number of banks in the private sector were allowed. Dhaka Bank PLC is one of them. Today the banking concept is not continuing inside the branches or the cabin of the branches. The bankers are now practicing the non-cabin banking. The assurance of the availability of the service provider is main factor in bank service. As a result, it has become essential for every person to have some idea on the bank and banking procedure. There are 56 scheduled banks in Bangladesh who operate under full control and supervision of Bangladesh Bank which is empowered to do so through Bangladesh Bank Order, 1972 and Bank Company Act, 1991. There are 6 State Owned Commercial Banks (SOCBs) which are fully or majorly owned by the Government of Bangladesh. 2 specialized banks are now operating which were established for specific objectives like agricultural or industrial development. These banks are also fully or majorly owned by the Government of Bangladesh. There are 39 private commercial banks (PCBs) [31 conventional PCBs and 8 Islami Shariah based PCBs] which are majorly owned by the private entities. There are 9 Foreign Commercial Banks (FCBs) are operating in Bangladesh as the branches of the banks which are incorporated in abroad. There are now 4 non-scheduled banks in Bangladesh which are Ansar VDP Unnayan Bank, Karmashangosthan Bank, Probashi Kollyan Bank, Jubilee Bank. Even though banking sector in Bangladesh is going through a radical change, it still suffers from chronic inefficiency. The biggest problem of Bangladesh banking system is the bank loan default problem. Various initiatives have been undertaken to tackle the loan default problem in Bangladesh. One of them is to have a credit policy, procedures and guidelines mandated by the Bangladesh Bank.
1.2 Objectives of the Report
This research report is prepared to fulfill the requirements for the degree of Master of Business Administration (MBA) under the Department of Finance and Banking, University of Rajshahi. More specifically, this study entails the following aspects:
1.3 Methodology
In order to generate this report only secondary data has been used. The secondary sources that have been used to gather and collect data are given below-
1.4 Limitation of the Report
It’s a great opportunity for me to a make a report on the financial performance of Dhaka Bank PLC but there were some limitations while making this report like I tried my level best to contact or talk to some high officials for more detailed information and consultation but they could not manage time for me. The main constraint of the study is insufficiency of information, which was required for the study. There are various information which should not be provided due to security and other corporate obligations.
1.5 Literature Review
Generally financial performance of banks and other financial institution measured by using combination of financial ratio analysis, benchmarking, measuring performance against budget or mix of these methodologies(Avkiran,1995).The comparative financial performance of banking sector conducted by using CAMELS rating system (Nimalathasan, 2008). The performance of Malaysian Islamic bank carried out by using financial ratios (Samad and Hassan).The South African commercial banks performance measured by financial ratios analysis (Kumbiari and Webb, 2010).Performance of selected Indian commercial banks has done by view growth in asset, profit, revenue, investment and deposit (Jaladhar, Anchula and Achari, 2011). EVA (Economic Value Added) is modern financial measurement tool that determines if a business is earning more than its true cost of capital (Gabriela et al, 2009). While analyzing performance of AXIS bank ratios and correlation analysis is used (Shrivastava et al, 2011). Financial performance analysis is vital for the triumph of an enterprise. Financial performance analysis is an appraisal of the feasibility, solidity and fertility of a business, sub-business or mission.
1.6 An Overview of Dhaka 4 Bank PLC
Dhaka Bank PLC is the leading private sector bank in Bangladesh offering full range of Personal, Corporate, International Trade, Foreign Exchange, Lease Finance and Capital Market Services. Dhaka Bank PLC is the preferred choice in banking for friendly and personalized services, cutting edge technology, tailored solutions for business needs, global reach in trade and commerce and high yield on investments, assuring Excellence in Banking Services.
1.7 History of Dhaka Bank PLC
Dhaka Bank PLC is a scheduled bank that was incorporated under the Companies Act 1994, started its operation on July 1995 with a target to play the vital role on the socio-economic development of the country. Aiming at offering commercial banking service to the customers’ door around the country. This organization achieved customers’ confidence immediately after its establishment. Within this time the bank has been successful in positioning itself as progressive and dynamic financial institution in the country. This is now widely acclaimed by the business community, from small entrepreneur to big merchant and conglomerates, including top rated corporate and foreign investors, for modern and innovative ideas and financial solution.
References
Table of Contents
1.1 Introduction
1.2 Objectives of Report
1.3 Methodology
1.4 Limitation of the Report
1.5 Literature Review
1.6 An Overview of Dhaka Bank Limited
1.7 History of Dhaka Bank Limited
1.8 Corporate Information
2.1 Financial Performance analysis
2.2 Objective
2.3 Summary
2.4 Analysis
2.4.1 Liquidity Ratio
2.4.1.1 Cash ratio
2.4.1.2 Loan to total deposit ratio
2.4.1.3 Loan to total asset ratio
2.4.1.4 Core deposit ratio
2.4.1.5 Deposit composition ratio
2.4.1.6 Cash position indicator
2.4.1.7 Liquid securities indicator
2.4.1.8 Capacity ratio
2.4.2 Credit risk ratio
2.4.2.1 Equity to asset
2.4.2.2 Equity to net loans
2.4.3 Asset activity ratio
2.4.3.1 Fixed asset turnover
2.4.3.2 Net asset turnover
2.4.4 Profitability ratio
2.4.4.1 Return on asset
2.4.4.2 Return on equity
2.4.4.3 Return on deposit
2.4.4.4 Interest spread
2.4.4.5 Net interest margin
2.4.5 Leverage ratio
3.1 Findings
3.2 recommendations
Conclusion
References
Research, Report, Financial, Performance, Analysis, Commercial, Dhaka, Bank, PLC, Liquidity, Cash, Loan, Deposit, Asset, Core, Indicator, Capacity, Credit, Risk, Leverage, Ratio, Equity, Fixed, Net, Return, Asset, Turnover, Interest, Spread
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