Posted on 30th Dec 2024 10:31:30 PM Banking, Finance
Executive Summary
The commercial banks have been playing a commendable role in achieving the economic growth of Bangladesh. Default culture in many of the banks is a chronic problem. The four selected banks are Arab Bangladesh Bank, Dutch-Bangla Bank, One Bank and National Bank. The object of the study is to focus the performance indicators of banking activities of Bangladesh through highlighting their Growth, profitability and liquidity during the period of 2004-2013. Two hypotheses are tested based on said objectives. This study covers operational information of four commercial banks based on secondary data collected from Government & nongovernment publications as well as from banks website for a period of 10 years i.e. 2004-2013 as detailed in methodology chapter. The findings of the study reveal that wide fluctuation in deposit, net income and the profitability indicators in last three years that is 2010-2013. Although the selected bank had the increasing at decreasing trends in particular dimensions, yet, the average situation not so much deteriorated during the study period. This is only occurring due to slowdown in trade, productivity, political violence unstable condition in economy. With the recent market economy concept, introduction of modern technology of banking sector, there is severe competition in the world banking environment. This also requires prudent uses of Bank fund through developing strategic plans and policies based on modern information technology and global knowledge. The selected bank should aware of their operational efficiency and asset utilization aspect. Finally the selected bank’s performance is at satisfactory level due to unstable situation in Bangladesh.
1.1 Introduction
Banks are the mainstream of the financial system of a country like Bangladesh. Because of close relationship between economic and financial development, the banking system must be robust, resilient and sound for efficient intermediation of financial resources. Banks have played a vital role in economy by providing credit for performing economic activities and at the sometime conglomerate the surplus capital from general public through different types of depository incentives.
Economic systems of a country are influenced by financial institutions like banks. Modern trade and commerce would almost be impossible without the availability of suitable banking services. First of all, banking promotes savings. All manner of people, from the ordinary laborers and workers to the rich land owners and businessmen, can keep their money safely in banks and saving centers. Banking promotes investments. Banks easily invest the money they get in industry, agriculture and trade. The commercial banking system dominates Bangladesh's financial sector. Bangladesh Bank is the Central Bank of Bangladesh and the chief regulatory authority in the sector. That is why I will analyze the comparative analysis of financial performance for the selected commercial banks to know the present scenario of banking sector in Bangladesh.
1.2 Objective of the Research
In this proposal, there are some specific objectives for research through which I try to evaluate financial performance of selected banks. That are-
1.3 Literature Review
With respect to the Performances of Bangladeshi Commercial Banking sector, foreign and national experts undertook number of studies. Some of the notable ones are; Shakoor (1989) , Bhattacharya (2007), Chowdhury and Islam (2007), Bhatt & Ghosh (1992), Haque (2001), Hossain and Bhuiyan (1990).
Shakoor (1989), in his study “performance evaluation of the nationalized commercials banks in Bangladesh” described the nationalized commercials banks performance in the field of operational management, liquidity management and profitability. It stated how efficiently operational activities are perform. It has been done by using different assumption and techniques. Liquidity management of NCBs is not adequately maintained. In spite of the internal operational limitation, profitability of NCBs is upper trends.
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.
Bhatt & Ghosh (1992), observed that the profitability of commercial banks depend on several factors some of them are endogenous and some exogenous. The endogenous factors represent control of expenditure, expansion of banking business, timely recovery of loans and productivity. The exogenous factors consist of direct investments such as SLR (Statutory Liquidity Ratio), CRR (Cash Reserve Ratio) and directed credit programs such as region wise, population wise guidelines on lending to priority sectors. The regulated and restricted regime in the operation of banking system in terms of investment, credit allocation, branch expansion, interest rate determination and internal management eroded the productivity and profitability of commercial banks.
Haque (2001), in his study “An analysis the efficiency of Commercial Bank in Bangladesh” observed that the efficiency of commercials banks in Bangladesh are not quite enough to compete to the global banking. Operational activities are not fully computerized (online). Commercials banks performed various business transactions inside & outside Bangladesh. Each level of management functions of commercials banks is done by efficiently and effectively. There has much of lacking about corporate social responsibility (CSR) of commercial banks.
Berger & Humphrey (1997) assert that the whole idea of measuring bank performance is to separate banks that are performing well from those which are doing poorly. They further indicated that, “evaluating the performance of financial institution can inform government policy by assessing the effects of deregulation, mergers and market structure on efficiency” (p175). Bank regulators screen banks by evaluating banks’ liquidity, solvency and overall performance to enable them to intervene when there is need and to gauge the potential for problems (Casu et al, 2006) .On a micro‐level, bank performance measurement can also help improve managerial performance by identifying best and worst practices associated with high and low measured efficiency.
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 2viewed 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.
1.4 Scope of the Study
Out of 56 commercial banks four banks are selected for the study purpose. I also ignore the commercial banks based on Islamic Shariah. There are lots of statistical and financial tools available to evaluate the financial performance of banks but in my study I only used Ratio and ANOVA. But I think these two tools are very much important to analysis the financial performance.
1.5 Limitations of the Study
The study of this kind is generally encountered with some limitations. Unavailability of data is a major problem. Data accuracy cannot be ensured as mainly secondary data collected from Annual Report, Various Financial Stability reports, Economic trends is used in this study. Another important problem is Time; to prepare a good research enough time is required. Budget is also a sensitive issue in the case of Research.
However, repeated and sincere efforts have been given to ensure the accuracy of the data used in this study.
1.6 Conclusion
It is hope that this paper will make a comparative analysis of performance of selected commercial banks on the basis of some major financial ratio as well as some statistical tools. I think from this paper the investor, the management of particular bank will get the proper idea what should be done in the next for betterment of the bank’s financial performance & which sensitive issue should be considered firstly in operating banking Activities.
References
List of Abbreviation
ABBL Arab Bangladesh Bank Limited
DBBL Dutch-Bangla Bank Limited
NBL National Bank Limited
OBL One Bank Limited
BB Bangladesh Bank
ANOVA Analysis of Variance
ROA Return on Asset
ROE Return on Equity
ROD Return on Deposit
CRAB Credit Rating Agency of Bangladesh
SGR Simple Growth Rate
H0 Null Hypothesis
H1 Alternative Hypothesis
LDR Loan to Deposit Ratio
LAR Loan to Asset Ratio
CONTENTS
Letter of Transmittal
Letter of Acceptance
Executive Summary
Acknowledgement
CHAPTER ONE Introduction
1.1 Introduction
1.2 Objective of the Research
1.3 Literature Review
1.4 Scope of the Study
1.5 Limitations of the study
1.6 Conclusion
CHAPTER TWO Methodology
2.1 Definition of Methodology
2.2 Sample of the study
2.3 Period of the study
2.4 Data Collection
2.5 Data Analysis
2.6 Variables
2.7 Conclusion
CHAPTER THREE Banking Sector in Bangladesh
3.1 Introduction
3.2 History of banking sector in Bangladesh
3.3 Generation of banking sector in Bangladesh
3.4 Banking sector in Bangladesh
3.5 Bangladesh Bank
3.6 Description of Selected commercial bank
3.7 Conclusion
CHAPTER FOUR Performance Analysis
4.1 Introduction
4.2 Ratio Analysis
4.3 Growth aspect
4.4 Earning Performance
4.5 Liquidity Ratio
4.6 Hypothesis Test
CHAPTER FIVE Findings and Conclusion
Introduction
Findings
5.1 Recommendations
5.2 Conclusion
5.3 References
Appendices
Research, Report, Financial, Performance, Evaluation, Private, Commercial, Banks, Bangladesh, Ratio, Analysis, Liquidity, Ratio, Hypothesis, Test
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