national bank limited

View with images and charts

“Financial Performance Evaluation of National Bank Limited�

Historical Background: After the inauguration in 1983, it has always taken its motto one step forward. Presently, the bank created a strong market base of 132 branches and 15 SME centers throughout the country. Now they are spreading more in the rural area alongside urban areas due to its growing importance in the business and economy. Customer’s satisfaction and involvements get priority in their daily activities.

The bank is the pioneer is tapping the new horizons of the banking system. It has long been sending and receiving money through legal channels. The bank is the first who introduced the Western Union and MasterCard among the private commercial banks of Bangladesh. Meeting the need of the customers through modern technology with efficiency and searching new sector of business, the bank strives to increase its trends of growth. The bank is not only dedicated to profit maximization, it also remains in fulfilling its social responsibilities. Besides participating in building national economy, National Bank Limited is always a caring bank in adding value to the assets of shareholders. In short, the bank has the focus of ethics reminding all the commitments to its stakeholder.

Company profile: After the inauguration of National Bank Limited it is spreading its banking activities all over the country.

Present capital structure: Authorized capital: Tk17,500 million Paid up capital: Tk4,412.13 million Present share structure: Number of share holders: 34,130 Number of branches: NBL has 132 branches and 15 SME centers.

Head office: The head office of NBL is in 18, Dilkusha commercial area Dhaka-1000 Number of employees; NBL has 3,442 employees and 4152 foreign correspondents.

Board of directors: The Board of directors comprised of 14 members headed by a chairman.

Vision:

Ensuring highest standard of clientele services through best application of latest information technology, making due contribution to the national economy and establishing ourselves firmly at home and abroad as a front ranking bank of the country is our cherished vision.

Mission: Efforts for expansion of activities at home and abroad by adding new dimensions to our banking services are being continued unabated. Alongside, we are also putting highest priority in ensuring transparency, accountability, improved clientele service, as well as to our commitment to serve the society through which we want to get closer to the people of all strata. Winning an everlasting seat in the hearts of the people as a caring companion in uplifting the national economic standard through continuous up gradation and diversification of our clientele services in line with national and international requirements is the desired goal we want to reach.

Core Values of NBL: NBL’s core values consist of six key elements. It binds their people together that the employees are essential to everything being done in the bank.

Integrity: NBL protects and safeguards all customer information. NBL treats everyone in an equitable and consistent manner. NBL creates an environment, which earns and maintains customer trust.

Open Communication: NBL builds customer relationships based on integrity and respect. NBL offers a full line of products and excellent service. NBL is committed to the prosperity of the customers and shareholders.

Performance Driven: In NBL, customers and employees are judged in terms of their performance.

Continuous Self Improvement: Continuous learning, self-challenge and strive make ways for self improvement of workforce at NBL. Quality: NBL offers hassle free better service quality. NBL builds-up quality assets in the portfolio.

Teamwork: Interaction, open communication, and maintaining a positive attitude reflect NBL’s commitment to a supportive environment based on teamwork.

Goals of NBL: •

Bring modern banking facilities to the door steps of the general public through diversification of services.

•

Cordial, deep rooted and farm banker customer relationship though improving customer services.

•

Ensuring highest use of professional through their enhancement of their attitude and competence.

•

Taking part in the national economic development through continuous productive development and taking part in social activities.

•

Providing service through improved information technology.

Products and services of the bank: The employee of NBL has decades of banking experience maintaining their different array of products and services at home and abroad. Their technology based banking such as any branch banking, tele-banking, ATM services.

Deposit products: Savings deposit:

National Bank Limited offers customers a hassle free and low charges savings account through the branches all over Bangladesh. For accounts opening, 2 copies of passport size photograph, nominee photo and valid photocopy of voter ID card in needed.

Benefits:

Interest rate of 4.00% on minimum monthly balance; minimum balance Tk.5000; maintenance charge

yearly Tk. 600; no hidden costs; Standing Instruction Arrangement are available for operating account.

Current Deposit: National Bank Limited offers customers current deposit facility for day-to-day business transaction without any restriction. For account opening, 2 copy of recent passport size photo, TIN certificate, nominee’s photograph, valid photocopy of voter ID card is required.

Minimum balance Tk.2000; minimum maintenance charges half yearly Tk.400; No hidden costs; Standing Instruction Arrangement are available for operating account; easy access to other facilities.

Special notice deposit: National bank Limited offers interest on customer’s special notice deposit account. They also give facility to withdraw money any time. The requirement is same as saving deposit.

Benefits: Minimum maintenance charges half yearly tk. 500; Standing Instruction is available for operating account.

Fixed Deposit: The scheme offer fixed term savings which scales up savings amount with the time. For account opening, one copy of recent photograph of the account holder and nominee’s photograph is required.

Benefits: Any amount can be deposited; premature encashment facility is available; overdraft facility available against term receipt.

Foreign currency deposit: National Bank Limited gives opportunity to maintain foreign currency account through its Authorized Dealer Branches. Bangladesh nationals residing abroad or foreign nationals residing abroad or Bangladesh and foreign firms operating in Bangladesh or abroad or Foreign missions and their expatriate employees can use this deposit service. For account opening two copies of recent photograph, nominee’s photograph, passport copy, ID of residence in abroad is required.

Benefits: No initial deposit is required to open the account; interest will be offered 1.75% for US Dollar account, 3% for Euro account and 3.25% of GBP account; interest provided on daily product basis on the credit balance (minimum balance of US Dollar 1000/- or GBP 500/- at least for 30 days) maintaining in the account.

NFC deposit: National Bank Limited gives opportunity to maintain foreign currency account through its Authorized Dealer Branches. All non – resident Bangladeshi nationals and persons of Bangladesh origin including those having dual nationality and ordinarily residing abroad may maintain interest bearing NFC Account.

Benefits: NFC account can be opened for one month, three month, six month, one year through US dollar, Pound Benefits:

Sterling, Japanese Yen and Euro; the initial amount of 1000 Dollar or 500 Pound or equivalent other designated currency; interest is paid on the balance maintained in the account; the interest is tax free in Bangladesh.

Monthly Savings: NBL offers monthly savings scheme for its retail customers. One copy of recent photograph and Nominee’s photograph is enough to open the account.

Benefits:

Monthly installments of deposit will be tk. 500, 1000, 2000, 3000, 4000, 5000 and 10000; account may

be opened for any installment and term, which is not changeable and a person is allowed to open more than one account for different installment in a bank.

Monthly (Taka)

InstallmentsAmount to be paid on completion of Term 3(Three) years @9.00%

5(Five) years @9.25% 8(Eight) years @9.50%

500/-

20,627/-

37,896/-

70,849/-

1,000/-

41,255/-

75,791/-

1,41,691/-

2,000/-

82,510/-

1,51,583/-

2,83,394/-

3,000/-

1,23,765/-

2,27,374/-

4,25,091/-

4,000/-

1,65,020/-

3,03,166/-

5,66,788/-

5,000/-

2,06,274/-

3,78,957/-

7,08,485/-

10,000/-

4,12,549/-

7,57,914/-

14,16,970/-

Source: National Bank Limited website Monthly income scheme: Under the scheme one will deposit a minimum of tk. 100000 or its multiple for three years and will enjoy monthly benefit of 1000 for every tk. 100000. To open the account, one copy of recent photograph, nominee’s photograph and valid photocopy of voter ID card is needed.

Benefits:

Deposits of tk. 100000 and its multiple maximum of tk. 5000000 shall be acceptable under this

account; the account may be opened either single or jointly.

Double benefit scheme: NBL offers its customer DBS account, the amount of which will be double after six years. To open the account one copy of recent photo and nominee’s photo required.

Benefits:

Deposits of tk. 50000 and its multiple maximum of tk. 5000000 is acceptable under the scheme; a

person is allowed to make more than one DBS account, can be opened either single or jointly; all DBS account holder shall be offered with free life insurance policy under the scheme.

Millionaire income scheme: Under this scheme a holder can deposit a fixed amount on monthly basis for 5, 7, 10 years and on maturity the account holder will be a millionaire. To open the account one copy of recent passport and nominees photograph is used.

Benefits:

Deposits of fixed monthly amount for 5, 7, 10 years; deposit size will be based on tenure and after the

maturity the depositor will get one million taka; a person can open one or more than one account or this account

can be opened jointly; The account holder has to pay 12450 for 5 years, 7870 for 7 years and 4550 for 10 tears tenure.

Credit products: Overdraft: NBL offers overdraft facility for corporate customer for running day to day business operation. For taking the service a customer must have introductory current account and required document denoted by the loan requirement.

Benefits:

Low charges in overdraft account maintenance; facility is available against deposit receipt or mortgage

property; low interest rate 13-16%.

Lease Finance: NBL offers lease financing with easy installment facilities. The financing area is capital machinery, different equipments, gas, diesel generator and power plant, medical equipment, lift or elevator, information technology equipments, construction equipments and consumer durables.

Benefits:

Competitive monthly rental, tax benefit, fast processing, easy handover after leasing period.

Home loan: This product is for purchasing flat of construction of home. Any Bangladeshi citizen, resident or nonresident, who are eligible for the payment can apply for the loan.

Benefits:

Financing amounts extends up to 70% or 75 lacs taka which is highest of total construction cost; grace

period available up to 9 months for flat purchase or 12 months in home construction; competitive interest rate; no application of processing fee.

SME loan: This product is introduced for enterprise or businessman named “Festival Small Loan” and “NBL Small Business Loan”. The eligibility to get the loan is honesty, sincerity and integrity.

Benefits:

Max. 3 lacs for Festival Scheme and 5 lacs for small business scheme; collateral free advance; 3

months for Festival Scheme and 5 years for Small Business Loan (including 1 month grace period, only for the second scheme).

Consumer credit scheme: The scheme is introduced for retail customer. According to this scheme, loan is sanctioned for Electronics products and computer or computer accessories.

Benefits: Fast processing, competitive interest rate, no application or processing fee, easy monthly installment.

Trade finance: This scheme belongs to commercial purposes such as mainly in the industrial sector for export-import as working capital, packing credit, trade finance, issuance of import letter of credit, advising and confirming export letter of credit as a guarantor.

Benefits: Low interest of 13%-14.50%, minimum processing time and low service charges.

Cards:

Credit card: NBL credit card has already become a preferred name in the market. Many business houses are using it for a long time.

Benefits: Dual currency card facility, lowest rate of interest, lowest card fees, special discount of cards fee (condition applicable); amenities available to transfer 80% of the local credit card limit to any NBL account of having pay order facility; no excess limit charge, no hidden charges.

Power Card: The user of the card does not need to maintain any account at NBL. To apply the account 2 copies of recent photograph and nominees photograph is required.

Benefits: Prepaid card, annual fee tk. 200 only; can be issued and filled from RFCD/FC account; accepted at all VISA POS merchants; cash withdrawal at all ATM booths bearing VISA and Q-cash logo (except HSBC in Bangladesh); for drawing of cash from NBL ATMs- no charge, from ATM under Q-cash network tk. 10 and from other ATM tk. 100 per transaction; cash withdrawal fee (abroad)-2% on the cash drawn or US Dollar 2, whichever is higher; only 1% loading fee against both international and local Power Card at the time of refilling; yearly tk. 100 for enrollment of SMS service.

Other services: NBL capital market services: To expand the range of banking services its securities division started its function in 2008, though using qualified personnel and latest technologies it provides opening BO A/C, trading in the share market, providing margin facilities under marginal rules, counseling the investor in connection with the investment in share market services etc. through its 6 branches.

Merchant banking: The bank is providing the service under the name ”NBL Capital & Equity Management Ltd.”, It render its services through IPO activities, own portfolio management, banker to the issue, underwriting and preplacement.

Syndication and project financing: NBL appreciates the loan syndication both as a lead and as participating bank for large borrower to diversify its credit portfolio. The syndicated finance creates risk sharing and standard of credit remains on the higher end because of co-appraisal of many banks.

Overseas operation and foreign remittance: Since the time the bank has started the overseas operation and achieved much accolades transferring money in legal way. In 1993 NBL introduced “Western Union” for better money transfer service. It was the lone agent of the company until 2002. The bank introduced different products to ease the flow of foreign remittance such as online banking, EFT and other automated devices. They have also contract with ASA and SIBL to provide inward remittance products on behalf of NBL. The bank established exchange houses in different countries of the world such as Singapore, Myanmar, Oman and Malaysia. They have also offshore unit assigned to carry out international banking business involving nonresident foreign currency denominated assets and liabilities taking the advantages of low/nonexistent tax and higher return on investment.

Human resource management:

Human resources of NBL are managed by existing policy and service rule of the bank. The crucial point for the bank is finding right people and setting them in the right place in the right time. The bank focuses on nurturing and building the skills and competencies of staffs at various levels and to create a wealth of knowledge for the future of the bank. The bank also focuses on knowledge acquisition to ensure the rapid growth of the bank. An exhaustive skill is done early in the year to assess skill gaps that exist and to determine concretely the training and development intervention need to be made. The HRM division interacts closely with the line managers and specifically with the Operations division to review the bank’s skills inventory, which reaches to branch level.

The bank is equipped to develop skills at all levels of the bank. The National Bank Training Institute is equipped to provide necessary skills. NBL also provides ample benefits and incentives to its employee such as bonuses, cultural program, annual picnic, scholarship for the meritorious children of its employee etc.

Management system and style of National Bank Ltd: Managing Director Additional Managing Director Deputy Managing Director Senior Executive Vice President Executive Vice President Senior Vice President Vice president Senior Assistant Vice President Assistant Vice President Senior Principal Officer Principal Officer Senior Officer Officer Assistant Officer Junior Officer

Branches of National Bank Limited:

Financial highlights of NBL: Sl.

Particulars

No.

(BDT in millions) 2008

2009

2010

Taka

Taka

Taka

1

Paid-up-Capital

1,872.72

2,846.54

4412.13

2

Authorized Capital

2,450.00

7,450.00

17500.00

3

Total Assets

72,205.50

92,084.79

134732.31

4

Total Deposits

60,187.89

76,838.64

102471.83

5

Total Investment

9,156.61

12,315.20

24993.33

6

Total Loans & Advances

50,665.70

65,129.29

92003.56

7

Total Shareholder’s Equity

6,126.27

8,916.76

19105.60

8

Reserve fund/Surplus

4,253.55

6,070.22

14693.47

9

Interest Income

5,786.71

6,821.40

9616.14

10

Interest Expense

3,594.84

4,490.34

5577.09

11

Profit before Tax & Provision

3,123.83

3,397.70

8940.60

12

Profit after Tax

1,517.43

2,070.47

6860.34

13

Price Earning Ratio (Times)

13.95

13.77

12.32

14

Net Asset Value Per Share

327.13

313.25

43.30

15

Cost of fund (%)

6.76

6.45

6.52

16

Return on Assets (ROA)%

2.36

2.52

6.05

17

Return on Equity (ROE) %

28.38

27.53

48.96

18

Debt/Equity Ratio (Times)

6.99

9.31

6.05

19

Cost/Income Ratio (%)

64.87

69.13

31.41

20

Market Price Per Share

1,014.25

646.25

191.60

21

Remittance

39,877.80

44,381.50

49145.30

Theoretical background: Financial performance analysis of a company is very important to get an overall view about an organization. It generally consists of interpretation of balance sheet and interpretation of income statement. By using these two sources one can perform the ratio analysis and trend analysis which are the major tools for analyzing the financial performance of a bank.

Financial Performance: A subjective measure of how well a firm can use assets from its primary mode of business and generate revenues. This term is also used as a general measure of a firm's overall financial health over a given period of time, and can be used to compare similar firms across the same industry or to compare industries or sectors in aggregation.

Blance sheet: A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

The balance sheet must follow the following formula: Assets = Liabilities + Shareholders' Equity

Income statement: A financial statement that measures a company's financial performance over a specific accounting period.

Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year.

Also known as the "profit and loss statement" or "statement of revenue and expense".

Ratio Analysis: A tool used by individuals to conduct a quantitative analysis of information in a company's financial statements.

Ratios are calculated from current year numbers and are then compared to previous years, other companies, the industry, or even the economy to judge the performance of the company. Ratio analysis is predominately used by proponents of fundamental analysis.

Trend Analysis: Trend analysis informs us whether company’s financial position increasing or decreasing.

Significance of using ratio: •

To work out the profitability.

•

To work out the solvency.

•

Helpful for analysis of financial statements.

•

To simplify accounting information.

•

Helpful for forecasting purposes.

Cautions about Ratio Analysis: Before discussing specific ratios, we should consider the following cautions: • • • •

A single ratio does not generally provide sufficient information from which to judge the overall performance of the firm.

Be sure that the dates of the financial statements being compared are the same.

It is preferable to use audited financial statements for ratio analysis.

Be certain that the data being compared have all been developed in the same way.

Groups of Financial Ratios: Financial ratios can be divided into four basic groups or categories: i. ii. iii. iv.

Liquidity ratios Activity ratios Debt ratios & Profitability ratios

Liquidity, activity, and debt ratios primarily measure risk, profitability ratios measure return. In the near term, the important categories are liquidity, activity, and profitability, because these provide the information that is critical to the short-run operation of the firm. Debt ratios are useful primarily when the analyst is sure that the firm will successfully weather the short run.

Financial Ratios

Liquidity Ratio

Net Working Capital

Current Ratio

Activity Ratio

Inventory Turnover Average Collection Period Average Payment Period

Debt Ratio

Degree of Indebtedne ss Debt Ratio DebtEquity Ratio

Profitability Ratio

The Ability to Service Debt

Time Interest Earned

Gross Profit Margin Operating Profit Margin Net Profit Margin

Quick (AcidTest) Ratio Fixed Asset Turnover

Fixed Payment Coverage Ratio

Returns on Investment Return on Equity

Total Asset Turnover

Investment to Deposit Ratio

Earning Per Share Price/Earning Ratio

Figure 1: Groups of Financial Ratios

Analyzing Liquidity: The liquidity of a business firm is measured by its ability to satisfy its short term obligations as they come due.

Liquidity refers to the solvency of the firm’s overall financial position. The three basic measures of liquidity areNet Working Capital: Net Working Capital, although not actually a ratio is a common measure of a firm’s overall liquidity. A measure of liquidity is calculated by subtracting total current liabilities from total current assets.

Net Working Capital =Total Current Assets –Total Current Liabilities.

Current Ratio: One of the most general and frequently used of these liquidity ratios is the current ratio. Organizations use current ratio to measure the firm’s ability to meet short-term obligations. It shows the banks ability to cover its current liabilities with its current assets.

Current Ratio = Current Asset/Current Liabilities Quick Ratio: The quick ratio is a much more exacting measure than current ratio. This ratio shows a firm’s ability to meet current liabilities with its most liquid assets.

Quick Ratio=Cash + Government Securities + Receivable / Total Current Liabilities.

Analyzing Activity:

Activity ratios measure the speed with which accounts are converted into sale or cash. With regard to current accounts measures of liquidity are generally inadequate because differences in the composition of a firm’s current accounts can significantly affects its true liquidity.

Total Asset Turnover: The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate sales.

Total Asset Turnover = Sales/ Total Asset Investment to Deposit Ratio: Investment to Deposit Ratio shows the operating efficiency of a particular Bank in promoting its investment product by measuring the percentage of the total deposit disbursed by the Bank as long & advance or as investment. The ratio is calculated as follows: Investment to Deposit Ratio = Total Investments / Total Deposits Inventory turnover: A ratio showing how many times a company's inventory is sold and replaced over a period.

Inventory Turnover = Cost of good sold/ Average Inventory Average Collection Period: Average collection period is useful in evaluating credit and collection policies. This ratio also measures the quality of debtors. It is arrived at by diving the average daily sales into the accounts receivable balance: Average Collection Period=Accounts receivable/ (Credit sales/365) Average Payment Period: Average payment period ratio gives the average credit period enjoyed from the creditors that means it represents the number of days by the firm to pay its creditors. A high creditor’s turnover ratio or a lower credit period ratio signifies that the creditors are being paid promptly. This situation enhances the credit worthiness of the company. However a very favorable ratio to this effect also shows that the business is not taking the full advantage of credit facilities allowed by the creditors. It can be calculated using the following formula: Average Payment Period=Accounts payable/ Average purchase per day Fixed Asset Turnover:

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. The fixed-asset turnover ratio is calculated as: Fixed Asset Turnover=Gross Turnover/ Net fixed assets

Analyzing Debt: The debt position of that indicates the amount of other people’s money being used in attempting to generate profits. In general, the more debt a firm uses in relation to its total assets, the greater its financial leverage, a term use to describe the magnification of risk and return introduced through the use of fixed-cost financing such as debt and preferred stock.

Debt Ratio: The debt ratio measures the proportion of total assets provided by the firm’s creditors.

Debt Ratio = Total Liabilities / Total Assets Equity Capital Ratio: The ratio shows the position of the Bank’s owner’s equity by measuring the portion of total asset financed by the shareholders invested funds and it is calculated as follows: Equity Capital Ratio = Total Shareholder’s Equity / Total Assets Time Interest Earned Ratio: This ratio measures the ability to meet contractual interest payment that means how much the company able to pay interest from their income.

Time Interest Earned Ratio=EBIT/ Interest

Analyzing Profitability: These measures evaluate the bank’s earnings with respect to a given level of sales, a certain level of assets, the owner’s investment, or share value. Without profits, a firm could not attract outside capital. Moreover, present owners and creditors would become concerned about the company’s future and attempt to recover their funds.

Owners, creditors, and management pay close attention to boosting profits due to the great importance placed on earnings in the marketplace.

Operating Profit Margin: The Operating Profit Margin represents what are often called the pure profits earned on each sales dollar. A high operating profit margin is preferred. The operating profit margin is calculated as follows:

Operating Profit Margin = Operating Profit / Sales Net profit Margin: The net profit margin measures the percentage of each sales dollar remaining after all expenses, including taxes, have deducted. The higher the net profit margin is better. The net profit margin is calculated as follows: Net profit Margin = Net profit after Taxes / Sales Return on Asset (ROA): Return on asset (ROA), which is often called the firms return on total assets, measures the overall effectiveness of management in generating profits with its available assets. The higher ratio is better.

Return on Asset (ROA) = Net profit after Taxes / Total Assets Return on Equity (ROE): The Return on Equity (ROE) measures the return earned on the owners (both preferred and common stockholders) investment. Generally, the higher this return, the better off the owners.

Return on Equity (ROE) = Net profit after Taxes / Stockholders Equity Price/ Earnings ratio (PE ratio):

The Price/ Earnings ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the income or profit earned by the firm per share.

P/E ratio = Price per share / earnings per share Earnings per share (EPS): Earnings per share (EPS) are the earnings returned on the initial investment amount.

EPS=Net income/no. of share outstanding

Ratio analysis: Analyzing Liquidity Ratio: Current ratio: The current ratio, one of the most commonly cited financial ratios, measures the firm’s ability to meet its short term obligations. It is expressed as:

Current Ratio=Current Asset/Current Liabilities Year

2008

2009

2010

NBL

1.23

1.01

1.08

Table: 1 Current Ratio Source: Annual report of NBL(2008-2010)

Current Ratio 1.4 1.2 1 0.8

NBL

0.6 0.4 0.2 0 2008

2009

2010

Graphical presentation: Figure: 2 Current Ratio Interpretation: In this analysis it has seen that in 2008 NBL’s current ratio was highest and 2009 it was lowest among all the year. In 2010 I is increased than the past year. Normally banks maintain current ratio 1:1.

Net Working capital : A proportion of investment that is required to conduct the business is called net working capital. Net working capital, although not actually a ratio is a common measure of a firm’s overall liquidity a measure of liquidity ratio calculated by: Net Working capital=Current Asset-Current Liabilities Year

2008

2009

2010

NBL

29917888519(Tk)

14723220089(Tk)

26874345787(Tk)

Table:2Net Working capital Source: Annual report of NBL(2008-2010

Graphical Presentation: Net working capital

Figure: 3 Net Working Capital 35000000000 30000000000 25000000000 20000000000

NBL

15000000000 10000000000 5000000000 0 2008

2009

2010

Interpretation: Net working capital of NBL is fluctuating last few years it is in a up and down situation, in 2009 it is decreased but in 2010 it improves. However, the bank is able to meet up its current obligations.

Analyzing Activity Ratio: Total Asset Turnover Ratio: The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate sales.

Total Asset Turnover= Operating Income/Total Asset

Year

2008

2009

2010

NBL

.073

.071

.097

Table:3 Total Asset Turnover Ratio Source:Annual report of NBL(2008-2010)

Graphical Presentation:

Asset Turnover Ratio 0.12 0.1 0.08 0.06

NBL

0.04 0.02 0 2008

2009

Figure:4 Total Asset Turnover Ratio Interpretation:

2010

The banks total asset turnover ratio fluctuates from .073-.097. We know the greater the total asset turnover; it is more efficient. In year 2008 to 2009 total asset turnover ratio of NBL decreasing but at 2010 it’s higher than previous which is better for NBL. Investment to Deposit ratio: Investment to Deposit Ratio shows the operating efficiency of a particular Bank in promoting its investment product by measuring the percentage of the total deposit disbursed by the Bank as long & advance or as investment. The ratio is calculated as follows: Total investment/Total Deposit Year

2008

2009

2010

NBL

.160

.152

.244

Table:4 Investment to Deposit ratio Source:Annual report of NBL(2008-2010)

Graphical Presentation:

Figure:5 Investment to Deposit ratio

Interpretation NBL’s investment to deposit ratio is decreasing signal for the bank in years 2008 to 2009 .But in 2010 it’s again increasing. Which indicates good sign,but the bank should hold it.

Analyzing Debt Ratio: Debt Ratio: The debt ratio measures the preparation of total assets provided by the firm’s creditors.

Debt ratio= Total Liabilities/Total Assets Year

2008

2009

2010

NBL

.91

.9

.855

Table:5 Debt Ratio Source:Annual report of NBL(2008-2010)

Graphical Presentation:

Figure:6 Debt Ratio Interpretation:

The debt ratio of the firm’s decreasing from .91 to 0.855 .Lower the ratio, it is less risky. Debt ratio indicates how much portion of total assets is financed by the debt. So the bank works hard to decrease this ratio.

Time Interest Earned Ratio: The times interest earned ratio, sometimes called the interest coverage ratio, measures the firm’s ability to make contractual interest payments.

Time Interest Earned Ratio =Earnings before interest & Taxes/Interest Year

2008

2009

2010

NBL

1.29

1.37

1.716

Table: 6 Time Interest Earned Ratio Source:Annual report of NBL(2008-2010)

Graphical Presentation: Time Interest Earned Ratio 2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

NBL

2008

2009

2010

Figure: 7 Time Interest Earned Ratio Interpretation: Year by year the TIE of NBL is in uprising scenario.From the analysis it has seen that NBL’s TIE ratio were fluctuating and in 2010 it was highest which indicates positive sign that mans NBL’s interest payment capacity were increasing.

Analyzing Profitability: Net Profit Margin: The net profit margin measures the percentage of each sales dollar remaining after all expenses, including taxes, have deducted. The higher the firm’s net profit margin is better. The net profit margin is a commonly cited measure of the company’s success with respect to earnings on sales.

Net Profit Margin=Net profit after tax/operating income Year

2008

2009

2010

NBL

.29

.32

.53

Table:7 Net Profit Margin Source:Annual report of NBL(2008-2010)

Graphical Presentation

Figure:8 Net Profit Margin Interprétation:

In the year 2008 to 2010 NBL’s net profit margin increasing year by year which indicate that the bank’s operating result were improving. In this figure it has seen that in 2010 NBL’s net profit margin was 53% which indicates very good operating result of the bank.

Return on Asset (ROA): The return on asset (ROA), which is often called the firm’s return on total assets, measures the overall effectiveness of management in generating profits with its available assets. The higher the ratio is better.

Return on Asset (ROA) =Net Profit after tax/Total Asset Year

2008

2009

2010

NBL

2.36

2.52

5.17

Table:8 Return on Asset (ROA) Source: Annual report of NBL(2008-2010)

Graphical Presentation:

Figure:9 Return on Asset (ROA)

Interpretation: From the analysis it has seen that NBL’s Returns on Asset were gradually increasing and in 2010 it was highest 5.17 times that means that year bank utilize their assets properly compare to other.

Return on Equity (ROE): The return on equity measures the return earned on the owner’s (both preferred and common stockholder’s) investment. Generally the higher the return the better of the owner’s.

Return on Equity=Net Profit after Tax/ Shareholders equity Year

2008

2009

2010

NBL

28.38%

27.53%

35.9%

Table:9 Return on Equity (ROE) Source:Annual report of NBL(2008-2010)

Graphical Presentation

Figure:10 Return on Equity (ROE) Interpretation:

The banks return on equity deviates from 28.38 to 35.90 in the preceding 3 years and the highest value can be observed in year 2010 and the lowest value can be observed during the 2009.

Earnings per Share: The firm’s Earning per share (EPS) are generally of interest to present or prospective stockholders and management. The Earning per share represent the number of dollars earned on behalf of each outstanding share of common stock. The earnings per share is calculated as follows: Earnings per Share =Earnings available for common stock holder/No of shares outstanding Year

2008

2009

2010

NBL

5.33

4.69

15.55

Table:10 Earnings per Share Source:Annual report of NBL(2008-2010)

Graphical Presentation:

Figure:11 Earnings per Share Interpretation:

The bank’s earnings per share is increasing from 5.33 to 15.55 But in 2009 EPS was decrease in 2010 again NBL’s EPS remain increase. Therefore, earning per share of NBL should be increased to attract investors.

Import and export:

NBL opened a total 24,775 LCs amounting to USD 1,390.03 million to facilitate import trade in 2010.NBL has been nurturing the export business enthusiastically since its inception .In 2010 it handled 22,135 export documents valuing USD 619.79 million with growth of 24% over the last year volume of USD 559.78 million.

Import & Export 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0

Import Export

2008

2009

2010

Figure:12 Import & Export

Remittance: By introducing good banking system NBL drew the attention of its customer.Now its helps its customer to get money from abroad sender.For this NBL provides Western Union Money Transfer,Samba,Express money sevices.Which are very convenience than the traditional Hundi service .This type of services are very easy to receive money for the receiver.The remittance service of NBL got a huge response and it has increased over the years.

Remittance

50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0

Remittance

2008

2009

2010

Figure:13 Remittance

Investment & Deposit: NBL remained engaged with Merchant banking services through IPO activities ,Own portfolio management ,Banker to the issue, underwriting and replacement. During the year the bank has gained TK.3,616.41 million, additionally TK.30.02 million was received as cash dividend and TK.40 million was from from banker to the issue under writing commission etc.The deposit of the bank gradually increased over the years.

Investment & Deposit 120000 100000 80000 Investment

60000

Deposit

40000 20000 0

2008

2009

2010

Figure:14 Investment & Deposit

Comparative analysis NBL With UBL: Liquidity Ratio: Current ratio:

Year

2008

2009

2010

NBL

1.23

1.01

1.08

UBL

1.16

1.15

1.12

Table:11 Current ratio Source:Annual report of NBL & UBL(2008-2010)

Graphical presentation:

Current Ratio 1.4 1.2 1 0.8

NBL

0.6

UBL

0.4 0.2 0 2008

2009

2010

Figure:15 Current ratio Interpretation: After observing the graph shown above, it can be said that all the banks have the standard level of liquidity position. In 2010 UBL has the highest current assets (1.12) than NBL (1.08).NBL should increase the ratio.

Activity Ratio: Asset Turnover Ratio: Year

2008

2009

2010

NBL

.073

.071

.097

UBL

.07

.06

.03

Table:12 Asset Turnover Ratio Source: Annual report of NBL & UBL(2008-2010)

Graphical presentation:

Asset Turnover Ratio 0.12 0.1 0.08 NBL

0.06

UBL

0.04 0.02 0 2008

2009

2010

Figure:16 Asset Turnover Ratio

Interpretation: After observing the given graph, over the three years the total asset turnover ratio., UBL’s is decreasing and NBL’s turnover ratio is increasing. So in 2010 the turnover ratio of NBL (0.097 times) is in better position than UBL (0.03 times) Invest To deposit Ratio: Year

2008

2009

2010

NBL

.160

.152

.244

UBL

.22

.38

.3

Table:13 Invest To Deposit Ratio Source:Annual report of NBL & UBL(2008-2010)

Graphical presentation:

Invest to Deposit Ratio 0.4 0.35 0.3 0.25

NBL

0.2

UBL

0.15 0.1 0.05 0 2008

2009

2010

Figure:17 Invest to deposit Ratio

Interpretation: All the bank’s investment to deposit ratio is fluctuating over the year. In 2010 the investment to deposit ratio of UBL (30%) is in better position than NBL (24%).NBL in this regard keep close observation on it.

Debt ratio: Debt Ratio: Year

2008

2009

2010

NBL

.91

.9

.855

UBL

.94

.91

.9

Table:14 Debt Ratio Source: Annual report of NBL & UBL(2008-2010)

Graphical presentation: Debt Ratio 0.96 0.94 0.92 0.9

NBL

0.88

UBL

0.86 0.84 0.82 0.8 2008

2009

2010

Figure:18 Debt Ratio Interpretation: Every organization should give more emphasize on equity capital than debt capital.Debt ratio of NBL is decreasing. In 2010 the debt ratio fof NBL (85%) was lower than UBL (90%) .

profitability Ratio: Net Profit Margin: Year

2008

2009

2010

NBL

.29

.32

.53

UBL

.28

.24

.34

Table:15 Net Profit Margin Source: Annual report of NBL & UBL(2008-2010)

Graphical presentation:

Net Profit Margin 0.6 0.5 0.4 NBL

0.3

UBL

0.2 0.1 0 2008

2009

2010

Figure:19 Net Profit Margin

Interpretation: From the above graph, it can be said that NBL profit margin is increasing year to year and UBL’s profit margin is fluctuating. In 2010 NBL’s (53%) profit margin is in better position than UBL (31%) Return On Asset: Year

2008

2009

2010

NBL

2.36

2.52

5.17

UBL

1.95

1.54

1.37

Table:16 Return On Asset Source: Annual report of NBL & UBL(2008-2010)

Graphical presentation:

Return On Asset 6 5 4 NBL

3

UBL

2 1 0 2008

2009

2010

Figure:20 Return On Asset

Interpretation: After having a careful view on the graph, over the three years NBL has maximum return on asset than UBL. It indicates good position for NBL.But it should remain so.

Return On Equity: Year

2008

2009

2010

NBL

28.38%

27.53%

35.9%

UBL

30.86%

70.81%

23.12%

Table:17 Return On Equity Source: Annual report of NBL & UBL(2008-2010)

Graphical presentation:

Return On Equity 40.00% 35.00% 30.00% 25.00%

NBL

20.00%

UBL

15.00% 10.00% 5.00% 0.00% 2008

2009

2010

Figure:21 Return On Equity

Interpretation: From the above graph, it can be said that the ROE of UBL is decreasing year to year and NBL’s ROE is increasing year by year. In 2010 NBL’s (35.90%) ROE is in better position than UBL (23.12%).

Earnings Per Share: Year

2008

2009

2010

NBL

5.33

4.69

15.55

UBL

14.15

6.91

5.32

Table:18 Earnings Per Share Source:Annual report of NBL & UBL(2008-2010)

Graphical presentation: Earnings Per Share 18 16 14 12 10

NBL

8

UBL

6 4 2 0 2008

2009

2010

Figure:22 Earnings Per Share Interpretation: In this figure we have seen that, the UBL’s EPS is Decreasing and NBL’s EPS is increasing year by year. In 2010 the earnings per share for NBL was tk 15.55, for UBL was tk 5.32.So it can be said that NBL is in better position than UBL .

Major Findings: •

In the analysis it has seen that in 2008 NBL’s current ratio was highest and 2009 it was lowest among the years. Normally banks maintain current ratio 1:1 and it has seen that NBL maintain current ratio more than 1:1 ratios. It indicates that NBL’s liquidity position is not bad.

•

The greater the total asset turnover; it considered more efficiency. From the analysis it has seen that in year 2008 to 2009 total asset turnover ratio of NBL decreasing but at 2010 it’s higher than previous which indicate better efficiency of NBL.

•

NBL’s investment to deposit ratio is decreasing in years 2008 to 2009 which conveys negative signal for the bank. But in 2010 it’s again increasing.

•

From the analysis it has seen that NBL’s Returns on Asset were gradually increasing and in 2010 it was highest 5.17 times that means that year bank utilize their assets properly compare to other years.

•

The bank’s earnings per share is fluctuating from tk5.33 to tk15.55 and in 2010 NBL’s EPS were highest. It indicates positive sign.

•

From the trend analysis NBL’s operating profit margin was increasing year by year.Which is a good sign for the bank

•

The Total Assets Turnover of NBL is higher than Uttara Bank Limited that means NBL efficienly used their total assets incompare to Uttara Bank Limited.

•

Finally, it has seen that National Bank Ltd Financial performance in 2010 were very good.

Recommendations: •

Although the current ratio of NBL is decreasing, but the current ratio of NBL should be in a stable position.

•

Over the years the asset turn over ratio of NBL is better than UBL. The asset turn over ratio of NBL should be maintain.

•

The net working capital is not in a stable position, so the bank should give more attention to maintain a stable position.

•

Invest to deposit ratio of NBL is not satisfactory than UBL. The invest to deposit ratio of NBL should be increased.

•

The debt ratio of NBL is lower than UBL .NBL should maintain low debt ratio.

•

From trend analysis it has seen that ROE of NBL was fluctuating. So, bank should take steps to improve it.

•

Over the years NBL maintains higher profit margin than UBL.Net profit margin should always keep increasing.

•

ROA of NBL is in a increasing position over the years. ROA always should keep good position.

•

ROE of NBL is in fluctuation over the years .ROE of NBL always try to be better.

•

EPS of NBL is lower in 2008 to 2009 than UBL.EPS of NBL should not be decreased.

Conclusion: National Bank Limited has been trying to operate its business successfully since 1983. The bank has already developed good image and goodwill among its clients by offering excellent services. Today, the whole Banking

sector is facing a tough competition and challenge. In this situation our Branch is in good position than any other Bank of its locality and day-by-day we are increasing our activities & goodwill. Within 27 years of its operation, the bank has grabbed a position in the banking sector. According to the CAMEL rating the banks performance are 2, which is satisfactory. It is expected that in a year or so the rating will be 1, which is strong.

So we can say that overall performance is good in banking sector of Bangladesh.

From the practical implementation of customer dealing procedure during the whole period of my practical orientation in National Bank Limited Bank I have reached a firm and concrete conclusion in a very confident way. Success in the banking business largely depends on effective lending. Less the amount of loan losses, the more the income will be from credit operations. the more the income from credit operations the more will be the profit of the National Bank Limited and here lays the success of credit financing.

It can be argued that though the results achieved so far are not satisfactory, credit financing is a modern scientific technique for enhancing National Bank Limited bank’s strength and there lies the opportunities to make it more effective in the future for our own benefit.