Performance Evaluation of National Bank Limited

1.0 INTRODUCTION
Banking system plays a very important role in the economic life of the nation. The health of the economy is closely related to the soundness of its banking system. In a developing country like Bangladesh the banking system as a whole play a vital role in the progress of economic development. A bank as a matter of fact is just like a heart in the economic structure and the Capital provided by it is like blood in it. As long as blood is in circulation the organs will remain sound and healthy. If the blood is not supplied to any organ then that part would become useless. So if the finance is not provided to agriculture sector or industrial sector, it will be destroyed. Loan facility provided by banks works as an incentive to the producer to increase the production. Banking is now an essential part of our economic system. 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. Secondly, banking promotes investments. Banks easily invest the money they get in industry, agriculture and trade. They either invest it directly or advance loans to other investors. Thirdly, it is most through banks that foreign trade is carried on. Whether we export or import, it is through banks that money is transferred from one country to another. For example, bills of exchange and letters of credit are the regular ways banks use to transfer money. A number of recent studies, however, indicate that the banking sector plays a more important role than it was believed earlier (World Bank, 1996; Almeyda)In Bangladesh Sonali Bank is the largest among the Nationalized Commercial
1

Banks(NCBs) while Pubali is leading in the private ones. Among the 12 foreign banks, Standard Chartered has become the largest in the country. Besides the scheduled banks, Samabai (Cooperative) Bank, Ansar-VDP Bank, Karmasansthan (Employment) Bank and Grameen bank are functioning in the financial sector. In Bangladesh the number of total branches of all scheduled banks is 6,038 as of June2000. Of the branches, 39.95 per cent (2,412) are located in the urban areas and 60.05per cent (3,626) in the rural areas. Of the branches NCBs hold 3,616, private commercial banks 1,214, foreign banks 31 and specialized banks 1,177. Bangladesh Bank (BB) has been working as the central bank since the countrys independence. Its prime jobs include issuing of currency, maintaining foreign exchange reserve and providing transaction facilities of all public monetary matters. Bangladesh Bank (BB) regulates and supervises the activities of all banks. BB is also responsible for planning the government's monetary policy and implementing it thereby. In a developing country like Bangladesh, the banking system as a whole, play a vital role in the progress of economic development. In this paper it has been tried to analyze the development and growth of National Bank Limited. of Bangladesh and evaluate its performance. It is observed that the National Bank Limited has been playing a vital role in economic development as well as in development of banking industry in Bangladesh.

1.1Background of the study

This term paper is about the financial performance evaluation of Prime Bank Limited is submitted to the course instructor Dr. Tanbir Ahmed Chowdhury, Professor of Business Administration Department, on April 03, 2013. The report is conducted based on field survey and internet survey.
2

1.2An Over view of National Bank Limited

National Bank Limited has its prosperous past, glorious present, prospective future and under processing projects and activities. Established as the first private sector bank fully owned by Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the passage of time after facing many stress and strain. The members of the board of directors are creative businessmen and leading industrialists of the country. To keep pace with time and in harmony with national and international economic activities and for rendering all modern services, NBL, as a financial institution, automated all its branches with computer networks in accordance with the competitive commercial demand of time. Moreover, considering its forth-coming future, the infrastructure of the Bank has been rearranging. The expectation of all class businessmen, entrepreneurs and general public is much more to NBL. At present we have 145 branches under our branch network. In addition, our effective and diversified approach to seize the market opportunities is going on as continuous process to accommodate new customers by developing and expanding rural, SME financing and offshore banking facilities. The emergence of National Bank Limited in the private sector was an important event in the Banking arena of Bangladesh. When the nation was in the grip of severe recession, the government took the farsighted decision to allow the private sector to revive the economy of the country. Several dynamic entrepreneurs came forward for establishing a bank with a motto to revitalize the economy of the country. National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private sector. From the very inception, it was the firm determination of National Bank Limited to play a vital role in the national economy. We are determined to bring back the long forgotten taste of banking services and flavors. We want to serve each one promptly and with a sense of dedication and dignity. The then President of the People's Republic of Bangladesh Justice Ahsanuddin Chowdhury inaugurated the bank formally on March 28, 1983 but the first branch at 48, Dilkusha Commercial Area, Dhaka started commercial operation on March 23, 1983. The 2nd Branch was opened on 11th May 1983 at Khatungonj, Chittagong.
3

At present, NBL has been carrying on business through its total 167 service locations (branches and Agri branches) spread all over the country. Since the very beginning, the bank has exerted much emphasis on overseas operations and handled a sizable quantum of home bound foreign remittance. It has drawing arrangements with 415 correspondents in 75 countries of the world, as well as with 37 overseas Exchange Companies located in 13 countries. NBL was the first domestic bank to establish agency arrangements with the world famous Western Union in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. This has meant that the expatriates can remit their hard-earned money to the country with much ease, confidence, safety and speed. NBL was also the first among domestic banks to introduce international Master Card in Bangladesh. In the meantime, NBL has also introduced the Visa Card and Power Card. The Bank has in its use the latest information technology services of SWIFT and REUTERS. NBL has been continuing its small credit programmes for disbursement of collateral free agricultural loans among the poor farmers of Barindra area in Rajshahi district for improving their livelihood. National Bank, has now acquired strength and expertise to support the banking needs of the foreign investors. NBL stepped into a new arena of business and opened its Off Shore Banking Unit at Mohakhali to serve the wage earners and the foreign investors better than before. Since its inception, the bank was aware of complying with Corporate Social Responsibility. In this direction, we have remained associated with the development of education, healthcare and have sponsored sporting and cultural activities. During times of natural disasters like floods, cyclones, landslides, we have extended our hand to mitigate the sufferings of victims. It established the National Bank Foundation in 1989 to remain involved with social welfare activities. The foundation runs the NBL Public School & College at Moghbazar where present enrolment is 1140. Besides awarding scholarship to the meritorious children of the employees, the bank has also extended financial support for their education. It also provided financial assistance to the Asiatic Society of Bangladesh at the time of their publication of Banglapedia and observance of 400 years of Dhaka City.

The Transparency and accountability of a financial institution are reflected in its Annual Report containing its Balance Sheet and Profit & Loss Account. In recognition of this, NBL was awarded Crest in 1999 and 2000, and Certificate of Appreciation in 2001 by the Institute of Chartered Accountants of Bangladesh. The bank has a strong team of highly qualified and experienced professionals, together with an efficient Board of Directors who play a vital role in formulating and implementing policies. Mission: Efforts for expansion of our 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, account ablility, improved clientele service as well as to our commitment to serve the society through which we want to get closer and 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 upgradation and diversification of our clientele services in line with national and international requirements is the desired goal we want to reach. 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 are our cherished vision.

1.3 OBJECTIVES OF THE STUDY

The specific objectives of the study are as follows: 1) To present an overview of a Private Commercial Bank (National Bank Limited) of Bangladesh. 2) To appraise the performance of selected Private Commercial Bank of Bangladesh.
5

3) To appraise the principal deposit and loan schemes of National Bank Limited. 4) To relate the theoretical knowledge to the original financial data of Prime Bank Limited. 5) To know the financial performance of National Bank Limited in the last five years. (2007-2011) 6) To identify the strength and weakness of the bank based on the financial performance in the last five years (2007-2011). 7) To present our observation and suggestion to the bank.

1.4. SCOPE & METHODOLOGY OF THE STUDY

The present study has been carried out to evaluate the performance of selected private commercial banks of Bangladesh. The selected bank is National Bank Limited. This study has been based mainly on data from secondary sources. The relevant data and information were collected from Stock Exchanges, Annual Reports of the commercial bank, Bangladesh Bank, Securities and Exchange Commission (SEC) and web sites of relevant commercial bank of Bangladesh etc. Relevant articles and literature in this context have also been consulted. In this article we analyzed last five years data of selected private commercial bank. For evaluating the performance of selected private commercial bank, the following performance variables of the selected private commercial bank have been used: 1. Number of branches 2. Total deposit 3. Total loans and advances 4. Classified loans 5. Percentage of classified loan to total loan 6. Net profit after taxation & provision 7. Cost of fund
6

We get the basic idea about different ratio and the procedure to evaluating performance of a financial institution from our text book (Commercial Banking). And we have collected necessary data needed for performance evaluation from the Financial Statement and Income Statement of National Bank Limited published on its Annual Report. For getting necessary information we also take help from Brochures of National Bank Limited, different written document of National Bank Limited and newspaper articles and also form its web side.

1.5. Limitations of the study:

It was a great opportunity for us to work in Prime Bank limited to make a report on the financial performance of it but there were surely some limitations while making this report. These are As we have done this kind of report for the first time and the subject matter is very complex thats why it was difficult to organize the report in a simple manner. Getting the information and interpreting it, on the basis of our understanding and then implementing it. Besides all these Time constraint is another problem for which many aspects of Prime Bank Limited are dropped in this report. The bank employees are so busy all the time that they could not help us much to interpret the information.

2.0 Performance evaluation of National Bank

2.1 Principal function of National bank:

Efforts for expansion of our 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, account ability, improved clientele service as well as to our commitment to serve the society through which we want to get closer and 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. 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 are our cherished vision. NBL focused on all key areas covering capital adequacy, maintaining good asset quality, sound management, satisfactory earning and liquidity. As a consequence, it was possible to a record growth of 175.51 percent with Tk. 8,809.40 million pre tax profit in the year under review over the preceding year. The net profit after tax and provision stood at Tk. 6,860.34 million which was Tk. 2,070.47 million in the previous year registering a 231.34 percent rise. The total deposits increased to Tk. 102,471.83 million being 33.37 percent increase over the preceding year. Loans and advances stood at Tk.92,003.56 million in the year under report which was Tk. 65,129.289 million representing 41.26 percent rise over the preceding year. Foreign trade stood at Tk. 144,255.00 million in 2010 compared to Tk. 115,939.00 million, increased by 24.42 percent compared to that of the previous year. During 2010, the bank handled inward remittance of Tk. 49,145.30 million, 10.73 percent higher than that of the previous year. Return on Equity (ROE) registered a 77.84 percent rise over the preceding year

2.2 Principal of deposit schemes:

There are several types of deposit schemes provided by the National bank. They are Savings deposit National Bank Limited offers customers a hassel free and low charges savings account through the branches all over Bangladesh. o o o o o 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. o Minimum balance Tk.2000. o Minimum maintenance charges half yearly Tk.400. o No hidden costs. o Standing Instruction Arrangement are available for operating account. o Easy access to our other facilities. Term deposit 1. Special Notice Deposit National Bank Limited offers interest on customer's special notice deposit account and gives facility to withdraw money any time. o Minimum maintenance charge - half yearly Tk.500. o Standing Instruction Arrangement are available for operating account. 2. Fixed Deposit National Bank Limited offers fixed term savings that will scale up your savings amount with the time. o Any amount can be deposited. o Premature encashment facility is available.
9

o Overdraft facility available against term receipt. Foreign currency deposit 1. RFC Deposit National Bank Limited gives opportunity to maintain foreign currency account through it's 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. o No initial deposit is required to open the account. o Interest will be offered 1.75% for US Dollar Account , 3.00 % for EURO Account and 3.25% for GBP Account. o They will get interest on daily product basis on the credit balance (minimum balance of US$ 1,000/- or GBP 500/- at least for 30 days) maintaining in the account. 2. 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 NFCD Account. o NFCD Account can be opened for One month, Three months, Six months and One Year through US Dollar, Pound Starling, Japanese Yen and Euro. o The initial minimum amount of $1000 or 500 Pound Starling or equivalent other designated currency. o Interest is paid on the balance maintain in the Account. This interest is tax free in Bangladesh.

10

 Monthly savings scheme National Bank Limited offers monthly savings scheme for it's retail customers. o The deposit amount is Tk.500 to highest Tk. 50, 0000 and tenor is from 3 years to 10 years maximum. o Account can be operated by debit instruction and online deposit. o Depositor can avail loan amount 80% of his deposited amount.
Amount to be paid on completion of Term Sl no Monthly Installments (Taka) 01 02 03 04 05 06 07 08 09 10 500/1,000/2,000/3,000/4,000/5,000/10,000/20,000/30,000/50,000/3(Three) years 5(Five) years 8(Eight) years 10(Ten) years 21,050/42,100/84,200/1,26,300/1,68,000/2,10,500/4,21,000/8,42,000/12,63,000/21,05,000/39,500/79,000/1,58,000/2,37,000/3,16,000/3,95,000/7,90,000/76,000/1,52,000/3,04,000/4,56,000/6,08,000/7,60,000/15,20,000/1,10,000/2,20,000/4,40,000/4,56,000/8,08,000/11,00,000/22,00,000/44,00,000/66,00,000/-

15,80,000/- 30,40,000/23,70,000/- 45,60,000/-

39,50,000/- 76,00,000/- 1,10,00,000/-

Monthly income scheme Under this scheme one will deposit a minimum of tk.1,00,000/- or its multiple for three years and will enjoy monthly benefit of Tk.1,000/- for every Tk.1,00,000/-. o Deposit of Tk.1,00,000/- and its multiple maximum of Tk 50,00,000/shall be acceptable under this scheme. o The account may be opened either singly or jointly.

11

 Double benefit scheme Dreams come true. National Bank Limited now offers Double Benefit Scheme for it's customers. The benefits under this scheme shall become double after 6 years. o Deposit of Tk.50,000/- and its multiple maximum of Tk 50,00,000/shall be acceptable under this scheme. o A person is allowed to open more than one DBS Account. o The account may be opened either singly or jointly.
o All DBS account holder shall be offered with free Life Insurance Policy under this scheme.

Millionaire deposit scheme Under this scheme one will deposit a fixed amount on monthly basis for 5, 7 or 10 years and on maturity he/she will be just a millionaire. o Deposit of fixed monthly amount for 5, 7 or 10 years. Deposit size will be based on tenure. Upon maturity the depositor will get Tk. 10,00,000/-. o A person is allowed to open more than one MIS Account. o The account may be opened either singly or jointly.

Installment Tenure On maturity 12,450/7,870/4,550/5 7 10 10,00,000/10,00,000/10,00,000/-

12

2.3 Principal of Loan:

National bank also offers different types of loans to their customer. They are Overdraft NBL offers overdraft facility for corporate customers for day-to day business operations . o Low charges in overdraft account maintenance. o Facility is available against deposit receipt or mortgage property. o Low interest rate 13-16%. Lease financing National Bank Limited offers leasing facility for clients with easy installment facility. Area o Capital machinery. o Different equipments. o Gas, Diesel generator and Power plant. o Medical equipments. o Lift or elevator. o Information Technology equipments. o Construction equipments. o Consumer durables. House building NBL offers home loan facility for purchasing flats or construction of house . o Financing amount extends upto 70% or Tk. 75,00,000 which is highest of total construction cost. o Grace period available up to 9 months in flat purchase or 12 months in construction. o Competitive interest rate. o No application or processing fee.

13

 Small medium enterprise NBL offers financial support to small businessmen/enterprise with new products named "Festival Small Business Loan" and "NBL Small Business Loan" has been introduced in the Bank. o Maximum Tk.3.00 lac (Festival Scheme) and Maximum Tk.5.00 lac (Small Business Scheme) . o 3 Months (Festival Scheme) and 5 years (including 1 month grace period (Small Business Scheme)) o Collateral Free Advance. Consumer credit scheme NBL offers consumer credit facility for retail customers. Financing items - Electronics consumer products. Computer or Computer accessories. o o o o Fast processing. Competitive interest rate. No application or processing fee. Easy monthly installment.

Trade finance NBL provides comprehensive banking services to all. types of commercial concerns such as in the industrial sector for export-import purpose as working capital, packing credit, trade finance, Issuance of Import L/Cs, Advising and confirming Export L/Cs. - Bonds and Guarantees . o Low interest rate 13.00%-14.50%. o Minimum processing time. o Low service charges.

14

2.4 Performance evaluation:

2.4.1 Total Deposit: Customers deposit continued to increase every year in Prime Bank Limited (According to the annual report until 2012). Till 2012 total amount of customers deposit are shown in the graph below-

Year

Amount of deposit (in millions)

60187.435 76814.651 102471.832 127475.154
rd

140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 Total Deposit (in millions )

2008 2009 2010 2011 2012(3 quarters)

148012.506

Figure 01: Total customers deposit from 2008-2012(3rd quarters)

Fig 01 shows that every year their deposit is increasing in a high that really good for the bank.

2.4.2 Total Loan: Here the bellow table shows the total loan and advance amount of National Bank Limited from the year 2008-2012. As we here see that every year in Prime Bank Limited (According to the annual report until 2012). Till 2012 total amount of customers loans and advances are continuously increasing (shown in bellow graph)15

Year 2008 2009 2010 2011 2012(3rd quarters)

Amount of loan (in millions) 49665.74 64962.312

140000 120000 100000 80000

92003.564 116063.025

60000 40000 20000

Loans & Leases (in Millions)

120008.43

0 2008 2009 2010 2011 2012(3rd quarters)

Figure 02: Total loans and advances from 2008-2012(3rd quarters)

From (2008-2012 3rd quarter) National bank gave a lot of loan. From the graph we can see their given loan is increasing year after year.

2.4.3: Provision for Loan Loss Ratio: Loan Loss Provision to Total Loans = Loan loss provisions/Total Loans X 100 The Loan loss Provision to Total Loans ratio of Prime Bank (2007-2011) is shown in the table below-

16

Year 2008 2009 2010 2011 2012(3rd quarters)

Provision for Total loan and Ratio loan losses leases 295 49665.074 0.59 200 131.2 332.784 29.720 64962.312 92003.564 116063.25 120008.43 0.31 0.14 0.29 0.024

Change -.28 -.17 +.15 -.27

0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2008 2009 2010 2011 2012(3rd quarters) Provision for Loan loss Ratio

Figure 03: Provision for Loan loss Ratio of National Bank Limited from 2008-2012(3rd quarters).

The higher the loan loss provision ratio means the bank is in a risky position in order to regain the loan from the clients. On the other hand, lower the ratio means the bank is in a less risky position in order to regain loans from customers. From the loan loss provision to total loan ratio of National Bank Limited it is seen that in 2008 it was 0.59% and in 2008 suddenly it decreased to 0.31%.But in 2009 it was increased to .29%.

17

2.4.4: Debt Ratio A ratio that indicates what proportion of debt a company has relative to its assets. The measure gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load. Debt Ratio = Total Debt / Total Assets
Year Total Debts (Taka in millions) Total assets (Taka in millions) Total debt ratio

2008 2009 2010 2011 2012(3rd quarters)

66095 83047 115629 146992 159669

72227 91980 134748 168555 182560

0.915101 0.902881 0.858112 0.872071 0.874611

0.92 0.91 0.9 0.89 0.88 0.87 0.86 0.85 0.84 0.83 0.82 2008 2009 2010 2011 2012(3rd quarters) Debt ratio

Figure 04: Debt Ratio of National Bank Limited from 2008-2012(3rd quarters)

From above figure as we can see that the proportion of debt relatively to its assets in 2007 was 0.915101 and in next year it decreased to 0.902881 and 2011 it again decreased and reached to 0.872071.
18

2.4.5 Net Interest Margin: A ratio that examines how efficiently an organization can manage its investment decision to its debt situation. The formula of Net Interest Margin isNet Interest Margin = Interest Income - Interest Expense / Average Total Assets X 100 The Net Interest Margin of National Bank Limited of last five years is given below-

Year
2008 2009 2010 2011 3.03% 2.52% 3.07% 3.14%

NIM

2012(3rd 1.96% quarters)

3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2008 2009 2010 2011 2012(3rd quarters) Net Interest Margin

Figure 05: Net interest margin of National Bank Limited from 2008-2012(3rd quarters). 19

In 2008 the net interest margin ratio of NBL was 3.03% which fall in 2009 to 2.52% and maintain the steadiness in 2009 also. Due to increase in the loans and advances in 2010 the amount of interest income was also increased compare to the interest expense. Total asset of NBL was also increased in 2010 but compare to the interest income it was a bit slower. For this reason net interest margin change in a large scale in 2010 compare to the previous years change.

2.4.6: Net Income Bellow table shows the net income of National Bank Limited from the year 2008 to 2012

Year

2008 2009 2010 2011 2012(3rd quarter)

NI (in millions) 1517.43 2082.028 6871.559 6112.985 1589.602

8000 7000 6000 5000 4000 3000 2000 1000 0 2008 2009 2010 2011 2012(3rd quarter) Net Income (in million)

Figure 06: Net income of National Bank Limited from 2008-2012(3rd quarters).

20

From the net income of National Bank Limited it is seen that the last five years net incomes were-1517.43 million, 2082.028 million, 6871.559 million, 6112.985 million and 1589.602 million. From the net income trend of Prime Bank Limited it is easily noticed that the trend of the net income was upward. Every year the net income was increasing gradually.

2.4.7: Return on Assets (ROA): Return on Assets ratio of a bank gives an idea of how efficiently a bank is using its assets to generate profit. Return on Assets (ROA) is calculated asReturn on Asset (ROA) = Net Income / Total Assets X 100 The return on asset ratios of National Bank Limited from 2008-2012 are given below-

Year 2008 2009 2010 2011 2012(3rd quarters)

ROA 2.10% 2.26% 5.10% 3.63% 0.87%

6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2008 2009 2010 2011 2012(3rd quarters) Return on Asset (ROA)

Figure 07: Return on Assets (ROA) of National Bank Limited from 20082012(3rd quarters) 21

In the year 2008 the return on assets of NBL was 2.10%. From that in 2009 the ratio rises to 2.26% and in 2010 to 5.10% because net income of NBL Increased. On the other hand in 2011 there is a huge change in ROA of NBL.

2.4.8: Return on Equity (ROE): Return on Equity is a ratio that measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ROE is expressed as a percentage. For calculating the ROE of National Bank Limited the formula of ROE will be used isROE = Net Income / Average shareholders Equity. The ROE of National Bank Limited from 2008-2012 is shown in the table belowYear 2008 2009 2010 2011 2012 (3rd quarter) ROE 24.76% 23.30% 35.94% 28.36% 06.94%

22

40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2008 2009 2010 2011 2012 (3rd quarter) Return on Equity (ROE)

Figure 08: Return on Equity (ROE) of National Bank Limited from 2008-2012(3rd quarters)

Here it is seen that ROE of National Bank Limited in 2008 was 24.76% which declined to 23.30% in 2009. This situation occurred because in 2008 Net Income decreased. On the other hand the average equity of NBL in 2008 increased. Again in 2010, the ROE increased to 35.34%. This situation occurred because there is a huge increase both in the Net Income and Average Equity in 2010. In 2011 Net income again decreased but in a increasing order. For That ROE in the 2011 was 28.36%.

2.4.9: Earning Per Share (EPS): Earnings per share (EPS) is calculated asEPS = Net Income / Number of Share Outstanding The earnings per share of National Bank Limited from 2008-2012 are given below-

23

Year 2008 2009 2010 2011 2012(3rd quarters)

EPS 81.03tk 7.27tk 15.57tk 7.07tk 1.12tk

90 80 70 60 50 40 30 20 10 0 2008 2009 2010 2011 2012(3rd quarters) Earning Per Share (EPS)

Figure 09: Earning per share (EPS) of National Bank Limited from 2007-2011

In this above graph as we can see that in the year 2008 the EPS was higher for National Bank Ltd. And in next 2009, 2010 and 2011 the EPS was goes down..

24

2.4.10: Dividend: Total dividend paid by National Bank Limited from the year 2008 to 2012 was shown in bellowYear 2008 2009 2010 2011 2012(3rd quarters) Dividend 52% 55% 95% 65% 10%

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2008 2009 2010 2011 2012(3rd quarters) Dividend

Figure 10: Dividend paid by National Bank Limited from 2008-2012(3rd quarters)

25

From this figure as we can see that in National Bank Limited their dividend paid was goes up in 2008-2010 and in next year it again fall to 65%.

2.4.11 Loan Deposit Ratio: The ratio is commonly known as LTD ratio and is expressed as percentage. Basically this kind of ratio is mainly used by the banks to know their liquidity by dividing the total loans by total deposits. The formula of the loans to deposits ratio isLoans to Deposit ratio = Loans / Deposits X 100 In loans to deposits ratio if the ratio is high that means the bank has low liquidity. That means the bank does not have enough liquidity to meet its payment requirement. On the other hand, if the liquidity ratio is low that means the bank has high liquidity. This situation mainly occurs when the bank has more liquidity in their hand to meet up all payment requirements. The Loans to Deposits ratio of National Bank Limited is shown in the table below-

Year 2008 2009 2010 2011

Ratio 82.5% 84.5% 89.8% 91% 81%

2012(3rd quarters)

26

92.00% 90.00% 88.00% 86.00% 84.00% 82.00% 80.00% 78.00% 76.00% 2008 2009 2010 2011 2012(3rd quarters) Loan Deposit Ratio

Figure 11: Loans to Deposits ratio of National Bank Limited from 2008-2012(3rd quarters)

The Loan to Deposit ratios of National Bank Limited in last five years were 82.5%, 84.5%, 89.8%, 91% and 81%. From the changing of these ratios it is seen that there is a normal trend of increase and decrease of ratio but in 2012 there will be a bog change in Loan to Deposit ratio.

2.4.12 Profit Margin: A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every taka of sales Prime Bank Limited is actually keeps in earnings. So, Profit Margin = Net Income / Operating Revenue X 100 The Profit Margin of National Bank Limited is shown in the table below27

Year 2008 2009 2010 2011 2012(3rd quarter)

Profit margin 28.50% 30.96% 52.48% 46.77% 51.55%

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2008 2009 2010 2011 2012(3rd quarter) Profit margin

Figure 12: Profit Margin of National Bank Limited from 2008-2012(3rd quarters)

Here from this figure as we can see that in National Bank Limited the total profit margin for 2008 was 28.5% in next year it increases to 30.96%. After in 2010 it again increased to 52.48% and in 2011 it decreases to 46.77.

28

2.4.13: Equity Multiplier The equity multiplier is a ratio used to determine the financial leverage of a company. Equity Multiplier = Total Assets / Total Equity The Equity Multiplier of National Bank Limited is shown in the table belowYear 2008 2009 2010 2011 2012(3rd quarters) Equity multiplier 11.78 10.29 7.04 7.81 7.98

14 12 10 8 6 4 2 0 2008 2009 2010 2011 2012(3rd quarters) Equity Multiplier

Figure 13: Equity Multiplier of National Bank from 2008-2012(3rd quarters)

29

So, here from this figure as we can see that in National Bank Limited in the year 2008 their equity multiplier was 11.78 and in next year 2009 it decreased to 10.29 and in 2010 to 7.04 and from next year to 2012 it continuously increase and come to 7.98. Which indicate that, for National Bank Limited their financial leverage was continuously going down again it going up now.

30

3.1 Findings of the study

Recommendation Some recommendations based on the financial performance of National Bank Limiteds financial performance are given below A bank should increase the non-funded income in order to increase the operating income ratio After giving the loan to the customers, a banker should also perform certain duties to the customers to decrease the bad debt problem. Like-monitoring, supervising and follow up the loan that is taken by the customers. Before giving long-term loan a bank should consider that whether a bank has long term deposit or not. Otherwise the bank will surely face the liquidity problem. The rule of uniformity should be imposed by Bangladesh Bank for all types of schemes. By this way customers can decide from where they will receive service based on the service quality and organizational environment. Employee Recruitment Process- should be done in a fare process so that appropriate and talented employees are selected through the recruitment process and increase the productivity and quality of the service. Directors interference in case of giving loan should be lessening because in this way risk may increase and bad debt may also increase.

31

3.2 Conclusion

National Bank Limited is one of the leading commercial banks in our country. In all economic condition of our country National Bank Limited has been working with great confidence and competing tremendously with Government oriented bank, local commercial banks along with the multinational banks also. National Bank Limited always tried its level best to perform financially well. In spite of trying to do well in some aspects National Bank Limited faced some financial problems from time to time. Some of the problems were-excessive bad loans, shortage of loans and advances, scarcity of cash in hands due to vault limit etc. These problems arouse time to time due to economic slowdown, interest rate fluctuation, emerging capital market, inflation in the money market and so on. Fighting with all these problems and competing with other banks every moment the bank is trying to do better to best. If this thing continues we hope that National Bank Limited will develop even more in the future.

32

3.3 References

Text book Commercial Banking, 2nd edition, Donald R. Fraser, Benton E. Gup and James W. Kolari Annual Report of National Bank Limited, 2008 Annual Report of National Bank Limited, 2009 Annual Report of National Bank Limited, 2010 Annual Report of National Bank Limited, 2011 Annual Report of National Bank Limited, 2012 http://www.nblbd.com/ http://www.dsebd.org/ http://www.bangladesh-bank.org/ http://www.secbd.org

33