Some Important Ratio:

Net Interest Income = Interest Income - Interest Expense

Net Non-interest Income = Non-interest Income - Non-interest Expenses
Net Interest Margin = (Interest Income Interest Expenses) / Total Assets
Operating Efficiency Ratio = Total Operating Expenses / Total Operating Income
PLL% = Provision for Loan Losses / Loans
Burden% = (Non Interest Op Expenditure - Non Interest Income)/ Average Assets
ROA = Net Income / Total Assets
ROE = Net Income / Total Equity
Equity Multiplier (EM) = Total Assets / Total Equity
Equity to Asset Ratio = Total Equity / Total Assets
NNIM= Net Non-interest Income / Total Assets
SELECTED PROBLEM:
1. A summarized Balance sheet and other relevant information of Modern Bank Ltd, is given below:
Liabilities & Capital

Amount
(Tk.)

Assets

Amount (Tk.)

Deposit

5000

Cash

800

Borrowing

1000

Loans

6000

Capital

800

Total

6800

Total

6800

Average interest rate on deposit 11% and on borrowing is 5%. Total administrative expenses equal Tk. 150.
Investors expected rate of return on the capital is 20%. Total amount of bad loan equals Tk. 75. Calculate
Loan Price?
SOLUTION:
Loan Price = (Cost of Fund + Cost of Administration + Cost of Capital) + Risk Premium
(Total Deposit * Avg. int. rate) + (Total Borrowing * Borrowing Rate)
Cost
of
. %
Total Loans & Advances
(5000 * 11%) + (1000 * 5%)
= %
6000

Fund

= 10%

Total Administrative Expenses

150
Cost of Administration = % = % = 2.5%

Total Loans & Advances

6000

(Total Capital * Investors expected Rate)

(800 * 20%)
Cost of Capital = % = .
% = 2.67%
Total Loans & Advances
6000
Total Bad & Loss Loan
Risk Premium = % = 1.25%
Total Loans & Advances
So, Loan Price = 10% + 2.5% + 2.67% + 1.25% = 16.42%
2.

SOLUTION:
RWA = (1200*0%) + (1000 * 20%) + (2000*50%) + (4500 * 100%) = 0 + 200 + 1000 + 4500 = 5700
Core Capital = (RWA * 5%) = 285
Minimum Capital Requirement = (RWA * 10%) = 570
3.

SOLUTION:
ROA = (Net Income / Total Asset)
Total Asset = 2000000 / 1.25% = 160000000

ROE = (Net Income / Total Equity)

Total Equity = 2000000 / 13.5% = 14814815
Equity Multiplier = (Total Assets / Total equity) = 10.80
Equity to asset ratio = (Total Equity / Total Asset) = 9.26%
(iii) New Equity = 14814815 1000000 = 13814815
Net Income = 2000000 + 200000 = 2200000
ROE = (Net Income / total Equity) = 2200000/ 13814815 = 15.92%

4.

Given: ROE=15%, Tax Rate=40%, Total Asset=25 Crore, Total Liability=15 Crore.
Net Non-Interest Expense= 1.5%, PLL=0.35% of total Asset.
Find out the Net Interest Margin (NIM).

SOLUTION:
Given,
Total Assets = Tk. 25 Crore
Total Liabilities = Tk. 15 Crore
So, Total Equity = Tk. (25 - 15) = Tk. 10 Crore
ROE = 15%
So, Profit After Tax = Tk. (10 * 15%) Crore = Tk. 1.5 Crore
So, Profit Before Tax = Tk. 1.50/ (1 - 0.40) = Tk. 2.50 Crore
Here,
Provision for Loan Losses = Tk. 25 * 0.35% = Tk. 0.0875 Crore
Net Non-Interest Income (Expenses) = Tk. 25 * (1.5%) = Tk. (0.375) Crore
We Know,
Profit Before Tax = Net Interest Income - Provision for Loan Losses + Net Non Interest Income
i.e., 2.50 = NII - 0.0875 - 0.375
So, NII = 2.50 + 0.0875 + 0.375 = 2.9625 Crore
So, Net Interest Margin (NIM) = NII / Total Assets
= 2.9625/25
= 0.1185 or 11.85%. (Answer)

5. Net Interest Income is Tk. 10000, non-interest expenses is Tk. 15000, Liabilities is Tk. 200000 and equity is Tk.
150000, Total income is Tk. 60000, interest expense in Tk. 25000. Calculate (i) ROE, (ii) ROA, (iii)NIM,
(iv)NNIM
SOLUTION:
Net Interest Income = Interest Income Interest Expense
Interest Income = 10000 + 25000 = 35000
Total Income = Interest Income + Non-interest Income
Non-interest Income = 60000 35000 = 25000
Net non-interest income = non-interest income non-interest expense
= 25000 15000 = 10000
Total Asset = Liability + Equity
= 200000 + 150000 = 350000

(i) ROE = (Net Income / Total Equity)

= {(Net Interest Income + Net non-interest income) / Total Equity}
= (10000 + 10000)/ 150000 = 13.33%
(ii) ROA = (Net Income / Total Asset)
= 20000 / 350000 = 5.71%
(iii) NIM = Net interest Income / Total Asset = 10000 / 350000 = 2.86%
(iv) NNIM = Net Non-interest Income / total Asset = 2.86%

6. If a bank has a net interest margin of 2.50%, a noninterest margin of -1.85%, and a ratio of provision for loan
losses, taxes, security gains, and extraordinary items of -0.47%, what is its ROA?
SOLUTION: ROA =Net interest margin + Noninterest margin Ratio of provision for loan losses, taxes,
security gains, and extraordinary items
= 2.50% + (-1.85%) (-0.47%) = 1.12 %

December 2013
****************************
Solution to 6(a)
Net Income
= Interest Income + Non Interest Income + Securities Gains - Interest Expense - Non Interest Expense Taxes
Provision for Loan Loss
= 1875 + 501 + 21 1210 685 16 381
= 105
Total Equity
= Total Assets Total Liabilities
= 15765 15440 = 325
ROE
= Net Income / Total Equity
= 105 / 325
= 32.30%
ROA
= Net Income / Total Assets
= 105 / 15765
= 0.66%

NIM
= (Interest Income Interest Expenses) / Total Assets
= (1875 - 1210) / 15765
= 665 / 15765
= 4.21%
EPS = 105,000,000 / 145,000 = Tk. 724.14 per share
Net Non-interest Margin
= (Non-interest Income - Non-interest Expenses) / Total Assets
= (501 685) / 15765
= (184) / 15765
= - 1.16%
Here,
Total Operating Income
= Int. Income + Non Interest Income
= 1875 + 501 = 2376
Total Operating Expenses
= Int. Expenses + Non Int. Expense + Provision for Loan Loss
= 1210 + 685 + 381
= 2276
Net Operating Margin
= (Total Op. Income Total Op. Expenses) / Total Assets
= (2376 2276) / 15765
= 0.63%
NIM=(1875-1210)/12621X100 = 5.26. NNIM= (501-685)/12621 X100=(1.45)
#MFI - December 2013
***************************
Solution to 4(b)
Given,
Return on Assets, ROA = 0.80%
Equity Multiplier, EM = 12 times
So, Return on Equity, ROE = ROA * EM = 0.80 * 12 = 9.6%
#MFI - December 2013
***************************
Solution to 4(b)
Given,
Return on Assets, ROA = 0.80%
Equity Multiplier, EM = 12 times
So, Return on Equity, ROE = ROA * EM = 0.80 * 12 = 9.6%
#MFI - December 2013
***************************
Solution to 4(b)
Given,
Return on Assets, ROA = 0.80%
Equity Multiplier, EM = 12 times
So, Return on Equity, ROE = ROA * EM = 0.80 * 12 = 9.6%

Math Solution- DECEMBER 2013

6 A.
Net Income = Interest Income + Non Interest Income + Securities Gains - Interest Expense - Non Interest Expense
Taxes Provision for Loan Loss
= 1875 + 501 + 21 1210 685 16 381 = TK. 105 M
Total Equity = Total Assets Total Liabilities
= 15765 15440 = TK. 325 M
Debt= Deposit Account+ Bills Payable+ Borrowings (from Other or any Bank)
******* Contra will not count (Ignore)
Equity= Share Capital + Profit and Loss + Reserve Fund and other Reserves+ Surplus
Debt Equity Ratio or Burden%= Debt/Equity
Net Interest Income NII= Interest Income-Interest Expense
= (Interest on Advances+ Interest on Investment)-0)
Non Interest Income = Commission, Exchange and Brokerage+ Others Revenue+ Profit on

sale on Investment
Non Interest Expenses = Salary+ Allowance+ MDs Fee + Legal Fees + Sales Expenses +
Printing& Stationary + Postage & Telegram + Repair & Maintenance
Net Non Interest Income =Non Interest Income- Non Interest Expense
(Operating Income (Interest Income-Interest Expenses+ Other Income) Operating Expenses (All Expenditure excluding Interest Paid and Provision))
ROE= Return on Equity = Net Income / Total Equity = 105 / 325 = 32.30%
ROA = Return on Asset= Net Income / Total Assets = 105 / 15765 = 0.66%
NIM = Net Interest Margin= (Interest Income Interest Expenses) / Total Assets
= (1875 - 1210) / 15765 = 665 / 15765= 4.21%
EPS = Earnings Per Share = 105,000,000 / 145,000 = Tk. 724.14 per share
Net Non Interest Margin = (Non Interest Income Non Interest Expenses) / Total Assets
= (501 685) / 15765 = (184) / 15765 = - 1.16%
Here,
Total Operating Income = Int. Income + Non Interest Income
= 1875 + 501 = TK. 2376 M
Total Operating Expenses = Int. Expenses + Non Int. Expense + Provision for Loan Loss
= 1210 + 685 + 381 = TK. 2276 M
Net Operating Margin = (Total Op. Income Total Op. Expenses) / Total Assets
= (2376 2276) / 15765 = 0.63%
Management of Financial Institutions (MFI)
DAIBB - Dec-2013
Solution to 6(a)
Net Income
= Interest Income + Non Interest Income + Securities Gains - Interest Expense - Non Interest Expense Taxes
Provision for Loan Loss
= 1875 + 501 + 21 1210 685 16 381
= 105
Total Equity
= Total Assets Total Liabilities
= 15765 15440 = 325
ROE
= Net Income / Total Equity
= 105 / 325
= 32.30%
ROA
= Net Income / Total Assets
= 105 / 15765
= 0.66%
NIM
= (Interest Income Interest Expenses) / Total Assets
= (1875 - 1210) / 15765
= 665 / 15765
= 4.21%
EPS = 105,000,000 / 145,000 = Tk. 724.14 per share
Net Non-interest Margin
= (Non-interest Income - Non-interest Expenses) / Total Assets
= (501 685) / 15765
= (184) / 15765
= - 1.16%
Here,
Total Operating Income
= Int. Income + Non Interest Income
= 1875 + 501 = 2376

Total Operating Expenses

= Int. Expenses + Non Int. Expense + Provision for Loan Loss
= 1210 + 685 + 381
= 2276
Net Operating Margin
= (Total Op. Income Total Op. Expenses) / Total Assets
= (2376 2276) / 15765
= 0.63%
Management
DAIBB
Solution to 4(c)

of

Financial
-

Institutions

(MFI)
Nov-2011

i) Net Interest Income = Interest Income - Interest Expense = (80,000+15,000) - 19,500 = Taka 75,500 thousands.
ii) Net Non-interest Income = Non-interest Income - Non-interest Expenses =(20000+2000+8000) (7500+3500+2000+2500+25000) = 30000 - 40500 = (10500)
iii) Net Interest Margin = (Interest Income Interest Expenses) / Total Assets = (95000 - 19500) / 682500 = 11.06%
iv) Operating Efficiency Ratio = Total Operating
(19500+7500+3500+2000+2500+25000) / 125000 = 48%

Expenses

Total

Operating

Income

Assets

v) PLL% = Provision for Loan Losses / Loans = 7500 / 295000 = 0.0254 or 2.54%
vi) Burden% = (Non Interest Op Expenditure - Non Interest
[(7500+3500+2000+2500+25000) - (20000+2000+8000)] / 682500 = 1.53%

Income)/

vii) ROA = Net Income / Total Assets = 65000 / 682500 =9.52%

viii) ROE = Net Income / Total Equity = 65000 / (200000+115000+130000) = 14.60%
ix) Equity Multiplier (EM) = Total Assets / Total Equity = 682500 / 445000 = 1.53 times
x) Equity to Asset Ratio = Total Equity / Total Assets = 445000 / 682500 = 65.20%

Average