“A Comparative Study Between Two Similar Conventional

Banks (Mercantile bank Ltd VS. Eastern bank Ltd)”

Internship Autumn-2017

Submitted by

Rumana Khan Tonny

ID: 1310577

Submitted to

MR. Anwar Zahid

Lecturer

Finance Department

School of Business

Independent University, Bangladesh.

Submission Date: 30th November, 2017.
i
 Letter of Submission

16th November, 2017

Mr. Anwar Zahid

Lecturer

School of Business,

Independent University, Bangladesh.

Subject: Submission of Internship Report.

Dear Sir,

With due respect I would like to thank you for advising me to complete the Internship Report on
the topic of “To Compare The Performance of Two Commercial Bank” and submit it, which is
mandatory requirement for the BBA Program. It is an opportunity for me to applying my
knowledge in reality along with experiencing corporate environment.

I gave my best effort to prepare this report with my short term experience in the organization as
well as information gathered from different sources. I would be grateful for any assessment or
rectification given on any mistake arising from the report since I am not experienced in this
aspect.

I, therefore, hope that you will be satisfied with the report. I shall be highly obliged if you are
kind to provide your valuable judgment about.

Sincerely Yours,

Name: Rumana Khan Tonny

ID: 1310577

ii
 Acknowledgement

First of all, I am grateful to the almighty Allah, for blessing me with the physical and mental
stability to complete the report

In the preparation and finish this internship report, I acknowledge the encouragement and
assistance given by a number of people and institution. I am most grateful to the Mercantile
Bank Ltd management to give me the opportunity to complete my internship in their
organization.

I would like to express my gratitude to my supervisor Mr. Anwar Zahid for providing me
detailed feedback and advice on this report. I was fortunate to have him as my supervisor. He
was always there when needed and gave me suggestions in making this study as flawless as
possible.

I also want to give my special thanks to AVP: Assistant vice president and in charge Md. Kamal
Hossain, FVP: First vice president and in charge Md.Sarwar Alam and , First Vice President and
manager operation Abu Saleh Md. Ibrahim, Bijoy Nager Branch for providing all the support in
the organization.

Furthermore, I want to convey my heartiest thanks to my classmates and friends. Without their
help this report could not be fulfill. Finally, special thanks go to the respondents, who spared
their time generously, and helped me to complete my study.

iii
 Table of Contents
Title page ……………………………………………………………………………………………………………………………………….… i

Letter of submission ………………………………………………………………………………………………………………..…………ii

Acknowledgement…………………………………………………………………………………………………………………..….…… iii

Table of content………………………………………………………………………………………………………………………..….…..iv

Executive summary ……………………………………………………………………………………………………………………..……v

Chapter 1......................................................................................................................................................1

1.1 Company Profile: ........................................................................................................................... (1-2)

1.1.1Vision, mission, objective ,core values ……………………………………………………………………………………… (3-4)

1.1.2 Corporate division / department …….......................................................................................... (5-6)

1.1.3 Product line and services of Mercantile bank……......................................................................... (7-9)

1.1.4 CSR (corporate social responsibilities): ………........................................................................... (10-11)

Chapter 2 ............................................................................................................................................(12-13)

2.1 SPECIFIC RESPONSIBILITIES OF MY JOB .............................................................................................. 12

2.2 Functions of department ................................................................................................................... 13

Chapter3 ............................................................................................................................................(14-16)

3.1 Analysis of industry/markets………………………………………………................................................... (14-17)

3.2. Finding peer group/ main competitor....................................................................................... (17-18)

3.3 Ratio analysis of Mercantile Bank Limited ……………………………………………………………………………… (19-27)

3.4 Recommendation ......................................................................................................................... 28

Chapter 4 .................................................................................................................................................29

4.1Conclusion and implications ………………………………………………………………………………………………………… 29

Reference ........................................................................................................................................ (30-31)

Appendix A ……………………………………………………………………………………………………………………………………… 32

Appendix B………………………………………………………………………………………………………………………………………. 33

Appendix C………………………………………………………………………………………………………………………………………. 34

iv
 Executive Summary

This report has attempted to highlight on the experience Mercantile Bank Limited (MBL).
Mercantile Bank Limited is one of the leading financial banks in the country. As an intern from
business discipline, I got the opportunity to work with this organization and try to put my effort
to make a depth study.

The first part of the report discusses the organizational overview which included the brief
overview of the institution. I have given my best effort to include all the necessary points in
order to give a clear understanding about Mercantile Bank Limited.

In the second part of the report, I included all my experience during internship resembling my
jobs and responsibilities, learning from the internship. Here I have emphasized mostly about my
daily responsibilities and how much I was able to contribute to the organization. Afterwards I
have provided a short description about the difficulties that I have faced throughout the
internship journey and my methods of overcoming them.

The last part was very significant because here I got the opportunity to share my feelings from
the internship. I had a lot of expectation from where some were achieved and some were not.

It is undoubtedly true that this internship has impacted a great influence in my career plan. It got
me engaged in a lot of thought regarding where I had the scope to go ahead and thus this part
deals with that. Later on, I have drawn attention towards the findings by stating what my
corrections could have been if I could get an opportunity to redo the internship program. Finally,
the appendix includes annual report from Mercantile Bank website (2012-1016) of past twelve
weeks.

v
 Chapter 1

Introduction

1.1 Company profile

Background:

Mercantile Bank Limited was incorporated in Bangladesh as a Public Limited Company under
the Bank Companies Act, 1991 on May 20, 1999 and originated commercial banking operation
on June 02, 1999. The Bank move toward for public issue of shares on in 2003 and its shares are
listed with Dhaka Stock Exchange and Chittagong Stock Exchange. The Bank has 119 branches
spread all over the country. MBL is a highly capitalized new generation Bank with an
Authorized Capital and paid-up Capital of Tk. 12000.00 million and Tk. 7761.15 million
respectively. With assets of TK. 116,655,283,665 and more than 2000+ employees, the bank has
diversified activities in retail banking, corporate banking and international trade. MBL
undertakes all types of banking transactions to support the development of trade and commerce
in the country. MBL’s services are also available for the entrepreneurs to set up new ventures
and BMRE of industrial units. The bank provides superior prominence on Export, Import, Trade
Finance, SME Finance, Retail Credit and Finance to women Entrepreneurs. To provide customer
services in respect of International Trade it has proven wide correspondent banking relationship
with local and foreign banks covering major trade and financial centers at home and abroad.
MBL appeared as a new commercial bank to provide efficient banking services and to contribute
socio economic development of the country. With the passage of time it has expanded its number
of branches and variety of services along with its core business of taking deposits and making
loans. Growing trend of the bank’s profitability over the last 9 years is also materialized. The
MBL is committed to the delivery of the superior shareholders’ value. Foreign Exchange
Department of the bank is one of the most important departments. Now it has become the
backbone of the bank. With the aim to be the ‘Bank of Choice’, it is operating in the industry
with a team of devoted personnel to excel both their own career and the bank’s future.

1
 SHORT INTRODUCTION ABOUT MERCANTILE BANK LIMITED:

Table : 1.1

Status Public Limited Company

Date of Incorporation May20, 1999

Date of Commencement June 02, 1999.

Subscription for Shares October 21-22, 2003
Listed in Dhaka Stock Exchange February 16, 2004
Listed in Chittagong Stock Exchange February 26, 2004

Head Office 61, Dilkhusha Commercial Area, Dhaka-1000

Chairman A.K.M. Shaheed Reza

Number of Branches 119
Number of Employees 2000+
Services Provided All kind of Banking service

Diversification of Product and Services Corporate Banking and Retail Banking

Technology Used Member of SWIFT, Temenos T24, Microsoft

Computer System
E-mail mbl@bol-online.com
Website www.mblbd.com
SWIFT MBLBBDDH

SOURCE : MERCANTILE BANK LIMITED WEBSITE

2
 Vision, mission, objective and Core values

1.2.1Vision

To be the bank of first choice through maximizing value of our clients, shareholders and
employees and contributing to the national economy with social commitments.

1.3.1 Mission

Will become most caring, focused for equitable growth based on diversified deployment of
resources and nevertheless will remain healthy and gainfully profitable bank.

1.4.1Objective

 Strategic Objective:
 To increase shareholders' value
 To achieve economic value addition
 To be market leader in product innovation
 To be one of the top three financial institutions in Bangladesh in terms of
efficiency
 To be one of the top five financial institutions in Bangladesh in terms of market
share in all significant market segments we serve.
 Financial objective:
To achieve 20% return on share holders equity or more, on average.

1.5.1Core values

 Customer delight
Customer satisfaction pervades all our activities. We appreciate that Customer’s
satisfaction is critical for our success.

 Innovation

3
 Spurring innovation for reinforcement of our business. Origination and materialization of
change management for attainment of perfection and we believe change is always
constant.

 Ethical Values
We continue to be responsible, ethical, sincere and transparent in our thoughts and
actions.

 Caring for Human Resources

Realization of latent potentialities of employees, respecting individual worth and dignity
to ensure smooth career progression as well as welfare orientation in Human Resources
management policy and practices.

 Commitment
We always keep high on the agenda our commitment towards valued depositors as their
trustworthy custodian and to maintain the same spirit for all other stakeholders.

 Socially Responsible
Constant endeavor to act and respond in a socially responsible manner keeping in mind
society and our country. To care for our environment.

 Shareholders Value
Creation and Maximization of values for our shareholders.

4
1.1.2 Corporate Division/department of Mercantile Bank Limited, Bijoynagar
Branch.

In the Branched Based Approach: Branch manager is the head and each individual branch is
treated as the separate identity. The branch manager is liable to all the performance of that
particular branch. Before the starting of a facial year and from then onward, it is the duty of the
branch manager to see that targets are being met. A chart is given below for better understanding

Mercantile Bank Limited at a glance

SOURCE: DEPERTMENT WISE EMPLYEE ALLOCATION FROM MBL, BIJOYNAGAR BRANCH.

5
Figure No.1.2

Board of Director

Chairman

Managing Director
Additional Managing Director
Deputy Managing Director
Senior Executive Vice President
Executive Vice President
Senior Vice President
Vice President
First Vice President
Assistance Vice President
First Assistance Vice President
Principal Officer
Senior Executive Officer
Executive Officer
Officer
Assistance Officer
Trainee Assistance Officer

SOURCE: BANKING SECTOR WEBSITE

6
1.1.3 Details of the product lines or services

Mercantile Bank Limited offers various kinds of deposit products and loan schemes. The bank
also has highly qualified professional staff members who have the capability to manage and meet
all the requirements of the bank. Every account is assigned to an account manager who
personally takes care of it and is available for discussion and inquiries, whether one writes
telephones or calls.

Loan scheme:

Home Loan:

 Age limit minimum 21 Years. Maximum 65 years at the time of loan maturity for
service holders & 70 for others.
 Loan Limit TK. 120.00 Lac
 Competitive Interest Rate.

Cottage Loan:

 Age limit 21-60 years.

 Loan limits maximum TK.30.00 Lac.
 Competitive Interest Rate.

Car Loan:

 Age limit 21-65 years.

 Loan Limit TK.40.00 Lac
 Competitive Interest Rate.

Doctor's Loan:

 Age limit 25-65 years.

 Loan Limit Maximum TK.5.00 Lac for General Practitioner, TK.15.00 Lac for
Specialized Doctors and TK.50.00 Lac for owners of Hospital/Clinic/Diagnostic
Center.
 Competitive Interest Rate.

7
Education Loan:

 Age limit 25-65 years.

 Loan Limit Maximum TK.5.00 Lac for studies in Bangladesh and Maximum
TK.20.00 Lac for studies in abroad.
 Competitive Interest Rate.

Others are Personal Loan, House Furnishing Loan, Secured Over Draft (SOD),Refinance
Scheme for Green Product/Initiatives, Krishi / Polli Loan.

Foreign Exchange Business:

Over the years, foreign trade operations of the bank played a pivotal role in the overall business
development of the bank. The bank have total 119 branches but only 20 branches have foreign
exchange department.

Online Banking:

Online Banking has been facilitated in all Branches of the Bank since January 01, 2006. Now,
customers can enjoy a number online Banking services in CD, SB, SND, Loan accounts and
Monthly Savings Scheme (MSS) accounts. We are currently offering the following Online
Banking Services:

 Cash deposit and withdrawals

 Transfer between accounts by Cheque
 Online clearing transactions

Online Banking Times:

 Sunday to Thursday: 10 am to 4 pm
 Saturday: 10 am to 2 pm (Only in open branches)

Under this system a client will be able to do following type of transactions:

 Cash withdrawal from his/her account at any branch of the bank.

8
  Cash deposit in his/her account at any branch of the bank irrespective of the location.
 Cash deposit in other’s account at any branch of the bank irrespective of the location.
 Transfer of money from his/her account with any branch of the bank.

MY Cash:

The mobile banking service of Mercantile Bank Ltd is branded as “MY Cash” and it aims to
connect with the country’s unbanked population. Being one of the early movers in the industry,
MY Cash has network connectivity with every telecom operator of the country.

Utilizing the scope of countrywide mobile phone connectivity, MY Cash intends to reach every
single door of the country with its wide range of financial solutions. To combat rising
competitive pressures, MY Cash is immensely communication driven to ensure customer
preference, resulting in a strong brand image.

A mobile financial service provider authorized by Bangladesh Bank, MYC ash currently offers a
wide range of services through mobile phones to the people of Bangladesh - such as Cash in,
Cash Out, Send Money, MY Top Up, MY DpS, MY Bank Deposit and Merchant Payment. MY
Cash has already been positioned as a Complete Mobile Financial Service (MFS) Provider in the
industry for facilitating the needs of Savings, Payments, Purchase & Transfer of money
nationwide. MY Cash promises to provide a combination of convenient and secure services to
‘Make Life Easy’.

9
1.1.4 Philanthropic activities/ CSR

Corporate Social Responsibility (CSR) is a corporation's initiatives to assess and take

responsibility for the company's effects on environmental and social wellbeing.CSR referred to
as corporate citizenship and can involve incurring short-term costs that do not provide an
immediate financial benefit to the company, but instead promote positive social and
environmental change. The term generally applies to effort that go beyond what may be
required by regulators or environmental protection groups.CSR provides a sole opportunity for
corporate citizens to contribute towards the socio-economic of the country, thereby
emphasizing the new role that commercial powerhouses are starting to adopt-that of change
makers who undertake the resolution to resolve some major problems of the country.MBL
Family always tries to be a responsible partner of our customers, shareholders employees,
communities, and other stakeholders attaching highest priority to ethical conduct and integrity.
This includes monetary donations and aid given to nonprofit organizations and communities.
Donations are made in areas such as the arts, education, housing, health, social welfare and
thee environment, among others, but excluding political contributions and commercial event
sponsorship.CSR is indeed a fundamental part of the long-term business and sustainable
growth and success, which plays an important role in promoting values both locally and
internationally. In Mercantile Bank, we believe that financial sustainability goes hand in hand
with the development of the communities and environment in which we operate.Our CSR is
the continuing commitment by business to behave ethically and contribute to economic
development while improving the quality of life of the workforce and their families as well as of
the local community and society at large. We believe that investing in today is building for
tomorrow. Our future is our society.

Mercantile Bank as a corporate citizen is very much active to the cause of society specially in
meeting its obligations to the less privileged. Mercantile Bank Foundation was setup in 2000
with the prescribed policy to contribute one percent of the Bank’s operating profit or BDT 4.00
million, whichever is higher to the foundation. The areas of our contribution under the banner of
corporate social responsibility (CSR) are well diversified across different segments as well as
geographical areas and our annual expenses was BDT 83.10 million in 2013.Our contributions
10
are in the sectors of Education, Healthcare, Disaster Management, Art and Culture, Sports etc.
As a part of Mercantile Bank’s CSR activities Education Scholarship Program (ESP) began its
journey from 2011. Education Scholarship program is an explicit expression of MBL’s motive
towards building the nation through extending hands of assistance to the future generation of
the country. In this circumstances, Mercantile Bank Foundation launched a Scholarship
program in the name and style, “Mercantile Bank Abdul Jalil Education Scholarship” In
2014, MBL provided scholarships among the students who have successfully passed (with
minimum CGPA of 4.50) J.S.C, S.S.C and H.S.C in 2013 to continue their further studies.
Through this program, we engage to build self-respect and capabilities to make career,
educational and life-changing journey. and our annual expenses was BDT 66.90 million in 2016.
In 2016, MBL awarded scholarship worth BDT 10.00 million among 837 students. We
aspire to increase the number of beneficiary students in the coming days. For awarding
scholarship, we sought application eligible candidates all over the country through
advertisement in leading national dailies and selected 837 awardees by a committee.

11
 Chapter 2

Internship experience/ observation details

2.1 Job responsibilities

 Description of the job

As an internee I have performed numerous activities. My main task was to assist officers and
executives in every aspects of their daily work. It includes every activity that the officials
performed like dealing with customers, computer posting, document analysis etc.

 Specific responsibilities of the job :

 Assisting employees in their day to day operations.

 Maintaining different registers.
 Sorting of Cheque, vouchers.
 Entry of cheque and deposits slips number and amount in the registers and give the serial
number to those slips.
 Editing of L/C issue statement.
 Filling up EXP and IMP forms.
 Filing different L/C related documents .
 Matching month wise L/C and Bills transaction value between server and register.
Example: LCAF-Letter of Credit Authorization Form, IMP Form, EXP Form etc.
 Endorsement of different papers. Example: Bill of Exchange, Bill of lading, Commercial
Invoice etc.

 Different aspects of job performance :

 It helped me to learn banking activities
 It has enhanced my knowledge
 I was able to complete almost every task successfully
12
2.2 Functions of the department

Figure: 2.1

GENERAL
LOAN AND FOREGIN
BANKING
CREDIT EXCHANGE
DEPART
DEPARTMENT DEPARTMENT
MENT
1.Proper Client
Selection for
1.Account Loan
1.Import
Opening Disbursment
2.Proposal sent
2.Account to Head Office
Closing for approval of
loan
3.Pay Order
Issue 3.Sanction of loan
2.Export
4.Loan
4.Clearing(Cheq Disbursment
ue Collection)
5.Recovery of Loan
5.Fund 6.File Suit
Transfer(Accoun agreementt
t to Account) claasified loan
3.Remittance
6.Anti Money
Laundering 7.bank
Supervision guarantee issue

SOURCE :MERCANTIE BANK WEBSITE

13
 Chapter 3

Internship outcome/Issue Analysis/Empirical Analysis

3.1 Analysis of industry/markets in Mercantile Bank Limited:

Banking sector plays a significant role in the economy. The Banking sector in Bangladesh is
different from the banking as seen in other developed countries. The financial system of
Bangladesh consists of Bangladesh Bank (BB) as the central bank. Now, banks in Bangladesh
are primarily of two types: Scheduled Banks and Non-Scheduled Banks. There are 57 scheduled
banks in Bangladesh who operate under full control and supervision of Bangladesh Bank which
is empowered to do so through Bangladesh Bank Order, 1972 and Bank Company Act, 1991.
Scheduled Banks are classified into following types:

State Owned Commercial Banks (SOCBs): There are 6 SOCBs which are fully or majorly
owned by the Government of Bangladesh.

Specialized Banks (SDBs): 2 specialized banks are now operating which were established for
specific objectives like agricultural or industrial development. These banks are also fully or
majorly owned by the Government of Bangladesh.

Private Commercial Banks (PCBs): There are 40 private commercial banks which are majorly
owned by the private entities. PCBs can be categorized into two groups:

Conventional PCBs: 32 conventional PCBs are now operating in the industry. They perform the
banking functions in conventional fashion i.e interest based operations.

Islami Shariah based PCBs: There are 8 Islami Shariah based PCBs in Bangladesh and they
execute banking activities according to Islami Shariah based principles i.e. Profit-Loss Sharing
(PLS) mode.

Foreign Commercial Banks (FCBs): 9 FCBs are operating in Bangladesh as the branches of the
banks which are incorporated in abroad.(Bangladesh bank website)

14
The Major Service sectors in Bangladesh economy, which divided into four categories of
scheduled Banks. These are Nationalized Commercial Banks (NCBs), Government Owned
Development Financial Institutions (DFIs), Private Commercial Banks (PCBs), and Foreign
Commercial Banks (FCBs). Performance of financial Institution is generally measured by
applying quantitative techniques of financial measurement. ( Nimalathasan. B, 2008)

Islam (2015)said, After the impendence in 1971 the banking sector of Bangladesh started its
journey with a new dream and new commitment towards equity and social justice along with
growth and development.

BANKING SECTOR OF BANGLADESH

Figure 3.1

Central Bank (Bangladesh Bank)

Scheduled Non-
Banks Scheduled Specialized
Banks Financial
Institutions

State Owned Private Commercial Foreign Commercial

Commercial Banks Banks Banks

Conventional Commercial Banks Islamic Shariah based Commercial Banks

Source: Bangladesh bank website

At this time people know about technology, they feel safe when they keep their money in banks.
People assured any transaction with the bank. For the purpose either local or foreign business
transaction they deal with the agreement by their suitable banks. Because of the over population,

15
for that their needs become so higher ,so that Bangladesh have many banks and many branches
also. For that banks are now more challenger ,more competitive. Now, Bangladeshi banks have
huge transaction by the Import ,Export, Remittance transaction and others also.

Service quality is one of the critical success factors that influence the competitiveness of an
organization. A bank can differentiate itself from competitors by providing high quality
service. Service quality is one of the most attractive areas for researchers over the last
decade in the retail banking sector (Avkiran, 1994; Stafford, 1996; Johnston, 1997; Angur et
al, 1999; Lasser et al, 2000; Bahia and Nantel, 2000; Sureshchandar et al, 2002;
Gounaris et al, 2003; Choudhury, 2008).

File and Prince (1992) argued that the customers who are satisfied tell others about their
experiences and this increases WOM advertising. In this way, banks can increase customers.

The main role of a financial system is to assist the flow of funds from savers to borrowers. If a
financial system is efficient, then it should show profitability improvements, increasing volume
of funds fl owing from savers to borrowers, and better quality services for consumers. Unlike in
other developed nations where financial markets as well as the banking system work in unison to
channel those funds, in developing countries financial markets are undersized and sometimes
completely absent. It falls on the banks to bridge the gap between savers and borrowers and to
perform all tasks associated with the profitable and secure channeling of funds. The banking
sector also plays an important economic role in providing financial intermediation and economic
acceleration by converting deposits into productive investments. This entails the study of
banking sector performance in developing economies of greater significance.

Akhavein (1997) examine that, The new empirical evidence of the factors that influence bank
profitability in a developing economy. While there has been extensive literature examining
the profitability of banking sectors in developed countries, empirical works on factors that
influence the performance of banks in developing economies are relatively scarce.
Furthermore, at the present time, this type of analysis is completely missing in the literature
concerning the banking sector in Bangladesh.

16
Another case of rate of return mismatch occurs when banks borrow in foreign currency and lend
in domestic currency. In this case, an unexpected depreciation of then domestic currency
threatens bank profitability. Many countries have regulations limiting bank’s open foreign
currency positions, but sometimes such regulations can be circumvented (Garber, 1996).

When bank deposits are not insured, a deterioration in the quality of a bank’s asset portfolio may
trigger a run, as depositors rush to withdraw their funds before the bank declares bankruptcy.
Because bank assets are typically illiquid, runs on deposits accelerate the onset of insolvency. n
countries in which the banking sector is liberalized but bank supervision is weak and legal
remedies against fraud are easy to circumvent, banking crises may also be caused by widespread
“looting”: bank managers not only may invest funds in projects that are too risky, but they may
invest in projects that are sure failures but from which they can divert money for personal use.

Akerlof and Romer (1993) claim that looting behavior was at the core of the Savings and Loans
crisis in the U.S. and of the Chilean banking crisis of the late 1970's. Thus, a weak legal system
that allows fraud to go unpunished should increase the probability of a banking crisis.

3.2 Finding peer group/ main competitor(s)

Similar categories bank, Year of established and Total Assets- 2016

Table: 3.1

Name of Private commercial

Banks Year of established Total Assets
rd
(3 generation)

1.Mercantile Bank Ltd. 1991 2,05,035,393,990

2.Dhaka Bank 1994 1,98,048,000,000
3.Prime Bank 1995 2,56,599,130,000
4.Mutual Trust Bank 1994 1,64,480,420,074
5.Eastern Bank Ltd 1992 2,11,185,000,000
6.Jamuna Bank Ltd 1994 1,69,195,030,000
Source: Finalcial report 2016 (Balance sheet) Private commercial banks in Bangladesh

17
Justification of selection to Mercantile bank Ltd. Compare With Eastern Bank Ltd. :

 Both of the banks belong to 3rd generation.

 Both are scheduled bank and conventional bank.
 There are lot of similarities in their Asset liability portfolio.

Strength and weakness about Mercantile Bank Ltd. :

Strength:

 DPS interest rate is Higher than other private banks for 3 months at now. So it’s attract more
customers for DPS.
 Mercantile Bank Limited has nationwide image of providing quality service. It provides
excellent and prompt services with higher degree of secrecy to corporate and mass
level of customers even internationally.
 It has an excellent management team and disciplined workforce.
 MBL abides by a set of core values that reflects high commitment to customer:

1. Responsive to customers’ needs.

2. Flexible in approach

3. Professional in manner

4. Strive for service excellence.

 A group of qualified experienced, dedicated and well trained personnel employing the
best effort to accomplish the organizational objective.

Weakness:

 MBL should increase its ATM Booth in different locations of Dhaka city as well as out side
of Dhaka where it is operate.
 ATM booths are not available for service.
 Online Banking quality and service is not much good because website design , option are not
too updated.
 Mercantile bank website page sometimes server getting down.

18
3.3 Ratio analysis

Financial Performance Measure: A tool used by individuals to conduct a quantitative analysis

of information in a company's financial statements. The financial performance analysis of a
comparative study between Mercantile Bank Ltd. And Eastern Bank Ltd. is given below:

Compute in detail and interpret (in detail) the followings over the last 5years of your selected
banks:

1. ROA

2. ROE

3. EPS

4. P/E RATIO

5. LOAN GROWTH

6. DEPOSIT GROWTH

7. LOAN TO DEPOSIT

ROA (Return on Asset): ROA is a profitability ratio which shows how profitable a bank is
related to its total assets. ROA gives an idea that how efficient the management of a bank is to
generate profits using its assets. The formula is:

Return on Assets = Net Profit after Taxation / Total Assets.

Calculation:

YEAR 2012 2013 2014 2015 2016

1.MBL 1.03% 1.33% 0.76% 0.79% 1.15%
2.EBL 1.72% 1.68% 1.28% 1.23% 1.33%
If return on assets is increasing, then either net income is increasing or average total assets are
decreasing. A company can arrive at a high ROA either by boosting its profit margin or, more
efficiently, by using its assets to increase sales.

19
Interpretation:

RETURN ON ASSET
2.00%
1.72% 1.68%
1.50%
1.33% 1.28% 1.23% 1.33%
1.03% 1.15% MBL
1.00%
0.76% 0.79%
0.50% EBL

0.00%
2012 2013 2014 2015 2016

ROA is the most used profitability ratio. As MBL and EBL was a part of banking industry and
its most of the assets come from the debt which was the reasons for its low net profit as well as
poor ROA. From 2013-2014 MBL has increasing rate of return on assets 1.03% to 1.33% which
is good for the bank. On the other hand EBL bank in 2012 has 1.72% which was good but in
2013-2015 has 1.68% to1.25% ration goes down. We, see that for MBL in 2013- 2015 has
1.33% to 0.79% ration goes down .Its means that Banks are efficient in earnings from its
resources in 2016 both Banks ration goes increases which has 1.33% for EBL and 1.15% for
MBL. As a result the MBL had low ROA in the year of 2016 which was 1.15% more than EBL
in the year 2016 had 1.33%.In the year of MBL the net profit of the bank had decrease.

.ROE (Return on equity): Return on equity measures a bank’s profitability which calculates
how much net profit that bank may generates with the money that shareholders have invested as
equity. The formula is:

Return on Equity = Net Profit after Taxation / Equity

Calculation:

YEAR 2012 2013 2014 2015 2016

1.MBL 13.42% 16.84% 9.11% 9.60% 13.78%
2.EBL 14.44% 14.44% 10.93% 10.95% 12.94%

20
Interpretation:

RETURN ON EQUITY
20.00%
16.84%
15.00% 14.44% 14.44%
13.42% 13.78%
12.94%
10.00% 10.93% 10.95% MBL
9.11% 9.60%
5.00% EBL

0.00%
2012 2013 2014 2015 2016

From the chart, 2012-2013 MBL has increasing rate of return on equity which was 13.42% to
16.84% is good for the bank. It means these bank increasing their efficiency in earnings from
stockholders equity. But in 2014 we can see that the return on equity was 9.11% ratio goes down
and 2015 to 2016 goes increases 9.60% to 13.78%. It means in 2016.

On the other hand 0f EBL, though ROE of 2012 and 2013 has 14.44% constant ratio because
Deposits and Non-deposit Borrowings are constant. In 2014 to2016 continuously increased
which has 10.93% to 12.94% much compared to the MBL which is 13.78% in the year of 2016.It
shows banks was decreasing its ability to generate profit without needing as much capital at the
year of 2014, but from 2016 the ability was increased again in both banks because their bank
stability is good for many reason. One is; There was no bank bankruptcy at all , second is ;L/C
opening commission earning huge.

The higher percentage of ROE shows that Mercantile Bank is heavily dependent on Deposits and
Non-deposit Borrowings from other banks or financial institutions. As we know the more debt a
company has, the less shareholders’ equity it has, and as a result, it has higher ROE.

Though Mercantile Bank enjoys a high percentage of ROE, but from its total asset calculation,
we can say, one needs huge investment to create a competition in Banking Industry.

EPS(Earnings per share): Earnings per share is a popular measure of overall profitability of the
company and is usually expressed in the dollars or taka. The formula is:

Earnings Per Share of Stock (EPS) = Net Income After Taxes / Common Equity Shares
Outstanding
21
Calculation:

YEAR 2012 2013 2014 2015 2016

1.MBL 2.26 2.68 1.61 1.9 3.01
2.EBL 3.72 4.2 3.45 3.16 3.78

We know the higher the EPS, the better that is. A higher EPS is the sign of higher earnings,
strong financial position and therefore a reliable company to invest money. A consistent
decreasing in the EPS figure year after year is an indication of continuous failure in the earning
power of the company.

Interpretation:

EARNING PER SHARE

5

4 4.2
3.72 3.78
3.45
3 3.16 3.01
2.68 MBL
2.26
2 1.9
1.61 EBL
1

0
2012 2013 2014 2015 2016

The line chart of above shows that both Banks fails to ensure better earning power of the country
as its EPS falls down drastically from what it had in the year of 2014. 2012-2013 MBL has
increasing rate of earning per share which was 2.26 taka to 2.68 is good for the bank . It means
these bank increasing because there net income increase so we can easily generate the profit of a
bank. But in 2014 we can see that earning per share was 1.61 taka goes down and 2015 to 2016
goes increases 1.90 taka to 3.01 taka in 2016 .In that year, net income increase, so that profit
was increased.

22
On the other hand 0f EBL, though earning per share of 2012 and 2013 has 3.72 taka to 4.20taka
goes higher, huge increase in the number of shares outstanding and In 2014 suddenly goes down
3.45taka,because of net income decrease. In 2015 to 1016 continuously increased which has 3.16
taka to 3.78 taka much compared to the MBL which has 3.01 taka in the year of 2016.It shows
MBL was decreasing its ability to generate profit without needing as much net income at the year
of 2014, but from 2016 the ability was increased again in both banks because their bank stability
is good for many reason.

P/E ratio (The price-earnings ratio ):P/E ratio is the ratio for valuing a company that measures
it’s current share price relative to its per-share earnings. The price-earnings ratio is also
sometimes known as the price multiple or the earnings multiple. The P/E ratio can be calculated
as:

Market Value per Share / Earnings per Share

Calculation:

YEAR 2012 2013 2014 2015 2016

1.MBL 8.45 5.57 8.52 5.68 5.01
2.EBL 8.52 6.93 7.78 9.05 7.67

Higher P/E ratios are typically considered to indicate higher growth and increased revenue
potential, or at least that investors are anticipating higher growth, since they are willing to pay a
greater multiple of current earnings per share to obtain the company's stock. Analysts commonly
interpret relatively lower P/E ratios as indicative of higher risk. Firms with lower reinvestment
needs generally have higher P/E ratios.

P/E RATIO (TIMES)

10 8.45 8.52 8.52 7.78 9.05
6.93 7.67
5.57 5.68 5.01
5 MBL
EBL
0
2012 2013 2014 2015 2016

23
 From the column chart, 2012-2013 MBL has decreasing P/E Ratio 8.45to 5.57 times. Which was
not good for the bank. It means, these bank decreasing their market value per share and
automatically P/E Ratio goes down. But in 2014 we can see that P/E Ratio was 8.52 times goes
higher and 2015 to 2016 goes down 5.68 times 5.01 lower growth and decreased revenue.

On the other hand 0f EBL, though P/E ratio of 2012 and 2013 has 8.52 to 6.93 times. In 2014
to2016 continuously increased which has 7.78 to 9.05 times. It shows banks was higher growth
and increased revenue. But from 2016 the has 7.67 times goes down for lower growth and
decreased revenue.

Loan growth: A loan is the act of giving money, property or other material goods to another
party in exchange for future repayment of the principal amount along with interest or other
finance charges. A loan may be for a specific, one-time amount or can be available as an open-
ended line of credit up to a specified limit or ceiling amount. Loans can come from individuals,
corporations, financial institutions, and governments. They offer a way to grow the overall
money supply in an economy as well as open up competition and expand business operations.
The interest and fees from loans are a primary source of revenue for many financial institutions
such as banks, as well as some retailers through the use of credit facilities.

Calculation:

YEAR 2012 2013 2014 2015 2016

1.MBL 93,384,291,546 97,582,383,031 117,241,097,332 126,624,048,642 154,116,150,199
2.EBL 96,894,171,151 103,330,817,582 120,012,343,042 134,449,422,020 156,371,334,810

Interpretation:

LOAN GROWTH

2012 2013 2014 2015 2016

MBL 93,384,291,546.00 97,582,383,031.00 117,241,097,332.0 126,624,048,642.0 154,116,150,199.0
EBL 96,894,171,151.00 103,330,817,582.0 120,012,343,042.0 134,449,422,020.0 156,371,334,810.0

24
The column chart of above shows that Mercantile Banks shown that yearly (2012-2016) the
loan growth rate became increases 93,384,291,546 BDT; 97,582,383,031 BDT; 117,241,097,332
BDT; 126,624,048,642BDT and 154,116,150,199 BDT .

Eastern bank relatively not good position on the loan growth. EBL shown that yearly (2012-
2016) the loan growth rate became increases 96,894,171,151 BDT; 103,330,817,582 BDT;
120,012,343,042 BDT; 134,449,422,020 BDT and 156,371,334,810 BDT.

It means when loan decreases because of loan interest rate is lower or loosening its credit
standards or somehow encouraging borrowers to move over their business and when loan
increases because of loan interest rate is higher or gaining its credit standards or somehow
encouraging borrowers stable to their business.

Deposit Growth : deposits are the most common, and almost always the cheapest, source of
loanable funds for banks. Accordingly, deposit growth gives investors a sense of how much
lending a bank can do. There are some important factors to consider with this number. First, the
cost of those funds is important; a bank that grows its deposits by offering more generous rates is
not in the same competitive position as a bank that can produce the same deposit growth at lower
rates. Also, deposit growth has to be analyzed in the context of loan growth and the bank
management's plans for loan growth. Accumulating deposits, particularly at higher rates, is
actually bad for earnings if the bank cannot profitably deploy those funds.

Calculation:

YEAR 2012 2013 2014 2015 2016

1.MBL 118,045,024,783 120,912,479,182 135,000,511,870 147,708,732,715 155,783,565,760
2.EBL 91,434,890,705 117,036,841,168 116,722,401,675 127,905,896,726 140,205,117,331

25
Interpretation:

DEPOSIT GROWTH
200,000,000,000.00

150,000,000,000.00

100,000,000,000.00

50,000,000,000.00

-
2012 2013 2014 2015 2016
MBL 118,045,024,783 120,912,479,182 135,000,511,870 147,708,732,715 155,783,565,760
EBL 91,434,890,705. 117,036,841,168 116,722,401,675 127,905,896,726 140,205,117,331

The line chart of above shows that Mercantile Bank’s shown that yearly (2012-2016) the
deposit growth rate became increases118,045,024,783 BDT, 120,912,479,182 BDT,
135,000,511,870 BDT, 147,708,732,715 BDT and155,783,565,760 BDT. When deposit goes
higher it means deposit interest rate is higher so that customer interested to open deposit account.

Eastern bank’s shown that yearly(2012-2013)the deposit growth became

increases91,434,890,705 BDT than 117,036,841,168 BDT. it means deposit interest rate is
higher so that customer interested to open deposit account. In 2014 deposit growth goes down
116,722,401,675.It means deposit interest rate goes down ,loan growth interest rate lower so that
encouraging borrowers to move over their business or this year many deposit account were
mature .

Loan/Deposit Ratio: The loan-to-deposit ratio (LTD) is a commonly used statistic for assessing
a bank's liquidity by dividing the bank's total loans by its total deposits. This number is expressed
as a percentage. If the ratio is too high, it means that the bank may not have enough liquidity to
cover any unforeseen fund requirements, and conversely, if the ratio is too low, the bank may not
be earning as much as it could be.

26
Calculation:

YEAR 2012 2013 2014 2015 2016

1.MBL 79% 81% 87% 86 % 99%
2.EBL 106% 88% 103% 105% 112%

Interpretation:

Loan to Deposit
MBL EBL

106% 112%
103% 105% 99%
88% 87% 86%
79% 81%

2012 2013 2014 2015 2016

From the column chart, 2012,2013,2014 MBL has increasing loan-to-deposit ratio 79% , 81%
than 87%.It means, that the bank may not have enough liquidity to cover any unforeseen fund
requirements But in 2015 we can see that loan-to-deposit ratio was 86% goes down, the bank
may not be earning as much as it could be. In 2016 has increasing loan-to-deposit ratio 99%.it
shows that deposit in this year has limited maturity.

On the other hand 0f EBL, though loan-to-deposit ratio of 2012 and 2013 has 106% to 88%. In
2014 to2016 continuously increased which has 103%, 105% than 112%.

The loan/deposit ratio helps assess a bank's liquidity, and by extension, the aggressiveness of the
bank's management. So every times doesn’t mean that if ratio or roatio goes highr ,might be
customer got loan on higher interest rate. Conversely, if the loan/deposit ratio is too low, the
bank is holding on to unproductive capital and earning less than it should or the bank profit
generate is not good. Might be that year many customers deposit were mature with higher
interest rate.

27
3.4 Recommendation

Through this study I myself gained some practical knowledge. I want to put some
suggestion here which I think if followed would definitely help Mercantile Bank Ltd. to
Improve their performance and there by its contribution in the whole economy.

Mercantile bank should have to do marketing a lot. Not only person to person but also business
to business marketing is required a lot to attract depositors. This bank needs to give a
competitive interest rate on deposit. At present time ,it’s the best chance to increase deposit
growth rate .For 3 months Mercantile bank offered 6.50% interest rate for DPS. Other deposit
scheme are also good.

For the increasing loan growth MBL bank should be increasing marketing policies. Many ways
they can use ,by newspaper, TVC. Branches in rural area mostly use the marketing segments. If
the marketing is good ,interest rate goes down ,all the loan procedure are quickly complete, give
to the customer ‘s one stop service ,open a new desk ( help desk ) service than MBL bank must
be achieve their loan growth.

If net income increases ,market share goes down EPS should also increases. When loan ,deposit
growth relatively good than automatically EPS should be good and than banks achieve the
stability .

28
 Chapter 4

4.1 Conclusion and implications:

The purpose of the report was to analyze the overall banking activities of Mercantile Bank
Limited and compare and contrast them with Eastern bank Limited. The report thus highlighted
the problems associated with the bank; these problems were identified from structure, culture,
management practices and most importantly from present objectives and strategies. From the
time of its inception, it had the capabilities: human resources, technology, products and
acceptance of the market. As time went by, the bank gradually lost its focus / vision and
evidently, market share of the bank dived and so did asset / deposit base. It is however, not too
late for the bank to recover the loss in business. Although MBL, Bangladesh still maintains
a profitable operation, growth of the bank is not in sight and “merely existing” cannot be a
strategy for the bank. Some of the strategies thus suggested, involve structural changes in
credit administration, treasury and human resources management. These changes will
increase motivation of employees, segregate duties and thus will improve efficiency and
performance. Mercantile Bank Limited has made a memorable mark in the banking industry of
Bangladesh. Customers view MBL as one of the best brands in the private bank category. There
is still a lot of room to improve for MBL to possess one of the most efficient internal banking
processes. Hence, if MBL can implement robust monitoring systems and software modules and
ensure cross functional dialogues for better understanding of financial budget allocation, MBL
team can truly become a global benchmark in being one of the most efficient and effective teams
in the entire banking industry of Bangladesh.

29
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31
APPENDIX: A

Mercantile Bank Ltd annual report 2016, 2015, 2014, 2013

32
APPENDIX: B

Eastern Bank Ltd annual report 2016, 2015, 2014, 2013

33
APPENDIX: C

Mercantile Bank Ltd and Eastern Bank Ltd from annual report 2012, 2013, 2014, 2015, 2016.

Data calculation:

MERCANTILE BANK LTD.

RATIO ANALYSIS 2012 2013 2014 2015 2016
1.03% 1.33% 0.76% 0.79% 1.15%
1. ROA % (A. report, p 89,2013) (A.rport,p89,2013) (A.report,p53,2016) (A.report,p55,2016) (A,report,p103,2016)

13.42% 16.84% 9.11% 9.6% 13.78%

(A.report,p53,2016) (A.report,p53,2016) (A.report,p53,2016) (A.report,p53,2016) (A.report,p53,2016)
2. ROE %
2.26 2.68 1.61 1.9 3.01
(A.report,p53,2016)
(A.report,p53,2016) (A.report,p53,2016) (A.report,p53,2016) (A.report,p53,2016)
3. EPS TK
8.45 5.57 8.52 5.68 5.01
4. P/E RATIO (TIMES)
(A.report,p53,2016) (A.repot,p53,2016) (A.report,p53,2016) (A.report,p53,2016) (A.report,p53,2016)

5. LOAN GROWTH TK 93,384,291,546 97,582,383,031 117,241,097,332 126,624,048,642 154,116,150,199

6. DEPOSIT GROWTH TK 118,045,024,783 120,912,479,182 135,000,511,870 147,708,732,715 155,783,565,760
(A.report,p170,2013) (A.report,p170,2013) (A.report,p164,2014) (A.report,p211,2016) (A.report,p211,2016)
7. LOAN TO DEPOSIT % 79% 81% 87% 86% 99%

EASTERN BANK LTD.

RATIO ANALYSIS 2012 2013 2014 2015 2016
1.33%
1.72% 1.68% 1.28% 1.23%
(A.report,p55,2016)
(A.report,p55,2016) (A.report,p55,2016) (A.report,p55,2016) (A.report,p55,2016 )
1. ROA %
14.44% 14.44% 10.93% 10.95% 12.94%
(A.report,p55,2016) (A.report,p55,2016) (A.report,p55,2016) (A.report,p55,2016) (A.report,p55,2016)
2. ROE %
3.78
3.72 4.2 3.45 3.16
(A.report,p55,2016)
(A.report,p55,2016) (A.report,p55,2016) (A.report,p55,2016) (A.report,p55,2016)
3. EPS TK

8.52 6.93 7.78 9.05 7.67

4. P/E RATIO (TIMES)
(A.report,p55,2016) (A.report,p55,2016) (A.report,p55,2016) (A.report,p55,2016) (A.report,p55,2016)

5. LOAN GROWTH TK 96894171151.00 103330817582.00 120012343042.00 134449422020.00 156371334810.00

6. DEPOSIT GROWTH TK 91434890705.00 117036841168.00 116722401675.00 127905896726.00 140205117331.00
(A.report,p171,2013) (A.report,p171,2013) (A.report,p178,2014) (A.report,p184,2016) (A.report,p184,2016)
7. LOAN TO DEPOSIT % 106% 88% 103% 105% 112%

34