A Term Paper

On
“Financial ratio analysis of Prime Bank &
Dutch Bangla Bank”.

Submitted To,
Leo Vashkor Dewri
Senior Lecturer
Department of Business Administration
East West University

Submitted By,
F. M. Tanvir Rahim
ID : 2015-1-10-066
& Shekh Md. Arafat Reza
ID : 2012-3-10-151
Course Code : FIN 380
Section : 01

Date of Submission : 6 th December, 2018

Letter of Transmittal

6th December, 2018

Leo Vashkor Dewri
Senior Lecturer
Department of Business Administration
East West University.

Subject: Submission of the Term Paper on “Financial ratio analysis of Prime Bank and
Dutch-Bangla Bank ”.

Dear Sir,

It has been our immense pleasure that we are submitting “Financial ratio analysis of Prime bank
and Dutch Bangla bank.” which was assigned as a group report and a mandatory requirement of
the course “Commercial bank management”

We have put our best effort to look for relevant findings related to the company’s ratio analysis by
analyzing the annual report of the Prime bank and Dutch Bangla bank.

We hope your kind consideration if any mistakes are there and let us know for our learning
purpose.

Sincerely,

F. M. Tanvir Rahim …………………………….

Shekh Md. Arafat Reza …………………………….

 Acknowledgement

First of all we pay a special thanks to our Almighty God, who made us able to do this report.

We would like to express our gratitude and indebtedness to our honorable faculty Leo Vashkor
Dewri ,senior Lecturer, Department of Business Administration, East West University. With his
inexhaustible guidence, valuable advice, continuous inspiration and generosity he helped us to
carry out this term paper successfully.

We would like to exhibit our gratitude to those journalists, web developer groups, Investopedia,
and many credible sources which helped us made this report.

Again we like to thanks you sir for your valuable suggestion, comments which helped us
immensely and helped us widen our knowledge regarding Bank Management.

Finally, we would like to thank all group members that directly or indirectly helped us to provide
and accumulate all the necessary information for the accomplishment of this term paper.
Contents
INTRODUCTION ........................................................................................................................................ 5
Origin of the report ................................................................................................................................... 5
Background of the study ........................................................................................................................... 5
Scope of the study ..................................................................................................................................... 5
Objective of the report .............................................................................................................................. 5
Methodology ............................................................................................................................................. 5
Limitations ................................................................................................................................................ 6
Learning Outcome .................................................................................................................................... 6
1) Number of Days of Inventory ......................................................................................................... 12
2) Number of days of receivables........................................................................................................ 12
3) Number of Days Payable ................................................................................................................ 13
4) Operating cycle ............................................................................................................................... 13
5) Net Operating cycle ........................................................................................................................ 14
6) Current Ratio................................................................................................................................... 14
Interpretation ........................................................................................................................................... 14
7) Quick Ratio ..................................................................................................................................... 15
Interpretation ........................................................................................................................................... 15
8) Net working capital ......................................................................................................................... 15
Interpretation ........................................................................................................................................... 16
9) Gross Profit margin ......................................................................................................................... 16
10) Operating Profit Margin .............................................................................................................. 17
11) Net Profit margin ........................................................................................................................ 17
12) Inventory Turnover ..................................................................................................................... 17
13) Accounts Receivable Turnover ................................................................................................... 17
14) Total Asset Turnover .................................................................................................................. 18
29) Recomandation………………………………………………………………………………………………………………….29

30) Conclusion………………………………………………………………………………………………………………………30
 INTRODUCTION
Origin of the report

The objective of this paper is to analyze the ratio of Prime Bank Limited in comparison with
Dutch Bangla Bank Limited. The collected data is from 2013-2017. By analyzing the ratios of
Prime Bank Limited and Dutch Bangla Bank Limited, we expect to get an understanding of the
financial condition of this bank.

Background of the study

By analyzing the ratio of the both bank it is easy to evaluate the both bank’s financial performance.

Scope of the study

The study would focus on the following areas of Prime Bank Limited and Dutch Bangla Bank
limited

 Credit appraisal system of Ptrime Bank Limited.

 Procedure for different credit facilities.
 Organization structures and responsibilities of management.

Each of the above areas would be critically analyzed in order to determine the efficiency of
Prime & Dutch Bangla bank’s Credit appraisal and Management system.

Objective of the report

 To fulfill the requirement of Commercial Bank Management course

 Analyzing the performance of National Credit and Commerce Bank Limited
 Analyzing the performance of Prime Bank Limited

Methodology
We have used secondary sources of information.

 Website of Prime Bank Limited & Dutch Bangla Bank Limited

 Annual report 2013 to 2017.
 Internet
 Text books
 Materials provided in class
 Processing of Data & Bank visit
Limitations

 Market price was not found in the annual report.

 Interest expense was not broken down in the financial statements.
 We didn’t have enough primary resources.
 For resource constraints we mostly depended on secondary data

Learning Outcome

We learn from this course as well from this report how to establish a bank, the structure of the
bank, procedure of start a bank, legal obligation, interest rate determination, interest rate system,
different kinds of deposit and loan, different kinds of financial service provide by banks and also
different kind of risk associate with the bank.
 Background of Prime Bank Limited

Prime Bank being Banking Company has been registered under the companies Act 1993 as a
Public Limited Company on February 12, 1995 with its registered office at 5, Rajuk Avenue,
Motijheel Commercial Area, Dhaka-1000, Bangladesh. Later, the office had been shifted to
Adamjee Court (annex building), Motijheel Commercial Area. It started operation from April 17,
1995 with a commitment to play some social role in addition to normal banking. Its slogan is
“Prime Bank Ltd. – a bank with a difference”. From the very beginning, the bank has adopted the
policy of diversifying its business. To achieve this objective, the bank started Consumer Credit
Scheme, Lease Financing, Hire Purchase, loans in general, Secured Overdrafts etc. Under the
dynamic leadership of the Chief Executive Officer, the bank earned profit within December 1995
and raised its reserve. The bank started operation its business through four branches. Now its
branches stood at fifty two and by this year another two new branches will start their operation.

Prime Bank has an authorized capital of Taka 4,000 million and paid up capital of Taka 1,750
million. It is a full licensed scheduled commercial bank set up in the private sector by a group of
highly successful entrepreneurs in pursuance of the government to liberalize banking and financial
services. The former Governor of Bangladesh Bank Mr. Lutfar Rahman Sarker was the first
Managing Director of this bank. At present, Managing Director is Mr. M Shahjahan Bhuiyan, who
has a long experience in domestic and international banking. Highly professional people having
wide experience in domestic and international banking are managing the bank. The bank has made
a significant progress within a very short time due to its very competent board of directors,
dynamic management and introduction of various customer friendly deposit and loan products. At
present bank has 13 Directors, including the Chairman. The bank holds the first position in the
CAMEL rating, published by Bangladesh Bank for the last consecutive four years.

Vision

To be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital adequacy,
asset quality, sound management and profitability having strong liquidity.
Mission

To build Prime Bank Limited into an efficient, market driven, customer focused institution with
good corporate governance structure. Continuous improvement in our business policies, procedure
and efficiency through integration of technology at all levels.

Efforts focused

On delivery of quality service in all areas of banking activities with the aim to add increased value
to shareholders’ investment and offer highest possible benefits to our customers.

Strategic Priorities

To have sustained growth, broaden and improve range of products and services.
 Background of Dutch Bangla Bank

Dutch Bangla Bank restricted could be a scheduled bank. The bank is established collectively by
native Bangladeshi parties spearheaded by M Sahabuddin Ahmed (Founder & Chairman) and
therefore the Dutch company FMO. And conjointly established beneath the Bank firms Act 1991
and incorporated as a public Ltd. beneath the businesses Act 1994. In People's of Republic
Bangladesh with the first objective to hold on every kind of banking business in Bangladesh. The
Bank is listed with Dhaka exchange restricted and city exchange restricted. DBBL could be an
Asian nation European personal venture scheduled bank commenced formal operation from June
3, 1996.

DBBL could be a public Ltd. by shares, incorporated in Asian nation within the year 1995 beneath
firms Act 1994. With half-hour equity holding, European nation Development no depository
financial institution (FMO) of European nation is that the international co-sponsor of the bank.
Out of the remainder seventieth, hour equity has been provided by distinguished native
entrepreneurs and industrialists and therefore the rest 100% shares is that the public issue.
Throughout the initial operative year (1996-1997) the bank received talent augmentation technical
help from ABN Amor Bank of Bangladesh.

DBBL has started its business with foreign Bank. DBBL commenced its business as scheduled
bank with impact from Gregorian calendar month 04, 1995 with one branch Motijheel Branch,
Dhaka, with a maxim to grow as leader within the banking arena of Asian nation through higher
guidance and impact services to purchasers and so to revitalize the economy of the country. All
the branches area unit presently providing really On-Line banking facility. DBBL resumed its
operational activities at the start with a certified capital of Tk. four hundred million and paid up
capital of Tk. 202.14 million.
Nature of Business

• The bank conducts all types of commercial banking operations.

• The company offers deposit products including savings deposit accounts, current deposit
accounts, short term deposit accounts, resident foreign currency deposits, foreign currency
deposits, convertible and non convertible take accounts, exporter’s FC deposits, and term deposits.

• The company offers corporate banking services, including project finance and working
capital finance, syndications and structured finance, trade finance, equity finance and social and
environmental infrastructure finance.

• The bank is also providing individual credit, facilities related to local and foreign
remittances and several products related services.

• The outline of the Bank, which is considered to support the fixed income group in nurturing
the standard of living is competitively priced and has been widely appreciated by the customers.

• This banking services consisting of cash credit, term loans, festival loans, women
entrepreneurs financing, distributor financing and small shop financing schemes.

• It also provides import and export finance, treasury services, debit and credit cards, internet
mobile, and SMS banking services, and Automated Teller Machine (ATM) agent banking services.

Mission

Dutch Bangla Bank engineers enterprise and creativity in business and industry with a commercial
to social responsibility. “Profits Alone” do not hold a central focus in the banks operation, because
“man does not live by bread and butter alone.

Vision

DBBL’s essence and attribute rest on a cosmos of ability and therefore the, marvel-magic
of a charmed life that abounds with spirit of life and adventures that contributes towards human
development. Dutch Bangla Bank dreams of butter Bangladesh, wherever arts and letters, sports
and athletics, music and recreation, science and education, health and hygiene, clean and pollution,
free atmosphere and specifically a society supported morality and ethics build all our lives price
living.
Objectives

The objective of core is Dutch Bangla Bank believes in it uncompromising commitment to fulfill
its customer needs and satisfaction and to become their first choice in banking. Taking cue from
its pool esteemed clientele, Dutch Bangla Bank intends to pave the way for a new era in banking
that upholds and epitomizes its vaunted marquees “Your Trusted partner”.

Key Information

Year of Establishment: 1996

Authorized Capital: 400 Crore

Paid-up Capital: 20 Crore Taka

Customers: More than 21,009,000

Number of Employees: 1800

Total Number of Branches: 173

Total Number of Fast Tracks: 747

Total Number of ATM Booths: 4455

POS Merchants: 7180

Rocket Merchants: 10146

 1) Number of Days of Inventory
Here the value is increasing day by day which is a bad sign for the money to float on market
for a long time. The banks must take new decision to reduce the value.

Name Prime Bank Dutch Bangla Bank

Year (2017) 114.01 8.28

NUMBER OF DAYS INVENTORY

Prime Bank DBBL

7%

93%

2) Number of days of receivables

The time of day receivable is constant it is in a good form. The bank may take measures to
reduce it.

Name Prime Bank Dutch Bangla Bank

Year (2017) 334.88 337.95

Number of Days Receivables

DBBL

Prime

333 333.5 334 334.5 335 335.5 336 336.5 337 337.5 338 338.5

Column2 Column1 Series 1

 3) Number of Days Payable
The payable value is also stable and may not need change.

Name Prime Bank Dutch Bangla Bank

Year (2017) 257.21 273.59

Number of Days Payable

280

260

240
Prime DBBL

Series 1 Column1 Column2

4) Operating cycle
The operating cycle values are also increasing as a matter of fact measures needs to be taken to
reduce it.

Name Prime Bank Dutch Bangla Bank

Year (2017) 448.89 346.24

Operating Cycle

Prime DBBL
 5) Net Operating cycle
The Operating cycle of the bank has also increased drastically from first year and it need to be
bring under control in comparison like the first year.

Name Prime Bank Dutch Bangla Bank

Year (2017) 221.02 72.65

Net operating Cycle

DBBL
Prime
0 50 100 150 200 250

Column2 Column1 Series 1

6) Current Ratio
The current ratio is maintaining a constant value though the liabilities are more than the assent
the bank need to increase the asset amount.

Name Prime Bank Dutch Bangla Bank

Year (2017) 0.2238 0.1059

Current Ratio

0.1059
0.2238

Prime DBBL

Interpretation

A low current ratio say less than 1.0-1.5 might suggest that the business is not well placed to pay
its debts. It might be required to raise extra finance or extend the time it takes to pay creditors.
There is no such thing as an ideal current ratio. Different businesses and industries work with
different levels of cover. However, a ratio of less than one is often a cause for concern,
particularly if it persists for any length of time.
 7) Quick Ratio

Here company also need to increase the asset amount as the liabilities are exceeding the asset.

Name Prime Bank Dutch Bangla Bank

Year (2017) 0.066 0.0056

Quick Ratio

Prime DBBL

Interpretation

If quick ratio is higher, company may keep too much cash on hand or have a problem collecting
its accounts receivable. Higher quick ratio is needed when the company has difficulty borrowing
on short-term notes. A quick ratio higher than 1:1 indicates that the business can meet its current
financial obligations with the available quick funds on hand.

8) Net working capital

As sales are healthier than the assets the bank must keep the ratio or make it better

Name Prime Bank Dutch Bangla Bank

Year (2017) 0.1236 0.0939

Net Working Capital

DBBL
Prime

0 0.5 1 1.5 2 2.5 3

Series 1
Interpretation

Net working capital equals a company's total current assets minus its total current liabilities.
Current assets are resources, such as cash and accounts receivable, that a company expects to use
up or convert to cash within a year. Current liabilities are amounts of money, such as accounts
payable, that a company owes to others and expects to pay within a year. Having more net
working capital helps a company run its business.

9) Gross Profit margin

There is a big fluctuation in gross margin bank need to take measure to keep it constant.

Name Prime Bank Dutch Bangla Bank

Year (2017) 54.75 0.8903

Gross Profit Margin

3.2

54.75

Prime DBBL

Interpretation

Company's total earnings net income which is calculated by taking revenues and adjusting for
the cost of doing business, depreciation, interest, taxes and other expenses. This number is found
on a company's income statement and is an important measure of how profitable the company is
over a period of time. The measure is also used to calculate earnings per share. In2017, the gross
profit of

Prime bank is Higher than Dutch Bangla bank. It means in 2017 Primebank earn more than
Dutch Bangla bank.
 10) Operating Profit Margin
As sales are better than operating income the company should maintain this ratio.

Name Prime Bank Dutch Bangla Bank

Year (2017) 0 0

11) Net Profit margin

Bank should take new policies to make the profit margin ratio higher than the existing value.

Name Prime Bank Dutch Bangla Bank

Year (2017) 0 0

12) Inventory Turnover

Inventory turnover ratio is very low and is below market standard so bank should try to improve
the ratio.

Name Prime Bank Dutch Bangla Bank

Year (2017) 0.0178 0.0223

Inventory Turnover

0.0178
0.0223

Prime DBBL

13) Accounts Receivable Turnover

Bank should take policies to increase the receivable than of selling on credit.

Name Prime Bank Dutch Bangla Bank

Year (2017) 0 0
 14) Total Asset Turnover
Sales should be more healthier than the total asset amount.

Name Prime Bank Dutch Bangla Bank

Year (2017) 0.1103 0.1212

Total Asset Turnover

0.1103
0.1212

Prime DBBL

15.Fixed asset Turnover

The ratio is healthier than the market standard and bank should maintain it.

Prime Bank DBBL

39.5651 57.4080764

60

40

20

0
Prime Bank DBBL
Interpretation

Fixed asset turnover is the ratio of sales to the value of fixed assets. It indicates how well the business is
using its fixed assets to generate sales A declining ratio may indicate that the business is over-invested in
plant, equipment, or other fixed assets.

16.Total Debt to Asset Ratio

Bank should lessen the debt more and maintain good asset.

Prime Bank DBBL

39.5651 57.40848

Prime Bank
DBBL

Interpretation

The Total Debt to Asset Ratio is calculated by Total Debtl/Total Asset. According to the pie
chart Prime Bank ratio is lower than DBBL. So its indicates that Prime is in higher position.
17. Long term Debt to Asset Ratio

As the bank has more long term debt the bank should try to lessen it and make adjust with
market standard.

Prime Bank DBBL

0.903667 0.93753842

Prime Bank
DBBL

Interpretation

Long term to asset ratio is calculated by Long term debt/total asset shows the
ability of management to acquire deposits at a reasonable cost and invest them in profitable
investments. This ratio indicates how much net income is generated per Taka of assets. The
higher the Long Term Debt Asset, the more the profitable the bank. Here both of the banks Long
term debt Asset increase. Prime Bank equity lower than DBBL.
18. Debt to Equity Ratio

As total debt is higher than shareholder’s equity bank should try to lessen the total debt.

Prime Bank DBBL

0.903667 0.93753842

Prime Bank
DBBL

Interpretation

The debt to equity ratio is a financial ratio indicating the relative proportion of shareholders'
equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also
known as risk, gearing or leverage. Companies finance the purchase of assets either through
equity or debt, so a high equity multiplier indicates that a larger portion of asset financing is
being done through debt. The multiplier is a variation of the debt to equity ratio. A high equity
multiplier is not necessarily better than a low multiplier. Prime Banks equity is higher than
DBBL.
19. Equity Multiplier

It has a healthy ratio as assets are more than the shareholder’s equity.

Prime Bank DBBL

8.03274 12.0005164

Prime Bank
DBBL

Interpretation

The equity multiplier is a measurement of a company’s financial leverage. Companies finance

the purchase of assets either through equity or debt, so a high equity multiplier indicates that a
larger portion of asset financing is being done through debt. The multiplier is a variation of the
debt ratio. A high equity multiplier is not necessarily better than a low multiplier. Prime Banks
equity is higher than DBBL.

20. Times Interest Coverage Ratio

This ratio is okay with the market standard as interest is bit higher than EBIT.

Prime Bank DBBL

0.128683 0.16443607
 0.2

0.15

0.1

0.05

0
Prime Bank DBBL

Interpretation

The interest coverage ratio is calculated by dividing a company's earnings before interest and
taxes (EBIT) by the company's interest expenses for the same period. The lower the interest
coverage ratio, the higher the company's debt burden and the greater the possibility of
bankruptcy or default. So, Prime bank is Higher than DBBL

21. Fixed Coverage Ratio

This value should be increased as EBIT is lower and interest and lease payment is lower bank
should work to decrease its value.

Prime Bank DBBL

-0.06064 1132820589

15

10

0
Prime Bank DBBL
-5
Interpretation

The fixed charge coverage ratio is a financial ratio that measures a firm’s ability to pay all of its
fixed charges or expenses with its income before interest and income taxes. The fixed charge
coverage ratio is basically an expanded version of the times interest coverage ratio. According to
the chart Prime bank is lower rate and DBBL is more than higher in Prime Bank.

22.Earning’s Per share

Here the EPS is decreasing day by day.

Prime Bank DBBL

-1.06272 34.2319708

40

30 Series 3
20 Series 2

10 Series 1

0
Prime Bank DBBL
-10

Interpretation

Earnings per Share indicate the shareholders earning by per share of the company. It also show
shows how profitable a company is on a shareholder basis. Here both companies is in fluctuation
position. We can’t indicate that which company is better. Both the banks EPS decrease per year
but Prime Bank higher than DBBL bank.
23.Dividend Payout Ratio

Here as the company didn’t paid dividend most of the year the ratio showed no value.

Prime Bank DBBL

0.365928 -0.02492

0.4

0.3 Series 3
0.2 Series 2

0.1 Series 1

0
Prime Bank DBBL
-0.1

Interpretation

In Prime Bank , the total dividend is increasing. In DBBL the total dividend is decreasing.

24) Price-Earnings Ratio

Here the EPS should be higher than the market price to make the bank share more attractive.

Prime bank DBBL

95.84802 -3.54737

Prime Bank
DBBL
Interpretation

The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its
current share price relative to its per-share earnings. The higher the P/E ratio, the more the
market is willing to pay for each amount of annual earnings. DBBL P/E ratio is higher than
Prime Bank

25. Basic Earning Power ratio

Here bank should take measures to increase operating income from total asset.

Prime Bank DBBL

0.023971 0.059347

0.06

0.05

0.04

0.03

0.02

0.01

0
Prime Bank DBBL

Interpretation

Basic Earning Power Ratio. Basic earning power (BEP) ratio is a measure that calculates the
earning power of a business before the effect of the business' income taxes and its financial
leverage. It is calculated by dividing earnings before interest and taxes (EBIT) by total assets.
According to the chart, DBBL is increasing rather than Prime Bank
26. Return on Assets

Compared to total asset net income should also be more from the total asset to make proper
utilization.

Prime Bank DBBL

0.023971 0.006499

Sales

Prime Bank
DBBL

Interpretation

Return on Assets = net profit/total assets shows the ability of management to acquire deposits at
a reasonable cost and invest them in profitable investments. This ratio indicates how much net
income is generated per Taka of assets. The higher the return on asset, the more the profitable the
bank. Here both of the banks return on asset decrease. Prime Banks equity higher than DBBL.
27. Return on Equity

Here the shareholder’s equity should also be more than the net income as a matter of fact that
shareholders should be paid from the income generated

Prime Bank DBBL

0.246669 0.104041

Sales

Prime Bank
DBBL

Interpretation

Return on equity is the most important indicator of a bank’s profitability and growth potential. It
is the rate of return to shareholders or the percentage return on each Taka of equity invested in
the bank. Prime Bank equity Lower than DBBL which is a positive indication.
 Recommendations

The banks are in reality service administrations. Dutch Bangla Bank Limited has certain
complications in General banking events. I would like to bid several proposals and endorsements
to overwhelm the difficulties relating the topic mentioned above of Dutch Bangla Bank and also
to improve the performance of Dutch Bangla Bank regarding general banking. The following
recommendations are not decisions, rather they are only propositions to progress the

Performance to accomplish the customer contentment so that, the clients pay

more attention to Dutch Bangla Bank. Now, in below some endorsements are mentioned:

 Branch should introduce a smoother function to deal with the customer.

 Adding a fully computerized general banking system to satisfy the customers by
providing faster service.
 Establishing a networking system inside the branches to transfer data within a short
period.
 Cancel the introducer system to collect more deposit through the new account
which will result satisfying the customers.
 Upgrading the general banking conveniences rather than the conventional banking
system for easier understanding.
 Setting up sophisticated technology and formulating appropriate programs to
develop the captioned activities.
 The bank should increase their staff according to customer demand,
 The bank must deliver rapid client service to escape haphazardness.
 There is no facility of working out for intern students. They can introduce
workspace or seminar for short term period training for an intern that will enrich
the recital and knowledge of the intern students.
 Every branch should have their capability about the power system and internet
connectivity for diminishing the service down time.
 Conclusion

Every bank’s has their unique strategy, which jumper’s cable to their aim. Some wishes to
develop quicker and attain some long range mountains of growth. On the other hand, some can’t
want to lead a silence life history minimizing the risk of infection and convoy a mental image of
a sound bank. Bank Dutch Bangla Bank Ltd. is still quite new in its operation. The financial
analysis of the bank is performing well; appears the bank is doing very well in the banking sector
of Bangladesh and has well-to-do.

Dutch Bangla Bank Ltd Panthapath Branch is working well. However, there are some
downsides in realizing the different tasks manually; it can be overcome through the involvement
of more experts in decision making process and utilizing the tools to judge the integrity of the
customers. In conclusion, it can be discussed that over the results accomplished so far are not
reasonable, why the bank is not expanding a modern systematic procedure for attractive its asset
and there is the chances to make it more actual in the future for their benefit.

The intention of the placement program is to expand knowledge of practical banking

and to compare this concrete knowledge with academic experience. Throughout, the three months
of an internship program, it is not probable to drive to the wisdom or each activity of division
because of time limitation. So, objective of internship program have not been fulfilled with
complete satisfaction. However, the highest effort has been given to achieve the aims of the
internship program.

I think this report may show a guideline to Dutch Bangla Bank Ltd. for future planning
and successful operation to accomplish its goal in the competitive business environment.