Professional Documents
Culture Documents
PERFORMANCE IN BANGLADESH
Submitted to
Mohd. Anisul Islam
Lecturer
School of Business Studies
Southeast University
Submitted By
Lutfor Rahman
Program- BBA
ID-2012010000354
Date of Submission-02-05-2016
Acknowledgment
At the very beginning, I express my gratefulness & thanks to the immeasurable grace and
profound kindness of the almighty Allah, the supreme authority of the universe for completing
this report within the scheduled time. I am indebted to a number of persons for their kind
recommendation, submission, direction, cooperation, and their collaboration.
I would like to thank my Supervisor Mohd. Anisul Islam for spending precious time
from his busy schedule to help me in shaping up this report. He has helped me a lot from
proposal selection to final submission and his guidance was most valuable for preparing this
report. I am grateful to him for continual support and suggestion. Without his co-operation and
supervision, the report would not have been possible.
Not simply as a mere formality, rather as a genuine token of my appreciation, I would like to
convey my best regards to officer Md.abdul Fattah, officer, Janata Bank Limited for his
insightful suggestions and continuous support for working on the issue. All of them have obliged
me by providing the valuable and most confidential data of their respective branches.
Finally, I want to express my deep gratitude to my parents whose blessings are always with me to
complete my report.
Letter of Transmittal
Executive Summary
Nowadays banking sector in Bangladesh plays a considerable role in the economic development
and business improvement, in this aspect ranking of banks is vital. In this study, financial ratio
analysis of Janata Bank performance in our country. Also, the most efficient bank is identified
here. Data Envelopment Analysis is used for this purpose. The data from the annual reports of
janata banks are used in this study for the purpose of profitability analysis, liquidity analysis and
credit quality. After the analysis of the data janata bank is the most effective bank of our
economic. Janata bank is a profitable bank in the economic market. Liquidation ability of the
bank is well but janata bank reserve a huge trade in the loan loss reserve.
Table of Content
Chapter
Topic
Page number
Chapter-1
Introduction
6-8
Chapter-2
9-12
Chapter-3
13-15
Chapter-4
16-19
Chapter-5
Empirical Result
20-29
Chapter-6
Conclusion
30-32
Appendix
Chapter1-Introduction
Abstract
This paper investigates the performance of Janata Bank for the period of 1995-2004. Financial
ratios are employed to measure the profitability, liquidity and credit quality performance of
Janata bank. The study found that overall bank performance increased considerably in the year
by year of the analysis. A significant change in trend is noticed at the onset of the global financial
crisis in 2007, reaching its peak during 2008-2009. This resulted in falling profitability, low
liquidity and deteriorating credit quality in the South African Banking sector.
1.Introduction
Banks are the backbone of the global economy, providing capital for innovation, infrastructure,
job creation and overall prosperity. Banks also play an integral role in society, affecting not only
spending by individual consumers, but also the growth of entire industries. The operations of
banks are known as one of the most important economic activity in the world. Any activity
which requires investments and financial resources undoubtedly requires the involvement of
banks and financial institutions. Thus, banks have the central role in the economy. The financial
environment of any economy consists of typically five components, namely: money, financial
instruments, financial institutions, rules and regulations and financial markets. Among the
various financial institutions, banks are a fundamental component and the most active players in
the financial system.
This study evaluates performance for the period 1995-2004 using financial ratio analysis of
janata bank. Financial ratios enable us to identify unique bank strengths and weaknesses, which
in itself inform bank profitability, liquidity and credit quality.
History of janata Bank
1.1Background
With the emergence of Bangladesh as an independent, sovereign state in 1971 after a devastating
nine month war against the West Pakistani occupation army, a war, full of blood and tears,
trauma and pain of millions of our beloved ones, the legacy of rebuilding the already broken
financial base of the country was felt as an urgent call of the day against a collapsed economic
reality of a newly born state.
1.2Inception
In this backdrop, in order to rebuild the countrys economy, measures had been taken to merge a
number of banks previously operated in this region and make new banks and this initiatives led
to formation of Janata Bank in 1972 by combining the erstwhile United Bank Limited and Union
Bank Limited under the Banks Nationalization Order (Presidents Order No. 26) of 1972.
1.3Corporatization
In 15 November, 2007 Janata Bank got registered with the Joint Stock of Registrars and
restructured it as a public limited company with the name Janata Bank Limited.
1.4 Roundup
Including 4 overseas branches in United Arab Emirates Janata Bank runs its business with 906
branches across the country having a big family of around 14,244 (As on 01.05.2015) employees
with its head office located at Janata Bhaban at Motijheel C/A, the heart of the capital city,
Dhaka.
At the end of 2014 the Bank held Deposit BDT 5,16,010 million, Advance BDT 3,19,773 million
with Authorized capital BDT 30,000 million and Paid-up Capital BDT 19,140 million.
Janata Bank Limited, a corporate body trusted over the years, the 2nd largest (in respect of
Deposits/Assets) commercial bank in Bangladesh, has been playing pivotal role in overall
financial activities of the country and is possessing a long heritage of discharging laudable
services to the society since her embankment immediately after the emergence of this verdant
rich alluvial soil as a sovereign, independent state.
The contribution of the Bank to the national economy and social reform has set standard bar so
high that others in this business cant help aspire touching the benchmark of success earned by
JBL. More so a matter of great honour is that the contribution, commitment and success of the
Bank have been recognized with a number of prestigious awards by national and international
organizations of repute.
from Kabul, Afghanistan came to India and started money lending business in exchange of
interest sometime in 1312 A.D. They were known as Kabuliwallas.
2.1Bangladesh Bank
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. BB is also 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. BB is also responsible for planning the governments monetary policy and
implementing it thereby.
The BB has a governing body comprising of nine members with the Governor as its chief. Apart
from the head office in Dhaka, it has nine more branches, of which two in Dhaka and one each in
Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and Barisal.
2.2 Number & Types of Bank
The number of banks in all now stands at 56 in Bangladesh. Out of the 56 banks, 4 are
Nationalized Commercial Banks (NCBs), 31local private commercial banks, 9 foreign
banks, 2 specialized bank and 8 Islamic bank.
10
B a n g la
d e sh
Bank
3 1 P r iv a te
c o m m e r c ia l
bank
8 Is la m i
c o m m e rc i
al bank
6 G o v e rm e n t o w n
c o m m e rc ia l &
s p e c ia liz e d b a n k
9 F o re ig n
c o m m e rc ia
l bank
Sonali Bank is the largest among the NCBs while Pubali is leading in the private ones. Among
the 9 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. The number of total branches of
all scheduled banks is 6,038 as of June 2000. Of the branches, 39.95 per cent (2,412) are located
in the urban areas and 60.05 per 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.
11
1995
4.9%
1996
4.6%
1997
5.4%
1999
4.9%
2000
5.9%
2001
5.3%
2002
4.4%
2003
5.3%
2004
6.3%
Product (GDP)
Unemployment
2.9%
2.5%
2.9%
3.1%
3.3%
3.4%
3.4%
4.3%
4.5%
Rate
Inflation Rate
External Debt
10.3%
40.22
2.4%
36.2
5.3%
32.62
6.1%
34.79
2.2%
31.9
2.0%
30.6
3.3%
33.4
5.7%
33.5
7.6%
33%
%
-0.57
%
-0.15
%
-0.1
-0.63
4.8
5.0
5.1
5.1
Gross Domestic
Government
budget balance
Government
4.6
4.7
4.9
5.04
4.9
spending
Table: GDP, Unemployment rate, inflation rate, External Debt, government budget balance,
government spending.
12
13
Jahangir, Shill and Haque (2007) stated that the traditional measure of profitability through
stockholders equity is quite different in banking industry from any other sector of business,
where loan-to-deposit ratio works as a very good indicator of banks' profitability as it depicts the
status of asset-liability management of banks. But banks' risk is not only associated with this
asset liability management but also related to growth opportunity. Smooth growth ensures higher
future returns to holders and there lies the profitability which means not only current profits but
future returns as well. So, market size and market concentration index along with return to
equity and loan-to-deposit ratio grab the attention of analyzing the banks profitability.
Chowdhury and Islam (2007) stated that deposits and loan advances of Nationalized Commercial
Banks (NCBs) are less sensitive to interest changes than those of Specialized Banks (SBs). So
SBs should not make abrupt change in lending or deposit rates by following the NCBs. If NCBs
change their lending or deposit rates, their deposits or loans and advances will be affected less
than those of SBs. Moreover, deposits of NCBs have higher volume and higher volatility than
those of SBs. On the other hand, loans advances of NCBs show a higher volume and higher
volatility than those of SBs. However, SBs offer higher deposit rates and charge higher lending
rates than NCBs. That is why the interest rate spread of SBs was higher than that of NCBs.
Chowdhury (2002) pointed that the banking industry of Bangladesh is a mixed one comprising
nationalized, private and foreign commercial banks. Many efforts have been made to explain the
performance of these banks. Understanding the performance of banks requires knowledge about
the profitability and the relationships between variables like market size, bank's risk and bank's
market size with profitability. Indeed, the performance evaluation of commercial banks is
14
especially important today because of the fierce competition. The banking industry is
experiencing major transition for the last two decades. It is becoming imperative for banks to
endure the pressure arising from both internal and external factors and prove to be profitable.
According to Al-Shamrnari and Salirni (1998) profitability ratio especially return on equity
(ROE) signals the earning capability of the organization. They also suggest that higher return on
equity (ROE) ratio is appreciable as it is the primary indicator of bank's profitability and
functional efficiency.
Bhatt & Ghosh (1992), observed that the profitability of commercial banks depend on several
factors some of them are endogenous and some exogenous. The endogenous factors represent
control of expenditure, expansion of banking business, timely recovery of loans and productivity.
The exogenous factors consist of direct investments such as SLR (Statutory Liquidity Ratio),
CRR (Cash Reserve Ratio) and directed credit programs such as region wise, population wise
guidelines on lending to priority sectors. The regulated and restricted regime in the operation of
banking system in terms of investment, credit allocation, branch expansion, interest rate
determination and internal management eroded the productivity and profitability of commercial
banks.
15
16
17
4.2The Variables
4.2.1Profitability Performance
The most common measure of bank performance is profitability. Profitability is measured using
the following criteria:
Return on Assets (ROA) = 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 ROA, the more the profitable the
bank.
Return on Equity (ROE) = net profit/ total equity. ROE is the most important indicator of a
banks profitability and growth potential. It is the rate of return to shareholders or the percentage
return on each of equity invested in the bank.
Cost to Income Ratio (C/I) = total cost /total income measures the income generated per taka
cost. That is how expensive it is for the bank to produce a unit of output. The lower the C/I ratio,
the better the performance of the bank.
18
19
Chapter5:-Empirical Result
20
5.Empirical Result
This section presents and discusses the results
There are various groups of people who are interested in analysis of financial
position of accompany. They use the ratio analysis to work out a particular
financial characteristic of the company or Bank in which they are interested. Ratio
analysis helps the various groups in the following manner: To work out the
profitability: Accounting ratio help to measure the profitability of the business by
calculating the various profitability ratios. It helps the management to know about
the earning capacity of the business concern.
1996
1997
1999
2000
2001
2002
2003
2004
0.01
0.01
0.02
0.01
0.01
0.01
0.01
0.01
0.0
0.12
0.10
0.19
0.33
0.36
0.36
0.47
0.66
0.0
99.3
98.9
90.38
74.5
86.85
68.98
58.41
57.45
(C/I)
21
Return on Assets
0.03
0.02
0.02
ROA
0.01
0.01
0
1995
1996
1997
1999
2000
2001
2002
2003
2004
In the figure 1 show that Return on Assets (ROA) of Janata bank was .01% in the year of 1995.
In the year 1996 Return on Assets is the same position .01%. Janata bank believes that the banks
profitability remained favorable in 1996. Return on assets increased by .01 % from .01%in 1996
to .02% in 1997 before slightly falling to .01% in 1999. From 1999 to 2003 Janata Bank Return
on Assets was .01%. In 2004, Return on assets decreased by .01 % from .01% in 2003 to 0% in
2004. In the year 2004, Janata Banks net profit was 0 so their Return on Assets was o%. Loans
and advances were the main contributors to the increase in assets mainly due to increase in
mortgage loans. The higher ratios indicate a better prospective.
22
Return on Equity
0.7
0.6
0.5
ROE
0.4
0.3
0.2
0.1
0
1995
1996
1997
1999
2000
2001
2002
2003
2004
Figure2 show that Return on Equity (ROE) is .12%at 1995. In 1996, profitable performance
decrease by .02% from .12% in1995 to .10% at 1996. In 1997, profitable performance increase
by .09 % from .10% to .19% at 1997. Profitable performance consequence increase from 1997 to
2003 and Return on Equity reach at .66%. In those year Janata Bank performance was profitable
because the higher ratios indicate a better prospective but in the year 2004 Janata Bank
performance was not profitable. This year Janata Bank Return on Equity 0% it indicate there is
no profit in this year.
23
C/I
120
100
80
C/I
60
40
20
0
1995
1996
1997
1999
2000
2001
2002
2003
2004
in 2008. This
improvement continues at 2000 by decreasing 15.82% from 90.94 to 74.56 at 2000. In 2001,
Cost to Income Ratio again increased by 12.29% from 74.56 to 86.85. After that Cost to Income
Ratio consequence decrease from 2002 to 2004 reach at 57.45%. The lower the C/I ratio, the
better the performance of the bank. So Janata Bank performance was good after 2001.
24
1996
1997
1999
2000
2001
2002
2003
2004
32.8
39.22
30.9
30.7
32.5
35.44
28.2
32.04
45.09
5
63.0
7
62.9
2
61.3
59.29
4
64.9
63.77
58.13
3
76.4
7
75.8
6
72.2
70.41
0
72.0
70.77
and 61.63
5
46.4
8
62.3
3
2
3
Table2- LADST,NLTA, NLDST of 1995- 2004
25
25
20
15
10
5
0
1995
1996
1997
1999
2000
2001
2002
2003
2004
26
40
30
20
10
0
1995
1996
1997
1999
2000
2001
2002
2003
2004
27
50
40
30
20
10
0
1995
1996
1997
1999
2000
2001
2002
2003
2004
28
1997
0.0
1999 2000
0.32 1.01
2001 2002
.42
1.23
2003 2004
2.07 2.15
loans (LRGL)
Loan loss reserve to gross loans (LRGL)
2.15
2
1.5
1.01
1
0.5
0
LRGL
1.23
0.42
0.32
0
1995
0
1996
0
1997
1999
2000
2001
2002
2003
2004
Figure 7 show that 1995 to 1997 Asset Credit Quality is 0%. In 1999 it increase by .32% and
reach .32%. Credit risk ratios increased by .69% during 2000 indicating the deterioration of the
quality of the loan portfolio as compared to 1999. In 2001 Asset Credit Quality decrease by .59%
29
from 1.01 to .42 in 2001. After 2001 Asset Credit Quality ratio increase consequence at 2002 to
2004 it indicate that janata banks non performing loans are increase from 2002 to 2004.
Chapter6:-conclusion
30
Conclusion
An efficient operation of banking sector enables the smooth financial resources intermediation of
an economy. Economic growth is contributed greatly by the efficiency of banking sector in
resources generation and its proper allocation. The smooth and efficient operation of banking
sector also helps to reduce risk of failure of an economy. Therefore, the performance of banking
sector is always been a source of interest for researchers to judge the economic condition of a
country. From this view point, the study is done on the analysis of banking activities and
financial performance of Janata Bank Ltd. JBL plays an important role in the banking sector as
well as in our economy. It plays a great role in collecting scattered deposit, loan settlement and
international trade etc. At present there is no such organization in the world that is free from
problem and challenges. Every concern has to strive and struggle a lot to be more profitable and
to go more competitive edge. The study showed that the bank is financially safe and its capital
adequacy ratio is also good. I wish continuous success and healthy business portfolio of Janata
Bank Limited. this study provides a new perspective in evaluating the financial performance of a
leading Bangladeshi commercial banks as well as the finding of this study can be added to the
present literature and it can help researchers in their future studies.
31
Reference
http://www.theglobaleconomy.com/Bangladesh/Inflation
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http://pubs.sciepub.com/jbe/2/5/3/
http://dspace.library.daffodilvarsity.edu.bd:8080/.../merged_document%20AV
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