Bank Fund Maanagement Termpaper
Bank Fund Maanagement Termpaper
Bank Fund Maanagement Termpaper
Term paper on
Financial performance analysis of Dhaka Bank Bangladesh from Year 2017 to
2021
Kaniz Fatema
Name ID
Lecturer
Army Institute Of Business Administration, Savar Md. Modasser (B7200B049)
Islam Emon
Zarif Hossain Khan Shitab (B7200B038)
Honorable ma’am
Here is my term paper on “Financial Analysis of Dhaka Bank limited from year 2017 to 2021”
assigned to me as a requirement of the course “Bank Fund Management, Course code: FIN 4712”
Amid the previous situation of coronavirus pandemic our banking institutions have gain notable
growth. One of them is Dhaka Bank Limited. Through this term paper I have tried to find out
several ratios related to financial performance of Dhaka Bank and their situation of asset, liability
and equity status from those years. While preparing the report I have taken help from of internet,
books, newspaper, classes and other relevant sources.
I hope that, you would be kind enough to grant me the permission to work on “Financial Analysis
of Dhaka Bank from year 2017 to 2021” and oblige thereby.
I shall be glad to answer any kind of questions related to this study and I shall be glad to provide
further clarification if needed.
Sincerely Yours
Name: Md Modasser Islam Emon
ID: B7200B049
Batch: BBA 7
Major: Finance
Table of Contents
INTRODUCTION 4-6
CHAPTER 1 1.1 Introduction
1.2 Objective of the study
1.3 Data Sources
In the very beginning the CAMELS rating and how it works are given in the introduction part.
Other than that various sub divisions and rating manual is also depicted. Dhaka Bank was rated B
or Satisfactory level by CAMELS rating Bangladesh. As a part of the study in the main body five
different sector of banks and the position like capital adequacy, asset quality, management quality,
earning quality and lastly the liquidity position is also added. With the calculation of these ratio
correlated graphs were also added to understand the scenario better and in a visionary way to
understand small details and the comparisons of different years. Also some notes related to the
benchmark and the situation has been added too. Lastly the conclusion chapter depicts the results
and why the CAMELS rating gave Dhaka Bank satisfactory rating was given proper logical
explanation.
Chapter 01 Introduction
1.1 Introduction
A bank is a financial institution that is licensed to accept checking and savings deposits and make
loans. Banks also provide related services such as individual retirement accounts (IRAs),
certificates of deposit (CDs), currency exchange, and safe deposit boxes. Banks do offers various
services to its customers like checking accounts, savings account, loan services, letter of credit
openings, currency exchanges etc. But there are several services that the modern day banks are
serving in countries same as in Bangladesh too. It is important to find out profitability and the asset
management of banks to know if the bank is performing good or bad. There are several ratios to
find out the statements of the banks and the situation of banks like asset and liability management,
return on assets and return on equity etc. These ratings however can give an idea about how the
bank is performing. CAMELS Rating System is an international bank-rating system where bank
supervisory authorities rate institutions according to six factors. It is encountered by six
components named capital adequacy, asset quality, management competence, earnings, liquidity
and sensitivity to market risk. It is used for banking companies to know about their financial
condition, overall soundness of the banks, and predict different risk factors that may contribute to
turn the bank into a problem. CAMEL first founded in 1979 and in 1996 CAMEL became
CAMELS with the addition of a component grade for the Sensitivity of the bank to market risk. In
Bangladesh, the five components of CAMEL have been used for evaluating the bank’s operations
that reflect in a complete institution’s financial condition, compliance with banking regulations
and statutes and overall operating soundness since the early nineties. In 2006, Bangladesh Bank
has upgraded the CAMEL into CAMELS and included ‘Sensitivity to market risk’ or ‘S’ which
make CAMEL into CAMELS. It has 1 through 5 rating for each of these components and a
composite rating where the rating of 1 indicates strong performance or best rating, 2 reflects
satisfactory performance, 3 represents performance that is flawed to some degree, 4 refers to
marginal performance and is significantly below average and 5 is considered as unsatisfactory or
worst rating. In Bangladesh, CAMELS rating is followed by all commercial as a recommendation
of Bangladesh Bank.
1.2 Objective of the study
The main objective of this study is to go through details of Dhaka Bank Limited’s situation in 2020
and 2021.Another objective is to align Bank fund management course with Dhaka Bank Limited
practically. The other objectives are
Data were taken from newspaper, book, and internet and Dhaka bank websites.
Chapter 2 Graphs and Analysis
CAMELS (Capital, Asset, Management, Earning, Liquidity and Sensitivity) Rating is a very
popular term using to evaluate the overall performances of various commercial banks by
Bangladesh Bank. In 2008 this rating was done by the regulatory authority. The serial is made on
the basis of performance of June 2011 .According to performance; banks are categorized in 5
categories-
From the CAMELS rating done by Bangladesh Bank in 2021 Dhaka Bank Limited is a
Satisfactory or B class rated bank.
The capital adequacy ratio (CAR) is an indicator of how well a bank can meet its obligations. Also
known as the capital-to-risk weighted assets ratio (CRAR), the ratio compares capital to risk-
weighted assets and is watched by regulators to determine a bank's risk of failure. It's used to
protect depositors and promote the stability and efficiency of financial systems around the world.
Tier-1 capital, core funds on hand to manage losses so that a bank can continue operating and,
Tier-2 capital, a secondary supply of funds available from the sale of assets once a bank closes
down.
The capital adequacy ratio is calculated by dividing a bank's capital by its risk-weighted assets.
Currently, the minimum ratio of capital to risk-weighted assets is 8% under Basel II and 10.5%
(which includes a 2.5% conservation buffer) under Basel III.23 High capital adequacy ratios are
those that are higher than the minimum requirements under Basel II and Basel III.
Capital to Risk Weighted Assets (CRAR) Ratio 11.96% 13.84% 16.12% 14.52% 14.65% 1%
Non-performing loan means the borrower is not paying the interest and the capital money also.
NPL to total loan ratio shows how much the bank’s loans are not bringing profit into the bank.
CREDIT QUALITY
NPL to Total Loans and Advances (%) 5.98 4.99 4.74 3.13 3.32
5.98
6
4.99
4.74
5
4
3.13 3.32
3
0
2017 2018 2019 2020 2021
NPL to Total Loans and Advances (%)
Here the data shows that the NPL to total loan is slowly decreasing year after year. So the banks
performance is good.
25
19.14 19.28
20
15 NPL/Total equity
10
5
0
2018 2019 2020 2021
Management quality is an important part of the CAMEL rating. It proves how the decisions have
been made in times of crucial moments.
( BDT in million)
97%
96%
95%
94%
93%
Total loans/ Total deposits
92%
91%
90%
89%
2021 2020 2019 2018
2.3.2 Interest Expenses to Deposit:
9.00% 8.30%
8.00% 6.80%
6.70%
7.00%
6.00%
5.00% 4.50%
Interest Expense/ Total
4.00% deposits
3.00%
2.00%
1.00%
0.00%
2021 2020 2019 2018
Here the interest expense to deposit was also seen a decreasing role, which is a good initiative.
Earning quality reflects quality of institution profitability and its ability to earn consistency. The
quality of earning is a very important criterion that determines the ability of an institution to earn
consistently, going into the future.
2.4.1Net interest margin
If a bank NPA (non-performing assets) are high, their NIM will go down. Higher NIM would
increase the profitability of the bank. The NIM is going a slight decreasing way as we can see it.
12 11.28
10.53
10 9.21 9.28
8.18
8
6
4
2 0.69 0.54 0.56 0.7 0.65
0
2017 2018 2019 2020 2021
Return on assets should stay under 5%. On the other hand ROE should go high which is a good
sign. Here we can see the ROA is less than 5% which is alarming as the rate is quite low here. The
rising ROE is a problem as indicates that it is not able to generate profit without capital.
2.5 Liquidity
In short, working capital is the money available to meet your current, short-term obligations. To
make sure your working capital works for you, you'll need to calculate your current levels, project
your future needs and consider ways to make sure you always have enough cash.
1 0.93
0.83 0.81
0.8 0.76 0.76
0.6
Current Ratio
0.4
0.2
0
2017 2018 2019 2020 2021
Here we can see the Current ratio or Working capital ratio was always below 1 which means the
current liabilities were more than the current assets. For banking institutions the rate for working
capital should be less than 1 which means there were less idle money.
Here the ratio means a minimum ratio that the commercial banks has to maintain in the form of
gold, liquid cash. It is basically the reserve requirement that the banks has to maintain in regular
basis.
2017 2018 2019 2020 2021
Statutory Liquidity Ratio (at the close of the year) 13.51 13.60 16.01 18.20 24.83
24.83
25
20 18.2
16.01
15 13.51 13.6
10
0
2017 2018 2019 2020 2021
3.1 Conclusions
The study was done with a purpose to find out different rates and ratios to collaborate with the
CAMEL ratings of commercial banks under BASEL convention. The rating helps to find out the
overall situation by calculating different types of ratios related with 5 possible scenarios and 5
possible positions for the banks. Here Dhaka Bank Limited was rated B section or satisfactory by
CAMELS rating Bangladesh as the corona pandemic was a reason why no banks were giver A
category recognition. We can see in most cases or scenarios Dhaka Bank has performed above
than the industry benchmark and that’s why it was rated satisfactory bank by Bangladesh Bank.
There will be updated accord like BASEL II and Basel III. So while the banking sector will also
be stronger by then.