EXECUTIVE SUMMARY

The goal of Eastern Bank Limited was to reach banking system more
closely to the general people. In addition, this made this bank up to this
time. Now Eastern Bank Limited is an improved and modernized bank
where the banking system has been easier than the continuing banking
system.
First, I looked at the overview of the bank.
Then, in the literature review section, I look at some financial data
regarding the performance of Eastern Bank and some of the most
common terminologies of banking sector.
Next, I look into the analysis part. In this section, I use ratio analysis to
evaluate the performance and compare it with another competitor bank
named United Commercial Bank Limited (UCBL).
Here

use

some

common

ratio

reflecting

banking

performance

observation for evaluation over the period of 2009-2011. The analysis is

done through interpretation of the ratios found.
The next part consists of some recommendations about how to improve
the conditions of the bank in terms of liquidity, leverage, efficiency,
profitability and market position.
At last, I conclude by discussing the overall performance evaluation of the
bank.

1 | Page

INTRODUCTION
Banking industry is one of the private sectors that have been attracting
investors so much to invest in the financial market. To ensure economic
stability, and to develop the rural and urban areas with necessary
financial

assistance,

government

nationalized

commercial

banking.

Previously only government banks were here to serve the financial needs
of consumers, but later private banks started dominating the market with
lots of branches and many services all over the country. They have joined
the banking industry to serve the common and corporate sector and to
enhance their profitability in the economy. Bangladesh Bank has created a
favorable environment for the private banking sector. It has encouraged
investments in banking in a way that most of the private banks have been
running their operation profitably. Rules and regulations are implemented
by the government to ensure accountability of the banks, and also to ease
the process of the customers to deal with banking activities.

Among so many domestic and multinational banks operating listed in

Dhaka Stock exchange I have randomly selected Prime Bank as the bank
for my analysis and Eastern Bank Ltd as its competitor. Prime Bank Ltd.
has been established in the private sector to provide all banking services
and financial services to facilitate Bangladeshi people. The Bank offers
services for all commercial banking needs of the customers, which
includes deposit banking, loans and advances, export import financing,
inland and international remittance facility etc. It has been growing rapidly
as one of the leaders of the new generation banks in the private sector.

2 | Page

OBJECTIVES
The main objective of the report is to evaluate the performance of Eastern
Bank Limited (EBL) in comparison with the United Commercial Bank
Limited (UCBL). In order to evaluate the performance I conduct the basic
ratio analysis. Then I conduct the interpretation of those ratios to find out
whether the bank is in a good position or in a worse position. The ratios
that I conduct is mainly divided into five basic grounds which are liquidity
ratios, solvency ratios, profitability ratios, market to book value ratios, and
efficiency ratios. After conducting the research I interpret and get the
desired results and I also have included some recommendations to
improve the situation.

Origin of the Report

M. Morshed, (Senior Lecturer) the honorable course instructor of Bank
Management assigned me to prepare a report on October 2012. The date
of the submission of the report is December 24, 2012.

Purpose of the Report

I am very much passionate to be an executive of the coming days. So, I
have to gather more experience beside our study. I do not want to
concentrate my lessons only in classroom but to implement it in my
practical life that will help me in my professional life. The purposes of
preparing of this report are

To relate my theoretical report writing knowledge with the practical

working experience.
To know about the functions played by the bank.

Scope of the Report

3 | Page

I have collected data from the local branch of EBL; I have mainly tried to
cover all the information needed to know about the functions played by
the bank. The entire interviews are taken from the Managers or various
upper level officers of the bank.

4 | Page

METHODOLOGY
Source of Collecting Data
The purpose of my term paper is analyze the performance of Eastern
Bank and compare its performance with United Commercial Bank
Limited .The project starts with

Data Collection
This term paper is based on Secondary Data. The main sources in
conducting this research were the banks annual report, DSE Library,
selected

reference

books,

local

texts

books

about

bank

management, journals related to Eastern Bank from the internet.

Quantitative Analysis
I have conducted a Quantitative Analysis. Various types and classes
of ratios were used in evaluating performance of Eastern Bank.
According to the plan I calculated all the ratios by taking require
information from its financial reports. Almost all of those ratios were
taught in our class; moreover I have collected some from internet.
Application Software used: Microsoft Excel, Microsoft word.

5 | Page

LIMITATIONS
To prepare this report, lots of efforts have given but its accuracy and
effectiveness is minimized due to some limitations. Such as Misleading information provided in the annual reports of these
banks to attract potential investors or to satisfy the present
shareholders.
Although it was very difficult to me to complete the whole project
within very short period, I did give my hundred percent to
finish my project on time and in a presentable manner. If I had
enough time, I will make the report with more compatible
financial analysis.
Method and information to prepare this report was not enough.
This report could have been prepared in a more efficiently by
taking personal interviews, expert advices and verifying all the
data.
Major ratio analysis limitation is that ratio analysis does not take
into account the effect of inflation. Sometimes profit figures are
increasing due to inflationary factors rather than an increase in
sales. But the analysis will show an improved performance by the
company which is clearly not the case.
As I am dealing with a local bank some local ratios needed to be
given as the text books we follow only talk about American ratios.
So we had to us so local books and journals which I must say was
extremely hard to locate.
While doing the project I had to face a problem that all of the
data of all of the years are not stated using the same terms. So I
found it somewhat difficult to understand to some of the cases
because all of the terms are not similar to our text book.

6 | Page

OVERVIEW OF THE BANK

With a vision to become the bank of choice and to be the most valuable
financial brand in Bangladesh, Eastern Bank Ltd. (EBL) began its journey in
1992. Over the years EBL has established itself as a leading private
commercial bank in the country with undisputed leadership in Corporate
Banking and a strong Consumer and SME growth engines. EBL's ambition
is to be the number one financial services provider, creating lasting value
for its clientele, shareholder, and employees and above all, for the
community it operates in.

Mission

We will deliver service excellence to all our customers, both internal

and external.
We will ensure to maximize shareholders' value.
We will constantly challenge our systems, procedures and training to
maintain a cohesive and professional team in order to achieve
service excellence.
We will create an enabling environment and embrace a team based
culture where people will excel.

Vision
To become the most valuable brand in the financial services in Bangladesh
creating long-lasting value for our stakeholders and above all for the
community we operate in by transforming the way we do business and by
sustainable growth.

Achievements
EBL believes in relationship building and focuses on sustainable and longterm growth both for the bank, its clients and the community it operates
in. Despite the constant threat of the global economic recession and its
subsequent effect on the Bangladesh market in 2010, EBL's Profit after Tax
grew by 66.70% from last year. The Non Performing Loan Ratio dropped to
1.99% from 2.46%. The same year, Earning per Share (EPS) had
decreased by around 66% and Cost to Income ratio dropped to 32.10%
from 35.62% which is one of the lowest in the industry. In addition, in
7 | Page

2010 the bank's Credit Rating increased to AA from AA-, which was A+ in
the year before.

09
Ja n u a r
y
2011
D ece
m ber
2011

25
Ju n e
2011

28
N ovem
ber
2011

8 | Page

25
N ovem
ber
2011

LITERATURE REVIEW
Ratio Analysis
Ratio Analysis is the starting point in developing the information desired
by the analyst. Ratio analysis provides only a single snapshot, the analysis
being for one given point or period in time. In the ratio analysis it is
possible to define the company ratio with a standard one. For this paper
we have gone through Time Series Analysis.

Time series Analysis: Evaluation of the banks financial performance

over time using financial ratios.
LIQUIDITY RATIO

It is a determinant of a firms liquidity position. The main equation is given

bellowA financial firms net liquidity position= Supplies of liquidity flowing into
the financial Firm- Demand on the financial firm for Liquidity (Supplies of
liquidity flowing into the financial Firm= Incoming deposits (inflows)+
Revenues from the sales of non deposit services+ Customer loan
repayments+ Sales of assets+ Borrowings from the money market
Demand on the financial firm for Liquidity=

Deposits withdrawals+

Volume of acceptable loan requests+ Repayments of borrowings+ Other

operating expenses+ Dividend payments to stockholders.) If the ratio is
negative, its a liquidity deficit. Management must decide the way of
raising additional funds. In case of positive result, its a liquidity surplus.
Then the additional liquid fund is invested somewhere profitable.
Cash Position indicator
Cash and deposits due from depository institution, where a great
proportion of cash implies the institution in a stronger position to handle
immediate cash need.

9 | Page

Cashdeposits due

deposit . Institutions
Total Asset

Capacity Ratio
This ratio is really a Negative liquidity indicator because loan and leases
are often the most illiquid assets.
Net LoansLeases
Total assets
Liquid Securities Indicator
This Ratio compares the most marketable securities an institution can hold
with the overall size of its asset portfolio; the greater proportion of
government securities, the more liquid the depository institutions position
tends to be.
Government securities
Totalassets
Deposit composition ratio
Demand deposits are subject to immediate withdrawal via check writing,
while time deposits have fixed maturities with penalties for early
withdrawal. The equation is
Demand Deposit
Time Deposit
This ratio measures how stable a funding base each institution possesses;
a decline suggests greater deposit stability and a lesser need for liquidity.

10 | P a g e

LEVERAGE RATIO
Banks in general are highly leveraged, as they deal mostly with
borrowed funds. The more leveraged a bank is, the more it will be subject
to several kinds of risks including interest rate risks, liquidity risks and
maturity risks.
Debt ratio
This measures the portion of the total assets that are generated through
debts. Creditors generally find it more comfortable when the debt ratio is
lower, as that indicated a better cushion for them. On the contrary,
stockholders prefer a higher debt ratio as that increases their expectation
for earnings in the near future

Total Liabilties
Total Assets

Debt to Equity Capital Ratio

It indicates what proportion of equity and debt the company is using to
finance its assets. A high debt-equity ratio generally means that a
company has been aggressive in financing its growth with debt. The
equation is

Total Liabilties
Shareholders Equity

Times Interest Earned

Times interest earned indicates the number of time the interest expenses
can be paid off with the current operating revenue that the bank is able to
generate through its services. The equation is

Total Operating Revenue

Interest Expense

11 | P a g e

The lower the ratio, the more the company is burdened by debt expense.
An interest coverage ratio below 1 indicates the company is not
generating sufficient revenues to satisfy interest expenses.

Equity Multiplier (EM)

Total assets divided by common stockholder's equity. This is a measure of
leverage. The higher the ratio is, the more the company is relying on debt
to finance its asset base. A higher equity multiplier indicates higher
financial leverage, which means the company is relying more on debt to
finance its assets. The equation is

Total Asset
Total Equity Capital

12 | P a g e

EFFICIENCY RATIOS
The efficiency ratios of the bank measures the efficiency with which bank
manages certain important aspects of the bank such as, employee
productivity, operating activities, tax management etc.
Operating efficiency ratio
This measures how efficiently the operating expenses of the bank/other
institutions are managed.
Total Operating Expense
Total Operating Revenue

Employee Productivity ratio

The ratio measures the level of income that each employee generates. It
helps to determine the efficiency of a bank in terms of employees.
Net Operating Income
No . of Full time Employee
Expense Control Efficiency
This ratio calculates the pretax net operating income relative to the total
operating revenue. The efficiency with which the bank manages its
operating expense can be derived from this.
Pretax Net Operating Income
Total operating revenues

Tax Management Efficiency

This ratio portrays the use of security gain/losses and other management
tools such as the process of buying bonds and other securities on which
the taxes have been exempt to minimize the tax liability of the institution.
The equation is
Net Incom e
Pretax Net Operating Income

13 | P a g e

Asset Management Efficiency

It indicates that how efficiently the firm is utilizing the asset to generate
revenue or return. It concern on portfolio management policies, especially
the mix and yields on the banks assets. By carefully allocating assets to
the highest yielding loans and investments while avoiding excessive risk,
management can raise the average yields on assets. It is the same as
asset utilization ratio. The equation is
Total operating revenues
Total Assets

Net Profit Margin

This measures the companys pricing strategy and operating efficiency.
This measures the amount of the proportion of the companys revenue,
after providing for the indirect expenses. The equation is
Net Income
Total operating revenues

14 | P a g e

PROFITABILITY RATIOS
In order to measure the performance of the bank, profitability ratios have
been used as well. The profitability ratios of the banks are used to
measure how well exactly the bank is performing, as far as their profits
are considered. It is one of the most basic means to measure the
performance of any profit making organization and may provide
management, as well as investors with a more thorough analysis of the
bank in question.
Return on Equity
Return on equity measures a Bank's profitability by revealing how
much profit

bank

generates with

the

money

shareholders

have

invested. The equation for ROE is

Net Income After tax

Total Equity Capital

It measures the return on the money the investors have put into the
company. This is the ratio potential investors look at when deciding
whether or not to invest in the company. Net income comes from the
income statement and stockholders equity comes from the balance
sheet. In general, the higher the percentage is the better.
Return on Assets
ROA measures the efficiency with which the company is managing its
investment in assets and using them to generate profit. This particular
ratio indicates the amount of revenue that was generated through the use
of the asset. The equation is
Net Income After tax
Total Asset

15 | P a g e

The higher the percentage, the better the assets have been managed,
and the more efficient the management that means the company is doing
a good job using its assets to generate sales.

Net Interest Margin

Net Interest Margin (NIM) is a measurement of the difference between the
interest income generated by banks or other financial institutions and the
amount of interest paid out to their lenders. It is expressed as a
percentage of what the financial institutions are earning minus the
interest that it pays on borrowed funds to its investors. It examines
how successful a firm's investment decisions are compared to its debt
situations. The equation is
Interest revenueInterest expense
Total assets
A negative value denotes that the firm did not make an optimal decision,
because

interest

expenses

were

greater

than

the

amount

of

returns generated by investments.

Net Non Interest Margin
It is expressed as a percentage of how much noninterest revenue the
financial institutions are earning minus the non interest expense. Noninterest income includes revenues earned from loan and investments or
fee income from fiduciary activities, services charges on deposit accounts,
trading account gains and fees, revenues income from investment
banking, security brokerage and insurance services. Noninterest expenses
include salaries, wages and employee benefits. The equation is

16 | P a g e

Non Interest revenueNon Interest expense

Total Assets

17 | P a g e

MARKET POSITION RATIOS

The market ratios provide the information that is required by any investors
before they invest in any organization. A good view of the company can
contribute to its increased share prices providing its shareholders with
capital gain on the shares they have purchased of the company.
Earnings per Share
The portion of a company's profit allocated to each outstanding share of
common stock. Earnings per share serve as an indicator of a company's
profitability. It tells an investor how much of the company's profit belongs
to each share of stock. The equation is
Net Income after Tax
Number of Common stock outstanding
The more this ratio is, the happier are the investors and the more
confidence they would portray while investing in it.
Price to earnings Ratio
The P/E ratio indicates exactly how much investors or the shareholders are
ready to pay for each Taka worth of return that the shares would provide.
The equation is
Market Value Per share
Earning per share
A high P/E suggests that investors are expecting higher earnings growth in
the future compared to companies with a lower P/E. It gives us an
indication of the confidence that investors have in the future prosperity of
the business.
Dividend per Share

18 | P a g e

This ratio shows the dividend that the company/bank has declared/paid on
each of its share. The higher it is, the more the investors will be willing to
invest in it.
Total Dividend
Number of common stock outstanding

Growth rate:
The sustainable growth rate is the growth rate a company can achieve
without changing its current financial ratios or performance and without
issuing

new

It is calculated by: Growth rate, g= ROE*Retention ratio.

Otherwise, g= ROE*(1-DPS/EPS)
The intrinsic share price of a stock is calculated using Multiple Period Model

19 | P a g e

shares.

FINDINGS AND ANALYSIS

LIQUIDITY POSITION
CASH POSITION INDICATOR
BANK

2009

2010

2011

EBL

14.57%

10.09%

8.13%

UCBL

10.41%

9.13%

9.93%

10.41%

14.57%
2009

10.09%

9.13%

2010
EBL

9.93%
8.13%

2011

UCBL

Analysis:
The first ratio in Liquidity is cash position indicator. The amount of cash
that a company, investment fund or bank has on its books at a specific
point in time. The cash position is a sign of financial strength and
liquidity. It often takes into consideration highly liquid assets such as
certificates of deposit, short-term government debt and other cash
equivalents. In Eastern Bank Limited (EBL) in 2011 cash position was
8.13% of total assets. In 2009 and 2010, it was 14.57% and 10.09%
respectively. Not too much cash in hand is a good sign. It also may incur
opportunity cost. EBLs direct competitor United Commercial bank (UCB)
had a fall in the year 2010, change of 1.28% and later in 2011 it has
increased by 0.80%. UCB is holding more cash than EBL.

20 | P a g e

CAPACITY RATIO
BANK
EBL
UCBL

2009
0.66
0.68

2010
0.71
0.72

2011
0.70
0.07

80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%

2009

2010
EBL

2011

UCBL

Analysis:
Capacity ratio is how much loan and leases uses in total asset. Capacity
ratio is negative liquidity indicator because loans and leases are often
the most illiquid of asset. EBL in 2009 and 2010, capacity ratio was .66
and .71 respectively. But later EBL was unable to maintain a lower ratio.
On the other hand UCB 2010 was very high ratio but they managed to
reduce the ratio for the following year to 0.07.

21 | P a g e

LIQUID SECURITIES INDICATOR

12.00%

BANK

2009

2010

2011

EBL
UCBL

11.04%
8.68%

8.32%
9.55%

10.92%
9.65%

11.04%

10.92%
9.55%

10.00%

8.68%

9.65%

8.32%

8.00%
EBL

6.00%

UCBL

4.00%
2.00%
0.00%
2009

2010

2011

Analysis:
Govt. securities / total asset, Liquid Security indicator can be liquidized
very short period of time. Banks holds Liquid Security to meet the short
term obligations. EBL has 10.92% of total assets in terms of GVT
securities like debenture, Bond etc in 2011 where as UCB has 9.65% of
Government Securities in their portfolio. Government Securities are almost
risk free investment and one of the major sources of liquidity. So its
always good to have Government securities in the portfolio of EBL.

22 | P a g e

DEPOSIT COMPOSITION RATIO

BANK

2009

2010

2011

EBL
UCBL

14.73%
18.90%

20.69%
20.38%

17.33%
27.04%

27.04%

30.00%
25.00%
18.90%
20.00%

20.69%
20.38%
17.33%

14.73%
EBL

15.00%

UCBL

10.00%
5.00%
0.00%
2009

2010

2011

Analysis:
In 2009, Eastern Bank has a deposit composition ratio of 14.73% which
tells us that demand deposits that are subject to immediate withdrawal
via check writing are 0.1473 portion of time deposits that have fixed
maturities with penalties for early withdrawal. In 2010, it is increased to
20.69% because relative increase in demand or current deposit is higher
than relative increase in time or term deposits. In 2011, it fell to 17.33%.
United Commercial bank (Competitor): Its deposit composition ratio has
an upward trend from 18.90% in 2009 to 27.04% in 2011.This tells us that
relative increase in demand deposit was higher than relative increase in
time deposit from 2009 to 2010.

23 | P a g e

LEVERAGE RATIO
DEBT RATIO
BANK

2009

2010

2011

EBL
UCBL

0.88
0.94

0.85
0.94

0.88
0.91

0.94

0.94

0.94
0.91

0.92
0.90

0.88

0.88

0.88

EBL
UCBL

0.86
0.84
0.82
0.80
2009

0.85
2010

2011

Analysis:
Banks are highly financially leveraged. In 2009, 88% of the Eastern Banks
asset was financed by debt. It means for every TK 1 of total assets, TK
0.88 is financed by debt. In 2010, it decreased to 85% because relative
change in total assets was higher than relative change in total debt.
United Commercial bank (Competitor): Debt ratio of UCB is decreased to
some extent after maintain the same ratio for two consecutive years
during 2009 and 2010. In 2011, it was 91%. So it is showing us downward
trend in debt ratio.
Eastern Bank is less financially leverage than its competitor. So risk
exposure for Trust bank is less than UCB. If economy goes well than UCB
will earn more profit than Eastern bank but if economy goes through
recession UCB will incur more loss than Eastern bank. So UCB with lower
debt ratio is in a safer position.
24 | P a g e

DEBT TO EQUITY RATIO

BANK

2009

2010

2011

EBL

7.29

5.79

7.16

14.86

15.62

9.58

UCBL
15.62

14.86
16.00
14.00

9.58

12.00
10.00

7.29

EBL

7.16

UCBL

8.00
6.00
4.00
UCBL

2.00
EBL

0.00
2009

5.79
2010

2011

Analysis:
The debt to equity ratio is also referred to as the financial leverage ratio.
The financial leverage ratio indicates the extent to which the business
relies on debt financing. A high financial leverage ratio indicates possible
difficulty in paying interest and principal while obtaining more funding.
Eastern bank Financial Leverage was 5.7905 in year 2010. This was very
good comparing with other banks and industry. EBL has also achieved
efficient result to minimize the financial leverage in year 2009 to 2010. On
the other hand EBL direct competitor has more chance of financially
default or leverage. The ratio was 15.62 in year 2010 which was
approximately three times more than EBL Financial leverage ratio.

25 | P a g e

TIMES INTEREST EARNED

2011

BANK

2009

2010

2011

EBL

1.14

1.54

1.22

UCBL

1.35

1.64

1.51

1.51
1.22

1.64

2010

1.35
2009

1.54

EBL
UCBL

1.14

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80

Analysis:
A ratio used to determine how easily a company can pay interest on
outstanding debt. The interest coverage ratio is calculated by dividing a
company's earnings before interest and taxes (EBIT) of one period by the
company's interest expenses of the same period. The lower the interest
coverage ratio, the higher chance that company's debt burden and the
greater the possibility of bankruptcy or default. EBL current position has
declined from the past 2 years. In 2011, Interest coverage ratio was 1.22
on the other hand EBLs direct competitors had 1.51. An interest
coverage ratio below 1.0 indicates the business is having difficulties
generating the cash necessary to pay its interest obligations. In this case,
EBLs competitor, UCBL is having a better position between the two banks.

26 | P a g e

EQUITY MULTIPLIER (EM)

BANK

2009

2010

2011

EBL

8.29

6.79

8.16

UCBL

15.86

16.62

10.58

18.00
15.86
16.00

16.62

14.00
12.00
10.58

10.00
8.29
8.00

EBL
6.79

8.16

2010

2011

UCBL

6.00
4.00
2.00
0.00
2009

Analysis:
A

measure

of

financial

leverage

calculated

as

Total

Assets/Total

Stockholders' Equity. Like all debt management ratios, the equity

multiplier is a way of examining how a company uses debt to finance its
assets. This ratio shows a company's total assets per dollar of
stockholders' equity. A higher equity multiplier indicates higher financial
leverage, which means the company is relying more on debt to finance its
assets. Eastern Bank Limited had achieved a great success to reduce the
ratio during the year 2010. Later the same rate increased in year 201. So
EBL is moving towards higher financial leverage risk. Comparing with EBL
to UCB, UCB has higher financial leverage risk. Although UCB has
minimized financial leverage, EBL is at a better position than its
competitor.

27 | P a g e

EFFICIENCY RATIO
OPERATING EFFICIENCY RATIO
BANK
EBL
UCBL

2009
0.36
0.22

0.40
0.36
0.35
0.30
0.25
0.22

0.32

2010
0.32
0.23

2011
0.34
0.17

0.34

0.23

0.20

0.17

0.15

EBL
UCBL

0.10
0.05
0.00
2009

2010

2011

Analysis:
The Operating efficiency ratio was almost consistent throughout the 3
years implying that the bank was able to manage its operating revenues
with its expenses as planned. UCBLs Operating Efficiency ratio curve is
fluctuating, but shows a decreasing trend. But this increasing trend does
not indicate that, that the bank is efficiently utilizing its expanse and
revenue altogether. This increasing trend reflects that the bank has failed
to reduce its expanse and simultaneously increase its revenue. EBL is
showing an upward and unsteady operating efficiency trend whereas UCB
has steadier downward trend than that of EBLs. It shows that Prime bank
has been successfully able to minimize its operating expenses.

28 | P a g e

EMPLOYEE PRODUCTIVITY RATIO

BANK

2009

EBL

$
5,817,044
$
614,779

UCBL

2010

2011

$
$
4,508,689 4,207,055
$
$
1,326,442 1,734,713

$7,000,000
$6,000,000
$5,000,000
$4,000,000

2009
2010

$3,000,000

2011

$2,000,000
$1,000,000
$EBL

UCBL

Analysis:
Net Operating Income/No. of Full Time employee. This ratio shows that
how much employee efficient in generating profit. It indicates productivity
of full time employee. Higher the ratio its good for the bank. EBLs per
employee generate tk 4,207,055 in total operating income which is very
good. The income is very impressive in last three years for EBL. The total
number employees were 878, 973 and 1214 in 2009, 2010 and 2011
respectively. EBLs direct competitors UCBs employee productivity is good
but comparing with EBL it was not satisfying for the UCB. United
Commercial bank (UCB) per employee contribution to operating profit is
almost 1/3 of EBL. The total number employees were, 2508, 2738 and
2982 in 2009, 2010 and 2011 respectively.

29 | P a g e

EXPENSE CONTROL EFFICIENCY

BANK
EBL
UCBL

2009
58.33%
16.16%

2010
61.80%
26.93%

2011
52.99%
26.53%

UCBL
2009
2010
2011
EBL

0.00%

20.00%

40.00%

60.00%

80.00%

Analysis:
It means how efficiently the bank is controlling their expenses. Bank has
significance in controlling unusual expenses. EBL failed to control the
expenses over the last 3 periods. EBL had high expense during last 3
years. On the other hand their competitor bank UCB managed to control
their expenses more efficiently.

30 | P a g e

TAX MANAGEMENT EFFICIENCY

BANK
EBL
UCBL

2009
53.86%
60.50%

2010
60.73%
60.07%

2011
61.05%
56.95%

62.00%
60.00%
58.00%
2009

56.00%

2010
54.00%

2011

52.00%
50.00%
EBL
UCBL

Analysis:
The tax management efficiency ratio of a fund measures what percentage
of a funds earnings is lost to taxation. It is extremely important to
consider tax portion. Capital gain and dividend which options bank takes
they have consider about tax factor. Above graphs shows that both EBL
and UCB has almost same position to manage the tax. EBL tax
management ratio was in 2010 was 0.6073 on the other hand their direct
competitor had almost same ratio of 0.6007 in year 2010.

31 | P a g e

ASSET MANAGEMENT EFFICIENCY

BANK
EBL
UCBL

2009
6.63%
10.54%

2010
7.87%
10.38%

2011
6.63%
11.54%

12.00%
10.00%
8.00%
EBL

6.00%

UCBL

4.00%
2.00%
0.00%
2009

2010

2011

Analysis:
It refers to proper utilization of asset in generating revenues. Higher the
ratio higher is the assets manage efficiency. EBL performance was stable
over the last 3 years but the performance of UCB was significant in last
3years. In 2011, UCB has managed the asset much better than the EBL.

32 | P a g e

NET PROFIT MARGIN

BANK
EBL
UCBL

2009
31.41%
9.78%

2011
32.35%
15.11%

37.53%

40.00%
35.00%

2010
37.53%
16.18%

32.35%

31.41%

30.00%
25.00%
16.18%

20.00%
15.00%

15.11%

EBL
UCBL

9.78%

10.00%
5.00%
0.00%
2009

2010

2011

Analysis:
EBL In the year 2010, out of every TK 100 operating revenues, EBL earns
a profit of TK 37.53. From 2009 to 2010, net profit margin for EBL has
been steady from 31.41% in 2009 to 32.35% in 2011 because relative
increase in net profit was more than relative increase in operating
revenue. For UCB from 2009 to 2011, net profit margin increased steadily
from 9.78% to 15.11 % because relative increase in net profit was more
than relative increase in operating revenue. In 2008 and 2010, net profit
margin for EBL was more than net profit margin of UCBL indicating that
EBL Bank is in a better position.

33 | P a g e

PROFITABILITY RATIOS
RETURN ON EQUITY

2011

2010

2009

BANK

2009

2010

2011

EBL

17.26%

20.07%

17.50%

UCBL

16.35%

27.91%

18.45%

18.45%
17.50%

27.91%
20.07%

EBL
UCBL

16.35%
17.26%

0.00%

5.00% 10.00% 15.00% 20.00% 25.00% 30.00%

Analysis:
ROE means return on shareholders equity in the company represent how
efficiently company is using equity of the shareholders to generate profit.
Higher the percentage higher is the efficiency of the company. EBL has
been maintaining a constant rate from the past three years. UCB is
showing that shareholders equity is being used efficiently. Eastern banks
direct competitor UCBs 2010 performance was very impressive. The
growth in ROE from 2009 to 2010 was significantly higher than the EBL.

34 | P a g e

RETURN ON ASSETS
BANK
EBL
UCBL

2011

2010

2009
2.08%
1.03%

2010
2.96%
1.68%

2011
2.14%
1.74%

1.74%
2.14%

EBL

1.68%

Linear (EBL)

2.96%

UCBL
Linear (UCBL)

2009

1.03%

0.00%

2.08%
1.00%

2.00%

3.00%

4.00%

Analysis:
ROA represent the return realized from the total asset of the company.
Higher the ratio that means more efficient the performance of the
company is. From the above analysis we can say that ROA of EBL is better
than UCB over the period of 2009-2011. ROA has an upward trend from
2008 to 2010 for Eastern Bank Limited. On the other hand the
performance of UCB was poor during year 2009 but has been increasing
from the past two years.

35 | P a g e

NET INTEREST MARGIN

BANK
EBL
UCBL

2009
3.10%
2.03%

2010
3.38%
1.03%

2011
2.82%
-0.29%

4.00%
3.50%
3.10%
3.00%

3.38%
2.82%

2.50%
2.03%
2.00%

EBL

1.50%

UCBL

1.00%

1.03%

0.50%
0.00%
2009
-0.50%

2010

-0.29%
2011

Analysis:
Net Operating Profit/Total Assets. It is Interest sensitive profit which is
realized by the bank. This ratio is the most important for the bank,
because bank faces significant interest rate risk. Spread between income
and expense reduced due to interest rate risk. Interest rate always
fluctuates. Bank has to maintain a margin between maturity of asset and
liability especially in interest sensitive assets and liabilities. Higher the
ratio higher is the banks margin. EBL has maintained a stable net interest
margin over the last three years especially in 2010. On the other hand
UCBs net interest margin is following a downward trend between 2009
and 2011.

36 | P a g e

NET NON INTEREST MARGIN

BANK
EBL
UCBL

2009
3.53%
2.83%

2010
4.37%
2.94%

2011
4.61%
2.41%

5.00%
4.37%

4.50%
4.00%
3.50%
3.00%

4.61%

3.53%
2.83%

2.94%
EBL

2.50%
2.41%

2.00%

Linear (EBL)
UCBL

1.50%
1.00%
0.50%
0.00%
2009

2010

2011

Analysis:
EBLs net non interest margin displays a mixed trend as well with 2010
and 2011 being the years for main concern. In these years the banks noninterest margin increased by a huge margin. Their net non-interest income
shows a stable trend. The figures above suggest the bank have generated
stable non-interest income and have been able to utilize their assets
efficiently to generate this income. Their competitor UCB is maintaining a
downward trend in net non interest margin. EBL has successfully been
able to maximize its noninterest revenues i.e. fee incomes and thus has a
better non interest margin than UCB.

37 | P a g e

MARKET POSITION RATIOS

EARNINGS PER SHARE
BANK
EBL
UCBL

2009
58.53
7.81

2010
8.30
7.50

2011
5.57
20.25

70.00
60.00

58.53

50.00
EBL

40.00

Linear (EBL)
30.00

UCBL
20.25

20.00
10.00

7.81

8.307.50

Linear (UCBL)

5.57

0.00
2009

2010

2011

Analysis:
the portion of a company's profit allocated to each outstanding share of
common stock. Earnings per share serve as an indicator of a company's
profitability. From 2009 to 2011, downward trend continued for EBL in EPS.
Unlike EBL, UCB have been maintaining an upward trend in EPS. From
2009 till 2011 the Earnings per share started at $7.81 and currently at
$20.25 per share. Over the 3 years, UCB is in a favorable position with
greater EPS because from investors point of view, common shareholders
earn more net income per share.

38 | P a g e

PRICE TO EARNING RATIO

BANK

2009

2010

2011

EBL
UCBL

11.01
0.00

15.59
30.24

11.82
2.17

35.00
30.24

30.00
25.00
20.00

EBL

15.59
15.00

UCBL

11.82

11.01

10.00
5.00
0.00

2.17
0.00
2009

2010

2011

Analysis:
A valuation ratio of a company's current share price compared to its pershare earnings. EBL P/E ratio is very good in 2009 and 2010. It shows a
fundamental share. Investors will invest more on EBL. On the other hand
UCBs P/E ratio was too high in the year 2010. There are too many
fluctuations in the ratio whereas EBL has been maintaining a constant P/E
ratio. Potential investor will not invest in UCB due to high P/E ratio.

39 | P a g e

DIVIDEND PER SHARE

BANK
EBL
UCBL

2009
0.00
5.12

2010
1.71
3.59

2011
0.00
10.00

12.00
10.00

10.00

8.00
EBL

6.005.12
4.00

UCBL
3.59

2.00

1.71

0.00 0.00
2009

2010

0.00
2011

Analysis:
Eastern bank did not given any cash dividend in the year 2009 and 2011.
They have given bonus share to the investors. EBL has given 55% Stock
for their investors. That means investors who hold 100 shares they will get
55 shares bonus. Some banks prefer Stock option over cash dividend due
to cash position. EBL has given 55% stock for their investors which is very
good comparing with last two years. EBL direct competitor UCBs Dividend
rate was good over the last 3 years compared to EPLs.

40 | P a g e

INTRINSIC SHARE PRICE OF Eastern Bank AND

United Commercial Bank

Risk free rate(DEC 2011- 364 dayTbill Rate)

Average Stock return 2011
Market Return
Beta

REQUIRED RATE OF
RETURN(Ke)
ROE
Dividend per share(D0)
Earnings per share
g
Intrinsic Value

41 | P a g e

EBL

UCB

0.115

0.115

-0.00154
-0.00149
1.25142
2

-0.0055
-0.00149
1.13626
3

-0.03078

-0.01737

0.17496
3
1.70940
2
8.30176
8
0.13893
7
88.1674
9

0.1845
7.49714
9
20.2464
1
0.11618
1
96.6597
2

CONCLUSIONS
Finally after comparing all the ratios above, we can conclude that the
performance of EBL was quite good in comparison with UCB but we also
like to include that the performance could be even better than the
previous years. So we strongly recommend taking initiative discussed
above to improve the condition of the bank in future. EBL is one of the
prominent banks in Bangladesh. EBL should more engage in CSR activates
in our country. EBL should help more in developing financial and economic
growth of the country. I have several vital ratios which are very important
for the evaluation the performance of the bank. These ratios shows the
position the EBL is now in. it will help to any investors to identify basic
information about EBL and potential investors to invest in right place.

42 | P a g e

Bibliography
1. Eastern Bank Limited. (2008). Annual Report 2008. Retrieved on
November 10, 2011
2. Eastern Bank Limited. (2009). Annual Report 2009. Retrieved on
November 10, 2011
3. Eastern Bank Limited. (2010). Annual Report 2010. Retrieved on
November 11, 2011
Website: www.ebl-bd.com

4. United Commercial Bank Limited. (2008). Annual Report 2008.

Retrieved on November 11, 2011
5. United Commercial Bank Limited. (2009). Annual Report 2009.
Retrieved on November 11, 2011
6. United Commercial Bank Limited. (2010). Annual Report 2010.
Retrieved on November 11, 2011
Website: www.ucbl.com

43 | P a g e

APPENDIX

44 | P a g e