Intern Report on Dhaka Bank

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Chapter1

Introduction


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1.1 Origin of Report:

The report is titled GENERAL BANKING SERVICES & PERFORMANCEANALYSIS of DHAKA BANK Ltd (DBL) is prepared to fulfill the requirement ofinternship program of the BBA program in the department of Business. I select this topicbecause the banking sector is most important sector in our modern economy and as abusiness student it helps in my future career what I learn from general banking activities. Itgives me a practical observation of the banking sector. It also gives idea in which sector theyplay vital role to develop. Daffodil Institute of IT (DIIT) is a well-known and reputed institute inBangladesh.

1.2 Objectives

Primary objectives:The primary objectives of this report are to fulfill the requirement of BBA program containingthe completion of 3 months internship program and preparation of internship reportaccordingly.

Specifies ObjectivesThe specifies objectives of the study are as follows:

i. To know the General Banking practice in Dhaka Bank Ltd. and evaluate itsperformance.

ii. To find out quality services to the customers of Dhaka Bank Ltd.iii. To find out business growth of Dhaka Bank Ltd.iv. To give suggestion for the development of Dhaka Bank Ltd.v. To describe the General Banking Activities of Dhaka Bank Ltd.vi. To analysis the performance through ratio analysis.vii. To compare the practical knowledge with theoretical knowledge.

viii. To know about the rules and regulation of the DBL.

1.3 Importance

To find ways to improve the present general banking system of DBL. To gain practical knowledge about over all banking system & especially general

banking and customer related information.

1.4 Information need

This report is about the satisfaction of General Banking. So it needs suchinformations like customers demographic information that contains customers age,educational qualification and marital status, what kind of services they are taking andfor which purpose they are taking services. Information related with customerssatisfaction to the banking service is also needed. Such informations like bankingenvironment and relationship, facilities comparison to other private bank, improvementin banking service, uses of modern technologies, service duration, prompt generalbanking service , ATM service charge, maintaining their services according to theirslogan.

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1.5 Information source

Giving the nature of the present study, it was required to collect data both from the primaryand secondary sources. Different brochures, circulars, website of DBL and report of thebank. Following sources helped to prepare this report.

Primary Source

i. Face to face conversation with the bank officers and stuff.ii. Direct conversion with the clientiii. Practical desk work

Secondary Source

i. Various research studies.ii. Books and website of DBL.

iii. Publications, Magazines and Journals.

iv. Annual reports.

1.6 Data collection

A research design is simply a framework or a plan for a study that may be used as a guide incollecting and analyzing data. For preparing this report author has undergone up to twobranches (Moghbazar, Karwan Bazar). From each branch collected 10 questionnaires at likerscale and asked suggestions on General Banking service and has taken face to faceinterview, some of the bank customers.

1.7 Limitations

Every study of this type has some limitation. The topic of my study also has faced somelimitations, I have faced a few impediments & restriction while conducting the study, whishmay be termed as limitations. These as follows:

There is time limitation due to short time period of internship program.

Every company has some policy of not disclosing some data to all, so thereport does not acquire all aspects of each topic.

Insufficient data: Its very difficult to collect recent data, which is very importantfor interpretation of report.

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Chapter2

OverviewOfDhaka Bank Ltd.

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2.1 BACKGROUNDA financial institution that accepts deposits and may use the proceeds of those deposits tomake loan is called commercial bank- Franco Modigliani.

Dhaka Bank Limited was incorporate as a public limited company under the Companies Act.1994. The Bank started its commercial operation on July 05, 1995 with an authorized capitalof TK. 1,000 million and paid up capital of Tk. 100 million. The paid up capital of the Bankstood at TK. 2,659,597,763 as on March 31, 2010. The total equity (capital & reserves) of theBank as on March 31, 2010 stood at Tk. 6,036,368,754. The Bank has 63 branches, 4 SMEService Centers, 5CMS Units, 2 Offshore Banking Unit across the country and a widenetwork of correspondents all over the world. The Bank has plans to open more branches inthe current fiscal year to expand the network.Bank efforts to provide Excellence in Banking services, the Bank has launched OnlineBanking services, joined a countrywide shared ATM network and has introduced a co-branded credit card. A process is also underway to provide e-business facility to the banks

clientele through Online and Home banking solution.

2.1.1 HISTORICAL BACKGROUND

Dhaka Bank was incorporated as a Public Limited Company on 6 th April of 1995 underCompany Act. 1994 and commenced commercial operation on the 5 th July of 1995. Thecompany went for the public issue of shares on the 18 th November 1999 and its shares arelisted with the Stock Exchanges of Bangladesh.

The bank commenced its operation with an authorized capital of Tk 1000 million and paid upcapital of Tk 100 million. The paid up capital of the bank amounted to Tk 2660 million as on31st December 2002 stod at Tk 6580 million. Bank has also made a 1% general provision ofTk 742 million against the unclassified loans and advances, which will be treated assupplementary capital. The capital Adequacy Ratio is 10.09% as on December 31st 2011,which exceed the stipulated requirement for bank in Bangladesh.

The Bank has added one new branch to its network in February 2012 making a total numberof branches 63. With state of the art modern facilities including spacious ATM booth andonline banking. Dhaka bank formally opened new branch at Jatrabari.

In DBL is effort to provide Excellence in banking services, the Bank has launched MobileBanking Solution on July 31 last at its Head Office.

2.1.2 MISSION

To be the premier financial institution in the country providing high quality products andservices backed by latest technology and a team of highly motivated personnel to deliverExcellence in Banking.

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2.1.3 VISION

At Dhaka Bank we draw our inspiration from the distant stars. Our endeavor is to offer thevalued customers the razor sharp sparkle through accuracy, reliability, timely delivery, cuttingedge technology, tailored solutions for business needs, global reach in trade and commerceand high yield on their investments.Our people, product and processes are aligned to meet the demand of our discerning

customers.Our prime objective is to deliver a quality that demonstrates a true reflection of our vision:Excellence in Banking.

2.1.4 SLOGAN

2.1.5 MOTTO

The Bank will be a confluence of the following three interests:

Of the Bank : Profit Maximization and Sustained Growth.

Of the Customer : Maximum Benefit and Satisfaction.

Of the Society : Maximization of Welfare.

2.1.6 GOALS of DBL

Long-term Goal:

To be the Market Leader both in terms of Deposits and good advances among PrivateCommercial Banks in Bangladesh by the year 2015.

Short-term Goal:

To increase Current Market Shares at least 0.50% by 2015.

Financial Goal:

To reduce the existing Cost of Fund by 1%, this currently stands at 11.06%

2.1.7 DBL VALUES

DBL Values are:- Customer Focus

Integrity

Teamwork

Respect for the Individual

Quality

Responsible Citizenship

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5

8 11 1214

17 1820 23

29

3741

45

50

57

62 63

0

10

20

30

40

50

60

70

Num ber of Branches Over the Y

Branches 5 8 11 12 14 17 18 20 23 29 37 41 45 50 57 62 63

1 99 6 1 9 9 7 1 99 8 1 99 9 2 00 0 2 0 0 1 2 00 2 2 00 3 2 00 4 2 00 5 2 00 6 2 00 7 2 00 8 2 0 0 9 2 01 0 2 01 1 2 01 2

2.1.8 MANAGEMENT SYSTEM

Dhaka Bank Ltd is governed by a board of Director. The Board includes:

Chairman

Vice Chairman

19 Directors

20 Sponsor Shareholders

Managing Director

Current chairman of the Board of Director is Mr. Reshadur Rahman and the ManagingDirector is Mr. Khondker Fazle Rashid

2.1.9 BRANCHES

As on February 2012 the Bank serves its customers through 63 branches and 20 ATM

booths spread all over the country. It also has six CMS unit, eight business centers.

2.2 DIVISION OF DHAKA BANK LTD.

The whole operation of DBL has been divided into different divisions for the optimalperformance of the workforce. The roles of each division are as well defined. The divisionshave got interrelations between them of Dhaka Bank Ltd.

Credit Division

Operation Division

Central Accounts Division

Information Technology Division

Retail Banking Division

Investment Division

Human Resources Division Audit & Risk Management Division

Dhaka Bank Training Institute

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Chapter3

Analysis

Of the

General Banking

Activities

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3.1 PRODUCTS

Deposit Pension Scheme (DPS)

Deposit Double (Get double within 72 months)

Special Deposit Scheme

Smart Plan

Edu-Savings Plan

Home Loan

SME

Personal Loan

Car Loan

Dual Currency Credit Card

Mobile Banking

ATM Card

Remittance

Gift Cheque

Student Service Centre

Platinum, Gold & Silver Savings Accounts

3.2 SERVICE SEGMENTS OF DBL

1. Corporate Banking2. Retail Banking: ATM /Debit Card Credit Card3. SME4. GTS5. Islamic Banking6. Capital Market Service

7. Locker

3.2.1 Corporate Banking

Some Corporate Services:

Securitization of Assets

Corporate Finance and Advisory Services

Syndication of Funds

Project Finance

Syndication & Structured Finance

Trade Finance


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Working Capital Finance

3.2.2 Retail Banking

Some Retail Services:

Deposit DoubleDeposit Pension Scheme [DPS]

Salary AccountExcel AccountBundled Savings ProductATM CardPersonal LoanCar LoanHome LoanVacation LoanAny Purpose LoanCredit Card

3.2.3 SME

Dhaka Banks Involvement:

Recognizing the SME segments value additions and employment generation capabilities

quite early, the Bank has pioneered SME financing in Bangladesh in 2003, focusing on

stimulating the manufacturing sector and actively promoting trading and service businesses.

Product Cash Credit

Eligibility All SME businesses where the Key personnel have 2 years

experience in the line of business.Satisfactory credit report

Method of Appraisal The clients business experience, expertise, business

volumes and monthly cash flow are used in the assessment

process.

Margins (indicative) The quality of receivables would be of importance in fixing

margins up to which working capital is made available.

Tenor Maximum 12 months (renewable)

Pricing Risk based pricing strategy, in line with the market rates.

Security Primary:

Charge on the inventory and receivables.

Charge on other current assets

Personal guarantee of proprietor /partners/ directors.

Charge on fixed assets.

Secondary:

Collateral security on a case-to-case basis.

Interest Fixed Rate, typically for 12 months.

Review Facility terms & pricing are both reviewed at least annuallyProcessing fee Processing fee of 1% is generally charged on small loans.

Actual fee charged is determined on a case-to-case basis.

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3.2.4 Global Trade Services [GTS]

Head Office consists of two units-

Financial Institutions or FI and

Remittance Unit.

Financial InstitutionsFI arranges correspondent banking network, credit lines and other facilities required for 15

Authorized Dealer (AD) branches and one Offshore Banking unit of DBL. With a vast network

(320+) of correspondents throughout the globe, Dhaka Bank Limited is one of the banks in

Bangladesh enjoying credit line facility from International Finance Corporation (IFC) under it's

Global Trade Finance Facilitation Program (GTFP) for conformation of the L/Cs issued by

itself. Dhaka Bank Ltd. provides the following services:

Import Letter of credits

Export Letter of credits, negotiation & documentary collection

Local guarantees against counter guarantees

Remittance

Dhaka Bank Limited started providing remittance services through it's local & foreign

correspondents in 2004. Dhaka Bank Ltd. has 63 branches and 3 Kiosks in Bangladesh

posing a total of 66 branches. Dhaka Bank is also working with two NGOs namely PAGE

DEVELOPMENT CENTRE (Comilla based with 60 branches) and PADAKEEP MANABIK

UNNOYAN KENDRA (a National NGO with 150 branches). DBL has extended its horizon toa total of 300 branches altogether and is not limited to only banking affairs in the urban area

but also related with the social activities (e.g. agro loan) in the rural Bangladesh.

3.2.5 Islamic Banking

Dhaka Bank Limited offers Shariah based Islamic Banking Services to its clients. The bank

opened its First Islamic Banking Branch on July 02,2003 at Motijheel Commercial Area,Dhaka. The second Islamic Banking branch of the bank commenced its operation at Agrabad

Commercial Area, Chittagong on May 22, 2004.Dhaka Bank Limited is a provider of on line

banking services and any of its clients may avail Islamic Banking services through any of the

branches of the bank across the country.

Dhaka Bank Islamic Banking Branches offer fully Shariah based, Interest free, Profit-Loss

Sharing Banking Services. Dhaka Bank Shariah Council is closely monitoring its activities.

Besides, Dhaka Bank is an active member of Islamic Banking Consultative Forum, Dhaka

and Central Shariah Board of Bangladesh.

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Our valued clients may have the following accounts with our Islamic BankingBranches

01. Al-Wadeeah Current Account.

02. Mudaraba Savings Account.

03. Mudaraba Term Deposit Account.

04. Mudaraba Special Notice Account.

05. Mudaraba Hajj Savings Account.

06. Mudaraba Pension Scheme Account.

07. Mudaraba Special Deposit Scheme Account.

08. Mudaraba Foreign Currency Deposit Account.

Dhaka Bank Limited Islamic Banking Branches offer the following products

01. Mudaraba Purchase Order.

02. Bai Muazzal Industrial.

03. Bai Muazzal Others.

04. Mudaraba Post Import Trust Receipt.

05. Mudaraba Term Financing Industrial.

06. Mudaraba Term Financing Others.

07. Sirkatul Milk.

08. Ijara Transport.

09. Ijara Machinery & Equipment.

10. Quard.

Besides, selling of Payment Order, Demand Draft, Bank Guarantee and other bankingservices are available in Dhaka Bank Limited Islamic Banking Services.

3.2.6 Capital Market Services

Capital Market Operation besides investment in Treasury Bills, Prize Bonds and otherGovernment Securities constitute the investment basket of Dhaka Bank Limited.

Interest rate cut on bank deposits and government savings instruments has contributed to

significant surge on the stock markets in the second half of 2004, which creates opportunities

for the Bank in terms of capital market operations. The Bank is a member of Dhaka Stock

Exchange Limited and Chittagong Stock Exchange Limited. The investment portfolio of the

Bank made up of Government Securities and Shares and Debentures of different listed

companies stood at Tk. 3,078 million as of December 31, 2004 indexing a 50% increase over

Tk. 2,046 million in the previous year. Income from investment stood at Tk. 146 million in2004 registering a 10% growth over the previous year.

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3.2.7 Locker Services

You could use the locker facility of Dhaka Bank Limited and thus have the option of covering

your valuables against any unfortunate incident.We offer security to our locker service as afforded to the Bank's own property at a very

competitive price.

We would be at your service from Saturday through Thursday from 10:00 am to 5:00 pm

Locker Facility Charges: (Including insurance premium)

Locker Size Yearly Charge

Locker Charge-Small Tk.3,000

Locker Charge-Medium Tk.5,000

Locker Charge-Large Tk.7,000

Locker Security Deposit (Refundable) Tk.5,000

Locker key replacement cost Tk.6,000

3.3 Financial Highlights

DBL made a satisfactory progress in all areas of business operation in 2010. Dhaka Banksdeposit shot up by 11% to Tk 67,743 million excluding call and the total asset of the bankamounted to Tk 90,141 million as on December 31, 2010 registering a growth of 16% overthe previous year. During 2010 loans and advances rose by 20% and stood at Tk 63,591million as at December 31, 2010. In 2010 export and import business of the bank rose by11% and 51% respectively.

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Financial Highlights

Last 2 YEARS FINANCIAL HIGHLIGHTS

* The financial data of 2011 was not available till 30th January, 2012.

[ Source: DBL Annual Report, 2010 ]

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3.4 SWOT Analysis of DBL

SOWT Analysis is a strategic planning method used to evaluate the strengths, weaknesses,opportunities and threats of a business unit. Its involves specifying the objectives of thebusiness venture and identifying the internal and external factors that are favorable and

unfavorable to achieving that objectives.

Strengths:

Corporate brand imageAcademically qualified & flexible staffGood asset qualityComfortable liquidity positionTechnology focusNewly customized retail products & services

Opportunities:

Emerging business & cost containment opportunitiesScope of market penetration from new IT platform banking, SME, syndication, leasing,capital market services, Islamic Banking.Great opportunities are hidden in the Retail Banking sector. Services like DepositDouble, Car Loan & Edu-Saving Plan.

Weaknesses:

High cost of fundInadequate capital baseTraditional deposit productsWide branch networkLack of portfolio diversificationPoor HR managementLack of technical skillsOrganizational restructuring required

Threats:

Increased competitionMarket pressure for lowering the interest rateNew regulatory requirementsIncreased bargaining power of customers as competition rises.

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Chapter4

Overview of Ratio

Analysis

OfDhaka Bank Limited

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4.1 Ratio Analysis

A tool used by individuals to conduct a quantitative analysis of information in acompanys financial statements. Ratios are calculated from current year numbers andare then compared to previous years, other companies, the industry to judge theperformance of the company. Ratio analysis is predominately used by proponents offundamental analysis.

There are many ratios that can be calculated from the financial statements pertainingto a companys performance, activity, financing and liquidity. Some common ratiosinclude the price earnings ratio, debt-equity ratio, earning per share, asset turnoverand working capital.

Ratio analysis is a form of Financial Statement Analysis that is used to obtain a quickindication of a firms financial performance in several key areas. The ratios arecategorized as Short-term Solvency Ratios, Debt Management Ratio, AssetManagement Ratios, Profitability Ratios and Market Value Ratios.

Ratio Analysis is a tool possesses several important features. The data, which areprovided by financial statements, are readily available. The computation of ratiosfacilitates the comparison of firms which differ in size. Ratios can be used to comparea firms financial performance with industry averages. In addition, ratios can be usedin a from of trend analysis to identify areas where performance has improved or

deteriorated over time.Because Ratio Analysis is based upon accounting information, its effectiveness islimited by the distortions which arise in financial statements due to such things asHistorical Cost Accounting and inflation. Therefore, Ratio Analysis used to obtain aquick indication of a firms performance and to identify areas which need to beinvestigated further.

4.2 Importance and Advantage of Ratio Analysis

Ratio analysis is an important tool for analyzing the companys financial performance. The

following are the important advantages of the accounting ratios.

1. Analyzing Financial StatementsRatio analysis is an important technique of financial statement analysis. Accountingratios are useful for understanding the financial position of the company. Differentusers such as investors, management, bankers and creditors use the ratio to analyzethe financial situation of the company for their decision making purpose.2. Judging EfficiencyAccounting ratios are important for judging the companys efficiency in term of itsoperations and management. They help judge how well the company has been able toutilize its assets and earn profits.

3. Locating WeaknessAccounting ratios can also be used in locating weakness of the companys operationseven though its overall performance may be quit well. Management can then payattention to the weakness and take remedial measures to overcome them.

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4. Formulating PlansAlthough accounting ratios are used to analyze the companys past financialperformance, they can also be used to establish future trends of its financialperformance. As a result, they help formulate the companys future plans.5. Comparing PerformanceIt is essential for a company to know how well it is performing over the years and ascompared to the other firm of the similar nature. Besides, it is also important to knowhow well its different divisions are performing among themselves in different years.Ratio analysis facilitates such comparison.

4.3 Tier 1 Capital

A term used to describe the capital adequacy of a bank. Tier 1 capital is core capital; thisincludes equity capital and disclosed reserves.

Equity capital includes instruments that cant be redeemed at the option of the holder.

A comparison between a banking firms core equity capital and total risk-weighted a banksfinancial strength based on the sum of its equity capital and disclosed reserves andsometimes non-redeemable, non-cumulative preferred stock. A firms weighted for credit risk.Central banks typically develop the weighting scale for different asset classes, such as cashand coins, which have zero risk, versus a letter or credit, which carries more risk.

Regulators use the Tier 1 capital ratio to grade a firms capital adequacy as one of thefollowing rankings, well-capitalized. A firm must have a Tier affect its capital, to be classifiedas well-capitalized. Firms that are ranked undercapitalized or below are prohibited frompaying any dividends or management fees. In addition, they are required to file a capitalrestoration plan.

4.4 Tier 2 Capital

A term used to describe the capital adequacy of a bank. Tier II capital is secondary bankcapital that includes items such as undisclosed reserves, general loss reserves,subordinated term debt and more.This is related to Tier 1 capital.

4.5 Capital Adequacy Ratio (CRA)

A measure of a banks capital. It is expressed as a percentage of a banks risk weightedcredit exposures.

Tier one Capital + Tier two Capital

CRA = -----------------------------------------------Risk Weighted Assets

Also known as Capital to Risk Weighted Assets Ratio (CRAR).

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This ratio is used to protect depositors and promote the stability and efficiency of financialsystems around the world

Two types of capital are measured, tier one capital, which can absorb losses in the event of awinding-up and so provides a lesser degree of protection to depositors.

4.6 Total Capital Ratio

Capital ratio measure the amount of a banks capital in relation to the amount of risk it istaking. The idea is that all banks must ensure that a reasonable proportion of their risk iscovered by permanent capital. Banks must maintain a minimum total capital ratio of 8%. Ineffect, this means that 8% of the risk-weighted assets must be covered by permanent or nearpermanent capital. At least half of the regulatory capital must fall into tier 1, which takes intoaccount just the pure equity capital so the tier 1 ratio must be at least 4%. The risk weightingprocess takes into account the relative risk of various types of lending. For example, a loan

to the Government would be given a risk weighting of 0% (not risky at all) whereasunsecured personal lending would be given a risk weighting of 100%. The higher the capitaladequacy ratios a bank has, the greater the level of unexpected losses it can absorb beforebecoming insolvent- so the less risky it should be.

4.7 Nonperforming Loan (NPL)

A sum of borrowed money upon which the debtor has not made his or her scheduledpayments for all least 90 days. A nonperforming loan is either in default or close to being indefault. Once a loan is nonperforming, the odds that it will be repaid in full on a

nonperforming loan, it becomes a nonperforming loan, even if the debtor has not caught upon all the missed payments.

Institutions holding nonperforming loans in their portfolios may choose to sell them to otherinvestors in order to get rid of risky assets and clean up their balance sheets. Sales ofnonperforming loans must be carefully considered since they can have numerous financialimplications, including affecting the companys profit and loss and tax situations.

4.8 Loans and Advances

The term loan refers to the amount borrowed by one person from another. The amount is inthe nature of loan and refers to the sum paid to the borrower. Thus from the view point ofborrower, it is borrowing and form the view point of bank, it is lending. Loan may beregarded as credit granted where the money is disbursed and its recovery is made on alater date. It is a debt for the borrower. While granting loans, credit is given for a definitepurpose and for a predetermined period. Interest is charged on the loan at agreed rate andintervals of payment. Advance on the other hand, is a credit facility granted by the bank.Banks grant advance largely for short term purposes, such as purchase of goods trade inand meeting other short term trading liabilities. There is a sense of debt in loan, whereas anadvance is facility being availed of by the borrower. However, like loans, advances are alsoto be repaid. Thus a credit facility-repayable in installments over a period is termed as loan

while a credit facility repayable within one year may be known as advances. However, in thepresent lesson these two terms are used interchangeably.

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Money paid to stockholders, normally out of the corporations current earnings oraccumulated profits. All dividends must be declared by the board of directors and are taxableas income to the recipients.Long-term investors who want to maximize their gains should consider reinvesting thedividends. Most brokers offer a choice as to whether you wish to reinvest or take cashdividends.

4.10Net Interest Margin

A performance metric that examines how successful a firms investment decisions arecompared to its debt situations. A negative value denotes that the firm did not make anoptimal decision, because interest expenses were greater than the amount of returnsgenerated by investments.

Calculated as:Net Interest Margin = Investment Returns Interest Expenses

Average Earning Assets

For Example, FOX Crop has a return on investment of $1,000,000 an interest expense of$2,000,000 and average earning assets of $ 10,000,000. FOX crops net interest marginwould be 10%. This would mean that FOX crop has lost more money due to interestexpenses than was earned from investments. In this case, FOX crop would have been betteroff if it had used the investment funds to pay off debts instead to making an investment.

4.11Credit / Deposit Ratio

The amount of a banks loans divided by the amount of its deposits at any given time. Thehigher the ratio, the more the bank is relying on borrowed funds, which are generally morecostly than most types of deposits.

4.12Current Ratio

A liquidity ratio that measures a companys ability to pay short-term obligations.The Current Ratio formula is:

Current Ratio= Current Assets

Current Liabilities

Also known as liquidity ratio, cash asset ratio.

The ratio is mainly used to give an idea of the companys ability to pay back its short-termliabilities (debt and payables) with its short-term assets (cash, inventory, receivables). Thehigher the current ratio, the more capable the company is of paying its obligations. A ratiounder I suggests that the company would be unable to pay off its obligations if they camedue at that point. While this shows the company is not in good financial health, it does notnecessarily mean that it will go bankrupt- as there are many ways to access financing- but itis definitely not a good sign.

The current ratio can give a sense of the efficiency of a companys operating cycle or itsability to turn its product into cash. Companies that have trouble getting paid on their

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receivables or have long inventory turnover can run into liquidity problems because they areunable to alleviate their obligation. Because business operations differ in each industry.

This ratio is similar to the acid-test ratio except that the acid-test ratio does not includeinventory and prepaid as assets that can be liquidated. The components of current ratio(current assets and current liabilities) can be used to derive working capital (differencebetween current assets and current liabilities). Working capital is frequently used to derivethe working capital ratio, which is working capital as a ratio of sales.

4.13Return on Equity

The amount of net income returned as a percentage of shareholders equity. Return on equitymeasures corporations profitability by revealing how much profit a company generates withthe money shareholders have invested.

ROE is expressed as a percentage and calculated as:

Return on Equity = Net Income

Shareholders Equity

Net income is for the full fiscal year (before dividends paid to common stock holders but afterdividends to preferred stock). Shareholders equity does not include preferred shares.Also known as return on net worth (RONW).

The ROE is useful for comparing the profitability of a company to that of other firms in thesame industry.There are several variations on the formula that investors may use:

1. Investors wishing to see the return on common equity may modify the formula aboveby subtracting preferred dividends from net income and subtracting preferred equity fromshareholders equity, giving the following:

Return on common equity (ROCE) = Net income Preferred dividends

Common equity

2. Return on equity may also be calculated by dividing net income by averageshareholders equity. Average shareholders equity is calculated by adding theshareholders equity at the beginning of a period to the shareholders equity at periodsend and dividing the result by two.

3. Investors may also calculate the change in ROE for a period by first usingthe shareholders equity figure from the beginning of a period as a denominator todetermine the beginning ROE. Then the end of period shareholders equity can beused as the denominator to determine the ending ROE. Calculating both beginningand ending ROE allows an investor to determine the change in profitability over theperiod.

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4.14Return on Assets (ROA)

An indicator of how profitable a company is relative to its total assets. ROA gives an idea asto how efficient management is at using its assets to generate earnings. Calculated bydividing a companys annual earnings by its total assets, ROA is displayed as a percentage.

Sometimes this is referred to as return on investment.

The formula for return in assets is: Net Income

Total Assets

Note: Some investors add interest expense back into net income when performing thiscalculation because they like to use operating returns before cost of borrowing.

ROA tells you what earnings were generated from invested capital (assets). ROA for publiccompanies can very substantially and will be highly dependent on the industry. This is whywhen using ROA as a comparative measure, it is best to company.The assets of the company are comprised of both debt and equity. Both of these types offinancing are used to fund the operations of the company. The ROA figure gives investors anidea of how effectively the company is converting the money it has to invest into net income.The higher the ROA number, the better, because the company is earning more money onless investment. For example, if one company has a net income of $ 1 million and totalassets of $ 5 million, its ROA is 20%; however, if another company earns the same amountbut has total assets of $ 10 million, it has an ROA of 10%. Based on this example, the firstcompany is better at converting its investment into profit. When you really think about it,managements most important throwing a ton of money at a problem, but very few managersexcel at making large profits with little investment.

4.15Cost of Deposit

It is a combination of a number of components.

i. The rate paid out to the depositorii. The Central Cash and Reserve Liquidity Requirementiii. The compensation paid to the branch or the sales team that booked the depositiv. Any additional tangible or non-tangible incentives offered or paid to the depositor or

the sales team

When combine these factors across all products and deposits across the bank get the cost ofdeposit for the bank.

4.16Cost / Income Ratio

The cost-to-income ratio is a key financial measure, particularly important in valuing banks. Itshows a companys costs in relation to its income. To get the ratio, divide the operating costs(administrative and fixed costs, such as salaries and property expenses, but not bad debtsthat have been written off) by operating income. The ratio gives investors a clear view of how

efficiently the firm is being run- the lower it is, the more profitable the bank will be. Changesin the ratio can also highlight potential problems, if the ratio rises from one period to the next;

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it means that costs are rising at a higher rate than income, which could suggest that thecompany has taken its eye off the ball in the drive to attract more business.

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Chapter5

Financial Performance

Analysis

OfDhaka Bank Limited

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8.238.8

9.779.3

6.89

0

2

4

6

8

10

Capital Ratio Analysis

2006

2007

2008

2009

2010

Capital Ratio Analysis 8.23 8.8 9.77 9.3 6.89

2006 2007 2008 2009 2010

1.2 1.56

2.08 2.01

3.2

0

1

2

3

4

Tier 2 Capital Ratio


2006 2007 2008 2009 2010

Financial Performance Analysis

Table 5.1: Tier 1 Capital Ratio Analysis in Five years.Taka in million where applicable

Year 2006 2007 2008 2009 2010 Growth %

Tier 1 Capital Ratio 8.23 8.80 9.77 9.30 6.89 26

Interpretation:

The bar diagram shows that the trend of tier 1 Capital ratio was constant for the year 2007after in the year 2008 and 2009 it increased. Then it decreased in 2009 and 2010 at 26%.

Table 5.2: Tier 2 Capital Ratio Analysis in Five Years.

Taka in million where applicableYear 2006 2007 2008 2009 2010 Growth %

Tier 2 Capital Ratio 1.20 1.56 2.08 2.01 3.20 59

Interpretation:

The bar diagram shows the trend of tier 2 capital ratio was increased for the year 2006 to2008 and afterwards in the year 2009 it decreased a little bit. Then it increased in 2010 at59%.Table 5.3: Total Capital Ratio Analysis in Five Years.

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9.4310.36

11.8411.31

10.09

0

2

4

6

8

10

12

Total Capital Ratio


2006 2007 2008 2009 2010

1.64

3.15

3.84

5.57

4.75

0

1

2

3

4

5

6

2006 2007 2008 2009 2010

% of NPLs to Total Loans & Advances

Taka in million where applicable

Year 2006 2007 2008 2009 2010 Growth %

Total Capital Ratio 9.43 10.36 11.84 11.31 10.09 11

Interpretation:

The bar diagram shows that the trend of total capital ratio was increased for the year 2006 to2008. Then it decreased in 2009 and 2010 at 11%.

Table 5.4: % of NPLs to Total Loans & Advances Analysis in Five Years.


% of NPLs to TotalLoans & Advances

1.64 3.15 3.84 5.57 4.75 18

Interpretation:

The bar diagram shows that the trend of % NPLs to Total Loan and Advances was increased2006 to till 2009. Then it decreased in 2010 at 18%.Table 5.5: Cash Dividend (%) Analysis in Five Years.

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10

-

15

- -

0

2

4

6

8

10

12

14

16

2006 2007 2008 2009 2010

Cash Dividend (%)

3.77

4.54 4.60 4.56

5.24

0

1

2

3

4

5

6

2006 2007 2008 2009 2010

Net Interest Margi


Year 2006 2007 2008 2009 2010 Growth %

Cash Dividend (%) 10 - 15 - - -

Interpretation:

The bar diagram shows that the trend of cash dividend (%) it increased in 2008.

Table 5.6: Net Interest Margin Analysis in Five Years.Taka in million where applicable

Year 2006 2007 2008 2009 2010 Growth %

Net Interest Margin 3.77 4.54 4.60 4.56 5.24 15

Interpretation:

The bar diagram shows that the trend of net interest margin was increased for the year 2007and constant for the year 2009. Then it increased in 2010 at 15%.

Table 5.7: Credit / Deposit Ratio (%) Analysis in Five Years.

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1.24 1.38 1.28

2.101.97

0

1

2

3

Current Ratio (Times)

Current Ratio (Times) 1.24 1.38 1.28 2.1 1.97

2006 2007 2008 2009 2010

81.94 82.03

87.21 86.85

93.87

75

80

85

90

95

Credit / Deposit Ratio

Credit / Deposit Ratio 81.94 82.03 87.21 86.85 93.87

2006 2007 2008 2009 2010


Year 2006 2007 2008 2009 2010 Growth %

Credit / DepositRatio

81.94 82.03 87.21 86.85 93.87 8

Interpretation:

The bar diagram shows that the trend of credit / deposit ratio (%) was constant for the year2007 and afterwards in the year 2008 it increased and 2009 it decreased a little bit. Then itincreased in 2010 at 8%.

Table 5.8: Current Ratio (Times) Analysis in Five Years.Taka in million where applicable

Year 2006 2007 2008 2009 2010 Growth %

Current Ratio(Times)

1.24 1.38 1.28 2.10 1.97 6

Interpretation:

The bar diagram shows that the trend of current ratio (times) was increased for the year 2007

and afterwards in the year 2008 it decreased a little bit. Then it increased in 2009 and againdecreased in 2010 at 6%.Table 5.9: Return on Equity (ROE) Analysis in Five Years.

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22.74 22.5320.97

19.32

25.52

0

10

20

30

Return on Equity (ROE)

Return on Equity (ROE) 22.74 22.53 20.97 19.32 25.52

2006 2007 2008 2009 2010

1.22 1.231.18

1.29

2.00

0

0.5

1

1.5

2

Return on Asset (ROA)

Return on Asset (ROA) 1.22 1.23 1.18 1.29 2

2006 2007 2008 2009 2010


Year 2006 2007 2008 2009 2010 Growth %

Return on Equity(ROE)

22.74 22.53 20.97 19.32 25.52 32

Interpretation:

The bar diagram shows that the trend of ROE was constant for the year 2007 and afterwardsin the year 2008 and 2009 it decreased a little bit. Then it increased in 2010 at 32%.

Table 5.10: Return on Asset (ROA) % Analysis in Five Years.


Return on Asset(ROA)

1.22 1.23 1.18 1.29 2.00 55

Interpretation:

The bar diagram shows that the trend of ROA was constant for the year 2007 and afterwardin the year 2008 it decreased a little bit. Then it increased in 2009 and 2010 at 55%.Table 5.11: Cost of Deposit (%) Analysis in Five Years.

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9.15 8.97 9.4 8.68

7.06

0

2

4

6

8

10

Cost of Deposit (%)

Cost of Deposit 9.15 8.97 9.4 8.68 7.06

2006 2007 2008 2009 2010

78.1472.15 72.16 70.85

63.42

0

20

40

60

80

Cost / Income Ratio in Operating Business

Cost / Income Ratio in Operating

Business

78.14 72.15 72.16 70.85 63.42

2006 2007 2008 2009 2010


Year 2006 2007 2008 2009 2010 Growth %

Cost of Deposit (%) 9.15 8.97 9.40 8.68 7.06 19

Interpretation:

The bar diagram shows that the trend of Cost of Deposit (%) was decreased for the year2007 and afterwards in the year 2008 it increased a little bit. Then it decreased 2009 and2010 at 19%.

Table 5.12: Cost / Income Ratio in Operating Business Analysis in Five Years.Taka in million where applicable

Year 2006 2007 2008 2009 2010 Growth %

Cost / Income Ratioin Operating

Business78.14 72.15 72.16 70.85 63.42 10

Interpretation:

The bar diagram shows that the trend of Cost / Income ratio in operating business wasconstant decreased for the year 2010 at 10%.

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Chapter6

Recommendations

&

Conclusion

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6.1 Recommendations

Banking Industry in Bangladesh is now in right track. The bankers are contributing much thanthe previous years for the growth and development of the country. Banking is becoming moreand more vital for economic development of Bangladesh in mobilizing capital and otherresources. Dhaka Bank, being a third generation bank, is also extending such contributionsas to the advancement of the socioeconomic condition of the country. It is not possible to get100% from anywhere especially for those organizations which deals with mass people. DBLis committed to provide quality services, maintain corporate governance & supportinternational business as a continuation of excellent performance since its incorporation. DBLis fully committed to conduct its business activities in economically, environmentally &socially sustainable manner.

Though this, it still can improve its some unobjectionable but highly new sales officers, moreeffective training regarding client / customers handling, providing right information, organizingvarious application forms for loan and other various services. More skilled and competentpersonnel should be recruited and should be properly nurtured in eliminating these problems.Also the communication between the sales officers and loan administration should be moreeffective and less time consuming.

It is very vigorous for a business organization to be the market leader, retains the desiredposition as well as regains the anticipated market share due to improper mix of operationalnetwork & marketing mix strategies. With respect to that, it needs extra care & extra effort inthe respective areas as per their capacity but could be the major considerations.

The last step of the lending activities is the recovery unit. When the Branch failed to collectthe Banks overdue then the respective branch send the defaulters list and Monitoringofficers try to collect banks money. For better feed back from the recovery officer the bankneed to arrange several kinds of imitative in order to improve the productivity of the recoveryunit. Some recommendations are as follows:

Motivational trainingMotivational training is another prerequisite to deal with the defaulter. Because in case ofdealing with a habitual defaulter, the Recovery officer has to posses some internal qualityto motivate the borrower for adjusting the over dues and it requires the practice ofcontinuous motivation.

It was recognized that a productive and motivated worked is a prerequisite to leadershipwith the customers and the market that the bank serve. Banks core guiding values arecustomer focus, integrity, teamwork and respect for individual quality and respectablecitizenship. Here the Bank treats and openness where people of different backgroundscan reach their fullest potential.

Introduce commissionThe recovery officers of DBL are third party contacts. If commission based recovery canbe initiated, then the recovery officer will motivate and try better for collecting thedefaulted amount.

RestructuringThe recovery department is to be more structured to identify delinquent customerspromptly & more support is needed to collect the overdue amount from them.This internship program, in first, has been arranged for gaining knowledge of practical

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banking and to compare this practical knowledge with theoretical knowledge. Comparingpractical knowledge with theoretical knowledge, it involves identification of weakness inthe banking activities and making recommendations for solving these identifiedweaknesses. However, highest effort has been given to achieve the objectives of theinternship program.

6.2 Conclusion

This is the era of globalization that causes a new dimension in almost each & every sector ofthe global economy. With respect to that, banks play the most vital role. Here, the localprivate banks are continuously increasing the profitability & enhancing their clientele servicesin order to be in a competitive position in the banking sector. Having a proper mix oftechnological & communication infrastructure, competent human resources, enhancement ofthe market share in this competitive industry are highly required. Hence, almost all the bankswhether local or multinational intend to be ahead of the competitive edge. Apart from thatbanks are having more than the required liquidity, which might be invested in some potentialsectors that could increase the productivity side by side it might add some values in the

clientele service. With respect to that, at first the multinational banks had introduced thepersonal loan for the first time in this country which results a new dimension in the bankingsector. From the customer perspective, it was truly beneficial & desirable which might availthem to meet the end of their needs and wants. After realizing the market demand & financialprospect, the local banks have already come up with this sort of loan in different name suchas Consumer Credit Scheme (CCS) which is quite similar with the personal loan.

Dhaka Bank Limited, a lending local private commercial bank, has a good reputation andbrand value in the market. Customers are still very much interested about the launches ofvarious products and services into the market, especially about the various personal bankingproducts.

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Bibliography

Reports and Prospectus:

Dhaka Bank Ltd. (2010),Annual Report, Dhaka Bank Limited, Dhaka, Bangladesh

Dhaka Bank Ltd. (2009),Annual Report, Dhaka Bank Limited, Dhaka, Bangladesh

Insight Dhaka Bank Limited, August 2011, Volume 10, issue 2.

Dhaka Bank Limited (DBL)s Brochures, Leaflets and Operational Manual.

Websites:

http://www.google.com

http://www.wikipedia.com

http://www.dhaka bankltd.com

Books:

Lawrence. J Gitman (2003), Principals of Managerial Finance, 10th edition, Person

Education (Singapore) Pte. Ltd.

Circular of Bangladesh Bank.
http://www.google.com/http://www.wikipedia.com/http://www.google.com/http://www.wikipedia.com/

Documents

Intern Report on Dhaka Bank