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An Analysis of Financial Performance of BRAC Bank Ltd - Al Sukran

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Al Sukran

This document provides an analysis of the financial performance of BRAC Bank Ltd over several years based on ratio analysis. Key findings from the ratio analysis include: - BRAC Bank maintained a current ratio over 1.1x from 2010-2013 indicating adequate liquidity. - The cost income ratio was around 0.5x, showing moderate operating efficiency. - Total asset turnover declined from 2010-2012 but increased in 2013, demonstrating fluctuating asset utilization efficiency. - Recommendations are made to improve liquidity ratios, loan to deposit ratios, and asset turnover ratios to boost financial performance. - In conclusion, while BRAC Bank faced some challenges in recent years, its overall performance is better than average and it

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Topic An Analysis of Financial Performance
Supervised By: Sk. Habibur Rahaman Senior Lecturer Manarat International University Prepared By: Al Sukran- 1413MBA50346 Manarat International University
Introduction
Background of the Study This is a report on my internship at BRAC BANK LTD this report details my experiences at the company. The internship and this report are part of my MBA requirements for the ACCOUNTING at major at Manarat International University. As an accounting student I have to work with accounting related topic. I discuss about An Analysis of Financial Performance of BRAC Bank Ltd. So I analysis some data base on different ratio analysis.
Objective of the Study This report is designed to know more about the Financial Ratio Analysis of BRAC BANK LTD. and analyze the ratio of this organization and identify the financial condition of this organization. In addition, the study seeks to achieve the following objectives: To analysis the Financial Statement of Brac Bank Ltd. To calculate the financial ratios and identify the areas of concern. To identify and assess the present Financial Ratio Analysis of Brac Bank Limited.
Methodology of the Study This report is prepared by two sources Primary Sources: Basically this type of Sources included working at bank and interviews with others the bankers of BRAC BANK LTD. Secondary Sources: Secondary data were collected in the following ways: Data gathered within the organization itself. Data gathered from Texts Internet sources. General reports Annual reports Official documents
Limitation of the Study However the some of the limitations I have face while preparing this Report are listed as follows: Time Limitation Inadequate Data Lack of Record Lack of experiences
Overview of BRAC Bank Ltd BRAC Bank was founded on 4 July 2001 as a private commercial bank focused on Small and Medium Enterprises (SME). BRAC Bank was founded to reach the large number of unbanked people which were not covered by traditional bank. The main concept of the bank was to facilitate Small and Medium Enterprises (SME). Since then the Bank has become a leading bank in Bangladesh. Financial Services - SME Banking, Retails Banking, Card Service (Credit & Debit), Foreign Exchange & Related Services, Wholesale Banking & Custodial Service, Probashi Banking Distribution Network - Branch : 166 (Dec, 2014), SME Unit Office : 458, Remittance Delivery Point : 1800 , ATM Booth : 350+, Apon Somoy (Financial Kiosk) : 16
Analysis and Findings
Analysis Ratios allow us to compare companies across industries, big and small, to identify their strengths and weaknesses. Financial ratios are often divided into four main categories: Analyzing Liquidity Ratio Analyzing Activity Ratio Analyzing Debt Ratio Analyzing Profitability
Ratio Analysis of Brac Bank Ltd
Current Ratio Figure: Current Ratio Year 2010 2011 2012 2013 Current Asset 108,791,342,196 120,691,016,472 157,898,600,871 157,010,788,637 Current Liability 95,407,908,332 107,837,411,843 144,202,510,136 139,510,917,707 Current Ratio 1.14 1.12 1.09 1.13 1.14 1.12 1.09 1.13 Current Ratio=Current Asset/Current Liabilities
Operating Cash Flow Ratio Figure: Operating Cash Flow Year 2010 2011 2012 2013 Operating Cash Flow (1,439,205,626) 933,830,374 19,855,243,700 (5,679,858,459) Current Liability 95,407,908,332 107,837,411,843 144,202,510,136 139,510,917,707 Operating Cash Flow Ratio -0.02 0.01 0.14 -0.04 Operating Cash Flow Ratio=Operating Cash Flow/Total Debt -0.02 0.01 0.14 -0.04
Cash Income Ratio Figure: Cost Income Ratio Year 2010 2011 2012 2013 Total Operating Income 9,527,527,784 10,134,733,422 10,894,801,767 12,460,835,400 Total Operating Expenses 4,751,309,242 5,164,822,269 5,749,605,759 6,535,958,634 Cost Income Ratio 0.50 0.51 0.53 0.52 Cost Income Ratio = Total operating Expenses/Total Operating Income 0.50 0.51 0.53 0.52
Total Asset Turnover Figure: Total Asset Turnover Year 2010 2011 2012 2013 Total Operating Income 9,527,527,784 10,134,733,422 10,894,801,767 12,460,835,400 Total Asset 117,297,555,748 133,201,048,438 173,676,792,029 171,901,669,638 Total Asset Turnover Ratio 0.08 0.08 0.06 0.07 Total Asset Turnover= Operating Income/Total Asset 0.08 0.08 0.06 0.07
Investment to Deposit Ratio Figure: Investment to Deposit Ratio Year 2010 2011 2012 2013 Total Investment 12,855,985,261 14,198,827,511 25,372,525,282 21,298,625,661 Total Deposit 88,157,908,331 103,725,529,225 134,646,448,482 124,746,344,037 Investment to Deposit Ratio 0.15 0.14 0.19 0.17 Investment to Deposit Ratio = Total investment/Total Deposit 0.08 0.14 0.19 0.17
Debt Ratio Figure: Debt Ratio Year 2010 2011 2012 2013 Total Liabilities 107,879,663,647 123,598,443,600 163,522,243,477 160,314,216,168 Total Asset 117,297,555,748 133,201,048,438 173,676,792,029 171,901,669,638 Debt ratio 0.92 0.93 0.94 0.93 Debt ratio= Total Liabilities/Total Assets 0.92 0.93 0.94 0.93
Time Interest Earned Ratio Figure: Time Interest Earned Ratio Year 2010 2011 2012 2013 Earning Before Interest & Tax 4,956,218,541 5,164,822,269 5,145,196,008 5,924,876,766 Interest 1,984,711,371 2,053,030,038 1,987,929,120 2,900,072,524 Time Interest Earned Ratio 2.50 2.52 2.59 2.04 Time Interest Earned Ratio =Earnings before interest & Taxes/Interest 2.50 2.52 2.59 2.04
Net Profit Margin Figure: Net Profit Margin Year 2010 2011 2012 2013 Net Profit after Tax 1,670,361,526 1,702,381,869 540,381,091 1,246,324,101 Total Operating Income 9,527,527,784 10,134,733,422 10,894,801,767 12,460,835,400 Net Profit Margin 0.18 0.17 0.05 0.10 Net Profit Margin=Net profit after tax/operating income 0.18 0.17 0.05 0.10 0 0.05 0.1 0.15 0.2 2010 2011 2012 2013 NetProfit Margin 0.18 0.17 0.05 0.10
Return On Asset Figure: Return On Asset Year 2010 2011 2012 2013 Return on Asset (ROA) 1.55% 1.36% 0.35% 0.72% Return on Asset (ROA) =Net Profit after tax/Total Asset 1.55% 1.36% 0.35% 0.72%
Return On Asset Figure: Return On Equity Year 2010 2011 2012 2013 Return on Equity 18.95% 17.90% 5.47% 11.46% Return on Equity=Net Profit after Tax/ Shareholders equity 18.95% 17.90% 5.47% 11.46%
Earnings Per Share Figure: Earnings Per Share Year 2010 2011 2012 2013 Earnings per Share 5.68 5.54 1.52 3.20 Earnings per Share =Earnings available for common stock holder / No of shares of common stock 5.68 5.54 1.52 3.20
Cost of Fund Figure: Cost of Fund Year 2010 2011 2012 2013 Cost of Fund 8.54% 8.66% 8.43% 8.13% 8.54% 8.66% 8.43% 8.13%
Credit Deposit Ratio Figure: Credit Deposit Ratio Year 2010 2011 2012 2013 Credit Deposit Ratio 95.63% 84.82% 76.96% 82.30% 95.63% 84.82% 76.96% 82.30%
Return on Investment Figure: Return on Investment Year 2010 2011 2012 2013 Return on Investment 9.00% 12.41% 3.44% 6.05% 9.00% 12.41% 3.44% 6.05%
Net Asset Value Per Share Figure: Net Asset Value Per Share Year 2010 2011 2012 2013 Net Asset Value Per Share 33.29 28.80 26.34 26.14 0 10 20 30 40 2010 2011 2012 2013 Net AssetValue Per Share 33.29 28.80 26.34 26.14
Findings In the analysis it has seen that in 2010 BBLs current ratio was highest and 2012 it was lowest among the years. It has seen that BBL maintains current ratio more than 1:1 ratios. It indicates that BBLs liquidity position is not bad. In 2010 BBLs Cost Income Ratio was lowest it indicates positive sign. We know that the lowest the ratio, the higher the operating efficiency. But company maintains an average around .50 per year. The greater the total asset turnover; it considered more efficiency. From the analysis it has seen that in year 2010 to 2012 total asset turnover ratio of BBL decreasing but at 2013 its higher than previous which indicate better efficiency of BBL. BBLs investment to deposit ratio is decreasing in years 2010 to 2011 which conveys negative signal for the bank. But in 2012 its again increasing. Company maintains an average Investment to deposit ratio around 0.16. From the analysis it has seen that BBLs debt ratios were satisfactory range in compare to other banks and also it was decreasing trend.
Findings In the year 2010 to 2012 BBLs net profit margin decreasing year by year which indicate that the banks operating result were not improving. But in 2013 it improved better than previous year. From the analysis it has seen that BBLs Returns on Asset were gradually decreasing and in 2010 to 2012. But its improved from 2012 to 2013. From the analysis return on equity of BBLs was around 18% in 2010 and 2011. In 2012 because of recession and bad market position Return on Equity reduced unbelievably at 5.47%. But in 2013 BBLs able to increase their ROE at 11.46%. From the analysis we found that earnings per share is 5.50 in 2010 & 2011 But in 2012 EPS was decrease at 1.52 and in 2013 again BBLs EPS remain increase. From analysis Net Asset Value Per Share of BBLs was 33.29 in 2010. But it is decreasing year by year. But it maintains an average 26.00 last two years
Recommendations It is seen in the study that the liquidity ratio of B.B.L during 2012 & 2013. The liquidity of the bank should be reds by improving current & quick ratio. But company should maintain this properly and has to improve. It is further seen that the loan to deposit ratio of the bank was lower during 2012 & 2013. Therefore the loan to deposit ratio must be improve by increasing need loan. Assets utilization ratio was also lower in 2011 & 2012. In case B.B.L. This ratio should also be increased by increasing operating income. Finally, at the end of the year we can see that although there have some difficulties but we can overcome those difficulties by removing all the weaknesses to develop the product effectively and grab more opportunity hidden in the banking industry and the bank should also increase the strength with their solid brand image, experience and skills of the employees. With their strengths BRAC BANK LTD. can also reduce the threats existing in the market.
Conclusions Banking sector is the chief financial intermediaries in a country. Its also true for Bangladesh. BRAC BANK LTD is a very challenging institution. In the age of globalization and free trade, the process and the system of running a bank is changing. BBL is continuously managing itself with this changing environment. The days are gone for banks to keep their functions confined within the periphery of accepting deposit and lending money as well as making a profit. The company strategies are clear and concise. It was also found that the bank is doing better in most of the sectors and their performance is better than average. Finally it can be said that the bank is doing very good in the competitive market and if it can continue to perform this way it can become a leading banking institution which can play a pivotal role in the development of the country.
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An Analysis of Financial Performance of BRAC Bank Ltd - Al Sukran

  • 1. Topic An Analysis of Financial Performance
  • 2. Supervised By: Sk. Habibur Rahaman Senior Lecturer Manarat International University Prepared By: Al Sukran- 1413MBA50346 Manarat International University
  • 4. Background of the Study This is a report on my internship at BRAC BANK LTD this report details my experiences at the company. The internship and this report are part of my MBA requirements for the ACCOUNTING at major at Manarat International University. As an accounting student I have to work with accounting related topic. I discuss about An Analysis of Financial Performance of BRAC Bank Ltd. So I analysis some data base on different ratio analysis.
  • 5. Objective of the Study This report is designed to know more about the Financial Ratio Analysis of BRAC BANK LTD. and analyze the ratio of this organization and identify the financial condition of this organization. In addition, the study seeks to achieve the following objectives: To analysis the Financial Statement of Brac Bank Ltd. To calculate the financial ratios and identify the areas of concern. To identify and assess the present Financial Ratio Analysis of Brac Bank Limited.
  • 6. Methodology of the Study This report is prepared by two sources Primary Sources: Basically this type of Sources included working at bank and interviews with others the bankers of BRAC BANK LTD. Secondary Sources: Secondary data were collected in the following ways: Data gathered within the organization itself. Data gathered from Texts Internet sources. General reports Annual reports Official documents
  • 7. Limitation of the Study However the some of the limitations I have face while preparing this Report are listed as follows: Time Limitation Inadequate Data Lack of Record Lack of experiences
  • 8. Overview of BRAC Bank Ltd BRAC Bank was founded on 4 July 2001 as a private commercial bank focused on Small and Medium Enterprises (SME). BRAC Bank was founded to reach the large number of unbanked people which were not covered by traditional bank. The main concept of the bank was to facilitate Small and Medium Enterprises (SME). Since then the Bank has become a leading bank in Bangladesh. Financial Services - SME Banking, Retails Banking, Card Service (Credit & Debit), Foreign Exchange & Related Services, Wholesale Banking & Custodial Service, Probashi Banking Distribution Network - Branch : 166 (Dec, 2014), SME Unit Office : 458, Remittance Delivery Point : 1800 , ATM Booth : 350+, Apon Somoy (Financial Kiosk) : 16
  • 10. Analysis Ratios allow us to compare companies across industries, big and small, to identify their strengths and weaknesses. Financial ratios are often divided into four main categories: Analyzing Liquidity Ratio Analyzing Activity Ratio Analyzing Debt Ratio Analyzing Profitability
  • 11. Ratio Analysis of Brac Bank Ltd
  • 12. Current Ratio Figure: Current Ratio Year 2010 2011 2012 2013 Current Asset 108,791,342,196 120,691,016,472 157,898,600,871 157,010,788,637 Current Liability 95,407,908,332 107,837,411,843 144,202,510,136 139,510,917,707 Current Ratio 1.14 1.12 1.09 1.13 1.14 1.12 1.09 1.13 Current Ratio=Current Asset/Current Liabilities
  • 13. Operating Cash Flow Ratio Figure: Operating Cash Flow Year 2010 2011 2012 2013 Operating Cash Flow (1,439,205,626) 933,830,374 19,855,243,700 (5,679,858,459) Current Liability 95,407,908,332 107,837,411,843 144,202,510,136 139,510,917,707 Operating Cash Flow Ratio -0.02 0.01 0.14 -0.04 Operating Cash Flow Ratio=Operating Cash Flow/Total Debt -0.02 0.01 0.14 -0.04
  • 14. Cash Income Ratio Figure: Cost Income Ratio Year 2010 2011 2012 2013 Total Operating Income 9,527,527,784 10,134,733,422 10,894,801,767 12,460,835,400 Total Operating Expenses 4,751,309,242 5,164,822,269 5,749,605,759 6,535,958,634 Cost Income Ratio 0.50 0.51 0.53 0.52 Cost Income Ratio = Total operating Expenses/Total Operating Income 0.50 0.51 0.53 0.52
  • 15. Total Asset Turnover Figure: Total Asset Turnover Year 2010 2011 2012 2013 Total Operating Income 9,527,527,784 10,134,733,422 10,894,801,767 12,460,835,400 Total Asset 117,297,555,748 133,201,048,438 173,676,792,029 171,901,669,638 Total Asset Turnover Ratio 0.08 0.08 0.06 0.07 Total Asset Turnover= Operating Income/Total Asset 0.08 0.08 0.06 0.07
  • 16. Investment to Deposit Ratio Figure: Investment to Deposit Ratio Year 2010 2011 2012 2013 Total Investment 12,855,985,261 14,198,827,511 25,372,525,282 21,298,625,661 Total Deposit 88,157,908,331 103,725,529,225 134,646,448,482 124,746,344,037 Investment to Deposit Ratio 0.15 0.14 0.19 0.17 Investment to Deposit Ratio = Total investment/Total Deposit 0.08 0.14 0.19 0.17
  • 17. Debt Ratio Figure: Debt Ratio Year 2010 2011 2012 2013 Total Liabilities 107,879,663,647 123,598,443,600 163,522,243,477 160,314,216,168 Total Asset 117,297,555,748 133,201,048,438 173,676,792,029 171,901,669,638 Debt ratio 0.92 0.93 0.94 0.93 Debt ratio= Total Liabilities/Total Assets 0.92 0.93 0.94 0.93
  • 18. Time Interest Earned Ratio Figure: Time Interest Earned Ratio Year 2010 2011 2012 2013 Earning Before Interest & Tax 4,956,218,541 5,164,822,269 5,145,196,008 5,924,876,766 Interest 1,984,711,371 2,053,030,038 1,987,929,120 2,900,072,524 Time Interest Earned Ratio 2.50 2.52 2.59 2.04 Time Interest Earned Ratio =Earnings before interest & Taxes/Interest 2.50 2.52 2.59 2.04
  • 19. Net Profit Margin Figure: Net Profit Margin Year 2010 2011 2012 2013 Net Profit after Tax 1,670,361,526 1,702,381,869 540,381,091 1,246,324,101 Total Operating Income 9,527,527,784 10,134,733,422 10,894,801,767 12,460,835,400 Net Profit Margin 0.18 0.17 0.05 0.10 Net Profit Margin=Net profit after tax/operating income 0.18 0.17 0.05 0.10 0 0.05 0.1 0.15 0.2 2010 2011 2012 2013 NetProfit Margin 0.18 0.17 0.05 0.10
  • 20. Return On Asset Figure: Return On Asset Year 2010 2011 2012 2013 Return on Asset (ROA) 1.55% 1.36% 0.35% 0.72% Return on Asset (ROA) =Net Profit after tax/Total Asset 1.55% 1.36% 0.35% 0.72%
  • 21. Return On Asset Figure: Return On Equity Year 2010 2011 2012 2013 Return on Equity 18.95% 17.90% 5.47% 11.46% Return on Equity=Net Profit after Tax/ Shareholders equity 18.95% 17.90% 5.47% 11.46%
  • 22. Earnings Per Share Figure: Earnings Per Share Year 2010 2011 2012 2013 Earnings per Share 5.68 5.54 1.52 3.20 Earnings per Share =Earnings available for common stock holder / No of shares of common stock 5.68 5.54 1.52 3.20
  • 23. Cost of Fund Figure: Cost of Fund Year 2010 2011 2012 2013 Cost of Fund 8.54% 8.66% 8.43% 8.13% 8.54% 8.66% 8.43% 8.13%
  • 24. Credit Deposit Ratio Figure: Credit Deposit Ratio Year 2010 2011 2012 2013 Credit Deposit Ratio 95.63% 84.82% 76.96% 82.30% 95.63% 84.82% 76.96% 82.30%
  • 25. Return on Investment Figure: Return on Investment Year 2010 2011 2012 2013 Return on Investment 9.00% 12.41% 3.44% 6.05% 9.00% 12.41% 3.44% 6.05%
  • 26. Net Asset Value Per Share Figure: Net Asset Value Per Share Year 2010 2011 2012 2013 Net Asset Value Per Share 33.29 28.80 26.34 26.14 0 10 20 30 40 2010 2011 2012 2013 Net AssetValue Per Share 33.29 28.80 26.34 26.14
  • 27. Findings In the analysis it has seen that in 2010 BBLs current ratio was highest and 2012 it was lowest among the years. It has seen that BBL maintains current ratio more than 1:1 ratios. It indicates that BBLs liquidity position is not bad. In 2010 BBLs Cost Income Ratio was lowest it indicates positive sign. We know that the lowest the ratio, the higher the operating efficiency. But company maintains an average around .50 per year. The greater the total asset turnover; it considered more efficiency. From the analysis it has seen that in year 2010 to 2012 total asset turnover ratio of BBL decreasing but at 2013 its higher than previous which indicate better efficiency of BBL. BBLs investment to deposit ratio is decreasing in years 2010 to 2011 which conveys negative signal for the bank. But in 2012 its again increasing. Company maintains an average Investment to deposit ratio around 0.16. From the analysis it has seen that BBLs debt ratios were satisfactory range in compare to other banks and also it was decreasing trend.
  • 28. Findings In the year 2010 to 2012 BBLs net profit margin decreasing year by year which indicate that the banks operating result were not improving. But in 2013 it improved better than previous year. From the analysis it has seen that BBLs Returns on Asset were gradually decreasing and in 2010 to 2012. But its improved from 2012 to 2013. From the analysis return on equity of BBLs was around 18% in 2010 and 2011. In 2012 because of recession and bad market position Return on Equity reduced unbelievably at 5.47%. But in 2013 BBLs able to increase their ROE at 11.46%. From the analysis we found that earnings per share is 5.50 in 2010 & 2011 But in 2012 EPS was decrease at 1.52 and in 2013 again BBLs EPS remain increase. From analysis Net Asset Value Per Share of BBLs was 33.29 in 2010. But it is decreasing year by year. But it maintains an average 26.00 last two years
  • 29. Recommendations It is seen in the study that the liquidity ratio of B.B.L during 2012 & 2013. The liquidity of the bank should be reds by improving current & quick ratio. But company should maintain this properly and has to improve. It is further seen that the loan to deposit ratio of the bank was lower during 2012 & 2013. Therefore the loan to deposit ratio must be improve by increasing need loan. Assets utilization ratio was also lower in 2011 & 2012. In case B.B.L. This ratio should also be increased by increasing operating income. Finally, at the end of the year we can see that although there have some difficulties but we can overcome those difficulties by removing all the weaknesses to develop the product effectively and grab more opportunity hidden in the banking industry and the bank should also increase the strength with their solid brand image, experience and skills of the employees. With their strengths BRAC BANK LTD. can also reduce the threats existing in the market.
  • 30. Conclusions Banking sector is the chief financial intermediaries in a country. Its also true for Bangladesh. BRAC BANK LTD is a very challenging institution. In the age of globalization and free trade, the process and the system of running a bank is changing. BBL is continuously managing itself with this changing environment. The days are gone for banks to keep their functions confined within the periphery of accepting deposit and lending money as well as making a profit. The company strategies are clear and concise. It was also found that the bank is doing better in most of the sectors and their performance is better than average. Finally it can be said that the bank is doing very good in the competitive market and if it can continue to perform this way it can become a leading banking institution which can play a pivotal role in the development of the country.