Ratio Analysis

Of
BRAC Bank Ltd
Short-term Solvency or Liquidity Ratio
A liquidity ratio is a type of financial ratio used to determine a company’s ability to pay its
short-term debt obligations. The metric helps determine if a company can use its current, or
liquid, assets to cover its current liabilities.

Current Ratio = Current Assets / Current Liabilities

= 38629/36664

= 1.05

Quick Ratio = (Cash equivalents + marketable securities + accounts receivables) ÷ current

liabilities

=1.30

Working Capital to asset ratio = Net WC/ Total assets

= 43691 /367920

=11.87%

Long Term Solvency or Financial Leverage Ratio

Total Debt Ratio= Total assets-Total Equity/Total assets

=367920-37658/367920
=330262/367920
=89.76%
 Consolidated Balance Sheet (amount in crore)

Particulars City Bank Ltd.- BRAC Bank Eastern Bank UCBL

2019 Ltd.-2019 Ltd.-2019
Cash 2591.2655 2282.95081 1969.028681 2640.3568
Balance with Other Banks 2344.5479 1579.94985 2436.919672 1276.695
and Financial Institutions
Money at Call and Short 8.9379167 0 59.43 170
Notices
Investments 4364.8648 4594.35719 4206.647077 5919.1436
Loans and 24777.773 26409.1182 23909.4708 32548.378
Advances/Investments
Fixed Assets 629.92514 818.871815 740.7132303 1454.0216
Other Assets 862.7908 1100.14062 486.9888926 942.78186
Non-Banking Assets 115.2339 6.6471775 10.8736495 0
Total Assets 35695.339 36792.0356 33820.072 44951.376

Bond 920 0 650 0

Borrrowings from other 4514.7497 3666.33666 4634.823599 4212.5056
Banks, financial institutions
and agents
Deposits and other accounts 24644.071 26830.9328 23997.99675 33057.07
Other Liabilities 3162.5852 2528.95309 1941.076327 4345.4356
Total Liabilities 33241.405 33026.2226 31223.89667 41615.011
Total Shareholders' Equity 2453.9232 3765.81302 2596.175329 3336.3652
Non Controlling Interest 0.0107806 0 0 0.00002
Total Liabilities and 35695.339 36792.0356 33820.072 44951.376
Shareholders' Equity

Contingent Liabilities 11317.352 10013.716 9943.344788 18393.887

Other Commitments 522.46858 0 34.7552793 1.9010212
Total Off-Balance Sheet 11839.821 10013.716 9978.100068 18395.788
Items including Contingent
Liabilities

No. of Ordinary Share 101.63867 123.337533 81.1799547 115.95437

Outstanding at the end of
the Year
 Common Size Balance Sheet

Particulars City Bank Ltd.- BRAC Bank Eastern Bank

2019 Ltd.-2019 Ltd.-2019 UCB Ltd.-2019
Cash 0.0725939 0.06205014 0.058220712 0.0587381
Balance with Other Banks 0.0656822 0.04294271 0.072055425
and Financial Institutions 0.0284017
Money at Call and Short 0.0002504 0 0.00175724
Notices 0.0037819
Investments 0.1222811 0.12487369 0.12438315 0.1316788
Loans and 0.6941459 0.71779443 0.706960967
Advances/Investments 0.7240797
Fixed Assets 0.0176473 0.02225677 0.021901586 0.0323465
Other Assets 0.024171 0.0299016 0.014399404 0.0209734
Non-Banking Assets 0.0032283 0.00018067 0.000321515 0
Total Assets 1 1 1 1

Bond 0.0257737 0 0.019219356 0

Borrrowings from other 0.1264801 0.09965028 0.137043576
Banks, financial institutions
and agents 0.0937125
Deposits and other accounts 0.6904002 0.72925926 0.709578523 0.7353962
Other Liabilities 0.0885994 0.06873643 0.05739421 0.0966697
Total Liabilities 0.9312534 0.89764597 0.923235665 0.9257784
Total Shareholders' Equity 0.0687463 0.10235403 0.076764335 0.0742216
Non Controlling Interest 3.02E-07 0 0 4.449E-10
Total Liabilities and 1 1 1
Shareholders' Equity 1

Total Off-Balance Sheet 0.3316909 0.27217075 0.295034856

Items including Contingent
Liabilities 0.4092375

Interpretation
 The balance sheet shows that cash of the UCBLwas comparatively high & it indicates
that UCBL was sufficiently managed cash flow & their liquidity position was in safe
position. We know that liquidity is one of the major issues for any financial institutions &
it is a reputational issue for any Bank. But more liquidity indicates fund management
inability as idle fund costs for any FI. So, we have to focus on the liquidity ratio of those
banks. Their liquidity ratio is more than 1. So we can say that their liquidity is well
managed.
 EBL Balance with other banks & FI is more than other banks. Their investment in other
FI indicates financial strength & EBL is stronger in this indicator.
 Investment in government & others is comparatively high in UCBL. Increased
Investment of UCBL indicates their market strength as well as financial.
 The UCBL was continuously increasing its loans over the years which create more profit
as well as risk for the bank. But at the same time we have to consider AD Ratio.
 In case of fixed assets of the BBL, it increased over the years. BBL managed more Fixed
assets than other banks. Though other assets and non-banking assets were increasing, so
that total assets were continuously increasing over the years.
4.7 Different Ratios with interpretation

PROFITABILITY RATIOS

01.Return on Assets: Return on assets (ROA) is one of the most used profitability ratio. It is
the method to identify how profitable a bank is related to its total assets. By determining return
on assets, a manager gets to know about the efficiency of using assets to generate earnings

Formula: Net Income/Total Assets

City BRAC EBL UCBL Industry

0.00770635 0.01185878 0.012795858 0.0067047 0.0074759

Table-01: Return on assets of the Banks for the year 2019.

Return on Asset (ROA)

0.01 0.01
0.01
0.01
0.01 0.01 0.01
0.01 0.01
0.01
0
0
0
City Bank Ltd.- BRAC Bank Ltd.- Eastern Bank UCB Ltd.-2019 Industry-2019
2019 2019 Ltd.-2019

Figure-01: Return on assets of the Banks for the year 2019

If return on asset of a bank is increasing, it means net income is increasing or total assets are
decreasing. In the above, table-1 & figure-1 shows that ROA of the EBL was 0.012 in 2019 but
industry average was .0074. The bank was done excellent performance.

02. Return on Equity: The ratio identifies how well a bank could use the fund it gets from
shareholders and how well it could make profit from that fund.

Net Income / Stockholders' Equity

 City BRAC EBL UCBL Industry
0.092395
0.1065648 0.120860803 0.16175998 3 0.1103052

Table-2 Return on Equity of the Banks for the year 2019

Return on Equity (ROE)

0.16
0.16
0.12 0.11
0.12 0.11
0.09
0.08
0.04
0
City Bank Ltd.- BRAC Bank Ltd.- Eastern Bank UCB Ltd.-2019 Industry-2019
2019 2019 Ltd.-2019

Figure-2: Return on Equity of the Banks for the year 2019

From the table and figure we see that return on stockholders’ equity of the EBL was 0.16 in 2019
which was more than industry average. Only The ROE of UCBL is less than industry.

During the period of 2019 the banks ware outperformed and achieved the goal.

03. Net Profit Margin: Net profit margin ratio represents how much profit generates from
each dollar of sales. This ratio is the true indicator of a bank’s financial health. By calculating
this ratio, one can understand how efficiently a bank’s financially perform.

Net Income after Taxes/Total Operating Revenues

City BRAC EBL UCBL Industry

12.03% 11.05% 16.17% 9.23% 11.03%

Table-4: Net Profit Margin of the Banks for the year 2019
 Net Profit Margin
0.16
0.16
0.12 0.11
0.12 0.11
0.09
0.08
0.04
0
City Bank Ltd.- BRAC Bank Ltd.- Eastern Bank UCB Ltd.-2019 Industry-2019
2019 2019 Ltd.-2019

FINANCIAL LEVERAGE RATIOS

06.Debt Ratio:It is a financial ratio that indicates the extent of a bank’s leverage. A higher
ratio indicates that the bank is more leverage.

Total Liabilities / Total Assets

Year 2013 2014 2015 2016 2017

The CBL 0.877 0.876 0.885 0.922 0.906
Industry
Average 0.914 1.203 0.931 0.922 0.927
Table-6Debt Ratioof the CBL from the year 2013-2017
 1.400
1.200
1.000
0.800
The City Bank Ltd.
0.600 Industry Average
0.400
0.200
0.000
2013 2014 2015 2016 2017

Figure-6Debt Ratioof the CBL and industry average of other banks from the year 2013-
2017

In the above, from the table-6 and figure-6 we see that in 2013 theCBL’s debt ratio was 0.877
and industry average was 0.914. In 2014 it was slightly decreased in 0.876 and the ratio was very
less than industry average which is 1.203. In 2015 and 2016 the ratio was increased from0.885 to
0.922 but industry average was remaining high in 2015 but became equal in 2016.

The debt ratio of the CBL again decreased in 2017 to 0.906 which was less than industry average
of 0.927 and it is good for the bank and indicates that the bank is more leverage than other banks.

If we compare with industry average of net interest margin, in all those years from 2013 to 2017
the ratio was less than the CBL. In 2017 the industry average was 0.022 and the bank ratio was
0.027

07.Equity Ratio:Equity ratio is a solvency ratio. It can measure the amount of assets that are
financed by equity of a bank.

Total Equity / Total Assets

Year 2013 2014 2015 2016 2017

The CBL 0.123 0.126 0.115 0.078 0.094
Industry
Average 0.086 0.076 0.123 0.078 0.073
Table-7:Equity Ratioof the CBL from the year 2013-2017
 0.140
0.120
0.100
0.080
The City Bank Ltd.
0.060 Industry Average
0.040
0.020
0.000
2013 2014 2015 2016 2017

Figure-7:Equity Ratio of the CBL and industry average of other banks from the year 2013-
2017

In the CBL, during the period 2013 & 2014 the figures are increasing from 0.123 to 0.126 which
was higher than industry average which is good for the bank. After the year 2014 the equity ratio
of the CBL was continuously decreasing from the years 2015 to 2016. In 2015 the equity ratio
was decreased by 0.115 but still high than industry average. In 2016 the ratio was again
decreased and became equal to industry average which is 0.078. During the year 2017, the equity
ratio was increased by 0.094 and also became higher than industry average of 0.073. So
comparing with other banks, we can say that the CBL is in a well position.

08.Debt-Equity Ratio:Debt-equity ratio is a financial ratio indicates the relative proportion

of equity and debt used to finance a company’s debt.

Total Liabilities / Total Equity

Year 2013 2014 2015 2016 2017

The CBL 7.110 6.930 7.713 11.830 9.622
Industry
Average 11.260 16.360 11.233 12.472 13.396
Table-8: Debt-Equity Ratioof the CBL from the year 2013-2017
 18.000
16.000
14.000
12.000
10.000
The City Bank Ltd.
8.000 Industry Average
6.000
4.000
2.000
0.000
2013 2014 2015 2016 2017

Figure-8Debt-equity ratioof the CBL and industry average of other banks from the year
2013-2017

Like all other banks, the CBL’s most of the funds collected from deposits.

In the above from table-8 and figure-8 we see that during the periods of 2013-2017, the debt-
equity ratio ofthe CBL remains among 7% to 9%. In 2013 the ratio was 7.110 and less than
industry average. During the years from 2014 to 2016 the rate was increasing continuously from
6.930 to 11.830 but industry average was less than the CBL’s debt-equity ratio. In 2017 the ratio
was increased by 9.622 and industry average was 13.396.Industry average is continuously
remain higher than the CBL’s debt to equity ratio in all the years.As a result the bank is doing
well.

09.Equity Multiplier: To determine a company’s financial leverage, equity multiplier is a

straightforward ratio for this purpose. A higher equity multiplier indicates that a larger portion of
asset financing is attributed to debt.

Total asset/Total Equity Capital Accounts

Year 2013 2014 2015 2016 2017

The CBL 8.110 7.913 8.713 12.830 10.622
Industry
Average 12.259 12.341 11.964 13.476 14.400
Table-9:Equity Multiplierof the CBL from the year 2013-2017
 16.000
14.000
12.000
10.000
8.000 The City Bank Ltd.
6.000 Industry Average
4.000
2.000
0.000
2013 2014 2015 2016 2017

Figure-9:Equity Multiplierof the CBL and industry average of other banks from the year
2013-2017

From the year 2013 to 2014 the ratio was decreasing from 8.110 to 7.913, in 2014 it was increase
in8.713, and again from 2016 to 2017 the ratio was decreasing from 12.830 to 10.622. So here
the scenario indicates that the bank trying to maintain lower equity multiplier.

For comparing with industry average, in the above in table-9 & figure-9 we can see that industry
average is always high from the CBL’s equity multiplier that means the bank still maintain a
good financial leverage.

EFFICIENCY RATIOS

10.Asset Utilization:Asset utilization ratio determines total revenue earned relative to its
total assets. It is an indicator to identify the efficiency of a company’s assets to generate revenue.

Total Operating revenues/Total Assets

Year 2013 2014 2015 2016 2017

The CBL 0.059 0.061 0.061 0.058 0.055
Industry
Average 0.050 0.050 0.048 0.048 0.043
Table-10Asset Utilizationof the CBL from the year 2013-2017
 0.070

0.060

0.050

0.040
The City Bank Ltd.
0.030 Industry Average
0.020

0.010

0.000
2013 2014 2015 2016 2017

Figure-10Asset Utilizationof the CBL and industry average of other banks from the year
2013-2017

In above the table-10 & figure-10 shows thatthe CBLis outperformed in every year from 2013 to
2017. In 2013 the ratio was 0.059 which was higher than industry average of 0.050.In 2014 the
ratio increased in 0.061 and it was higher than industry average which was 0.050. In 2015 the
ratio remains same as 2015 as and also higher than industry average. In 2016 the ratio
wasdecreased to 0.058 which was still higher than industry average. In last year, it was again
decreasing to 0.055 from 0.058 but overall the ratio is good and was also higher than industry
average in 2017.

So we can see that theCBL’s asset utilization ratio was decreasing from 2015 to 2017, itis
indicated that the CBL is getting less efficient to generate sales relative to its assets and it is a
indicator of bad sign for the bank but if we look at the industry average and compare with the
CBL, then it is clear that the CBL is outperformed in every year from 2013 to 2017 because the
industry average is continuously lower than the CBL.

11.Tax Management Efficiency:This ratio indicates the percentage of a fund’s earnings is

spent to taxation. Funds that lose little for taxes have a high ratio.

Net income after Taxes/Net Income before Taxes & Security Gains (or Losses)

Year 2013 2014 2015 2016 2017

The CBL 0.096 0.351 0.788 0.721 0.676
Industry 0.376 0.386 0.585 0.647 0.556
 Average
Table-11: Tax Management Efficiencyof the CBL from the year 2013-2017

0.900
0.800
0.700
0.600
0.500
The City Bank Ltd.
0.400 Industry Average
0.300
0.200
0.100
0.000
2013 2014 2015 2016 2017

Figure-11: Tax Management Efficiencyof the CBL and industry average of other banks
from the year 2013-2017

In 2013 the ratio was 0.096 and was very less than industry average of 0.376. In 2014 the ratio
was increased very high to 0.351 but still it was less than industry average of 0.386. IN 2015 it
increased by 0.788 and also became higher than industry average. In 2016 city achieved high
ratio than industry average and the ratio was 0.721. In 2017 the ratio decreased in 0.676 but still
it maintained higher ratio than industry average which was 0.556.

So we can say that though there are exist high ratios in the CBL’s graph and the industry average
was also less than the CBL’s ratio which means the bank had to lost little funds to taxes.

12.Expense Control Efficiency:

Net Income before Taxes & Security Gains (or Losses)/Total Operating revenue

Year 2013 2014 2015 2016 2017

The CBL 0.439 0.452 0.349 0.378 0.337
Industry
Average 0.524 0.536 0.351 0.575 0.327
Table-11: Expense Control Efficiency of the CBL and industry average of other banks
from the year 2013-2017
 0.700

0.600

0.500

0.400
The City Bank Ltd.
0.300 Industry Average
0.200

0.100

0.000
2013 2014 2015 2016 2017

Figure-11: Expense Control Efficiency of the CBL and industry average of other banks
from the year 2013-2017

From the table-11 we see that, it 2013 the CBL’s expense control efficiency ratio was 0.439 and
the industry average was 0.524. In 2014 the ratio increased slightly to 0.452 but still industry
average was lower than the CBL’s ratio. In 2015, both the ratios were decreased but the CBL’s
expense control ratio was remained higher than industry average. In 2016 the CBL’s ratio was
0.378 and industry average was lower than the CBL which was 0.575.

The lower the ratio the better a bank’s perform. The CBL ensured a lower ratio than industry
average and also trying to increase the efficiency of expense control through these years.But in
the last year, the CBL’s ratio was lower than industry average that was 0.337. So now the bank
needs to be more cautious about this.

13.Asset Management Efficiency:Asset management efficiency ratio measures a bank’s

efficiency in managing its assets to generate revenue.

Total Operating revenue/Total Assets

Year 2013 2014 2015 2016 2017

The CBL 0.059 0.061 0.074 0.058 0.055
Industry
Average 0.050 0.050 0.051 0.048 0.043
Table-13Asset Management Efficiencyof the CBL from the year 2013-2017
 0.080
0.070
0.060
0.050
0.040 The City Bank Ltd.
Industry Average
0.030
0.020
0.010
0.000
2013 2014 2015 2016 2017

Figure-13Asset Management Efficiencyof the CBL and industry average of other banks
from the year 2013-2017

From the table-13 we see that in 2015 theCBL was outperformed but in 2016 & 2017, the ratio
decreases. The bank needs to focus to its asset management to generate more sales.

From 2013-2017, industry average of asset management ratio is continuously lower from the
CBL. That means other banks have less efficiency in asset management than the CBL, so this is
good sign for the CBL.

14.Funds Management Efficiency:

Total Assets/total Equity Capital Account

Year 2013 2014 2015 2016 2017

The CBL 8.110 7.913 8.713 12.830 10.622
Industry
Average 12.259 12.341 11.964 13.476 14.400
Table-14Funds Management Efficiencyof the CBL from the year 2013-2017
 16.000
14.000
12.000
10.000
8.000 The City Bank Ltd.
Industry Average
6.000
4.000
2.000
0.000
2013 2014 2015 2016 2017

Figure-14Funds Management Efficiencyof the CBL and industry average of other banks
from the year 2013-2017

In case of funds management efficiency, the CBL is not in a good situation. The bank could not
properly use its shareholders funds to generate sales and the above graph-14 proves it. In 2013-
2014, the ratio was decreased but the industry average increases that mean other banks are more
properly manage its funds than the CBL. In the year 2015 it was increase to 8.713 but still
couldn’t reach to industry average and in 2016 the CBL’s funs management efficiency was
highly increased from 2015 that was 8.713 to 12.830 but industry average remain higher than the
CBL. In 2017 again the bank failed to manage its funds properly compare to other banks
because the CBL’s ratio was decreased from 2016 to 10.622 and industry average was 14.100.

In the graph we see that, industry average is higher all those years from the CBL, it is not a good
sign for the bank. Other banks are doing well than the CBL. The management team needs to
focus on it.

MARGIN

15. Net Interest Margin:Net interest margin is an indicator to measure that how
successfully a bank invest its funds and compare with the expenses that a bank occur on the same
investment. A positive net interest margin describe that the bank make the investment efficiently.

(Interest Income from Loans & Security Investments-Interest expense on Deposits on other
Debt issued)/Total assets
 Year 2013 2014 2015 2016 2017
The CBL 0.033 0.029 0.025 0.026 0.027
Industry
Average 0.022 0.023 0.022 0.022 0.022
Table-15Net Interest Marginof the CBL from the year 2013-2017

0.035
0.030
0.025
0.020
The City Bank Ltd.
0.015 Industry Average
0.010
0.005
0.000
2013 2014 2015 2016 2017

Figure-15Net Interest Marginof the CBL and industry average of other banks from the
year 2013-2017

From the above table-15 and figure-15 we see that in 2013 the CBL’s net interest margin was
0.033and industry average was 0.022. In 2014 it was decreased in 0.029 but the ratio was still
higher than industry average.In 2015 the ratio was again decreased by0.025 but industry average
was remaining less. But it was increased in 2016 and 2017 from 0.026 to 0.027 which is good.

If we compare with industry average of net interest margin, in all those years from 2013 to 2017
the ratio was less than the CBL. In 2017 the industry average was 0.022 and the bank ratio was
0.027

The negative figure of the ratio indicates that the bank cannot make effective investment
decisions. So it cleans that the CBL makes good investment decisions and become profitable.

16. Net Non-interest Margin:Non-interest income is the income from bank and creditor
which is derived primarily from deposit fees, transaction fees, annual fees, monthly account
service charge etc. This ratio indicates how a bank generates money from the sale of money City
did not perform well in this.
 (Noninterest Revenues-Noninterest Expenses)/Total Assets

Year 2013 2014 2015 2016 2017

The CBL -0.007 -0.001 0.006 0.005 -0.003
Industry
Average 0.004 0.003 0.003 0.001 -0.002
Table-16: Net Non-Interest Marginof the CBL from the year 2013-2017

0.008

0.006

0.004

0.002
The City Bank Ltd.
0.000
Industry Average
2013 2014 2015 2016 2017
-0.002

-0.004

-0.006

-0.008

Figure-16: Net Non-Interest Marginof the CBL and industry average of other banks from
the year 2013-2017

In the graph there are negative values for the CBL and this means the bank is inefficient in
making funds from non-interest income.

From the industry average we can understand that other banks are more efficient from the CBL.
So this is not a good sign for the bank.

17. Net Bank Operating Margin:This ratio measures how much profit the CBL makes on
its sales after paying variable cost such as wages but before paying interest or tax. A good
operating margin is needed for bank to be able to pay for its fixes costs.

(Total operating Revenues-Total Operating Expenses)/Total assets

Year 2013 2014 2015 2016 2017

The CBL 0.026 0.028 0.032 0.031 0.024
Industry
Average 0.026 0.027 0.024 0.024 0.020
 Table-17Net Bank Operating Marginof the CBL from the year 2013-2017

0.035
0.030
0.025
0.020
The City Bank Ltd.
0.015 Industry Average
0.010
0.005
0.000
2013 2014 2015 2016 2017

Figure-17Net Bank Operating Marginof the CBL and industry average of other banks
from the year 2013-2017

From the table and graph we see that the CBL’s net operating margin in 2013 was 0.026 and it
was equal to industry average. From 2013 to 2015 this margin increases continuously from 0.026
to 0.032. In 2016 it was decreased by 0.031 but still was higher than industry average of 0.024.
In 2017 net operating margin of the bank’s was again decreased by 0.024 and industry average
was 0.020. It means its net operating margin is higher than industry average.

The CBL is always maintaining high net operating ratio than industry average. So it cleans that
the bank is in a good position because net operating margin always be high for the betterment of
the company.