Bank Management Project on IFIC Bank

Ratio Analysis of IFIC Bank

Introduction

This is a report of performance analysis of the company entitled IFIC Bank. The ratio analysis

will help to find out the financial performance of this bank for the period of 2006 to 2009. The

performance of IFIC Bank has been analyze in terms of

Activity (Efficiency) ratios

Profitability ratios

Market Position ratios

Objectives

The objective of this report is to analyze the financial performance of IFIC Bank from the years

2006 to 2009. Ratios have been used as an instrument to analyze and explain the financial

performance of the bank. This will allow a greater insight into the company and also the industry

where it operates. I will also recommend on what needs to be done for the improvement of the

bank. This analysis will help investors to decide on whether to invest their money in IFIC Bank

or not. The objective of a company is to maximize shareholder’s wealth. I will identify on behalf

of the investors whether the company is actually directing toward its objective by using ratio

analysis. This report will also allow me to get some practical experience regarding the financial

evaluation using ratio analysis. This will prove useful in the future, when I will be in the

practical field.

1


Methodology

The purpose of my term paper is to analyze the performance of IFIC .The project starts

with

Data Collection

This term paper is based on Secondary Data. The main sources in conducting this

research were the bank’s annual report, DSE Library, selected reference books, local

texts books about bank management, credit risk rating report of IFIC Bank and journals

on the internet.

Quantitative Analysis

I have conducted a Quantitative Analysis. Various types and classes of ratios were used

in evaluating performance of IFIC Bank. According to the plan I calculated all the ratios

by taking require information from its financial reports. Almost all of those ratios were

taught in our class; moreover I have collected some from internet.

Application Software used: Microsoft Excel, Microsoft word.

Limitation

As I am dealing with a local bank some local ratios needed to be given as the text books we

follow only talk about American ratios. So had to use so local books and journals which I

must say was extremely hard to locate.

I found it somewhat difficult to understand some of the terms as all of the terms given in the

financial statements were not similar to our text book.

Although it was very difficult for me to complete the whole project within very short period,

I did give my hundred percent to finish my project on time and in a presentable manner. If I

had enough time, I will make the report with more compatible financial analysis.

2


Major ratio analysis limitation is that ratio analysis does not take into account the effect of

inflation. Sometimes profit figures are increasing due to inflationary factors rather than an

increase in sales. But the analysis will show an improved performance by the company

which is clearly not the case

IFIC Bank’s overview:

International Finance Investment and Commerce Bank Limited (IFIC Bank) is banking company

incorporated in the People’s Republic of Bangladesh with limited liability. It was set up at the

instance of the Government in 1976 as a joint venture between the Government of Bangladesh

and sponsors in the private sector with the objective of working as a finance company within the

country and setting up joint venture banks/financial institutions aboard. In 1983 when the

Government allowed banks in the private sector, IFIC was converted into a full fledged

commercial bank. The Government of the People’s Republic of Bangladesh now holds 32.75%

of the share capital of the Bank. Directors and Sponsors having vast experience in the field of

trade and commerce own 8.62% of the share capital and the rest is held by the general public.

The Bank has:

82 Branches

5 SME Service Centers

Oman International Exchange, L.L.E. in Oman

2 Branches in Pakistan

Nepal Bangladesh Limited in Nepal

3


Mission:

Our Mission is to provide service to our clients with the help of a skilled and dedicated

workforce whose creative talents, innovative actions and competitive edge make our position

unique in giving quality service to all institutions and individuals that we care for.

We are committed to the welfare and economic prosperity of the people and the community, for

we derive from them our inspiration and drive for onward progress to prosperity.

We want to be the leader among banks in Bangladesh and make our indelible mark as an active

partner in regional banking operating beyond the national boundary.

In an intensely competitive and complex financial and business environment, we particularly

focus on growth and profitability of all concerned.

Values:

Customer Focus

Integrity and Honesty

Quality

Teamwork

Respect for the Individual

Responsible Citizenship

Transparency and Accountability

Environmentally Conscious

High Morale

Goal:

Our people, products and processes are aligned to meet the demand of our discerning

customers. Our goal is to achieve a distinction like the luminaries in the sky. Our prime

objective is to deliver a quality that demonstrates a true reflection of our vision –

Excellence in Banking.

4


Objectives:

Our objectives are to conduct transparent and high quality business operation based on

market mechanism within the legal and social framework spelt in our mission and

reflected in our vision.

Our greatest concerns are our customers to provide them continually efficient, innovative

and high quality products with excellent delivery system.

Our motto is to generate profit with qualitative business as a sustainable ever-growing

organization and enhance air returns to our shareholders.

We are committed to our community as a corporate citizen and contributing towards the

progress of the nation as our corporate social responsibility.

Our employees are our backbone. We promote their well being through attractive

compensation package, promoting staff morale through training, development and career

planning.

We strive for fulfillment of our responsibility to the government through paying entire

range of taxes and duties and abiding the other rules.

We are cautious about environment & climatic change and dutiful to make our homeland

a green and clean soil.

Products and Services offered by Dhaka Bank:

Corporate Banking

Securitization of Assets

Corporate Finance and

Advisory Services

Syndication of Funds

Project Finance

Syndication & Structured

Finance

Trade Finance

5


Working Capital Finance

Retail Banking

Bundled Savings Product

Deposit Pension Scheme

Salary Account

Personal Loan

Car Loan

Home Loan

Credit Card

SME

GTS

Corporate Banking:

IFIC Bank is providing a wide range of financial services, offering specialist advice and products

to corporate clients to meet diverse demands of changing market scenario. We have expertise to

customize products & services to meet specific requirements of our clients. We are committed to

serve our customer with extensive branch net work all over the country to expedite our client's

business growth. We facilitate your business to face the challenges and realize opportunities,

now and in the future. Our main focus is relationship based banking and understanding corporate

& institutional business environments.

Our experienced Relationship Managers & their team can respond to and anticipate your needs

and give you competitive business advantages. Products and services for commercial and

business customers include: Working Capital Finance, Project Finance, Term Finance, Trade

Finance, Lease Finance, Syndication Loan etc.

Retail Services:

IFIC Easy Loan Our Easy Loan is to serve your any personal financial needs. The loan is

absolutely hassle free & paid against financial securities. Eligibility Adult person having an

account with us then easily apply for the IFIC Easy Loan. Loan Size

6


Savings Account

We are offering the most attractive interest rate of 5% on your Savings Account:

NRB Account

We are providing following facilities to NRBs:

Foreign Currency A/C

We are offering Foreign Currency Account in USD/GBP/EURO for NRBs. Foreign Currency

can be remitted by the Nationals of Bangladesh living abroad earned by them as wage earners or

from other sources. Nominee of Account holder can also able to operate this Account.

7

Maximum 95% of the face value of FDR.

Maximum 100% * of the MIS amount.

Maximum 100% of the principal amount of PSS.

Maximum 90% of ICB Unit Certificate.

12 to 36 months.

Initial Deposit: Tk. 500.00 at rural branches & Tk. 1000/- for urban

branches which should be considered as minimum balance.

Competitive Interest Rate

No extra hidden charge

Debit Card facility

SMS Banking Facility

ATM facility

Online banking facility

Utility payment service

Transfer of fund from one branch to another

Opportunity for availing locker facility


NFCD

We issue Foreign Currency Fixed Term Deposit in USD/GBP/EURO with different tenure.

Interest is paid in respective Foreign Currency as per published daily Exchange Rate.

Wage Earners Development Bond

A beneficiary of a wage-earners’ remittance in foreign exchange in his own name or in the name

of wage-earner can purchase Wage Earners Development Bond in Bangladeshi Taka for tenure

of five years at 12.00% interest rate. In case of premature encashment interest will be paid at

lower rate.

USD Premium Bond

USD Investment Bond

Literature Review

Ratio Analysis

Financial ratio

analysis is the

calculation and

comparison of

ratios which are

8

These Bonds can be issued from the balance of the FC account with a

tenure for Three years. Rate of interest is 7.5% p.a. in BDT.

Principal amount is payable in US Dollar.

Interest is payable in Bangladesh Taka.

Principal amount can be payable in Bangladesh Taka if the purchaser

desires.

These Bonds can be issued from the balance of the FC account with a

tenure for Three years.

6.5% annual interest rate.

Principal amount and interest payable in US Dollar.

Principal amount and interest can be payable in Bangladesh Taka at the

discretion of the investor.


derived from the information in a company's financial statements. The level and historical trends

of these ratios can be used to make inferences about a company's financial condition, its

operations and attractiveness as an investment. Ratio Analysis enables the business

owner/manager to spot trends in a business and to compare its performance and condition with

the average performance of similar businesses in the same industry. Ratio analysis may provide

the all-important early warning indications that allow you to solve your business problems before

your business is destroyed by them.

Financial ratio analysis groups the ratios into categories which tell us about different facets of a

company's finances and operations. An overview of some of the categories of ratios is given

below.

Leverage Ratios

Debt Management Ratios attempt to measure the firm's use of Financial Leverage and ability to

avoid financial distress in the long run. These ratios are also known as Long-Term Solvency

Ratios.

Debt is called Financial Leverage because the use of debt can improve returns to stockholders in

good years and increase their losses in bad years. Debt generally represents a fixed cost of

financing to a firm. Thus, if the firm can earn more on assets which are financed with debt than

the cost of servicing the debt then these additional earnings will flow through to the stockholders.

Moreover, our tax law favors debt as a source of financing since interest expense is tax

deductible.

With the use of debt also comes the possibility of financial distress and bankruptcy. The amount

of debt that a firm can utilize is dictated to a great extent by the characteristics of the firm's

industry. Firms which are in industries with volatile sales and cash flows cannot utilize debt to

the same extent as firms in industries with stable sales and cash flows. Thus, the optimal mix of

debt for a firm involves a tradeoff between the benefits of leverage and possibility of financial

distress.

9


i. Total debt to total asset ratio: The ratio of the Total debt to total asset, generally called

debt ratio, measures the percentage of funds provided by creditors. Total debt includes

both current liability and long term debt. Creditors preferred lower debt ratio because the

lower the ratio, the greater cushion against the creditors’. On the other hand stockholders

want more leverage because it magnifies expected earnings.

ii. Debt equity The Debt to Equity Ratio measures how much money a company should

safely be able to borrow over long periods of time. It does this by comparing the

company's total debt (including short term and long term obligations) and dividing it by

the amount of owner's equity The result get after dividing debt by equity is the

percentage of the company that is indebted (or "leveraged"). The normal level of debt to

equity has changed over time, and depends on both economic factors and society's

general feeling towards credit. Generally, any company that has a debt to equity ratio of

over 40 to 50% should be looked at more carefully to make sure there are no liquidity

problems.

iii. Interest Coverage Ratio: The interest coverage ratio is a measurement of the number

of times a company could make its interest payments with its earnings before interest

and taxes; the lower the ratio, the higher the company’s debt burden. As a general rule of

thumb, investors should not own a stock that has an interest coverage ratio under 1.5. An

interest coverage ratio below 1.0 indicates the business is having difficulties generating

the cash necessary to pay its interest obligations. The history and consistency of earnings

is tremendously important. The more consistent a company’s earnings, the lower the

interest coverage ratio can be. EBIT has its short fallings; companies do pay taxes,

therefore it is misleading to act as if they didn’t. A wise and conservative investor would

simply take the company’s earnings before interest and divide it by the interest expense.

This would provide a more accurate picture of safety.

Activity (Efficiency) Ratios

10


A ratio used to calculate a bank's efficiency. Not all banks calculate the efficiency ratio the same

way. Asset management, also called asset utilization, ratios tells a company how well their assets

are working to generate sales. Cash is always the best asset but it doesn't generate any revenue.

The other assets on your balance do generate sales revenue. Those other assets are accounts

receivable, inventory, and fixed assets.

i. Operating Efficiency Ratio: Operating efficiency ratio measures how efficiently bank

manages its expanse, which usually means reducing operating expense and incasing

operating revenue.

ii. Employee Productivity Ratio: This ratio means reducing operating expenses and

increasing of their employee through use of automated equipment and improved

employee training, which is calculated by Net operating income / Number full time

equivalent employees.

iii. Tax management efficiency: Tax management efficiency ratio reflecting the use of

security gain or losses and other management tools (such as buying tax- exempt bonds)

to minimize tax exposure, which is the ratio of before- tax income to total revenue as an

indicator of how many dollars of revenue survive after operating expense removed,

which is basically a measure of operating efficiency and expense control.

iv. Expense management efficiency: This is a ratio of pre tax net operating income to

total operating revenue. Measures how efficiently the bank able to manage its operating

expense.

v. Asset management efficiency: Which is nothing but the degree of asset utilization

(AU) that reflects the portfolio manages policies, especially the mix and yield on asset.

This ratio is calculated by total operating revenue divided by total asset.

vi. Funds management efficiency: Which is nothing but equity multiplier (EM),

calculated as total asset divided by total equity capital. EM reflects leverage or financing

policy: the source chosen to fund the financial institution- debt financing or equity

financing.

Profitability Ratios

11


The profitability ratios are used to measure how well a company is performing in terms of

profit. The profitability ratios are considered to be the basic bank financial ratios. In other words,

the profitability ratios give the various scales to measure the success of the firm.

The profitability ratios can also be defined as the financial measurement that evaluates the

capacity of a company to produce yield against the expenses and costs over a particular time

period. If a company is having a higher profitability ratio compared to its competitor, it can be

inferred that the company is doing better than that particular competitor. The higher or same

profitability ratio of a company compared to its previous period also indicates that the company

is doing well. Some of the categories of ratios are given below.

i. Return on Equity (ROE): The amount of net income returned as a percentage of

shareholders equity. Return on equity measures a corporation's profitability by

revealing how much profit a company generates with the money shareholders have

invested. ROE is expressed as a percentage and calculated as, Return on Equity = Net

Income/Shareholder's Equity.

ii. Return on Assets (ROA): An indicator of how profitable a company is relative to its

total assets. ROA gives an idea as to how efficient management is at using its assets to

generate earnings. Calculated by dividing a company's 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 on assets is, Net income divided by total asset.

Some investors add interest expense back into net income when performing this

calculation because they'd like to use operating returns before cost of borrowing.

iii. Net Interest Margin (NIM): Is a measurement of the difference between the interest

incomes generated by banks or other financial institutions and the amount of interest

paid out to their lenders (for example, deposits). It is considered similar to the gross

margin of non-financial companies, which basically measures how large a spread

between interest revenue and interest cost management has been able to achieve by

close control over earning asset and pursuit of the cheapest sources of funding.

Calculated as (interest income – interest expense) / Total earning asset.

12


iv. Net Non interest Margin: Unlike Net interest Margin, Net Non interest Margin

measures the amount of non-interest revenue generating from service fees the financial

firm has been able to collect relative to the amount of non- interest cost incurred from

salaries and wages, repair and maintenance of facilities , and probation for loan loss

expense. Calculated as (Non Interest Revenues – Non Interest Expenses)/ Total Assets.

v. Net Operating Margin: A ratio used to measure a company's pricing strategy and

operating efficiency. It is a measurement of what proportion of a company's revenue is

left over, before taxes and other indirect costs (such as rent, bonus, interest, etc.), after

paying for variable costs of production as wages, raw materials, etc. A good operating

margin is needed for a company to be able to pay for its fixed costs, such as interest on

debt. Calculated as, (Total Operating Revenues – Total Operating Expenses) / Total

Assets.

vi. Earnings per Share (EPS): The portion of a company's profit allocated to each

outstanding share of common stock, which serves as an indicator of a company's

profitability. Calculated as, Net Income After Tax / Common Equity Shares

Outstanding.

Market Position Ratios

Market position ratio, reflect the firms stocks price to it earnings, cash flow and book value per

share. This ratio gives management an indication of what investors think of the company’s past

performance and future prospects. If the liquidity, assets management, debt management and

profitability ratios all look good then the market value ratios will be high and the stock price will

probably be as high as can be expected.

13


i. Price-Earning (P/E) Ratio: The P/E Ratio indicates how much investors are paying for

per dollar of return. It is calculated by dividing current market price of share by the

earning per share of common stock.

ii. Market-Book Ratio: The Market-to-Book Ratio is calculated by dividing market price

per share by the book value per share. A firm's book value reflects historical cost

accounting. Hence the market to book value ratio compares the market value of the

company’s investment to their cost. Market-book value ratio indicates what the investors

are giving against each taka value of share. It also reflects overall performance of the

company.

iii. Dividend per Share (DPS): Dividend per share ratio shows how much return the

common shareholders are getting against each share. It is calculated by dividing the net

income by number of common share outstanding.

iv. Dividend Yield: The dividend yield is a comparison between the dividend and market

price of share. It shows the return that the share holder gets against each taka of

investment.

14


FINDINGS

AND

ANALYSIS OF

RATIOS

Leverage Ratio

1. Total Debt to Total Asset

2006 2007 2008 2009

0.954682344 0.934514899 0.93009482 0.933269765

15


2006 2007 2008 2009

0.95

0.930.93 0.93

Total Debt to Total Ratio

From the graph we can see that there exists a great rise and fall in this ratio. In 2006 the debt to total

assets ratio was 95.47%, which means that for BDT 100 of the total asset of the bank it has BDT 95.47.

After 2006 there was a sudden fall in this ratio to 93.45% in 2007 and it stables on around 93% up to

2009. So we can say that higher debt may decrease shareholders wealth and increases the risk of the

company.

2. Debt to Equity Ratio

2006 2007 2008 2009

21.06645455 14.2706491 13.3050916 13.98571073

16


2006 2007 2008 2009

21.0714.27 13.31 13.99

Debt to Equity

The graph shows that the debt to equity ratio of this bank has decreased to 14.27 in 2007 from 21.06 in

2006 and stables around 13 for the next two years. Thus it indicates a risky position of the company as

the ratio is higher than 1.

3. Interest Coverage Ratio:

2006 2007 2008 2009

0.355391231 0.772420887 0.561326403 0.595500372

17


2006 2007 2008 2009

0.36

0.77

0.56 0.60

Interest Coverage

IFIC Bank’s interest coverage ratio was lowest in 2006 when it was 0.36 which means that this bank

could cover their interest expenses by 0.36 times with their current level of profit before tax. Then it

increased in 2007 at 0.77 which indicates a better position compare to previous year. Again it decreases

for the next two years. Lower interest coverage ratio indicates less capacity of making payment of

interest before making profit.

Activity (Efficiency Ratio)

1. Operating Efficiency Ratio

2006 2007 2008 2009

0.76604383 0.710780408 0.706442741 0.69827227

18


2006 2007 2008 2009

0.77

0.71 0.710.70

Operaing Efficiency

It was found that operating efficiency ratio for IFIC Bank was 76.6% in 2006 which mean that for every

BDT 100 this bank has TK. 76.6 as expense. Operating efficiency ratio decreases in the next year in 2007

and continues to decreases up to 2009. Thus we can say that over the time the bank has decreased its

expenses except in 2006 which is a good thing for the bank.

2. Tax Management Efficiency

2006 2007 2008 2009

0.294194322 0.642032074 0.405169428 0.459050759

19


20062007

2008 2009

0.29

0.64

0.41 0.46

Tax Management Efficiency

During 2006 tax management efficiency ratio for IFIC bank was 29.42%, which means that the bank’s

after tax income is 29.42% of the pretax income. In the next year there was an increase in this ratio to

64.2% and in the following years it has decreased constantly to 40.52% in 2008 and slightly increased in

2009 to 45.9%. Thus we can observe that the bank is not managing its taxable assets properly with the

passage of time.

3. Expense Control Efficiency

2006 2007 2008 2009

0.23395617 0.289219592 0.293557259 0.30172773

20


2006 2007 2008 2009

0.230.29 0.29 0.30

Expense Control Ef-ficiency

After analyzing this bank’s expenses management efficiency, it can be said that the bank has managed

its cost very diligently. In 2006 it was only 23.4% which indicates out of BDT 100 revenue, the company

incurring Tk. 23.4 expense before tax. As the passage of time it increases a little but it not extremely

indicating good performance of the bank.

4. Asset Utilization

2006 2007 2008 2009

0.102211176 0.130191782 0.120849542 0.103245374

2006 2007 2008 2009

0.10

0.13 0.120.10

Asset Utilization

21


In 2006 IFIC Bank’s asset utilization (AU) ratio was 10.22%.In 2006 it increased to 13.0% and again falls

down in 2008 and 2009. From here it can be said that this bank has recovered 10.22% of the assets by its

operating revenue in 2006 which then increases to 13% in. Thus we can presume that with the passage

of time the bank could not increased efficiency in asset utilization but it stables its performance.

5. Fund Management Efficiency

2006 2007 2008 2009

22.0664545 15.27064910 14.3050916 14.9857107

2006 2007 2008 2009

22.07

15.27 14.31 14.99

Chart Title

Fund management efficiency ratio for IFIC Bank was highest in 2006 which was 22.07 and then there

were downs and ups and in 2009 this ratio was 14.99. Thus it can be said that though this bank had total

assets were 22.07 times the total equity in 2006 but this has decreased to 14.99 in 2009. Thus its total

equity on an average has increased over the time.

22


6. Efficiency Ratio

2006 2007 2008 2009

0.315701548 0.466068527 0.363873015 0.403764354

2006 2007 2008 2009

0.32

0.47

0.360.40

It has been found that this ratio has increased from 31.57 in 2006 to 46.6% in 2007. But decreased to

36.39% in 2008 and again rise in 2009. Thus it can be concluded that except in 2007 when this ratio was

highest, change in the total noninterest expense has been proportionately lower when in compared to

the net interest and non interest income, thus it can be said that with the passage of time this bank was

becoming efficient and thus was able to reduce their non interest expense.

23


Profitability Ratio

1. Return on Equity ( ROE )

2006 2007 2008 2009

0.155238606 0.369169236 0.205619901 0.214300844

2006 2007 2008 2009

0.16

0.37

0.21 0.21

ROE

In 2006 return on equity for IFIC Bank was 15.52%, which means that IFIC bank has earned TK 15.52 for

their shareholders per BDT 100 equity money. In the next this ratio has increased to 36.92%, the highest

up to 2009. In the next year it decreased to 20.56% and had a slight increased in 2009. From here it can

be said that though IFIC bank earned a higher return for its shareholders in 2007 but it has declined with

the passage of time.

24


2. Return on Asset ( ROA )

2006 2007 2008 2009

0.00703505 0.024175085 0.014373896 0.014300346

2006 2007 2008 2009

0.007

0.024

0.014 0.014

ROA

In 2006 the return on assets (ROA) for this bank was 0.70%, which means that by utilizing BDT 100 the

bank can earn a net income of TK 0.70. The return on assets (ROA) drastically rose to 2.42% in 2007 but

again it fall down to 1.43% in 2008 and stables in 2009. Thus it can be said that there was fluctuation in

the net income and thus the return on assets (ROA) has also several fluctuations.

3. Net Interest Margin (NIM)

2006 2007 2008 2009

25


0.022543352 0.021997982 0.025556848 0.017522192

2006 2007 2008 2009

0.02 0.020.03

0.02

Net Interest Margin

It can be said that in 2006 the bank made a net interest income of TK 2.25% by utilizing its Assets. This

ratio has shown a steady increase except in 2008 and became 1.75% in 2009. Thus it can be said that

with the passage of time the bank had been earning a stable net interest income which is good for the

bank.

4. Net Non-Interest Margin

2006 2007 2008 2009

0.001369583 0.015656032 0.009919412 0.0136298

26


2006 2007 2008 2009

0.001

0.016

0.010 0.014

Net Non Interest Margin

In 2006 net non-interest margin for Dhaka bank was 0.1%, which means IFIC earns TK 0.1 of net non-

interest income by investing its BDT 100 worth of its total assets. After 2006 there was a sharp increase

of this ratio in 2007 when net non-interest margin becomes 1.6% and then it decreases in the next year

and it was 1.4% in 2009. Thus it can be said that this bank’s net non-interest income had a fluctuation in

these years.

5. Net Operating Margin

2006 2007 2008 2009

0.05481158 0.08267627 0.02555685 0.01752219

27


2006 2007 2008 2009

0.05

0.08

0.030.02

Net Operating Margin

From the analysis of the IFIC Bank it can be said that it made a net operating profit of TK 5.48 by utilizing

TK 100 worth of assets in 2006. Over the time this ratio has increased at a higher pace in 2007 and

starting to decrease for the next two years. In 2009 it was 1.75%. Thus it can be said that over the time

this bank has earned a lower operating profit by utilizing its assets which tells us that the bank has

became less efficient in controlling its operating expenses with the passage of time.

6. Earnings Per Share (EPS)

2006 2007 2008 2009

62.466798669 143.8654179 49.00069418 51.58200792

2006 2007 2008 2009

62.46

143.87

49.00 51.58

EPS

28


The higher the EPS the higher the earning potential for the bank’s shareholders and higher the growth.

In case of IFIC Bank it is observed that EPS has alternative ups and downs, where it increased in one year

and in the next year it decreased again. In 2006 it was62.46, increase to 143.87 in 2007 and decreased

to 49.00 in the next year. This means that the shareholders have earned a fluctuated EPS, which may not

be very good for the bank as they may have problems in finding out future equity capital.

7. Net Profit Margin

2006 2007 2008 2009

0.068828577 0.185688255 0.118940427 0.138508343

This ratio has

increased from

6.88% in 2006

to 18.56% in 2007 and then it decreased to 11.89% in 2008 and it increased a little and became 13.85%

in 2009. Thus it can be said that Net income in relation to total operating revenue has increased from

2006 to 2007 thus in this period the firm’s profit was more satisfactory and it was most satisfactory in

2007 and then the profit margin in relation to total operating revenue decreased which shows a

declining condition for this bank.

29

2006 2007 2008 2009

0.07

0.19

0.120.14

Net Profit Margin


Market Position Ratio

1. Price Earnings Ratio

2006 2007 2008 2009

15.22408736 16.13313354 31.5476787 22.308767

2006 2007 2008 2009

15.22 16.13

31.54

22.33

P/E Ratio

It has been found that P/E ratio of the bank has slightly increased from 2006 to 2007 where the P/E ratio

was 15.22 in 2006 it increased to 16.13 in 2007. Then it again increased in 2007 and it was highest in this

year which was 31.54 and it decreased in 2008 to 22. By observing the trend we can say that the P/E

ratio has fluctuated with the passage of time mainly due to the fluctuation of EPS and change in the

market value of the share which increased drastically in 2008 which reflect the upward movement of the

P/E ratio in 2008. Thus in 2006 the bank’s shareholders could have earned TK1 by investing TK15.22,

though in the following years the shareholders have earned TK1 by investing more money but at the

same time the growth rate of the bank has gone up.

2. Market Book Ratio

2006 2007 2008 2009

9.51 23.21 15.4546 11.50234

30


2006 2007 2008 2009

9.51

23.21

15.454611.50234

Market Book Ratio

In 2006 the investors of IFIC bank are willing pay TK 9.51 for TK 1 book value of share. Then in the next

two years investors of IFIC Bank are willing pay the highest money for TK 1 book value of share and again

this ratio has increased and reached its peak in 2007 when investors faith in this bank was highest thus

they wanted to pay TK 23.21for TK 1 book value of share. In the next year it reaches to 1.746 and then

again increases to 2.074 in 2009. This fluctuation was mainly due to the change in the market value of

the share which decreased drastically in 2008 which reflect the downward movement of the market

book value ratio.

3. Book Value Per Share2006 2007 2008 2009

402.392165 389.7004512 238.3071579 240.6990419

31


2006 2007 2008 2009

402.39 389.70

238.31 240.70

Book Value Per Share

IFIC bank’s Book value per share has decreased from 402.39 (2006) to 389.31 in 2007, though this

ratio has been lower in between these two periods. Thus it can be said that IFIC bank if liquidated

today will earn a lower amount of money than if it were liquidated in the earlier years, so this

bank’s value has decreased with the passage of time as shown in 2009.

32


Recommendation:

After computing the ratios, I came to conclude that the IFIC bank has been doing well except in

few sectors. If we have a look on its ROA and ROE, we can say that IFIC bank has maintained

these two ratios quite better with the passage of time it has not fluctuated much rather in ROA

we find them to be increasing. We find some fluctuation in EPS and P/E of IFIC bank, thus I

believe that they must be more cautious in maintaining these two ratios and thus try to increase

these by increasing market price of the share. IFIC bank should do their best to improve their

leverage position as all these ratios shows that they have a very high leverage and thus they also

have a higher risk, thus in this respect they need to increase the amount of equity capital as too

much leverage may be associated with more risk. IFIC Bank also need to take essential measure

to improve their tax management ratio .IFIC bank should also take effective measure to decrease

its total noninterest expense

The overall performance of the bank through 2006 to 2009 was quite satisfactory as I would

suggest to buy shares of IFIC Bank.

33


Bibliography:

www.ificbank.com.bd

34

Bank Management Project on IFIC Bank

Documents

Transcript of Bank Management Project on IFIC Bank