Bank and Industry

Independent University Bangladesh

Report on: CAMELS Rating of BRAC Bank

IntroductionThe CAMELS ratings or Camels rating is a supervisory rating system to classify a bank's overall condition. The ratings are assigned based on a ratio analysis of the financial statements. The components of a bank's condition that are assessed:

(C)apital adequacy (A)ssets (M)anagement Capability (E)arnings (L)iquidity (also called asset liability management)

(S)ensitivity (sensitivity to market risk, especially interest rate risk)

BRAC Bank's ConditionCapital AdequacyThe bank has increased its total capital rapidly year by year but in 2005 the capital has increased little more. On the other hand, total capital of the industry has also increased. The average capital adequacy of the bank within 5 years is 10,391.80 and average capital adequacy of industry within 5 years is 9,554.20. So, we can see that the bank has the more capital comparing to the industry average.Asset qualityThe bank has increased its total asset rapidly year by year compare to the industry average. The classified loan to total assets of the Brac bank was also increasing but in 2004 it was decreased by 3%. On the other hand, the industry has the increased classified loans to total assets year by year. Average asset of the bank within 5 years is 1, 18,349 and Total average asset of the industry within 5 years is 98,263.89. So, we can see that the bank has the more asset than industry average.Management

Average cost of deposit of the bank within 5 years is 7.92% and Total average cost of deposit of industry within 5 years is 9.12%. So, we can see that the bank has the less cost of deposit than the industry average.EarningsReturn on investment of the bank has increased in 2008, 2009, 2011 but in 2012 it has decreased enough. On other hand, return on investment of the industry average has increased rapidly. Average net income of the Brac bank within 5 years is 1,237.80 and Total average net income of industry within 5 years is 1,405.27. So, there is bank has the less net income than the industry average.

Liquidity

Average cash of the Brac bank within 5 years is 9,269.43 and average cash of industry within 5 years is 6,293.64. So, there is bank has the more cash than the industry average.

Sensitivity to market risk

average net interest margin of the bank within 5 years is 3.74% and average net interest margin of the industry within 5 years is 2.70%. So, there is bank has the more net interest margin than the industry average.

RatingBankIndustry

Capital8.58

Asset98.5

Management7.58

Earnings8.58

Liquidity86

Sensitivity76

Weighted8.087.41

Capital adequacy

We rated the bank 8.5 because the bank has the more capital comparing to the industry average. And we rated the industry 8.Asset qualityWe rated the bank 9 because that the bank has the more asset than industry average. And we rated industry 8.5 because it has fewer assets.Management

We rated the bank 7.5 and industry 8 because the bank has the less cost of deposit than the industry average.

Earningswe rated the bank 8.5 and industry 8 because bank has the more return on investment than the industry average. We rated the industry 8 because it has more net income than the Brac bank.Liquidity

We rated the bank 8 and industry 6 because Brac bank has more cash than the industry average.

Sensitivity to market risk

We rated the bank 7 and industry 6 because Brac bank has the more net interest margin than the industry average.

Ratio Analysis

Capital adequacy ratio: (in percentage)

Analysis: In this graph on average bank has a more or sometimes similar adequacy than industry. This means bank has a capital more than industry on average. In 2011 industry has a little bit higher than bank but in 2012 it looks similar. Before that in 2008 to 2011 bank is good capitalized than industry. In percentage bank and industry both are in 10 on average.

Deposit Ratio: (in percentage)

Analysis: In this situation of graph bank and industry are likely similar in deposit ratio. On average both are above 8 or similar. But in 2012 it becomes down to 7.7 of bank and 8 on industry. So it shows that the ratio of deposits of bank and industry likely similar on average. But most probably bank has an easy position on deposit.

Cost of Deposit: (in percentage)

Analysis: In 2008 to 2009 bank and industry both have similar ratio in cost of deposit. But after 2009 it looks much higher on industry than bank but both are under situation than before. In 2011 and 2012 it looks much raise in industry which cost of industry must increase.

Return On Investment: (in percentage)

Analysis: Return on investment that last five years of bank and industry look very complexes. In 2008 to 2009 bank is more than industry on return but after 2010 industry has a higher situation than bank on return. But both are likely downward in 2012.So it causes an effect on economy as well.

Return on asset: (in percentage)

Analysis: Return on assets is likely complex on bank and industry both. On graph it shows that on 2010 industry has better return on assets than bank. On average industry is higher as well in return on asset. On first 2008 bank grown up but after it comes to down a year to year. But industry got upper to down as well on return on asset.

Return on equity: (in percentage)

Analysis: This graph shows that in 2008 industry has much more return on equity than bank. Which is half of industry .But later it much downfall of industry .That not so well. But bank has real converse on year to year. On 2012 it falls again both bank and industry.

Net Interest Margin: (in percentage)

Analysis: On net interest margin bank has more suitable position than industry. Interest situation is ore applicable in bank. So that bank has up situation than industry has. But industry has a good margin at their situation. On 2010 it goes up for both bank and industry.

Overall Situation: Theres something are preferred for bank and something for industry at their own situation. Such as in equity return industry has well situation also in asset. But bank of interest margin and cost of deposit situation as well. So in compare situation bank is more suitable position than industry at their situation. And the cost of deposit is higher than bank of industry, which does not, seems well. It affect on industry total situation.

Submitted to:

Mr. Saquib Shahriar

Lecturer, School of Business

FIN 401: Banking and Finance

Independent University, Bangladesh

Submitted by:Md.Ikramul Hakim#1020023Ahmed Saumik#1020296Taijul Islam#0920555Tawhiduzzaman#0910015Hafijur rahman#0910055

2

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8583.74

9490.5

8585.29

7780.96

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BankIndustrySeries 3

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1311.23

12.4511.54

12.0710.33

11.611.91

11.4411.35

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BankIndustrySeries 3

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_1436772948.xlsChart1

12.6110.32

12.312.06

913.06

11.4111.86

3.445.9

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BankIndustrySeries 3

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_1436772951.xlsChart1

9.449.51

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6.517.55

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_1436772943.xlsChart1

22.8840.54

19.1920.38

18.9519.41

17.915.04

5.477.39

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BankIndustrySeries 3

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_1436772946.xlsChart1

1.641.38

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_1436772940.xlsChart1

3.32.61

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42.65

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BankIndustrySeries 3

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