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Transcript of comparison of five banks
Introduction
The main feature of bank is to conduct banking business with deposits and
loan. The systems, vision and strategies differ in various types of banks. On
the basis of these measures the overall banking system is classified in
different sectors throughout the world. In our country, there are basically two
types of banking system-commercial banking system and specialized
banking system. Commercial sectors can be classified under four categorized
-Nationalized Commercial Banks, Local Commercial Banks, and Foreign
commercial and Islamic Banks.
Though all these types banking system are same in mission of profit making
but they differ in their applying strategies, purposes and visions. Here we
studied on five banks selected from five types of banking system. We
focused on the different types of loan they provide and deposits they
receive, analyzed their performance on the basis of different ratios and
statistical trends to make comparison among them.
Objectives of the report
Report writing based on information analysis is as a part of our B.B.A.
program. Through report writing we are able to know the present situation of
studied topic. The main objective of this study is to make comparisons
among five types of banking system existing in our country. Other objectives
may be identified as following:
To keep ourselves abreast of with current situations of the different
banking systems.
To strengthen relation with banking environment.
To increase overall skill so that we can be more modern and
challenging to manage our future business1
Methodology
Sources of data :
We have collected the data from both primary and secondary sources.
I. Primary Sources:
We have collected the information by interviewing the employees of our
selected banks.
II. Secondary Sources :
We have also collected information from the following secondary sources:
Websites of the studied banks
Annual reports of five banks from the library of “Bangladesh Bank”.
Methods of data analysis :
We have analyzed the data in a qualitative and subjective way. The overall
process of analyzing data presented below in brief:
At first we identified the variation of loan and deposits conducted by
selected banks.
Then we analyzed various ratios to measure the overall performances
and quantity of offerings.
Then we analyzed on the basis of statistical trends.
And finally we made our comparison summarized by providing overall
findings.
2
Rationale of the study
Business world is shrinking in width so is the banking sector, that’s why it is
necessary to cope up with the rapidly changing environment. In our country
there are several types of banking systems which differ in many aspects.
And it is essential for us to measure the performances of these banking
systems. This report will help us in this regard and make updated
information available to us.
Scope of the report
This study covering in depth analysis performances and offerings of different
types of banks which gives us the way to be familiarized with the banking
environment. This report also gives us an opportunity to gather practical
experience by working in the practical arena with our limited theoretical
knowledge and expertise.
3
Limitations of the Report
Report writing is a part of B.B.A. program’s number distribution and we have
to submit report after completing analysis of data. So, within very short time
and within various limitations we have completed this report. Some
limitations are:
Limitations in availability of information.
Problem in taking assignment with the employees.
In some cases we analyzed on the basis of ‘trial and error method’,
some of these are approximate information.
4
Banks overview
We studied on following banks:
Name Types
Sonali Bank Ltd Nationalized Commercial Bank
Shahzalal Islami Bank Ltd Islamic Bank
Dutch-Bangla Bank Ltd Local Commercial Bank
Honkong Shanghai Banking Corporation Ltd Foreign Commercial Bank
BASIC Bank Bangladesh Ltd Specialized Bank
The concise overview of these selected banks is given below:
Sonali Bank Ltd.
Sonali Bank is a state-owned commercial bank in Bangladesh. It is the largest
bank of the country. A fully state-owned enterprise, the bank has been
discharging its nation-building responsibilities by undertaking government
entrusted different socio-economic schemes as well as money market
activities of its own volition, covering all spheres of the economy. Sonali
Bank Limited alone enjoys the prestige of being the agent of the Central
Bank of Bangladesh in such places where the guardian of the money market
has chosen not to act by itself.
Sonali Bank was established in 1972 under the Bangladesh Banks
(Nationalization) Order, through the amalgamation and nationalization of the
branches of National Bank of Pakistan, Bank of Bhowalpur and Premier Bank
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branches located in East Pakistan until the 1971 Bangladesh Liberation War.
When it was established, Sonali Bank had a paid up capital of 30 million taka.
In 2001, it’s authorized and paid up capital were Tk 10 billion and Tk 3.272
billion respectively. The bank's reserve funds were Tk 60 million in 1979 and
Tk 2.050 billion on 30 June 2000.
Sonali Bank performs all traditional banking functions including deposit
mobilization and lending. The bank discharges the treasury functions as the
agent of the Bangladesh Bank. It collects tax, stamp duty and registration
fees, operates special savings accounts, pays salaries to the teachers of
schools, madrashas, and colleges and pension to retired government
employees. The bank provides funding to some income generating and
economic development projects namely, Poverty Alleviation Credit Program,
Female Special Credit Program, and Agro-based Industrial Credit Program in
the rural areas. It has a large participation in foreign exchange business and
off-balance sheet activities.
Sonali Bank has a total of 1297 branches. Out of them, 488 are located in
urban areas, 696 in rural areas, and 2 are located overseas. It also operates
the Sonali Exchange Company Inc. in USA and Sonali Bank (UK) Ltd., United
Kingdom, to facilitate foreign exchange remittances.
Basic Bank Ltd.
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BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank
Limited) registered under the Companies Act 1913 on the 2nd of August,
1988, started its operations from the 21st of January,1989. It is governed by
the Banking Companies Act 1991. The Bank was established as the policy
makers of the country felt the urgency for a bank in the private sector for
financing small scale Industries (SSIs). At the outset, the Bank started as a
joint venture enterprise of the BCC Foundation with 70 percent shares and
the Government of Bangladesh (GOB) with the remaining 30 percent shares.
The BCC Foundation being nonfunctional following the closure of the BCCI,
the Government of Bangladesh took over 100 percent ownership of the bank
on 4th June 1992. Thus the Bank is state-owned. However, the Bank is not
nationalized; it operates like a private bank as before.
BASIC Bank Limited is unique in its objectives. It is a blend of development
and commercial banks. The Memorandum and Articles of Association of the
Bank stipulate that 50 percent of loan able funds shall be invested in small
and cottage industries sector.
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CAPITAL POSITION
Authorized capital Tk. 2000 million
Paid up capital Tk. 1309.77 million.
Total Reserve and Surplus Tk. 1681.39 million
The Bank is required to transfer 20 percent of its net profit before Tax to
Capital Fund as per the Banking Companies Act 1991.
Basic bank offer followings:
Term loans to industries especially to small-scale enterprises.
Full-fledged commercial banking service including collection of
deposit, short term trade finance, working capital finance in
processing and manufacturing units and financing and facilitating
international trade.
Technical support to Small Scale Industries (SSls) in order to enable
them to run their enterprises successfully.
Micro credit to the urban poor through linkage with Non-
Government Organizations (NGOs) with a view to facilitating their
access to the formal financial market for the mobilization of
resources.
In order to perform the above tasks, BASIC Bank works closely with
its clients, the regulatory authorities, the shareholders (GOB),
banks and other financial institutions.
8
In Bangladesh, the HSBC Group’s history dates back to 1996 when The
Hongkong and Shanghai Banking Corporation (HSBC) Ltd opened its first
branch. Today, the HSBC Group offers a comprehensive range of financial
services in Bangladesh including commercial banking, consumer banking,
payments and cash management, trade services, treasury, and custody and
clearing.
HSBC conducts its business through network of 9 branches, 1 sub branches
and an offshore banking unit. The number of employees working in this bank
is 830 as of 31 December 2008.
The key business areas of this bank are Personal Financial Services,
Commercial Banking and Corporate and Institutional Banking.
HSBC offers a full range of personal banking and related financial services
including current and savings accounts, personal loans, time deposits,
travelers cheques and inward and outward remittances
Commercial banking is a traditional strength of the HSBC Group .In
Bangladesh, HSBC is a popular choice for customers because of the Group’s
international reach and a wide range of financial services and products HSBC
has an offshore banking unit (OBU) license and can therefore also provide
foreign currency financing to qualifying customers. In addition, it is the only
major financial institution with a presence in 5 major EPZ areas including
Dhaka, Chittagong, Adamjee, Mongla and Comilla.
Corporate and institutional banking provides dedicated relationship
management services to HSBC’s clients in major corporate and financial
institutions. The Bank’s focus is on fostering long-term relationship based on
its international connections and extensive knowledge of Asia and Asian
business.
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Dutch-Bangla Bank Limited (DBBL) is Bangladesh's most innovative and
technologically advanced bank. DBBL stands to give the most innovative and
affordable banking products to Bangladesh. Amongst banks, DBBL is the
largest donor in to social causes in Bangladesh. It stands as one of the
largest private donors involved in improving the country. DBBL is proud to be
associated with helping Bangladesh as well as being a leader in the country's
banking sector.
Dutch-Bangla Bank engineers enterprise and creativity in business and
industry with a commitment to social responsibility. "Profits alone" do not
hold a central focus in the Bank's operation; because "man does not live by
bread and butter alone".
Dutch-Bangla Bank dreams of better Bangladesh, where arts and letters,
sports and athletics, music and entertainment, science and education, health
and hygiene, clean and pollution free environment and above all a society
based on morality and ethics make all our lives worth living. DBBL's essence
and ethos rest on a cosmos of creativity and the marvel-magic of a charmed
life that abounds with spirit of life and adventures that contributes towards
human development.
Dutch-Bangla Bank believes in its uncompromising commitment to fulfill its
customer needs and satisfaction and to become their first choice in banking.
Taking cue from its pool esteemed clientele, Dutch-Bangla Bank intends to
pave the way for a new era in banking that upholds and epitomizes its
vaunted marques "Your Trusted Partner
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Shahjalal Islami Bank Limited (SJIBL) commenced its commercial operation in
accordance with principle of Islamic Shariah on the 10th May 2001 under the
Bank Companies Act, 1991. During last eight years SJIBL has diversified its
service coverage by opening new branches at different strategically
important locations across the country offering various service products both
investment & deposit. Islamic Banking, in essence, is not only INTEREST-
FREE banking business, it carries deal wise business product thereby
generating real income and thus boosting GDP of the economy. Board of
Directors enjoys high credential in the business arena of the country,
Management Team is strong and supportive equipped with excellent
professional knowledge under leadership of a veteran Banker Mr.
Muhammad Ali.
To be the unique modern Islami Bank in Bangladesh and to make significant
contribution to the national economy and enhance customers' trust &
wealth, quality investment, employees' value and rapid growth in
shareholders' equity.
The banks perform its banking business with a view to accomplishing mission
of providing quality services to customers. Setting high standards of
integrity, making quality investment, ensuring sustainable growth in
business, ensuring maximization of Shareholders' wealth, extending our
customers innovative services acquiring state-of-the-art technology blended
with Islamic principles ensuring human resource development to meet the
challenges of the time.
Shahjalal Islami Bank Ltd follows strategies to strive for customer’s best
satisfaction & earn their confidence, to manage & operate the Bank in the
most effective manner, to identify customers needs & monitor their
perception towards meeting those requirements, to review & updates
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policies, procedures & practices to enhance the ability to extend better
services to the customers.
Depository and Lending services
Accepting deposit from interested customers and lending money to
interested public is the main function of a bank. To convince customers
various banks offer different types of deposits and loans. In this section we
have discussed different types of deposits and loans.
Sonali bank
The loans and advances made by sonali bank ltd may be classified into
several classes. These categories are briefly discussed below:
Small loan:
Sonali bank Bangladesh ltd. Provides small loan for various purposes.
On the basis of purpose small loan of SBL can be classified into
following classes:
General small loan
Staff small loan
Special small loan program
Small trading loan
Rural small trading loan scheme
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House Building Loan:
SBL Home Loan facility will assist one in purchasing a new apartment
or renovate the existing home. SBL provides two types of house
building loan. These loans are as follow:
General house building loan:
Stuff house building loan
Working capital loan:
SBL provides loan and advances for financing working capital. These
loans may be following types on the basis of purpose and nature:
Working capital to industries (hypothesis)
Working capital to industries(pledge)
Working capital to agro based industries (hypothesis)
Working capital agro based industries(pledge)
Loan under different scheme :
Loan under SB industrial credit scheme.
Loan under external credit program
Loan under SB agro based industrial credit scheme
Loan under imported merchandise.
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Others:
Besides mentioned above, sonali bank ltd provides following loan and
advances:
Demand loan
Current account barter
Loan against trust receipt
Forced loan against back to back LC
Bridge financing
Term loan to banks and NBFI.
Deposits:
Like other banks sonali bank ltd receives money as following traditional
deposits:
Fixed deposit
Short term deposit
Savings deposit
Current deposit
Along with these reported deposit sonali bank has some new deposit
product which mobilize more savings. These new scemes are as
follows:
SDS:
It stands for Sonali Deposit Scheme. It’s a special deposit scheme
which facilitates the more saving of employees of Sonali Bank.
EDS:
It stands for Education Deposit Scheme. This deposits scheme
facilitates savings for education.
14
MDS:
It stands for Medicare Deposit Scheme. This scheme collects savings
for using medial purposes.
RDS:
It stands for Rural Deposit Scheme. This scheme mobilizes savings
from rural people.
MSS:
It’s the short name of Marriage Deposit Scheme. In this scheme,
depositors deposit money for bearing the cost of marriage.
SJIBL
Loans and advances:
Investment made by Shahjalal Islami Bank Ltd may classified into following
catagories on the basis of diferent sectors:
Small & Medium Enterprise Investment
Small Business Investment
Housing Investment
Household Durable
Car Investment
CNG Conversion Investment
Overseas Employment Investment
Investment Scheme for Doctors
Investment Scheme for Executives
Investment Scheme for Marriage
Investment Scheme for Education
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Shahjalal Islami Bank Ltd makes investment in above mentioned sectors but
in islamic mode. In islamic mode the lebell of loan items and features are
different traditional baking system which are disscussed below:
Bai Mechanism:
Bai means purchase and sale of goods in cash or on credit or in advance at
an agreed upon profit, which may or may not be disclosed to the client.
Majority of investments of Islamic banks are extended through this
mechanism. A good number of investment products have been designed to
facilitate mainly working capital financing which goes as follows:
Bai-Murabaha Murabaha LC (Sight/Deferred):
Through this mode of indirect facility, the bank facilitates import of goods of
the client at fixed rate of service charge (LC commission) on invoice value.
LC may be opened at 100% cash or at a different ratio.
Murabaha Post Import TR:
This is post import finance under the principle of “Bai”, extended to retire
Shipping Documents under LC opened. We buy the imported goods and sell
the same to the importer at a cost plus an agreed upon profit repayable
today or on some date in the future in lumpsum or by installments. Usually
payment is made by lumpsum from the sale proceeds of the consignment.
Possession of goods remains with the client. Collateral security is usually
obtained to secure the finance.
Murabaha Post Import Pledge:
As like as Murabaha Post Import TR with an exception to security, Goods
remain under the control of the Bank. Collateral security may or may not be
obtained.
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Bai-Muajjal Bai-Muajjal Commercial TR:
It is an agreement between bank and client whereby bank delivers goods to
the client upon deferred payment, i.e. the client shall pay the price at some
future date at a time, by lump sum or by installment. Under this mode of
investment, bank is not supposed to disclose cost price and profit separately.
Goods are delivered on trust and Trust Receipt is obtained for legal
implication.
Bai-Muajjal (Real Estate):
Mode of operation and principle of this product are alike Bai-Mujjal
Commercial TR. Difference is with the purpose, i.e. the facility is only
extended against construction or purchase of building, apartment etc.
Bai-Muajjal (WES Bill):
Investment facility under this Mode is extended to liquidate ABP liability at
maturity, when the client can not liquidate the liability as a result of non-
repatriation of the related export proceeds.
Bai-Muajjal (Term):
Under this mode of investment, term facility is given to meet client’s
requirement, which is repaid by a specific repayment schedule. Purpose is a
bit different, such as to meet BG claim, etc.
Bai-Salam Bai-Salam (PC):
This is export finance. Bai-Salam is a term used to define a sale in which the
buyer makes advance payment, but the delivery is delayed until some time
in the future. Usually the seller is an individual or business and the buyer is
the bank.
17
The Bai-Salam sales serve the interest of both parties:
The seller- receives advance payment in exchange for the obligation to
deliver the commodity at some later date. He benefits from the salam
sale buy locking in a price for his commodity, thereby allowing him to
cover his financial needs whether they are personal expenses, family
expenses or business expenses.
The purchaser benefits because he receives delivery of the commodity
when it is needed to fulfill some other agreement, without incurring
storage costs. Second, a Bai-Salam sale is usually less expensive than
a cash sale. Finally a Bai-Salam agreement allows the purchase to lock
in a price, thus protecting him price fluctuation.
Depository services:
Shahjalal Islami Bank Ltd receive money as following deposit :
Mudaraba Monthly Income
Mudaraba Double Money
Mudaraba Monthly Deposit
Mudaraba Millionaire
Mudaraba Haji Deposit
Mudaraba Housing Deposit
Mudaraba Small Business
Mudaraba Cash Waqf Deposit
Mudaraba Lakhopoti Deposit
Mudaraba Bibaho Deposit
Mudaraba Mohor Deposit
Mudaraba Shikhkha Deposit
Mudaraba Special Term Deposit
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BASIC Bank Ltd.
Basic bank is one of the pioneer specialized banks in our country. It focuses
mainly flourishing small industry sector of the country. Though it is a
specialized bank for small industry and cottage its banking range includes
something more. Here loan and deposit items of basic bank are presented
below along with features of them.
Loan and advances:
Agricultural loan:
The loan provided to the agriculturists. It is mainly provided for the purpose
of purchasing land, equipment etc. The basic type of agricultural loan is
labeled as Primary Products. The interest rate of this product is 10.00%.
Industrial term loan:
These types of loan are provided for development of agro based industries,
micro industries, small scale industries medium scale industries, large scale
industries and small and medium scale industries of NBFI.
Though all types of loans are provided for industrial development but the
interest rate among them vary which are shown below:
19
Types of industrial term loan Interest rate
Agro based industries 11.50%
Micro industries 11.50%
Large scale industries 12.50%
Small scale industries 13.00%
Medium scale industries 13.00%
Credit to NBFI for small and medium scale industries 13.00%
Working capital loan (industrial):
Basic bank provides these types of loan to sectors mentioned in previous
point. But interest rate varies among the sectors as well as compared with
Industrial term loan. Different interest rates are shown in following table:
Types of industrial term loan Interest rate
Agro based industries 12.00%
Micro industries 13.50%
Large scale industries 13.00%
Small scale industries 13.00%
Medium scale industries 13.00%
Credit to NBFI for small and medium scale industries 13.00%
Export loan:
BASIC Bank provides two types of export loans. One is direct export loan and
other one is advanced against inland documentary bills accepted by banks.
Again direct export loan may be classified under two categories. One is PC
and other one is ECC. Advanced against inland documentary bills are mainly
20
two types. One is loan payment in foreign currency an other one is loan
payment in local currency. The interest rate among thee types of loan varies
which are presented in following table:
Types of export loan Interest
rate
Direct export
1. PC 7.00
2. ECC 7.00%
Advanced against inland documentary bills accepted by banks
1. Payment in foreign currency 12.00%
2. Payment in foreign currency 13.00%
Commercial loan:
The sectors provided commercial loan by BASIC Bank can be classified as
Small Enterprise, Medium Enterprise, Large Enterprise and Trade Financing
and other short term and demand loan. Here trade financing also includes
import financing. Interest rate of commercial loan provided to all sector is
same that is 13.00%
Advance against Work Order :
It is a type of loan provided by basic bank ltd. Includes contractor finance. It
bears relatively higher interest rate that is 14.75%.
21
Over draft :
Basic bank provides overdraft facilities against banks own fixed deposit,
other banks fixed deposit, govt. bonds and securities and unit certificate or
share. The interest rates of them vary which are shown in following table:
Over draft Interest rate
Against banks own fixed deposit 2.00% above FDR rate
Against other banks fixed deposit 14.755
Against Govt. bonds and securities 13.00%
Against unit certificate or share 14.00%
Consumer loans:
As a part of consumer financing basic bank provides house loan, transport
loan and others. The interest rates among them vary which are presented
below:
Consumer loan Interest rate
House loan 13.00%
Transport loan 14.75%
Others 14.75
Wholesale loans:
Basic bank also provides wholesale financing NGO for micro credit and other
special programs at a rate of 11.50%.
22
Deposits:
Fixed deposits:
Basic bank receive fixed deposit for four different durations. These are 3
months duration, 6 months duration, 12 month duration, and 24 months. The
interest rates of fixed deposit vary based on the duration which is shown in
following table:
Fixed deposit Interest rate
3 month duration 7.00%
6 month duration 7.25%
12 month duration 7.50%
24 month duration 7.75%
Saving deposits:
BASIC Bank receives money as saving deposits which provide 6.60% interest
to the depositors.
Short term deposit:
Depositors can make short term deposits on BASIC Bank which provides
4.5% interest to the depositors.
Basic fortune:
The deposit pension scheme of BASIC Bank is known as BASIC FORTUNE.
DBBL23
Deposits of Dutch-Bangla Bank Ltd.:
DBBL offers different categories of deposits to cut the needs of customers.
There product categories are:
Retail deposits
Corporate deposits.
Retail deposits :
Retail deposits are provided to non corporate customers. Retails Deposits are
of various types:
Saving deposit:
They provide 4.5% interest on this deposit on minimum balance.
Current deposit:
No interest is provided for current account.
Foreign currency Deposit(current deposit):
This type of deposit depends on currencies like:
USD
URD
Exporter foreign currency deposit:
This type of deposit is offered to those who open letter of credits.
Residual foreign currency deposit(for NRB services)
Non-Resident convertible foreign currency deposit
Pension deposit:
It is offered for minimum 3 years and maximum 10 years. Interest rate is
8.75%.
Deposit plus scheme:
24
It is offered for minimum 3 years and maximum 10 years. Interest rate is
8.75%. Minimum amount is 500 and maximum is 5000.
Children education service scheme
Power account:
It is offered to stuff of the bank.
Salary based deposit:
It is offered to employees of another company but collect salary from DBBL.
Corporate Deposits:
These types of deposits are actually offered to corporate customers. Bank
actually keeps secrate these types of deposit.
Loans of Dutch-Bangla Bank Ltd.:
DBBL offers different types of retail and corporate loans. These are given
below:
Retail loans:
Different types of retail loans are given below:
Power account:
Power account is consists of two types of loan account:
Staff loan:
Staff loan is offered to staff only
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Salary based loan:
It is offered to staffs against there salary.
Requirements for this type of loan given below:
2 copy photographs
Salary certificate
National ID cards
TIN certificate
Full secured loan:
Borrowers need to keep same amount of money as loan
security against there loan account. Interest Rate is 9%.
Other types of loans and their interest rate are given below:
Loans TypeInterest Rate(in percentage)
Overdraft account (OD-ATM) 18
Cash credit (hypo) 13
Overdraft against financial obligation 14.75
General Clean Line 17.50
General power account 17.50
Power line 15.50
Power plus line 15
General auto line 15
Full secured loan 9
26
HSBC Bank
Depository services:
Time Deposit:
The monthly interest bearing Time Deposit from Hsbc bank is a
hub from where customer can earn interest on a monthly basis with the
security of a fixed deposit account. It provides the account holder with the
benefits of attractive interest rates, security, convenience and flexibility.
Benefits:
Monthly interest earned can be transferred to another
nominated account
Better rates than normal savings account
Higher rate than 1- month time deposit account's rate
Free ATM Card for new accounts
Eligibility:
27
Any individual or joint account holder having or opening a Time
Deposit account worth BDT 500000(minimum) with HSBC is eligible to apply
on:
Terms and condition:
A minimum deposit balance of BDT500000 is needed to
open the Time Deposit account.
The interest eared will be fortified if the Time Deposit account is prematurely
encashed or closed before the completion of the month.
Savings plus:
With HSBC,s Savings Plus Account, the account holder can earn
interest from the account on a monthly basis rather than at the end of six
months.
Benefits:
Interest will be paid at the end of each month instead of six months.
ATM card with daily withdrawal limit of BDT50,000.
Free phone banking facilities are provided.
Free personalized cheque book will be provided.
Monthly statements will also be provided.
Eligibility:
Any resident Bangladeshi above 18 years of age is eligible to open
a Savings plus Account.
Terms and condition:
28
Minimum opening balance is BDT 500,000.
Interest is payable only for balance of BDT 500,000 or above.
Smart savers plan:
In life, one must enjoy today and plan for tomorrow, and be
prepared for the unforeseen challenges. With this in mind, HSBC has
designed an easy-to-manage, unique savings plan that enables the account
holder to grow an initial investment in 3 years, and still draw against the
savings in times of need.
No sign-up fee
Attractive savings interest rates and competitive rates on Overdraft
facilities
You can purchase as many units as you desire
The tenure of the plan is 3 years
Ideal units of BDT5, 000; BDT50, 000; BDT100, 000 & BDT500, 000.
Convenient monthly installments of BDT1, 000; BDT2, 400; BDT4, 700.
Overdraft facilities up to 90% against your deposit with a minimum
amount of BDT90,000
Terms and condition:
To earn the maturity value, all the installments must be paid regularly
Final maturity value is subject to tax and excise duty as per local
regulations.
Children savings plan:
Children are the most important term in parent’s life.
Many times parent can not fulfill their requirements. Now with HSBC children
savings plan one can secure their children’s future. Offering exclusive
benefits catered towards child, this savings plan is a perfect fit to one’s
lifestyle.
Benefits:
29
Attractive interest rates
No sign up fee
No penalty for missed installment.
This savings plan can be purchased in multiple units.
Initial deposit of BDT10000 with monthly deposits of BDT5000
Any tenure up to the child being 18 years of age.
Terms and condition:
Bank reserves the right to close the plan if the customer misses 3
consecutive installments.
If the plan is closed within one year, customers will get the deposited
amount only and no interest will be paid for the plan.
If the plan is closed after one year, customers will get the deposited
amount along with the interest at the prevailing savings rate during
the time of closure.
Discontinuation fee will be charged if the plan is closed before two
years.
Education savings plan:
Benefits:
Attractive interest rates
No sign-up fee
No penalty for missed installment
Can be purchased in multiple units
Initial deposit of BDT10,000 with monthly deposits of BDT5,000 (1
unit)
Flexible tenure of 1, 2 or 3 years.
Terms and condition:
30
Bank reserves the right to close the plan if the customer misses
3 consecutive installments.
If the plan is closed within one year, customers will get the
deposited amount only and no interest will be paid for the plan.
If the plan is closed after one year, customers will get the
deposited amount along with the interest at the prevailing
savings rate during the time of closure.
Discontinuation fee will be charged if the plan is closed before
end of the tenure.
Lending services:
Home loan:
The decision to buy or renovate a home is one of the most
important investment decisions anyone will ever make. HSBC's Home Loan
facility will assist one in purchasing a new apartment or renovate the
existing home.
Features:
No personal guarantee or cash security
Wide range of loan amounts -
- Minimum: BDT750,000
- Maximum: 80% of the total value of apartment (subject to a cap of
BDT7,500,000)
Financing for the registration cost
Competitive interest rates
31
Interest is calculated on monthly reducing balance as opposed to
annual reducing balance, giving you a lower monthly installment
amount
Low processing fees
Clubbing of income is allowed for immediate family members’ i.e.
Husband-Wife, Father-Child, mother-Child etc.
Repayments by monthly installments of up to 20 years or prior to
borrower's age reaching 60 years or retirement date, whichever is
earlier
Options for partial prepayment and early settlement
Requirements:
Age of the property must not be more than 20 years
Property valuation and vetting cost must be borne by the customer
Registered mortgage in favor of HSBC and original title deed
Irrevocable General Power of Attorney (IGPA) in favor of HSBC
Property insurance covering fire, earthquake, flood, and cyclone
Documents stated in the Application Form
Car loan:
Features:
No personal guarantee or cash security
Wide range of loan amounts -
- Minimum: BDT100,000
- Maximum: 75% of brand new car value or 70% of reconditioned car
value (up to a maximum of BDT2,000,000)
Competitive interest rates
32
Interest is calculated on monthly reducing balance
Low processing fees
Flexible repayment schedule of 12, 24, 36, 48 or 60 months.
Requirements:
Manufacturing year of the car must be within 5 years of application date
The car must be covered under a comprehensive car insurance policy
Documents stated in the Application Form
Travel loan:
Feature:
No personal guarantee or cash security
Wide range of loan amounts -
- Minimum: BDT50,000
- Maximum: (Up to a maximum of BDT 500,000)
Competitive interest rates
Interest is calculated on monthly reducing balance
Low processing fees
Flexible repayment schedule of 12, 24, 36 or 48 months
Loan against partial security is also available
Requirements:
Travel quotation and other documents stated in the
Application Form.
Wedding loan:
Features:
No personal guarantee or cash security.
33
The loan amount ranges from BDT50,000 to BDT1,000,000 or a
maximum of four times of your monthly income, whichever is
lower.
If you are an Auto Pay customer, you can get six times or if you
are a CEPS customer you can get ten times of your monthly
income.
Competitive interest rates.
Low processing fees.
You can repay the loan in 12, 24, 36 or 48 months.
Loan against partial security is also available.
Professional loan:
HSBC, backed by local expertise and global financial
knowledge, offers this low cost solution to their valued customers.
Features:
No personal guarantee or cash security
Wide range of loan amounts -
- Minimum: BDT50,000
- Maximum: (Up to a maximum of BDT 1,000,000)
Competitive interest rates
Interest is calculated on monthly reducing balance
Low processing fees
Flexible repayment schedule of 12, 24, 36 or 48 months
Loan against partial security is also available
Student loan:
34
Features:
No personal guarantee or cash security.
Loan amount ranging from BDT50, 000 to BDT750, 000 or a
maximum of four times of your monthly income, whichever is
lower.
If you are an Auto Pay customer, you can get six times or if you
are a CEPS customer you can get ten times of your monthly
income up to a maximum of BDT750, 000.
Competitive interest rates. Low processing fees.
You can repay the loan in 12, 24, 36 or 48 months.
Loan against partial security is also available.
Facility for opening a student file is also available.
To open a student file, the student has to provide a copy of the
college/university admission paper and proof of formal
acceptance by student along with other documents
General business measures
With a view to comparing five banks we will first pay a deep look into the
general business of these banks. That is their average and total deposits and
loans, growth rate, fluctuation from the average or expected deposit or loan
over the five years.
Total Deposit (In Millions)
Banks 2004 2005 2006 2007 2008 AverageSBL 252234 277079 302303 328997 364386 304999.8DBBL 21067.56 27241.11 40111.54 42111.45 51575.67 36421.21HSBC 19917.73 24363.01 32876.73 44500.88 51163.86 34564.44SIBL 9092 12205 18091 22618 36484 19698BASIC 15509.18 22325.58 24084.65 31947.98 38368.23 26441.12
35
Bank
2004 2005 2006 2007 2008 Average0
50000
100000
150000
200000
250000
300000
350000
400000
SBLDBBLHSBCSIBLBASIC Bank
The above table shows the total deposit and average deposit of five banks
over five years. Sonali bank has the highest deposit as it has greatest
number of branches. The deposit other banks also rising. The deposit of
DBBL and HSBC is almost same on an average. The deposit of all banks has
an increasing trend. So, we can expect it will increase in the following years.
Growth of Deposit (In percentage)
Banks 2005 2006 2007 2008 AverageSBL 9.85 9.10 8.83 10.76 9.64DBBL 29.30 47.25 4.99 22.48 26.01HSBC 22.32 34.95 35.36 14.97 26.9SIBL 34.24 48.23 25.02 61.31 42.2BASIC Bank 43.95 7.88 32.65 20.09 26.14
36
2005 2006 2007 2008 Average0
10
20
30
40
50
60
70
Growth rate of deposit
SBLDBBLHSBCSIBLBASIC Bank
Year
Grow
th ra
te
The above table represents the growth rate of the selected banks in each
year. Though the total deposit of Sonali bank was the highest, their growth
rate is lowest in comparison to other four banks. In the year 2006, the
growth rate of DBBL and SIBL were same and higher than others. But in the
year 2007, growth rate of SIBL went down and again in the year 2008 they
were in the peak. These situation shows high fluctuation of deposit growth
and therefore risk of SIBL. But on an average SIBL has highest growth rate.
Fluctuation of Deposit (Standard deviation)
(In million)
Banks Fluctuation (STD)
SBL 43799.71.DBBL 12202.96HSBC 13188.23
37
SIBL 10741.4BASIC Bank 8863.55
DBBL HSBC SIBL BASIC Bank0
2000
4000
6000
8000
10000
12000
14000
Fluctuation (STD)
Fluctuation (STD) 43799.71.
The above table and graph postulates the fluctuation of deposit from the
average or expected deposit. The fluctuation of deposit is calculated by
standard deviation. The more the STD the more risky the deposit is.
From the above chart we can see that the standard deviation of SBL is higher
than the other banks. Which resembles their riskier deposit and over the five
year their deposit fluctuated a lot from the expected deposit. The fluctuation
of basic bank is the lowest, which shows that their low risk. The STD of DBBL
and SIBL is almost same.
Total Loan (In Millions)
Banks 2004 2005 2006 2007 2008 AverageSBL 168283 227010 241029 206348 231166 214767.2DBBL 14976.04 20349.42 28325.34 28369.58 41016.62 26607.4HSBC 17301.22 21436.49 26105.28 33807.70 34302.74 26590.69SIBL 7149 10590 15516 20617 32919 17358.2
38
BASIC Bank 1200.15 15339.35 19000.00 22263.35 27269.13 19174.4
2004 2005 2006 2007 2008 Average0
50000
100000
150000
200000
250000
SBLDBBLHSBCSIBLBASIC Bank
The above table and graph shows the total loan of the five banks. Like the
total deposit, the total loan of Sonali bank was the highest among the five
banks. In the loan deposit ration section we have seen that this bank gives
above 90% of its deposit as loan, which is risky. Other banks have a rising
trend of loan throughout the five year. On an average the total loan of DBBL
and HSBC is almost similar.
Growth of Loan (In percentage)
Banks 2005 2006 2007 2008 AverageSBL 3.5 6.1 -14.4 12 1.8DBBL 35.88 39.19 0.15 44.58 29.95HSBC 23.90 21.78 29.51 1.46 19.16
39
SIBL 48.13 46.52 32.88 59.67 46.8BASIC Bank 27.83 23.86 17.18 22.48 22.84
2005 2006 2007 2008 Average
-20
-10
0
10
20
30
40
50
60
Growth rate of total business
SBLDBBLHSBCSIBLBASIC Bank
Year
Grow
th ra
te
In the above table we can see the growth rate of loans and advances of the
banks. Over the five year the growth rate of SIBL was highest than others
which resembles their increase in profit margin. The growth rate of Sonali
bank was the lowest and in the year 2007, their total loan declined so the
growth rate becomes negative. The growth rate of DBBL and HSBC remained
stable over five years, while basic bank has a decreasing trend.
Fluctuation of Loans and Advances (In million)
Banks Fluctuation (STD)
SBL 28897.03DBBL 9850.54
40
HSBC 7494.28SIBL 10077.06BASIC Bank 5942.54
SBL DBBL HSBC SIBL BASIC Bank0
5000
10000
15000
20000
25000
30000
Fluctuation (STD)
Fluctuation (STD)
The above table and graph postulates the fluctuation of loan from the
average or expected loan. The fluctuation of loan is calculated by standard
deviation. The more the STD the more risky the loan is.
In the above table we can see that the STD is highest for SBL. Though their
loan was highest than others, their fluctuation or risk of loan is also higher.
The STD of Basic bank is the lowest, which means that their loan varies little
from the mean of expected Loan. HSBC also has a low fluctuation of loan,
while the STD of HSBC and SIBL is close.
Total Business (In Millions)
Banks 2004 2005 2006 2007 2008 AverageSBL 420517 504089 543332 535345 595552 519767
41
DBBL 36043.62 47590.53 68436.88 70480.73 92592.29 63028.81HSBC 37218.95 45799.50 58982.01 78308.58 85466.60 61155.13SIBL 16241 22795 33607 43235 69403 37056.2BASIC Bank 27509.33 37664.93 43084.65 54211.33 65637.36 45621.52
2004 2005 2006 2007 2008 Average0
100000
200000
300000
400000
500000
600000
SBLDBBLHSBCSIBLBASIC Bank
The above table shows the total business (Deposit + Loan) of the bank. A bank mainly deals with deposit and loan. It collects deposit and gives the money to other people on interest as loan. So, the loan and deposit of a bank together represent a bank’s total business.
As the deposit and loan is highest of the five due to greater branch, the total business of Sonali bank is higher than the other five.other banks has a rising trend. The value of DBBL and HSBC is much close.
Growth of Total Business (In percentage)
Banks 2005 2006 2007 2008 AverageSBL 19.8 7.7 1.47 11.2 10.04
42
DBBL 32.03 0.44 2.99 31.37 16.71HSBC 23.05 28.78 32.77 9.14 23.44SIBL 40.35 47.43 28.65 60.53 35.39BASIC Bank 36.92 14.39 25.83 21.08 24.56
2005 2006 2007 2008 Average0
10
20
30
40
50
60
70
SBLDBBLHSBCSIBLBASIC Bank
The above table contains the growth rate of total business of the five banks.
The growth rate of SIBL remained at the top on an average for five year and
it has a rising trend. DBBL has a stable growth rate over the years, while rate
of HSBC fluctuates. Sonali bank has the lowest growth rate of total business
on an average. The rate of Basic bank has a decreasing trend.
Operating income
43
2004 2005 2006 2007 2008 Average
0
1000
2000
3000
4000
5000
6000
7000
8000
Operating income
SBL
BASIC
HSBC
DBBL
SIBL
Year
Val
ue
The term operating income refers to the income generated from operating
activities. The above graph shows the operating income of each bank.
According to the graph, DBBL has the highest operating income on an
average of the five banks. The operating income of DBBL is also rising year
to year. But the operating income of Sonali bank has a decreasing trend,
which is the indicator of their less efficiency. The income of Basic bank and
SJIBL is also increasing though it is not that much high as HSBC and DBBL.
44
Banks 2004 2005 2006 2007 2008 Average
SBL 1619.9 4247.0 3005.8 3963.6 952.5 2757.6BASIC 951.87 1244.22 1554.45 1612.05 2351.39 1542.8HSBC 1622.83 2451.53 3275.71 4194.40 5250.63 3359.0
3DBBL 2367.00 3453.00 5181.00 6367.00 7276.00 4928.8SIBL 215.744 67.711 1072.27 1628.82 2322.99 1061.0
7
Growth rate of operating income
Banks 2005 2006 2007 2008 Average SBL 316.13 -24.16 41.29 61.93 98.8BASIC 30.7 24.93 4.2 45.05 26.22HSBC 51.07 33.62 28.04 25.18 34.48DBBL 45.12 50.83 22.90 14.28 33.28SIBL -68.62 1497.78 51.90 42.62 380.92
2005 2006 2007 2008 Average -200
0
200
400
600
800
1000
1200
1400
1600
Groth rate of operating income
SBLBASICHSBCDBBLSIBL
Year
Gro
wth
rat
e
The table and graph on the top shows the growth rate of operating
income of studied five banks over the five years. SBL or sonali bank
had a high growth rate in the year 2005 but the growth rate became
negative in the next year. They recovered the decrease in year 2007
and 2008. SJIBL faced a negative growth rate in the year 2005 but
their operating income jumped in the next year. For this huge
increase in 2006, the average growth rate of operating income of
SJIBL became highest. The growth rate of HSBC has a decreasing
trend.
Performance measures
The performance of a bank can be measured on the basis of its profitability, liquidity, solvency, debt management, management efficiency and trend of
45
deposits and loans. In the following section we compared the performance of our studied banks on the basis of above mentioned criteria.
Profitability:
Profitability ratios are used to evaluate firms profit with respect to a given
level of sales, a certain level of assets, or the owners’ investment. Without
profits, a firm cannot attract outside capital. To compare the performance of
our studied banks, we used some profitability ratios in this section. These are
given below.
Return on Asset Ratio (In percentage)
Banks 2004 2005 2006 2007 2008SBL 0.33 1.15 0.85 0.96 0.33DBBL 1.06 1.29 0.93 1.01 1.49HSBC 2.14 2.76 2.92 2.07 3.00SIBL 2.22 2.60 2.17 1.76 4.85BASIC Bank 1.30 0.83 1.94 1.23 1.68
2004 2005 2006 2007 20080
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Return on asset
SBLDBBLHSBCSIBLBASIC Bank
Year
Ratio
Return on asset is a profitability ratio which measures the amount of profit
earned in terms of assets that they own. The higher the ratio the more
effective the company is in utilizing its assets.
46
The above chart suggests that Shahjalal Islami Bank has the highest ROA
ratio in 2008 but their ratio fluctuates a lot, as in the year 2007 ROA was
1.76%. Sonali Bank Ltd has the lowest ROA which dictates that they are
inefficient in utilizing their assets. DBBL and basic bank also have the lower
ROA ratio but they have an increasing trend over the years. Among all banks
HSBC has a stable ROA over the five year though it is not the highest.
Return on Investment Ratio (In percentage)
Banks 2004 2005 2006 2007 2008SBL 4.93 6.76 5.20 5.34 7.03DBBL 6.22 5.87 7.30 9.48 9.69HSBC 33.96 35.78 32.17 69.25 18.73SIBL 12.34 13.21 14.08 14.68 15.10BASIC Bank 9.81 7.89 5.78 6.59 6.50
2004 2005 2006 2007 20080
10
20
30
40
50
60
70
Return on Investment
SBLDBBLHSBCSIBLBASIC Bank
Year
Rati
o
Return on investment ratio is the ratio of money gained or lost on an
investment related to the amount of money invested. It is measured by net
income to total investment.
The above chart shows that HSBC Bank has the higher ROI ratio compared to
other banks throughout the five years. HSBC was in the peak in 2007. Other
banks have almost similar ratio in all the five years. But the interesting thing
is that in the year 2008, ROI of all banks went down, global economic crisis
may be the reason. Though the ROI of all other banks is lower than that of 47
HSBC, they have an increasing trend over the years except basic bank,
which has a decreasing trend.
Return on Equity Ratio (In percentage)
Banks 2004 2005 2006 2007 2008
SBL 2.6 3.3 -12.7 4.48 9.46
DBBL 26.03 31.01 24.07 24.02 29.58
HSBC 27.63 21.12 24.21 25.30 24.46
SIBL -176.07 34.46 38.44 23.21 25.58
BASIC Bank 19.59 16.54 24.74 10.89 18.43
2004 2005 2006 2007 2008
-200
-150
-100
-50
0
50
Return on equity
SBLDBBLHSBCSIBLBASIC Bank
Year
Ratio
The ratio of net income to stockholder’s equity measures the return on
equity. It shows what percent the bank earns in terms of only on its equity
rather than on asset which also covers total liability. It is the most reliable
measure of performance of a firm.
From the above chart, we can see that in the year 2004, shah jalal Islami
bank has a negative ROE ratio but they recovered it later earning a favorable
48
ratio. Sonali bank has a very low return on equity and in the year 2006, they
have a negative ROE, which shows they had a net loss in that year. But their
ROE is increasing from the year 2007. The ROE of HSBC and DBBL is almost
same but among the banks, the ratio of HSBC is highest in the year 2004,
which shows that they earn 27% of their net income from their equity
capital. But it decreased in the later years, while ROE of DBBL got the peak
in year 2008 earning 29.58%.
Earnings per Share
Banks 2004 2005 2006 2007 2008SBL 0 0 0 10.82 25.68DBBL 116.93 181.97 179.18 237.37 82.17HSBC 0 0 0 0 0SIBL -204.91 33.63 49.50 28.81 36.41BASIC Bank 43.18 35.21 58.64 21.60 41.99
2004 2005 2006 2007 2008
-250
-200
-150
-100
-50
0
50
100
150
200
250
Earning per share
SBLDBBLHSBCSIBLBASIC Bank
Year
Valu
e (In
taka
)
The term earnings per share represents the portion of a company’s earnings,
net of taxes and preferred stocks dividends, that is allocated to each share of
common stock. It often used as the barometer to gauge a company’s
profitability per unit of shareholder ownership. As Sonali Bank Ltd and HSBC
Bank do not operate in the share market, they do not have earning per share
49
in the above mentioned years. The EPS of DBBL Bank is in an increasing rate
till 2007 but it declined in 2008. Though they have higher rate compared to
other banks. It is mentionable here that in the year 2004 Shahjalal Islami
Bank had the negative value which again represent their loss of that year
though they recovered the position in onwards year. BASIC Bank had almost
the similar rate till 2006 but it fell in 2007 but recovered in 2008.
Solvency :
Solvency ratios measures how solvent the bank is in paying the liabilities or
the capability of a Bank to pay off its liabilities in time. In this section we
measured and compared the solvency of the banks. The following ratios are
used to measure solvency.
Capital Adequacy Ratio (In percentage)
Banks 2004 2005 2006 2007 2008
SBL 1.8 1.8 6 12.4 12.6DBBL 10.45 10.16 10.05 11.76 10.96HSBC 12 20 21 24 26SIBL 4.69 8.70 10.39 16.42 13.81BASIC Bank 12.49 11.77 11.98 12.91 12.02
2004 2005 2006 2007 20080
5
10
15
20
25
30
Capital Adequecy Ratio
SBLDBBLHSBCSIBLBASIC Bank
Year
Rati
o
50
Capital adequacy ratio is the ratio which determines the capacity of the bank
in terms of meeting the time liabilities and other risks such as credit risk,
operational risk, etc. The required CAR in our country for banks is 10%.
From the above chart it is shown that, HSBC Bank has high CAR compared to
other banks throughout the five years but in the year 2004Basic bank has
little higher CAR than HSBC. So it suggests that they have that much
resources or asset to meet the liabilities in any given time than all other
banks studied. Though Sonali Bank Limited is the largest nationalized
commercial bank in Bangladesh, they couldn’t meet the minimum
requirement till the fiscal year 2006, but they recovered it in year 2007 and
2008 maintaining CAR of 12.4% and 12.6% respectively. CAR of BASIC Bank
and DBBL remained almost table throughout the five years. While DBBL’s
CAR ranges from 10-12% and Basic bank’s CAR ranges from 11-13%. There
is an increasing trend of Shahjalal Islami Bank Ltd till 2007 and it decreases
in 2008.
DEBT RATIOS:
The debt ratio measures the proportion of total assets financed by the firm’s
creditors. The higher this ratio, the greater the amount of other people’s
money being used to generate profits.
Debt to Asset Ratio (In percentage)
Banks 2004 2005 2006 2007 2008SBL 97.91 98.13 108.06 95.29 95.04DBBL 90 92 98 96 95HSBC 92.24 86.94 87.96 87.88 87.73SIBL 97.00 94.02 94.03 90.23 92.05BASIC Bank 92.32 93.64 92.39 93.30 93.61
51
2004 2005 2006 2007 20080
20
40
60
80
100
120
Debt to asset ratio
SBLDBBLHSBCSIBLBASIC Bank
Year
Ratio
Debt ratio is a financial ratio that indicates the percentage of a company’s
assets that are provided via debt. Companies with high debt to asset ratio
could be in high as they may not satisfy the demand of creditors. So, the
lower the debt to asset ratio the better the performance of the firm is.
All the banks are in almost the same position that indicates that none banks
in our country is risk free as they all contain high debt to asset ratio. In the
year 2006 sonali bank has the highest debt to asset ratio, which dictates that
in that year their debt offset their asset. In the year 2008 HSBC has the
lowest debt to asset ratio. Over the five year sonali bank has the highest
debt to asset ratio. It means most of its assets are financed from borrowed
funds.
Loan Deposit Ratio (In percentage)
Banks 2004 2005 2006 2007 2008
SBL 66.72 81.93 79.73 62.72 63.44DBBL 75.60 82.93 75.93 69.82 80.85HSBC 86.86 88.00 79.00 75.97 67.04SIBL 78.63 86.77 85.77 91.15 90.23BASIC Bank 77.37 69.74 78.89 69.69 71.07
52
2004 2005 2006 2007 20080
10
20
30
40
50
60
70
80
90
100
Loan deposit ratio
SBLDBBLHSBCSIBLBASIC Bank
Year
Ratio
The amount of a bank’s loans divided by the amount of its deposit is known
as the loan deposit ratio. The higher the ratio, the more the bank is relying
on borrowed funds, which are generally more costly than other sources of
fund. This ration also shows what percent of deposit is invested to the
market.
The above chart furnishes that the loan deposit ration of all the banks is very
much close throughout the five years. HSBC bank has a decreasing ratio,
which indicates that they are being less dependent on the borrowed funds
for investment. Shahjalal Islami Bank Ltd has an increasing ratio, they gave
90.23% of their deposit as loan which is much risky as they may not meet
the demand of fund by deposit. BASIC Bank has a stable and favorable ratio.
Sonali Bank Ltd had increasing ratio till 2006 and in the year they incurred a
huge net loss, higher loan deposit ratio may be a reason for this. But they
was able to decrease it in the year 2007 and 2008.
53
Market analysis
The performance of a company can also be measured on the basis of the
market the company holds on its target market than its competitors. For
better understanding in this section we will try to find out what portion of
deposit and loan our selected banks hold on its market area.
Market Share of Deposit (In percentage)
Banks 2004 2005 2006 2007 2008
SBL 44.12 44.13 45.85 46.6 47
DBBL 3.61 3.78 4.29 3.76 3.64
HSBC 22.85 22.33 25.74 25.75 25.6
SJIBL 5.76 6.43 7.71 8 10.35
BASIC 20.19 24.16 23.52 27.17 27.96
2004 2005 2006 2007 20080
5
10
15
20
25
30
35
40
45
50
SBL DBBLHSBCSIBLBASIC
From the above table we can see that Sonali bank alone holds over 44% of
the total deposit in national commercial bank sector and it has a rising trend
over the five years. In the year 2008 it held 47% market share. Among
private commercial banking sector DBBL holds little of the total market
54
where HSBC holds a huge share. The market share of SJIBL is increasing, so
does the market share of Basic bank.
Market share of loans & advances (In percentage)
Banks 2004 2005 2006 2007
SBL 44.16 53.59 56.74 49.19HSBC 25.06 27.21 26.56 25.63
DBBL 3.21 3.45 3.78 3.08
SJIBL 5.2 6.18 7.43 8.15
BASIC 11.12 13.89 15.54 17.22
2004 2005 2006 20070
10
20
30
40
50
60
SBLHSBCDBBLSJIBLBASIC
The above table shows the market share of loans and advances of five
banks. Sonali bank again holds the largest market share of loan in NCB’s. In
PCB, HSBC holds the largest market share. The market share of DBBL was
rising till 2006 but it decreased in the year 2007. In specialized banks,
Though Basic bank doesn’t hold a larger share but its market share of loan is
rising rapidly.
55
Trend analysis
Trends used to show how a company has done in the previous years and to
estimate how it will do in the near future in a particular area on the basis of
an independent variable that has a correlation with it.
In this section tried to show how the loan and deposit changes with the
change in interest income and interest expense respectively and what the
overall trend of studied banks is. We used linear regression to show the
trends.
Sonali bank:
Trend of loan (In million)
Year X (Interest income) Y (loan) Ŷ (Trend of loan)2004 9285.4 168283 192438.12005 11968.45 227010 226271. 62006 11962.87 241029 226201.22007 8962.09 206348 188361.22008 13101.86 231166 240563.9
9285.4 13101.860
50000
100000
150000
200000
250000
300000
Trend of loan
Trend of loan
X (interest income)
Ŷ=75
348.
57+1
2.61
x
56
The above graph shows the trend of loans and advances of sonali bank from
2004 to 2008 in relation to interest expense, where interest expense is
independent variable (X). The correlation between the two is 0.80, which
resembles that they have a strong positive correlation. The trend of loan is
rising but the rise is not at good pace in comparison with other banks. Total
amount of loan rises as interest income rises. Through coefficient of
determinants, we also found that 64% of (Y) of loan is accounted for interest
income. The intercept of the line is 75348.57, which means when interest
income (X) is zero the amount of loan will be 75348.57 million. The slope of
the line is 12.61. It indicates that an increase of taka 1 million interest
income will result in an increase of 12.61 million.
Trend of deposit (In million)
Year X (Interest expense) Y (deposit) Ŷ (predicted Y)2004 1078.81 252234 277979.82005 1141.41 277079 278426.82006 1503.94 302303 281015.32007 6625.39 328997 317582.72008 13965.92 364386 369994.4
1078.81 13965.920
50000
100000
150000
200000
250000
300000
350000
400000
TREND OF DEPOSIT
TREND OF DEPOSIT
X (interest expense)
Ŷ=27
0277
.1+7
.14x
57
In the above graph we have shown the trend line of deposits of Sonali bank,
where interest expense is the independent variable and deposit is the
dependent variable. The correlation between the two is 0.91, which
resembles a very strong correlation. Deposit increased as interest expense
increased. It means they increased their interest rate on deposit which
resulted in increased deposit. 83% of Deposit (Y) is accounted for interest
expense(X). The intercept of the line is 270277.1, which means when
interest expense (X) is zero the amount of deposit will be 270277.1 million.
The slope of the line is 7.14. It indicates that an increase of taka 1 million
interests will result in an increase of 7.14 million.
DBBL:
Trend of loan (In million)
Year X (Interest income) Y (loan) Ŷ (Predicted Y)2004 1845 14976.06 14611.192005 2684 20349.42 19803.532006 4054 28325.34 28282.072007 4879 28369.58 33387.772008 5455 41016.62 36952.47
1845 54550
5000
10000
15000
20000
25000
30000
35000
40000
Trend of loan
Trend of loan
X (Interest income)
Ŷ=31
93.0
02+6
.19x
58
The above graph shows the trend line of loans and advances of DBBL in
relation to interest income. The correlation between the interest income and
loan is 0.94, which means there is a very strong correlation between the
interest income and loans and advances. Moreover, 88% of Y is explained by
(x) of interest income. DBBL’s loan has a greater rising trend than that of
sonali bank. The predicted Y has risen from 14611.19 to 36952.47 within four
year. From the following graph we can predict that their loans will also rise in
the future years. The intercept of the line is 3193.002, which means when
interest income (X) is zero the amount of loan will be 3193.002million. The
slope of the line is 6.19. It indicates that an increase of taka 1 million interest
income will result in an increase of 6.19 million.
Trend of deposit (In million)
Year X (Interest expenses) Y (deposit) Ŷ (Predicted Y)
2004 3550 21067.56 24794.12
2005 3610 27241.11 32615.032006 3710 40111.54 45649.88
2007 3690 42110.15 43042.91
2008 3636 51575.67 36004.09
3550 36360
5000
10000
15000
20000
25000
30000
35000
40000
Trend of deposit
Trend of deposit
X(Interest expense)
Ŷ=-4
3794
3+13
0.34
8x
59
The reported graph shows the trend of deposit of DBBL in relation to interest
expense. The correlation between interest expense and deposit is 0.68 or a
moderate correlation and 46% of the change of deposit is accounted for
interest expense. Though deposit has a rising trend from 2004 to 2007, in
2008 the predicted y decreased. As the interest rate increased on deposit,
amount of deposit also increased. As the interest expense fall so do the
predicted Y. The intercept of the line is -43794, which means when interest
expense (X) is zero they will incur a loss of 43794 million. The slope of the
line is 130.35. It indicates that an increase of taka 1 million interests will
result in an increase of 130.35 million.
BASIC BANK:
Trend of Loan (In million)
Year X (Interest income) Y (loan) Ŷ (Predicted Y)2004 1355.59 12000.15 12655.822005 1781.04 15339.35 15255.862006 2278.55 19000 18296.292007 2866.57 22263.35 21889.852008 3829.43 27269.13 27774.16
1355.59 3829.430
5000
10000
15000
20000
25000
30000
Trend of loan
Trend of loan
x
Ŷ=43
71.4
17+6
.11x
60
The above regression line shows the trend of loan of Basic bank in respect to
interest income. With the rapid rise of interest income amount of loans and
advances also risen rapidly. The correlation between interest income and
loan is 0.99 which means there is a very strong correlation between the two
and 98% of the change of Y is accounted for the change of x according to
coefficient of determinants. The rise in loans of basic bank is much higher
than that of sonali bank but little less than DBBL. But we can predict the
increase will keep its pace in the next year. The intercept of the line is
4371.417, which means when interest income (X) is zero the amount of loan
will be 4371.417 million. The slope of the line is 6.11. It indicates that an
increase of taka 1 million interest income will result in an increase of 6.11
million.
Trend of Deposit (In million)
Year X (Interest expenses) Y (deposit) Ŷ (Predicted Y)2004 817 15509.18 18245.532005 984 22325.58 20110.572006 1315.86 24084.65 23816.772007 1928.47 31917.98 30658.362008 2708.92 38368.23 39374.39
817 2708.920
5000
10000
15000
20000
25000
30000
35000
40000
45000
Trend of deposit
Trend of deposit
X
Ŷ=91
21.3
2+11
.17X
61
The above graph shows the trend of deposit of Basic bank in relation to
interest expense. The correlation between interest expense and deposit is
0.98. Which dictates a very strong correlation and 96% of the change of
deposit is accounted for interest expense. The deposit has a rising trend. As
the interest rate increased on deposit, amount of deposit also increased. The
intercept of the line is 9121.32, which means when interest expense (X) is
zero the amount of deposit will be 9121.32 million. The slope of the line is
11.17. It indicates that an increase of taka 1 million interests will result in an
increase of 11.17 million.
SJIBL:
Trend of Loan (In million)
Year X (Interest income) Y (loan) Ŷ (Predicted Y)2004 718.17 7149 6025.0482005 1350.88 10590 10602.042006 2145.5 15516 16350.282007 2973.44 20617 22339.552008 4236.17 32919 31474.08
718.170000000001 4236.170
5000
10000
15000
20000
25000
30000
35000
Trend line of loan
Trend line of deposit
X
Ŷ=82
9.84
+7.2
34x
The above regression line shows the trend of loan of Shahjalal Islami bank in
respect to interest income. The line is almost vertical which refers a high rise
62
in loan. The correlation between interest income and loan is 0.99 which
means there is a very strong correlation between the two and 98% of the
change of Y is accounted for the change of x according to coefficient of
determinants. The intercept of the line is 829.84, which means when interest
income (X) is zero the amount of loan will be 829.84 million. The slope of the
line is 7.23. It indicates that an increase of taka 1 million interest income will
result in an increase of 7.234 million.
Trend of Deposit (In million)
Year X (Interest expenses) Y (deposit) Ŷ (Predicted Y)2004 625.71 9092 8384.9742005 944.16 12205 12095.122006 1491.37 18091 18470.472007 1960.02 22618 23930.542008 2962.4 36484 35608.9
625.71 2962.40
5000
10000
15000
20000
25000
30000
35000
40000
Trend of deposit
Trend of deposit
x
Ŷ=10
95.0
53+1
1.65
x
The above graph shows the trend of deposit of SJIBL in relation to interest
expense. The correlation between interest expense and deposit is 0.99.
Which dictates a very strong correlation and 98% of the change of deposit is
accounted for interest expense. The deposit has a rising trend. As the
interest rate increased on deposit, amount of deposit also increased. The
63
intercept of the line is 1095.053, which means when interest expense (X) is
zero the amount of deposit will be 1095.053 million. The slope of the line is
11.65. It indicates that an increase of taka 1 million interests will result in an
increase of 11.65 million.
HSBC:
Trend of Loan (In million)
Year X (Interest income) Y (loan) Ŷ (Predicted Y)2004 1511.48 17301.22 17603.692005 2206.2 21436.49 21276.012006 3405.07 26105.28 27613.292007 3994.4 33807.7 30728.522008 4940.93 34302.74 35731.92
1511.48 4940.930
5000
10000
15000
20000
25000
30000
35000
40000
Trend of loan
Trend of loan
x
Ŷ=96
13.9
39+5
.29x
The graph on top shows the trend of deposit of HSBC in relation to interest
expense. The correlation between interest expense and deposit is 0.97.
Which dictates a very strong correlation and 94% of the change of deposit is
accounted for interest expense. The deposit has a rising trend. As the
interest rate increased on deposit, amount of deposit also increased. The
intercept of the line is 9613.94, which means when interest expense (X) is
64
zero the amount of deposit will be 9613.94 million. The slope of the line is
5.29. It indicates that an increase of taka 1 million interests will result in an
increase of 5.29 million.
Trend of Deposit (In million)
Year X (Interest expenses) Y (deposit) Ŷ (Predicted Y)2004 770.56 19917.73 34317.772005 979.91 24363.01 34335.952006 12521.14 32876.73 35338.032007 1758.95 44500.88 34403.592008 2027.03 51163.86 34426.87
770.56 2027.0334260
34280
34300
34320
34340
34360
34380
34400
34420
34440
Trend of deposit
Trend of deposit
X
Ŷ=34
250.
87+0
.087
x
The above graph shows the trend of deposit of HSBC in relation to interest
expense. The correlation between interest expense and deposit is 0.03.
Which dictates a very weak correlation and 0.09% of the change of deposit is
accounted for interest expense. The deposit has a rising trend. As the
interest rate increased on deposit, amount of deposit also increased. The
intercept of the line is 34250.87, which means when interest expense (X) is
zero the amount of deposit will be 34250.87 million. The slope of the line is
0.087. It indicates that an increase of taka 1 million interests will result in an
increase of 0.087 million.
65
Findings
1. As a foreign bank HSBC conducts its business with limited number of
branches and targets only the sophisticated segment of the country.
As a result most of the people do not get banking services from this
bank. And they get relatively little deposits than bank like SBL but they
recover their profit through higher service charge.
2. As a nationalized bank Sonali Bank Ltd conducts their banking business
throughout the country with the largest branch network. The banking
facilities of SBL are available to the all segments of customers. Due to
nationalization the services offered by SBL is very traditional and
charges are relatively smaller but the amount of deposit is highest as
well as loans and advances too.
3. As a Islamic bank Shahjalal Islami Bank conducts their banking
business based on Islamic shariah. This bank provides and receives
profit in stead of interest. In our country. More than 90% people are
muslims so SJIBL collects a huge some of money and make them
available as loan and advances.
4. As a specialized bank BASIC Bank conducts banking business for the
development of small industries and cottage which is a major objective
of this bank along with profit making. As a result the profitability of this
bank is lower than other types of banks.
66
5. As private local bank DBBL operates its business in the urban area of
the country with the largest ATM network. By offering lucrative time
and interest facilities DBBL collects a huge some of money and makes
them available to the people as multipurpose usable loan and
advances which result larger profitability.
6. Due to largest branch network SBL has the largest amount of deposit.
In our finding we find that a growth rate of deposit of DBBL, SJIBL,
HSBC and BASIC Bank is higher but SBL though it‘s deposit amount is
largest. Besides these, the growth rate of deposit of SJIBL is fluctuating
which shows the comparatively higher risk.
7. Based on huge some of deposit the SBL makes the largest amount of
loan and advances. Growth rate of loan of SJIBL is highest and SBL is
lowest because of capturing the maximum range of customers. DBBL
and HSBC has similar growth rate but BASIC Bank has a negative
growth rate because the emphasize both on development of small
industry and making profit. Due to fluctuation in growth of deposit
SJIBL has greater fluctuation in growth rate of advances.
8. We measured profitability on based on ROA, ROI and ROE. We find that
the ratio of reported three differ in different years. SJIBL has highest
ROA ratio but floatable. HSBC has the highest ROI ratio because of
their efficiency in business. In our survey we find that in different years
different banks were the top holder of ROE.
9. We measured the solvency of selected banks based on CAR, Debt to
Asset ratio and LDR. In our findings it is seen that HSBC has highest
67
CAR throughout the five years which shows the much resources and
assets to meet the liabilities of borrowers. All the banks have almost
the same Debt to Asset ratio that indicates that no bank in our country
is risk free. The LDR of HSBC is lowest which shows the less
dependency of borrowed funds and LDR of SJIBL is highest whish shows
the more dependency on borrowed fund.
10. We presented market share of each bank based on individual
sector. Market share of deposit and loan of SBL is higher because
among 3 nationalized banks it maintains the largest banking network
in the country and abroad too. The market share of foreign is also
mentionable because there is very few numbers of foreign banks in our
country.
11. From trend analysis, we have found that when interest expense
is zero, all banks have a positive amount of deposit except DBBL. But
the slope of DBBL is highest, which shows the greater sensitivity of
Deposit due to the change in interest. In terms of HSBC, increase or
decrease in interest rate doesn’t change the deposit to a greater
extent. In case of loans and advances, all the banks has a mentionable
amount when rate of interest is zero and increase in interest income
increases the amount of loan of sonali bank mostly.
68
Conclusion
It can be doubtlessly concluded that all the surveyed banks are efficient in
their own goals with respects to their available resources. SBL makes highest
profit from greater resources and other three commercial banks are efficient
in achieving their main goal profit making. With available resources, basic
bank making profit along with flourishing the small and cottage industries.
Throughout our analysis, we find that the highest total business of Sonali
bank, because of largest network of branches. There are significant variation
in profitability of each bank, whereas, Shahjalal Islami bank has greater
fluctuation and on an average HSBC has the highest profitability in respect to
all profitability ratios. HSBC also has the most favorable position in terms of
solvency, which is the result of efficient banking performance. So, very finally
it can be said that all types of banking system in Bangladesh are operating
smoothly in each of its operational domain which is clear from the analysis of
five representative banks, but in comparison of five types of banks the
foreign bank is doing the best.
69
Recommendations
No company or bank in the world is free from weakness and threats. Each
company or bank has to face some sort of limitations. From all over our
study, we have found some limitations of the studied banks in where they
need to pay attention for better performance and profit. Here we put some
recommendation to overcome these limitations.
1. According to our survey we have seen that Sonali bank is the lowest,
where other private commercial banks enjoying high profitability with
their long line of services. Sonali bank should focus on more customer
oriented services with line of depository and lending services.
2. The performance of Shahjalal bank in terms of deposits, loans, ratios
fluctuates most than any other bank, which resembles their instability.
They should pay heed to stabling their financial performance.
3. DBBL holds a very little market share of the total market of private
commercial banks. For greater profitability they should focus on
increasing their market share.
4. HSBC emphasizes mostly on corporate banking rather than retail
banking, they should also emphasize on potential retail banking.
5. Sonali bank has highest debt to asset ratio, which means most of their
assets are acquired from borrowed fund rather than equity. It contains
more risk. So, they should try to lower the debt to asset ratio by
decreasing liability.
6. Basic bank can focus more on commercial banking services with the
available resources.
70
Appendix
Ratio Calculation
Profitability Ratio
Ratio FormulaReturn on Asset Ratio Net income after tax/Total asset X 100Return on Investment Net income after tax/ Total investment X 100Return on Equity Net income after tax/ Shareholders equity X 100
Solvency Ratio
Ratio FormulaCapital Adequacy Ratio Core capital/Risk weighted asset X 100Loan Deposit Ratio Loan/Deposit X 100
Debt Ratio
Ratio FormulaDebt to Asset Ratio Total Debt/ Total asset X 100
Regression Calculation
Loans and advances
1) X= Interest revenue
Y= Loan and advances
Deposits
2) X=Interest expense
Y= Deposit
Ŷ= a+bX
71
References
Annul Reports:
Annul report of DBBL from 2004-2008
Annul report of Sonali bank from 2004-2008
Annul report of SJIBL bank from 2004-2008
Annul report of Basic bank from 2004-2008
Annul report of HSBC bank from 2004-2008
Web sites:
www.dutchbanglabank.com
www.sonalibank.com.bd
www.hsbc.com.bd
www.shahjalalbank.com.bd
www.basicbanklimited.com
www.bangladesh-bank.org
72