Bank Performance evaluation of EBL

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Topic:Topic: Performance Evaluation of

Eastern Bank Ltd.Eastern Bank Ltd.

Md. Likhon - - - 080102005Farhan Uddin Ahmed - - - 080102023Md. Atiqul Islam - - - 080102025Shabnam Jahan - - - 070102004Muhammad Sazzad Hussain Chowdhury - - - 080102027

Group Group MembersMembers

Shabnam Shabnam Jahan Jahan

07.01.02.004

Company ProfileCompany ProfileEastern Bank Limited (EBL) is one of the

modern, fully online and technologically superior private commercial Banks in Bangladesh. Eastern Bank markets a wide range of depository, loan & card products.

Eastern Bank has its presence in major cities/towns of the country including Dhaka, Chittagong, Sylhet, Khulna and Rajshahi. Tracing its origin back to 1992, EBL is serving the individual and corporate clientele alike with remarkable success offering innovative banking services since then.

Vision:

To become the bank of choice by transforming the way we do business and developing a truly unique financial institution that delivers superior growth and financial performance and are the most recognizable brand in the financial services in Bangladesh.

Mission:

• We will deliver service excellence to all our customers, both internal and external.

• We will constantly challenge our systems, procedures and training to maintain a cohesive and professional team in order to achieve service excellence.

• We will create an enabling environment and embrace a team based culture where people will excel. We will ensure to maximize shareholder's value.

Values:

• Openness;• Trust;• Commitment;• Integrity• Service excellence;• Responsible Corporate Citizen;

Performance Performance EvaluationEvaluation

Bank Planning:

Objectives of EBL:

•EBL will deliver service excellence to all his customers, both internal and external.•EBL will ensure to maximize shareholders’ value.•EBL will constantly challenge his systems, procedures and training to maintain a cohesive and professional team in order to achieve service excellence.•EBL will create an enabling environment and embrace a team based culture where people will excel.

Strategic priority of EBL:

• Further improvement of asset quality.• Further change in deposit mix to increase pie

of low cost deposits.• To become cost efficient organization.• Moderate growth in conventional products.• Careful presentation in the capital market.• Increased and focused Corporate Social

Responsibility (CSR).• Increase shareholders’ value.• Create world class IT infrastructure to deliver

superior service to our customers.

Muhammad Sazzad Hussain Muhammad Sazzad Hussain

ChowdhuryChowdhury 08.01.02.027

Technology:EBL started its journey from a meager information technology platform. The branches were operating in a standalone/decentralized environment using local software where limitations were in abundance.

The sense of customer support and service at these private banks, literally, were not up to the par with what the customers came to expect from these MNC banks.

Described in 3 steps - 

• Success story• EBL with new ICT infrastructure features• Benefits from changes

Success story:EBL management consisting of dynamic bankers from foreign banks working environment could assess the benefits out of Information Technology [IT] in utilizing it to the maximum through their experience.

Their guideline and streamlined decision making has played a pivotal role in the implementation process of Flex cube software in the branches.

EBL is the pioneer Bank in laying foundation to the world class banking software in Bangladesh. No other private Banks in Bangladesh could implement foreign banking software with success in the past

EBL with new ICT Infrastructure features:• High Speed DDN and Radio Link connectivity

between Branches and the Head Office • Local Area Network (LAN) - providing data network

connectivity at the Head Office and the Branches• Metropolitan Area Network (MAN) - connecting the

DHK branches with HO, CTG branches with Agrabad and SYL branches with Chouhatta

• Wide Area Network (WAN) - enabling the data network circle between Head Office and the Branches

• Solid foundation over data and network security implementation

Benefits from Changes:

We list a few of the benefits of centralization here –

At a glance - At a glance - Benefits from Benefits from ChangesChanges

Standalone systems = > Centralized system Branch Banking = > Anywhere Banking Telegraphic Transfers = > Online Inter-branch transfer

Produce MIS at Branch = > Centralized MIS Audit needs branch visit = > MIS available at Head Office

On Card Signature/Pix = > Digital Signature/Pix

Farhan Uddin Farhan Uddin AhmedAhmed 08.01.02.023

Personal Development:

Employee Benefits:

At Eastern Bank, they believe compensation and benefits should not be single offerings, but should be integrated into their Total Rewards employee benefits program, which is designed to help their employees achieve their goals in their personal and professional lives.

Below is a brief list of the programs available to their employees:

CompensationTheir compensation plans are performance based and, depending upon your position, may include base salary, incentives, commissions, referral incentives and recognition awards.

Health and Wellness

• Medical insurance – plan options through Tufts;• Delta Dental insurance;• Eye Med Vision Care insurance;• Vision and hearing aid reimbursements;• Flexible spending accounts – medical, dependent

care, adoption, insurance premiums;• Use on-site fitness center in Lynn;

Personal Protection

• Life insurance and AD&D insurance;• Supplemental Life and Dependent Life;• Sick days;• Short-term disability;• Long-term disability;

Financial Future

• Defined benefit pension plan;• 401(k) savings and investment plan with

company contribution;

Education

• Tuition reimbursement program;• Wide variety of on-site training courses;

Other Benefits

• Free or discounted banking services;• Discounted group auto and homeowners

insurance;• T-Pass pre-tax program;

Md. Md. LikhonLikhon 08.01.02.005

Bank Profitability:

Like all businesses, banks profit by earning more money than what they pay in expenses. The major portion of a bank's profit comes from the fees that it charges for its services and the interest that it earns on its assets. Its major expense is the interest paid on its liabilities.

The major assets of a bank are its loans to individuals, businesses, and other organizations and the securities that it holds, while its major liabilities are its deposits and the money that it borrows, either from other banks or by selling commercial paper in the money market.

To analyze performance of Eastern Bank Limited (EBL) by calculating different financial ratios, we use following ratios-

1. ROE (Return on Equity)2. ROA (Return on Asset)3. Profit Margin4. Asset Utilization5. Net Interest Margin6. Provision for Loss Ratio7. Loan Ratio8. Temporary Investment Ratio9. EPS (Earning Per Share)10.DPS (Dividend Per Share)11.P/E (Price Earning) Ratio

ROE (Return on Equity):

• ROE= (Net Income ÷ Total Equity) × 100

Year 2005 2006 2007 2008 2009

Net Incom

e546,515,028 513,233,680 418,648,150 798,353,197

1,458,991,932

Total Equity 3,071,336,9

103,314,723,1

643,710,912,9

394,733,358,6

668,434,181,8

04

ROE17.79% 15.48% 11.28% 16.87% 17.3%

By this ratio we see that in 2006 & 2007 EBL’s ROE is relatively lower than others. But in 2008 its increasing & also continuous increasing is going on. Therefore, investors will attract more effectively to invest.

ROA (Return on Asset):

• ROA= (Net Income ÷ Total Asset) × 100

Year 2005 2006 2007 2008 2009

Net Income

546,515,028 513,233,680 418,648,150 798,353,1971,458,991,93

2

Total Asset 27,399,954,4

6935,934,833,1

1042,507,025,5

0454,351,795,9

8368,330,333,1

03

ROA1.99% 1.43% 0.99% 1.47% 2.14%

Managing asset or handling asset is the most important part of an organization. Here, we see that Eastern Bank Ltd. Managing their asset in average at 1.5%. And also in 2009, ROA is much better than others.

Profit Margin:

• Profit Margin= (Net Income ÷ Operating Revenue) × 100

Year 2005 2006 2007 2008 2009

Net Income 546,515,028 513,233,680

418,648,150

798,353,1971,458,991,9

32

Operating

revenue

1,591,610,252

2,110,747,329

2,820,667,205

3,701,632,829

4,617,633,138

Profit Margin 34.34% 24.32% 14.84% 21.57% 31.60%

EBL’s profit margin ratio in 2005 is 34.34% but it decreases in 2006, 2007, 2008 and it’s overcome in 2009. So, EBL is doing well in 2009.

Asset Utilization:• Asset Utilization== (Operating Revenue ÷ Total

Asset)

Year 2005 2006 2007 2008 2009Total Asset

27,399,954,469

35,934,833,110

42,507,025,504

54,351,795,983

68,330,333,103

Operating

revenue

1,591,610,252

2,110,747,329

2,820,667,205

3,701,632,829

4,617,633,138

Asset Utilizati

on0.058 0.059 0.066 0.068 0.067

EBL’s asset utilization capability is increasing 0.058 to 0.067. That’s a very good sign to any financial organization.

Net Interest Margin:• Net Interest Margin= (Total Interest Income –

Total Interest Expense) ÷ Average Earning Asset

Year 2005 2006 2007 2008 2009Total Intere

st Incom

e

2,075,412,5222,829,332,6

323,808,903,0

365,224,413,1

456,186,163,1

90

Total Intere

st Expen

se

1,365,455,6422,160,078,1

422,498,068,1

173,675,380,7

514,032,711,6

12

Average

Earning

Asset

13,602,755,449.5

17,768,026,879

21,062,048,945

26,962,555,829

33,924,417,402

 Net

Interest

Margin 0.052 0.038 0.062 0.057 0.063

EBL’s net interest margin standing in 2009 is 0.063, which is much better from previous years.

Provision for Loss Ratio:• Provision for Loss Ratio= (Provision for Loan

Losses ÷ Total loans & Leases) × 100

Year 2005 2006 2007 2008 2009Provision for Loan

Losses

88,425,742 223,369,258 584,394,008 452,686,073 262,511,322

Total loans &Leas

es

17,757,598,566

25,973,981,280

30,895,706,294

39,427,383,891

46,129,522,083

Provision for Loss Ratio 0.5% 0.86% 1.89% 1.15% 0.57%

Provision for loan losses is doing better when it’s decreasing. Here we see that in 2006, 2007, 2008 this rate is increase & in 2009 its rate become lower. So, EBL is standing in a low risk position.

Md. Atiqul Md. Atiqul IslamIslam 08.01.02.025

Loan Ratio:• Loan Ratio= = (Net Loan ÷ Total Asset) ×

100

Year 2005 2006 2007 2008 2009Net loan

17,174,528,536

25,046,619,296

30,194,171,436

38,632,083,300

45,277,521,185

Total

Asset

27,399,954,469

35,934,833,110

42,507,025,504

54,351,795,983

68,330,333,103

Loan

Ratio 62.69% 69.7% 71.03% 71.08% 66.26%

EBL use their asset against loan very well like more than 50%. So, it is the good sign to EBL. But in 2009 it decreases. So, EBL must have to concentrate on this & solve the problem.

Temporary Investment Ratio:• Temporary Investment Ratio= (Treasury bill

+ Investment ≤ 1year + Due from other Bank) ÷ Total Asset

Year 2005 2006 2007 2008 2009Treasury

bill4,560,000,0

003,680,000,0

001,170,000,0

00- -

Investment ≤ 1year

-2,962,734,7

731,298,180,1

68440,079,520 278,305,675

Due from other Bank

745,258,450 927,301,7291,540,351,9

873,406,323,9

256,777,216,5

53

Total Asset

27,399,954,469

35,934,833,110

42,507,025,504

54,351,795,983

68,330,333,103

Temporary

Investment

Ratio

0.19 0.21 0.094 0.071 0.1

Temporary invest ratio of EBL in 2009 is running low. EBL must have to keep concentrate on it.

EPS (Earning Per Share):

• EPS= Net Income ÷ No. of Shares Issue

Year 2005 2006 2007 2008 2009

Net Income

546,515,028

513,233,680 418,648,150798,353,19

71,458,991,93

2

No. of Shares Issue 8,280,000 8,280,000 10,350,000 13,869,000 24,964,200

EPS

66 61.98 40.50 57.56 58.44

EPS of EBL 2005 & 2006 is good but in 2007 it is too much lower. In 2008 EBL make over the problem for EPS is increasing & also keep it in 2009.

DPS (Dividend per Share):

• DPS= Proposed Dividend ÷ No. of Shares Issue

Year 2005 2006 2007 2008 2009

Proposed

Dividend

331,200,000

372,600,000 351,900,000 - -

No. of Shares Issue

8,280,000 8,280,000 10,350,000 13,869,000 24,964,200

DPS

40 45 34 - -

DPS of EBL 2005 & 2006 is good but in 2007 it is much lower. And it is going on in 2008 & 2009. EBL can’t give dividend.

P/E (Price Earning) Ratio:

• P/E Ratio = Market Price of per Share ÷ Annual Earnings per share (EPS)

Year 2005 2006 2007 2008 2009Market Price of

per Share1222.75 792.50 1070.75 589.30 644.25

Annual Earnings per Share

(EPS) 66 61.98 40.50 57.56 58.44P/E (Price Earning)

Ratio 18.53 12.79 26.44 10.24 11.02

EPS of EBL 2005, 2007 is good but in 2006, 2008, 2009 it is too much lower. Somehow external factors are not work properly for that P/E ratio decreasing.

SWOT analysis of EBL

Strengths:

•First online banking operations across all the branches.•Authorized share capital increased to BDT 3.3 billion.•EBL listed with Dhaka and Chittagong stock exchange Ltd.•Became partner bank of IFC under Global Trade Finance Program (GTFP) to support EBL handle complex trade transactions.•Launching of SME Banking Division.•Signed agreement with ADB to become ADB’s partner bank under their Trade Finance Facilitation Program (TFFP) support guarantee and revolving credit facility.•Launched Own managed Cards Software and Production System.•Awarded ‘Super brand’ by super brands Inc. for the period 2009-2011

Opportunities:

• Lack of Bank Branches and ATM Booths.• Lack of Capital.• Lower growth rate.

Weaknesses:

• Emerging economies.• The Middle East.

Threats:• Downturn in American spending.• Rival Banks are growing faster than EBL.

At Eastern Bank, they know that your business is unique with specific financial challenges and opportunities. Their experienced team of business bankers not only will take the time to understand them, but to solve them. So no matter what lies ahead for you and your business, you can count on them to be there for you – every step of the way.

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