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.

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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.

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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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http://en.wikipedia.org/wiki/File:Sonali_Bank_logo.JPG

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.

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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.

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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.

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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:

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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

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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%.

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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%.

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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%




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:

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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

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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:

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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.


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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


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:

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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.


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.


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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

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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:




- Maximum: 75% of brand new car value or 70% of reconditioned car

value (up to a maximum of BDT2,000,000)


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:




- Maximum: (Up to a maximum of BDT 500,000)



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:




- Maximum: (Up to a maximum of BDT 1,000,000)



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


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


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


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


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


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


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


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


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


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


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


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


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:


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.


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





HSBC:


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


Which dictates a very strong correlation and 94% of the change of deposit is




64





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


Which dictates a very weak correlation and 0.09% of the change of deposit is







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