Profitability Ratio

Return on Asset (ROA) : Net Income / Total Assets

ROA indicates managements capability to efficiently managing and generating income
relative to its assets. In other words, how much assets have been used to generate a unit of
income.

National Bank Limited Jamuna Bank Limited Islami Bank Limited

-6.25% 0.56% 0.33%

Among the three above banks, Jamuna Bank is currently in the leading position having
0.56% showing their efficiency in converting assets into income followed by Islami bank
with 0.33%. However, NBL’s situation is far worse since it has negative ROA of – 6.25%
which portrays discrepancies and inefficiency in the management.

Return on Equity (ROE) : Net Income / Total Equity Capital

ROE indicates how a bank is converting its equity capital into income/ profits. Higher
efficiency means the management is prudent in using its equity to generate revenues. It
approximates the net benefit the stockholders have received from investing their capital in the
financial firm.

National Bank Limited Jamuna Bank Limited Islami Bank Limited

-77.89% 8.2% 8.86%

If we see the ROEs of these three banks, NBLs ROE comes to eye strikingly having a
significant loss or negative figure of -77.89% percent. Islami bank has the highest ratio of
8.86% followed by Jamuna banks 8.2%. IBL has been more efficient and effective in
generating net profit from investing in equity. Since, NBL’s ROE is significantly on a
negative margin, the bank has to expose itself to higher risk by depending on leverages.

Net Interest Margin (NIM): (Interest Income-Interest Expenses) / Total Assets

National Bank Limited Jamuna Bank Limited Islami Bank Limited

-1.89% 1.06% -

Jamuna Bank has the best Net Interest Margin (NIM) at 1.06%, indicating a healthy spread
between interest income and interest expenses, which contributes positively to profitability.
Islami Bank has a NIM of 0 since the bank is Sharia Compliant and there is no interest
involved. Nonetheless, National Banks -1.89% net interest margin suggests that it's in a
challenging
position, as it incurs more interest expense from its deposits and achieves less interest income
from loans, impacting profitability. Therefore, Jamuna bank is in a stronger position.

Net Non-Interest Margin (NNIM): (Non-Interest Revenues - Non-Interest Expenses -

Provision for Loans & Lease losses) / Total Assets

The net noninterest margin evaluates the portion of noninterest income generated through
service fees collected by the bank in comparison to the noninterest costs it has accrued,
including expenses like salaries, repairs, and provisions for loan losses etc.

National Bank Limited Jamuna Bank Limited Islami Bank Limited

-4.81% 0.142% -8.21%

Here, both National Bank and Islami Bank has a negative figure of -4.81% and -8.21%
respectively. Only Jamuna Bank has positive margin of 0.142%. However, it is typical for
banks to have a negative noninterest margin since its noninterest expenses overweighs the
incomes. NBL’s & IBL’s negative margin shows that they are facing a net loss from it
whereas Jamuna Bank indicating it has more noninterest income than expenses.

Net Operating Margin (NOM): (Total Operating Income – Total Operating Expenses) /
Total Assets

National Bank Limited Jamuna Bank Limited Islami Bank Limited

-6.7% 2.03% 1.23%

Jamuna bank has the highest Net Operating Margin (NOM) at 2.03%, indicating a strong
ability to generate profits from its core operating activities. In contrast, NBL and IBL have -
6.7% and 1.23% margin respectively which suggests they are facing challenges in achieving
profitability. Jamuna bank appears to be the only bank in a better position with a positive
NOM, while Banks A and C need to address their profitability issues.
 Liquidity Ratio

Current ratio: Current Asset / Current Liabilities

Current ratio indicates a company's ability to pay off its short-term obligations using its
current assets.
National Bank Limited Jamuna Bank Limited Islami Bank Limited
1.10 1.15 1.12

All three banks are close in terms of their liquidity position. Jamuna bank has the highest
current ratio of 1.15 among the three banks, indicating stronger short-term liquidity and a
better ability to meet current obligations. A higher current ratio suggests Jamuna bank is in a
relatively more favorable position in terms of its short-term financial health compared to
NBL & IBL, which have ratios of 1.10 and 1.12, respectively. However, all three have ratio
above 1. So, there are no huge risks associated with the banks to fail in meeting short term
obligations.

Cash Ratio: (Cash + Cash equivalents) / Current liabilities.

National Bank Limited Jamuna Bank Limited Islami Bank Limited

0.065 0.061 0.08

It is evident from the following ratios that all three are in challenging position in terms of
paying of current obligations through cash and cash equivalents since all are below 1.
Islami bank with a cash ratio of 0.08 appears to be in a relatively stronger position in terms of
liquidity. A higher cash ratio indicates a larger cash reserve relative to its liabilities. National
bank follows with a ratio of 0.065, while Jamuna Bank has the lowest cash ratio of 0.061,
suggesting it may have a comparatively lower liquidity cushion.

Capacity ratio: Total Loans & Advances / Total assets

The capacity ratio of a bank indicates the proportion of total loans and benefits to total assets.

National Bank Limited Jamuna Bank Limited Islami Bank Limited

0.82 0.64 -
Among the three banks, National bank has the highest capacity ratio at 0.82, indicating that it
provides more loans to generate more interest income and contribute to assets. Jamuna bank
follows with a ratio of 0.64, while IBL has a capacity ratio of 0, since it’s a sharia compliant
bank and does not involve in interest-based loans. Interestingly, National bank appears to be
in the best position due to its higher capacity ratio.

Financial Risk Ratio

Debt Ratio: Total liabilities / Total assets

The debt ratio indicates the proportion of total assets that are financed by the debt of a
company.
National Bank Limited Jamuna Bank Limited Islami Bank Limited
0.92 0.93 0.96

All three of the selected banks have relatively similar debt ratio close to 1 indicating that its
proportion of debt is slightly lesser than its assets. NBL has the lowest debt ratio of 0.92,
indicating a relatively lower reliance on debt financing compared to Jamuna and Islami bank
with debt ratios of 0.93 and 0.96, respectively. A lower debt ratio suggests better financial
stability and a lower risk of default, making National bank appear to be in a stronger position
surprisingly.

Debt to Equity Ratio: Total liabilities / Total shareholders’ equity

Debt to equity ratio tells us where the business stands in terms of being able to repay this debt
and continue operations. If it is very high, the business has high dependence on debt for daily
operations – and may not be able to repay this debt if times get hard.

National Bank Limited Jamuna Bank Limited Islami Bank Limited

11.47 13.41 25.43

Among the three banks, National bank has the lowest debt-to-equity ratio of 11.47. A lower
ratio indicates a lower financial risk and suggests that NBL relies less on debt financing,
potentially making it more resilient to economic downturns. Conversely, IBL has
significantly higher ratio 25.43 than the other two which may indicate a higher level of
financial leverage and associated risk, which could be a concern for stakeholders. So, NBL
and JBL are currently is more efficient and in a better position although all of them are above
the safety threshold.
Times interest earned ratio: EBIT/ Interest Expenses
It indicates the solvency of a company and measures the ability to pay all interest in business
by operating income or earnings before interest and tax (EBIT)
National Bank Limited Jamuna Bank Limited Islami Bank Limited
-1.24 0.35 -

An ideal TIE ratio should be atleast 2 or higher. In this case both of the banks are in
dangerous situation since its their ratios are way below 2 and it indicates a struggle to meet
interest obligations and high risk of bankruptcy. National bank is in a severe situation having
a negative ratio of -1.24 than Jamuna banks 0.35 which is low but better than NBL. Note that,
due to Sharia banking laws. Islami bank does not have any interests.