Term Paper: Report on Ratio Analysis of NRBC Bank

Limited

Period: 2017 to 2021

Subject Code: EMBA: 503

Submitted To:
Mr. Dr. Sheikh Abu Taher
Professor
Department of Finance & Banking

Submitted By
Mohammad Riazul Haque Patwari
ID: 20221009
Section: B
Date of Submission: September 09, 2022

EMBA Program, Faculty of Business Studies

Jahangirnagar University, Savar, Dhaka-1342, Bangladesh.
 Letter of Transmittal

09 September, 2022

Mr. Dr. Sheikh Abu Taher

Professor
Department of Finance
Faculty of Business Administration Jahangirnagar University

Subject: Submission of Ratio Analysis Report

Dear Sir,

With due respect, I would like to inform you that, it is a great pleasure for me to submit the working
report on “NRB Commercial Bank Limited‟‟, as a requirement for MBA program. While conducting
the working report, I have gathered lots of knowledge on financial and banking industry, especially
NRB Commercial Bank, and enjoyed working there.

Finally, I shall be glad to answer any kind of query relating to this internship report, if necessary.

Sincerely Yours

..……………
Mohammad Riazul Haque Patwari
ID: 20221009
32nd Batch, EMBA (Finance & Banking)
Faculty of Business Administration
Jahangirnagar University

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 Declaration

I am Mohammad Riazul Haque Patwari, hereby declare that this term paper report on “Key
Financial Ratio Analysis of NRB Commercial Bank Limited”, submitted by me to
JahangirNagar University Bangladesh, in partial fulfillment of the requirement for the
degree of EMBA is an original work.

It has not been submitted earlier, either partly or wholly to any other University or Institution for the
award of my Degree, Diploma, Fellowship or other similar titles or prizes and that the work has been
published in any journal or magazine

……………………
Mohammad Riazul Haque Patwari
ID: 20221009
32nd Batch, EMBA (Finance & Banking)
Faculty of Business Administration
Jahangirnagar University

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 Acknowledgement

First, I want to pay my gratitude to almighty Allah for enabling us to prepare the report successfully.
Then I would like to express my sincere gratitude and cordial thanks to some specific person who
helped me to organize this report and for their kind opinion, suggestions, instructions, and support and
appropriate for this.

First of all, I would like to thank my Term paper Supervisor Mr. Dr. Sheikh Abu Taher, for him
continuous guidance and assistance I preparing the report on Financial Ratio Analysis of the “None
residential Bangladesh Commercial Bank Ltd”. His valuable advice has helped me a lot in writing this
report. I am immensely thankful to him for the supports he has provided during my report.

Next, I would also like to express heartfelt gratitude to my organizational support at the NRB
Commercial Bank Limited, Mr. Moshiur Islam Masum, and Mr. Omar Faruque. They directed me
towards the right information and regularly reviewed my progress in preparation of this report. They
have provided the information about the organization and the information about as well to help me
with the report.

Finally, this report would not have been possible without the dedication and contribution of all my
colleagues who has helped me by teaching all the works. I express my sincere gratitude to all of them.
Their valuable contribution is what made this term paper possible.

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 Executive Summary

In the new competitive business era, private banking sector is getting more competitive in
Bangladesh. In this sector the most used financial statements are the balance sheet and profit and loss
account where the balance shows the financial position and profit and loss of a bank. Ratio Analysis
deals with these statements.

Ratio analysis is the most popular trend to evaluate a bank‟s performance over years or with other
companies in an industry. In my report I had to study NRBCBs financial statement for the few years
then had to analyze give significant comments regarding the changes in financial position. Analysis
and interpretation of these financial statements through ratio analysis has now become an important
technique for performance appraisal because the investors, financial experts, management executives
and the bankers are always rely on these ratios to make important decisions. The management team of
any bank, investor and the government agencies always concern about liquidity ratios and adequacy
ratios of a bank which interprets the efficiency of a bank.

As a part of my B.B.A program, I have spent 12 weeks in NRB Commercial Bank limited, Mugrapara
Branch learning the activities of General banking, Clearing cheques, BRTA, and Cash counter,
department. I have analyzed the Key Financial Ratio Analysis of NRB Commercial Bank Limited
to find out its ratios by using its past and current records. After preparing this report I came to know
that analysis of financial statements through ratios helps to overcome the past flaws and make the
future decisions and strategies. Therefore, it is very necessary for every organization whether the
company‟s size is to make financial statement and to analyze it by ratios.

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 Summary of Ratio Analysis
NRBC Bank Ltd.
Ratio Analysis
Name: Mohammad Riazul Haque Patwari
ID: 20221009 (32th Batch)

1) Liquidity Ratio:
2017 2018 2019 2020 2021
Current Ratio 1.29 1.32 1.39 1.64 2.24
2017 2018 2019 2020 2021
Quick Ratio 2.01 2.23 1.68 1.63 2.05

2)Profitability Ratio:
2017 2018 2019 2020 2021
Gross profit margin ratio (%) 0.251 0.236 0.238 0.217 0.269

2017 2018 2019 2020 2021

Operating income ratio (%) 0.499 0.522 0.537 0.487 0.514

2017 2018 2019 2020 2021

Net profit/net income margin ratio (after tax )(%) 0.028 0.031 0.032 0.016 0.025

2017 2018 2019 2020 2021

Return on assets ratio (%) 0.014 0.012 0.013 0.012 0.015

2017 2018 2019 2020 2021

Return on equity ratio (%) 0.12 0.13 0.14 0.14 0.19

2017 2018 2019 2020 2021

Operating cash flow to net profit ratio (%) 0.013 0.012 0.014 0.013 0.016
 1. Current Ratio:

Current Ratio

16%
28% 2017
2018
17% 2019
2020
2021
21%
18%

Current ratio refers that subtract all business expenses from total revenue. This gives a
picture of business's profitability that is, how much earning after paying to operational
expense of business. Net income is sometimes called net earnings, net profit or “the bottom
line.” In the situation of NRBC Bank Limited, every year net fluctuate, from the year 2020
profit was gradually increased but in the year of 2021 profit was to high.

2. ROA (Return on assets) :

ROA(Return on assets)

2.05165279 2.01283664
2017
2018
1.626975987 2019
2.233719087
2020
1.680992198 2021

The term return on assets (ROA) refers to a financial ratio that indicates how profitable a company
is in relation to its total assets. Corporate management, analysts, and investors can use ROA to
determine how efficiently a company uses its assets to generate a profit. ROA is usually calculated
by dividing a company's net income by the average total assets. Average total assets can be
calculated by adding the prior period's ending total assets to the current period's ending total assets
and dividing the result by two.

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 3. Return on Equity (ROE):

Return on Equity(ROE) (%)

0.54
0.53
0.52
0.51
0.5 0.537 Operating income
0.522 ratio (%)
0.49 0.514
0.48 0.499
0.487
0.47
0.46
2017 2018 2019 2020 2021

Return on equity (ROE) is the measure of a company's net income divided by its shareholders' equity.
ROE is a gauge of a corporation's profitability and how efficiently it generates those profits. The return
on equity measures the return earned on the common stockholders’ investment in the firm. Generally, the
higher this return, the better off the owners are. Return on Equity is calculated by, “Return on Equity=Net
Profit after Tax/ Shareholders equity x 100”.

4. Net Interest Income (NIM) :

Net Interest Income (NIM) (%)

0.3

0.25

0.2

0.15 Gross profit margin

ratio (%)
0.1

0.05

0
2017 2018 2019 2020 2021

The NIM ratio measures the profit a company makes on its investing activities as a percentage of total
investing assets. Banks and other financial institutions typically use this ratio to analyze their investment
decisions and track the profitability of their lending operations. Net Interest Margin = (Net return on
investment – Interest paid) / Average Assets.

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 5. Credit to Deposits Ratio :

CREDIT TO DEPOSITS RATIO

Net profit/net income margin ratio (after tax )(%)

2021 0.025

2020 0.016

2019 0.032

2018 0.031

2017 0.028

Credit-deposit ratio, popularly CD ratio, is the ratio of how much a bank lends out of the deposits it has
mobilized. RBI does not stipulate a minimum or maximum level for the ratio, but a very low ratio
indicates banks are not making full use of their resources. To calculate the loan-to-deposit ratio, divide a
bank's total amount of loans by the total amount of deposits for the same period. You can find the figures
on a bank's balance sheet. Loans are listed as assets while deposits are listed as liabilities.

6. Cash and Bank Balance to Total Deposit Ratio:

Return on assets ratio (%)

0.016
0.015
0.014 0.014
0.013
0.012 0.012 0.012

0.01

0.008

0.006

0.004

0.002

0
2017 2018 2019 2020 2021
Return on assets ratio (%)

The cash and bank balance kept by the banks in respect to the total deposit collected. The
cash-deposit ratio for a bank is equal to (total cash)/(total deposits). The bank must maintain
liquidity to operate and will hold an amount of cash to service net withdrawals from customer
activities such as drawing from their deposit (checking and savings) accounts.
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Debt-to-Assets Ratio:
Investment-to-Total Assets Ratio is measure by total loans divided by total assets.

Total Liquid Fund to deposit Ratio :

The ratio of the value of liquid fund (easily converted to cash) to short-term funding plus total
deposits. Liquid fund include cash and due from banks, trading securities and at fair value through
income, loans and advances to banks, reverse repos and cash collateral.

Liquid Assets to Total Assets:

The ratio of the value of liquid assets (easily converted to cash) to short-term funding plus total
deposits. Liquid assets include cash and due from banks, trading securities and at fair value through
income, loans and advances to banks, reverse repos and cash collaterals.

Findings
 The liquidity condition of the bank is much better that the sign of
continues improvement.
 Return on assets ratio is higher that, indicates the effective managerial performance
of the NRBC bank.
 The earning of the shareholders is much higher that is proven by return on equity.
 To increase asset turnover, NRBC Bank had to utilize its sources of fund on
those assets which bring more revenue to the bank.
 Loan to deposit NRBC bank has taken more financial stress by making
excessive loans and also shows risk that to meet depositors.
 Net profit margin is positive of NRBC bank. So NRBC bank made more
money during that period.
 Operating expenses to revenue is positive. It is clearly notify that the NRBC bank is
earning revenue increase gradually from the early period.

Reminiscing 2021

NRBC Bank has grown exponentially in different quarters throughout the year 2021. By the end of
the year, the Balance Sheet size stood at Tk.15,295.76 cr. By 2021, our operating profit was
Tk.40,544.61 Lac which is 32.15% growth from the last year. Deposits were Tk.12,08,267.81 Lac
and Loans & Advances were Tk.10,48,983.13 Lac for the year 2021. Our deposits and advances
have grown by 26.77% and 40.17% compared to the position of 2020 which shows substantial
growth despite the challenging economic trend. Besides, Loans and advances disbursed to more
than 15,000 customers through service points across the country. In terms of service accessibility,
there are 131 partner banking centers with SKS Foundation, the largest NGO in North Bengal. Our
Export Business were Tk. 3065.22 cr. while our import business were Tk. 4237.07 cr in 2021. We
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have remarkable growth by 164.60% in remittance business compared to 2020 which is a testament
of our efficient business development plan. By the end of 2021, Bank’s Capital Adequacy Ratio
(CAR) stood at 13.45%.

Micro Credit Finance

NRBC Bank Ltd. introduced Micro Finance Program on November 2020 to extend small loans to
the unbanked people for the purpose of developing them as self-reliant who ultimately help to
increase per capita income as well as GDP of our country. The progress of the microfinance
operations has been gradually increasing through launching Micro Credit Programs Micro Finance
Disbursement Trend 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 Apr/21 Jun/21 Aug/21
Oct/21 Dec/21 Feb/22 Amount in Crore Month SKS-NRBC Partnership Barnch NRBC Barnch
following Partnership Banking Model NRBC Barnch following NRBC Microcredit Model.

Earnings per share (EPS)-[Restated]

The Shareholders in its 8th Annual General Meeting (AGM) held on June 26, 2021 dully approved
5% stock dividend on basis of record date May 31, 2021, hence Number of shares stood 737.60
million@ Tk. 10 Per.

Conclusion
Since the banking service especially the private Banks are doing an outstanding business, so it is clear
that the modern people are more concerned about securing their valuable assets and get high-quality
and timely services. For this reason lot of new commercial bank has been established in last few years
and these banks have made this banking sector very competitive. So, now banks have to organize their
operation and do their operations according to the need of the market. Banking sectors no more
depends on a traditional method of banking. In this competitive world this sector has trenched its
wings wide enough to cover any kind of financial services anywhere in this world. The major task for
banks, to survive in this competitive environment is by managing its assets and liabilities in an
efficient way. NRB Commercial Bank is the most promising bank in Bangladesh. Every day NRB
Commercial Bank endeavor to increase their product and services although they provide a wide range
of product of services to their customers. NRB Commercial Bank is helping the economy of
Bangladesh by remitting of funds both local and foreign.