CHAPTER-1

INTRODUCTION

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1.1 INTRODUCTION:
Financial analysis is structural and logical way to present overall financial performance of a
financial institution. It’s also help to evaluate and decision making for business operation. In
financial analysis process ratio analysis is the most dominant and logical structure to help
business related stakeholder. Under the financial ratio analysis process there are few categories
to identical area of financial institution. So, business stakeholders try to concentrate to get overall
business overview from profitability, liquidity, assets management and solvency ratio analysis.
These ratios not only help to decision making process also emphasized on risk avoiding and
profit raising related factors. To calculate this ratio, need to take quantitative data from bank
trading activity and other sources. Ratios are the simplest mathematical (statistical) tools that
reveal significant relationships hidden in mass of data and allow meaningful comparisons.
Some ratios are expressed as fractions or decimals, and some as percentages. Major
types of business ratios include Efficiency, Liquidity, Profitability, and Solvency ratios and the
ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick indication
of a firm's financial performance in several key areas. The ratios are categorized as Short-term
Solvency Ratios, Debt Management Ratios, Asset Management Ratios, Profitability Ratios, and
Market Value Ratios Profit Ratio analysis is based on line items in financial statements like the
balance sheet, income statement and cash flow statement; the ratios of one item – or a
combination of items - to another item or combination are then calculated. Ratio analysis is used
to evaluate various aspects of a company’s operating and financial performance such as its
efficiency, liquidity, profitability and solvency. The trend of these ratios over time is studied to
check whether they are improving or deteriorating. Ratios are also compared across different
companies in the same sector to see how they stack up, and to get an idea of comparative
valuations. Ratio analysis is a cornerstone of fundamental analysis.

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1.2 OBJECTIVE OF THE STUDY:

o To Discussed the Financial ratio measurement and analysis.

o To measure profitability, liquidity and credit management of IBBL and City Bank
Limited.
o To show the financial stability analysis consists of (profitability and liquidity).
o To analyze the balance sheet and income statement.
o To measure descriptive statistics.
o To using Financial ratio analysis.
o And to know overall Bank financial performance condition.

1.3 SOURCES OF DATA:

i. Primary data:

The Primary data are collected by

o Personal observation and

o Interviewing the employees of the banks.

ii. Secondary data:

The secondary data are collected from

o Books
o Online articles
o Lecture sheets and
o Banks annual reports.

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1.4 LIMITATIONS OF THE STUDY:

 As both were large banks and in the same industry so sometimes there is a huge
fluctuation of amount.
 Sometimes there is missing of some particular value which is needed to calculate ratios.
 Some information becomes confusing because of lack of practical knowledge of ours.

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 CHAPTER-2
Background of Islami Bank Bangladesh Limited and City Bank
Bangladesh Limited

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2.1 Islami Bank Bangladesh Limited
Islami Bank Bangladesh Limited is a Joint Venture Public Limited Company engaged in
commercial banking business based on Islamic Shari'ah with 63.09% foreign shareholding
having largest branch network (total 338 Branches) among the private sector Banks in
Bangladesh. It was established on the 13th March 1983 as the first Islamic Bank in the South
East Asia. It is listed with Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd.
Authorized Capital of the Bank is Tk. 20,000.00 million and Paid-up Capital is Tk. 16,099.91
million having 33,686 shareholders as on 31st December 2017.

General information:
 Established on the 13th March 1983.

 Started functioning from March 30, 1983.

 Listed with DSC and CSE on 2nd July1985 and 7th March1996 respectively.

 Authorized capital: Tk. 20,000.00 Million (31st December 2017).

 Paid-up capital: 16,099.90 Million (31st December 2017).

Product and services:

 Al-Wadeah Current Account (AWCA)
 Mudaraba Savings Account (MSA)
 Mudaraba Term Deposit Account (MTDR)
 Mudaraba Special Notice Account (MSNA)
 Mudaraba Hajj Savings Account (MHSA)
 Mudaraba Special Savings (Pension) Account (MSSA)
 Mudaraba Savings Bond (MSB)

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 Mudaraba Monthly Profit Deposit Account (MMPDA)
 Mudaraba Muhor Savings Account (MMSA)
 Mudaraba Waqf Cash Deposit Account (MWCDA)
 Mudaraba NRB Savings Bond (MNSB) Account
 Mudaraba Foreign Currency Deposit Account (MFCD)
 Students Mudaraba Savings Account (SMSA)
 Mudaraba Farmers Savings Account (MFSA)
 BAI-MODES
 SHARE-MODES
 IJARA-MODES
 Investment Scheme
 House Hold Investment Scheme
 Investment Scheme for Doctors (ISD)
 Transport Investment Scheme (TIS)
 Car Investment Scheme (CIS)
 Small Business Investment Scheme (SBIS)
 Micro Industries Investment Scheme (MIIS)
 Agricultural Implement Investment Scheme (AIIS)
 Real Estate Investment Program (REIP)
 Real Estate Investment (Commercial & Working Capital)
 Agricultural Investment of IBBL
 NRB (Non-Resident Bangladeshi) Entrepreneurs Investment Scheme(NEIS)
 Women Entrepreneurs Investment Scheme (WEIS)
 Remittance Card
 Investment Scheme for Foreign Expatriate
 Mudaraba NRB Saving Bond
 SME Information
 Offshore Banking Units (OBU)
 Locker Service

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2.2 City Bank Limited
City Bank is one of the oldest private Commercial Banks operating in Bangladesh. It is a top
bank among the oldest five Commercial Banks in the country which started their operations in
1983. The Bank started its journey on 27th March 1983 through opening its first branch at B. B.
Avenue Branch in the capital, Dhaka city. It was the visionary entrepreneurship of around 13
local businessmen who braved the immense uncertainties and risks with courage and zeal that
made the establishment & forward march of the bank possible. Those sponsor directors
commenced the journey with only Taka 3.4 crore worth of Capital, which now is a respectable
Taka 2311.78 crore as capital & reserve.City Bank is among the very few local banks which do
not follow the traditional, decentralized, geographically managed, branch-based business or
profit model. Instead the bank manages its business and operation vertically from the head office
through 5 distinct Units namely

 Business Unit
 Branch Banking
 Risk Unit
 Operations Unit
 Support unit

Under a real-time online banking platform, these 5 distinct Units are supported at the back by a
robust service delivery or operations setup and also a smart IT Backbone. Such centralized
business segment-based business & operating model ensure specialized treatment and services to
the bank's different customer segments.

The bank currently has total 120 branches which includes 99 online branches, 1 full-fledged
Islamic Banking branch, 1 SME service center and 11 SME/Agri branches spread across the
length & breadth of the country. Besides these traditional delivery points, the bank is also very
active in the alternative delivery area. It currently has 311 ATMs of its own; and ATM sharing

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arrangement with partner banks that has more than 1150 ATMs in place; SMS Banking; Internet
Banking and so on. It already started its Customer Call Center operation.

General information:
 Established on the 27th March 1983.

 Total 120 branches which includes 99 online branches

Product and services:

 Transactional Account
 Current Accounts
 General Savings Account
 Savings Delight Account
 Seniors' Savings Account
 Student Savings Account
 RMG Workers' Account
 Basic Savings Account
 Term Deposit Account
 General DPS Account
 Insurance Backed DPS Account
 Fixed Deposit Account
 Monthly Interest Paying FD Account
 Double Money FD Account
 Foreign Currency Account
 Personal Loan
 Secured Loan
 Partial Secured Loan

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 City Scholar
 Home Loan

CHAPTER-3
Financial Analysis (IBBL & City Bank Limited)

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 Financial Analysis (IBBL & City Bank)

3.1 Liquidity Ratios:

liquidity is defined as the ability of a company to meet its financial obligations as they come due.
The liquidity ratio, then, is a computation that is used to measure a company's ability to pay its
short-term debts. There are three common calculations that fall under the category of liquidity
ratios. The current ratio is the most liberal of the three. It is followed by the acid ratio, and the
cash ratio. These three ratios are often grouped together by financial analysts when attempting to
accurately measure the liquidity of a company.

3.1.1 Current Ratio:

The current ratio indicates a company's ability to pay its current liabilities from its current assets.
This ratio is one used to quickly measure the liquidity of a company. The formula for the current
ratio is:

Current Asset
Current Ratio = Current Liabilities

Year IBBL City Bank Limited

2014 12% 10%
2015 13% 16%
2016 16% 17%

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 Current Ratio
18% 17%
16% 16%
16%

14% 13%
12%
12%
10%
10%

8%

6%

4%

2%

0%

IBBL City Bank

Interpretation:
Current Ratio measures the extent to which business has its current Assets to pay its current
liabilities. In 2014 the current ratio of IBBL was 12%. From the year 2014 to 2016 current ratio
of IBBL increased moderately to 16%. Which indicates Liquidity increasing. On the hand City
Bank limited had current ratio in 2014 10%. From 2014 to 2016 current ratio of City Bank
increases to 17%. overall liquidity position of City bank is better than IBBL.

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3.1.2 Acid Test Ratio (Quick):
This ratio is also referred to as the quick ratio. The purpose of this ratio is to measure how well a
company can meet its short-term obligations with its most liquid assets. Remember, liquid assets
are those that can be quickly turned into cash. Most of the current assets are highly liquid with
the exception of inventory, which often takes a longer amount of time to turn into cash. The
formula for calculating the acid ratio is:

Current Asset−Investment
Acid Test Ratio = Current Liabilities

Year IBBL City Bank Limited

2014 12% 10%
2015 13% 16%
2016 16% 17%

Acid test ratio

18% 17%
16% 16%
16%
14% 13%
12%
12%
10%
10%
8%
6%
4%
2%
0%
Axis Title

IBBL City Bank

Interpretation:

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Quick Ratio measures the extent to which business has Inventory adjusted current Assets to pay
its current liabilities. In 2014 the current ratio of IBBL was 12%. From the year 2014 to 2016
current ratio of IBBL increased moderately to 16%. Which indicates Liquidity increasing. On the
hand City Bank limited had current ratio in 2014 10%. From 2014 to 2016 current ratio of City
Bank increases to 17%. overall liquidity position of City bank is better than IBBL.

3.2. Financial Leverage Ratios:

Financial leverage ratios, sometimes called equity or debt ratios, measure the value of equity in a
company by analyzing its overall debt picture. These ratios either compare debt or equity to
assets as well as shares outstanding to measure the true value of the equity in a business.

3.2.1 Debt to Equity:

The debt to equity ratio is a financial, liquidity ratio that compares a company’s total debt to total
equity. The debt to equity ratio shows the percentage of company financing that comes from
creditors and investors.

The debt to equity ratio is calculated by dividing total liabilities by total equity. The debt to
equity ratio is considered a balance sheet ratio because all of the elements are reported on the
balance sheet.

Total Debt
Debt to Equity = Shareholders Equity

Year IBBL City Bank Limited

2014 12%
16%
2015 13% 15%
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 2016 14% 12%

Debt to Equity Ratio

18%
16%
16% 15%
14%
14% 13%
12% 12%
12%

10%

8%

6%

4%

2%

0%
2014 2015 2016

IBBL City Bank

Interpretation:
Debt to Equity Ratio measures a company's financial leverage. The D/E ratio indicates how
much debt a company is using to finance its assets relative to the value of shareholders’ equity.
In 2014, D/E ratio of City Bank was 16% where D/E ratio of IBBL is 12%.In 2015 both D/E
ratio of City Bank and IBBL increased in 15 % and 13 %.Again in 2016, City Bank’s D/E ratio
decreased to 12% But IBBL’s D/E ratio increased to 14%.Overall the condition of City bank’s
D/E ratio was better compare to IBBL D/E ratio.

3.2.2 Debt to Assets:

Total liabilities divided by total assets or the debt/asset ratio shows the proportion of a company's
assets which are financed through debt. If the ratio is less than 0.5, most of the company's assets

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are financed through equity. If the ratio is greater than 0.5, most of the company's assets are
financed through debt.

Total Debt
Debt to Assets = Total Assets

Year IBBL City Bank Limited

2014 86% 85%
2015 85% 91%
2016 88% 92%

Debt to Assets
94%

92%
92%
91%

90%

88%
88%

86%
86%
85% 85%

84%

82%

80%

IBBL City Bank

3.3 Coverage Ratios:

Coverage ratios are comparisons designed to measure a company’s ability to pay its liabilities.
On the surface, coverage ratios might sound a lot like liquidity and solvency ratios, but there is a
distinct difference. Coverage ratios analyze a company’s ability to service its debt and other
obligations.

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3.3.1 Interest Coverage Ratio:
The times interest coverage ratio, sometimes called the interest earned ratio, is a coverage ratio
that measures the proportionate amount of income that can be used to cover interest expenses in
the future.

EBIT
Interest Coverage Ratio = Interest Charges

Year IBBL City Bank Limited

2014 54% 36%
2015 58% 38%
2016 63% 21%

Interest Coverage Ratio

70%
63%
60% 58%
54%
50%

40% 38%
36%

30%
21%
20%

10%

0%

IBBL City bank

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3.4 Activity Ratios:
To understand if the company’s use of assets and process of running the operations are efficient
or not, the activity ratio analysis is applied. Also referred as operation ratio analysis, or turnover
ratio analysis, it includes calculating a set of indicators that allow making conclusions on how
effectively the firm uses its inventories, accounts receivable and fixed assets.

3.4.1 Receivable Turnover Ratio:

To measure how many times accounts receivable can be turned by a company into cash, we
should calculate the accounts receivable turnover ratio. This ratio indicating the liquidity of the
accounts receivable can be computed as follows:

Annual Net Credit Sales

Receivable Turnover Ratio = Receivables

Year IBBL City Bank Limited

2014 78% 34%
2015 75% 46%
2016 60% 55%

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 Receivable Turnover Ratio
90%
78%
80% 75%
70%
60%
60% 55%
50% 46%

40%
34%
30%

20%

10%

0%

IBBL City Bank

Interpretation:
Account receivable Turnover measures the extent to which business is efficient to collecting its
Account receivable. In 2014 the IBBL Receivable turnover was 78 % and it decreases to 60% in
2016 and on the other side the City bank had 34% to 55% from 2014 to 2016.which means the
IBBL fluctuates in 2015. The city bank is in good position than IBBL.

3.4.2 Total Asset Turnover:

The asset turnover ratio is an efficiency ratio that measures a company's ability to generate sales
from its assets by comparing net sales with average total assets. In other words, this ratio shows
how efficiently a company can use its assets to generate sales.

Net Sales
Total Asset Turnover = Total Assets

Year IBBL City Bank Limited

2014 3% 2%
2015 2% 2% Page | 19
2016 3% 3%
 Total Asset turnover ratio
4%
3% 3%
3%

3%
2% 2% 2%
2%

2%

1%

1%

0%
2014 2015 2016

IBBL City Bank

Interpretation:
Asset turnover ratio measures the value of a company’s sales or revenues generated relative to
the value of its assets. The Asset Turnover ratio can often be used as an indicator of the
efficiency with which a company is deploying its assets in generating revenue. In 2014 total asset
turnover of City bank was 2% where IBBL’s total asset turnover was 3%. After that in 2015,
IBBL total asset turnover reached to 2% but City bank remained into same position. Again in
2016, City Bank’s total asset turnover increased to 3% but IBBL’s total asset turnover decreased
to 2%. Overall the condition of was good compare to IBBL.

3.5 Profitability Ratios:

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Profitability ratio is used to evaluate the company’s ability to generate income as compared to its
expenses and other cost associated with the generation of income during a particular period. This
ratio represents the final result of the company.

3.5.1 Gross Profit Margin Ratio:

This ratio measures the marginal profit of the company. This ratio is also used to measure the
segment revenue. A high ratio represents the greater profit margin and it’s good for the company.

Gross Profit
Gross Profit Margin Ratio = Net Sales

Year IBBL City Bank Limited

2014 48% 42%
2015 45% 27%
2016 37% 20%

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 Gross Profit Margin Ratio
60%

48%
50%
45%
42%
40% 37%

30% 27%

20%
20%

10%

0%
2014 2015 2016

IBBL City Bank

Interpretation:
Gross Profit Margin measures the extent to which business is generating Gross Profit from its
sales. In 2014 the IBBL Gross Profit margin was 48 % and it decreases to 37% in 2016 and on
the other side the City bank had 42%to 20% from 2014 to 2016.which means the city bank has
more fluctuation than IBBL. The IBBL is in good position than City bank.

3.5.2 Net Profit Margin Ratio:

This ratio measures the overall profitability of company considering all direct as well as indirect
cost. A high ratio represents a positive return in the company and better the company is.

Net Profit after Taxes

Net Profit Margin Ratio = Net Sales

Year IBBL City Bank Limited

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 2014 22% 16%
2015 16% 18%
2016 19% 14%
Net Profit Margin Ratio
25%
22%

20% 19%
18%
16% 16%
15% 14%

10%

5%

0%
2014 2015 2016

IBBL City Bank

Interpretation:
Net Profit Margin measures the extent to which business is generating Net Profit from its sales.
In 2014 the IBBL Net Profit margin was 22% and it decreases to 19% in 2016 and on the other
side the City bank had 16% to 14% from 2014 to 2016.which means the IBBL and city bank
both has fluctuation.

3.5.3 Return on Investment Ratio:

Return on investment (ROI) measures the gain or loss generated on an investment relative to the
amount of money invested. ROI is usually expressed as a percentage and is typically used for
personal financial decisions, to compare a company's profitability or to compare the efficiency of
different investments. The return on investment formula is:

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 Net Profit after Taxes
Return on Investment Ratio = Total Assets

Year IBBL City Bank Limited

2014 1% 2%
2015 2% 2%
2016 1% 3%

Return on Investment
4%
3%
3%

3%
2% 2%
2%

2%
1% 1%
1%

1%

0%
2014 2015 2016

IBBL City Bank

3.5.4 Return on Equity:

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The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to
generate profits from its shareholders investments in the company. In other words, the return on
equity ratio shows how much profit each dollar of common stockholders’ equity generates.

Net Profit After Taxes

Return on Equity = Shareholders Equity

Year IBBL City Bank Limited

2014 19% 15%
2015 17% 20%
2016 12% 13%
Return on equity
25%

20%
19%
20%
17%
15%
15%
13%
12%

10%

5%

0%
2014 2015 2016

IBBL City Bank

Interpretation:
Return on Equity measures the extent to which business is generating net income by using it’s
shareholder equity.In 2014 the ROE of IBBL was 19% and then it decreased in 2016 which was
12% on the other side in the City bank the ROE was 15%to 13% from 2014 to 2016.so there asr
some fluctuation of ROE ratio in both bank.

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Chapter-04

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Recommendation:

 To remove some positive side which can be affective for the organization
 If the average collection period decreasing day by day. The sale of the firm may be
decreases.
 The current ratio is increasing which is a positive side of the firm it means the firm is
capable to face it’s all liabilities.
 The IBBL is in good position and city bank have to improve their profitability.

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Conclusion:
The financial statement consists of the mixture of steps and prices that interrelate and affect each
other. No one part of these analysis should be interpreted in isolation. Short –term liquidity
impacts profitability, profitability began with sale which relates to the liquidity of assets. The
efficiency of assets management influences the cost and Availability of credit which shapes the
capital structure. Every aspect of a cost Availability of a company’s financial statement condition
performance and outlook affects the share price. In this analysis the IBBL is in good position as
it has the good profitability.

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Chapter-05

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References:
 https://www.thecitybank.com/
 https://www.islamibankbd.com/
 Dhaka Stock Exchange

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