Letter of submission

21th January 2021

To,
The Supervisor
Britannia University, Cumilla Bangladesh

Subject: Submission of Internship Report.

Dear Sir,
I would like to inform you that I have completed my internship report on topic
"Financial Statement Analysis: A Study on Sonali Bank limited" of Bangladesh. I have
collected information from all available sources in a realistic way. While preparing report, I
have tried to follow your instruction based on systematic manner I sincerely hope that this
report meets your approval and also expects that I will get your kind consideration regarding
acceptance of this report.

Sincerely Yours,

……………………..

(Azizur Rahman)
ID No: 1603010011
Batch: Fall’16
School of business
Major in Finance (minor in Marketing)
Britannia University, Cumilla.

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 Declaration
This is Azizur Rahman, hereby declares that the present internship report on “Financial
Statement Analysis: A Study on Sonali Bank limited” uniquely prepared by me after
completion of three months internship of Sonali Bank limited I also confirm that this report is
only prepared for my academic requirement. The work has not been published in any Journal
or Magazine, any other university or institution for any degree apprenticeship and student
fellowship. This report is my original work and prepared for academic purpose which is a
part of BBA program.

……………………..

(Azizur Rahman)
ID No:
1603010011
11th Batch
Batch: Fall’16
School of business Major in Finance minor in Marketing
Britannia University, Cumilla.
 Supervisor's certificate

This is to certify that Azizur Rahman, a student of BBA Program, major in Finance and
Banking Britannia University, Cumilla bearing ID No. 1603010011, Batch has successfully
completed the Internship Report titled on “Financial Statement Analysis: A Study on
Sonali Bank limited” under my supervision and monitoring. I wish his success at every
sphere of life.

Supervisor

…………………..

Md. Saddam Hossain,

Lecturer of School of Business
Britannia University, Cumilla, Bangladesh.
 Acknowledgement
At first all credits go to Almighty Allah for everything. By the grace of Almighty Allah and
with the immense support from my parents, my supervisor and Sonali Bank Authority finally
I have finished my three months long internship program. I am so happy to declare that I have
completed my internship report within the deadline by great blessings of almighty I am really
owed to some special people who helped me to prepare the report with a great courage. I am
most grateful to my internship supervisor Md. Saddam Hossain for providing a detailed
feedback and support all the time on this report. My special thanks go to (SPO) and some
officers of different decks of Sonali Bank Limited, BISE Building Branch, Cumilla for their
guideline, assistance, intimacy and for their valuable time as well. Their continuous
assistance makes me to have a car idea about how Financial Performance evaluation of Sonali
Bank is going on. Without their contribution it would not have been possible for me to finish
the Internship. In writing the report, I have taken help from different books, journals and
other scholastic articles. I thank all those authors I am also indebted to my loving
friends and senior brothers for their assistance in my report preparation.

Finally, I extend my thanks to all of my well-wishers for their co-operation during this
important task.

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 Executive summary

Sonali Bank Limited is the largest state-owned commercial bank in Bangladesh with total of
1225 branches. Total of 756 branches in rural areas, 477 branches in urban areas. The
functions of the bank covered a wide range of banking and function activities to individual,
firms, corporate bodies, multinational agencies and the rural area. The bank provides more
than 21 types of free services on behalf of the government of Bangladesh through its rural
and urban branches as part of their commitment to society.

In the new competitive commercial enterprise era, non-public banking zone is getting
greater aggressive in Bangladesh. In this quarter the most used monetary statements are the
balance sheet and profit and loss account. In this report, I have given Financial Statement
analysis of Sonali Bank Limited. I have used financial tools like (Ratio Analysis) to analyzed
financial position of the bank. Beside this tool I have also used Horizontal Analysis, Vertical
Analysis of balance sheet and income statement of Sonali Bank limited. By using the
tools, I have been able to teach at some graphical interpretation. Without this I have also
mentioned others side of the Bank like (Products, Service and Social responsibility). In the
last chapter of the report, finding and recommendations were given to improve the financial
performance of the bank.
 SL. NO. Topics Page

Chapter-1 Introduction 8

Introduction 9
Significance of the report 9-10
The Objectives of the report 10-11
Limitations of the report 11-12

Chapter-2 Overview Of Sonali Bank Limited 13

Overview of Sonali Bank Limited 14
About Sonali Bank Limited 14-15
Role of Sonali Bank Limited in the National 15
Economy
Foreign Remittance 16
Tarde Financing 16-17
Investment Banking 17
Corporate Profile of Sonali Bank Limited 18
Organogram of Sonali Bank Limited 19
Management Hierarchy of Sonali Bank 20
Limited
Vision, Mission and Slogan of Sonali Bank 21
Limited
Objectives of Sonali Bank Limited 21-22
Strategic Significance of Sonali Bank Limited 22
Functions of Sonali Bank Limited 22-24

Chapter-3 Methodology 25
Sources of Data 26-29
Data Processing 29-30

Chapter-4 Analysis and Findings 31

Financial statement 32
Horizontal and Vertical Analysis 32-35
Liquidity Ration Analysis 36-38
Debt Ration Analysis 39-40
Profitability Ration Analysis 41-52
Findings 53-54
Chapter-5 Recommendation 55
Recommendation 56

Chapter-6 Conclusion 57
Conclusion 58
Reference 59
 Chapter – One

Introduction
Introduction

Financial statements for banks present a different analytical problem than manufacturing and
service companies. As a result, analysis of a bank's financial statements requires a distinct
approach that recognizes a bank's somewhat unique risks. Banks take deposits from savers,
paying interest on some of these accounts. They pass these funds on to borrowers, receiving
interest on the loans. Their profits are derived from the spread between the rate they pay for
funds and the rate they receive from borrowers. By managing this flow of funds, banks
generate profits, acting as the intermediary of interest paid and interest received and taking on
the risks of offering credit. As one of the most highly regulated banking industries in the
world, investors have some level of assurance in the soundness of the banking system. As a
result, investors can focus most of their efforts on how a bank will perform in different
economic environments. In this project, I am trying to provide assistance to the investors, by
showing them the performance of two banks underlying the same functions.

Significance of the Report

Financial statements provide an overview of a business' financial condition in both short and
long term. All the relevant financial information of a business enterprise presented in a
structured manner and in a form easy to understand, is called the financial statements.
Therefore these financial statements are very useful for the stake holder, as they obtain all
insight information. In assessing the significance of various financial data, experts engage in
ratio analyses, the process of determining and evaluating financial ratios. A financial ratio is a
relationship that indicates something about a company's activities, such as the ratio between
the company's current assets, current liabilities or between its accounts receivable and its
annual sales. The basic source for these ratios is the company's financial statements that
contain figures on assets, liabilities, profits, or losses. Financial ratios are only meaningful
when compared with other information. Since they are most often compared with industry
data, ratios help an individual understand a company's performance relative to that of
competitors; they are often used to trace performance over time. Ratio analysis can reveal
much about a company and its operations. However, there are several points to keep in mind
about ratios. First, financial statement ratios are "flags" indicating areas of strength or
weakness. One or even several ratios might be misleading, but when combined with other
knowledge of a company's management and economic circumstances, ratio analysis can tell
much about a corporation. Second, there is no single correct value for a ratio. The observation
that the value of a particular ratio is too high, too low, or just right depends on the perspective
of the analyst and on the company's competitive strategy. Third, a ratio is meaningful only
when it is compared with some standard, such as an industry trend, ratio trend, a ratio trend
for the specific company being analyzed, or a stated management objective. The significance
of my internship stems from the very nature of the financial statements i.e. they are usually
lengthy, bulky documents which have a huge array of numbers not readily understandable.
Financial statement analysis is the process of examining relationships among financial
statement elements and making comparisons with relevant information. It is a valuable tool
used by investors and creditors, financial analysts, and others in their decision-making
processes related to stocks, bonds, and other financial instruments. The goal in analyzing
financial statements is to assess past performance and current financial position and to make
predictions about the future performance of a company. Investors who buy stock are primarily
interested in a company's profitability and their prospects for earning a return on their
investment by receiving dividends and/or increasing the market value of their stock holdings.
Creditors and investors who buy debt securities, such as bonds, are more interested in
liquidity and solvency: the company's short-and long-run ability to pay its debts. Financial
analysts, who frequently specialize in following certain industries, routinely assess the
profitability, liquidity, and solvency of companies in order to make recommendations about
the purchase or sale of securities, such as stocks and bonds. Analysts can obtain useful
information by comparing a company's most recent financial statements with its results in
previous years and with the results of other companies in the same industry. My aim is to
summarize all that data into a form which is easily understood by all the relevant parties.

The objectives of the report

 The objectives of the report is to provide insight into how the banks work, what are
the strengths and weakness of the bank.
 The ratios will be compared of both the banks within the industry to see where the
banks stand. To give the stock holder a clear view about the financial feasibility of
both the banks so that they can take the appropriate decision and most significantly it
will provide a good understanding of the business cycle and the yield curve both of
which have a major impact on the economic performance of the bank.
 The primary objective of financial analysis is to forecast and/or determine the actual
financial status and performance of a project and, where appropriate, of the EAs. This
 is to enable ADB to combine that information with all other pertinent data (technical,
economic, social, etc.) to assess the feasibility, viability, and potential economic
benefits, of a proposed or continuing lending operation. Secondary objective is the
provision of Technical Assistance to a borrower and an EA to enable them to make
similar assessments for the project and to apply the techniques to other non-ADB
investments.
 A tertiary objective is to encourage borrowers to make any necessary changes to their
institutional and financial management systems to facilitate the generation of
appropriate data to support good financial analysis.
 The objectives of financial analysis as set out above are intended to measure the
achievement of financial objectives of a borrower, the project to be (or being)
financed.
 The financial performance of a public and private sector EA should normally be
measured by the use of at least one indicator selected from the range of the following
groups of indicators derived from the financial analysis of a project and it’s EA: (i)
Operation; (ii) capital structure, and (iii) liquidity. This means that, if only one
indicator from one of the three categories of indicators above would be the subject of
a loan covenant, the remaining indicator or indicators from each group above
recommended by the financial analyst should be the subject of periodic reporting.
 The efficient allocation of resources is an important consideration in pricing policy,
particularly for REEA services.
 Financial analysis is used to describe the impact of such a policy. I worked on the
financial statements of the bank i.e. Balance sheet of the bank and make some
essential calculations in order to give you an idea about the financial stability of the
bank.

Limitations of the report:

Any research work needs high degree of involvement regarding collection of information,
creation of data base, literature review and analysis of data. While doing so, many
limitations arise even though we always put our best effort to avoid them. In conducting the
present study, the following limitation has been faced.
 Lack of Experience: Though I have prepared many reports before, I had no
experience of internship. So, inexperience is one of the main constraints of the
Study.
 Insufficient data: There was not sufficient information due to confidentiality of
Sonali Bank Limited. So, we cannot articulate information properly of that
company.
 Busy working environment: The officials had sometimes been unable to provide
information because of their huge routine work.
 Lack of enough time: The report was prepared within a very short time considering
the topics related to report. That’s why; it wasn’t possible to demonstrate all aspects
of the report.
 Chapter – Two

Overview of Sonali Bank

Limited
Overview of Sonali Bank Limited
Soon after independence of the country Sonali Bank emerged as the largest and leading
Nationalized Commercial Bank by proclamation of the Banks' Nationalization Order 1972
(Presidential Order-26) liquidating the then National Bank of Pakistan, Premier Bank and
Bank of Bhwalpur. As a fully state owned institution, the bank had 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. The bank has been converted to a Public Limited Company with
100% ownership of the government and started functioning as Sonali Bank Limited from
November 15 2018 taking over all assets, liabilities and business of Sonali Bank. After
corporatization, the management of the bank has been given required autonomy to make the
bank competitive & to run its business effectively. Sonali Bank Limited is governed by a
Board of Directors consisting of 11(Eleven) members. The Bank is headed by the Chief
Executive Officer & Managing Director, who is a well-known Banker and a reputed
professional. The corporate head quarter of the bank is located at Motijheel, Dhaka,
Bangladesh, and the main commercial center of the capital.

About Sonali Bank Limited

Sonali Bank Limited is a state-owned leading commercial bank in Bangladesh. It is the
largest bank of the country. 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 Bahawalpur and Premier Bank branches located in
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
Taka 10 billion and Taka 3.272 billion respectively. Presently, it’s authorized and paid up
capital is Taka 10 billion and Taka 9 billion respectively. The bank's reserve funds were Taka
60 million in 1979 and Taka 2.050 billion on 30 June 2000.The management of Sonali Bank
is vested in a 7-member board of directors appointed by the government. The managing
director is the chief executive. He is assisted by a deputy managing director, six general
managers, and other senior executives. The general managers are in charge of the bank’s
branches in the headquarters of the six administrative divisions of the country namely,
Dhaka, Chittagong, Rajshahi, Khulna, Sylhet and Barisal. The bank has 32 departments at its
head office including a training institute in Dhaka. On 30 June 2000, the total number of
employees of the bank was 26,085. The bank has been converted to a Public Limited
Company with 100% ownership of the government and started functioning as Sonali Bank
Limited from November 15, 2007 taking over all assets, liabilities and business of Sonali
Bank. After corporatization, the management of the bank has been given required autonomy
to make the bank competitive & to run its business effectively. During 2015, $250,000 was
stolen from the bank by Cyber criminals using the Swift International payments network. In
2018, the Bank signed a legal Memorandum of Understanding with PayPal. Sonali Bank has
a total of 1211 branches. Out of them, 343 are located in urban areas, 862 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. Sonali Bank
UK remits up to 14 destinations across Bangladesh directly, these include Dhaka, Chittagong,
Sylhet, Moulvibazar, Beanibazar, Balaganj, Biswanath, Jagan nathpur, Sunamganj,
Gopalganj, Nabigonj, Hobigonj, and Kulauraor Tajpur. There are currently three branches in
the UK, one located in Osborn Street, London, another in Small Heath, Birmingham and in
Manchester. Sonali bank Limited is governed by a Board of Directors consisting of 11
members. It is headed by the Managing Directors & CEO, who is a well –known Banker and
a reputed professional. The corporate head quarter of the bank is located at Motijheel, Dhaka,
Bangladesh. The main commercial center of the capital.

Role of Sonali bank Limited in the National Economy

Economy and Banking industry go together and are inseparable. Sonali Bank Limited has
been playing an important role in the economic development of the country. As many as
26,085 people are in the employment of the Bank as on December 31, 2019. Besides, Sonali
Bank Limited has generated employments for hundreds of people in the projects and
industries established under finance. The Bank has been financing the trade and commerce of
the country since inception of the Bank in 1997. We have handled a volume of countries
exports and imports. The deposits our Bank mobilized through the outlets of branches helped
in the formation of capital in the country. Our lending to borrower reached Tk. 23163.18
million as on June 30, 2009. It has contributed to the industrialization and improvement of
trade and commerce of the country which ultimately accelerated economic growth and
national welfare through multiplying effect. We have collected VAT and tax on interest/
profit earning of customers of the Bank. For relief and rehabilitation of natural calamity-hit
people of the country in 2018 the bank has donated a denoted amount of money.
Foreign Remittance

To develop national infrastructure and economy of Bangladesh Sonali Bank Limited has been
playing dominant role to bring hard earning of Bangladesh expatriates working/ living abroad
through banking channels. For this purpose, Sonali Bank Limited has established a bank
named Sonali Bank (U.K) and an exchange house named Sonali Exchange Company Inc.
(SECI), USA. Our Bank has also established drawing arrangement with various exchange
house / banks in Middle East, Canada and Malaysia. Under this arrangement, remitters can
easily send their hard earning to the beneficiaries in Bangladesh through 1184 Sonali Bank
Limited Branches across the country. They can remit their money through Demand Drafts
(DD), Telegraphic Transfers (TTs), SWIFT and / or Computerized Payment Instructions (PC
to PC via dial up modem) on Sonali Bank Limited selective branches.

Trade Financing:

Sonali Bank Limited extends multiple credit facilities to boost up trade, commerce and
industry. The credit packages and interest rates are as under:

Credit Packages Interest Rate

(Floating)
1. Credit to Trade and Commerce 14%

2. Credit for Power Driven Vehicle/ Water Transport 14%

3. Overdraft Against:

Fixed Deposits 13%

SDPS Accounts
Five years period 12%
Ten years period 14%
Insurance Policy/ Shares and Debenture of Public Ltd. Co. 14%
Work order of Govt./ Semi Govt. Corp 14%
Wage Earners Dev. Bond 13%
4. Housing Loan
Residential 13.5%
Commercial 14%
5. Small Loan 14%

6. Consumers credit 14%

7. Loans To Public Sector Enterprise 14%

8. Cash Credit Facilities for Small Business enterprises 14%

9. Cash Credit Facilities against Bricks Manufacturing 14%

Investment Banking:

Central Accounts & Fund Management Division at Head Office maintains Investment
Portfolio of the Bank. With a view to implementing Government policies & decisions and
accelerating the growth of the capital market of the country, surplus funds of Sonali Bank are
utilized in the following areas:

A) Short Term:

1. Call loans: An overnight investment to other Banks & Financial Institutions.

2. Treasury Bills: Investment made to the Government through Treasury bills.

B) Long Term:

1. Government/ Public Bonds: Sonali Bank Limited purchases bonds issued by the
Govt. of Bangladesh and other Public Bodies.
2. Shares/ Equity Participation: Sonali Bank Limited participate in the IPO and extend
bridge finance to the equity of public limited companies, institutions and public
bodies.
3. Debentures: Sonali Bank Limited purchases debentures issued by the public bodies
and financial institutions under Government.
Corporate Profile of Sonali Bank Limited

Corporate Profile

Name of the Company : Sonali Bank Limited

Chairman : Mr. Md. Ashraful Moqbul
CEO & Managing Director : Mr. Md. Obayed Ullah Al Masud

Company Secretary : Mr Md. Ataur Rahman

Legal Status : Public Limited Company
Emerged as Nationalised Commercial Bank in 1972,
following the Bangladesh Bank (Nationalization) Order
Genesis :
No. 1972 (PO No.26 of 1972)

Date of Incorporation : 03 June, 2007

Date of Vendor's Agreement : 15 November, 2007
35-42, 44 Motijheel Commercial Area, Rangpur,
Registered Office :
Bangladesh
Authorized Capital : Taka 6000.00 Crore

Paid-up Capital : Taka 3830.00 Crore

Number of Employee : 18,806

Number of Branches : 1211

Phone-PABX : 9550426-31, 33, 34, 9552924
FAX : 88-02-9561410, 9552007
SWIFT : BSONBDDH
Website : www.sonalibank.com.bd
E-mail : itd@sonalibank.com.bd
 Organogram of Sonali Bank Limited

Board of Directors

Managing Directors

and CEO

Deputy Managing Directors - 1 Deputy Managing Directors - 1 Deputy Managing Directors - 1

General Managers Field GM at Divisions - 7

General Managers at Head Office -8

Deputy General Managers at Divisional Head of Head office

Deputy General Managers at Field Office
(GMO, PO and Corp. Br.)

Assistant General Managers at

Head Office eral Managers at Head Office

Other Executive SEO, EO, SO Other Executive SEO, EO, SO

officer at Head Office officer at Field
Office

Other Staffs at Head Office Other Staffs at Field Office

Figure: Organogram of Sonali Bank Limited

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Management Hierarchy of Sonali Bank Limited

Chairman

Board of Directors (BOD)

Managing Directors (MD)

Deputy Managing Directors (DMD)

General Manager (GM)

Deputy General Manager (DGM)

Assistant General Manager (AGM)

Senior Executive Officer (SEO)

Executive Officer (EO)

Officer

Figure: Management Hierarchy of SBL

Vision of Sonali Bank Limited
 Socially committed leading banking institution with global presence.
Mission of Sonali Bank Limited
 Dedicated to extend a whole range of quality product that support divergent needs of
people aiming at enriching their lives, creating value for stakeholders and
contributing toward socio – economic development of the country.
Slogan
 Your trusted partner in innovative banking.

Objective of Sonali Bank Limited

Sonali Bank has a various types of Objectives. Important objectives of Sonali Bank are as
follows:
 To collect of deposits

 To secure deposit

 To inspire savings

 To create employment

 To control loan

 To create medium of exchange

 To expand trade and commerce

 To helps in industrialization

 To increase the capital formation

 To provide the customers service

 To earn profit

 To ensure Regional Development.

Without those objectives, there are some others too. The bank is responsible to provide all
types of banking services to the door steps of people. The bank participates in various socio-
economic development activities and also takes part in implementation of various polities
and program made by government. As the largest state oriented and professional managed
leading bank of the country.
Strategic significance of Sonali bank
As a commercial bank, Sonali Bank has some core responsibilities towards customers,
management, shareholders and other business organizations. The bank is responsible for
sound customer satisfaction through quality and timely services. Like every commercial bank
this bank has some common goals to be met. In the present world, security is a common talk
in wealth preservation .This bank helps clients to securitize their wealth through secure
banking system. Sonali Bank helps the regional development of Bangladesh by the expansion
of loan portfolio to the business, agro-sectors, industry. A unique feature of sonali bank is
that it works in favor of Bangladesh bank by settling commercial transactions among
commercial bank known as clearing house. It has expanded its online services maintaining
competition with others commercial banks such online checking customers account, Issuing
visa and master card to support online transactions, online settlement of customers account
etc. The bank does some social services to create positive image in the country such as
acceptance of scraped money, providing scholarship facility to meritorious students. Finally,
the bank is serving society and more responsive to the environment through innovation and
challenges.

Functions of Sonali Bank Limited:

Main functions of Sonali Bank are:-
 Deposit collection from customers.
 Cash transactions through client’s current account.
 Attending bills of exchange and draft of customers.
 Loan sanction.
 Provide online services to the customers.
 Money transfer.
 Collecting different charges, interest dividends, rents, pension etc.
 Acts as an advisor.
 During the food scarcity they provide food to the government.
 They participate in the urban banking.
 They arrange part-time hypothesis for the university’s student.
 They provide the primary teachers’ salary as a representative of the government.
 They distribute pension to the retired workers.
 They distribute and collect the form of passport.
Small & Medium Enterprise (SME)
Sonali Bank Limited emphasizes highest priority on SME financing for eliminating poverty
by increasing SME loan flow at economically underdeveloped area & people setting up
priority base SME credit policy for women & underprivileged entrepreneurs. Sonali Bank is
working for the improvement of their socio – economic condition.

Corporate Social Responsibility (CSR):

To develop CSR engagements & practices the Bank has taken up leading programs at lower
rate of interest like:

 Special credit program for freedom fighters,

 Special Scholarship brilliant students

 Special credit program for Government Primary School Teacher,

 Credit Program for overseas Employment,

 Collateral-free group –based Credit Program for the landless &sharecroppers,

 Green Banking programs like biogas & solar plants

Products of the Bank

 Ready Cash
 Deposit Products
 Credit Products
 E-services
 Rural Credits
Ancillary services:
 Gas bills.

 Electricity bills.

 Municipal holding Tax.

 Passport fees, visa fees

 Customs & Excise duties.

 Source tax and VAT.

Payment:
 Pension of employees of Government and other Corporate Bodies.

 Bangladesh Bank employee’s pension.

 Army pension.

 Students' scholarship.

 Govt. & Non-Govt. Teachers' salary.

Social Service:
 Old age allowances.

 Widows, divorcees and destitute women's allowances.

 Freedom Fighters' allowances.

 Rehabilitation allowances for acid survival women.

 Disability allowances.

 Savings Certificates.

 ICB Unit Certificates.

 Prize Bonds.

 US Dollar Premium & Investment Bond.

 Lottery tickets of different Semi-Govt. And Autonomous Bodies.

 Sanchay patra.

 Public Service Commission's application form.

 Judicial Service Commission's application form.

 Misc. Services

 Bank a/c information on the tax paying client according to demand of NBR.

 Local Governance Support Project.

 Chapter – Three

Methodology
Every research program should follow some basic form of procedures. The researcher studied
various books & articles of different writers regarding the topic. However mainly this report is
written on the basis of experience gathered during the period of Internship. In order to make the
report more meaningful and presentable. Every researcher can use several tools to evaluate a
company, but this report writer will use one of the most valuable tool that is “financial ratios“.
Ratios are an analyst’s microscope; ratio allow researchers to get a better view of the firm’s
financial health than just looking at the raw financial statements. Ratios are useful both to
internal and external analysts of the firm. For internal purposes: ratios can be useful in planning
for the future, setting goals, and evaluating the performance of managers. External analysts use
ratios to decide whether to grant credit, to monitor financial performance, to forecast financial
performance, and to decide whether to invest in the company. The researcher will use Microsoft
Word and Microsoft Excel work sheets to compute the different ratios and analysis.

Sources of data
All the necessary information to prepare this report is collected from secondary sources of data.
Secondary data sources: It includes sources of existing/published data, such as:
 Operational manual
 Official Website
 Banking journals
 Research papers
 Account statement

Methods of data collection: The researcher have used following methods and tools to gather
necessary data or information (secondary)

Secondary Data: The researcher have used following tools to gather our necessary secondary
data:

a) Annual report: The researcher have collected Sonali Bank Limited annual report of
2014-19, on the basis of those report the researcher prepared this internship report.

b) Working papers: The researcher have collected working paper which is related
with the subject matter of report. The employees of SBL co-operate very much to
prepare this internship report.

26 | P a g e
c) Office files: The researcher got lots of information from office files of Sonali Bank
Limited.

d) Selected Books: Preparing this report the researcher got various help from lot of
books. The researcher have selected few chapters which are relates of my subject
matter, on the basis of this information the researcher prepared my internship
report.

e) Printed forms: The researcher have collected monthly and annually printed forms;
on the basis of these printed forms, the researcher prepared my internship report.

 Horizontal analysis: Trend analysis regularly refers to methods for extracting an

underlying pattern of behavior in a time series which would otherwise be partly or
almost completely hidden by means of trend. If the trend can be assumed to be linear,
trend analysis can be undertaken inside a formal regression analysis, as described in
trend estimation. Trend analysis is a mathematical technique that makes use of
historical outcomes to predict future outcome. This is done by tracking variances in
value and time table performance. The accounts listed help decide if the company is
going through any type of financial stress. When trend analysis is performed, an
organization is capable to see if its monetary position is enhancing or declining based
as the length and the items on the statements for all later intervals are compared with
gadgets on the statements of the base period. The adjustments are normally shown in
percentage.

 Vertical analysis: Common size or vertical analysis is a method of evaluating

monetary statistics by means of expressing each item in an economic announcement as
a proportion of a base amount for the equal time period. A company can use this
analysis on its stability sheet or its profits statement. A balance sheet summarizes the
company’s property (things that it owns that have value) its liabilities means the
amounts it owes to others, and its fairness means an owners funding in the business. A
profit assertion shows the company’s revenues means amount of cash it made through
promoting its goods and services and its prices means the amount of cash it spent to
earn its revenues.
 Ratio analysis: Financial ratios are useful indicators of a firm's performance and
financial situation. Financial ratios can be used to analyze trends and to compare the
firm's financials to those of other firms. Ratio analysis is the calculation and
comparison of ratios which are derived from the information in a company's financial
statements. Financial ratios are usually expressed as a percent or as times per period.
Ratio analysis is a widely used tool of financial analysis. It is defined as the systematic
use of ratio to interpret the financial statements so that the strength and weaknesses of a
firm as well as its historical performance and current financial condition can be
determined. The term ratio refers to the numerical or quantitative relationship between
two variables. With the help of ratio analysis conclusion can be drawn regarding
several aspects such as financial health, profitability and operational efficiency of the
undertaking. Ratio points out the operating efficiency of the firm i.e. whether the
management has utilized the firm’s assets correctly, to increase the investor’s wealth. It
ensures a fair return to its owners and secures optimum utilization of firm’s assets.
Ratio analysis helps in inter-firm comparison by providing necessary data. An intrafirm
comparison indicates relative position. It provides the relevant data for the comparison
of the performance of different departments. If comparison shows a variance, the
possible reasons of variations may be identified and if results are negative, the action
may be initiated immediately to bring them in line.

1. Liquidity Ratio Analysis: Liquidity Ratio is the ratio by which a company can
calculate the company’s ability to meet up the amount of liability to creditor. Most of the
firm used to take a large amount of loan from respected lender to expand its productive
activity. Against the loan a company has to calculate the cost of capital. Because a
levered company is more beneficial compare to unlevered company. So in that case for a
company has to maintain liquidity ratio to aware of its liability to creditors. There are
some liquidity ratios those are given below.
 Current ratio
 Net Working capital
 Cash ratio
 2. Profitability Ratio Analysis: The ratio measure the company’s ability in format of
profit remaining after deducting all costs. Every company wants to get biggest than big
profit in consider of its total operating activities. It can indicate the investment
opportunityto a firm about to take decision. By the ratio new investors for a company can
take decision at to have investment. There are some ratios which are considered as
profitability ratio. Those are given below:
 Operating profit per branch
 Net Profit Margin
 Return on Asset (ROA)
 Return on Equity (ROE)
 Earnings per Share
 Equity to Net Loans

3. Debt Ratio Analysis: Debt ratio analysis, defined as an expression of

the relationship between a company’s total debt and assets, is a measure of the ability to
service the debt of a company. It indicates what proportion of a
company’s financing asset is from debt, making it a good way to check a company’s
long-term solvency. In general, a lower ratio is better. Value of 1 or less
in debt ratios shows good financial health of a company. There are some ratios which are
considered as profitability ratio. Those are given below:
 Debt ratio
 Times interest earned ratio

Data Processing
There are some steps in this data processing process and those are given below.
 Collection: Firstly, The researcher have collected all required data from different
kinds of sources like website, discussion etc.
 Preparation: Then the researcher have prepared suitable data for further analysis and
processing in the MS excel 2013.
 Classification: After preparation then the researcher have classified data based on
their category.
 Validity check: Then the researcher have checked the validity of the given data.
 Final selection: After validated then the researcher have selected the data for the final
use in my report.
 Graph Making: Then the researcher made graphical explanation on those data.
 Chapter – Four

Analysis and Findings

Horizontal
analysis:
Horizontal analysis of Balance Sheet
Sonali Bank Limited
Particulars 2014- 2015- 2016- 2017- 2018-
2015 2016 2017 2018 2019
Cash 100% 93% 85% 62% 56%
Cash in Hand (Including Foreign Currencies) 100% 134% 157% 146% 180%
Balance with Bangladesh Bank and its Agent 100% 87% 62% 55% 49%
Bank
Balance with other Banks & Financial 100% 45% 63% 46% 26%
Institutions
In Bangladesh 100% 31% 53% 27% 15%
Outside Bangladesh 100% 94% 78% 252% 141%
Money at Call on Short Notice 100% 48% 99% 124% 20%
Investments 100% 84% 67% 58% 59%
Government 100% 84% 67% 58% 60%
Others 100% 75% 62% 54% 40%
Loans and Advances 100% 102% 99% 89% 81%
Loans, Cash Credit, Overdrafts, etc. 100% 97% 94% 84% 77%
Bills Purchased and Discounted 100% 199% 260% 310% 247%
Fixed Asset Including Premises, Furniture and 100% 99% 98% 98% 98%
Fixture
Others Assets 100% 96% 99% 69% 93%
Non-Banking Assets 0 0 0 0 0
Total Assets 100% 91% 83% 71% 69%
Liabilities
Borrowing from others Banks, Financial 100% 106% 114% 122% 131%
Institutions & Agents
Deposit and d Others Accounts 100% 101% 91% 759% 74%
Current Accounts & Others Accounts etc. 100% 90% 83% 61% 63%
Bills Payable 100% 67% 94% 56% 68%
Saving Bank Deposits 100% 92% 80% 55% 61%
Fixed Deposits 100% 86% 77% 72% 72%
Others Deposits 0% 0% 0% 0% 0%
Other liabilities 100% 120% 114% 115% 106%
Total Liabilities 100% 92% 83% 71% 68%
Shareholders’ Equity 100% 84% 86% 74% 75%
Paid up Capital 100% 36% 29% 29% 27%
Statutory Reserve 100% 85% 85% 78% 63%
Others Reserve 100% 44% 44% 39% 40%
Revaluation Reserve 100% 89% 76% 75% 87%
Total Liabilities and Shareholders’ Equity 100% 91% 83% 71% 69%
 Horizontal analysis of Income Statement
Sonali Bank Limited

Particulars 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Interest Income 100% 93% 86% 90% 100%
Income on Investment 100% 67% 57% 50% 46%
Non-interest Income 100% 89% 107% 115% 82%
Total Income 100% 83% 77% 76% 72%
Interest Expense 100% 90% 83% 82% 90%
Non-interest Expense 100% 93% 85% 62% 61%
Total Expense 100% 90% 84% 76% 81%
Net Interest Margin 100% 46% 35% 31% 24%
Net Non-interest Expense 100% 130% 36% 15% 23%
Operating Profit 100% 35% 34% 70% 25%
Earnings Before Provision & Tax 100% 38% 38% 72% 28%
Profit Before Provision & Tax 100% 34% 34% 68% 24%
Net Profit After Tax 100% 59% 61% 55% 50%

Horizontal analysis is a comparative analysis among the items in balanced sheet and
income statement. In 2015-2016 to 2018-2019 the percentage of cash has been decreased
from 93% to 56%. It showed that bank has paying attention in profitable transections to
make sure better use of money. Cash in hand (including foreign currency) showing 134% to
180% a better use of money in the format of foreign reserve. Investment showing a
negative trend from 2015-2016 to 2018-2019 which is 84% to 59% because of economical
slum in this country. Loan & advanced gradually decreased from 2015-2016 to 2018-2019
at this 102% to 81%. On the others hand, bills purchased and discounted item showing a
positive growth from 199% to 247%. In most cases the bank experienced inconstant rate of
return. So it has an effect to the banks total assets which decreased from sequence 91% to
69%. On the others side bank played better performance and got positive result. In income
statement showing a good trend in interest income from 2015-2016 to last year. The rate
increased 93% to 100%. The change is only 7%. All the above net profit after tax have
fluctuated following the years abnormally.

Vertical analysis:
Vertical analysis of Balance Sheet

33 | P a g e
S onali Bank Limited
Particulars 2014- 2015- 2016- 2017- 2018-
2015 2016 2017 2018 2019
Cash 6% 6% 6% 7% 7%
Cash in Hand (Including Foreign Currencies) 1% 1% 1% 1% 0%
Balance with Bangladesh Bank and its Agent 5% 5% 6% 6% 7%
Bank
Balance with others Banks & Financial 2% 4% 3% 3% 6%
Institutions
In Bangladesh 1% 3% 2% 3% 5%
Outside Bangladesh 1% 1% 1% 0% 0%
Money at Call on Short Notice 1% 1% 0% 0% 2%
Investments 32% 35% 40% 39% 37%
Government 30% 32% 37% 36% 34%
Others 2% 2% 3% 3% 3%
Loans and Advances 40% 36% 34% 32% 34%
Loans, Cash Credit, Overdrafts, etc. 37% 35% 33% 31% 33%
Bills Purchased and Discounted 3% 2% 1% 1% 1%
Fixed Asset Including Premises, Furniture and 4% 4% 3% 3% 3%
Fixture
Others Assets 15% 15% 13% 16% 11%
Non-Banking Assets 0% 0% 0% 0% 0%
Total Assets 100% 100% 100% 100% 100%
Borrowing from Others Banks, Financial 0% 0% 0% 0% 0%
Institutions & Agents
Deposit and others Accounts 92% 83% 84% 90% 86%
Current Accounts & Others Accounts etc. 17% 17% 17% 20% 19%
Bills Payable 1% 1% 1% 1% 1%
Savings Bank Deposits 20% 20% 21% 27% 23%
Fixed Deposits 42% 44% 45% 41% 40%
Others Deposits 0% 0% 0% 0% 0%
Others Liabilities 14% 10% 10% 8% 9%
Total Liabilities 94% 94% 94% 94% 95%
Shareholder’s Equity 6% 6% 6% 6% 5%
Paid up Capital 1% 3% 4% 3% 3%
Statutory Reserve 1% 1% 1% 1% 1%
Others Reserve 0% 0% 0% 0% 0%
Revaluation Reserve 3% 3% 3% 3% 2%
Total liabilities and Shareholders’ Equity 100% 100% 100% 100% 100%

34 | P a g e
 Vertical analysis of Income Statement
Sonali Bank Limited.

Particulars 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Interest Income 100% 100% 100% 100% 100%
Income on Investment 56% 77% 85% 100% 123%
Non-Interest income 37% 39% 30% 29% 46%
Total Income 193% 216% 215% 229% 269%
Interest Expense 140% 145% 145% 153% 155%
Non-Interest Expense 43% 43% 43% 62% 70%
Total Expense 183% 188% 188% 215% 225%
Net Interest Margin 16% 33% 40% 47% 68%
Net Non-Interest Expense 6% 4% 13% 33% 24%
Operating Profit 11% 29% 27% 14% 43%
Earnings Before Provision & Tax 13% 30% 29% 16% 45%
Profit before Provision &Tax 10% 29% 27% 14% 43%
Net Profit After Tax 13% 20% 2% 0% 26%

Vertical analysis refers the balance sheet items to understand percentage change of
assets, liabilities and other items. Basically it measures the respected items based on
partial common account. In comparison of total asset, the cash item showing a little
change from 2014-2015 to 2018-2019. Investment showing a lesser growth from
32% to 37%. Deposit and others account showing a normal rate of change following
the years. All tough saving deposit has beenincreased up from 20% to 23% but fixed
deposit has been decreased 42% to 40% expect 2016-2017. The bank could able to
control its liability so strongly. It has 1% increased following the years. On the other
hand, Vertical analysis of income statement that is income on investment showing a
better growth from 56% to 123%. Non-interest income has a positive trend 29% to
46%. Along with the different incomes like net interest margin, non-interest income,
operating profit total operating expense also increased 183% to 225%. All the above
change of data resulting a positive netprofit expect 2017-2018.

35 | P a g e
Liquidity Ratio Analysis

a. Current ratio:
The current ratio, one of the most commonly cited financial ratios, measures the firm’s
ability to meet its short term obligations. The higher the current ratio, the better the liquidity
position of the firm. It is expressed as: “Current Ratio=Current Asset/Current Liabilities”.

Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Current Ratio 1.37 2 1.83 1.86 1.46

Table-1: Current Ratio

Graphical Presentation:

Current Ratio
2.5

2 2
1.8 1.8

1.5
1.4
1.3

0.5

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Current Ratio

Figure-1: Current Ratio

The higher the current ratio; the more liquid the firm is considered to be. SBL’s current ratio
is good enough because it maintains more than 1tk current assets against 1tk current liabilities
whereas normally banking industry maintains 1: 1 current ratio. This graph shows that, the
current ratio in 2014-2015 is low but with the passage of time it increases. In 2015-2016, the
ratio is so higher than 5 financial year but decreased to 1.46 in 2018-2019. The ratio is good
but somewhat worse performance than previous year’s performance.
 b. Net Working capital
Networking capital, although not actually a ratio is a common measure of a firm’s overall
Liquidity a measure of liquidity ratio calculated by “Net Working capital=Current Asset-
Current Liabilities”.

Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Net Working Capital( In million) 61798 152912 143848 170775 122847

Table-2: Net Working capital

Graphical Presentation:

Net Working
180000
160000 170775
140000 152912
120000 143848
100000 122847
80000
60000
40000
20000
0 61798

2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Net Working

Figure-2: Net Working Capital

Net working capital of SBL gradually decreasing in Year by Year However, the bank cannot
able to meet up its current obligations. So the Bank should increase its Current asset.
 c. Cash Ratio:

It is the ratio of a company’s total cash and cash equivalents to its current liabilities. The cash
ratio is most commonly used as a measure of company liquidity. It can therefore determine
if, and how quickly, the company can repay its short-term debt. A strong cash ratio is useful
to creditors when deciding how much debt, if any, they would be willing to extend to the
asking party. The ratio is calculated by “Cash ratio = Cash in hand at banks/Total deposit
x100”.

Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Cash Ratio 7.75% 8% 6.7% 7.15% 7%

Table-3: Cash ratio

Graphical Presentation:

Cash ratio
9%

8% 8%
7.75%
8%

7.15%
7% 7%
6.70%
7%

6%
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Cash ratio

Figure-3: Cash ratio

The fall of 2016-2017 and 2018-2019 can be attributed to the growing loans and deposits
given and accepted by the bank. Growing loans make the cash in hand and at banks smaller,
while growing total deposits made the denominator of the cash ratio larger, thereby making
the numerical figure of the ratio smaller.
Debt Ratio Analysis:
a. Debt ratio:

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. The ratio is calculated by “Debt ratio= Total Liabilities/Total Assets x100”.

Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Debt Ratio 97% 94% 94% 93% 94%

Table-4: Debt ratio

Graphical Presentation:

Debt ratio
98%

97%

96%

95%

94%

93%

92%

91%
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Debt ratio

Figure-4: Debt ratio

This graph shows that, the debt ratio was high in 2014-2015 but sharply decreased in 2015-
2016. The Debt ratio measures, the proportion of total assets provides by the firm’s creditors.
Their debt ratio were decreasing trend that indicates positive sign.
 b. Times interest earned ratio:

Times interest earned ratio, sometimes called the interest coverage ratio, measures the Bank’s
ability to make contractual payments6. The higher its value, the better able the firm is able
the bank is to fulfill its interest obligations. The times interest ratio is computed by “Times
interest earned ratio=Earnings before interest and Tax/Interest”.

Year
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Times interest earned 0.28 1.57 3.15 0.80 5.10

ratio

Table-5: Times interest

Graphical Presentation:

Times interest earned ratio

6

1
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

0 Times interest earned ratio

Figure-5: Times interest earned ratio

This graph shows that, the times interest earned ratio was low but gradually increased over 3
years. In 2017-2018 the ratio sharply decreased and a sharp increase in 2018-2019. The time
interest earned ratio, sometimes called the interest coverage ratio, measures the firm’s ability
to make contractual interest payments. The higher the value, the better the firm’s ability to
fulfill its interest obligations. A value of at least 3 to 5 is often suggested. Here, the
performance of 2018-2019 is notable than previous years.
Activity Ratio Analysis:
a. Cost Income Ratio: The “cost income ratio (CIR)” or “cost-to-income ratio”
shows the relation between income and the cost of acquiring that income. The CIR is
an important measure of bank performance. As a rule, the lower a bank’s cost-to-
income ratio, the more efficiently a bank operates. It is calculated by “Cost Income
Ratio=Total operating Expenses/Total Operating Income x 100”.

Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Cost income Ratio 50.72% 80.08% 60.16% 61.89% 94.01%

Table-6: Cost Income Ratio

Graphical Presentation:

Cost Income Ratio

100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%

2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Cost Income Ratio

Figure-6: Cost Income Ratio

We know that this ratio measures the operating efficiency of the bank by measuring the
portion if the total operating costs relative to the total operating income of that bank and the
higher the ratio, the lower the operating efficiency. In 2015-2016 the operating cost of Sonali
Bank Ltd. is high but after that it sharply decreases in 2016-2017 but sharply increases in
2018-2019. So it can be said that the operating efficiency of the Sonali Bank Ltd. is in not
good position that is they are not able to minimize their operating cost.
 b. Total Asset Turnover Ratio:
The total asset turnover indicates the efficiency with which the firm is able to use all its
assets to generate sales. But in Bank, I took operating income alternative to sales. It is
calculated by, “Total Asset Turnover= Operating Income/Total Asset x 100”.

Year 2014-2015 2015-2016 2016-2017 2017- 2018-2019

2018
Total Asset Turnover 1.46 .35 .91 .843 0.354

Table-7: Total Asset Turnover

Graphical Presentation:

Total Asset Turnover

1.46

0.91
0.843

0.35 0.354

2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Total Asset Turnover

Figure-7: Total Asset Turnovers

Generally, the higher a firm’s total asset turnover, the more efficiently its assets has been
used. This measurement is probably of greatest interest to management, because it indicates
whether the firm’s operations have been financially efficient. This exactly means how many
times the company turns over its assets per year. The greater the total asset turn over, the
company is more efficient and 4 to 6 times is standard position but also depends on industry.
Here, SBL’s total asset turnover ratio is decreasing after 2016-2017 to 2018-2019 which is
not a good sign.
 c. Capacity ratio:
Capacity ratio is the ratio of net loans and leases to total assets. It is a negative liquidity
indicator, because loans and leases are often among the most illiquid assets that a bank can
hold. SBL’s capacity ratio is given below. The ratio is “Capacity Ratio= Total loan and
Advances/Total assets”.

Year 2014- 2015-2016 2016-2017 2017-2018 2018-2019

2015
Capacity Ratio 50% 40% 36% 34% 32%

Table-8: Capacity ratio

Graphical Presentation:

CAPACITY RATIO
Capacity ratio

60%

50% 50%

40% 40%
36%
34%
32%
30%

20%

10%

0%

2014 - 2015 2015 - 2016 2016 - 2017 2017 - 2018 2018 - 2019
Figure-8: Capacity Ratio

The lower the capacity ratio of a bank, the better the position. The ratio is decreasing
gradually since 2014-2015 to 2018-2019 and the bank is performing well.
 d. Investment to Deposit ratio:

Investment deposit ratio basically give information that where bank is using their deposits. It
may be in the economic wealth development or in some special area where regional
development must be done like Agriculture. SME loan for small and medium business is
another sector for investment to earn more interest. The ratio is “Investment to Deposit
Ratio=Total investment/Total Deposit”.

Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Investment To Deposit 0.25 0.40 0.42 0.47 0.45

Ratio
Table-9: Investment to Deposit Ratio

Graphical Presentation:

Investment to Deposit Ratio

Investment to Deposit Ratio

0.47
0.45
0.42
0.4

0.25

2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Figure-9: Investment to Deposit Ratio

Investment to deposit ratio shows that which amount of deposit is used to as investment.
Sonali Bank Ltd. investment to deposit ratio is increasing year by year. That means, Bank is
properly using their deposits in different profitable sectors in the domestic and foreign arena.
Profitability Ratio Analysis:

a. Operating profit per branch:

Profit per branch is also a good indicator of the financial performance of the bank. Sonali
Bank is expanding its branch year by year to innovate banking industry and to reach the core
areas of home country for providing banking services. The ratio is “Operating Profit per
branch= Total operating profit/No of branches”.

Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Operating profit per 9.2 2.47 7.1 7.17 3.52

branch(in million)

Table-10: Operating profit per branch

Graphical Presentation:

Operating profit per branch

10
9
8
7
6
5
4
3
2
1
0

2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Operating profit per branch

Figure-10: Operating profit per branch

The profit per branch is not the financial indicator because the branches are increasing year to
year. Last year 2 branches were increased without any contribution to profit. But it is a good
indicator that the profit figure is positive on an average per branch but there actually losses
for too many branches.
 b. Net Profit Margin:
The net profit margin measures the percentage of each sales dollar remaining after all
operating expenses, VAT, preferred dividends and interest. The higher the firm’s net profit
margin, the better the financial condition of Bank. The net profit margin is a commonly cited
measure of the company’s success with respect to earnings on sales. Ratio is “Net Profit

Margin=Net profit after tax/operating income”.

Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Net Profit Margin (226%) 120% 71% 7% 36%

Table-11: Net Profit Margin

Graphical Presentation:

Net Profit Margin

150%

100%

50%

0%
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
-50%

-100%

-150%

-200%

-250%
Net Profit Margin

Figure - 11: Net Profit Margin

The Bank net profit margin in 2014-2015 was negatively high that is (226%). But in 2015-
2016 SBL recovered from worst situation and then slight increased but sharply decreased in
2017-2018. The last year’s position was positive and good.
 c. Return on Asset(ROA):

The return on asset (ROA), which is often called the firm’s return on total assets, measures
the overall effectiveness of management in generating profits with its available assets. The
higher the ratio, the better. The formula is “Return on Asset (ROA) =Net Profit after
tax/Total Asset x 100”.
Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Return on 3% 0.42% 0.65% .06% .13%

Asset

Table-12: Return on Asset

Graphical Presentation:

Return on Asset
4%

3%

3%

2%

2%

1%

1%

0%
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Return on Asset

Figure-12: Returns on Asset

The bank’s return on asset was strongly positive in 2014-2015 but sharply decreased in 2015-
2016 and recovered somewhat in 2016-2017. In 2017-2018, it was lowest but increased in the
last year. The positive figure (ROA) indicates that the Bank is performing well. We can
notice that performance is positive but not as like as 2014-2015. A slight increase in ROA
brings hope that the Bank’s performance is going to be well in near future.
 d. Return on Equity(ROE):

The return on equity measures the return earned on the common stock holders’ 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 x100”.

Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Return on Equity (104%) 7.2% 10% .82% 2.25%

Table-13: Return on Equity

Graphical Presentation:

Returns on Equity
20%

0%
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
-20%

-40%

-60%

-80%

-100%

-120%

Returns on Equity

Figure -13: Returns on Equity

The banks return on equity recovered from the worst situation in 2014-2015 to 2016-2017. In
2017-2018 the ratio decreased to .82% only but increased in 2018-2019 .The fluctuation of
ratio indicates management inefficiency. So, they should be attentive about shareholders
wealth. They should work hard to increase the return associated with equity.
 e. Earnings per Share:

The firm’s earning per share (EPS) generally represents earning of shareholders on their
respective shares. The Earning per share represent the number of dollars earned on behalf of
each outstanding share of common stock. The higher the earnings, the better the financial
position. The earnings per share is calculated as follows: “Earnings per Share = Earnings
available for common stock holder/No of shares of common stock outstanding”

Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

EPS(in Taka) (221.86) 31.82 32.12 1.53 3.96

Table-14: Earnings per Share

Graphical Presentation:

Earning per share

50

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
-50

-100

-150

-200

-250

Earning per share

Figure-14: Earnings per Share

The graph shows that, in 2014-2015 earnings per share of SBL’s is highest negative than next
4 years. But in 2015-2016 and 2016-2017 the ratio was so good but a gradual decrease is the
main concern for the 2017-2018. Net profit margin reduction that means bank’s operating
result is decreasing. A slight increase in 2018-2019 proves that management is trying to
overcome with the operating efficiency.
 f. Equity to Net Loans:

This ratio forms part of the Capital and Funding ratios of a bank and measures a company’s
financial leverage by calculating the proportion equity and debt the company is using to
finance its assets. Total equity covers total equity reserves, total share capital and treasury
stock. Net loans include loans to banks or credit Institutions, customer net loans and loans to
group companies. The ratio is as follows, “Equity to net loans=Total equity/Net loans”.

Year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Equity to net loans 5.8% 14.5% 17.75% 21% 17%

Table-15: Equity to net loans

Graphical Presentation:

Equity to net loans

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%

2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Equity to net loans

Figure-15: Equity to net loans

It was 5.8% in 2014-2015 and developed to 14.50% in 2015-2016. It dropped again to 17% in
2018-2019. The fluctuations in the ratio from 2014-2015 to 2018-2019 can be explained by
changes in the manner of financing. Both the total equity and net loans increase in 2017-2018
which results in greater equity to net loans ratio. But in 2018-2019 the net loans increased
significantly which took the ratio down again.
 Summary of Financial Ratios:

Particulars 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

Current Ratio 1.37 2 1.83 1.86 1.46

Cash Ratio 7.75% 8% 6.7% 7.15% 7%

Debt Ratio 97% 94% 94% 93% 94%

Times interest 0.28 1.57 3.15 0.80 5.10

earned ratio
Cost income 50.72% 80.08% 60.16% 61.89% 94.01%

Ratio
Total Asset 1.46 .35 .91 .843 0.354

Turnover
Capacity Ratio 50% 40% 36% 34% 32%

Investment To 0.25 0.40 0.42 0.47 0.45

Deposit Ratio
Net Profit (226%) 120% 71% 7% 36%

Margin
Return on 3% 0.42% 0.65% .06% .13%

Asset
Return on (104%) 7.2% 10% .82% 2.25%

Equity
EPS(in Taka) (221.86) 31.82 32.12 1.53 3.96

Equity to net 5.8% 14.5% 17.75% 21% 17%

loans
A short summary is a slice reflection of whole analysis of the report. For time convenience, I
listed all the ratios in a single table that reflects the whole analysis. Here, we can see that the
liquidity ratio comprised of current and cash ratios is somewhat well though the current ratio
in last year (2018-2019) is1.46.
The debt ratio analysis comprised of debt ratio and times interest coverage ratio. As we
know, the higher the debt ratio, the higher the chance that the firm may fall into in solvency.
Here, the debt ratio is high over the years but not likely as 2014-2015. The time interest
coverage ratio is another important ratio because the standard range is 3.0 to 5. Here, the ratio
is in consistent over the years and there is a greater fluctuations though the last year’s
position was excellent.
The activity ratio analysis consist of cost income ratio, total asset turn over, capacity ratio and
investment to deposit ratio. The cost income ratio reflects efficiency. The lower the ratio, the
higher the performance. Here, over the years the ratio was somewhat consistent but last
year’s (2018-2019) ratio is one of the main hindrance of good performance of SBL. The total
asset turnover ratio is decreasing over the years. It is one of the important ratio to investigate
because it is another cause of poor performance. In deposit collection SBL is doing well.
The profitability ratio analysis consist of net profit margin, ROA, ROE, equity to net loans
ratio. The net profit margin was too much negative in 2014-2015 because the bank had to pay
a large amount of deferred tax payment and over the years it is good enough. ROA and ROE
prove that management is not efficient to capture the all the branches because the number of
loss branches are increasing year to year that reduces the ROA and ROE. The equity to net
loans is on an average consistent over the years.
Findings

After collecting and analyzing data, I have got some findings. These findings are completely
from my personal point of view. Those are given below.
Sonali bank as a nationalized commercial bank achieved a favorable reputation in not only
Bangladesh but also in foreign country. It is one of the leading government Bank in
Bangladesh. The bank has already shown a tremendous growth in profits and deposits. The
bank successfully stepped in to the 45 year of operation having enjoyed the complete
confidence of the depositor’s and achieving significant growth in the entire areas of banking
operations. I saw that the profit of Sonali bank as a commercial bank, is low but as a
government commercial bank, it is remarkable in Bangladesh. It has a wide spread
networking facility. That means, the every Upzila has at least one branch of Sonali Bank. But
the others banks have no such facility.
To tell specifically, the liquidity position was well previous years but last year’s current ratio
was not up to the mark. The higher the ratio, the more the liquidity. But excess liquidity
reduces profitability. A manager must offset between liquidity and profitability. Last year
(2018-2019) the liquidity ratio was 1.46 with maintaining on an average link with previous
years. Without this, cash ratio and net working capital was good enough. I think the liquidity
position is enough to run operations.
In Debt ratio, the debt position of a firm indicates the amount of other people’s money being
used to generate profit. In general, the financial analyst is most concerned with long term
debts, because these commit the firm to a stream payments over the long run. Because
creditors claim must be satisfied before the earnings can be distributed to shareholders,
current and prospective shareholders pay close attention to the firm’s to repay debts. Here,
the debt ratio is spread by (94%-97%).That means 94-97% is leverage on the total assets. But
the times interest ratio is good enough to meet up the fixed financial charges. My analysis
shows that the bank took deposits from the customer at a low rate but invested the funds at
high rate. To prove this, I can give a reference that Sonali Bank already declared that they
collected 1 trillion deposits from the customers. A great achievement for them compering to
all national commercial banks.
In activity ratio, we can see that the ratio fluctuates among the years. Cost to income ratio
measures that how much expenses are incurred to generate profit. The ratio of 2018-2019 was
high than 2017-2018. I found some reasons behind that increasing in Rent, Tax, and
Electricity and employee salary are the main elements. The same reason is applicable to total
asset turnover ratio. A good sign is found in investment to deposit ratio because the bank
collectedidledepositsfromthecustomersandinvestedproperly.Thebankrecoveredfrom the poor
positions in 2014-2015 to rich position in2018-2019.
In profitability ratio, as per my analysis, I saw that sharp decrease in profit in 2014-2015 was
caused by the large flow of deferred tax payment and other provisions. The diminution of
investmentin2017-2018causes a large cash flow out side of the bank for this the profit was
low. But in 2018-2019 somewhat there no such large cash out flow. Everything was normal
and the profit margin was well. Hence, the ROA and EPS was consistent with the net profit
margin. But the equity loan and ROE ratio was low because of the bank’s ability to raise a
well collection of deposit from the Customer.
In summary, as a largest commercial bank and the agent of Bangladesh Bank Sonali Bank has
to do various types of work without thinking about the profit. For this reason we have seen
that in some cases bank has doing loss, but though loss we cannot directly say that its bank’s
failure. This is happening only for helping the nation. On the other hand we have seen that
the bank profit increasing rate is poor but increasing. The bank is highly liquid and earns
much profit on owner’s equity. Bank’s operating efficiency is good. EPS is becoming double
per year and earning spread is also increasing. So, after all we can say that as a nationalized
bank commercial bank Sonali Bank Limited is a bank which is earning better than other
nationalized bank.
 Chapter – Five

Recommendation
In my intern ship period, I tried to look something deeply that what are the actual problems
behind the backward positions of Sonali Bank than other private commercial banks. From my
analysis and point of view, some recommendations are as follows-

 Lack of proper utilization of human resources across the bank. Some branches have
excess employees without having works and some others have excessive work load
without human resources to tackle the pressure. There need a good optimization of
recruiting and employment of human resources.

 Sonali Bank management should introduce more customer oriented servicesthat

private banks provide like ATM facility, online banking facility etc.

 Sonali bank is under online facility. That’s ok but the facility provided by the Bank
is too poor to maintain the cyber security. So, proper internet security and bearing all
branches under CC Camera is essential.

 In bad debts recovery sectors, the bank sometimes indifferent to overlook the
clients. The management body should give proper guidance regarding this.
Director’s interference in case of giving loan should be lessened because in this way
risk may increase and bad debt may also increase. The root level managers should
be encouraged to recover bad debts from default clients.

 There should be proper incentives for the employees to carry out the banking
functions properly. Because motivations, communication with employees are
the major tools to utilize the human forces properly. Over time allowances can
be allowed as per extra working hours.

 Bangladesh Bank should impose the rule of uniformity for all types of schemes. By
this way customers can decide from where they will receive service based on the
service quality and organizational environment.

 The website design is need to improve. Therefore, the website design should be
changed and can put more information about the bank. The existing design
cannot capture the customer’s attention.
 Chapter – Six

Conclusion
The Sonali Bank limited is not only a commercial bank but also a government bank. As a
commercial bank, it has many general functions like other commercial bank. Collection of
core deposits from the customers from urban and rural areas and investing those deposits as
an investment to different sectors in the economy like industry, agriculture, business, power
plants, telecommunications etc. Without those the bank has a great contribution in the green
banking to protect the environment with the climate change challenges globally. As a
government bank it has core responsibility to maintain pension services by the government to
the different govt. employees. A great responsibility is performed by the bank is the clearing
housing function on behalf of the Bangladesh bank. The Bank is strongly positioned in the
market and with its core strengths it can match shareholders’ expectations and thus raise their
wealth in future through ethical banking and best pricing. So, the motive of profit generation
like private commercial bank is not the ultimate goal of SBL but to provide a better services
for the economic development of country. In spite of trying to do well in some aspects Sonali
Bank limited faced some financial problems from the time to time. Some of the problems
were – excessive bad loans, shortage of loans and advances, quality deposits, scarcity of cash
in hands due to vault limit etc. Those problems arise due to economic slowdown, interest rate
fluctuation, emerging capital market and inflation in the money market. For this, the helping
hand of government is essential and it is expected that govt. will broaden its hand for
implementing the recommendations for the welfare of the people of Bangladesh.
References
To prepare this report I have collected data mainly from annual reports of Sonali Bank
Limited, different books regarding ratio analysis, the websites of Bangladesh Bank and
others websites about ratio analysis. The references are given below:

1. ET. All, Garrison, Ray H., Managerial Accounting, (Thirteen edition) Chapter 2.
2. ET. All, Kieso, Donald E., Accounting Principles, (Twelfth edition) Chapter 1.
3. Annual Report of Sonali Bank Limited, 2018-2019
4. Annual Report of Sonali BankLimited, 2017-2018
5. Annual Report of Sonali BankLimited, 2016-2017
6. Annual Report of Sonali Bank Limited, 2015-2016
7. Annual Report of Sonali Bank Limited, 2014-2015
8. https://www.siblbd.com
9. https://en.wikipedia.org/wiki/Sonali banking and finance