UNIVERSITY OF DEVELOPMENT ALTERNATIVE (UODA)

THESIS REPORT

A STUDY ON
Financial Performance of Bank Asia Limited
SUBMITTED TO:
THE DEAN
FACULTY OF BUSINESS ADMINISTRATION

SUPERVISED BY:
MR. SIDDIQUE HAYAT KHAN
ASSOCIATE PROFESSOR

SUBMITTED BY:
RAKIB HOSSAIN
BBA 53 BATCH, MAJOR FINANCE
STUDENT ID: 021163034
FACULTY OF BUSINESS ADMINISTRATION
BBA PROGRAM
UNIVERSITY OF DEVELOPMENT ALTERNATIVE (UODA)

DATE:
SEPTEMBER 12, 2020

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 Letter of Transmittal

12-sep-2020

The Dean
Faculty of Business Administration
University of Development Alternative (UODA)

Subject: Submission of thesis on “Financial Performance of Bank Asia Limited”.

Dear Sir,

With due respect, I would like to state that I have completed a thesis with my honest and maximum effort
that fulfills partial requirements of Bachelor of Business Administration Degree. I have prepared this
report on the basis of my on Bank Asia Limited. It is a great pleasure for me to present you this report
under the heading of “Financial performance”. I enjoy preparing this report, which enriched my partial
knowledge of the theoretical concept. Under the supervision of Mr. Siddique Hayat Khan.
I would like to thanks you for giving me such a great job and opportunity like this to prove my ability in
making a quality report. Therefore, I sincerely hope that you would be kind enough to accept my report for
assessment and oblige thereby.
Thanking you for your kind supervisions.

Sincerely yours,

Rakib Hossain
Batch # 53rd
Std. ID # 021163034
University of Development Alternative

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 Declaration

I am Rakib Hossain, hereby declare that the thesis titled “Financial Performance of Bank Asia
Limited” is uniquely prepared by my own efforts after the completion of three months works on
Bank Asia Limited. This report is a record of extensive research work under the supervision and
guidance of Mr. Siddique Hayat Khan, University of Development Alternative (UODA) .

I confirm that, the report is only prepared for only my academic requirement not for other purpose. I also
assure that this internship report is not submitted anywhere of Bangladesh before me.

Batch # 53rd
Std.ID # 021162034
University of Development Alternative (UODA)

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 Executive Summary

(Prepare this some other time after the presentation)

In this report the financial performance of Bank Asia Ltd. has been analyzed. It has been one of the leading private
commercial banks in Bangladesh and also doing really well over past few years.

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 12 SUBJECT PAGE
1. Introduction 7
2 Objectives of the Report 8
3 Fact/ Summaries Information 9
4 Ratios:

Return on Assets (ROA)

Return on Equity (ROE)
Debt to Equity Ratio
Earnings per Share
Dividend per share

Net Asset Value Per Share

5 Authorized capital:
6 Paid-up capital
7 Core (Tier 1) capital
9 Supplementary (Tier 2) capital
10 Total capital (Tier 1 and Tier 2)
11 Total risk weighted assets:

12 Tier 1 capital to risk-weighted asset ratio (%):

13 Tier 2 capital to risk-weighted asset ratio (%)

14 Number of share outstanding
15 Deposits
16 Assets
17 Loans and Advances
18 Investments
19 Non-performing loans/assets (NPL/NPA)
20 Provisions
21. Classified loans

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 INTRODUCTION
Banks are very old form of financial institution that channel excess funds from surplus unit to
deficit unit in consideration of a price called Interest. The banking sector is dominating the financial
sector of Bangladesh that mobilizes resources for productive investments in a country which in turn
contributes to economic development. Like other countries, banking sector plays a vital role in the
economic development of Bangladesh. To achieve economic development, a sound and efficient
banking systems’ importance can’t be denied. In Bangladesh, this sector has reached to another
level during the last three decades or so, as a result of increased demand of the growing economy.
But in the recent times, the banking sector has been going through several uncertainties which is
very alarming for the economy. Non-performing loan or default loan is the most concerned issues of
the banking sector. Day by day the rate of NPL has been increasing which made the banks very
conscious about granting loans to the customers. Furthermore, siphoning money to other foreign
countries is also a very alarming issue regarding this sector.

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 OBJECTIVE OF REPORT
The objectives of the report can be divided into two levels. One is primary objective and the other is
secondary objectives.

The primary objectives of the report are:

 To fulfill one of the requirements of achieving BBA degree.

 To secure good marks on internship report.
 To adapt with the corporate world.

The secondary objectives of the report are:

 To identify their key financial performances for acquiring the knowledge of

operational efficiency of Bank Asia Ltd.
 To obtain a clear concept of banking sector in Bangladesh.
 To get acquainted with the ratios which indicate and measure the performance of
a bank.

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Fact/ Summaries Information:
Information

Established 27th November 1999

Public Offering shares 2003

Number of directors: 15(Total)

Independent 5

ATM 149

Share distribution:

Local 65.6%
Foreign
6.00%
Institutions
Individuals 10.40%

Total General Public 10.2%

13.8%

Other information
Number of branches
123
Number of foreign branches
Number of SME Service Centers 3
Number of Islamic Windows
4
Number of Employees
5
Number of Foreign Correspondents
2,256

698

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Coverage Area District 64

Upazilla 417

SHARES INFORMATION MATRIX:

No. of Shares Outstanding(Million) 1,110.39

Earnings Per Share (Taka) 2.04

Number of Shareholders 10,344.00

Market Value Per Share (Taka) 17.70

Price Earnings Ratio 8.68

Net Asset Value Per Share (Taka) 21.02

Dividend Coverage ratio 2.04

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Ratios:

Return on Assets (ROA)

It’s a profitability indicator which shows the efficiency of an organization in managing assets to
generate income. It is expressed by dividing net profit after tax by total assets. The higher this ratio
is, the better it is. The higher level of this ratio indicates that the organization is very efficient at
using its resources.
Formula: ROA= Net Income/ Total Assets

Table :Return on Assets (ROA)

Years
2014 2015 2016 2017 2018
Return On Asset (ROA)
1.28% 1.26% 0.65% 0.76% 0.74%

Return on Assets (ROA)

1.40%

1.20%

1.00%
1.28% 1.26%

0.80%
0.40% 0.76% 0.74%
0.65%
0.20%
0.60%

0.00% 2014 2015 2016 2017 2018

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Interpretation:

From the above figure we can see that return on asset was in increasing trend from 2014 to 2015.
In 2014 Bank Asia Ltd. Has earned Tk. 1.28 for each taka of assets they have invested. But in
2016 return on asset declines drastically because profit after tax of 2016 was lower than 2014 and
2015 and total asset was higher than 2014 and 2015 and that’s why the return on asset declines. In
2017 it again increased because its profit after tax and total asset increased but in 2018, it slightly
decreased to 0.74% than the previous year.

Return on Equity (ROE)

Return on equity (ROE) is a measure of profitability that calculates how much profit a company
generates with each of its shareholders' equity. This ratio compares net income to shareholders’
equity. Return on equity compares the level of income against the level of shareholders equity
invested in an organization. The higher this ratio is the better it is. The higher level of this ratio
indicates that the company is very capable to turn its assets into profits.
Formula: ROE = Net Income / Total Equity

Table 4.6.2.1: Return on Equity

Years
2014 2015 2016 2017 2018
Return On Equity (ROE)
14.09% 14.36% 8.13% 10.21% 10.21%

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 Return on Equity (ROE)

14.09% 14.36%
10.21% 10.21%
8.13%

2014 2015 2016 2017 2018

Debt to Equity Ratio:

Debt to Equity (DE) ratio is a leverage ratio which measures the degree to which the bank’s assets
are financed by its debts and by the shareholders’ equity. The D/E ratio indicates how much debt a
company is using to finance its assets relative to the value of shareholders’ equity. A higher debt to
equity ratio indicates that the bank financially relies more on external lenders
I.e. the bank’s assets are crucially backed by the liabilities than the shareholders’ equity.

Formula:

D/E Ratio = Total Liabilities / Shareholders' Equity

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 Table 4.6.3.1: Debt to Equity Ratio

Years
2014 2015 2016 2017 2018
Debt to Equity Ratio
9.84 10.82 12.3 12.73 12.17

Debt to Equity
14

12.73
12.3 12.17
12
10
10.82
9.84
8

2 2014 2015 2016 2017 2018

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Interpretation:

From the above scenario we can see that the ratio started to rise after 2014. From the year 2015-
2018 the ratio has been higher though it slightly decreased to 12.17 in 2018. It indicates that, the
bank is mostly financed by the creditors rather than its own financial resources. If the bank
continues running with higher debt to equity ratio then it would be difficult for them to attract
additional lending capital.

Earnings per Share

Earnings per share (EPS) are the portion of a company's profit allocated to each outstanding shares
of common stock. Earnings per share serve as an indicator of a company's profitability.
Formula:
EPS= Net Income / Number of shares outstanding

Years
2014 2015 2016 2017 2018
Earnings Per Share
2.64% 2.92% 1.57% 1.84% 2.04%

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 Dividend per share:
DIVIDEND, either in the form of cash or stock is viewed as one of the simplest yet powerful message
regarding a company’s historical performance and future prospect to its shareholders. A company’s
willingness to pay steady dividends over time and ability to increase them provide good clues about its
fundamentals. However, companies that do not regularly pay higher dividends are not necessarily without
profits. If a company thinks that its own desired strengthening of balance sheet or business expansion
opportunities are better than giving away higher dividends, it may choose to retain some earnings, handle
contingencies, reinvest into the business and create prospect for better dividend in the years to come. Bank
Asia issued stock dividend in the earlier years of its operation to strengthen its core capital and since 2014
a mix of stock and cash dividend are distributed. For 2018 the Board of Directors has proposed 10%
dividend (5% Stock and 5% Cash) amounting to Tk.1,110 Million.

Net Asset Value Per Share:

The Net Asset Value Per Share can be defined as an expression for net asset value which calculates
the value per share for a fund or a company. It is expressed as subtracting the liabilities from total
assets and the outcome will be divided by the no. of outstanding share.

Formula:NAVPS = Total Asset – Total Liabilities / No. of Outstanding Shares

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 Table 4.6.7.1: Net Asset Value Per Share

Years
2014 2015 2016 2017 2018
Net Asset Value Per Share (Taka)
22.10 21.54 19.29 18.96 21.02

Net Asset Value Per Share

22.1
21.54

21.02
19.29
18.96

2014
2015
2016
2017
2018

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IMPORT & EXPORT STRATEGIES

Arranging credit lines for foreign currency from international agencies to facilitate international
trade business particularly import clients at a competitive rate and the country as a whole will get
benefit of building foreign exchange reserve.

Marketing for not only established business houses but also the potential clients having strong
entrepreneurship spirit to grow.

Garments sector will be more focused where tested and potential clients will be in the portfolio
basket under the regime of calculative risk return trade-off.

Emerging ship building and ship breaking sectors will explore new opportunities which the Bank
will tap for increasing international trade.

Industries having backward linkage will yield better opportunity and reduce risk exposure.
Focusing on service export sectors like IT and Education.

EXPORT in USD (Million): 1,607

Import in USD (Million): 1,999

Authorized capital:

 Authorized share capital—also known as "authorized stock," "authorized shares," or

"authorized capital stock"—refers to the maximum number of shares a company is legally
allowed to issue or offer based on its corporate charter.
 Subscribed capital represents a portion of the authorized capital that potential shareholders
have agreed to purchase from the company's treasury, often as part of the company's initial
public offering (IPO).

Authorized capital: 2018-15,000 (Million BDT)

 Paid-up capital:

 Paid-up capital is money that a company receives from selling stock directly to investors.
 The primary market is the only place where paid-up capital is received, usually through an initial
public offering.

 Funding for paid-up capital is arrived at from two sources: the par value of stock and excess
capital.

Paid-up capital: 11103.87 (Million BDT)

Core (Tier 1) capital:

Tier 1 capital is used to describe the capital adequacy of a bank and refers to core capital that includes
equity capital and disclosed reserves. Equity capital is inclusive of instruments that cannot be redeemed at
the option of the holder.

Tier 1 capital is essentially the most perfect form of a bank’s capital—the money the bank has stored to
keep it functioning through all the risky transactions it performs, such as trading/investing and lending.

Core (Tier 1) capital: 21,165.37 (Million BDT)

Supplementary (Tier 2) capital:

The term tier 2 capital refers to one of the components of a bank's required reserves. Tier 2 is designated
as the second or supplementary layer of a bank's capital and is composed of items such as revaluation
reserves, hybrid instruments, and subordinated term debt. It is considered less secure than Tier 1 capital—
the other form of a bank's capital—because it's more difficult to liquidate. In the United States, the overall
capital requirement is partially based on the weighted risk of a bank's assets.

Supplementary (Tier 2) capital: 13,917.53 (Million BDT)

 Total capital (Tier 1 and Tier 2):

Total capital is all interest-bearing debt plus shareholders' equity, which may include items such
as common stock, preferred stock, and minority interest.

 Under Basel III, a bank's tier 1 and tier 2 assets must be at least 10.5% of its risk-weighted
assets, up from 8% under Basel II.
 Tier 1 capital is the primary funding source of the bank.

 Tier 1 capital consists of shareholders' equity and retained earnings. 

 Tier 2 capital includes revaluation reserves, hybrid capital instruments and subordinated
term debt, general loan-loss reserves, and undisclosed reserves.

Total capital (Tier 1 and Tier 2): 35,082.90 (Million BDT)

Total risk weighted assets:

Risk-weighted assets are used to determine the minimum amount of capital that must be held by
banks and other financial institutions in order to reduce the risk of insolvency. The capital
requirement is based on a risk assessment for each type of bank asset.

 Basel III, a set of international banking regulations, sets the guidelines around risk-
weighted assets.
 Risk coefficients are determined based on the credit ratings of certain types of bank assets.

 Loans backed with collateral are considered to be less-risky than others because the
collateral is considered in addition to the source of repayment when calculating an asset's
risk

Total risk weighted assets: 233,085.63 (Million Taka)

Tier 1 capital to risk-weighted asset ratio (%):

The tier 1 capital ratio is the ratio of a bank’s core tier 1 capital—that is, its equity capital and
disclosed reserves—to its total risk-weighted assets. It is a key measure of a bank's financial
strength that has been adopted as part of the Basel III Accord on bank regulation.

Tier 1 capital to risk-weighted asset ratio (%): 9.08%

Number of share outstanding:

Shares outstanding refer to a company's stock currently held by all its shareholders, including
share blocks held by institutional investors and restricted shares owned by the company’s officers
and insiders.

Number of share outstanding: 1,110.39

Deposits:

 A deposit is a financial term with multiple definitions.

 One definition of deposit refers to when a portion of funds is used as security or collateral
for the delivery of goods or services.

Another kind of deposit involves a transfer of funds to another party, such as a bank, for
safekeeping.

2018:222,471 (Million Taka)

 Assets:

A financial asset is a liquid asset that gets its value from a contractual right or ownership claim.
Cash, stocks, bonds, mutual funds, and bank deposits are all are examples of financial assets.

2018

307,291 (Million Taka)

Loans and Advances:

A loan and advance is a financial facility provided by the banks and financial institutions to
help their customers in financial need.
A finance is a life blood for any type of business or a particular need. So when one is not able
to get a full amount of money by his own. He can use this type of financial services provided
by a bank.

2018

214,618 (Million Taka)

Investments:

 Investment is the act of putting money to work to start or expand a business or project or the
purchase of an asset, with the goal of earning income or capital appreciation.
 Investment is oriented toward future returns, and thus entails some degree of risk.

Common forms of investment include financial markets (e.g. stocks and bonds), credit (e.g. loans or
bonds), assets (e.g. commodities or artwork), and real estate.
 2018

35,999.20 (Million Taka)

Non-performing loans/assets (NPL/NPA):

Non-Performing Loan Ratio:

Non-Performing Loan (NPL) is the amount of money lent to the consumers which is either
default or close default. If the borrower of the money does not repay the installments for more
than 90 days, the loan is classified or Non-Performing Loan.

Formula: NPL= Total Non-Performing Loan / Total Loans & Advance

Non- Performing Loan Ratio

Years
2014 2015 2016 2017 2018
Non-Performing Loan Ratio
5.31% 4.26% 5.41% 4.38% 4.10%

Non-Performing Loan (NPL)

2018 4.10%

2017 4.38%

2016 5.41%

2015 4.26%

2014 5.31%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%

Provisions:

For banks, a general provision is considered to be supplementary capital under the first Basel
Accord. General provisions on the balance sheets of financial firms are considered to be a
higher risk asset, because it is implicitly assumed that the underlying funds will be in default
in the future.

2018-

3,892.76 (Million Taka)

Classified loans

 A classified loan is a bank loan that is in danger of default.

 Loans don't have to be past due in order to be considered classified.

 Lenders normally record classified loans as adversely classified assets on their

books as a precaution to prevent further risk and loss.

Lenders generally do a credit analysis to determine a borrower's creditworthiness and

the quality of a loan.

2018

4.10% (Ratio)