Table of Contents

Chapter-1 ....................................................................................................................................... 3
1.1 Introduction: ..................................................................................................................... 3
1.2 Background ...................................................................................................................... 3
1.3 Justification of the study .................................................................................................. 4
1.4 Objectives of the study ..................................................................................................... 4
1.5 Significance of the study .................................................................................................. 6
1.4 Scope of the Study ................................................................................................................ 7
CHAPTER 2 .................................................................................................................................. 8
Analysis of the Industry................................................................................................................ 8
2.1 Specific of industry ............................................................................................................... 8
2.3 Industry’s seasonality............................................................................................................ 9
2.4 Economic factors that affect the industry ........................................................................... 10
2.4.1Capital adequacy and deposits ...................................................................................... 11
Capital Adequacy: ................................................................................................................. 11
Deposits: ............................................................................................................................... 12
2.4.2Growth domestic product (GDP) .................................................................................. 12
2.4.3 Inflation ........................................................................................................................ 13
2.5 Substitutes of this industry .................................................................................................. 13
2.6 Political, legal, and regulatory factors ............................................................................ 13
Chapter-3 ..................................................................................................................................... 15
Ratio Analysis and Financial Statement ................................................................................... 15
3.1 Introduction of the Ratio Analysis: ..................................................................................... 15
3.2 Assumption of Ratio Analysis: ........................................................................................... 16
3.3 Liquidity Analysis of Sonali Bank Limited (2018-2022) ................................................... 17
3.4 Liquidity Ratio: ................................................................................................................... 18
3.5 Earning Performance of Sonali Bank Limited: ................................................................... 19
Return on Asset (ROA): ..................................................................................................... 19
Return on Equity (ROE): ................................................................................................... 20
Operating Profit Margin .................................................................................................... 21

pg. 1
 Earnings per Share (EPS): ................................................................................................. 22
Owners’ Equity Ratio: ............................................................................................................ 23
3.5 Capital Adequacy of Sonali Bank Limited (2018-2022): ................................................... 25
3.6 Capital Adequacy Ratio (CAR): ......................................................................................... 25
Chapter-4 ..................................................................................................................................... 26
CHAPTER – 5 ............................................................................................................................. 32
Recommendation & Conclusion ................................................................................................ 32
Recommendation: ....................................................................................................................... 32
Conclusion: .................................................................................................................................. 33
Bibliography & References: ....................................................................................................... 34

pg. 2
 Chapter-1

1.1 Introduction:
The financial statement of a company provides a comprehensive view of its financial
performance and health, which is crucial for making informed decisions about investment,
lending, and other business activities. The financial statement includes the income statement,
balance sheet, and cash flow statement, which reflect the company's revenues, expenses, assets,
liabilities, and cash flows over a specific period.

Banks play the most important role in the economy. Banks collect money from
the individuals and lend them to others. Now banks offer the widest range of financial services
and perform lots of financial functions. Thus banks have proven that they are the key factor for
the business and economy as well. Sonali Bank Limited is the largest banking institution in
Bangladesh, dynamic in actions, honest in dealings, just in judgment, fair in approaches and
devoted to high quality service to customers and thereby contribute to the growth of GDP of the
country throughout stimulating trade and commerce, boosting up export, poverty
alleviation, raising living standard of limited income group and overall sustainable socio-
economic development in the country. To achieve the aforesaid objectives of the Bank, different
banking activities must play an active role to provide the financial assistance to the
customer who also helps them by providing them with management assistance when needed.
Sonali Bank Limited has played this role with their experiences in the banking sector
where the others are not merely performed

Overall, the analysis of the financial statement of Sonali Bank Bangladesh Ltd. can contribute to
a better understanding of the bank's financial performance and prospects, and provide a basis for
informed decisions about the bank's future.

1.2 Background
Now a Days business have been involved in financial transactions through Sonali banking. Some
of these interest-bearing banks were established in the Middle East and Asia by European
enterprises as they became more important trading partners for European firms. The need for this
sort of banking grew steadily during the coming decades. The Mit Ghamr savings scheme in

pg. 3
Egypt was soon up and running, becoming Egypt's first well-known institution. It is possible for
all depositors in a cooperative organization to acquire loans for practical and productive
purposes. On the other hand, this co-op also contributed to some initiatives on a part basis. The
Nasser Social Bank incorporated this idea in 1971. Sonali financing was also discussed in high-
profile conferences such as the First International Conference on Sonali Economics and the
Finance Leaders of Sonalic countries. It was officially established as a public limited company
under the Company Act of 1913 on March 13th, 1983. It is owned by 36.91 percent of residents
and 63.09 percent of non-residents. Foreign and local Shareholder’s holdings are of 57.36% and
42.64% of the Paid-up capital respectively. Bank’s corporate Headquarter is situated in its own
18-storied modern building at 40, Dilkusha, Dhaka.

1.3 Justification of the study

In Program it is a mandatory program for all students of B.B.A under National
University. Practical orientation is a positive development in professional area. Recognizing the
importance of practical experience, Department of Business Administration has
introduced a one to three months practical exposure as a part of the curriculum of Bachelor of
Business Administration. For the completion of this internship program I have chosen a bank
named “Sonali Bank Limited” and my internship report is based on “Financial performance
analysis of Sonali Bank Limited”. I have prepared this report under Mr. Sohel Ahmed, Lecturer,
Department of Business Administration, Dhaka City College. In the study period,
mainly student gain theoretical knowledge but now a day, in the job market there is no
substitute of principle work experience. Therefore, before getting into job, students should have
some real-world experience in the major field of study on the career choice that interest him/her.

1.4 Objectives of the study

The objective of the report has been categorized into three parts:

1. Banking system in Bangladesh has been a driving factor for our economy making up
more than eighty percent of all the financial sectors. They are providing facilities for
international trade, creating employment for a huge portion of our population, earning
remittance from foreign settlements, fortifying agricultural sector, and so much more
besides providing investible assets to both public and private sector. One of the main

pg. 4
 objectives of banking system is to increase the profit ratio and to gather reserve funds or
inactive cash from people in general at lower interests and loan these public cash at
higher interests. Their objectives are to help the government in economic matters, to have
control over currency and exchange rates by having a central bank. The Bangladesh Bank
is the Central Bank of Bangladesh which is enabled to deal with the issues of money,
keep up the reserves and deal with the financial and credit system with a view to settling
domestic cash, keeping high level of creativity and production, decreasing the
unemployment rate and expanding genuine pay

2. The Sonali Bank Bangladesh Limited was established with core objective of building up
an Sonalic based economy for an adjusted development in the economy by making sure
that the dissimilarity between urban and rural areas is reduced and there will be equality
in income circulation. Under the Rural Development Scheme of SBL, their objective is to
extend opportunities for investing in cultivating and other agricultural activities, also to
fund activities which will in return promote employment and source of income for the
poor people. Their other objectives include offering schooling assistance, access to
medical resources, and housing facilities.

The author of this report was required to not only work as an intern for a period of three months
within the organization, but also prepare a report which is based on the analysis of Sonali Bank
Bangladesh Ltd. (SBL), in order to demonstrate authors understanding of the theoretical
knowledge in combination with the practical and real life scenarios of a banking organization. To
learn and acquainted to fulfill the academic purpose.

3. To gather the practical experience base on the theoretical knowledge.

4. To habituated with the corporate environment and culture.

5. To serve the function of overall banker customer relationship.

6. To observe the function of general banking system.

7. To evaluate the financial performance of Sonali Bank Limited.

8. To observe the function of merchant banking operations.

pg. 5
1.5 Significance of the study
The significance of this report is very important for us. Banks play an important role in the
economy for offering a service for people wishing to save. Banks also play an important role in
offering finance to businesses who wish to invest and expand. These loans and business
investment are important for enabling economic growth.

 The impact of government policy of banks and regulation on banking is very essential for
us and the whole economic. The banking system in Bangladesh has undergone radical
changes since independence. It helps to protect the safety of the public’s savings and to
control the supply of money & credit in order to achieve a nation’s broad economic goals.
To provide the government with credit, tax revenues and other services that helps people
to growth financial condition. Bangladesh bank helps raising reserve requirements, banks
must set aside more of each incoming deposits into required reserves, & less money is
available to support making new loans.

 The significance of Sonali bank to encourage socio-economic growth and financial

services to the loss-income community particularly in the rural areas. SBL plays vital role
in the employment creation in Bangladesh. There are 13,229 employees who are directly
engaged and a good number of stakeholders are indirectly involved through Financing in
various types of business, such as Import, Export, industrialization, SME financing and
rural development project. As a result large numbers of families directly &indirectly
benefited from Sonali Bank and they are also contributing in the economy as a part of the
whole economic system of Bangladesh. The most important feature of Sonalic banking is
that it promotes risk sharing between the provider of funds or investors on the one hand
and both the financial intermediary as Sonali bank and the user of funds on the other
hand. Sonali Bank Bangladesh Limited (SBL) is performing a significant role in the
development of the country. SBL has already emerged as the top export-import bank in
Bangladesh. In Bangladesh, demand for remittances of migrant workers has now been
enhanced tremendously. SBL is playing vital role to help the people self-reliant. To
ensure self-reliant SBL has taken upright endeavor for the development of backward- 13 |
P a g e or rural areas. As a result the rural poor people taking RDS scheme. SBL regularly
pay their income tax in due time. The bank paying excise duty, withholding tax and vat to

pg. 6
 government exchequer on time deducting from employee’s salary as well as customers
and vendors invoice. The bank is the highest corporate taxpayer in the banking Sector
and is the second highest among all the taxpayers including foreign taxpayers in
Bangladesh below here:

1.4 Scope of the Study

As I was an intern, my scope was limited and restricted for some purpose. I had maintained some
official formality for the collection of data of my report. This study will give a clear idea about
the financial performance of Sonali Bank Limited as well as the different section of different
products and services of Sonali Bank Limited. At last the financial position of the bank in the
banking industry based on its last couple of year’s performance.

 Information availability.

 Good communication system.

 Have a wide area of gaining knowledge.

 Good working environment

Author has experienced a great practical knowledge about the banking system and real life
working place. Author has also understood what his strength in work place and what is the
weakness or problem he faced in the work place. So there are a great significance to work in real
life scenario and in this report author try to express what the importance 14 | P a g e of banks is
and what is the important to read the report. And this report will help the author to develop his
knowledge in practical.

pg. 7
 CHAPTER 2

Analysis of the Industry

2.1 Specific of industry

The banking industry of Bangladesh plays a significant role in the expansion of the financial
system. Bank is a financial intermediary and its collect deposits and paying interest on them,
making loans and advances and charging the borrowers higher rates of interest. In rending this
service to borrowers and depositors, banks have an expectation of achieving targeted rates of
returns.

Sonali Bank Limited, often referred to as Sonali Bank, is one of the oldest and largest
commercial banks in Bangladesh. Its origins can be traced back to the British colonial period
when the Bank of Bengal was established in 1806. The Bank of Bengal later merged with the
Bank of Bombay and the Bank of Madras to form the Imperial Bank of India in 1921.

Following the partition of India in 1947, the Imperial Bank of India was restructured and became
the State Bank of India (SBI). SBI operated in what is now Bangladesh until 1971 when
Bangladesh gained independence from Pakistan. As a result, all Pakistani assets in Bangladesh
were nationalized, including the branches of SBI.

Over the years, Sonali Bank has played a vital role in the economic growth of Bangladesh. It has
expanded its branch network across the country, providing banking services to both rural and
urban areas. The bank has been actively involved in financing various sectors, including
agriculture, industry, trade, and infrastructure, contributing to the development of the national
economy.

Sonali Bank has also adapted to changing times and embraced modern technology to improve its
services. It introduced online banking, ATM services, and electronic fund transfer systems,
enhancing convenience for its customers and promoting financial inclusion.

pg. 8
 In recent years, the government of Bangladesh has taken steps to restructure and modernize
Sonali Bank. The bank has undergone organizational reforms, including the establishment of
separate divisions for corporate and retail banking, and the adoption of international best
practices in risk management and governance.

Today, Sonali Bank Limited continues to be a prominent player in the banking sector of
Bangladesh, with a strong presence and a wide range of financial services. It remains committed
to supporting the country's economic development and serving the banking needs of its
customers.

2.3 Industry’s seasonality

The seasonality of an industry refers to the recurring patterns and fluctuations in demand, sales,
and other business metrics that are influenced by seasonal factors. Different industries may
experience varying degrees of seasonality based on the nature of their products or services and
customer preferences. Here are a few examples of industries and their associated seasonality
patterns:

I. Retail and Consumer Goods: The retail industry is highly influenced by seasonal factors,
such as holidays and changing weather conditions. For instance, the demand for clothing and
accessories tends to be higher during the spring and summer seasons, while sales of winter
apparel and holiday-related items peak during the fall and winter months. Retailers often
experience higher sales volumes and profitability during the holiday shopping season.

II. Tourism and Hospitality: The tourism and hospitality industry is heavily influenced by
seasonal fluctuations. Destinations popular for summer vacations experience peak demand
during the warmer months, while ski resorts and winter destinations attract more visitors
during the winter season. The industry's revenue and occupancy rates are typically higher
during peak seasons and major holidays.

III. Agriculture: The agricultural industry exhibits strong seasonality due to crop planting and
harvesting cycles. Different crops have specific growing seasons, and the demand and prices
for agricultural products fluctuate accordingly. For example, the demand for fruits and
vegetables typically increases during the summer months when these products are in season.

pg. 9
IV. Construction: The construction industry often experiences seasonal patterns, influenced by
weather conditions and economic factors. Construction activities tend to be more active
during the spring and summer seasons when weather conditions are favorable. Conversely,
in colder regions, construction projects may slow down or be halted during the winter
months due to inclement weather.

V. Entertainment and Media: The entertainment and media industry can also be subject to
seasonality. For instance, movie studios tend to release major blockbuster films during the
summer and holiday seasons when consumer moviegoing is at its peak. Similarly, television
ratings can vary based on the availability of popular shows and major sporting events during
specific times of the year.

It's important to note that while many industries exhibit seasonality, the degree and specific
patterns can vary based on geographic location, cultural factors, and market dynamics.
Businesses operating within seasonal industries need to carefully plan and manage their
operations, inventory, and marketing strategies to maximize opportunities during peak seasons
and mitigate challenges during slower periods.

2.4 Economic factors that affect the industry

There are several economic factors that can significantly impact industries. These factors shape
the business environment, influence consumer behavior, and affect overall industry performance.
Here are some key economic factors that commonly influence industries:

I. Economic Growth: The overall economic growth of a country or region has a substantial
impact on industries. During periods of robust economic growth, industries tend to
experience increased demand for goods and services as consumers have more disposable
income to spend. Conversely, during economic downturns or recessions, consumer spending
may decline, leading to reduced demand and challenging market conditions for industries.

II. Interest Rates: Interest rates set by central banks have a significant impact on industries,
particularly those reliant on borrowing or financing. Lower interest rates can stimulate
borrowing and investment, which can benefit industries such as real estate, construction, and

pg. 10
 consumer goods. Conversely, higher interest rates can increase borrowing costs, reducing
consumer purchasing power and potentially dampening demand for certain industries.

III. Inflation: Inflation: the general rise in prices of goods and services over time, affects
industries in various ways. Rising inflation can increase production costs, such as raw
materials, labor, and transportation, which can impact industries' profitability. Additionally,
high inflation rates may erode consumer purchasing power, leading to reduced demand for
certain products and services.

IV. Exchange Rates: For industries engaged in international trade, exchange rates play a critical
role. Fluctuations in exchange rates can impact the cost of imported raw materials and
finished goods, affecting production costs and profitability. Additionally, exchange rate
movements can influence export competitiveness and demand for industries reliant on
foreign markets.

V. Government Policies and Regulations: Government policies and regulations can

significantly shape industries. Fiscal policies, such as tax rates and incentives, can impact
businesses' profitability and investment decisions. Industry-specific regulations, such as
environmental standards or safety requirements, can also influence operational costs and
market dynamics.

It is important to note that the impact of these economic factors can vary across industries and
regions. Additionally, industries may be affected by a combination of multiple economic factors,
making it crucial for businesses to stay informed about the economic landscape and adapt their
strategies accordingly.

2.4.1Capital adequacy and deposits

Capital adequacy and deposits are two critical aspects of a bank's financial operations. Let's
explore each of them in more detail:

Capital Adequacy:
Capital adequacy refers to the ability of a bank to absorb potential losses and maintain its
financial stability. It is measured by the capital adequacy ratio (CAR), which is a key indicator of

pg. 11
a bank's solvency and risk management. The CAR is calculated by dividing a bank's capital (both
Tier 1 and Tier 2 capital) by its risk-weighted assets (RWA).

The capital requirements are set by regulatory authorities to ensure that banks have sufficient
capital to cover potential losses arising from credit risk, market risk, and operational risk. A
higher capital adequacy ratio indicates a stronger financial position and a better ability to
withstand adverse economic conditions or unexpected losses.

Banks typically raise capital through various means, such as issuing new shares, retaining
earnings, or raising debt. Maintaining an adequate capital base is crucial for banks to inspire
confidence among depositors, investors, and regulatory authorities.

Deposits:
Deposits are a significant source of funding for banks. Depositors entrust their money to banks,
which the banks use to provide loans and other financial services. Deposits can come from
individuals, businesses, government entities, and other financial institutions.

Banks are also subject to regulatory requirements regarding deposit insurance and reserve ratios.
Deposit insurance schemes, backed by governments or regulatory bodies, aim to protect
depositors in the event of a bank failure, up to a specified limit.

In summary, capital adequacy ensures that banks have sufficient financial resources to cover
potential losses, while deposits provide a stable and reliable source of funding for banks' lending
and operational activities. Both aspects are crucial for a bank's financial stability, risk
management, and ability to serve its customers and support economic growth.

2.4.2Growth domestic product (GDP)

Banks profitability increases during economic expansion, and declines in recession's period. So a
higher growth domestic product (GDP) growth causes banks loans and deposits to increase and
make bank's net interest income and loans losses to improve.

pg. 12
2.4.3 Inflation

When inflation is high, the marginal impact of inflation on banking lending activity and stock
market development diminishes rapidly we all know that. Because of inflation the price level
increase unexpectedly and it causes a proportional reduction in the exchange value of both
financial assets and liabilities in terms of real goods. So banks are generally creditor, bank
owners lose wealth when there is inflation.

2.5 Substitutes of this industry

This force is especially threatening when buyers or customers of this industry can easily find
substitute banks with attractive interest prices or better quality of services. So that customers can
switch from one bank to another with little cost and better facilities.

❖ Threat of substitutes for banking sector is low. Because the bank have the huge demand in
Bangladesh. There is also non-banking financial institution (NBFI) is important financial
intermediaries in Bangladesh economy.

NBFIs have been given licenses and are regulated under the financial institution, Act, 1993

Table 2.2: Summary of NBFIs deposit and lending

Table 2.2 shows that, there are total 35 crore NBFI and its total deposit was 44,161 crore and
total lending was 63,760 crore.

2.6 Political, legal, and regulatory factors

Political factors refer how the government intervenes in the economy and what is the effect of
banking industry. Political stability and importance of Credit Services sector in our economy.
Level of corruption in the politic especially levels of regulation in banking sector in Bangladesh.

pg. 13
Bureaucracy and interference in credit services in banking industry by government is also very
important. Banking clients and businesses are both influenced by legal variables, which are
external elements that are influenced by the law. A country's banking sector is impacted by legal
variables such as regulations and laws, which can have a positive or negative impact on the
outcomes of market actions and management decisions. The entire banking industry is affected
by ethical and legal factors that are intertwined. Bank regulations are a form of government
regulation that subjects banks to certain requirements, restrictions, policies, procedures,
standards, and guidelines. And banks have to maintain that regulation. This regulatory structure
creates transparency between banking institutions and the individuals and corporations with
whom they conduct business and give them credit.

There are lots of political, legal and regulatory factors below here:

❖ Govt. involvement & regulations: Author finds that, the greater capital regulation is
positively associated with bank stability, while strict restrictions, deposit insurance and lots of
supervision appear to exert an adverse effect on bank stability. These effects are more renounced
among banks with a high level of stability.

❖ Banks & Economy: Bank is crucial to the modern economy. As the primary supplier of loan,
SBL provides money for people to buy cars and homes and for businesses to buy equipment that
business needed, expand their operations, and meet their goals.SBL also provide customers with
a safe and secure place to keep their money and to earn some interest on their deposit as well.

❖ Interdependent Relation: There has been a lot of discussion about the connection between
the banking industry and the real economy. We all know that the banking industry has an impact
on the real estate market, and vice versa. Specifically, we examine whether a decrease in bank
credit produces a decrease in aggregate output or if the banking sector reduces loans to the
commercial sector as a result of an economic downturn.

pg. 14
 Chapter-3

Ratio Analysis and Financial Statement

3.1 Introduction of the Ratio Analysis:

Measuring bank performance is a lot like measuring the performance of a traditional company. A
bank's revenue is the return it makes from investments, and this income comes from interest or
asset appreciation on investments, such as stocks or real estate. Banks must also consider the cost
of the funds used to make these investments. Profits are ultimately made from the spread
between the amount banks pay for the investments and the amount they receive from borrowers.
The most commonly measure of profit for a bank is referred to as net interest margin. There are a
multitude of measures used to assess bank performance, with each group of Stakeholders having
its own focus of interest. Commonly used techniques to measure Bank’s performance are-

 Ratio Analysis,
 Economic measures of performance,
 Market-based measures of performance.

For my study I have Selected Ratio Analysis and some Market Based Measures as a tool of
measuring the financial performance of Sonali Bank Limited. The objective of this report is
evaluating Sonali Bank Limited’s financial performance. So that here discuss recent year’s
financial ratio of Sonali Bank Ltd.

A tool used by analysts which utilizes the relationship between accounting figures and their
trends over time to establish values and evaluate risks. Ratio analysis provide analyst with useful
information understand about developing insights into the economic characteristics of different
industries and of different firms in the same economic additional ,different over time in a single
firm or between firms due to operation ,financing and investing decision made by management
as well as external economic factor are often highlighted by common-side statement.

pg. 15
3.2 Assumption of Ratio Analysis:
The most common mode in which financial statement data are summarized is the ratio form.
Motivations for examining data in ratio form include:

 To control the effect of size differences across the bank overtime.

 To make the data better satisfy the assumptions underlying statistical tools.
 To probe a theory in which a ratio is the variable of interest.
 To exploit an observed empirical regularity between a financial ratio and the estimation
of variable of interest
 I have divided my overall ratio analysis into five separate parts presented as follows:

I have divided my overall ratio analysis into five separate parts presented as follows:

pg. 16
3.3 Liquidity Analysis of Sonali Bank Limited (2018-2022)
Liquidity means the ability to quick convert of an asset into cash. The liquidity ratios are being
used to determining a company's ability to pay off its short terms debt obligations. Generally, the
higher is the value of the ratio, the larger is the margin of safety that the company possesses to
cover short-term debts. There are a number of formulas to calculate the liquidity ratio of a
particular organization. They are-

i) Current Ratio
ii) Quick Ratio
iii) Loans to Deposit Ratio

(i) Current Ratio: The current ratio is a liquidity ratio that measures a company's ability
to pay shortterm and long-term obligations. To gauge this ability, the current ratio
considers the current total assets of a company (both liquid and illiquid) relative to
that company's current total liabilities

Formula: Current Ratio= 𝑪𝒖𝒓𝒓𝒆𝒏𝒕𝑨𝒔𝒔𝒆𝒕 /𝑪𝒖𝒓𝒓𝒆𝒏𝒕𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆

Calculation:

Graphical Presentation: The change of the cash ratio of Sonali Bank Limited is shown in the
graph below

pg. 17
Analysis: The bank is just able to cover all of its short-term obligations. Though it is satisfactory
it should increase current assets or decrease current liabilities. The Current ratio shows almost
stable results over the years. Over this five years period, the value of this ratio ranged from 1.03
to 1.04, which demonstrated a small amount of down.

3.4 Liquidity Ratio:

Graphical Explanation

pg. 18
Interpretation: The Cash Ratio of the Sonali Bank Limited is better using deposit against their
cash in hand. The cash to asset ratio has been fluctuated over the years a little bit. It was the
range between (0.06 - 0.08).The bank could able to use their cash in consider of asset. Cash to
deposit ratio in 2013 was good but it sequence of time has decreased (0.10 to 0.07) because of
deposit is increased. Loan to total asset ratio showing better fluctuation from 2013 to 2017. The
Loan to total deposit ratio in has been increased 2015 to 2016 and decreased 2018 but from 2020
increasing up to 2022.

3.5 Earning Performance of Sonali Bank Limited:

Profitability is a measure of efficiency. Profitability ratios are used to assess a business's ability
to generate earnings as compared to its expenses and other relevant costs incurred during a
specific period of time. In other words the profitability ratios are designed to provide answers to
questions such as what is the rate of profit. What is EPS? What is the rate of investment? What is
the rate of equity? Is the profit earned by the enterprise adequate? What is the dividend payout
ratio? What is retention ratio and so on? The analysis of the profitability ratio is important for the
shareholders, creditors, prospective investors, bankers and the government alike.

Return on Asset (ROA):

Return on Assets (ROA) is an indicator of how profitable a company is relative to its total assets.
ROA gives an idea as to how efficient management is at using its assets to generate earnings.

Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a
percentage.

pg. 19
Graphical Presentation: The change of the return on asset (ROA) of Sonali Bank Limited is
shown in the graph below

Analysis:

Return on assets Ratio of Sonali Bank Limited it is noticed that there is fluctuations in the last
five year. In 2022, the ratio increased to great level. This was because in that year earnings
available for common stockholders in creased to great level. But after that year there was a
decreasing trend in this ratio because of declining rate of increment in earnings.

Return on Equity (ROE):

Return on Equity is a ratio that measures a corporation's profitability by revealing how much
profit a company generates with the money shareholders have invested. ROE is the most
important indicator of a bank’s profitability and growth potential. It is the rate of return to

pg. 20
shareholders or the percentage return on each taka of equity invested in the bank. ROE is
expressed as a percentage.

2018 2019 2020 2021 2022

Analysis: The graph exhibits that the ROE ratio of Sonali Bank Limited was highest on 2013. In
2014 it has been decreased drastically and from then it is decreasing year to year.

The ROE of Sonali Bank Limited is low. It has increased its provision for loans and advances.
Therefore the return decreased as a result the return on equity ratio decreased.

Operating Profit Margin

Operating margin is a measurement which gives analysts an idea of how much a company makes
(before interests and taxes) on each dollar of sales. If a company’s operating margin is
increasing, it’s earning is more per dollar of revenue. The higher the margin, the better the
company.

Calculation:

pg. 21
Graphical Presentation: The change of the Operating profit margin of Sonali Bank Limited is
shown in the graph below-

Analysis: The Operating profit margin of Sonali Bank Limited in the last five years (2018-2022)
were 22.46%, 20.19%, 24.09%, 27.90%, 44.43% respectively. The operating margin of Sonali
Bank Limited is between 28% to 20% over 2018-2022. It’s almost stable in earning profit. Its
highest operating profit margin was in 2013 as it decreases its operating expenses. It should
sustain the trend of operating profit margin.

Earnings per Share (EPS):

The term Earnings per Share represents the potion of a company’s earnings, net of taxes and
preferred stock dividends that is allocated to each share of common stock. It is carefully
scrutinized metric that is often used as a barometer to gauge a company’s profitability per unit of
shareholders ownership.

As such, EPS is a key driver of share prices. Though EPS is widely considered to be the most
popular method of quantifying a firm’s profitability, it’s important to remember that earnings
themselves can often be susceptible to manipulation, accounting changes and restatements.

pg. 22
Calculation: The Earnings per Share of Sonali Bank Limited from 2009-2013 are given below-

(Source: Annual Reports of Sonali Bank Limited, 2018-2022)

Graphical Presentation The change of the Earnings per Share of Sonali Bank Limited is shown
in the graph below-

Analysis: The Earnings per Share of Sonali Bank Limited in the last five years (2018-2022)
were 14.04, 13.61, 25.12, 19.92, and 86.31 respectively. It was highest in 2018 as it had lower
no. of shares. From 2o19 its no. of shares increased. it is in good position.

Owners’ Equity Ratio:

Owners' equity ratio, also known as equity ratio or shareholders' equity ratio, is a financial metric
used to assess the proportion of a company's total assets that are financed by owners' equity. It
indicates the extent to which shareholders' equity contributes to the funding of a company's
assets.

The formula for calculating the owners' equity ratio is:

Owners' Equity Ratio = Shareholders' Equity / Total Assets

pg. 23
In this formula, shareholders' equity represents the residual interest in the assets of a company
after deducting liabilities. It is calculated as the difference between total assets and total
liabilities. Total assets include all the resources owned by a company, while total liabilities
represent the company's obligations or debts.

The owners' equity ratio is expressed as a percentage, showing the proportion of the company's
assets that are financed by owners' equity. A higher ratio indicates that a larger portion of the
assets is funded by shareholders, suggesting a lower financial risk and greater financial stability.

It's important to note that the optimal owners' equity ratio can vary depending on the industry,
company size, and specific circumstances. Some industries may require higher levels of debt
financing, while others may prefer a more conservative approach with higher equity financing. It
is generally advisable to compare the owners' equity ratio of a company with its industry peers or
historical data to gain a better understanding of its financial position and leverage.

Calculation: The Owners Equity ratio Sonali Bank Limited from 2018-2022 are given below-

Owners Equity:

(Source: Annual Reports of Sonali Bank Limited, 2018-2022)

Graphical Presentation: The change of the Owners Equity ratio of Sonali Bank Limited is
shown in the graph below-

pg. 24
Analysis: From the trend of Owners Equity Ratio showed in table and figure we see that there
was lower ratio in the year of 2019 it indicates that there was lower dividend. The rate was high
in 2019 and 2022 with a value of 37% because of higher earnings. But in 2019 there was fall in
the bank’s earnings. For this reason the rate of dividend fallen.

3.5 Capital Adequacy of Sonali Bank Limited (2018-2022):

Capital requirement (also known as regulatory capital or capital requirement) is the amount of
capital a bank or other financial institution has to hold as required by its financial regulator. This
is usually expressed as a capital adequacy ratio of equity that must be held as a percentage of
risk-weighted assets. These requirements are put into place to ensure that these institutions do
not take on excess leverage and become insolvent.

3.6 Capital Adequacy Ratio (CAR):

Capital adequacy ratio is the ratio which determines the bank's capacity to meet the time
liabilities and other risks such as credit risk, operational risk etc. In the simplest formulation, a
bank's capital is the "cushion" for potential losses, and protects the bank's depositors and other
lenders. Banking regulators in most countries define and monitor CAR to protect depositors,
thereby maintaining confidence in the banking system. CAR is similar to leverage; in the most
basic formulation, it is comparable to the inverse of debt-to-equity leverage formulations
(although CAR uses equity over assets instead of debt-to-equity; since assets are by definition
equal to debt plus equity, a transformation is required). Unlike traditional leverage, however,
CAR recognizes that assets can have different levels of risk.

pg. 25
 Chapter-4
Sonali Bank Bangladesh Limited

Profit & Loss Account

31 December 2022

pg. 26
 Sonali Bank Limited

Consolidarated Balance Sheet

31 December 2022

pg. 27
pg. 28
 Sonali Bank Limited

Consolidarated Profit and Loss Account

31 December 2022

pg. 29
 Sonali Bank Limited

Owners Equity

31 December 2022

pg. 30
 Sonali Bank Limited

Cash Flow Statement

31 December 2022

pg. 31
 CHAPTER – 5

Recommendation & Conclusion

Recommendation:
Based on the analysis of the financial statement of Sonali Bank Bangladesh Ltd., some
recommendations can be made to improve the bank's financial performance and health. Firstly,
the bank should focus on increasing its revenues by diversifying its business operations and
expanding its customer base. Secondly, the bank should improve its efficiency by reducing its
operating expenses, optimizing its asset utilization, and streamlining its business processes.
Finally, the bank should continue to maintain its strong liquidity and capital position to ensure its
solvency and ability to meet regulatory requirements.

To achieve its strategic objectives, Sonali Bank Bangladesh Ltd. should also consider investing
in technology to enhance its digital capabilities and improve its customer experience. The bank
should focus on developing innovative digital products and services to attract more customers
and increase its revenue streams. Moreover, the bank should leverage data analytics and artificial
intelligence to improve its risk management and decision-making processes, which can help to
reduce its credit risk and enhance its efficiency.

Another important recommendation for the bank is to strengthen its corporate governance
practices to ensure transparency, accountability, and ethical behavior. The bank should establish
an effective risk management framework and internal control system to manage its operational
and financial risks. Moreover, the bank should implement effective measures to prevent money
laundering and terrorist financing and comply with regulatory requirements.

pg. 32
 Conclusion:

In conclusion, the financial statement of Sonali Bank Bangladesh Ltd. reflects the bank's
financial performance over a specific period and provides valuable insights into its profitability,
liquidity, and solvency. The analysis of the financial statement shows that the bank has
maintained a strong financial position, with a healthy growth rate, high profitability, and
adequate capital and liquidity levels. However, the analysis also identifies some challenges that
the bank needs to address, including the need to diversify its revenues, improve its efficiency,
and manage its credit risk effectively.

Overall, the financial statement of Sonali Bank Bangladesh Ltd. indicates that the bank has a
promising future, with significant growth potential in the Sonalic banking sector in Bangladesh.
The recommendations made in this paper can help the bank to further improve its financial
performance and health and achieve its strategic objectives.

In conclusion, the financial statement of Sonali Bank Bangladesh Ltd. provides a useful tool for
stakeholders to assess the bank's financial performance and health. The analysis of the financial
statement shows that the bank has maintained a strong financial position, with a high level of
profitability, liquidity, and solvency. However, the bank needs to address some challenges and
capitalize on opportunities to improve its financial performance and achieve its strategic
objectives. The recommendations made in this paper can guide the bank in this regard and help it
to maintain its position as a leading Sonalic bank in Bangladesh.

pg. 33
Bibliography & References:

 36(12), 1252-1271. http://dx.doi.org/10.1108/MRR-06-2013-0138

 History of Sonali banking industry. (2019) Retrieved 10 February from

https://www.assignmentpoint.com/business/banking/history-of-Sonali-bank-
bangladeshltd.html

 Concept of Sonali banking (2010) Retrieved 10 February from

https://www.Sonalibankbd.com/abtSBL/cis_operational_techniques_of_Sonalic_bank.ph
p Differences between conventional bank and Sonalic Bank. (2021).

 Retrieved 10 February from https://www.ubldigital.com/Banking/UBL-

Ameen/Knowledge-Center/Differences-betweenConventional-Bank-and-

 SonalicBank#:~:text=Conventional%20Bank%20treats%20money%20as,participation%2
0on%20profit% 20%26%20loss%20basis.

 International Journal of Business and Management, the Impact external Factors (2014)
Retrieved 10 February from
https://www.researchgate.net/publication/272504187_The_Impact_of_Internal_and_Exte
rnal _

 Factors_on_Commercial_Bank_Profitability_in_Jordan Growth of Sonali Banking and

Finance in Bangladesh: A Critical Review. (2019). Retrieved
http://www.icmab.org.bd/wp-content/uploads/2019/07/6.Growth.pdf Johnson, Katherine,

"The Role of Sonali Banking in Economic Growth" (2013). CMC Senior

https://www.marketingstudyguide.com/2466

pg. 34