Army Institute of Business Administration

Savar Cantonment, Dhaka

Term paper on
Financial performance analysis of Dhaka Bank Bangladesh from Year 2017 to
2021

COURSE TITLE: Bank Fund Management

COURSE CODE: FIN- 4712

Submitted to: Prepared by:

Kaniz Fatema
Name ID
Lecturer
Army Institute Of Business Administration, Savar Md. Modasser (B7200B049)
Islam Emon

Date: 16 May 2023

 LETTER OF TRANSMITTAL

DATE: 16 May 2023

Kaniz Fatema
Lecturer
Army IBA
Savar Cantonment, Dhaka
SUBJECT: Submission of the term paper on “Financial Performance Analysis of Dhaka Bank
from year 2017 to 2021”

Honorable ma’am
Here is my term paper on “Financial Analysis of Dhaka Bank limited from year 2017 to 2021”
assigned to me as a requirement of the course “Bank Fund Management, Course code: FIN
4712” Amid the previous situation of coronavirus pandemic our banking institutions have gain
notable growth. One of them is Dhaka Bank Limited. Through this term paper I have tried to find
out several ratios related to financial performance of Dhaka Bank and their situation of asset,
liability and equity status from those years. While preparing the report I have taken help from of
internet, books, newspaper, classes and other relevant sources.
I hope that, you would be kind enough to grant me the permission to work on “Financial
Analysis of Dhaka Bank from year 2017 to 2021” and oblige thereby.
I shall be glad to answer any kind of questions related to this study and I shall be glad to provide
further clarification if needed.
Sincerely Yours
Name: Md Modasser Islam Emon
ID: B7200B049
Batch: BBA 7
Major: Finance
 Table of Contents
Details Sub topics Page
III
Executive Summary

INTRODUCTION 4-6
CHAPTER 1 1.1 Introduction
1.2 Objective of the study
1.3 Data Sources

Main Body 12-14

CHAPTER 2
15-18
CHAPTER 3 Conclusion

EXECUTIVE SUMMARY
In the very beginning the CAMELS rating and how it works are given in the introduction part.
Other than that various sub divisions and rating manual is also depicted. Dhaka Bank was rated
B or Satisfactory level by CAMELS rating Bangladesh. As a part of the study in the main body
five different sector of banks and the position like capital adequacy, asset quality, management
quality, earning quality and lastly the liquidity position is also added. With the calculation of
these ratio correlated graphs were also added to understand the scenario better and in a visionary
way to understand small details and the comparisons of different years. Also some notes related
to the benchmark and the situation has been added too. Lastly the conclusion chapter depicts the
results and why the CAMELS rating gave Dhaka Bank satisfactory rating was given proper
logical explanation.

Chapter 01 Introduction
1.1 Introduction
A bank is a financial institution that is licensed to accept checking and savings deposits and
make loans. Banks also provide related services such as individual retirement accounts (IRAs),
certificates of deposit (CDs), currency exchange, and safe deposit boxes. Banks do offers various
services to its customers like checking accounts, savings account, loan services, letter of credit
openings, currency exchanges etc. But there are several services that the modern day banks are
serving in countries same as in Bangladesh too. It is important to find out profitability and the
asset management of banks to know if the bank is performing good or bad. There are several
ratios to find out the statements of the banks and the situation of banks like asset and liability
management, return on assets and return on equity etc. These ratings however can give an idea
about how the bank is performing. CAMELS Rating System is an international bank-rating
system where bank supervisory authorities rate institutions according to six factors. It is
encountered by six components named capital adequacy, asset quality, management competence,
earnings, liquidity and sensitivity to market risk. It is used for banking companies to know about
their financial condition, overall soundness of the banks, and predict different risk factors that
may contribute to turn the bank into a problem. CAMEL first founded in 1979 and in 1996
CAMEL became CAMELS with the addition of a component grade for the Sensitivity of the
bank to market risk. In Bangladesh, the five components of CAMEL have been used for
evaluating the bank’s operations that reflect in a complete institution’s financial condition,
compliance with banking regulations and statutes and overall operating soundness since the early
nineties. In 2006, Bangladesh Bank has upgraded the CAMEL into CAMELS and included
‘Sensitivity to market risk’ or ‘S’ which make CAMEL into CAMELS. It has 1 through 5 rating
for each of these components and a composite rating where the rating of 1 indicates strong
performance or best rating, 2 reflects satisfactory performance, 3 represents performance that is
flawed to some degree, 4 refers to marginal performance and is significantly below average and
5 is considered as unsatisfactory or worst rating. In Bangladesh, CAMELS rating is followed by
all commercial as a recommendation of Bangladesh Bank.

1.2 Objective of the study

The main objective of this study is to go through details of Dhaka Bank Limited’s situation in
2020 and 2021.Another objective is to align Bank fund management course with Dhaka Bank
Limited practically. The other objectives are

 Find out situation of Dhaka Bank during pandemic situation

 CAMELS rating aligned with Dhaka Bank limited.
1.3 Data sources

Data were taken from newspaper, book, and internet and Dhaka bank websites.

Chapter 2 Graphs and Analysis

CAMELS (Capital, Asset, Management, Earning, Liquidity and Sensitivity) Rating is a very
popular term using to evaluate the overall performances of various commercial banks by
Bangladesh Bank. In 2008 this rating was done by the regulatory authority. The serial is made on
the basis of performance of June 2011 .According to performance; banks are categorized in 5
categories-

1. Strong or A-class banks

2. Satisfactory or B-class banks

3. Fair or C-class banks

4. Marginal or D-class banks

5. Unsatisfactory or E-class banks

From the CAMELS rating done by Bangladesh Bank in 2021 Dhaka Bank Limited is a
Satisfactory or B class rated bank.

2.1 Capital Adequacy Ratio

2.1.1 Capital Adequacy ratio

The capital adequacy ratio (CAR) is an indicator of how well a bank can meet its obligations.
Also known as the capital-to-risk weighted assets ratio (CRAR), the ratio compares capital to
risk-weighted assets and is watched by regulators to determine a bank's risk of failure. It's used to
protect depositors and promote the stability and efficiency of financial systems around the world.

Two types of capital are measured:

Tier-1 capital, core funds on hand to manage losses so that a bank can continue operating and,

Tier-2 capital, a secondary supply of funds available from the sale of assets once a bank closes
down.

The capital adequacy ratio is calculated by dividing a bank's capital by its risk-weighted assets.
Currently, the minimum ratio of capital to risk-weighted assets is 8% under Basel II and 10.5%
(which includes a 2.5% conservation buffer) under Basel III.23 High capital adequacy ratios are
those that are higher than the minimum requirements under Basel II and Basel III.
( BDT in Millions, Unless mentioned)

Risk Weighted Assets 182,954 210,240 193,398 199,837 213,899 7%

Core Capital (Tier-I) 14,540 15,402 16,503 17,713 19,433 10%
Supplementary Capital (Tier-II) 7,345 13,692 14,669 11,304 11,902 5%
Capital to Risk Weighted Assets (CRAR) Ratio 11.96% 13.84% 16.12% 14.52% 14.65% 1%
Tier-I Capital Ratio 7.95% 7.33% 8.53% 8.86% 9.08% 2%
RWA to Total Assets 80% 77% 68% 68% 64% -7%

Fig: CAR ratio graph

2.2 Asset Quality

2.2.1 NPL to Total Loan

Non-performing loan means the borrower is not paying the interest and the capital money also.
NPL to total loan ratio shows how much the bank’s loans are not bringing profit into the bank.

Formula: Net non-performing loan/ Total outstanding loan

(BDT in millions, unless mentioned)

2017 2018 2019 2020 2021

Particulars

CREDIT QUALITY

Volume of Non-performing Loans 9,209 9,009 9,278 6,227 7,145

NPL to Total Loans and Advances (%) 5.98 4.99 4.74 3.13 3.32

5.98
6
4.99
4.74
5

4 3.13 3.32

0
2017 2018 2019 2020 2021
NPL to Total Loans and Advances (%)

Here the data shows that the NPL to total loan is slowly decreasing year after year. So the banks
performance is good.

2.2.2 NPL to total equity

2018 2019 2020 2021

Particulars

Total equity 17249109680 1789595557 18792153885 20241848075

0

Volume of Non-performing Loans 9,00900000 9,27800000 6,22700000 7,14500000

NPL/Total equity 19.14 19.28 30.17 28.33
2.3 Management Quality

Management quality is an important part of the CAMEL rating. It proves how the decisions have
been made in times of crucial moments.

2.3.1Total loans and advances to total deposits:

Formula= Total Loans / Total Deposits

( BDT in million)

2021 2020 2019 2018

Total Loans & Advances 215,459 198,660 195,635 180,626

Total deposits 230,417 205,667 204,530 197,189

Total loans/ Total deposits 93% 96.59% 95.65% 91.60%

2.3.2 Interest Expenses to Deposit:

2021 2020 2019 2018

Interest expenses 10,394 13,969 17,040 13,409

Total deposits 230,417 205,667 204,530 197,189

Interest Expense/ Total deposits 4.5% 6.7% 8.3% 6.8%

Here the interest expense to deposit was also seen a decreasing role, which is a good initiative.

2.4 Earning quality

Earning quality reflects quality of institution profitability and its ability to earn consistency. The
quality of earning is a very important criterion that determines the ability of an institution to earn
consistently, going into the future.

2.4.1Net interest margin

Year 2017 2018 2019 2020 2021

Net Interest Margin (NIM) 3.90 3.79 3.06 2.97 3.00
If a bank NPA (non-performing assets) are high, their NIM will go down. Higher NIM would
increase the profitability of the bank. The NIM is going a slight decreasing way as we can see it.

2.4.2 Return on equity and return on assets

2017 2018 2019 2020 2021

Return on Assets (ROA)% 0.69 0.54 0.56 0.70 0.65
Return on Equity (ROE)% 9.21 8.18 9.28 11.28 10.53

Return on assets should stay under 5%. On the other hand ROE should go high which is a good
sign. Here we can see the ROA is less than 5% which is alarming as the rate is quite low here.
The rising ROE is a problem as indicates that it is not able to generate profit without capital.

2.5 Liquidity

2.5.1 Working capital ratio

In short, working capital is the money available to meet your current, short-term obligations. To
make sure your working capital works for you, you'll need to calculate your current levels,
project your future needs and consider ways to make sure you always have enough cash.

Working Capital Ratio = Net Current assets/ Net current Liabilities

2017 2018 2019 2020 2021

Current Ratio 0.93 0.83 0.81 0.76 0.76

Here we can see the Current ratio or Working capital ratio was always below 1 which means the
current liabilities were more than the current assets. For banking institutions the rate for working
capital should be less than 1 which means there were less idle money.

2.5.2 Statutory liquidity ratio

Here the ratio means a minimum ratio that the commercial banks has to maintain in the form of
gold, liquid cash. It is basically the reserve requirement that the banks has to maintain in regular
basis.

2017 2018 2019 2020 2021

Statutory Liquidity Ratio (at the close of the year) 13.51 13.60 16.01 18.20 24.83
The increasing rate of means a good position in maintaining liquidity.

Chapter 3 Conclusions
3.1 Conclusions

The study was done with a purpose to find out different rates and ratios to collaborate with the
CAMEL ratings of commercial banks under BASEL convention. The rating helps to find out the
overall situation by calculating different types of ratios related with 5 possible scenarios and 5
possible positions for the banks. Here Dhaka Bank Limited was rated B section or satisfactory by
CAMELS rating Bangladesh as the corona pandemic was a reason why no banks were giver A
category recognition. We can see in most cases or scenarios Dhaka Bank has performed above
than the industry benchmark and that’s why it was rated satisfactory bank by Bangladesh Bank.
There will be updated accord like BASEL II and Basel III. So while the banking sector will also
be stronger by then.