Bank Overview

Bank Asia Limited is one of the key pillars in the development of the financial industry in
Bangladesh and has been very successful in its operations started back in the year 1999. In 2001,
it was founded by a group of visionary entrepreneurs and businessmen whom started an
enterprise in Kenya.

Using one single vision of excellence, bank Asia aspires to become the leading one for
communities around them. This is an obligation that is built within an aim of providing both
advanced banking services and uncompromised ethics. However, the mission of Bank goes
beyond normal banking by focusing on the socio-economic development of the country.

Bank Asia has a wide range of service product spread across retail banking, corporate banking,
SME banking, and Islamic banking. This full package of service encompasses a broad audience
of customers. The bank caters for different deposit products from all the way through an
assortment of loans to cutting edge digital banking solutions that meet the varied needs of the
broad customer base.

At the heart of Bank Asia’s operational strategy lies technology. This institution adopted the
approach of strategic investment in IT infrastructure to promote security, efficiency and ease of
operations. The bank’s modern and customer-oriented approach incorporates online banking,
mobile banking and other digital solutions.

As part of its societal obligations, Bank Asia ventures into some community-based projects.
Some of these initiatives include community upliftment, education, health, etc., aimed at creating
a socially responsible society that goes beyond the conventional concept of banking.

One main consideration in this regard involves looking at the bank’s financial performance as
well as growth trend. Its resilience and competitive position is determined by metrics like; total
assets, net profit and capital adequacy ratio. At the same time, Bank Asia attaches great
importance to observance of norms stipulated by regulatory standards within its corporate
governance.
Bank Asia’s industry standing also manifests itself through the awards and recognitions it has
received for performance, service quality, and corporate practices among others beyond the
financial metrics. This confirms that the bank strives to be outstanding and remains ahead in
innovation.

Regarding the recent developments in Bank Asia limited, one has to consult the current news
reports, the bank’s report, and other relevant information sources.

Profitability Ratio

Return on Average Assets

Years 2014 2015 2016 2017 2018 2019

ROAA 1.27% 1.24% 0.68% 0.77% 0.74% 0.59%

ROAA
Series 1

2%

1% 1%

1%
0% 0% 0%
0%

2014 2015 2016 2017 2018 2019

Series 1 1% 1% 0% 0% 0% 0%
Return on Average Assets (ROAA): Return on Average Assets (ROAA) is a financial metric
that measures a bank's profitability in relation to its average total assets. It is calculated by
dividing the net income of a bank by its average total assets over a specific period, usually
expressed as a percentage. ROAA is a measure of a bank's profitability relative to its average
total assets. A higher ROAA indicates better profitability, while a lower ROAA suggests lower
profitability. (1)

Per Year Interpretation:

 The ROAA in 2014 was 1.27%, indicating relatively good profitability compared to
average total assets.
 In 2015, the ROAA decreased to 1.24%, signaling a slight decline while maintaining
reasonable profitability.
 The ROAA further declined to 0.68% in 2016, suggesting a decrease in profitability
compared to the bank's average total assets.
 2017 witnessed a significant drop to 0.77% in ROAA, indicating a notable decline in
profitability and a challenging period for the bank.
 The ROAA rebounded to 0.74% in 2018, showcasing improvement from the previous
year but still relatively lower compared to 2014 and 2015.
 In 2019, the ROAA decreased slightly to 0.59%. Although remaining relatively stable, the
bank's profitability did not recover significantly from the previous year.

Overall, the findings indicate a mixed performance in terms of profitability over the years. There
was an initial period of relatively higher profitability in 2014 and 2015, followed by a decline in
subsequent years. The year 2017 marked a notable challenge, and although there was
improvement in 2018, the bank's profitability remained below the levels observed in the earlier
years. In 2019, the stability in ROAA suggests a need for strategic measures to enhance
profitability.

(Note: The data used here reflects the provided ROAA percentages for Bank Asia.)

Capital and Basel III Influence

Basel III comprises international banking regulations established by the Basel Committee on
Banking Supervision (BCBS) to enhance the resilience and stability of the global banking
system. While Basel III doesn't specifically address ROAA, it introduces various requirements
related to capital adequacy and liquidity that can indirectly impact a bank's ROAA. These
regulatory modifications may influence a bank's profitability and, by extension, its ROAA. To
comply with heightened capital requirements, banks might need to secure additional capital,
potentially diluting earnings per share and affecting the return on assets. Additionally, the more
stringent liquidity requirements may necessitate banks to hold increased amounts of liquid assets,
potentially impacting their overall return on assets. In summary, although ROAA itself is not
directly tied to Basel III, the regulatory framework introduced by Basel III can affect a bank's
profitability and, consequently, its ROAA through the requirements related to capital, liquidity,
and risk-weighted assets.

Return on Average Equity (ROAE)

Years 2014 2015 2016 2017 2018 2019

ROAE 14.24% 14.45% 8.75% 10.61% 10.12% 8.20%

 ROAE
16.00%

14.00%

12.00%

10.00%

8.00%

6.00%

Return 4.00%
on Equity (ROAE): Return on Equity is a profitability metric that evaluates the profits
generated by a business in comparison to the value of its shareholders' equity. Calculated as Net
2.00%
Income divided by Shareholders' Equity, ROAE is expressed as a percentage. A higher ROAE
0.00%
signifies superior profitability,
2014 while
2015 a lower 2016
ROAE indicates
2017 lower profitability.
2018 2019

Per Year Interpretation:

 In 2014, the ROAE was 14.24%, signifying a notably high level of profitability relative
to the average shareholders' equity.
 2015 witnessed a decline in ROAE to 14.45%, although the bank sustained a reasonably
profitable position.
 The ROAE further decreased to 8.75% in 2016, indicating a continued decline in
profitability concerning the average shareholders' equity.
 A substantial drop to 10.61% occurred in 2017, suggesting a significant decline in
profitability and a challenging period for the bank.
 The ROAE rebounded to 10.12% in 2018, showcasing improvement from the previous
year; however, the bank's profitability remained relatively lower compared to 2014 and
2015.
 In 2019, the ROAE decreased slightly to 8.20%. Although stability was maintained, the
bank's profitability did not recover significantly from the previous year.
Overall, the findings indicate a mixed performance in terms of profitability over the years. An
initial period of relatively higher profitability in 2014 and 2015 was followed by a decline in
subsequent years.

Capital and Basel III impact

The Return on Average Equity (ROAE) and Basel III regulations in banking finance are
connected in the sense that Basel III introduces capital adequacy requirements that can indirectly
impact a bank's ROAE. Basel III requires banks to maintain a minimum level of capital relative
to their risk-weighted assets (RWA). This means that banks need to set aside more capital to
cover potential losses arising from risky assets. As a result, the denominator of the ROAE
equation (average shareholders' equity) may increase due to higher capital requirements,
potentially leading to a lower ROAE. The overall objective of Basel III regulations is to
strengthen the stability and resilience of the banking system. While these regulations can impact
a bank's ROAE through increased capital requirements and changes in risk-weighted assets, it is
important that the exact impact may vary depending on the specific circumstances and risk
profiles of individual banks.

Total Capital to Risk Weighted Assets Ratio

Year 2014 2015 2016 2017 2018 2019

RARWA 1.50% 1.40% 0.82% 0.95% 0.94% 0.81%

 Ratio
1.60% 1.50%
1.40%
1.40%

1.20%

1.00% 0.95% 0.94%

0.82% 0.81%
0.80%

0.60%

0.40%

0.20%

0.00%
2014 2015 2016 2017 2018 2019

Ratio

Return on Average Risk Weighted Assets (RARWA): RARWA is a crucial metric linked to a
bank's capital and profitability. This ratio assesses the return a bank achieves on its risk-weighted
assets, calculated by dividing the net income by the average risk-weighted assets. A higher
RARWA suggests the bank is generating more income relative to its risk-weighted assets,
indicating better profitability given the level of risk. Conversely, a lower RARWA implies less
income generated in relation to the risk exposure.

Per Year Interpretation:

 In 2014, the RARWA was 1.50%, signifying a positive profitability level relative to the
risk-weighted assets and a return of 1.50% on average.
 2015 saw a decrease in RARWA to 1.40%, indicating a decline in profitability compared
to the previous year but still reflecting a relatively positive return considering the risk-
weighted assets.
 The RARWA further declined to 0.82% in 2016, suggesting a continued decrease in
profitability relative to the bank's risk-weighted assets and a diminished ability to
generate returns on risk exposure.
  In 2017, the RARWA dropped significantly to 0.95%, indicating substantial challenges in
profitability and the bank's struggle to generate returns on its risk-weighted assets.
 The RARWA increased to 0.94% in 2018, representing a modest recovery in generating
returns on risk-weighted assets, although profitability remained relatively low compared
to earlier years.
 In 2019, the RARWA remained stable at 0.81%, indicating that the bank's profitability
stabilized at a similar level to the previous year, with a moderate return on risk-weighted
assets.
 Overall, the findings suggest fluctuations in the bank's profitability relative to its risk-
weighted assets over the years. The decline from 2014 to 2017 indicates challenges in
generating returns, while the slight recovery in subsequent years indicates some
improvement.

Capital and Basel III impact

Return on Average Risk Weighted Assets (RARWA) is indeed related to Basel III in banking
finance. Basel III introduces standardized approaches and internal ratings-based (IRB)
approaches for calculating risk weights assigned to different types of assets based on their credit
risk, market risk, and operational risk. The risk weights assigned to each asset class are
multiplied by the respective asset values to calculate risk-weighted assets. The calculation
methodology directly influences the denominator of the RARWA ratio. Basel III prescribes
minimum capital requirements for banks to ensure they have sufficient capital to absorb losses
and maintain financial stability. The RARWA ratio, which considers the return on risk-weighted
assets, helps assess the bank's ability to generate profits relative to the capital deployed. Basel III
emphasizes the importance of robust risk management practices and encourages banks to align
their risk-taking activities with capital allocation decisions. RARWA serves as a performance
measurement tool that enables banks to evaluate the effectiveness of their risk management
strategies and the returns generated on risk-weighted assets. Basel III ensures that banks maintain
an appropriate level of capital in proportion to their risk exposure. RARWA, as a profitability
ratio, helps assess how effectively banks utilize their capital in generating returns while
considering the risks associated with their assets.

Net Interest Margin (NIM)

Year 2014 2015 2016 2017 2018 2019

NIM 2.02% 1.48% 2.03% 2.49% 3.15% 3.96%

NIM
4.50%
3.96%
4.00%

3.50%
3.15%
3.00%
2.49%
2.50%
2.02% 2.03%
2.00%
1.48%
1.50%

1.00%

0.50%

0.00%
2014 2015 2016 2017 2018 2019

Net Interest Margin (NIM): NIM is a financial metric indicating the difference between a
bank's interest income and its interest expenses, presented as a percentage of its interest-earning
assets. This metric serves as an indicator of the profitability derived from a bank's core lending
and investment activities. A higher NIM implies a larger spread between interest income and
expenses, suggesting stronger profitability in interest-related activities. (5)
Per Year Interpretation:

 2014: The NIM is 2.02%, indicating that the bank's net interest income is 2.02% of its
interest-earning assets.
 2015: The NIM for this year is 1.48%, reflecting a slight decrease compared to the
previous year.
 2016: With a NIM of 2.03%, the metric remains relatively stable compared to the
previous year.
 2017: The NIM for this year is 2.49%, showing a decrease compared to the previous
years, signifying a decline in the bank's net interest income as a percentage of its interest-
earning assets.
 2018: The NIM for this year is 3.15%, continuing the downward trend from the previous
years.
 2019: The NIM for this year is 3.96%, representing the lowest value in the given period
and indicating a significant decline in the bank's net interest income as a percentage of its
interest-earning assets.

Overall, the NIM findings demonstrate a declining trend, reflecting challenges in maintaining or
improving the bank's profitability from its interest-earning activities.

Capital and Basel III Impact:

The Basel III framework in banking regulation doesn't explicitly dictate a specific relationship
between Net Interest Margin (NIM) and its requirements. However, there are indirect
connections as Basel III regulations impact various aspects of a bank's operations that can
influence its NIM. The framework introduces stricter capital requirements, including higher
minimum capital ratios and additional buffers, which can affect a bank's ability to generate
interest income and, consequently, its NIM.