The Financial Statement Analysis of Prime Bank

The Financial Statement Analysis of Prime Bank

Assignment

Submitted by Submitted to

Shaikh Reza Haider MD. KAYSHER HAMID

ID- 2223031068 ASSISTANT PROFESSOR

Batch-29th Faculty of Business Studies (FBS)

Course- Financial Institutes & Markets Bangladesh University of Professionals

 Table of Content

Serial Number Name Page Number

1 Introduction 1

2 Significance of the study 1

3 Research Objectives 1

4 Methodology 2

5 Overview 2

6 Product and Services 3

7 Analysis of Product and 4

Services

8 Recommended products & 4

services that can be offered in
Bangladesh
9 4
The Challenges

10 5
Analysis of Financial
Condition

11 Conclusion 9
12 References 9
Introduction
Established in 1995, Prime Bank stands as a prominent institution in Bangladesh's banking
sector, having steadily grown to become a key player in the country's financial landscape.
Committed to delivering comprehensive banking solutions, the bank has expanded its services
across Bangladesh while maintaining a customer-centric approach. With a vision focused on
innovation and customer satisfaction, Prime Bank offers a diverse range of financial products
and services, including retail and corporate banking, loans, investments, and cutting-edge digital
banking solutions. Embracing technological advancements, the bank strives to enhance
operational efficiency and provide a seamless banking experience for its customers. Beyond its
financial services, Prime Bank actively engages in corporate social responsibility endeavors,
contributing to community development and fostering sustainable practices. With a strong
industry presence and a track record of stable financial performance, Prime Bank continues to
uphold its commitment to ethical practices, innovation, and societal growth within Bangladesh's
banking landscape.
Significance of the study
Prime Bank's study provides a comprehensive understanding of the intricate workings, strategies,
and challenges inherent in Bangladesh's banking industry. Exploring its operations, financial
products, risk management practices, and customer engagement strategies illuminates the
broader trends and best practices within the sector. As a key financial institution, Prime Bank's
performance serves as a vital indicator of the banking sector's stability and health, directly
influencing Bangladesh's economic landscape. Analyzing its financial health, loan portfolio
quality, and market positioning helps gauge the sector's contribution to economic growth, job
creation, and financial inclusion. For investors and stakeholders, an analysis of Prime Bank's
financial performance, risk management practices, and growth strategies assists in evaluating
investment opportunities within the banking sector. Understanding customer-centric approaches
and market trends aids in aligning stakeholder expectations and identifying emerging
opportunities. In essence, studying Prime Bank offers a holistic view of the banking sector's
dynamics, encompassing economic, regulatory, social, and technological aspects. These insights
provide a foundation for informed decision-making, shaping industry practices, policies, and
strategies while contributing to Bangladesh's overall economic development and financial
stability.

Research Objectives
Profitability Analysis: Assess Prime Bank's net income trends, exploring factors influencing
profits and scrutinizing return metrics like ROA and ROE for insights into its operational
efficiency and shareholder value creation.

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Asset Quality Examination: Analyze the loan portfolio's health by evaluating NPLs, impaired
loans, and provisions made, aiming to understand the bank's risk exposure and credit
management practices.
Liquidity Review: Calculate and analyze liquidity ratios such as the Current Ratio and the Quick
Ratio to assess the bank's ability to meet short-term obligations and manage liquidity risks
effectively.

Methodology
This study is based on the published data of the listed financial institution in Bangladesh. The
main sources of data are the audited financial report of FI published in its annual reports. This
study will be based on Prime Bank Limited, the period covering from 2019-2022.

Overview
Prime Bank Limited is a prominent private commercial bank in Bangladesh. Prime Bank Limited
was established in 1995. It was founded by a group of prominent entrepreneurs led by the late
Dr. Azfar Ali, who had a vision of providing banking services that meet the needs of the
community. Prime Bank offers a wide range of banking services, including retail banking,
corporate banking, SME banking, and Islamic banking. They provide various products such as
savings and deposit accounts, loans, credit cards, remittance services, and more. The bank is also
involved in investment banking and has a presence in the capital market. Prime Bank offers
Islamic banking solutions in compliance with Shariah principles. Like many modern banks,
Prime Bank has focused on digital services, offering internet banking, mobile banking, and other
technological solutions to enhance customer convenience. The bank has implemented various
tech-driven solutions to streamline processes and improve customer experience. Prime Bank
engages in various social responsibility initiatives, including educational programs, health
camps, and community development projects. Prime Bank has been one of the leading banks in
Bangladesh in terms of financial performance, with steady growth in assets, deposits, and profits.
The bank has an extensive network of branches and ATMs across Bangladesh, catering to both
urban and rural areas. It also has correspondent banking relationships and operates in the
international arena to facilitate global transactions. Prime Bank adheres to regulatory standards
set by Bangladesh Bank and other relevant authorities. The bank follows corporate governance
principles to ensure transparency and accountability in its operations. Over the years, Prime
Bank has received recognition for its performance in various areas of banking and finance. Prime
Bank has established itself as a significant player in Bangladesh's banking sector, aiming to
provide comprehensive financial services while keeping pace with technological advancements
and maintaining a commitment to societal development.

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Product and Services
Prime Bank in Bangladesh offers a diverse range of products and services catering to various
customer segments. Here's an analysis of their key offerings:
1. Retail Banking: Savings and Deposit Accounts: Prime Bank provides various types of savings
accounts, fixed deposit schemes, and specialized deposit products catering to different customer
needs.
Retail Loans: They offer personal loans, home loans, car loans, and other retail lending products
with flexible repayment options.
2. Corporate Banking: Working Capital Financing: Prime Bank extends credit facilities for
businesses' day-to-day operational needs.
Trade Finance: Services like letters of credit, bank guarantees, and export-import financing
facilitate international trade.
Corporate Loans: Term loans and project financing are offered to corporates for expansion and
investment purposes.
3. SME Banking: Financial Support: Dedicated banking solutions tailored for small and medium-
sized enterprises (SMEs) to address their financial needs.
Advisory Services: Assistance with financial planning, guidance, and support for SMEs to grow
their businesses.
4. Islamic Banking: Shariah-Compliant Products: Prime Bank offers Islamic banking products in
compliance with Islamic principles, including savings accounts, investments, and financing.
5. Cards and Payments: Debit and Credit Cards: Prime Bank issues both debit and credit cards
with various features and benefits catering to different customer segments.
6. Digital Banking: Internet Banking: Online banking services for customers to access accounts,
transfer funds, pay bills, and more. Mobile Banking: Services accessible through mobile apps,
allowing customers to conduct banking transactions on their smartphones.
7. Investment Services: Capital Market Services: Prime Bank is involved in investment banking,
providing services related to IPOs, underwriting, and advisory services in the capital market.
Wealth Management: Services for managing investments, financial planning, and portfolio
management for high-net-worth individuals.
8. Remittance Services: Inward and Outward Remittances: Facilitation of international money
transfers, catering to both inward remittances from abroad and outward remittances for various
purposes.

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9. International Banking:
Correspondent Banking: Prime Bank maintains correspondent relationships to facilitate global
transactions and foreign trade for its customers.
Analysis of Product and Services
1. Diversified Portfolio: Prime Bank's wide array of services covers retail, corporate, SME,
Islamic banking, and international banking, aiming to cater to different customer
segments.
2. Technological Integration: The bank's emphasis on digital and mobile banking signifies
an effort to enhance convenience and accessibility for its customers.
3. Customized Solutions: Tailored products for SMEs and Islamic banking cater to specific
customer needs, reflecting a customer-centric approach.
4. International Presence: The bank's international banking services demonstrate its
commitment to facilitating global transactions and trade.
5. Market Adaptation: Continual addition of new products and services showcases the
bank's adaptability to changing market demands and technological advancements.
Prime Bank appears committed to providing comprehensive financial solutions to its customers
while adapting to the evolving needs of the market and technological advancements.

Recommended products & services that can be offered in Bangladesh

1. Monthly Investment Plan: An investor who can save a particular amount of money may
deposit the amount or more every month for a particular time. The bank may work to
prove the power of the penny-pinching approach of long term investment in
fundamentally sound stocks. With a decent double digit annual average return, the forced
savings may emerge as a large sum ultimately.
2. Capital Protected Scheme: This product for risk-averse investors can guarantee return of
the deposited capital at least even if the investment manager incurs losses. An investor
will have to deposit an exact amount for five to ten years and all the positive return will
be given to the investor after the tenure.
3. Equity Sharing Scheme: To prove the commitment for maximum efforts to ensure the
best outcome for their clients, the bank may invest some and the client may invest the rest
of the size of an investment account. Bank and the client will proportionately share the
profits or losses.

The Challenges

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 1. Customer retention: Customer retention is a significant challenge for banks, especially in
a competitive market. The bank is facing fierce competition, making it challenging to
maintain customer loyalty as customers have more options to choose from.
2. Volatility in equity market: The Dhaka Stock Exchange (DSE) in Bangladesh had a tough
year in 2022, with prolonged bearish trends due to economic challenges, manipulations,
and regulatory inaction. The DSEX, the key index of the DSE, dropped by 8.1% or 549
points in 2022, and the daily average turnover plunged by 35%.
3. Liquidity Crisis: The amount of excess liquidity in Bangladesh’s banking sector
decreased by Tk 57,707 crore to Tk 1.45 lakh crore at the end of December 2022,
compared to June 2022. The drop was due to factors such as high dollar sales by the
Bangladesh Bank, low deposit rates, growing inflationary pressure, and cash withdrawal
in the wake of loan scams.
4. Foreign remittance: The down fall of remittance is impacting the ability to manage trade
imbalances and stabilize the currency. It is leading to a reduction in deposits and
transaction volumes, affecting banks' fee-based income. The bank is facing challenges in
managing liquidity if there's a shortage of foreign currency reserves.

Analysis of Financial Condition

(a) Debt Ratio

total liabilities
Formula =
toal asset
403,289,722,879
Of fiscal year 2022 = = .93
435,460,393,490
362,139,900,334
Of fiscal year 2021 = = .92
391,875,283,332
319,820,729,674
Of fiscal year 2020 = = .91
348,293,555,291
297,137,667,620
Of fiscal year 2019 = = .91
325,071,762,234

As the debt ratio of the bank fluctuates around 90%, the bank is in higher financial risk
due to a larger proportion of debt funding.

(b) Time Interest Earned Ratio

EBIT
Formula =
Interest Expense

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 18,390,953,602
Of fiscal year 2022 = = 1.86
9,878,358,816
14,883,464,368
Of fiscal year 2021= = 2.19
6,794,530,559
15,851,900,455
Of fiscal year 2020 = = 1.53
10,348,259,152
19,888,509,277
Of fiscal year 2019 = = 1.70
11,688,044,915
Form the time interest earned ration, it can be comprehended that currently the bank is in
good financial condition and has the ability to meet interest expenses although the
situation in previous year was better.

(c) Return on asset ratio

Net income
Formula =
average total asset
4,021,849,232
Of fiscal year 2022 = = .009
433,409,661,350
3,111,025,821
Of fiscal year 2021= = .008
389,878,378,940
1,827,936,737
Of fiscal year 2020 = = .005
348,293,555,291
1327,598,170
Of fiscal year 2019 = = .004
325,071,762,234

From ROA, it can be seen that the bank is efficiency utilizing its assets to generate
profits. The ratio is getting better in each year.

(d) Return on equity

Net income
Formula = '
Average shareholde r s equity
4,021,849,232
Of fiscal year 2022 = = .12
32,304,602,512
3,111,025,821
Of fiscal year 2021 = = .10
29,888,873,023

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 1,827,936,737
Of fiscal year 2020 = = .06
28,472,825,617
1,327,598,170
Of fiscal year 2019 = = .04
27,934,094,614
As ROE is increasing in each year, it can be understood that the bank is in better
profitability and is efficient in utilization of shareholders' equity.

(e) Earnings per Share

Net income− preferred dividends

Formula =
Weighted Average Number of Common Shares Outstanding

3,994,865,356
Of fiscal year 2022 = = 3.53
1,132,283,477

3,249,616,784
Of fiscal year 2021 = = 2.87
1,132,283,477
1,797,072,599
Of fiscal year 2020 = =1.61
1,132,283,477
1,662,052,827
Of fiscal year 2019 = = 1.17
1,132,283,477

For Prime bank, the earnings per share has increased compared to previous year’s.
currently the bank earns profit of 3,53 taka for each outstanding share.

(f) Net Income Margin

Net income
Formula = × 100%
Total revenue
4,021,849,232
Of fiscal year 2022 = × 100% = 24.37%
16,501,948,655
3,111,025,821
Of fiscal year 2021 = × 100% = 20.67%
15,049,396,923
1,797,072,599
Of fiscal year 2020 = × 100% = 14.20%
12,653,040,037
1,662,052,827
Of fiscal year 2019 = × 100% = 11.76%
14,131,008,897
From the net income margin it can be seen that, currently the bank indicates better
profitability and effective cost management. In the present scenario the bank retains
24.37 taka after all the expenses for each 100 taka.

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(g) Price/Earnings Ratio
Price per share
Formula =
earning per share
19.2
Of fiscal year 2022 = = 5.4
3.53
21.5
Of fiscal year 2021 = = 7.5
2.87
17.10
Of fiscal year 2020 = = 10.62
1.61
18.20
Of fiscal year 2019 = = 15.55
1.17

The price/earning ratio has decreased over the years. This means the investors need to
invest less amount of money to gain profit.

(h) Operating Efficiency Ratio

Operating expenses
Formula = × 100%
Total revenue
7,753,887,524
Of fiscal year 2022 = × 100% = 46.98%
16,501,948,655
6,808,682,435
Of fiscal year 2021 = × 100% = 45.24%
15,049,396,923
6,943,810,376
Of fiscal year 2020 = × 100% = 54.88%
12,653,040,037
7,181,448,105
Of fiscal year 2019 = × 100% = 50.82%
14,131,008,897

From the ratio, it can be seen that, over the years the bank has spent a moderate amount
money in operating expenses for each taka of revenue generated. Currently the bank is
spending more than previous year.

(i) Nonperforming Loan Ratio

Nonperforming Loan
Formula = 100%
Total gross loan

10,132
Of fiscal year 2022 = × 100% = 3.42%
296 , 48

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 12,713
Of fiscal year 2021 = × 100% = 4.83%
263,015
8,034
Of fiscal year 2020 = ×100 %=¿ 3.46%
232,400
9,966
Of fiscal year 2019 = × 100% = 4.66%
213,955

The nonperforming loan ratio suggests that the bank is in a lower level of risk in the
bank's loan portfolio, potentially less impacting profitability and financial stability.

(j) Dividend Yield

annual dividend per share
Formula = × 100%
price per share
1.75
Of fiscal year 2022 = × 100% = 9.02%
19.2
1.50
Of fiscal year 2021 = × 100% = 8.14%
21.5
1.70
Of fiscal year 2020 = × 100% = 8.77%
17.1
1.3
Of fiscal year 2019 = × 100% = 7.42%
18.2

The present situation indicates that for each share held, an investor would receive a
dividend income equal to 9.02% of the share's current market price. The yield has
increased over the years.

Conclusion

In conclusion, it can be asserted that, Prime bank is overall in kilter. Although the debt
ratio is higher, the bank indicates a better condition for the investor. If the bank
introduces the mentioned products and schemes, it will become financially strong. All in
all, the bank is financially stable.

References

1. https://www.primebank.com.bd/annual-reports

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2. https://www.marketscreener.com/quote/stock/PRIME-BANK-PLC-6501187/
quotes/

3. https://assignmentpoint.com/problems-of-general-banking-activities-of-prime-
bank-2/

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