Financial Analysis of Dhaka Bank & Southeast Bank

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Financial Analysis
Of
Dhaka Bank & Southeast bank

Introduction

The banking sector in Bangladesh comprises of four categories of scheduled banks. These are, nationalized commercial banks (NCBs), government owned development finance institutions (DFIs), private commercial banks (PCBs) and foreign commercial banks (FCBs). As of December 2004, total number of banks operating in Bangladesh remained unchanged at 49. These banks have a total number of 6,303 branches including 10 overseas branches. Structure of the banking sector with breakdown by type of banks.

In 2004, the nationalized commercial banks (NCBs) held 39.6 percent of the total industry assets against 41.7 percent in 2003. Evidently, NCBs' domination in this area is showing a declining trend, while PCBs’ share rose to 43.5percent in 2004 against 40.8 percent in 2003. The foreign commercial banks held 7.2 percent of the industry assets in 2004, showing a little decrease by 0.1 percentage point over the previous year. There has been a decline in the operation of the DFIs with their shares of assets of only 9.7percent in 2004, against 10.2 percent in 2003. So from this statistics, we saw that our commercial banks are doing very good business in Bangladesh and they are playing a vital role in the society.

Objective

The broad objective of the study is to develop sound practical and theoretical understanding of the evaluation of the performance of Dhaka Bank & Southeast Bank from 2006-2009 and whether they are improving their performance or not. The specific objectives are: # Understanding the annual reports of Dhaka Bank & Southeast Bank. # Evaluate the performance analysis of Dhaka Bank & Southeast Bank.  

Profitability Ratios

Profitability Ratio:
20062007200820092006200720082009
Return on Asset1.21%1.23%1.28%1.23%1.76%1.90%2.70%1.66% Return on Equity22.80%22.50%21%19.30%18%19.9%29.3%16.51% Net Interest Margin1.99%2.8%2.8%2.7%1.9%2.4%1.6%0.9% Net Non- Interest Margin0.48%0.74%0.81%0.97%1.8%2.1%3.1%2.1% Net Operating Margin2.5%3.5%3.56%3.61%3.76%4.53%5.68%2.67% Earnings Per Share45.1736.3943.3645.0931.1142.8825.9254.64 Earning Spread2%3%3%3%2%2%1%1%

Net Profit Margin10.64%9.7%9.2%11%13.4%14.1%8.7%13.6% Tax Management Efficiency61.07%61.1%45%44.9%55.5%47.1%41.2%54.2% Expense Control Efficiency17.42%21.2%20.5%22.1%24.2%30%27.6%33.7% Asset Management Efficiency11.34%12.6%12.8%12.4%12.34%13.47%12.63%12.16% Funds Management Efficiency18.8718.3817.7915.6610.8410.4811.039.95 Operating Efficiency Ratio78.1%72.1%72.2%70.9%90.8%66.4%70.6%66.3%


Return on Assets (ROA):
Return on assets is primarily an indicator of managerial efficiency; it indicates how capable management has been in converting assets into net earnings.

ROA is calculated using the following formulae:

ROA = Net Income/ Total Assets
or
ROA= Net Interest Margin + Net noninterest margin – Special transactions affecting its net income

Profitability Ratio:
20062007200820092006200720082009
Return on Asset1.21%1.23%1.28%1.23%1.76%1.90%2.70%1.66%

Comments:
Dhaka bank was able to earn 1.21%, 1.23%, 1.28% & 1.23% of its assets during the years of 2006, 2007, 2008 & 2009 respectively. On the other hand Southeast bank earned 1.76%, 1.90%, 2.70% & 1.66% of net income by using its assets during the years of 2006, 2007, 2008 & 2009 respectively.

Return on Equity (ROE):
Return on Equity measures the rate of return flowing to shareholders. It approximates the net benefit that the shareholders have received from investing their capital in the financial firm i.e. pricing their funds at risk in the hope of earning a suitable profit. ROE is calculated using the following formulae:

ROE= Net Income/ Total Equity Capital
or
ROE= ROA X (Total...
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