finance finance mbl final finished by mfm

8/3/2019 Finance Finance MBL Final Finished by MFM

1/40

ASA UNIVERSITY BANGLADESH

AssignmentOn

Ratio Analysis of Mercantile Bank Limited

Course title: Principles of Financial

Course Code: FIN-214

Submitted to:

Mohd. Takdir Hossan

Course Instructor

Faculty of Business Studies

ASA University Bangladesh

Submitted by

Name ID Section Semester

071-12-320 Summer-2010

071-12-320 Summer-2010

071-12-320 Summer-2010

071-12-320 Summer-2010

071-12-320 Summer-2010

Date of Submission: August 31, 2010


2/40

Acknowledgement

On behalf of the Board of Directors, I wish to extend our sincere gratitude to all of our

valued shareholders who have over the years supported us in our quest to take MercantileBank to greater heights of achievement and success. I also intend to thanks our valued

clients for their continuous support. The confidence that the shareholders and clients have

on us has always been the source of our strength and inspiration.

We are thankful to the Government of the People's Republic of Bangladesh, Governor of

the Bangladesh Bank, Securities and Exchange Commission, Dhaka Stock Exchange,

Chittagong Stock Exchange, our respected Shareholders, valued Customers, Patrons and

Well-wishers for keeping their faith and trust on us to move forward.

Finally, I wish to thank all my colleagues in the Board for their important contribution to

the Bank's strategic thinking and most for their strong leadership in view of the current

operating environment. Their relentless support and commitment during the year were

invaluable. I also appreciate the Management Team and the dedicated Staff Members of

the Bank for their untiring commitment, loyalty and sincerity to the Bank.

We believe Mercantile Bank Limited is in great shape and well poised to meet the

challenges of 2010 and beyond. We have a fine team of people, a shared set of priorities,

a proud tradition of success and are eagerly looking forward to another year of success.

2


3/40

History:

Mercantile Bank Limited emerged as a new commercial bank to provide efficient

banking services and to contribute socio-economic development of the country. The Bank

commenced its operation on June 2, 1999. The Bank provides a broad range of financial

services to its customers and corporate clients. The Board of Directors consists of

eminent personalities from the realm of commerce and industries of the country.

Vision: Would make finest corporate citizen.

Mission: will become most caring, focused for equitable growth based on diversified

deployment of resources, and nevertheless would remain healthy and gainfully profitable

Bank.

Objectives:

to achieve positive Economic Value Added (EVA) each year.

to be market leader in product innovation.

to be one of the top three Financial Institutions in Bangladesh in terms of cost

efficiency.

to be one of the top five Financial Institutions in Bangladesh in terms of

market share in all significant market segments we serve.

to achieve 20% return on shareholders' equity or more, on average.

3


4/40

Performance of the Bank in 2009: The Year 2009 was the challenging one for the

financial sector. The incessant fall-out of international credit market due to world

economic meltdown resulting sluggish growth has put significant pressure on financial

performance of banks and financial institutions worldwide. Mercantile Bank Ltd.

Achieved continuous growth in almost all arenas of its business despite this economic

crisis, facing intensified competition of the industry. The Bank remained in financial

strong position with its continued focus on the vision of becoming country's finest

corporate citizen, providing excellent and need-based customer service.

The Bank mobilized deposits of BDT 58.30 billion as at December 31, 2009 compared to

BDT 49.54 billion, till 2008. Total loans and advances stood at BDT 48.30 billion at the

end of 2009 that was BDT 41.99 billion at the end of 2008. Import business stood at BDT60.59 billion in 2009 compared to BDT 56.53 billion in 2008. Export business stood at

BDT 46.30 billion in 2009 as against BDT 43.11 billion in 2008. The Bank collected

foreign remittance of BDT 5.06 billion in 2009 compared to BDT 4.72 billion in 2008.

In 2009, the Bank was able to make profit before Tax of BDT 1.66 billion as compared to

1.28 billion indicating 29.73% growth. Net profit attributable to shareholders stood at

BDT 807.52 million. The return on equity remained 18.80% during 2009 and Earning per

Share (EPS) stood at BDT 37.41. Non Performing Loan (NPL) ratio reduced to 2.54% in

2009 as compared to 2.86% in 2008. MBL made adequate provision against Classified

Loans which is significantly higher than last year. Adequate provision made the Bank

stronger than before. Tier-1 Capital stood at BDT 4.24 billion at the end of 2009

compared to that of BDT 3.47 billion at the end of 2008. Tier-2 Capital reached to BDT

758.91 million at the end of December 2009 as compared to that of BDT 660.29 million

at the end of 2008. Return on Assets (ROA) increased to 1.22% in 2009 from 1.10% in

2008 and Return on Equity (ROE) also increased significantly to 18.80% from 17.75% in2008. The Capital Adequacy Ratio (CAR) increased to 10.48% in 2009 as against that of

10.17% in 2008. Net Interest Margin (NIM) stood at 3.58% at the end of 2009,

suggesting a healthy growth in Net Interest Income.

4


5/40

Prospects in 2010:

The year 2010 has started with a new hope and potential. New opportunities for the

banking industry are waiting, including Mobile and Internet Banking. With a political

government in power and a strong foreign exchange reserve of more than 10 billion USD,

the hope that the congenial business atmosphere will prevail is not illusory. Political

stability is an important issue in this regard. A stable political situation boasts up the

confidence of the investors. As a result, economic activities of the country are expected to

get its momentum. This vibrant economic condition will certainly go in favor of the

banking industry. Under these circumstances, we do strongly believe that with the

patronization and co-operation of our valued clients and shareholders, our efficient and

energetic workforce would be able to achieve significant growth in 2010 and subsequent

years by capitalizing the new opportunity created in the banking sector.

Future Outlook of MBL

While the year 2010 is expected to be a tough one for the financial service sector, as the

global financial turmoil is not over and the resurgence of the world economy is sluggish.

However the Board of Directors of the Bank is optimistic about the Bank's prospects and

success in upcoming days. The Bank in 2009 achieved continuous growth almost in all

arenas of its business and the Bank is well positioned to enter into the New Year 2010

with a strong management team. In 2009 we made good progress in executing the Bank's

strategic agenda and priorities. Opportunities to further strengthen our business are

becoming increasingly evident as the environment becomes more challenging, which

presents us with a range of organic growth and acquisition opportunities. However, the

Board recognizes that the future is uncertain and that in the current environment its first

priority is to ensure that the Bank continues to maintain its strong financial position. We

do believe that continuation of our superior services, adoption of new products and

technologies, harmonious banker-customer relationship, embellishment of our human

resources with various trainings, prudent business policies, better risk management and

corporate governance system will help us to handle this challenge more efficiently.

5


6/40

Challenges in 2010 for MBL

In FY2009, Bangladesh economy experienced a moderate growth rate of 5.88%, where

target level of growth for FY2010 is 6.0%. World Bank predicted that Bangladesh

Economy would grow by 5.4% whereas Asian Development Bank (ADB) came up with

yet another projection saying that the Bangladesh economy would shrink from 5.4% to

5.2%. Bangladesh experienced adverse effects from the global downturn, primarily

through slower growth of exports and workers' remittances, and damped investment

sentiment. Still, it has maintained relatively strong expansion, reduced inflation, and kept

a current account surplus mainly with the help of huge remittance inflow. The medium-

term trajectory will depend heavily on the Government's ability to implement reforms,

which include substantially boosting budget revenue and raising infrastructure investmentin FY2010 as dampened global demand could weigh on exports and workers remittances.

With this backdrop, 2010 will be another challenging year for the financial institutions of

Bangladesh. Decline in garments and other export items, continued pressure on interest

margins, fees, commission and exchange earnings and increased provision requirement

will pose a challenge to the financial institutions during 2010 also. Sound political

environment.

Financial Product and Services

The Bank has launched a number of financial products and services since its inception.

Among these, Monthly Savings Scheme, Family Maintenance Scheme, Double Benefit

Deposit Scheme, Quarterly Benefit Deposit Scheme, 1.5 Times Benefit Deposit Scheme,

Advance Benefit Deposit Scheme, Consumer Credit Scheme, Small Loan Scheme, Lease

Finance Scheme, Overseas Employment Loan Scheme, Car Loan Scheme, Home Loan

Scheme and SME Loan have received wide acceptance among the people.

6


7/40

Deposit Products

Monthly Saving Scheme

It is our significant product; introduced to attract small savers for building up their habit

of savings and thereby build up a healthy capital base for the economy. The monthly

installments are in various sizes and one can adopt the schemes for a period of 08 years

or 10 years. Investor gets a lump sum (principal plus interest) at the maturity of the

scheme. Installment amount should be deposited within the first 10 days of each month.

The incumbent depositor can get a loan facility of maximum 80% of his deposited

amount. At the end of 2009, BDT 13.58 billion was deposited against that of BDT 9.79

billion in 2008 recording 38.71% growth in this scheme.

Monthly Benefit Deposit Scheme

Under this scheme, depositor will get a certain sum of money in each month proportion to

his/her deposit during the entire tenure. Benefit starts right from the first month of

opening an account under this scheme and continues upto five years. On maturity, the

principal amount is paid back. Objectives of this scheme are: help the retired persons for

investing their retirement benefits, create investment opportunities for Non-Resident

Bangladeshi, etc. Minimum deposited amount is BDT 50,000 or its multiples and the

tenure is Five (05) years. This scheme is also known as "Family Maintenance Deposit

Scheme (FMD)". Under this scheme total amount of BDT 1.86 billion was deposited upto

the end of 2009.

Double Benefit Deposit Scheme

Under this scheme, deposited amount will be double in a tenure of Seven and Half (7.5)

years. Minimum deposited amount should be BDT 10,000 or its multiples. Loan may be

granted up to maximum 80% of the deposited amount, but minimum principle amount

7


8/40

must be BDT 20,000. At the end of 2009 total amount of BDT 6.93 billion was deposited

under this scheme.

Quarterly Benefit Deposit Scheme

The 'Quarterly Benefit Deposit Scheme' will be maintained for a period of 3 (three) years

and the minimum amount of deposit is BDT 50,000.00 (fifty thousand) or its multiples.

Interest will be paid on quarterly basis. Benefit starts right from the first quarter of

opening the account. On maturity, principal amount will be paid back. Savings account is

needed to maintain this scheme. Loan may be granted up to maximum 80% of the forced

encashment value on the date of loan processing. During the period of continuation of

loan, quarterly benefits will be credited only to the loan account. Deposit under this

scheme increased to BDT 229.40 million in 2009 from BDT 145.35 million in 2008.

Times Benefit Deposit Scheme

Under the '1.5 Times Benefit Deposit Scheme' a deposit of minimum BDT 50,000.00

(fifty thousand) or its multiples will be received for a period of 4.25 years. On maturity,

1.5 times of the deposited amount will be paid back to the account holder. In case of

premature encashment interest will be paid on Saving A/c Rate. However, no interest

shall be paid if premature encashment takes place before expiry of 1 (one) year. Loan

may be granted up to maximum 80% of the deposited amount.

Advance Benefit Deposit Scheme

Under this Scheme, one can deposit a certain amount of money for two years. The

depositor will receive the benefit on yearly basis. The benefit amount of first year will be

received in advance at the time of deposit. On maturity, the depositor will get back the

principal amount with the benefit amount of second year. That is Interest is paid in two

phases, first phase paid initially BDT 9,500 and second phase paid BDT109,520 after

maturity against BDT 1,00,000. Loan may be granted up to maximum 70% of the

deposit. This is Also known as "Agrim Munafa Amanat Prokolpo (AMAP)". BDT 76.92

million was deposited under this scheme at the end of 2009.

8


9/40

Loan Products

Consumer Credit Scheme

Consumer Credit Scheme is one of the popular areas of collateral-free finance of the

Bank. People with limited income can avail of credit facility to buy household goods

including computer and other consumer durables. Total exposure under this scheme was

BDT 49.83 million at the end of 2009.

Small Loan Scheme

This scheme has been designed especially for the businessmen longing for credit facility

for their business and can't provide tangible securities. Total amount of BDT 15.40

million was deployed under this scheme at the end of 2009.

Lease Finance

This scheme has been designed to assist and encourage the genuine and capable

entrepreneurs and professionals for acquiring capital machinery, medical equipments,

computers, vehicle and other items. Flexibility and term and conditions of this scheme

have attracted the potential entrepreneurs to acquire equipments of production and

services and repay gradually from earnings on the basis of "Pay as you earn." Total

exposure under this scheme was BDT 356.50 million at the end of 2009.

Doctors' Credit Scheme

Doctors' Credit Scheme is designed to facilitate financing to fresh medical graduates and

established physicians to acquire medical equipments and set up clinics and hospitals and

thereby make the medical facilities upgraded and available to the mass people. BDT 7.06

million was disbursed under this scheme till the end of 2009.

9


10/40

SME Loan Scheme

Small and Medium Enterprise (SME) Loan Scheme has been introduced to provide

financial assistance to new or experienced entrepreneurs to invest in small and mediumscale industries with a comparatively low rate of interest as the same is assisted by the

Bangladesh Bank with refinancing facilities. Exposure under this scheme experienced

significant growth of 44.39% and amounting to BDT 983.39 million at 2009 end from

that of BDT 681.08 million at the end of 2008.

Personal Loan Scheme

Personal Loan Scheme has been introduced to extend credit facilities to cater the needs oflow and middle-income group for any purpose. Total Loans and Advances under this

scheme increased to BDT 364.38 million up to 2009 from that of 279.78 million at the

end of 2008.

Car Loan Scheme

Car Loan Scheme has been introduced to enable middle-income people to purchase

Cars/SUVs/Jeeps. Government and semi-government officials, employees of autonomousbodies, banks and other financial organizations, multinational companies, reputed private

organizations, teachers of recognized public and private universities and businessmen are

eligible for this loan. Total amount of BDT 201.98 million was disbursed under this

scheme up to December 2009.

Home Loan Scheme

To meet the growing need of housing for middle and lower-middle income people, MBLhas introduced Home Loan Scheme. We also support the Bangladesh Bank's Home Loan

Refinance Scheme. The Scheme will also boost up the growth of housing sector. Such

loan shall be available for purchase or construction of new apartments for self-residing

purpose.

10


11/40


12/40

Bangladesh Economy in 2009

In spite of this world economic fall down since 1930's Great Depression, Bangladesh

Economy remained resilient in 2009, attaining 5.88 % Real GDP growth in the fiscal year2008-09. Though it was the lowest growth over the last 5 years, performance of the

economy was satisfactory compared to that of other developing nations. Almost all the

macro-economic indicators showed positive trend during the period under review. Export

earnings recorded 10.12% growth and import cost augmented by 4.06% in FY2009 over

FY2008. Inflation remained at tolerable stage in the last few months of 2009. Foreign

Exchange Reserve touched US$ 10 billion in November 2009, which is a milestone for

Bangladesh Economy. The GDP growth target has been set at 5.5-6% in the current fiscal

year 2009-10 considering the depressed world economic scenario. But recent emerging

trend of inflation, declination of both Export and Import over the first 5 months of current

fiscal, sluggish domestic as well as foreign investment certainly pose evident threat

towards 6% growth target in Fiscal Year 2009-10. However, Bangladesh Bank, in its first

Monetary Policy of FY 2010 (June-January) expressed its optimism to attain 6% growth

in the mentioned time period.

Bangladesh Bank

Bangladesh Bank (BB) has been working as the central bank since the country's

independence. Its prime jobs include issuing of currency, maintaining foreign exchange

reserve and providing transaction facilities of all public monetary matters. BB is also

Bangladesh Bank (BB) has been working as the central bank since the country's

independence. Its prime jobs include issuing of currency, maintaining foreign exchange

reserve and providing transaction facilities of all public monetary matters. BB is also

responsible for planning the government's monetary policy and implementing it thereby.

The BB has a governing body comprising of nine members with the Governor as its

chief. Apart from the head office in Dhaka, it has nine more branches, of which two in

Dhaka and one each in Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and

Barisal.

12


13/40

SERVICES (Accounts, FDR, PDS, Deposit Scheme)

Current Account

Generally this sort of account opens for business purpose. Customers can withdraw

money once or more against their deposit. No interest can be paid to the customers in this

account. If the amount of deposit is below taka 1,000 on an average the bank has

authority to cut taka 50 from each account as incidental charge after every six months.

Against this account loan facility can be ensured. Usually one can open this account with

taka 500. One can open this sort of account through cash or check/bill. All the banks

follow almost the same rules for opening current account.

Savings Bank Account

Usually customers open this sort of account at a low interest for only security. This is

also an initiative to create people's savings tendency. Generally, this account is to be

opened at taka 100. Interest is to be paid in June and December after every six months. If

money is withdrawn twice a week or more than taka 10,000 is withdrawn (if 25% more

compared to total deposit) then interest is not paid. On an average, all the banks give

around six percent interest.

Special Services

Some Banks render special services to the customers attracting other banks.

Internet Banking

Customers need an Internet access service. As an Internet Banking customer, he will be

given a specific user ID and a confident password. The customer can then view his

account balances online. It is the industry-standard method used to protect

communications over the Internet. To ensure that customers' personal data cannot be

accessed by anyone but them, all reporting information has been secured using Version

and Secure Sockets Layer (SSL).

Home Banking

Home banking frees customers of visiting branches and most transactions will be

automated to enable them to check their account activities transfer fund and to open L/C

sitting in their own desk with the help of a PC and a telephone.

13


14/40

Electronic Banking Services for Windows

Electronic Banking Service for Windows (EBSW) provides a full range of reporting

capabilities, and a comprehensive range of transaction initiation options. The customers

will be able to process all payments as well as initiate L/Cs and amendments, through

EBSW. They will be able to view the balances of all accounts, whether with Standard

Chartered or with any other banks using SWIFT. Additionally, transactions may be

approved by remote authorization even if the approver is out of station.

Automated Teller Machine (Atm)

Automated Teller Machine (ATM), a new concept in modern banking, has already been

introduced to facilitate subscribers 24 hour cash access through a plastic card. The

network of ATM installations will be adequately extended to enable customers to non-

branch banking beyond banking.

Tele Banking

Tele Banking allows customers to get access into their respective banking information 24

hours a day. Subscribers can update themselves by making a phone call. They can

transfer any amount of deposit to other accounts irrespective of location either from home

or office.

14


15/40

Mercantile Bank Limited

Performance Analysis

Related Items

Items 2007

(ml TK)

2008

(ml TK)

2009

(ml TK)

Current Asset 29160.93 21605 24348.69

Current Liabilities 28454.4 17280.4 19361.31

Total Debt 42011.23 52311.39 61870.26

Net- Profit before Tax 1385.14 1581.51 1911.70

Net-Profit After Tax 540.50 615.88 807.52

Earning before interest & Tax 3686.41 5106.00 6066.17

Interest 3159.29 4045.97 4755.90

Total Assets 44940.54 55928.72 66166.52

Market price per share of common stock 415.61 348.25 395.00

No. of shares outstanding 14988.98 17986.78 21584.13

Fixed Asset 593.20 683.00 1032.83

Total Shareholders Equity 2929.30 3470.09 4296.25

15


16/40

Current Assets &

Current Liabilities Calculation

(BDT in Million)

Current AssetsBDT inMillion

2007 2008 2009

Cash 3717.35 4374.12 4790.15

Balance with other Banks and FIs 209.2 327.91 1017.87

Money at call & short term otice 520

Short term Investment


17/40

2007

Liquidity and Funding

1. Current Ratio=Current Asset/ Current Liabilities

=29160.93/28454.4

=1.02483:1

2. Quick Ratio= Current Asset/ Current Liabilities

=29160.93/28454.4

=1.02483:1

Leverage

1. Debt Ratio=Total Debt/ Total Asset

= 42011.23/44940.54*100

=93.48

2. Debt Equity Ratio= Total Debt/ Total Equity=42011.23/2929.30

=14.34173011

3. Times Interest Earned Ratio=EBIT/Interest Charges

=3686.41/3159.29

=1.166847614

4. Fixed Charged Coverage= Earning before interest & Tax/ Interest

=3686.41/3159.29

=1.166847614

Since there is no Lease payment, the Fixed Charged Coverage is the same as Times

Interest Earned Ratio.

17


18/40

Profitability

1. Net Profit Margin= NOI/ Earning before interest & Tax

=540.49/3686.41*100

=14.66169

2. Return on Asset=NOI/Total Asset

=540.50/44940.54*100

=1.20%

3. Return on Equity=NOI/ Common Equity

=540.50/2929.30*100

=18.45%

4. Earning Per Share=NOI/ No. of Shares

=540499295/14988980

=36.06

Market

1. Price Earning Ratio=Market price per share of common stock/ EPS

= 415.61/36.06

=12 times (Approximately)

2. Book value Per Share =Common stock equity/ No. of shares outstanding

=2929303879/14988980

=195.4305

3. Market/Book value ratio=Market Price per share/Book value per share

=415.61/195.43

= 2.126643811

18


19/40

2008



=21605/17280.4

= 1.2502604:1

2. Quick Ratio= Current Asset/ Current Liabilities

=21605/17280.4

= 1.2502604:1

Leverage


=52311.39/55928.72*100

=93.53%

2. Debt Equity Ratio= Total Debt/ Total Equity

= 52311.39/3470.09 =15.07:1

3. Times Interest Earned Ratio=EBIT/Interest Charges=5106.00/4045.97

=1.26


=5106.00/4045.97

=1.26



19


20/40

Profitability


=615.88/5106.00*100

=12.061888


=615.88/55928.72*100

=1.10%


=615.88/3470.09*100

=17.75%


=615883381/17986780

=34.24

Market


=348.25/34.24


2. Book value Per Share =Common stock equity/ No. of shares outstanding

=3470093732/17986780

=192.92


=348.25/192.92

=1.8051524

20


21/40

2009



=24348.69/19361.31

= 1.257595:1

2. Quick Ratio= Quick Asset/ Current Liabilities

=24348.69/19361.31

= 1.257595:1

Leverage


=61870.26/66166.52*100

=93.5069

2. Debt Equity Ratio= Total Debt/ Total Equity

=66166.52/4296.25

=15.401

3. Times Interest Earned Ratio=EBIT/Interest Charges

=6066.17/4755.90

=1.2755


=6066.17/4755.90

=1.2755



21


22/40

Profitability


=807.52/6066.17*100

=13.31186


=807.52/66166.52*100

=1.22%


=807.52/4296.25*100

=18.80%


=807516869/21584130

=37.41

Market


= 395.00/37.41


2. Book value Per Share=Common stock equity/ No. of shares outstanding

=4296251741/21584130

=199.05


=395/199.05

=1.984426

22


23/40

Trend Analysis

Liquidity & Funding

2007 2008 2009

Current Ratio 1.02:1 1.25:1 1.25:1

Current Ratio

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2007 2008 2009

Year

Rati Current R

2007 2008 2009

Quick Ratio 1.02483 1.2502604 1.257595

Quick Ratio

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2007 2008 2009

Year

Rati

Quick Ratio

23


24/40

2007 2008 2009

Liquidity & Funding:Current Ratio 1.02483 1.25026 1.2576

Quick Ratio 1.02483 1.25026 1.2576

Total liquidity & Funding

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2007 2008 2009

Year

Rati

Liquidity & Funding:

Current Ratio

Quick Ratio

Interpretation & Comments on Liquidity & Funding: Since Mercantile Bank Limited

is a Banking financial institution; there are no inventories in the institution. For this

reason the current ratio and quick ratio are MBL increases its capacity in 2007 and after

that year its current and quick ratios are increased in every year. MBLs quick liability

payment capacity is very strong in every year and basically its trend of quick ratio is

satisfactory, but on the other hand companys current liability payment ability is not very

strong because it has near about one and something assets for meeting its short term

current liabilities. So this position is not satisfactory for a bank and it has to increase its

ability of paying and meeting its short term liability by increasing its current assets

portion. We know the standards for current ratio is 2:1, but the current ratios of MBL are

below the standard line. On the other hand standard level for quick ratio is 1:1 and the

quick ratios of MBL are belonging in the standard line. So current assets should be

increased or current liabilities should be decreased for increasing the level of current

ratio.

Leverage

24


25/40

2007 2008 2009

Debt Ratio 93.48181 93.53225 93.5069

Debt Ratio

93.45

93.46

93.47

93.48

93.49

93.5

93.51

93.52

93.53

93.54

2007 2008 2009

Year

Ratio

Debt Ratio

2007 2008 2009

Debt Equity 14.34173 15.074938 15.40099

Debt Equity

13.8

14

14.2

14.4

14.6

14.815

15.2

15.4

15.6

2007 2008 2009

Year

Ratio

Debt Equity

25


26/40

2007 2008 2009

Times Interest

Earned Ratio 1.166848 1.2619965 1.275504

Time interes

1.1

1.12

1.14

1.16

1.18

1.2

1.22

1.24

1.26

1.28

1.3

2007 2008 2009

Year

Ratio Times Interest

Earned Ratio

2007 2008 2009

Fixed Charged

Coverage 1.166848 1.2619965 1.275504

Fixed charge

1.1

1.12

1.14

1.16

1.18

1.2

1.22

1.24

1.26

1.28

1.3

2007 2008 2009

Year

Ratio Fixed Charged

Coverage

26


27/40

Leverage:2007 2008 2009

Debt Ratio 93.4818 93.5322 93.5069Debt Equity 14.3417 15.0749 15.401

Times Interest Earned Ratio 1.16685 1.262 1.2755

Fixed Charged Coverage 1.16685 1.262 1.2755

Liverage

0

500

1000

15002000

2500

Year

2007 2008 2009

0 93.4818 93.5322 93.5069

0 14.3417 15.0749 15.401

0 1.16685 1.262 1.2755

0

Leverage:

Interpretation & Comments:

Debt ratio measure the proportion of total assets financed by the firms creditors. Trend

of debt equity ratio is belongs near about 14 to 15 times. That indicates debt financing

were 14 to 15 times higher than equity financing. So this trend and this position are not

very good condition for a bank because it also discourages new creditors to lend their

money to MBL. This trend is increasing in each year but it should be improved by theMBL by financing more shareholders equity. Trend of Times Interest Earned Ratio is not

satisfactory for the organization because it earned near about one and something more

from the amount that they have to pay as interest. We said earlier that MBLs have big

amount of debt capital. For this reason they have to pay big amount of money as interest

charged by the creditors. MBLs follow this structure for getting tax deductibility. But

27


28/40

they have to a big amount for interest charging by the creditors. So, trend of Times

Interest Earned Ratio should be increased either by decreasing debt capital or by

increasing earning volume of the organization. Since there is no Lease payment, the

Fixed Charged Coverage is the same as Times Interest Earned Ratio. So, overall leverage

ratio shows that MBL finances their capital fund by debt financing most for getting tax

deductibility from the government. But at the same time they should consider the

creditors view point toward the more debt financing organization. So overall leverage

ratio and its trend are moderate satisfactory and should be improved and should be

modified by the management and the owners of the MBL.

Profitability:

2007 2008 2009

NPM 14.66169 12.061888 13.31186

NPM

0

2

4

6

8

10

12

14

16

2007 2008 2009

Year

Valu

NPM

28


29/40

2007 2008 2009

ROE 18.45151 17.748243 18.79593

ROE

17.2

17.4

17.6

17.8

18

18.2

18.4

18.6

18.8

19

2007 2008 2009

Year

Value

ROE

2007 2008 2009

EPS 36.05978 34.240891 37.41253

29

EPS

32

33

34

35

36

37

38

2007 2008 2009

Year

Value

EPS


30/40

2007 2008 2009

ROA 1.2027 1.1011874 1.220436

Profitability:

2007 2008 2009

NPM 14.6617 12.0619 13.3119

ROE18.4515 17.7482 18.7959

EPS 36.0598 34.2409 37.4125

ROA 1.2027 1.10119 1.22044

Profitability

0

5

10

15

20

25

30

35

40

NPM ROE EPS ROA

Year

Value 2007

2008

2009

30

ROA

1

1.05

1.1

1.15

1.2

1.25

2007 2008 2009

Year

Value

ROA


31/40

Interpretation and Comments: NPM measures the percentage of each sales dollar

remaining after all costs and expenses, including interest, taxes, and preferred stock

dividends, have been deducted. The higher the NPM the better will be the condition of

the firm. MBLs NPM ratio trend shows that NPM decreased unto 2008 from 2007 and

again increase in 2009. So NPM condition of MBL is satisfactory. Return on equity

measures the return earned on the stockholders investment in the firm. Generally the

higher the rate of ROE the better will be the condition of the firm. MBLs ROE trend is

deceasing in year to year. That indicates earning rate from MBLs is decreasing that

dissatisfy the owners to invest in the firm. We know the standard level for ROE is 10% to

15% and in this case the condition of MBLs is satisfactory for providing return to their

shareholders. ROA measures the overall effectiveness of management in generating

profit with its available assets. The rate of ROA of MBL is not satisfactory.

Market

2007 2008 2009

Price Earning Ratio 12 times 10 times 11 times

Price Earning Ratio

9

9.5

10

10.5

11

11.5

12

12.5

Price Earning Ratio

Price Earning

Ratio

12 10 11

2007 2008 2009

31


32/40

2007 2008 2009

BV 195.4305 192.92468 199.0468

BV

189

190

191

192

193

194

195

196

197

198

199

200

2007 2008 2009

Year

Valu

BV

2007 2008 2009

MBV 2.126643811 1.8051524 1.984426

MBV

1.6

1.7

1.8

1.9

2

2.1

2.2

2007 2008 2009

Year

Valu MBV

32


33/40

Market:2007 2008 2009

Price Earnings Ratio(times) 12 10 11BV 195.431 192.925 199.047

MBV 2.126643811 1.8051524 1.984426

Market

0

500

1000

1500

2000

2500

Market:

Price

Earnings

Ratio(times)

BV

MBV

Year to year(2007-09)

Values Series1

Series2

Series3

Interpretation and Comments: Price Earning Ratio (times) measures the amount that

investors are willing to pay for each dollar of a firms earnings, the higher the P/E ratio

the greater is investor confidence. The level of P/E ratio indicates the degree of

confidence that investors have in the firms future performance. Price Earning Ratio of

MBL is satisfactory in each year. MBV provides an assessment of how the investors view

the firms performance. Firms expected to earn high returns relative to their risk

typically sell at higher M/B multiple. It relates the market value of the firms shares to

their book- strict accounting value. Market to Book value ratio is satisfactory for MBL.

So, overall market ratios of MBL are also satisfactory.

33


34/40

Highlights of all Ratios

2007 2008 2009

Liquidity &Funding:

Current Ratio 1.02483 1.25026 1.257595

Quick Ratio 1.02483 1.25026 1.257595

Leverage:Debt Ratio 93.48181 93.53225 93.5069

Debt Equity 14.34173 15.07494 15.40099

Times Interest

Earned Ratio 1.166848 1.261997 1.275504

Fixed Charged

Coverage 1.166848 1.261997 1.275504

Profitability:NPM 14.66169 12.06189 13.31186

ROE 18.45151 17.74824 18.79593

EPS 36.05978 34.24089 37.41253

ROA 1.2027 1.101187 1.220436

Market:

Price Earning Ratio (times) 12 10 11

BV 195.4305 192.9247 199.0468

MBV 2.126643811 1.80515 1.98443

Final Comments: Overall Performance of MBL is satisfactory.

34


35/40

Appendix

Balance Sheet

Mercantile Bank LimitedBalance Sheet as at December 31, 2009

PROPERTY AND ASSETS

Notes

2009

(BDT)

2008

(BDT)

Cash 3 4,790,155,210 4,374,119,340

Cash in hand (Including Foreign Currencies) 498,486,173 443,342,558

Balance with Bangladesh Bank and Sonali Bank Limited

(Including Foreign Currencies)

4,291,669,037 3,930,776,782

Balance with Other Banks and Financial Institutions 4 1,017,865,437 3 27,911,508

In Bangladesh 764,122,864 177,928,388

Outside Bangladesh 253,742,573 149,983,120

Money at Call and Short Notice 5Investments 6 9,664,722,134 6,264,705,100

Government 9,175,729,563 5,681,107,430

Others 488,992,571 583,597,670

Loans and Advances 7 48,295,546,954 43,419,362,481

Loans, Cash Credit, Overdraft etc. 7.A 44,574,237,307 38,787,868,658

Bills Purchased and Discounted 7.B 3,721,309,647 4,631,493,823

Fixed Assets Including Premises, Furniture and Fixtures 8 1,032,825,043 682,999,856

Other Assets 9 1,365,400,824 859,623,164

Non-Banking Assets - -

Total Assets 66,166,515,602 55,928,721,449

LIABILITIES AND CAPITAL

Liabilities

Borrowings from other Banks, Financial Institutions and

Agents

10 1,842,825,721 2,326,325,000

Deposits and other Accounts 11 55,553,083,656 46,374,178,835

Current Accounts and Other Accounts 11.1 7,425,229,434 5,831,638,360

Bills Payable 11.2 789,044,669 677,763,825

Savings Bank Deposits 11.3 4,392,947,478 3,020,870,440

Fixed Deposits 11.4 19,215,499,453 17,501,418,866

Deposits Under Schemes 11.5 23,730,362,622 19,342,487,344

Other Liabilities 12 4,474,354,484 3,758,123,882

Total Liabilities 61,870,263,861 52,458,627,717

Capital/ Shareholders' Equity

Paid-up Capital 13.1 2,158,413,400 1,798,677,900Statutory Reserve 14 1,555,373,902 1,222,833,902

Other Reserves 15 105,410,663 86,769,523

Surplus in Profit & Loss Account 16 477,053,776 361,812,407

Total Shareholders' Equity 4,296,251,741 3,470,093,732

Total Liabilities and Shareholders' Equity 66,166,515,602 55,928,721,449

OFF BALANCE SHEET ITEMS

CONTINGENT LIABILITIES A

Acceptances and Endorsements 17 8,054,757,500 8,157,477,000

35


36/40

Letters of Guarantee 17.1 4,161,302,647 3,640,902,808

Irrevocable Letters of Credit 17.2 8,546,632,687 7,281,346,277

Bills for Collection 17.3 56,785,690 73,305,882

Other Contingent Liabilities 17.4 937,694,607 764,829,154

Total 21,757,173,131 19,917,861,121

Other Commitments B

Documentary credits and short term trade related transactions

Forward assets purchased and forward deposits placed

Undrawn note issuance and revolving underwriting facilities

Undrawn formal standby facilities, credit lines and other

commitments

Total

Total Off-Balance Sheet Items Including Contingent

Liabilities (A+B)

21,757,173,131 19,917,861,121

These Financial Statements should be read in conjunction with the annexed notes (1 to 38)

36


37/40

Profit and Loss Account

For the year ended December 31, 2009

Notes 2009 (BDT) 2008 (BDT)

Interest Income 18.1 6,066,171,939 5,106,008,463

Less : Interest Paid on Deposits, Borrowings etc. 19 4,755,901,859 4,045,970,142Net Interest Income 1,310,270,080 1,060,038,321

Investment Income 18.4 696,663,198 520,333,916

Commission, Exchange and Brokerage 20 1,059,887,629 917,199,841

Other Operating Income 21 425,089,853 333,960,039

2,181,640,680 1,771,493,796

Total Operating Income 3,491,910,760 2,831,532,117

Salaries and Allowances 23 807,198,037 611,587,111

Rent, Taxes, Insurance, Electricity, etc. 24 184,168,069 155,724,646

Legal Expenses 25 7,994,350 5 ,045,236

Postage, Stamps, Telecommunication etc. 27,205,921 27,045,459

Stationery, Printings, Advertisements etc. 26 82,341,385 6 3,499,399

Chief Executive's Salary and Fees 23.1 6,450,000 6 ,450,000

Directors' fees 22 4,055,400 2 ,163,600

Auditors' Fees 709,000 500,000

Depreciation & Repair of Fixed Assets 27 96,423,954 74,617,737

Other expenses 28 363,666,775 303,383,441

Total Operating Expenses 1,580,212,891 1,250,016,629

Profit before Provision 1,911,697,869 1,581,515,488

Provision against Classified Loans 12.5 159,621,000 117,958,107

Provision against Unclassified Loans 12.5 80,300,000 77,174,000

Other Provisions 12.5 9,000,000 104,700,000

Total Provisions 248,921,000 299,832,107

Total Profit before Taxes 1,662,776,869 1,281,683,381

Provision for Taxation 12.4 855,260,000 665,800,000

Net Profit after Taxation 807,516,869 615,883,381

Retained Surplus brought forward from previous year 2,076,907 2,266,026

809,593,776 6 18,149,407

Appropriations

Statutory Reserve 332,540,000 256,337,000

Retained Surplus 477,053,776 361,812,407

809,593,776 618,149,407

Earning Per Share (EPS) 29 37.41 28.53


Financial HighlightsHighlights for the year 2009 and 2008 (BDT in millions)

SL NO. PARTICULARS 2009 2008

1 Paid-up Capital 2,158.42 1,798.68

2 Total Capital Fund 4,995.43 3,387.17

37


38/40

3 Capital Surplus/Deficit 226.86 120.41

4 Total Assets 66,166.52 55,928.72

5 Total Deposits 58,033.47 49,538.35

6 Total Loans and Advances 48,295.55 43,419.36

7 Total Contingent Liabilities and Commitments 21,757.17 1 9,917.86

8 Credit Deposit Ratio (in %) 83.22 87.65

9 Percentage of Classified Loans against Total

Loans and Advances (in %)

2.59 2.96

10 Profit after Tax and Provision 807.52 615.88

11 Amount of Classified Loans during the year 261.24 348.47

12 Provision kept against Classified Loans 629.70 5 78.20

13 Provision Surplus 1.09 -14 Cost of Fund (in %) 8.81 9.19

15 Interest Earning Assets 57,471.28 4 9,941.85

16 Non-interest Earning Assets 8,695.24 5,986.87

17 Return on Investments (ROI) (in %) 8.75 10.46

18 Return on Assets (ROA) (in %) 1.22 1.10

19 Income from Investments 696.66 520.33

20 Earning Per Share (BDT) 37.41 28.53

21 Net Income Per Share (BDT) 37.41 28.53

22 Price Earning Ratio (approximate) 11 Times 12 Times

38


39/40

CASH FLOW STATEMENT

Mercantile Bank Limited

For the year ended December 31, 2009

2009 (BDT) 2008 (BDT)

A. Cash Flows From Operating ActivitiesInterest Received 6,539,977,880 5,423,137,314

Interest Paid (4,154,550,199) (3,424,865,486)

Fees and Commission Received 488,656,221 459,036,752

Payment to the Employees (807,198,037) (486,587,111)

Payment to suppliers (82,233,119) (63,499,399)

Income Tax Paid (687,994,874) (638,616,891)

Received from other operating activities 1,001,161,940 788,994,91

Exchange Gain 571,157,810 458,155,089

Other Operating Income 430,004,130 330,839,823

Payment for other operating activities (607,226,990) (386,477,514)

Rent, Taxes, Insurances and Electricity (181,530,859) (154,613,531)

Legal Expanses (7,994,350) (5,045,236)

Postage, Stamps and Telecommunication (26,386,862) (27,045,459)

Auditors' Fees ( 709,000) (500,000)

Repair and Maintenance (16,433,744) (11,329,772)

Chief Executive's Salary and Fees (6,450,000) (6,450,000)

Directors' Fees (4,055,400) (2,163,600)

Other Expenses (363,666,775) (179,329,916)

Operating profit before changes in Operating Assets and

Liabilities

1,690,592,822 1,671,122,577

Increase / Decrease in Operating Assets and Liabilities

Loans and Advances to other Banks - -

Loans and Advances to Customers (4,674,471,704) (5,316,085,710)

Other Assets (Item-wise) (375,768,145) (325,165,611)Advance Deposits ( 138,572) (1,000,588)

Stock of Stationery (3,349,021) (10,414,961)

Suspense Account (246,553,307) (23,985,407)

Stamps in Hand (98,143) (881,385)

Advance Rent (56,804,386) (88,559,508)

Excise Duty - 42,400

Clearing Adjustment - -

DD paid without advice (5,687,684) (240,000)

Premium on Bond ( 907,421) -

Mercantile Bank General Account - -

Adjusting Account Debit (62,229,611) (200,126,162)

Deposit from other Banks (483,499,279) 1,552,075,000

Deposit from Customers 9,780,256,481 4,194,277,066Other Liabilities on account of Customers - -

Other Liabilities 1,858,866,802 26,251,607

Net Cash Received from Operating Activities 7,795,976,977 1,802,474,929

B. Cash Flows From Investing Activities

Sale proceeds of Fixed Assets - 501,877

Dividend Received 7,590,576 2,457,119

Purchase/Sale of Property, Plant and Equipment (269,834,977) (154,376,501)

Purchase/Sale of Shares (148,225,421) 215,272,192

39


40/40

Other Investment activities (2,784,895,223) (805,427,081)

Net Cash from Investing Activities (3,195,365,045) (741,572,394)

C. Cash Flows from Financing Activities

Receipts from Issue of Loan Capital & Debt Securities - -

Paid for Repayment of Loan and Debt Securities - -

Received by Issue of Share - -

Dividend Paid - -

Net Cash from Financing Activities - -

D Net Increase/(Decrease) of Cash and Cash Equivalent

(A+B+C)

4,600,611,932 1,060,902,535

Effect of Exchange Rate Changes on Cash & Cash Equivalent

E Opening Cash & Cash Equivalent 10,383,138,278 9,322,235,743

F Closing Cash & Cash Equivalent (D+E)* 14,983,750,210 10,383,138,278


finance finance mbl final finished by mfm

Documents