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Ismail Hossain

A Report On

Performance Analysis and Comparison Between Prime Bank & Southeast Bank

Course Title: Financial Institution & Markets (FIN-303)

Submitted To:Mijanur Rahman Joddar

Faculty of Business & Economics Daffodil International University

Submitted By:Group Name # IN2F

Section- B

SL No. Name ID No.01 Md. Ismail Hossain 111-11-179802 Fahaduz Zaman Remon 111-11-180203 Ali Ferdous 111-11-180304 Nazmul Haque 111-11-181305 111-11-1838

Faculty of Business & EconomicsDepartment of Business Administration

Daffodil International University

Date of Submission: 20-Apr-2013

Letter of Transmittal

April 20, 2013

Mijanur Rahman JoddarFaculty of Business & EconomicsDaffodil International University

Subject: Submission of repot on Performance Analysis and Comparison Between Prime Bank & Southeast Bank.

Dear Sir,

It is our pleasure to submit report on comparing profitability ratio between Southeast Bank & Prime Bank Limited as a part of BBA Program. We tried our best to gather relevant information for preparing a complete report by following our honorable course instructor’s instruction. Without your sincere co-operation and proper guideline, it would not possible for us to prepare the term paper. For this act of support, we are grateful to you. This term paper is not free from mistake due to some limitations.

We hope you accept it with gracious consideration.

Yours sincerely

………………………..Md. Ismail Hossain (Leader)On behalf of GroupSec # B, Program BBADaffodil International University

Acknowledgment

At first, we would like to express my gratitude to almighty Allah for enabling me the strength and opportunity to complete the report within the schedule time successfully.

At first, we are supposed to express the gratefulness from the core of my heart to Mijanur Rahman Joddar.

We make this report by collecting data from bank, online bank website, Wikipedia, website of Bangladesh bank, website of bankinfo.com etc. after collecting data we analysis all those as we need.

At last I shall be grateful to persons who read this term paper and who shall get benefit from this paper at present and in future.

Executive Summary

This report based on comparing ratio analysis between Southeast Bank Limited& Prime Bank Limited. Southeast Bank Limited is a private commercial bank in Bangladesh. The Bank’s journey began when it was incorporated as a Public Limited Company on March 12, 1995. In the Registrar of Joint Stock Companies and Firms issued the Certificate of Commencement of Business of the Bank on the same date. The Southeast Bank received its Banking License from the Bangladesh Bank on March 23, 1995. e Bank’s First branch was opened by Late M. Saifur Rahman, the then Honorable Finance Minister of the Government of the People’s Republic of Bangladesh as the Chief Guest at the commercial hub of the country at 1, Dilkusha Commercial Area, Dhaka on May 25, 1995. The incumbent Chairman of the Bank is Mr. Alamgir Kabir, FCA. Mr. M. A. Kashem a member of the Board and Mr. Yussuf Abdullah Harun were past Presidents of the Federation of Bangladesh Chamber of Commerce and Industries (FBCCI). [2]Southeast Bank takes pride for bringing women into the banking professiontio in a significant number for gender equality. At present, 32% of SEBL's employees are women that will rise to 45% over the next five years. On the other hand Prime Bank Limited is another private commercial bank in Bangladesh. It was established on April 17, 1995. It is now one of the banks in Bangladesh which follows international standard in Banking and Finance. Prime Bank was created and commencement of business started on 17th April 1995. The sponsors are reputed personalities in the field of trade and commerce and their stake ranges from shipping to textile and finance to energy etc. Prime Bank offers all kinds of Commercial Corporate and Personal Banking services covering all segments of society. Diversification of products and services include Corporate Banking, Retail Banking and Consumer Banking right from industry to agriculture, and real estate to software. Prime Bank Limited is the title sponsor of the 2013 edition of Bangladesh Premier League cricket tournament.

Table of Content

TOPIC NAME PAGE NO.

Letter of Transmittal i

Acknowledgment ii

Executive Summary iii

Introduction 1

Overview of Southeast &Prime Bank Limited 2-3

Financial statement analysis 4

Profitability ratio analysis of SEBL&PBL 4-12

SWOT analysis of SEBL&PBL 13-14

Recommendation & Findings 15

Conclusions 15

IntroductionA Bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers that have capital deficits to customers with capital surpluses.

There are different types of bank in Bangladesh. Like-

Central Bank Commercial Bank Industrial Bank Co-Operative Bank Savings Bank etc

Generally when we use the term “Bank” that time actually it means the commercial bank. The main job of the commercial bank is to collect the money from customers as deposit and give other customers money as loan. The commercial bank gives interest on deposit money to the customer and receives interest on loan money to the customers. The difference between these two interest rates is the main source of bank’s income.

In Bangladesh the commercial banking sector dominates the financial sector. In Bangladesh there is one central bank which is “Bangladesh Bank”. There are four state owned commercial banks. They are- Agrani Bank, Janata Bank, Rupali Bank, Sonali Bank. Besides this, there is also good number of private commercial bank in Bangladesh. Such as-Prime Bank, One Bank, Mercantile Bank, Bank Asia, South East Bank, IFIC Bank, Dhaka Bank, United Commercial Bank, Dutch Bangla Bank and so on. There are also some foreign Banks which are operating in our country. They are- Citi Bank, HSBC, Standard Chartered Bank, Commercial Bank of Ceylon, State bank of India, Habib Bank Limited, National Bank of Pakistan, Woori Bank, Bank Alfalah and ICICI bank.

In Bangladesh the banking sector is expanding day by day. A number of new banks are also taking preparation to merge in the market. Banking process is becoming faster and easier because internet banking system has already introduced in many banks. Now-a-days in order to keep pace in the competitive field all the banks are trying to come up with the innovative products and services to satisfy their customers. On the other hand customers also need to have an idea about all the process and products of the different bank in order to make a right choice.

Overview of Prime Bank & Southeast Bank Limited

Prime Bank Limited

Prime Bank was created and commencement of business started on 17th April 1995. The sponsors are reputed personalities in the field of trade and commerce and their stake ranges from shipping to textile and finance to energy etc. Prime Bank has already made significant progress within a very short period of its existence. The bank has been graded as a top class bank in the country through internationally accepted CAMELS rating. The bank has already occupied an enviable position among its competitors after achieving success in all areas of business operation.

Prime Bank offers all kinds of Commercial Corporate and Personal Banking services covering all segments of society within the framework of Banking Company Act and rules and regulations laid down by our central bank. Diversification of products and services include Corporate Banking, Retail Banking and Consumer Banking right from industry to agriculture, and real state to software. Prime Bank’s current capital adequacy ratio of 9.96% is in the market. In spite of complex business environment and default culture, quantum of classified loan in the bank is very insignificant and stood at less than 0.96%.

Prime Bank, since its beginning has attached more importance in technology integration. In order to retain competitive edge, investment in technology is always a top agenda and under constant focus. Keeping the network within a reasonable limit, our strategy is to serve the customers through capacity building across multi-delivery channels. Our past performance gives an indication of our strength. We are better placed and poised to take our customers through fast changing times and enable them compete more effectively in the market they operate.

Mission & Vision of Prime Bank Limited

Vision

Efficiency Capital adequacy Asset quality Sound management and Profitability having strong liquidity

Mission

To build Prime Bank Limited into an efficient, market-driven, customer focused institution with good corporate governance structure.

Continuous improvement of our business policies, procedure and efficiency through integration of technology at all levels.

Southeast Bank Limited

Southeast Bank Limited is a scheduled Bank under private sector established under the ambit of bank Company Act, 1991 and Incorporated as a Public Limited Company under Companies Act, 1994 on March 12, 1995. The Bank started commercial banking operations effective from May 25, 1995 during this short span of time the Bank had been successful to position itself as a progressive and dynamic financial institution in the country. The Bank had been widely acclaimed by the business community, from small entrepreneur or large traders and industrial conglomerates, including the top rated corporate borrowers for forward-looking business outlook and innovative financing solutions Thus within this very short period of time it has been able to create an image for itself and has earned significant reputation in the country's banking sector as a Bank with vision. Presently it has sixty three branches in operation. The experience of the prosperous economies of Asian Vision" has been preciously the essence of the legend of bank's success. Southeast Bank Limited has been awarded license by the Government of Bangladesh as a Scheduled Bank in the private sector in pursuance of the policy of liberalization of banking and financial services and facilities in Bangladesh. In view of the above, the up capital adequacy requirement of Bangladesh bank It is well recognized that there is an urgent need for better-qualified management and better- trained staff in the dynamic global financial market Bangladesh is no excepting of this trend Banking sector in Bangladesh is facing challenges from different angles though its prospect is bright in the future Money and Banking is the center around which all-economic science clusters. So this report is carried on to find out the problems faced for by Southeast Bank and recommend some measures to overcome these problems for economic development of Bangladesh.

Mission & vision of Southeast Bank Limited

SEBL’s Vision:

The vision is to be a premier banking institution in Bangladesh and contribute significantly to the national economy.

SEBL’s mission:

High quality financial services with state of the art technology. Fast & accurate customer service. Sustainable growth strategy. Follow ethical standards in business. Steady return on shareholders' equity. Innovative banking at a competitive price. Attract and retain quality human resource.

Financial statement analysis Financial statement Analysis involves a comparison of a firm’s performance with that of other firms in the same line of business, which usually is identified by the firm’s industry Classification. Generally speaking the analysis is used to determine the firm’s financial position so as to identify its current strengths and weakness and to suggest action the firm might pursue to take advantage of the strength and correct any weakness.

Profitability Ratio Analysis of SEBL & PBL (Last Five Years)

Profitability ratios: Profitability ratios are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. Some of the ratios are mentioned below to determine the profitability of Southeast Bank Limited & Prime Bank Limited from the year 2007-2011.

Return on assets: Return on Assets ratio of a bank gives an idea of how efficiently a bank is using its assets to generate profit. Return on Assets (ROA) is calculated by dividing the annual earnings of a bank by the total assets. So it can be said that the formula of ROA is-

Returnon Assets(ROA )= Net IncomeTotal Assets

Southeast Bank Limited Returnon Assets 2007-2011

Year Net income Total Assets Ratio

2011 1912.19 158078.59 1.21%

2010 2763.13 131783.27 2.10%

2009 1870.19 112676.98 1.66%

2008 887.24 81181.53 1.10%

2007 1222.97 64370.69 1.90%

The above figure represents the Return on assets (ROA) Ratio of Southeast Bank Limited & we see that in the year 2010 Southeast Bank was in most profitable position. In 2008 the Bank was in lowest profitable position.

Prime Bank Limited from the year 2007-2011

Year Net income Total Assets Ratio

2011 3662 199950 1.83%

2010 3003 154342 1.95%

2009 2748 124806 2.20%

2008 1232 110437 1.12%

2007 1401 79580 1.76%

The above figure represents the Return on assets (ROA) Ratio of Prime Bank Limited & we see that in the year 2009 Prime Bank Limited was in most profitable position. In 2008 the Bank was in lowest profitable position.

2011 2010 2009 2008 2007

1.83% 1.95%2.20%

1.12%

1.76%

Return on Assetes of PB

2011 2010 2009 2008 2007

1.21%

2.10%1.66%

1.10%

1.90%

Return on assets of SB

Return on deposit:

On time of deposited into your account was no good so the bank returned it and deducted the money from your account. So it has to calculate on time how much return on time. The ration between net income and total deposit.

Returnon Deposits(ROD)= Net IncomeTotal Deposit

Southeast Bank Limited Returnon Assets 2007-2011

Year Net Income Total Deposit Ratio

2011 1912.19 127178.22 1.5%

2010 2763.13 107729.58 2.56%

2009 1870.19 96669 1.93%

2008 887.24 68714.67 1.29%

2007 1222.97 55474.05 2.20%

The above figure represents the Return on Deposit (ROD) Ratio of Southeast Bank Limited & we see that in the year 2010 Southeast Bank was in most profitable position. In 2008 the Bank was in lowest profitable position.

Prime Bank Limited from the year 2007-2011

Year Net Income Total Deposit Ratio

2011 3662 159816 2.29%

2010 3003 124574 2.41%

2009 2748 106956 2.58%

2008 1232 88021 1.40%

2007 1401 70512 1.99%

The above figure represents the Return on Deposit (ROD) Ratio of Prime Bank Limited & we see that in the year 2009 Prime Bank Limited was in most profitable position. In 2008 the Bank was in lowest profitable position.

11 10 9 8 7

1.50%

2.56%1.93%

1.29%

2.20%

Return on Deposit of SB

11 10 9 8 7

2.29% 2.41% 2.58%

1.40%1.99%

Return on Deposit of PB

Return of Shareholders capital (ROC): Return of Shareholders capital refers to payments back to "capital owners" (shareholders, partners, unit holders) that exceed the growth (net income/taxable income) of a business. It should not be confused with return on capital which measures a 'rate of return'.

The ROC effectively shrinks the firm's equity in the same way that all distributions do. It is a transfer of value from the company to the owner. In an efficient market, the stock's price will fall by an amount equal to the distribution. Most public companies pay out only a percentage of their income as dividends. In some industries it is common to pay ROC.

Returnon Shareholder capital= Net IncomeShareholder contribution capital

Southeast Bank Limited Returnon Assets 2007-2011

Year Net Income Shareholder contribution capital

Return

2011 1912.19 16745.84 11.42

2010 2763.13 17095.90 16.16

2009 1870.19 9927.16 18.84

2008 887.24 7657.01 11.59

2007 1222.97 6468.36 18.91

Decision: The above figure represents the Return on Shareholder Capital (ROSC) Ratio of Southeast Bank Limited & we see that in the year 2007 Southeast Bank was in most profitable position. In 2011 the Bank was in lowest profitable position.

Prime Bank Limited from the year 2007-2011.

Year Net Income Shareholder contribution capital

Return

2011 3662 19139 19.13

2010 3003 16908 17.76

2009 2748 11745 23.4

2008 1232 6697 18.40

2007 1401 5573 25.14

The above figure represents the Returnon Shareholder capital Ratio of Prime Bank Limited & we see that in the year 2009 Prime Bank Limited was in most profitable position. In 2008 the Bank was in lowest profitable position.

11 10 9 8 7

11.42%

16.16%18.84%

11.59%

18.91%

Return on Shareholder Capital of SB

11 10 9 8 7

19.13% 17.76%23.40%

18.40%25.14%

Return on Shareholder Capital of PB

Series1

Net Interest Margin: A ratio that examines how efficiently an organization can manage its investment decision to its debt situation. The formula of Net Interest Margin is-

Net Interest Margin= Net∈ Interest Income−Interest ExpenseincomeTotal Assets

Southeast Bank Limited Returnon Assets 2007-2011

Year Net Interest Income Total Assets Ratio

2011 2123.10 158078.59 1.34%

2010 2676.19 131783.27 2.03%

2009 1118.57 112676.98 2.24 %

2008 1320.04 81181.53 1.63%

2007 1556.46 64370.69 2.42%

The above figure represents the Net Interest Margin of Southeast Bank Limited & we see that in the year 2007 Southeast Bank was in most profitable position. In 2011 the Bank was in lowest profitable position.

Prime Bank Limited from the year 2007-2011. Year Net Interest Income Total Assets Ratio

2011 4089 199950 2.04%

2010 4323 154342 2.80%

2009 2430 124809 1.95%

2008 1970 110437 1.78%

2007 1930 79588 2.42%

The above figure represents the Net Interest Margin of Prime Bank Limited & we see that in the year 2010 Prime Bank Limited was in most profitable position. In 2008 the Bank was in lowest profitable position.

11 10 9 8 7

1.34%

2.03% 2.24%

1.63%

2.42%

Net Interest Margin of SB

11 10 9 8 7

2.04%

2.80%

1.95%

1.78%

2.42%

Net Interest Margin of PB

Return on Equity: Return on Equity is a ratio that measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ROE is expressed as a percentage. There are several ways of calculating the return on equity for an organization. Like-

Net Income-Preferred Dividends/Common EquityNet Income/Average Shareholders’ EquityNet Income/Shareholders’ Equity.

For calculating the ROE of Prime Bank Limited the formula of ROE will be used is-

Returnon Eqity (ROE)= Net Incomeshareholders ’ Equity

Southeast Bank Limited Returnon Assets 2007-2011

Year Net Income shareholders’ Equity Ratio

2011 1912.19 16745.84 11.42%

2010 2763.93 17095.90 16.16%

2009 1870.19 9927.16 18.84%

2008 887.24 7657.01 11.59%

2007 1222.97 6468.36 18.91%

The above figure represents the Return on Equity of Southeast Bank Limited & we see that in the year 2007 Southeast Bank was in most profitable position. In 2011 the Bank was in lowest profitable position.

Prime Bank Limited from the year 2007-2011.

Year Net Income shareholders’ Equi ty Ratio

2011 3662 19139 20.32%

2010 3003 16908 21.65%

2009 2748 11745 30.19%

2008 1232 6697 20.58%

2007 1401 5573 30.68%

The above figure represents the Returnon Eqity of Prime Bank Limited & we see that in the year 2007 Prime Bank Limited was in most profitable position. In 2011 the Bank was in lowest profitable position.

11 10 9 8 7

11.42%

16.16%

18.84%

11.59%

18.91%

Return on Equity of SB

11 10 9 8 7

20.32% 21.65%

30.19%

20.58%

30.68%

Return on Equity of PB

Other operating Income to Total Assets: This ratio represents the relationship between “Other operating Income” of an organization to total assets. The formula is-

Other operating Income ¿Total Assets=Other Operating IncomeTotal Assets

Southeast Bank Limited Returnon Assets 2007-2011

Year Other operating Income Total Assets Ratio

2011 8168.46 158078.59 5.17%

2010 8507.00 131784.27 6.46%

2009 5858.46 112676.98 5.20%

2008 4039.43 81181.53 4.98%

2007 3817.97 64370.69 5.93%

The above figure represents the other operating Income to Total Assets of Southeast Bank Limited & we see that in the year 2010 Southeast Bank was in most profitable position. In 2011 the Bank was in lowest profitable position.

Prime Bank Limited from the year 2007-2011.

Year Other operating Income Total Assets Ratio

2011 11645 199950 5.82%

2010 9795 154342 6.36%

2009 10724 124806 8.59%

2008 8745 110437 7.92%

2007 8834 79588 11.10%

The above figure represents the other operating Income to Total Assets of Prime Bank Limited & we see that in the year 2007 Prime Bank Limited was in most profitable position. In 2011 the Bank was in lowest profitable position.

11 10 9 8 7

5.17% 6.46% 5.20% 4.98% 5.93%

Other operating In-come to Total Assets

Of SB

11 10 9 8 7

5.82% 6.36%8.59% 7.92%

11.10%

Other operating In-come to Total Assets of

PB

SWOT ANALYSIS SWOT is a short form that is used to describe the particular strengths, weakness, opportunities and threats that are strategies factors for a specific company.

SWOT ANALYSIS of Southeast Bank Limited

Strengths:

Efficient management. Leading Retail loan providers Better employee relations. Better location of the branch. Better financial standing. Interesting consumer schemes. Quick delivery of foreign exchange. On line Banking ATM facility Simultaneously Islamic Banking

Opportunities:

Market leadership. Growth of the banking sector. Different consumer service scheme of the SEBL. Make the goodwill. Perform more quickly services. Go beyond the national boundaries. SMS banking.

Weakness:

Inadequate work force. Conservative loan facility. Profit rate is less than others. Lack of sufficient own ATM booth

Threats:

Political instability. Intense competition. Government rules and regulation. Economical variation. Policy of competitive banks.

SWOT Analysis of Prime Bank limited

Strengths

Superior quality Huge Capital Fund Prime Bank Limited has a very well educated and professional management. Wide coverage of the bank with its 132 branches across the country has broadened the horizon of

its service. Quick delivery of foreign exchange. On line Banking ATM facility, 138 ATM available

Weaknesses

Non-availability of ATM Booths Reliance on Sufficient Collateral Absence of Recovery agen

Opportunities

Government Support Perform more quickly services. Go beyond the national boundaries Evolution of E-Banking Banking and information technology might give the bank leverage to its competitors. M-Banking

Threats

Mergers and Acquisition Frequent Currency Devaluation Emergence of Competitors Political instability. Intense competition. Government rules and regulation.

Recommendation & FindingsFindings:

When we analysis those two banks annual report, we calculate the profitability ratio, as well as current scenario of market, and also swot analysis of those two bank. By analysis all fo above we got some lack of those two bank. Those are given below-

1. The flow of Return on assets of southeast bank is better than Prime bank but the return on deposit is better prime bank.

2. Return of Shareholders capital, Net Interest Margin & return on equity is better prime banks.

3. Number of branch of Prime bank is more than Southeast Bank.4. Number of ATM also more Prime banks.5. Prime bank has Huge Capital Fund.

Recommendation:

Analysis all data, annual report, profitability ratio, swot analysis etc. It is clear that the current position of Prime bank is better than Southeast bank. So we will recommend invest on Prime bank.

Conclusion:

Southeast Bank started with a vision to be the most efficient financial intermediary in the country and it believes that the day is not far off when it will reach its desired goal. SEBL looks forward to a new horizon with a distinctive mission to become a highly competitive modern and transparent institution comparable to any of its kind at home and abroad.

On the other hand Prime Bank Limited is one of the leading commercial banks in our country. In all economic condition of our country Prime Bank Limited has been working with great confidence and competing tremendously with Government oriented bank, local commercial banks along with the multinational banks also. Prime Bank Limited always tried its level best to perform financially well. In spite of trying to do well in some aspects Prime Bank Limited faced some financial problems from time to time. Some of the problems were-excessive bad loans, shortage of loans and advances, scarcity of cash in hands due to vault limit etc. These problems arouse time to time due to economic slowdown, interest rate fluctuation, emerging capital market, inflation in the money market and so on. Fighting with all these problems and competing with other banks every moment the bank is trying to do better to best. If this thing continues we hope that Prime Bank Limited will develop even more in the future.