Financial Performance Evaluation of Uttara Bank

The prime objective of the report is to analyze Financial Performance of Uttara Bank Limited. Other objectives are to calculate the financial ratios and identify the areas of concern and compare the financial situation of Uttara Bank Limited with the two other banks- IFIC Bank Limited and pubali Bank Limited. Finally identify the findings and raise possible recommendations for improving the performance of Uttara Bank Limited.

Introduction

Uttara Bank is one of the largest and oldest private sector commercial bank in Bangladesh, with years of experience. Adaptation of modern technology both in terms of equipment and banking practice ensures efficient service to clients.  Bank not only oldest private banks but also surpassed almost all banks in terms of overall growth and profit. Stability of the financial institute in terms of growth, profitability and management is desirable for up-gradation of bank’s image in the market.  Security of the deposit maintained i.e. the level of efficiency and effectiveness of the investment portfolio of the bank, as the deposit maintained is used for investment portfolio of the bank, direct relationship over the customer loyalty and this is the prime factor affecting the image of any financial sector in the market. The Bank should have automated operations in the service windows to. New Products and Services add value to the brand image of the Bank. Insurance on deposit and loan products protect not only the bank’s interest but also the interest of the public. Limitations of operations are to be minimized to have superior customer satisfaction. Liquidity of deposits has direct impact on the public sentiment and hence has ample effect on the customer loyalty. The report on “Financial Performance Evaluation of Uttara Bank Limited.” This report gives an idea about the activities of Financial Performance of Uttara Bank Limited .The objective of this report is to analyze and focus on the over-all financial operation. This report aims to providing financial performance evaluation of Uttar Bank Limited. Here, all sorts of ratio analysis have been executed; on order to analyze how efficient, liquid and desirables the bank is in terms of its finance. To start with, the liquidity ratio of the bank reveals that Uttara Bank Limited has proven to be quite liquid and financial strength over the past three years. The content of this report is based on eight parts. In the First Two Parts a brief overview of background, significance, methodology, and instruments used for analysis of making report is discussed. The Companies history, its vision, mission, objective, goal, brand image, core values, business principles etc are discussed. To understand how Uttara Bank Ltd is performing in the macro environment, financial highlights are also provided to evolutes the financial condition of UBL. In the Third Part named Theoretical Background show brief description about ratio analysis. In the Fourth Part or Analysis Part I have discussed about Quantitative Analysis like different ratios of three years to understand the financial condition for analyze properly and compare with other bank like Pubali Bank and IFIC Bank Ltd. In next part Comparative Analysis is discussed where I try to show comparison with other private commercial bank and specially focus on Pubali Bank and IFIC Bank Ltd.  Then I concluded my report saying some recommendations and justifications, which may help Uttara Bank Limited to improve more than its current position.

Banking is now an essential part of our economic system. Modern trade and commerce would almost be impossible without the availability of suitable banking service. The health of the economy is closely related to the soundness of its banking system. Modern banks play an important part in promoting economic development of a country. Banks provide necessary funds for executing various programmers underway in the process of economic development. They collect savings of large masses of people scattered through out the country, which in the absence of banks would have remained ideal and unproductive. These scattered amounts are collected, pooled together and made available to commerce and industry for meeting the requirements. Economy of Bangladesh is in the group of world’s most underdeveloped economies. One of the reasons may be its underdeveloped banking system. Government as well as different international organizations have also identified that underdeveloped banking system causes some obstacles to the process of economic development. So they have highly recommended for reforming financial sector. Since 1990, Bangladesh Government has taken a lot of financial sector reform measurements for making financial sector as well as banking sector more transparent, and formulation and implementations of these reform activities has also been participated by different international organization like World Bank, IMF etc.

Objectives of the Report

General Objective

The prime objective of the report is to analyze “Financial Performance of Uttara Bank Limited  

Specific Objective

The following aspects can be listed as the specific objectives for this practical orientation in Uttara Bank Limited:

• To identify and assess the present financial performance of Uttara Bank Limited
• To calculate the financial ratios and identify the areas of concern.
• To understand the implications in analyzing and interpreting the financial ratios.
• To compare the financial situation of Uttara Bank Limited with the two other banks- IFIC Bank Limited and pubali Bank Limited.
• To identify the findings and raise possible recommendations for improving the performance of Uttara Bank Limited

Methodology

Research Design

This report is a descriptive type of research, which briefly reveals the overall activities performed by Uttara Bank Ltd. It has also been administered by collecting secondary data. Annual ports of UBL were the major secondary data sources in this regard. Ratio analysis and trend analysis have also been used as major tools for the financial performance analysis. The study is performed based on the information extracted from different sources collected by using a specific methodology. This report is analytical in nature

Sources of data:

Secondary data:

1. Annual Report of UBL.
2. Different text book and journals.
3. Various reports and articles related to study.
4. Some of my course elements as related to this report.
5. Web base support from the internet

Data Collection Procedure and Instruments:

For the “Financial Performance Evaluation of Uttara Bank Limited” I mainly used Secondary data. Besides this I also collect some information by taking expert opinion from the officers and direct observation while I doing the internship program at the bank.

Instruments Used For Analysis:

1. Ratio Analysis
2. Trend Analysis

Ratio Analysis:

The quantitative (such as ratio analysis) tools are used to analyze the gathered data and different types of computer software are used for reporting the gathered information from the analysis such as- Microsoft Word, Microsoft Excel etc. Ratio can be classified into four broad groups-

• Liquidity Ratio.
• Activity Ratio.
• Debt Ratio.
• Profitability Ratio.

Trend analysis:

It is really important to analysis trends in ratios as well as their absolute levels. This analysis informs us whether a company’s financial condition improving or deteriorating.

Overview of UBL

Uttara Bank formed in 1972 as a scheduled bank with assets and liabilities of the Eastern Banking Corporation set up in East Pakistan on 28 January 1965. It started banking business 22 June 1965 and became a member of the Dhaka Clearing House on 17 September 1965. At the time of establishment, Eastern Banking Corporation had a paid up capital of To 1.42 million and deposit resources of about To 10 million. It was the only scheduled bank formed with capital raised entirely from the small income group of people of East Pakistan.

Eastern Banking Corporation was nationalized under the Bangladesh Banks Nationalization Order 1972 and its name was changed to Uttara Bank. At that time, the bank had 211 branches. The government retracted 95% of its share capital and allowed it to operate as a private bank. It was transformed into a limited company on 15 September 1983 then it made its journey like a modern private Bank at its registered office and other branches. The initial Authorized Capital of the Bank was 20 (Twenty) core Taka. Which paid capital was 10 [ten] core taka. Government hold 6% share and rest 94% shares are distribute in privet sector. Uttara Bank’s head office is suited in Motijheel c/a. Dhaka-1000. A new opportunity in this field of financial activities was opened for the business. UBL made a careful journey and maintained its successive growth for few years with its qualified professional management under most unpredictable, unregulated, uncertainties and limitations. The bank is listed with both Dhaka and Chittagong Stock Exchanges.

Corporate Mission  

We shall be the forefront of national economic development by

• Anticipating business solutions required by all our customers everywhere and innovative supplying them beyond expectation.

• Setting industry benchmarks of world class standard delivering customer value through our comprehensive product range, customer service and all our activities building an exciting team-based working environment that will attract, develop and retain employees of exceptional ability who help celebrate the success of our business, of our customer and of national development.

• Maintaining the highest ethical standards and a community responsibility worthy of a leading corporate citizen.
• Continuously improving productivity and profitability, and thereby enhancing shareholder value

Corporate Vision

To be in the front of national development by providing all the customers inspirational strength, dependable support and the most comprehensive range of business solution through our team of professional that work passionately to be outstanding in everything to do.

Corporate Objective

The main objectives of the Uttara Bank Limited are as follows:

1. To establish, maintain, carry on, transact, undertake and conduct all types of banking, financial, investment and trust business of in Bangladesh and abroad.
2. To form, establish and organize any bank, company, institutions or organization either singly and/or in joint collaboration of partnership with any individual company, financial institution, bank, organization
3. Or any government and or government agency for the purpose of carrying on banking, financial investment and trust business and/or any other business as provided hereafter.
4. To carry on any business relating to Wage Earner Scheme as may be allowed by Bangladesh Bank from time to time including maintaining of foreign currency accounts and any other matter related thereto.
5. To contract or negotiate all kinds of loan and/or assistance, private or public from any source, local or foreign, and to take all such steps as may be required to be complete such deals.
6. To form, organize assets, participate or aid in forming, promoting or organizing any company, bank, syndicate, consortium institute or any holding and subsidiary company in Bangladesh or abroad for the purpose of undertaking any banking financial investment and trust business.
7. To take part in the formation, management, supervision or control of business or operations of any company or undertaking and for that purpose to render technical managerial and administrative services and act as administrator, manager and secretary.
8. To amalgamate or reconstruct or recognize with any commercial bank, or body corporate or association in cooperation with any person, commercial bank or association.
9. To establish and open offices and branches to carry on all or any of the above business abroad and within the country provided prior permission is obtained from the Bangladesh Bank.
10. To establish provident fund, gratuity, pension, and other fund for the welfare and benefit of the employees and staffs, former or present and any matter related thereon.

UBL at a Glance

• UBL is one of the largest private banks in Bangladesh.
• It operates through 211 fully computerized branches ensuring best possible and fastest services to its valued clients.
• The bank has more than 600 foreign correspondents world wide.
• Total number of employees nearly 3,562.
• The Board of Directors consists of 15 members.
• The bank is headed by the Managing Director who is the Chief Executive Officer.
• The Head Office is located at Bank’s own 18-storied building at Motijheel, the commercial center of the capital, Dhaka.

Strategies of UBL

UBL Bank Limited mainly follows top down approach to take necessary decisions for the company. Basically they follow the centralize strategy where the Head Office of the Bank control and monitor all the activities of its branches. In case of marketing strategy they basically depend on ‘word of mouth’ as they are already well reputed for its long-term service in the banking industry.

Function of Uttara Bank LTD

Uttara Bank Limited performs all types of functions of a modern commercial bank, which generally includes:

• Mobilization of savings of the people and safe keeping of all types of deposit account.
• Making advances especially for productive activities and for the other commercial and socio-economic needs.
• Providing banking services to common people through the branches.
• Introduce modern Banking services in the country.
• Discounting and purchasing bills.
• Various information, guidance and suggestions for promotion of trade and industry keeping in view of the overall economic development of the country.
• Finance for both capital machinery and working capital.
• Relating to constructions of both commercial and residential.
• Finance under small business of self employed clients.
• Finance of farming and non-farming activities to rural people including purchase of agricultural equipments.
• Ensuing proper utilization of credit disbursed.
• Developing new products Market surveys before making any finance
• Finance for small transport.
• Monitoring and forecasting.
• Developing marketing campaigns.
• Finance for household durables.
• Work simplification studies.
• Monitoring diversification of portfolio among different sectors.

Departments of Uttara Bank Ltd

There are mainly three departments these are:-

• General banking
• Foreign exchange and
• Loans and Advances

General banking:

General Banking Department is considered as the direct customer service center. It is the starting point of all the banking operation. It opens new accounts, remits funds, honor cheque, takes deposits, issues bank draft and pay order etc. general Banking is also known as retail banking. Following are the major banking:

• Account opening section
• Clearing section
• Cash section
• Remittance

Foreign Exchange:

This department is responsible for the following jobs:

• Verification o L/C application
• L/ C opening.
• Sanction the application
• Advising L/C
• Export trade financing
• Remittance

Loans and Advances:

This department is responsible for the following jobs:

• Prepare the application form to provide loan
• Preparing CIB Statements
• Preparing Credit Proposal and Statement
• Administration of Retail Credit

Theoretical Aspect

Financial Performance Analysis

Financial Performance is a subjective measure of how well a firm can use its assets from business and generate revenues. Financial Performance term is also used as a general measure of a firm’s overall financial situation over a given period of time, and can be used to compare with similar firms across the same industry or to compare industries or sectors in aggregation.

Financial performance analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project. It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top level management as one of their bases in making business decisions. Based on these reports, management may take decision. Financial performance analysis is a vital to get a financial overview about a company. Generally it is consists of the interpretation of balance sheet and income statement. Ratio analysis and trend analysis can be done by using these two statements. These analyses are the major tools for analyzing the company’s financial performance.

Balance sheet

In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a “snapshot of a company’s financial condition”. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business’ calendar year. A standard company balance sheet has three parts: assets, liabilities and ownership equity.

Income Statement

Income statement also referred as profit and loss statement, earnings statement, operating statement or statement of operations is a company’s financial statement that indicates how the revenue is transformed into the net income. It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues, including write-offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.

Ratio Analysis

A tool used by individuals to conduct a quantitative analysis of information in a company’s financial statements.Ratios are calculated from current year numbers and are then compared to previous years, other companies,the Industry, or even the economy to judge the performance of the company.The basic inputs to ratio analysis are the firm’s income statement and balance sheet for the periods to be examined. Ratio analysis is predominately used by proponents of fundamental analysis.

In finance, a financial ratio or accounting ratio is a ratio of two selected numerical values taken from an enterprise’s financial statements. There are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization. Financial ratios may be used by managers within a firm, by current and potential shareholders (owners) of a firm, and by a firm’s creditors. Security analysts use financial ratios to compare the strengths and weaknesses in various companies. If shares in a company are traded in a financial market, the market price of the shares is used in certain financial ratios. In short, ratio analysis is essentially concerened with the calculation of relationships which, after proper identification and interpretation may provide information about the operations and state of affairs of a business enterprise.The analysis is used to provide indicators of past performance in terms of critical success factors of a business.This assistance in decision-making reduces reliance on guesswork and intution and establishes a basis for sound judgement.

Significance of using ratios

The significance of a ratio can only truly be appreciated when:

1. It is compared with other ratios in the same set of financial statements.
2. It is compared with the same ratio in previous financial statements (trend analysis).
3. It is compared with a standard of performance (industry average).Such a standard may be either the ratio which represents the typical performance of the trade or industry, or the ratio which represents the target set by management as desirable for the business.

Ratio analysis is not merely the application of a formula to financial data to calculate a given ratio.  More important is the interpretation of the ratio value. To answer such questions as is it too high or too low? Is it good or bad? Two types of ratio comparisons can be made: Cross-sectional and Time-series analysis.

Time-series Analysis:

Time-series analysis evaluates performance over time. Comparison of current to past performance, using ratios, allows the firm to determine whether it is progressing as planned. Additionally, time-series analysis is often helpful in checking the reasonableness of a firm’s projected financial statements.

Cross-Sectional Analysis:

Cross-Sectional analysis evaluates performance of different firms` financial ratios at the same point in time.

Combined Analysis:

The most informative approach to ratio analysis is one combines cross-sectional and time-series analysis. A combined view permits assessment of the trend in the behavior of ratio in relation to the trend for the industry.

Cautions about Ratio Analysis

Before discussing specific ratios, we should consider the following cautions:

• A single ratio does not generally provide sufficient information from which to judge the overall performance of the firm.
• Be sure that the dates of the financial statements being compared are the same.
• It is preferable to use audited financial statements for ratio analysis.

Be certain that the data being compared have all been developed in the same way.

Analyzing liquidity

The liquidity of a business firm is measured by its ability to satisfy its short term obligations as they come due. Liquidity refers to the solvency of the firm’s overall financial position. The three basic measures of liquidity are:

• Net working capital = Current Assets – Current Liability
• Current ratio = Current Assets / Current Liability
• Quick Ratio = Cash + Government Securities + Receivable / Total Current Liabilities

a. Net Working Capital:

Net Working Capital, although not actually a ratio is a common measure of a firm’s overall liquidity. A measure of liquidity is calculated by subtracting total current liabilities from total current assets.

Net Working Capital =Total Current Assets –Total Current Liabilities.

b. Current Ratio:

One of the most general and frequently used of these liquidity ratios is the current ratio. Organizations use current ratio to measure the firm’s ability to meet short-term obligations. It shows the banks ability to cover its current liabilities with its current assets.

Current Ratio = Current Asset/Current Liabilities

Standard ratio: 2:1

c. Quick Ratio:

The quick ratio is a much more exacting measure than current ratio. This ratio shows a firm’s ability to meet current liabilities with its most liquid assets.

Quick Ratio=Cash + Government Securities + Receivable / Total Current Liabilities.

Standard ratio: 1:1

d. Operating Cost to Income Ratio:

It measures a particular Bank’s operating efficiency by measuring the percent of the total operating income that the Bank spends to operate its daily activities. It is calculated as follows:

Cost Income Ratio = Total Operating Expenses / Total Operating Income

Analyzing Activity

Activity ratios measure the speed with which accounts are converted into sale or cash. With regard to current accounts measures of liquidity are generally inadequate because differences in the composition of a firm’s current accounts can significantly affects its true liquidity.

A number of ratios are available for measuring the activity of the important current accounts, which includes inventory, accounts receivable, and account payable. The activity (efficiency of utilization) of total assets can also be assessed

a. Total Asset Turnover:

The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate sales.

Total Asset Turnover = Sales/ Total Asset

b. Investment to Deposit Ratio:

Investment to Deposit Ratio shows the operating efficiency of a particular Bank in promoting its investment product by measuring the percentage of the total deposit disbursed by the Bank as long and advance or as investment. The ratio is calculated as follows:

Investment to Deposit Ratio = Total Investments / Total Deposits

c. Inventory turnover:

A ratio showing how many times a company’s inventory is sold and replaced over a period.

Inventory Turnover= Cost of goods sold/ Average Inventory

The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or “inventory turnover days”. This ratio should be compared against industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble should prices begin to fall.

Average Collection Period:

Average collection period is useful in evaluating credit and collection policies. This ratio also measures the quality of debtors. It is arrived at by diving the average daily sales into the accounts receivable balance:

Average Collection Period=Accounts receivable/ (Credit sales/365)

A short collection period implies prompt payment by debtors. It reduces the chances of bad debts. Similarly, a longer collection period implies too liberal and inefficient credit collection performance. It is difficult to provide a standard collection period of debtors.

Average Payment Period:

Average payment period ratio gives the average credit period enjoyed from the creditors that means it represents the number of days by the firm to pay its creditors. A high creditor’s turnover ratio or a lower credit period ratio signifies that the creditors are being paid promptly. This situation enhances the credit worthiness of the company. However a very favorable ratio to this effect also shows that the business is not taking the full advantage of credit facilities allowed by the creditors. It can be calculated using the following formula:

Average Payment Period=Accounts payable/ Average purchase per day

Fixed Asset Turnover:

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company’s ability to generate net sales from fixed-asset investments – specifically property, plant and equipment (PPandE) – net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. The fixed-asset turnover ratio is calculated as:

Fixed Asset Turnover=Gross Turnover/ Net fixed assets

Analyzing Debt:

The debt position of that indicates the amount of other people’s money being used in attempting to generate profits. In general, the more debt a firm uses in relation to its total assets, the greater its financial leverage, a term use to describe the magnification of risk and return introduced through the use of fixed-cost financing such as debt and preferred stock.

a. Debt Ratio:

The debt ratio measures the proportion of total assets provided by the firm’s creditors.

Debt Ratio = Total Liabilities / Total Assets

b. Equity Capital Ratio:

The ratio shows the position of the Bank’s owner’s equity by measuring the portion of total asset financed by the shareholders invested funds and it is calculated as follows:

Equity Capital Ratio = Total Shareholder’s Equity / Total Assets

The ability to service debt:

It refers the ability of a firm to meet the contractual payments required on a scheduled basis over the life of a debt. The firm’s ability to meet certain fixed charges is measured using coverage ratios.

c. Time Interest Earned Ratio:

This ratio measures the ability to meet contractual interest payment that means how much the company able to pay interest from their income.

 Time Interest Earned Ratio=EBIT/ Interest

Operating Profit Margin:

The Operating Profit Margin represents what are often called the pure profits earned on each sales dollar. A high operating profit margin is preferred. The operating profit margin is calculated as follows:

Operating Profit Margin = Operating Profit / Sales

Net profit Margin:

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including taxes, have deducted. The higher the net profit margin is better. The net profit margin is calculated as follows:

Net profit Margin = Net profit after Taxes / Sales

Return on Asset (ROA):

Return on asset (ROA), which is often called the firms return on total assets, measures the overall effectiveness of management in generating profits with its available assets. The higher ratio is better.

Return on Asset (ROA) = Net profit after Taxes / Total Assets

Return on Equity (ROE):

The Return on Equity (ROE) measures the return earned on the owners (both preferred and common stockholders) investment. Generally, the higher this return, the better off the owners.

Return on Equity (ROE) = Net profit after Taxes / Stockholders Equity

Price/ Earnings ratio (PE ratio):

The Price/ Earnings ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the income or profit earned by the firm per share.

P/E ratio – Price per share / earnings per share

Earnings per share (EPS):

Earnings per share (EPS) are the earnings returned on the initial investment amount.

EPS= Net income/no. of share outstanding

Ratio Analysis

Liquidity Ratio:

Current ratio

The current ratio, one of the most commonly cited financial ratios, measures the firm’s ability to meet its short term obligations. The higher the current ratio, the better the liquidity position of the firm. It is expressed as:

Current Ratio=Current Asset/Current Liabilities

Interpretation:

That is the higher the current ratio; the more liquid the firm is considered to be.  But UBL, Current ratio is not good because it maintains 0.98tk current assets against 1tk current liabilities where as normally banking industry maintains 1: 1 current ratio. This graph shows that, the current ratio is decreasing year by year.

Net Working capital

Net working capital, although not actually a ratio is a common measure of a firm’s overall Liquidity a measure of liquidity ratio calculated by

Net Working capital=Current Asset-Current Liabilities

 Table: Net Working capital

Interpretation:

Net working capital of UBL gradually decreasing in Year by Year However, the bank can not able to meet up its current obligations.  So the Bank should increase its Current asset.

Analyzing Activity Ratio:

Cost Income Ratio:

Cost Income Ratio=Total operating Expenses/Total Operating Income

Table: Cost Income Ratio

Interpretation:

We know that this ratio measures the operating efficiency of the bank by measuring the portion if the total operating costs relative to the total operating income of that bank and the higher the ratio, the lower the operating efficiency. In 2007 the operating cost of UBL Bank Ltd. is high but after that it decreasing. So it can be said that the operating efficiency of the UBL Bank Ltd. is in good position that is they are able to minimize their operating cost.

Total Asset Turnover Ratio:

The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate sales.

Total Asset Turnover= Operating Income/Total Asset

 Table: Total Asset Turnover

Interpretation:

The banks total asset turnover ratio in 2005 – 2008 that is .0056- 0.068 which means 5.6 to 6.8 times. We know the greater the total asset turnover; it is more efficient and 4 to 6 times is slandered position but also depends on industry. But UBL is total asset turnover ratio is increasing day by day but in 2009 its decreasing which is not good sign

Debt Ratio:

The debt ratio measures the preparation of total assets provided by the firm’s creditors.

Debt ratio= Total Liabilities/Total Assets

Table: Debt ratio

Interpretation:

This graph shows that, the debt ratio was decreasing year by year. The Debt ratio measures, the proportion of total assets provides by the firm’s creditors. Their debt ratio were decreasing trend that indicates positive sign.

Time Interest Earned Ratio:

The times interest earned ratio, sometimes called the interest coverage ratio, measures the firm’s ability to make contractual interest payments.

Time Interest Earned Ratio =Earnings before interest and Taxes/Interest

Table: Time Interest Earned Ratio

Interpretation:

Time Interest earned ratio on UBL’s is highly satisfying. Because, it’s increasing year by year but in 2009 it was slightly decrease to 1.78. So UBL should maintain this ratio by minimizing its operating costs in order to get adequate earnings to satisfying interest obligations.

Investment to Deposit ratio:

Investment to Deposit Ratio=Total investment/Total Deposit

 Table: Investment to Deposit Ratio

Interpretation:

Investment to deposit ratio shows that which amount of deposit is used to as investment. UBL Bank Ltd. investment to deposit ratio is increasing last year .That means, Bank is properly utilize their deposit.

Net Profit Margin:

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including taxes, have deducted. The higher the firm’s net profit margin is better. The net profit margin is a commonly cited measure of the company’s success with respect to earnings on sales

Net Profit Margin=Net profit after tax/operating income

 Table:  Net Profit Margin

Interprétation:

The Bank net profit margin in 2005-2008 that is 0.04-0.28 which indicates that profit margin is increasing day by day and its good situation.  But in 2009 UBL’s net profit margin is decreasing which indicates that the banks profit is decreasing.

Return on Asset (ROA):

The return on asset (ROA), which is often called the firm’s return on total assets, measures the overall effectiveness of management in generating profits with its available assets. The higher the ratio is better

Return on Asset (ROA) =Net Profit after tax/Total Asset

Table-: Return on Asset

Interpretation:

The banks return on asset increasing from 0.23% to 1.54% in the preceding 5years. So the UBL earn more profit from the assets. This is good for the bank. But in 2009 ROA is goes down its not good for the bank.

Return on Equity (ROE):

The return on equity measures the return earned on the owner’s (both preferred and common stockholders’) investment. Generally the higher the return, the better off the owner’s.

Return on Equity=Net Profit after Tax/ Shareholders equity

Table: Return on Equity

Interpretation:

The banks return on equity deviates from 5.77% to 30.86%. In the preceding 5 years and the highest value can be observed in 2008 and the lowest value can be observed during the 2009, which is not desirable. So the management should work hard to increase the return associated with equity.

Earnings per Share:

The firm’s Earning per share (EPS) are generally of interest to present or prospective stockholders and management. The Earning per share represent the number of dollars earned on behalf of each outstanding share of common stock. The earnings per share is calculated as follows

Earnings per Share =Earnings available for common stock holder/No of shares of common stock outstanding

Table: Earnings per Share

Interpretation:

The graph shows that, in 2008 earnings per share of UBL’s is higher than 2007 and 2009 and it decrease in 2009.Net profit margin decreasing that means bank’s operating result is decreasing.

Price Earnings Ratio:

The price or earning (P/E) ratio is commonly used to assess the owners’ appraisal of share value. The P/E represents the amount investors are willing to pay for each dollar of the firm’s earnings. The higher the P/E ratio, the greater the investor confidence in the firm’s future. The price Earning (P/E) ratio is calculated as follows

Price Earnings Ratio=Market price per share of common stock/Earning per share

Table- Price Earnings Ratio

Interpretation:

The graph shows that, price earnings ratio of UBL’s in increasing from 2008 to 2007 and it slightly decreasing in 2009. The banks price earnings ratio is in good position.

Liquidity Ratio:

Current Ratio

Interpretation:

We know that, the current ratio measures a firm’s liquidity by measuring the portion of its current asset relative to its current liabilities and the higher the ratio, the higher the liquidity of the firm. The graph shows that, UBL current ration is better than IFICBL and PBL in 2007.And we see that 2008 and 2009 where IFICBL are in better position than PBL and UBL. But in 2009 UBL current ratio is not satisfactory other one bank. So it can be said   that, lower the current ratio, the lower the ability of the firm to pay its bills.

Major Finding:

From the analysis it has seen that UBL Bank Ltd Financial performance were better than other two banks (Pubali Bank and IFIC Bank) except in some cases:

liquidity Ratios:

• From the current ratio analysis it has seen that UBL has not enough current assets to pay their short term obligations because the current ratio is decreasing year by year.
• Uttara Bank Limited net working capital has gradually decreasing and 2009 it was negative figure that is bad sign for the bank.
• The operating efficiency of the Uttara Bank ltd is in good position because they are able t minimize their operating cost which  we have  seen cost to income ratio

Activity Ratios:

• Although Uttara Bank Limited total asset turnover ratio has increased in 2009 but overall their total asset turnover is satisfactory.
• The investment of the UBL is increasing in the last year. This is very good sign for the bank. Because if the investment is increased in the bank which help to gain maximum profit.

Debt Ratios:

• Debt Ratio UBL is in satisfactory range because it’s year by year decreasing.
• UBL’s Time interest ratio is not satisfactory because, they have only 1.78 tk. earning against 1 taka interest obligation which is not good

Profitability Ratios:

• From the trend analysis we have seen UBL’s Net profit margin were increasing year by year.  But in 2009 net profit margin has decreased. It indicates Negative operating result of UBL.
• In 2009, UBL P/E ratio is indicates very good sign. The investor who wants to buy UBL Share they will get the loan margin facility.
• From the analysis we see that UBL’s Earning per Share is better than other two banks, which indicates better earnings for the bank.
• The bank’s ROA is decreasing but PBL is more efficient to generate additional ROA than the UBL and IFICBL.

Conclusion:

Uttara Bank Limited (UBL) setting new standards in the banking arena in the time of turbulent economic conditions. As part of the long-term financial reform and modernization plan of the government, the bank had been converted into a public limited company. UBL helps to mobilize the resources to stay strong in the key areas of operation. In the areas of treasury operation, UBL remains the key player in the country’s foreign exchange and money market enhancing profitability through careful pricing and assessment of risk and return on investment, the treasury dealing is being strengthened to facilitate transactions requiring more sophisticated products and services for larger institutional and corporate clients. Though it has a wide range of network and confidence from the customers but it has some problems those problems reduce it income .It is PLC but the authority is not that flexible and it takes time to take decision.

From the practical point of view I can declare boldly that I really have enjoyed my Internship at this bank from the very first day. Moreover, this internship program that is mandatory for my B.B.A program, although short-date, obviously has helped my farther thinking about my career. I have tried my soul to incorporate the research report with necessary relevant information in my report.

Although excellence in Banking is the Moto of Uttara Bank Limited meeting the demand of the discerning customer is not the sole objective of the Bank. Customer relation should be increased to give appropriate service to them. And treat them as an asset of the company. Despite of these problems Uttara Bank Limited trying to improve this condition and take some necessary measure to improve its condition.

Some Recommendation for Uttara Bank Limited:

It is not unexpected to have problems in any organization. There must be problems to operate an organization. But there must be remedies to follow. The following commendations can be suggested to solve the above-mentioned problems:

• As, it has seen that Current Ratio and Net working capital of UBL is not satisfactory range so firstly , UBL should increased current asset for smoothly operate their business.
• UBL`s Cost to income ratio were satisfactory range so they should try to maintain this trend.
• As, Total Asset Turnover shows the efficiency of the bank, UBL should also try to improve their Total asset turnover although their total assets turnover is higher than that of Pubali Bank and IFIC bank.
• Although UBL net profit margin is increasing trend they should try to more for increasing their operating efficiency.
• From the trend analysis it has seen ROA of UBL were fluctuating. So they should try improving this and should take necessary steps to increase ROA.
• UBL’s investment to deposit and Loan to Deposit ratio both are increasing trend that is the positive sign towards the profitability of the bank. So the bank should work hard for maintaining this trend.
• As, UBL’s Time interest ratio is not satisfactory they should increase their EBIT or reduces the debt capital in order to smoothly satisfy the interest obligations.
• Uttara Bank Limited P/E ratio is satisfactory range they should try to maintain this.
• From the trend analysis we have seen operating cost of UBL is increasing year by year, it may adversely affect the profitability of the bank. So, they should give more concentration to reduce operating cost.
• From the trend analysis it has seen ROE of Uttara Bank ltd were fluctuating, so they should try improving this and should take necessary steps to increase ROE.