Evaluating the Financial Performance of Seven Second Generation Banks of Bangladesh: A Comparative Analysis
Md Mahbubur Rahman
Research Associate
Argus Credit Rating Services Limited
Dhaka, Bangladesh
Email: m.rahman1091@gmail.com
Abstract
Commercial banks are the active components in the development of an economy. The objective of this study is intended to evaluate comparative financial analysis during the period of 2011- 2014 of seven second generation commercial banks operating business in Bangladesh. To make a useful comparative study different financial ratios and measures are used. Financial ratios are segmented into four main categories and measures are including two indicators. Seven second generation banks are selected for comparison …show more content…
In the broad field of finance and economy the main concept of financial performance greatly depends on a banks historical performance and future prospect. Banks are the financial intermediaries mainly participate in the economic development. They stimulate the investment growth by providing financial support. A sustainable and efficient financial system delivers an improved economic outcome. In Bangladesh, service oriented sector depends immensely on banking sector. Banks are the economic drivers they connect to those who have fund like investors or depositors and also connect to those who are seeking capital such as individual or business who need loan. The banking sector of Bangladesh comprises four distinct categories of scheduled banks which includes the State-owned Commercial Banks known as SCBs, State-owned Development Financial Institutions known as DFIs, Private Commercial Banks known as PCBs and Foreign Commercial Banks called FCBs. Rashid (2010) stated that bank is a financial intermediary that channels fund from surplus units, the depositors, to the deficit units, the borrower, in the process of gaining from the spread of the different interest charged. By the scope of its functions, banks are the key driver to economic growth of any …show more content…
However, the main purpose of this study is to classify the second generation banks operating business in Bangladesh on the basis of their financial characteristics to appraise financial performance. Financial ratios of banks enable us to identify unique strengths and weaknesses very clearly, which in itself reflect banks profitability, liquidity and credit quality. The main financial indicators that have been considered in this study includes financial ratios and financial measures such as net interest margin (NIM), cost to income ratio, loan to deposit ratio, capital adequacy ratio, non-performing loan position, return on assets (ROA), return on equity (ROE), institution size, total assets and total shareholders’ equity. The financial ratios and measures are extracted from the annual audited financial statements of second generation banks in Bangladesh. The rest of the paper is organized as: the second sector explains the banking industry in Bangladesh, the third section represents the generation of banking sector in Bangladesh, the fourth section focuses on literature review, the fifth section contains the methodology of the study, and six section provides the analysis of data and ratios with details
Md Mahbubur Rahman
Research Associate
Argus Credit Rating Services Limited
Dhaka, Bangladesh
Email: m.rahman1091@gmail.com
Abstract
Commercial banks are the active components in the development of an economy. The objective of this study is intended to evaluate comparative financial analysis during the period of 2011- 2014 of seven second generation commercial banks operating business in Bangladesh. To make a useful comparative study different financial ratios and measures are used. Financial ratios are segmented into four main categories and measures are including two indicators. Seven second generation banks are selected for comparison …show more content…
In the broad field of finance and economy the main concept of financial performance greatly depends on a banks historical performance and future prospect. Banks are the financial intermediaries mainly participate in the economic development. They stimulate the investment growth by providing financial support. A sustainable and efficient financial system delivers an improved economic outcome. In Bangladesh, service oriented sector depends immensely on banking sector. Banks are the economic drivers they connect to those who have fund like investors or depositors and also connect to those who are seeking capital such as individual or business who need loan. The banking sector of Bangladesh comprises four distinct categories of scheduled banks which includes the State-owned Commercial Banks known as SCBs, State-owned Development Financial Institutions known as DFIs, Private Commercial Banks known as PCBs and Foreign Commercial Banks called FCBs. Rashid (2010) stated that bank is a financial intermediary that channels fund from surplus units, the depositors, to the deficit units, the borrower, in the process of gaining from the spread of the different interest charged. By the scope of its functions, banks are the key driver to economic growth of any …show more content…
However, the main purpose of this study is to classify the second generation banks operating business in Bangladesh on the basis of their financial characteristics to appraise financial performance. Financial ratios of banks enable us to identify unique strengths and weaknesses very clearly, which in itself reflect banks profitability, liquidity and credit quality. The main financial indicators that have been considered in this study includes financial ratios and financial measures such as net interest margin (NIM), cost to income ratio, loan to deposit ratio, capital adequacy ratio, non-performing loan position, return on assets (ROA), return on equity (ROE), institution size, total assets and total shareholders’ equity. The financial ratios and measures are extracted from the annual audited financial statements of second generation banks in Bangladesh. The rest of the paper is organized as: the second sector explains the banking industry in Bangladesh, the third section represents the generation of banking sector in Bangladesh, the fourth section focuses on literature review, the fifth section contains the methodology of the study, and six section provides the analysis of data and ratios with details