Project Report On “Financial Performance analysis of Lanka of Lanka Bangla Finance Ltd.”
Supervised By Prof. Md. Abdul Quddus Department of Business Administration Administration D!aka "nternational #ni$ersity. #ni$ersity.
Prepared by %omal &!andro 'arker Roll( )* Reg( +,+,-* 'ession( +)*+*/ Batc!( ++nd 0A 1ajor in Finance BBA Letter of Transmittal Date( +2 August +)*-
%o Prof. Md. Abdul Quddus Department of Business Administration Administration D!aka "nternational #ni$ersity. #ni$ersity.
'u3ject( 'u3mission of project report on “Financial Performance analysis of Lanka Bangla Finance Ltd.”
Dear 'ir " am !ere3y su3mitting my Project report paper 3ased on t!e topic “Financial Performance analysis of Lanka Bangla Finance Ltd.” as t!e partial re4uirement of t!e BBA program. " made sincere efforts to study related materials documents o3ser$e operations. 5it!in t!e tim time limi limit t " !a$ !a$e trie ried my 3est 3est to compi ompile le t!e perti rtinent nent infor nforma mati tion on as compre!ensi$ely as possi3le and if you need any furt!er information " 6ill 3e glad to assist you. " s!all 3e !ig!ly o3liged if you are kind enoug! to recei$e t!is report and pro$ide your $alua3le judgment. "t 6ould 3e my immense pleasure if you find t!is report useful and informati$e to !a$e an apparent perspecti$e on t!e issue.
%!anking you
7777777777777777777777 %omal &!andro 'arker Roll( )* Reg( +,+,-* 'ession( +)*+*/ Batc!( ++nd 0A 1ajor in Finance BBA
2|Page
Executive Summary
%!e financial !ealt! of a company may 3e determined 3y use of diagnostic procedures. As in a some clues a3out its future condition. %!e first 3attery of tests consists of financial ratios. %!e ratios descri3e relations!ips 3et6een selected items t!at appear on a firm8s financial statements. Financial ratios may 3e com3ined in $arious 6ays pro$ide different analytical perspecti$es. %!is paper presents diagnostic tools designed to determine t!e financial performance of a company. company. %o illustrate illustrate t!e paper t!e aut!or !as referred to t!e financial statements for Lanka Banla !inance Limited for fi$e consecuti$e years. Lanka Banla !inance Limited !as adopted an
aggressi$e financing position !as !ig!er market prices is generating !ig!er re$enues and is capitale4uity ratio its capital employed less fre4uently t!an o$erall situation. At t!e same time it !as impro$ed its profit margin and is attempting to 3ring its return on e4uity up. "t may !a$e increased t!e gro6t! and cas! flo6 prospects p rospects for t!e company 3ut it !as also increased its risk.
%!roug! financial analysis my aim to understand t!e financial factors is influencing t!e financial institutions and its decision making. Later " 6ill try to e$aluate t!e $arious ratios to appreciate t!eir impact on Financials8 performance performance p!ysical e9amination a $ariety $ ariety of tests is needed to o3tain a complete picture. %!e purpose of financial analysis is to diagnose t!e current and past financial condition of a firm and to gi$e g i$e o$er t!e last fe6 years.
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Ackno"ledement
" 6ould like to e9press my sincere gratitude and appreciation to my super$isor Prof. Md. Abdul Quddus Department of Business Administration D!aka "nternational #ni$ersity. D!aka Banglades!. :er magnanimous !elp e9cellent guidance constant encouragement and incessant assistance 6ere a$aila3le at all stages of my report. " am e9tremely grateful to !er for !er earnest feeling and !elp in matters concerning my report.
" 6ould like to e9tend my 6armest gratitude to my friends for t!eir cooperation stimulation and !elp during my 6ork.
" am grateful to my parents 6!o guided me t!roug! t!e entire studies and !ad !elped me morally and spiritually. %omal &!andro 'arker Date( +2 August +)*-
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Table of #ontents Particulars
S.$o.
Pae $o.
*
Letter of %ransmittal
+
+
;9ecuti$e 'ummary
/
/
Ackno6ledgement
,
&!apter * *.*
"ntroduction
<
*.+
O3jecti$es
=
*./
'cope of t!e Report
*)
*.,
'ources of Data
**
*.2
1et!odology
*+
*.-
Limitation
*/
&!apter + +.*
An o$er $ie6 of Banking 'ector in Banglades!
*,
+.+
%ypes of financial "nstitution
*2
+./
&ommercial Bank
*2
+.,
%!rift Bank
*-
+.2
"nsurance &ompanies
*-
+.-
'ecurities
*>
+.>
Finance &ompanies
*>
+.<
1utual Fund
*>
+.=
Pension Fund
*>
&!apter/ /.*
An O$er $ie6 of LBFL.
*<
/.+
Lanka Bangla Finance Ltd.
*=
/./
O3jecti$e of t!e &ompany
*=
/.,
&ode of conduct of t!e &ompany
+)
/.2
Products of t!e ser$ice of t!e &ompany
+)
/.-
&orporate :ade ?uarter
++
/.>
1ission
+/
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#%APTE&' ( )ntroduction
6|Page
)ntroduction Financial statements pro$ide a summari@ed $ie6 of t!e financial position and performance of a firm. %!erefore muc! can 3e learnt a3out a firm from careful e9amination of its financial statements as in$alua3le documentsperformance reports. %!e analysis of financial statements is t!us an important aid to financial analysis. %!e focus of financial analysis is on key figures in t!e financial statements and t!e significant relations!ip t!at e9ists 3et6een t!em. %!e analysis of financial statements is a process of e$aluating t!e relations!ip 3et6een component parts of financial statements to o3tain a 3etter understanding of t!e firm8s position and operations. %!e first task of t!e financial analyst is to select t!e information rele$ant to t!e decision under consideration from t!e total information contained in t!e financial statements. %!e second step is to arrange t!e information in a 6ay to !ig!lig!t significant relations!ips C!an Eain +))<. %!e final step is interpretation and dra6ing of inference and conclusions. "n 3rief financial analysis is t!e process of selection relation and e$aluation. %!e present paper is de$oted to an in dept! analysis of financial statements and its use for decision making 3y $arious parties interested in t!em. %!e focus of t!e paper is on ratio analysis as t!e most 6idely used tec!ni4ue of t!e financial analysis.
"n t!is project paper " 6ant to s!o6 “Financial Performance analysis of lanka Bangla Finance Ltd “ . #nder t!e super$ision of Prof. Md. Abdul Quddus* Department of Business
Administration D!aka "nternational #ni$ersity.
7|Page
+b,ectives
%!e o3jecti$e of t!e study may 3e $ie6ed as( -eneral ob,ective Specific ob,ective
-eneral ob,ectives %!is interns!ip report is prepared primarily to fulfill t!e Bac!elor of Business Administration degree re4uirement under Department of Finance D!aka "nternational #ni$ersity and get an o$erall idea of GBF"s sectors and its acti$ity specially t!e performance of Lanka Bangla Finance.
Specific ob,ectives
1ore specifically t!is study entails t!e follo6ing aspects( •
%o make fundamental company analysis.
•
%o analy@e t!e profita3ility of Lanka Bangla Finance Limited 6it! t!e !elp of different statistical tools.
•
%o test t!e predetermined !ypot!esis relating to t!e financial performances of Lanka Bangla Finance Limited only regarding profita3ility.
•
%o make fundamental GBF"s industry analysis.
•
"mpact of "ndustry Performance on Lanka Bangla Finance.
8|Page
S#+PE +! T%E &EP+&T %!e study 6ould focus on t!e follo6ing areas. •
Relations!ip of Get Profit 6it! its fundamental determinants.
•
&ompany Analysis LBFL and 6!ole financial industry
•
Brief o$er$ie6 of Lanka Bangla 'ecurities.
;ac! of t!e a3o$e areas 6ould 3e critically analy@ed in order to determine t!e regression model and to 3uild predetermined !ypot!esis.
9|Page
S+/&#ES +! 0ATA "nformation collected to furnis! t!is report is 3ot! from primary and secondary in nature.
Primary Source of 0ata %!e primary data of t!is report 6ere collected t!roug!( •
Direct inter$ie6 &on$ersation 6it! t!e researc! analyst of t!e Researc! Department.
•
Practical e9periences o3tained from t!e corporate office of LB'L
•
;9pert8s opinion.
•
Official records.
Secondary Source of 0ata " !a$e gat!ered t!e secondary data $ia follo6ing sources( •
Annual report of Lanka Bangla Finance ltd.
•
Printed outlines and documentation supplied 3y Lanka Bangla Finance ltd.
•
Annual Financial 'tatement of last , years of different GBF"s.
•
Analysis report of LB'L researc! and analysis department.
•
5e3site of Lanka 3angla Finance !ttp(666.lanka3angla.com.
10 | P a g e
MET%+0+L+-1 %!e data for t!is study 6as gat!ered from t!e annual financial statements pu3lis!ed 3y t!e Lanka Bangla Finance Limited in some selected internal maga@ines to accomplis! t!e aforesaid o3jecti$es. %!e ?uarterly and annual data for t!e selected GBF" during +)** to +)*2 are used in order to assess t!e profita3ility of t!e 3ank. Any progress of Lanka Bangla Finance Limited t!ereafter is t!us out of t!e scope of t!e report. :elp of ot!er sources like annual report maga@ines 3roc!ures journals ne6spapers 6e3sites etc. !a$e also 3een c!osen 6!ene$er found necessary. %!is paper is 3ased on secondary data collection.
"n processing t!e data $arious met!ods of con$entional statistics 6ere deployed. Fre4uency distri3ution measures of central tendency and dispersion time series analysis simple correlation and multiple regression analysis correlation matri9 and AGOHA in some cases calculated data are presented in grap! to gi$e t!e reader a 3etter understanding of financial components.
CeralaPearson correlation coefficient also used to in$estigate t!e correlation 3et6een t!e $aria3les at 2I le$el of significance according to t!e 'P'' soft6are package. 1icrosoft e9cel 6as also used to produce some grap!s and c!arts.
11 | P a g e
L)M)TAT)+$
" !a$e faced some usual constrictions t!roug!out my interns!ip program to some e9 tent t!at " are presented as follo6s( •
Primary data is al6ays !ard to 6ork on 3ecause of aut!enticity.
•
%ime is anot!er !indrance to prepare a 4uality report.
•
Po6er failure is anot!er main restraint to prepare t!is report
•
And scarcity of information is al6ays a common !indrance to prepare any types of report.
12 | P a g e
#%APTE&' 2 3An +vervie" of !inancial )nstitution sector in Banlades45
13 | P a g e
)ntroduction Financial sector reform in Banglades! started in *=>- 6it! pri$ati@ation of t!e 3anks to encourage pri$ate in$estment and continue in t!e mid*=<)s as part of 'tructural Adjustment Policies 'AP. Bet6een *==+ and *==- a Financial 'ector Reform Programmed F'RP 6as implemented. "ts major aim 6as to impro$e t!e operations of Gationali@ed &ommercial Banks G&Bs t!roug! t!e de$elopment of ne6 3anking tec!nologies computeri@ation of 3anking operations upgrading of skills c!anging outdated internal 3anking practices and corporate and credit cultures. Furt!er reforms are under6ay. "n Banglades! t!ere are ,= 3anks 6it! -/*< 3ranc!es of 6!ic! t!ere are /) pri$ate commercial 3anks *) foreign commercial 3anks and = nationali@ed commercial and speciali@ed 3anks. %!e 3anking sector employs a3out **)))) people. %otal deposits and loans and ad$ances also increased considera3ly 3et6een *==) and +))2 and some financial deepening !as taken place as a result of intensi$e reforms in t!e financial system. Foreign joint $enture 3anks no6 !old a3out =.2 percent of t!e total assets of commercial 3anks.
Types of financial institutions' • • • • • • •
&ommercial Banks "nsurance companies 'ecurities firms and in$estment 3anks Gon3anking financial institutions 1utual funds Pension funds 1icro financial institutions
#ommercial Bank A financial institution t!at pro$ides ser$ices suc! as accepting deposits gi$ing 3usiness loans and auto loans mortgage lending and 3asic in$estment products like sa$ings accounts and certificates of deposit. %!e traditional commercial 3ank is a 3rick and mortar institution 6it! tellers safe deposit 3o9es $aults and A%1s. :o6e$er some commercial 3anks do not !a$e any p!ysical 3ranc!es and re4uire consumers to complete all transactions 3y p!one or "nternet. "n e9c!ange t!ey generally pay !ig!er interest rates on in$estments and deposits and c!arge lo6er fees. %!e commercial 3anks are( • • • •
'onali Bank Limited Eanata Bank Limited Agrani Bank Limited Rupali Bank Limited
14 | P a g e
Private commercial banks • • • • • • • • • •
AB Bank Limited Banglades! &ommerce Bank Limited Bank Asia Limited BRA& Bank Limited D!aka Bank Limited Dutc! Bangla Bank Limited ;astern Bank Limited "F"& Bank Limited Eamuna Bank Limited 1eg!na Bank Limited
Thrift ank! A financial institution focusing on taking deposits and originating !ome mortgages. %!rift 3anks often !a$e access to lo6cost funding from Federal :ome Loan Banks 6!ic! allo6s for !ig!er sa$ings account yields to customers and increased li4uidity for mortgage loans. Also kno6n as Jsa$ings and loan associationsJ.
)nsurance companies' A 3usiness t!at pro$ides co$erage in t!e form of compensation resulting from loss damages injury treatment or !ards!ip in e9c!ange for premium payments. %!e company calculates t!e risk of occurrence t!en determines t!e cost to replace pay for t!e loss to determine t!e premium amount. A protection against t!e loss of income t!at 6ould result if t!e insured passed a6ay. %!e named 3eneficiary recei$es t!e proceeds and is t!ere3y safeguarded from t!e financial impact of t!e deat! of t!e insured.%!e insurance companies are( • • • •
Ei3an Bima &orporation Gational Life "nsurance &o. Ltd Delta Life "nsurance &o. Ltd. Baira Life "nsurance &ompany Ltd.
"ec#rities! Evidence of a corporation's debts or property.
15 | P a g e
'ecurities are documents t!at merely represent an interest or a rig!t in somet!ing elseK t!ey are not consumed or used in t!e same 6ay as traditional consumer goods %ypes of securities include notes stocks treasury stocks 3onds de3entures certificates of interest or participation in profits!aring agreements collateraltrust certificates preorgani@ation certificates or su3scriptions transfera3le s!ares in$estment contracts $otingtrust certificates certificates of deposit for a security.
!inance company an institution engaged in suc! speciali@ed forms of financing as purc!asing accounts recei$a3le e9tending credit to retailers and manufacturers discounting installment contracts and granting loans 6it! goods as security.
Mutual fund An openended fund operated 3y an in$estment company 6!ic! raises money from s!are!olders and in$ests in a group of assets in accordance 6it! a stated set of o3jecti$es
Pension $#n% & f#n% establishe% b' an em(lo'er to facilitate an% organi)e the investment of em(lo'ees* retirement f#n%s contrib#te% b' the em(lo'er an% em(lo'ees+ The (ension f#n% is a common asset (ool meant to generate stable gro,th over the long term- an% (rovi%e (ensions for em(lo'ees ,hen the' reach the en% of their ,orking 'ears an% commence retirement+
16 | P a g e
#%APTE&' 6 3An +vervie" of LB!L5
T4e #ompany' Lanka Banla !inance Limited' 17 | P a g e
Lanka Bangla Finance Limited LBFL a joint $enture financial institution esta3lis!ed 6it! multinational colla3oration is in operation since *==> !a$ing license from Banglades! Bank under Financial "nstitutions Act *==/. 5it! institutional s!are!olding structure educated moti$ated !uman resources friendly 6orking en$ironment dynamic corporate culture !as ena3led LBFL to 3e a di$ersified financial ser$ices pro$iding institution of t!e country. %ec!nical support pro$ided 3y 'ampat! Bank Limited 'ri Lanka !as 3een 6orking as a catalyst to emerge LBFL as most inno$ati$e financial solution pro$ider strictly in compliance 6it! t!e rules regulations of Banglades! Bank.
+b,ectives of t4e #ompany' Lanka Bangla Finance Limited practices participatory management and ad!eres to industry 3est practices in all endea$ors. "ncreasing stake!olders8 $alue is a natural dri$ing force for t!e people at Lanka BanglaK ne$ert!eless maintaining 4uality of ser$ice is at t!e core of 3usiness 6!ic! earned its unparalleled customer loyalty. ;$eryt!ing is done in compliance of all norms and regulatory re4uirements. %!e o3jecti$es of t!e compan y are gi$en 3elo6( •
;nric!ment e9pansion of financial offerings 3y introducing ne6 p roduct and ser$ice
•
lines t!roug! proper di$ersification and customi@ation of e9isting products and ser$ices for ensuring ma9imum market co$erage to meet e9ceed stake!olders8 needs e9pectations. &ontinuous impro$ement in operational processes t!roug! tec!nological ad$ancement
•
employee capacity 3uilding and impro$ement t!roug! !uman resources de$elopment programs t!ere3y ensuring effecti$e and efficient utili@ation of resources to ma9imi@e t!e $alue of t!e company. 'trengt!ening 3uilding 3locks to consolidate t!e p roduct ser$ice frame6ork and
•
maintaining strict compliance to good go$ernance norms and regulations to ensure long term sustaina3ility of t!e compan y. Building synergy among resources and acti$ities to ensure ma9imum outputs from
•
resource inputs. &ontri3ute to t!e society to s!are t!e ac!ie$ements of t!e company 6it! t!e nation.
18 | P a g e
#ode of #onduct of t4e #ompany' Lanka Bangla is a $alue dri$en organi@ation t!at means it does not depa rt from t!e principles e$en if it gi$es sometimes temporary 3enefit to t!e company. &ompany 3elie$es t!at its reputation and dignity is a3solutely priceless asset. %!e company8s affairs get t!e utmost priority all of t!e employees. %!e company8s reputation not only affects 6!et!er or not someone 6ill 3e customerK it also determines to 3e associated 6it! t!e firm. %!e code of conduct is designed to guide t!e employees of t!e company to o3ser$e comply 6it! t!e prudential norms of conduct manner and 3e!a$ior. "t is in alignment 6it! t!e company8s $ision and $alues to ac!ie$e t!e mission o3jecti$es and aims at en!ancing t!e et!ical and transparent process in managing t!e affairs of t!e company. "t also applies to e$ery employee of Lanka Bangla and may 3e furnis!ed to ot!ers for disc!arging t!e responsi3ilities. "n additional to t!e et!ical guidelines included in t!e code t!ere are many la6s and regulations t!at affect eac! of t!e 3usiness t!at company does. &omplying 6it! la6 is mandatory for e$eryone and is not su3ject to 3usiness priorities or indi$idual discretion.
Products and Services of t4e #ompany' Lanka Bangla is t!e lone non3anking financial institution 6!o operates 1aster&ard H"'A &ard including t!ird party processing 3usiness 6it! ot!er 3anks. %!e company is also in$ol$ed in dealing 6it! securities as 3roker in cap ital market 3ot! D!aka 'tock ;9c!ange and &!ittagong 'tock ;9c!ange t!roug! its su3sidiary named Lanka Bangla 'ecurities Limited 6!o is t!e 3usiness leader in t!is arena. %!e merc!ant 3anking department !as con$erted into anot!er su3sidiary of Lanka Bangla Finance to comply 6it! t!e statutory regulations t!at are catering t!e premier in$estment 3anking ser$ice. %!e products and ser$ices of t!e company are(
#redit and )nvestment Products' • •
Lease Finance %erm Finance
19 | P a g e
• • • •
'!ort %erm Finance 5orking &apital Finance Factoring Finance Personal Loan
Merc4ant Bankin +peration' •
"n$estors8 Portfolio
Manaement Services' • • • •
1argin loan "PO Ad$isory "ssue 1anagement #nder6riting
#ard +peration' • • •
1aster&ard and H"'A &ard "ssuing 1aster&ard Ac4uiring %!ird Party &ard Processing
0eposit Sc4emes' • • • • • • •
Periodic Return %erm Deposit &umulati$e %erm Deposit Dou3le 1oney %erm Deposit 1oney Builders %erm Deposit 1ortgage Loan :ome Loan Real ;state
0evelopers7 !inance #orporate Services' • •
'yndication of Loan &orporate Ad$isory 'er$ices
20 | P a g e
• • • • • • • • • • • • • •
"n$estment &ounseling '1; Finance '1; Finance for small 1edium 3usinesses to empo6er t!e people. Primary Dealers!ip Primary and 'econdary operation of %reasury Bill and %reasury Bond Auto Loan &ar Finance for indi$iduals and institutions 'tock Broking &utting edge Broking pro$ided 3y Lanka Bangla 'ecurities Limited
#orporate %ead8uarter' Safura To"er9Level:((;
Mission' 21 | P a g e
%o lead 3y e9ample t!roug! a commitment t!at empo6ers t!e organi@ation at e$ery le$el to stri$e for t!e !ig!est le$els of 4uality customer care and stake!older $alue.
>ision' %o 3e t!e nation8s most preferred financial ser$ices pro$ider.
!ocus' •
•
%o 3e t!e most soug!t after facilitator in creating 6ealt!. %o optimi@e t!e $alue of 3eing t!eir customer s!are!older or employee. %o esta3lis! strong regional presence.
!inancial %i4li4ts of Lanka Banla
22 | P a g e
Financial Position
+)*)
+)**
+)*+
+)*/
+)*,
ro6t! 2 Mear of &AR +)*, o$er I +)*/ A$erag eN
%otal Assets
*=/++
++/<) *-+=/
+,.=)I
++.2/I
Business Dis3ursement Property Plant and ;4uipment
,+>-
,,,,
><.,*I
,-.-)I
*=2
*<=
+/<
+=*
/=*+ = /*== > *=>2 ) /**
*=.+=I
*,*=/
/+-, < +2-* = **)>)
*=.<2I
%otal Lia3ilities
+2// = *<-> + -/>)
-.>+I
*+./
&urrent Assets
<=<-
=/,2 <=,2
*//* =/<*
*).//I
><>)
/>./*I
,.,=I
***-
,))
*=+< * *,=2 ,/*>
/).=,I
&urrent Lia3ilities Get current assets
*=<< > *)<) 2 =)<+
/=/2
<.<2I
/>.)/I
Gon&urrent Assets Long %erm Lia3ilities %erm Deposits
*)//>
*/)/2
2,2+
+2.>*I
>/,<
><->
**+.+
/>.2+I
,2-)
2/*)
>-*-
2,.)
/<./)I
%otal "n$estment Portfolio
*>+-=
+)),=
+/,+ ,
+2<* / ++-* *--< / /-2> -
=/.**I
-/+/
*//> *)-2 , *)<+ > +=<* +
++.-=I
+).-,I
+perational Performance 23 | P a g e
Financial Position
+)*)
+)**
+)*+
+)*/
+)*,
ro6t! of +)*, o$er +)*/
2 Mear &AR I A$erage N
Operating Re$enue Operating ;9penses Financial ;9penses Get Profit Before %a9 Get Profit After %a9
,*>-
/,*)
/2/>
2*<=
2*))
*.>*I
2.*+I
,=<
-+>
>=,
<=+
*+<2
,,.)/I
+-.>-I
*)*-
*/=>
+*,<
+>/*
/)//
**.)-I
/*.,,I
+//*
*/),
2*)
==>
,/,
2-.2*I
/,.//I
*
<2=
/,<
=22
,2,
2+.,,I
+=.2+I
;B"%DA
/>*)
+<*<
+<)<
,/-=
/=)=
*).2,I
*./*I
%urno$er of '!are %rading 3y LB'L
2-)/-
++=*+
*/2// 2
*/2>= 2
*<*-> ,
//.>=I
+,.2,I
24 | P a g e
#%APTE&' ? 3!inancial Analysis +f LB!L5
#urrent &atio' &urrent Ratio &urrent Asset &urrent Lia3ilities
25 | P a g e
1ear LBFL
2@(@ *.*,
2@(( *.),
2@(2 *.<,
2@(6 *.+=
2@(? *.,+
#omments' "f a companys current ratio is in t!is range t!en it generally indicates good s!ort term financial strengt!. "f current lia3ilities e9ceed current assets t!e current ratio is 3elo6 * t!en t!e company may !a$e pro3lems meeting its s!ortterm o3ligations. :ere LBFLs8 current ratio is o$er *. 'o LBFL !as good s!ortterm financial strengt!.
0ebt E8uity &atio' De3t ;4uity ratio %otal De3t '!are!olders ;4uity
1ear LBFL
2@(@ *).++
2@(( >.>+
2@(2 ,.),
2@(6 2.*>
2@(? 2.=-
#omments' %!e de3t to e4uity ratio is a financial li4uidity ratio t!at compares a companys total de3t to total e4uity. %!e de3t to e4uity ratio s!o6s t!e percentage of company financing t!at comes from creditors and in$estors. A !ig!er de3t to e4uity ratio indicates t!at more creditor financing 3ank loans is used t!an in$estor financing s!are!olders. :ere due to decreasing de3t e4uity ratio li4uidity is increasing of LBFL.
Earnins Per S4are' ;arnings Per '!are ;A% Gum3er of common 'tock
26 | P a g e
1ear LBFL
2@(@ *.<,
2@(( +.*/
2@(2 2.-2
2@(6 +.)2
2@(? +.=<
#omments' ;arnings per s!are ;P' is t!e portion of t!e company8s distri3uta3le profit 6!ic! is allocated to eac! outstanding e4uity s!are common s!are. ;arnings per s!are is a $ery good indicator of t!e profita3ility of any organi@ation and it is one of t!e most 6idely used measures of profita3ility. :ere Lanka Bangla8s profita3ility is raising year to year.
Price Earnins &atio Price ;arrings Ratio 1arket $alue per s!are ;P'
1ear LBFL
2@(@ *2.2-
2@(( *>.>*
2@(2 //./=
2@(6 *2.2,
2@(? +*.><
#omments' %!e price earnings ratio often called t!e P; ratio or price to earnings ratio is a market prospect ratio t!at calculates t!e market $alue of a stock relati$e to its earnings 3y comparing t!e market price per s!are 3y t!e earnings per s!are. "n ot!er 6ords t!e price earnings ratio s!o6s 6!at t!e market is 6illing to pay for a stock 3ased on its current earnings. :ere t!e ratings of Lanka Bangla8s price earnings ratio is upgrading day 3y day it8s a positi$e sign for a t!e company.
Return on ;4uity ( Return on ;4uity ;A% '!are!olders ;4uity
27 | P a g e
1ear LBFL
2@(@ /2.=2
2@(( /).-+
2@(2 ,/./=
2@(6 *).=2
2@(? *,.2,
#omments' %!is ratio indicates !o6 profita3le a company is 3y comparing its net income to its a$erage s!are!olders e4uity. %!e return on e4uity ratio RO; measures !o6 muc! t!e s!are!olders earned for t!eir in$estment in t!e company. %!e !ig!er t!e ratio percentage t!e more efficient management is in utili@ing its e4uity 3ase and t!e 3etter return is to in$estors. :ere Lanka Bangla8s indicates t!at its management cannot properly utili@ed its e4uity 3ase 3ecause its RO; is 3ecome decreasing year to year.
Return on Assets Return on Asset ;A% %otal Asset
1ear LBFL
2@(@ +.=,
2@(( /.*2
2@(2 -.=<
2@(6 *.=,
2@(? +.+*
#omments' Return on assets ROA is an indicator of !o6
profita3le a company is relati$e to its total assets. ROA gi$es an idea as to !o6 efficient management is at using its assets to generate earnings. &alculated 3y di$iding a companys annual earnings 3y its total assets ROA is displayed as a percentage. :ere Lanka Bangla8s management uses t!eir Asset properly from+)*) to+)*+ 3ut in +)*/ +)*, asset management is not maintain properly.
&eturn on )nvestment Return on "n$estment Get profit after interest and ta9 %otal Asset
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1ear LBFL
2@(@ /.2-
2@(( /.+<
2@(2 >.->
2@(6 +.)/
2@(? +./<
#omments' Return on in$estment RO" is performance measure used to e$aluate t!e efficiency of in$estment. "t compares t!e magnitude and timing of gains from in$estment directly to t!e magnitude and timing of in$estment costs. "t is one of most commonly used approac!es for e$aluating t!e financial conse4uences of 3usiness in$estments decisions or actions. :ere RO; is decreasing year to year in Lanka Bangla and it8s a t!reat for a company.
Total Asset Turnover &atio %otal Asset %urno$er Ratio Get 'ales %otal A$erage Asset
1ear LBFL
2@(@ *).>-
2@(( */.=)
2@(2 *<.-*
2@(6 */.**
2@(? *+.-,
#omments' %!e asset turno$er ratio is an efficiency ratio t!at measures a companys a3ility to generate sales from its assets 3y comparing net sales 6it! a$erage total assets. "n ot!er 6ords t!is ratio s!o6s !o6 efficiently a company can use its assets to generate sales. :ere is a fluctuating situation in Lanka Bangla in asset generating sales.
GonPerforming
1ear
2@(@
Loan 2@((
2@(2
2@(6
2@(? 29 | P a g e
LBFL
>.=
-.2*
/.=-
,.<,
2.)<
#omments' A nonperforming loan GPL is t!e sum of 3orro6ed money upon 6!ic! t!e de3tor !as not made !is sc!eduled payments for at least =) days. A nonperforming loan is eit!er in default or close to 3eing in default. Once a loan is nonperforming t!e odds t!at it 6ill 3e repaid in full are considered to 3e su3stantially lo6er. :ere nonperforming loans are decreasing in Lanka Bangla 6!ic! is $ery good sign for a company.
#%APTE&' 30 | P a g e
3!indins and #onclusion5
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profita3le. Again 6e see operating re$enue is t!e anot!er $aria3le 6!ic! !as a major impact on net profit. 'o it is undou3tedly true t!at if t!e re$enue increases ultimately it !as a positi$e effect o$er t!e profita3ility. %!e results of multiple regressions suggest t!at t!e selected independent $aria3les e9plain more t!an <<.=I c!anges in t!e net profit. By analy@ing t!e ot!er statistical results of multiple regressions 6e found t!at t!e results are $ery muc! consistent 6it! t!e simple regression. All t!e results are statistically significant and o$erall pro$ide an idea t!at li4uidity is t!e 3asic determinant of profita3ility in GBF" sector. 'o it can 3e inferred t!at t!is p romising and potential sector in Banglades! can flouris! $ery fast and en!ance profita3ility 3y impro$ing total e4uity and operating efficiency.
%o make t!e findings easier to understand summary of t!e analysis is gi$en 3elo6(
%!ere 6ere > $aria3les. - 6ere independent and * 6as dependent.
"n total *- 4uarterly data of eac! $aria3le 6as taken for analysis.
Almost all t!e independent $aria3les !a$e strong positi$e relation 6it! t!e
dependent $aria3le. %otal Asset !as direct effect on Get Profit.
%otal ;4uity !as direct effect on Get Profit.
%erm Deposit !as no significant t effect on Get Profit.
!as direct effect on Get Profit. Operational ;9pense !as direct effect on Get Profit
Operational Re$enue
&ecommendation "t 6as $ery difficult to find out any significant negati$e sides of Lanka Bangla Finance Limited among its numerous positi$e sides in term of profita3ility. :o6e$er t!ere are fe6 pro3lems need to 3e corrected 3y t!e management of t!e institution. 'ome necessary steps are recommended 3elo6 on t!e 3asis of collected data o3ser$ation e9pert staffs8 opinion and my kno6ledge and judgment(
Get profit 6as in a s!arp rise in t!e recent past. %!e company s!ould try to keep t!e momentum going.
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Operating re$enue !as significant effect on net profit. 'o t!e company s!ould look to ma9imi@e operating re$enue as muc! as possi3le.
Operating e9pense !as significant effect on net profit. 'o t!e company s!ould look to minimi@e operating e9pense as muc! as possi3le.
%erm deposit also !as significant effect on net profit. 'o t!e company s!ould attract more depositors to deposit 6it! attracti$e deposit sc!eme
%otal ;4uity directly affect t!e GAH of t!e company and in$estors pays a !uge attention on GAH so company s!ould al6ays try to increase t!e %otal ;4uity.
#onclusion %!e findings of t!e paper cannot 3e taken as conclusion and it 6ill 3e 6rong to end !ere 6it! suc! a result. Because t!is study gi$es a simple picture and lea$es room for furt!er study in different areas of GBF" functions suc! as products of producti$ity analysis Data ;n$elopment Analysis D;A &A1;L' rating ro3ust estimation approac! 3ased on t!e competing efficient structure ;' !ypot!esis effect of commercial property price mo$ements use of statistical tools and more. %!e impact of go$ernment policy in t!e performance of 'tandard 3ank limited is also not studied in t!is study 6!ic! must !a$e significant impact on t!e performance of Lanka
33 | P a g e
Bangla Finance Limited. Furt!er study also can 3e concluded on post and performs of GBF" sector.
:o6e$er t!e study pro$ides managers 6it! understanding of acti$ities t!at 6ould impro$e t!eir GBF"8s financial performance. %!e result of t!is study imply t!at it mig!t 3e necessary for t!e management of Lanka Bangla Finance Limited to take all t!e re4uired decisions 3y consistently o3ser$ing key financial data and de$iations among $arious elements to en!ance t!e financial position of t!is GBF".
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B)BL)+-&AP%1 Article'
Ali C Ak!ter 1 F. A!med : Q +)** Bank'pecific and 1acroeconomic "ndicators of Profita3ility ;mpirical ;$idence from t!e &ommercial Banks of Pakistan8 International Journal of Business and Social Science, + +/2+,+.
A3reu 1. 1endes H. &ommercial 3ank interest margins and Profita3ility( e$idence for some eu countries8 , ***.
Da$ydenko A. +)** JDeterminants of Bank Profita3ility in #k raineJ Underraduate Economic !evie" > */).
ul '. "rs!ad F. Qaman C +)** Factors Affecting Bank Profita3ility in Pakistan8 #$e !omanian Economic Journal, no./= -*<>.
:ays F. :. Lurgio ' A D il3ert A : ;fficiency Ratios and &ommunity Bank Performance8 Journal of Finance and %ccountancy, **2
Ea!angir G. '!ill '. and :a4ue A. E. +)** ;9amination of profita3ility in t!e conte9t of Banglades! 3anking industry8 %B%& Journal, +> /-,-.
'!a!Goor Ra!man %a@rina Fara "EARBA; 1arc! +)*+ Hol. * "ssue * Page Go( +- 0 /+
Fad@lan 'ufian and Royfai@al Ra@ali &!ong “D;%;R1"GAG%' OF BAGC
PROF"%AB"L"%M "G A D;H;LOP"G ;&OGO1M( ;1P"R"&AL ;H"D;G&; FRO1 %:; P:"L"PP"G;'” AA1EAF Hol. , Go. + =*0**+ +))<
ebsite' • • • • •
LB' Mearly 1arket Re$ie6 "ssue ,> Decem3er +)*) !ttp(666.dse3d.orgdse7nr37pro7usa7+)*).pdf D'; 1ont!ly Re$ie6 Hol. +-> !ttp(666.lanka3angla.com !ttp(666.l3s3d.com
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