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Introduction
Banking system plays a very important role in the economic life of the nation. The health of the economy is closely related to the soundness of its banking system. In a developing country like Bangladesh the banking system as a whole play a vital role in the progress of economic development. A bank as a matter of fact is just like a heart in the economic structure and the Capital provided by it is like blood in it. As long as blood is in circulation the organs will remain sound and healthy. If the blood is not supplied to any organ then that part would become useless. So if the finance is not provided to agriculture sector or industrial sector, it will be destroyed. Loan facility provided by banks works as an incentive to the producer to increase the production. Banking is now an essential part of our economic system. Modern trade and commerce would almost be impossible without the availability of suitable banking services. First of all, banking promotes savings. All manner of people, from the ordinary laborers and workers to the rich land owners and businessmen, can keep their money safely in banks and saving centers. Secondly, banking promotes investments. Banks easily invest the money they get in industry, agriculture and trade. They either invest it directly or advance loans to other investors. Thirdly, it is most through banks that foreign trade is carried on. Whether we export or import, it is through banks that money is transferred from one country to another. For example, bills of exchange and letters of credit are the regular ways banks use to transfer money. A number of recent studies, however, indicate that the banking sector plays a more important role than it was believed earlier. Our report is focus onto some commercial banks profit function.

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Objective of the study


the main objective of the study is: 1) To evaluate the profit functions of those selected commercial banks. 2) To determine whether or not the Net profit is affected by other factors. 3) To appraise significant factors which are affecting net profit.

Limitations
It was not possible to collect data personally by researching the whole country so we have lacking of primary data in our research report. We have to depend on secondary data source. Validity and authenticity of secondary data. Time period to make detailed analysis Number of branches, Lending interest rate & deposit interest rates are in percentile and low numerical form. So regression model will not show perfect result.

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Selected Banks Profile

Mercantile Bank Limited emerged as a new commercial bank to provide efficient banking services and to contribute socio-economic development of the country. The Bank commenced its operation on June 2, 1999. The Bank provides a broad range of financial services to its customers and corporate clients. The Board of Directors consists of eminent personalities from the realm of commerce and industries of the country. Vision: Would make finest corporate citizen. Mission: Will become most caring, focused for equitable growth based on diversified deployment of resources, and nevertheless would remain healthy and gainfully profitable Bank. Objectives: Strategic objectives: * To achieve positive Economic Value Added (EVA) each year. * To be market leader in product innovation. * To be one of the top three Financial Institutions in Bangladesh in terms of cost efficiency. * To be one of the top five Financial Institutions in Bangladesh in terms of market share in all significant market segments we serve. Financial objectives * To achieve 20% return on shareholders' equity or more, on average. Key People: Md. Abdul Jalil Al-Haj Akram Hussain (Humayun) A. S. M. Feroz Alam A.K.M. Shahidul Haque Chairman Vice Chairman Vice Chairman Managing Director & CEO

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The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a public company limited by shares for carrying out all kinds of banking activities with Authorised Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.100 each. The Company was also issued Certificate for Commencement of Business on the same day and was granted license on October 05, 1999 by Bangladesh Bank under the Banking Companies Act 1991 and started its banking operation on October 24, 1999. As envisaged in the Memorandum of Association and as licensed by Bangladesh Bank under the provisions of the Banking Companies Act 1991, the Company started its banking operation and entitled to carry out the following types of banking business: (i) All types of commercial banking activities including Money Market operations. (ii) Investment in Merchant Banking activities. (iii) Investment in Company activities. (iv) Financiers, Promoters, Capitalists etc. (v) Financial Intermediary Services. (vii) Any related Financial Services. The Company (Bank) operates through its Head Office at Dhaka and 77 branches. The Company/ Bank carries out international business through a Global Network of Foreign Correspondent Banks. Key people: Dr. Arif Dowla, Mr. Rashed Ahmed Chowdhury, Mr. Anis A. Khan, Mr. Md. Ahsan-uz Zaman, Mr. Quamrul Islam Chowdhury, Chairman Vice Chairman MD & CEO Additional Managing Director Deputy Managing Director & Company Secretary.

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National Bank Limited is one of the leading private commercial bank having a spread network of 139 branches and 15 SME/Agri Branches (total 154 service locations) across Bangladesh and plans to open few more branches to cover the important commercial areas in Dhaka, Chittagong, Sylhet and other areas in 2010. National Bank Limited has been licensed by the Government of Bangladesh as a Scheduled commercial 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 Bank within a period of 25 years of its operation achieved a remarkable success and met up capital adequacy requirement of Bangladesh Bank. National Bank Limited is a customer oriented financial institution. It remains dedicated to meet up with the ever growing expectations of the customer because at National Bank, customer is always at the center Mission: Efforts for expansion of our activities at home and abroad by adding new dimensions to our banking services are being continued unabated. Alongside, we are also putting highest priority in ensuring transparency, account ablility, improved clientele service as well as to our commitment to serve the society through which we want to get closer and closer to the people of all strata. Winning an everlasting seat in the hearts of the people as a caring companion in uplifting the national economic standard through continuous upgradation and diversification of our clientele services in line with national and international requirements is the desired goal we want to reach. Vission: Ensuring highest standard of clientele services through best application of latest information technology, making due contribution to the national economy and establishing ourselves firmly at home and abroad as a front ranking bank of the country are our cherished vision.

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Data & Methodology


Primary Source of data:
The whole study depend on secondary source of data and there is no need of primary data. Secondary Source of data: All data are collected from respective banks Annual report which are available in those banks website. Data

Yea r 200 7 200 8 200 9 201 0 201 1

NPL 893.99 1242.4 7 1252.0 5 1187.8 1 2084.6 2

Equity capital 2929.30 3470.09 4296.25 7185.69 9569.33

Liquidit Investmen y t 4145.34 4374.12 4790.16 4877.12 6948.62 7099.97 6264.71 9664.72 10937.20 24645.38

Net profit before tax 1198.84 1281.68 1662.78 1435.93 3004.17

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Table 1: Mercantile Bank Ltd. financial data from year 2007-2011

Avg.

Avg.

Ye ar 20 07 20 08 20 09 20 10 20 11

Deposit Amoun t 39348.0 0 49538.3 5 58033.4 7 75629.1 4 102262. 02

Loan Amou nt 31877. 00 41993. 95 31877. 86 43419. 36 48295. 55

Marketi ng Expens e 60.50 63.49 82.34 116.66 124.70

No. of Branc hes 41 42 53 65 75

Lendi ng Rate % 14.00 14.00 15.00 16.00 16.00

Depo sit Rate % 7.50 7.50 8.00 9.00 9.50

Manage rial Expense 8.12 8.61 10.51 9.17 10.16

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Year 2007 2008 2009 2010 2011

Deposi t Amoun t 24776.9 2 33820.4 1 42354.0 7 45129.4 8 59050.8 0

Loan Amoun t 22683.2 3 28529.3 5 33883.9 2 39676.0 0 47005.0 0

Marketi ng Expense 16.49 27.48 33.55 75.51 92.83

No. of Branche s 30 36 44 53 60

Avg. Lendin g Rate % 14.00 14.50 15.00 15.00 16.00

Avg. Depos it Rate % 7.50 7.50 8.00 9.00 9.50

Manageri al Expense 4.22 4.80 7.31 9.75 9.77

Year 2007 2008 2009 2010 2011

NPL 541.6 4 1402. 85 952.7 6 903.9 7 1195. 10

Equity capital 2044.30 2483.09 3684.51 4814.93 4378.81

Liquid ity 2229.6 1 2002.3 1 3103.9 5 3456.1 1 4716.1 3

Investm ent 3956.53 5606.49 9537.97 9216.00 20149.00

Net profit before tax 395.55 558.53 1391.92 1490.55 975.70

Table 2: Mutual Trust Bank Ltd. financial data from year 2007-2011

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Year 2007 2008 2009 2010 2011

Deposi t Amou nt 51964. 55 60187. 88 76814. 65 4101.7 9 5838.1 5

Loan Amoun t 49665.0 7 50665.0 7 64962.3 1 92003.5 6 116063. 03

Marketing Expense 43.44 83.13 110.62 121.82 112.72

No. of Branc hes 85 90 105 120 139

Avg. Lendi ng Rate % 14.00 14.50 15.00 15.00 16.50

Avg. Depo sit Rate % 7.50 8.50 9.50 10.50 12.50

Manage rial Expense 9.69 9.44 11.14 16.44615 1 19.03346 3

Table 3: National Bank Ltd. financial data from year

Ye ar 20 07 20 08 20 09 20 10 20 11

NPL 2998. 96 3305. 76 3402. 25 3642. 57 3264. 95

Equity capital 4566.36 6130.80 8916.76 19118.29 21562.55

Liquidi ty 4473.0 7 5426.9 2 6843.6 9 8702.1 5 10353. 47

Investm ent 7746.16 9142.30 12315.20 24953.97 29994.04

Net profit before tax 2035.34 2836.48 3178.36 8821.86 9448.87

2007-2011

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Year 200 7 200 8 200 9 201 0 201 1

Deposi t 38696. 49 47848. 88 59067. 40 41620. 14 55716. 99

Loan 34741. 77 40396. 12 43574. 7 58366. 31 70454. 53

Marketi ng Expens e 40.14 58.03 75.50 104.66 110.08

No. of Branc hes 52 56 67 79 91

Avg. Lendi ng Rate % 14.00 14.33 15.00 15.33 16.17

Avg. Depo sit Rate % 7.5 7.8 8.5 9.5 10.5

Manage rial Expense 7.34 7.62 9.65 11.79 12.99

Table 4: Average Financial Data of Mercantile Bank LTD.

Ye ar 20 07 20 08 20 09 20 10 20 11

NPL 1478.1 97 1983.6 93 1869.0 2 1911.4 5 2181.5 58

Equity Capital 3179.986 4027.995 5632.506 10372.97 11836.9

Liquidi ty 3616.0 07 3934.4 49 4912.6 5678.4 62 7339.4 08

Investm ent 6267.553 7004.501 10505.96 15035.72 24929.47

Net Profit Before Tax 1209.911 1558.898 2077.686 3916.115 4476.248

Mutual Trust Bank LTD. National Bank LTD. from year 2007-2011

*** N.B: All amounts (except No. of Branches, Avg. Lending Rate, and Avg. Deposit Rate), are in BDT million.

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Regression Equation: Whether or not the following Independent variables: 1. Deposit amount, 2. Loan amount, 3. Marketing Expense, 4. No. of branches, 5. Avg. Lending Rate, 6. Avg. Deposit Rate, 7. Managerial Expense, 8. NPL (Non performing Loan), 9. Equity Capital, 10. Liquidity, 11. Investment amount Are affected the Dependent variable- Net Profit of those above Banks we run the following regression equationY = a+ Where, + + +

Y= Depended Variable Net profit X= Independent variables And represents the coefficients of each independent variable.

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Analysis and Interpretation of Regression Equation


As because there are currency amount, percentage amount and as well as numerical values in independent variables data, we run multiple regressions by taking the independent variables in some segment and compare dependent variables with each segment. And test the following Hypothesis: H0 = Not affected H1 = Affected

No. of branches, Avg. Lending Rate, Avg. Deposit Rate with Net profit
With above variables data regression analysis are as followsRegression Statistics 0.997842 Multiple R 42 0.995689 R Square 49 0.982757 Adjusted R Square 96 191.7527 Standard Error 39 Observations 5 ANOVA df Regressi on Residual Total SS 8493339.0 3 87 36769.112 1 98 8530108.1 4 99 Coefficie nts Intercept No. of Branches 18468.54 38 146.1273 83 MS 283111 3 36769. 11 F 76.997 04 Significance F 0.083533775

Standard Error 11726.2956 121.7365803

t Stat 1.5749 68 1.2003 57

P-value 0.3601 43 0.4421 91

Lower 95%

Upper 95%

130528.1 167465.25 6 6 - 1692.9372 1400.682 9

P a g e | 13 2153.829 3 722.2908 55 2.5378 9 0.5331 22

Avg. Lending Rate Avg. Deposit Rate

848.6707469 1354.832756

0.2389 54 0.6881 88

- 8629.5549 12937.21 8 - 17937.073 16492.49 2

Here, R square is 0.99 which is greater than 0.8. that means the above data show goodness of fit or 99% Variation in the Net profit can be explained by those three variables. The intercept a = 18468.5438 which mean the sum of equation will be 18468.5438 when all other variables remain constant. The p-value of No. of branches and Avg. lending rate are less than 0.5 that means those two variable are significant to the dependent variable net profit but p-value of Avg. Deposit rate is greater than 0.05, that means it is not significant with Net Profit. At 0.05 level of significance with degree of freedom (3,1) is 4.15 which is less than F test statistics 76.99. So Null hypothesis is rejected and alternate hypothesis is accepted. We can say that those variables are affected Net profit. Deposit amount, Loan amount, Equity Capital with Net profit
With above variables data regression analysis are as followsRegression Statistics Multiple R 0.99 R Square 0.99 Adjusted R Square 0.999 Standard Error 26.092 Observations 5 ANOVA df Regressi on Residual Total 3 1 4 SS 852941 2 680.81 62 853009 3 Coefficie nts Intercept -81.4805 MS 284313 7 680.81 62 F 4176.0 72 Significance F 0.011375

Standard Error 121.4197

t Stat -0.6710

Pvalue 0.623 73

Lower 95% -1624.26

Upper 95% 1461.303

P a g e | 14 Deposit Amount Loan Amount Equity Capital 0.300 49 0.323 5 0.039 1

-0.00345 0.010261 0.3408

0.001763 0.005717 0.020979

-1.9588 1.7949 6 16.244 4

-0.02585 -0.06238 0.074231

0.018945 0.082898 0.607368

Here, R square is 0.99 which is greater than 0.8. that means the above data show goodness of fit or 99% Variation in the Net profit can be explained by those three variables. The intercept a = -81.4805, which mean the sum of equation will be -81.4805 when all other variables remain constant. The p-value of Deposit amount, loan Amount and equity capital are less than 0.5 that means those three variables are significant to the dependent variable net profit. At 0.05 level of significance with degree of freedom (3,1) is 4.15 which is less than F test statistics 4176.072. So Null hypothesis is rejected and alternate hypothesis is accepted. We can say that those variables are affected Net profit. Liquidity, Investment, NPL with Net Profit
With above variables data regression analysis are as followsRegression Statistics 0.9562 Multiple R 57 0.9144 R Square 27 0.6577 Adjusted R Square 06 854.37 Standard Error 09 Observations 5 ANOVA df Regressi on Residual Total 3 1 4 SS 780014 3 729949 .6 853009 3 MS 260004 8 729949 .6 F 3.5619 55 Significance F 0.367078

Coefficie nts Intercept -2627.46

Standard Error 6143.047

t Stat 0.4277 1

P-value 0.7427

Lower 95% -80682.3

Upper 95% 75427.36

P a g e | 15 0.5691 01 0.1668 4 0.1395 5 0.6706 2 0.8947 54 0.9117 3

Liquidity Investme nt NPL

1.357842 -0.07448 -0.3688

2.385943 0.446394 2.642773

-28.9584 -5.74644 -33.9484

31.67412 5.59749 33.21081

Here, R square is 0.91 which is greater than 0.8. that means the above data show goodness of fit or 91% Variation in the Net profit can be explained by those three variables. The intercept a = -2627.46, which mean the sum of equation will be -2627.46 when all other variables remain constant. The p-value of Liquidity, Investment, NPL are greater than 0.5 that means those three variables are not significant to the dependent variable net profit. At 0.05 level of significance, with degree of freedom (3,1) is 4.15 which is greater than F test statistics 3.56. So Null hypothesis is accepted or fail to reject. We can say that those variables are not affected Net profit.

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Marketing Expense, Managerial Expense with Net Profit


With above variables data regression analysis are as follows-

Regression Statistics 0.9852 Multiple R 17 0.9706 R Square 52 Adjusted R 0.9413 Square 04 353.79 Standard Error 44 Observations 5 ANOVA df Regressi on Residual Total 2 2 4 SS 827975 2 250340 .9 853009 3 Coefficie nts Intercept Marketing Expense Managerial Expense -2577.8 11.97486 435.0146 MS 413987 6 125170 .5 F 33.07 39 Significance F 0.029348

Standard Error 1321.614 29.12185 348.807

t Stat 1.9504 9 0.4111 98 1.2471 5

P-value 0.1904 1 0.7208 01 0.3385 83

Lower 95% -8264.25 -113.326 -1065.78

Upper 95% 3108.648 137.2761 1935.81

Here, R square is 0.97 which is greater than 0.8. that means the above data show goodness of fit or 97% Variation in the Net profit can be explained by those three variables. The intercept a = --2577.8, which mean the sum of equation will be -2577.8 when all other variables remain constant. The p-value of Marketing Expenses is greater than 0.5 that means this variable is not significant to the dependent variable net profit. At 0.05 level of significance with degree of freedom (2,2) is 5.86 which is less than F test statistics 33.0739. So Null hypothesis is rejected and alternate hypothesis is accepted. We can say that those variables are affected Net profit.

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Conclusion
By testing all variables with respect to dependent variable Net Profit, we find that In 3 segments which are include independent variables- No. of Branches, Avg. Lending Rate, Avg. Deposit Rate, Loan Amount, Deposit amount, Equity Capital, Marketing Expense, Managerial Expense the null hypothesis is rejected. So that can conclude that those variables are effected Net profit of those selective Banks as per as the Data. In one Segment which include independent variables Liquidity, Investment and Non Performing Loans the null hypothesis is accepted or fail to reject. So in that case we can conclude that those variables are not affected those selective Banks Net Profit according to those data.

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References
[1]. www.nbl-bd.com [2]. www.mtbl-bd.com [3]. www.mercantilebank-bd.com [4]. www.bangladeshbank.org.bd [6]. www.wikipedia.com [7]. www.scribd.com
[8]. www.economicreview.com

[9] Douglas, Linch, Statistical technique for Business & Economics, 14th edition by Tata-McGraw Hill Publications, 2010