Introduction

As a part of our MBA programs course Bank Financial Management we have been instructed to
choose two private commercial banks of Bangladesh to study. This will help us gain practical
knowledge of the financial management practices of Banks of Bangladesh. We have chosen AB
Bank Ltd. and AB Bank Ltd. Here we have analyzed their income statements and balance sheet.

Reporting Requirements of Financial Statements in Bangladesh

The scheduled banks of Bangladesh are required to prepare their financial statements in
accordance with the First Schedule (Section 38) of the Banking Companies Act 1991 as
amended by BRPD circular no. 14 dated 25 June 2003. According the prescribed format the
banks are required to prepare their financial statements both solo basis and consolidated basis.
Also data of previous year has to be shown alongside the present years.
Standard Format for Balance Sheet:
Like a typical balance sheet Bangladesh Banks standard format of balance sheet is divided into
two segments, Property and Assets and Liabilities and Capital. These segments then have sub
segments which has their own sub segments.
The Property and Assets portion is divided into eight segments as follows:
a)
b)
c)
d)
e)
f)
g)
h)

Cash
Balance with other banks and financial institutions
Money at call and short notice
Investments
Loan and advancements
Fixed assets
Other assets
Non-banking assets

On the other hand the liabilities and capital portion is divided into two main parts which are
Liabilities and Capital/ Shareholders Equity. The Liabilities part is divided into three segments as
follows:
a) Borrowings from other banks, financial institutions and agents
b) Deposits and other accounts
c) Other liabilities
The Capital/ Shareholders Equity has no sub segments.
Following is a sample of the prescribed format of balance sheet:

Page 1 of 10

<Name of the Bank>

Balance Sheet
At 31 December <Curr. Year>
Amount in Taka
At
31 Dec <Curr. Year>

At
31 Dec <Prev. Year>

00.00
00.00
00.00

00.00
00.00
00.00

00.00

00.00

00.00
00.00

00.00
00.00

Money at call and short notice

00.00

00.00

Investments
Government
Others

00.00
00.00
00.00

00.00
00.00
00.00

Loan and advancements

Loans, cash credits, overdrafts
Bills purchased and discounted

00.00
00.00
00.00

00.00
00.00
00.00

Fixed assets
Other assets
Non-banking assets
Total Assets

00.00
00.00
00.00
00.00

00.00
00.00
00.00
00.00

00.00

00.00

00.00

00.00

00.00

00.00

00.00

00.00

00.00

00.00

Notes
PROPERTY AND ASSETS
Cash
In hand (including foreign currencies)
Balance with Bangladesh Bank and it's
agent bank (including foreign
currencies)
Balance with other banks and financial
institutions
In Bangladesh
Outside Bangladesh

LIABILITIES AND CAPITAL

Liabilities
Borrowings from other banks, financial
institutions and agents
Deposits and other accounts
Current/ Al-wadeah current accounts
and other accounts
Bills payable
Savings bank/ Mudaraba savings bank
deposits

Page 2 of 10

<Name of the Bank>

Balance Sheet
At 31 December <Curr. Year>
Amount in Taka
At
31 Dec <Curr. Year>

At
31 Dec <Prev. Year>

00.00

00.00

00.00
00.00

00.00
00.00

Other liabilities

00.00

00.00

Total liabilities

00.00

00.00

Total shareholders' equity

Paid-up capital
Share premium
Statutory reserve
Revaluation reserve
Exchange equalization reserve
Other reserves
Retained earnings

00.00
00.00
00.00
00.00
00.00
00.00
00.00
00.00

00.00
00.00
00.00
00.00
00.00
00.00
00.00
00.00

Total liabilities and Shareholders'

equity

00.00

00.00

Notes
Fixed deposits/ Mudaraba fixed
deposits
Bearer certificates of deposit
Other deposits

Capital/ shareholders' equity

Along with the balance sheet banks have to disclose their off-balance sheet items according the
following format:
Amount in Taka
At
31 Dec <Curr. Year>

At
31 Dec <Prev. Year>

Contingent Liabilities
Acceptances and endorsements
Letters of guarantee
Irrecoverable letters of credit
Bills for collection
Other contingent liabilities

00.00
00.00
00.00
00.00
00.00
00.00

00.00
00.00
00.00
00.00
00.00
00.00

Other commitments
Documentary credits and short term

00.00
00.00

00.00
00.00

Notes
OFF-BALANCE SHEET ITEMS

Page 3 of 10

Amount in Taka
Notes
trade-related transactions
Forward assets purchased and forward
deposits placed
Undrawn formal standby facilities,
credit lines and other commitments
Total

At
31 Dec <Curr. Year>

At
31 Dec <Prev. Year>

00.00

00.00

00.00

00.00

00.00

00.00

Table 2: Prescribed format of off-balance sheet disclosure for banks in Bangladesh

Standard Format for Income Statement:

Bangladesh Banks standard format of income statement is named Profit and Loss Statement.
This statement has eight segments as shown below:
a)
b)
c)
d)
e)
f)
g)
h)

Operating income
Operating expenses
Profit before provision
Profit before tax
Net profit after tax
Appropriations
Retained surplus
Earnings per share

And following is a sample of the prescribed format of income statement:

<Name of the Bank>
Profit and Loss Statement
For the year ended 31 December <Curr. Year>

Notes

Amount in Taka
At
At
31 Dec <Curr. Year> 31 Dec <Prev. Year>

OPERATING INCOME
Interest income
interest paid on deposits and borrowings
Net interest income
Investment income
Commission, exchange and brokerage
Other operating income
Total operating income (A)

00.00
(00.00)
00.00

00.00
(00.00)
00.00

00.00
00.00
00.00
00.00
00.00

00.00
00.00
00.00
00.00
00.00
Page 4 of 10

<Name of the Bank>

Profit and Loss Statement
For the year ended 31 December <Curr. Year>
Amount in Taka
Notes

At
31 Dec <Curr. Year>

At
31 Dec <Prev. Year>

00.00
00.00
00.00
00.00
00.00

00.00
00.00
00.00
00.00
00.00

OPERATING EXPENSES
Salaries and allowances
Rent, taxes, insurance, electricity, etc.
Legal expenses
Postage, stamp, telecommunication, etc.
Stationary, printing, advertisements, etc.
Chief executive/ Managing director's
salary and fees
Directors' fees
Auditors' fees
Depreciation and repairs of Bank's assets
Other expenses
Total operating expenses (B)

00.00

00.00

00.00
00.00
00.00
00.00
00.00

00.00
00.00
00.00
00.00
00.00

Profit before provision (C=A-B)

00.00

00.00

General provision
Specific provision
Provision for off-balance sheet items
Provision for diminution in value of
investments
Other provisions
Total provision (D)

00.00
00.00
00.00

00.00
00.00
00.00

00.00

00.00

00.00
00.00

00.00
00.00

Profit before tax (C-D)

Provision for taxation
Current tax
Deferred tax
Net profit after tax

00.00
00.00
00.00
00.00
00.00

00.00
00.00
00.00
00.00
00.00

00.00
00.00
00.00
00.00
00.00

00.00
00.00
00.00
00.00
00.00

Appropriations
Statutory reserve
General reserve
Retained surplus
Earnings per share (EPS)

Table 2: Prescribed format of income statement for banks in Bangladesh

Page 5 of 10

Balance Sheet Analysis

Here we have analyzed the composition of our two banks balance sheets by observing the
percentage mix of sources and uses of funds. As reference we have used an average of three
years data namely 2011-2013.

Composition of Assets:
The following chart shows the composition of assets of Bank Asia Ltd. and AB Bank Ltd.

Bank Asia Ltd.

3.41% 5.25% 5.53% 1.59%

AB Bank Ltd.
8.49%
0.16%

5.67%

2.29%

1.00%
14.28%

17.78%

66.39%

4.54%

63.73%

Cash
Balance with other banks and financial institutions
Money at call and short notice
Investments
Loan and advances
Fixed assets
Other assets
Figure 1: Composition of assets of Bank Asia and AB Bank

Bank Asia And AB banks average total assets on 2013 were Tk. 140.6 billion and 170.8 billion
respectively. From the chart we can see that both the banks asset structure is quite similar.
Loan and advances takes up the highest position for both followed by investments then cash.
But a significant difference is in the percentages of cash and investments. Bank Asia tends to
keep less cash and invest more while AB Bank tends to keep more cash and invest less.

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 Capital Structure:
The following chart shows the capital structure of Bank Asia Ltd. and AB Bank Ltd.

Bank Asia Ltd.

AB Bank Ltd
9.52%

90.48%

8.94%

91.06%

Total shareholders' equity

Total liabilities

Figure 2: Capital structure of Bank Asia and AB Bank

The capital structure of both banks is similar as well. Both are highly leveraged with around 90
percent debt. Being commercial banks it is natural to be highly leveraged.

Composition of Liabilities:
The following chart shows the composition of liabilities of Bank Asia Ltd. and AB Bank Ltd.

Bank Asia Ltd.

AB Bank Ltd.
8.26%

8.43%

1.40%

4.47%

3.22%

0.00%

80.28%

78.16%

Borowings from other banks, financial institutions and agents

Subordinateed non-convertible zero coupon bonds
Deposits and other accounts
Other liabilities
Figure 3: Composition of liabilities Bank Asia and AB Bank

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Both banks share a similar composition of liabilities. As depository banks obviously most of their
liabilities -of around eighty percent- is concentrated in different deposit accounts. Besides this
Bank Asia has issued zero coupon bonds which is quite a new trend in the Bangladeshi financial
market.

Income Statement Analysis

Here we have analyzed the composition of our two banks income statements by observing the
percentage mix of all the elements. Like before we have used an average of three years data
namely 2011-2013.

Income generation:
Commercial banks have two sources of income: interest income and non-interest income.

Bank Asia Ltd.

AB Bank Ltd

26.35%
34.57%

65.43%
73.65%
Total interest income

Total non-interest income

Figure 4: Sources of income of Bank Asia and AB Bank

As like any other commercial bank both the banks main source of income is from interest
income. But AB Banks reliance on non-interest income is considerably higher than Bank Asia.
Efficiency Measurement:
Here we have utilized different income statement figures to measure the efficiency of our
chosen banks from different perspectives.

3.00%
2.00%

2.24%

1.58%

1.00%
0.00%
Bank Asia

AB Bank

Figure 5: Operating efficiency of Bank Asia and AB Bank

Page 8 of 10

In this case the lower the ratio the better so Bank Asia is ahead here.

15.00%

10.67%
7.90%

10.00%
5.00%
0.00%
Bank Asia

AB Bank

Figure : Return on equity of Bank Asia and AB Bank

In this case the higher the ratio the better so Bank Asia is ahead here.

Page 9 of 10

Appendix
Composition of Assets:
Items (average of 3 years)

Bank Asia Ltd.

Total Assets
Cash
Balance with other banks and financial institutions
Money at call and short notice
Investments
Loan and advancements/ investments
Fixed assets
Other assets
Non-banking assets

140,622,841,992.00
7,776,606,723.33
2,234,097,997.67
220,000,000.00
24,999,590,615.33
93,353,351,151.00
4,797,795,910.67
7,388,066,297.67
0.00

AB Bank Ltd.
100.00%
5.53%
1.59%
0.16%
17.78%
66.39%
3.41%
5.25%
0.00%

178,270,269,398.00
10,114,601,183.00
8,092,797,163.33
1,776,335,833.33
25,448,844,279.33
113,608,424,930.33
4,085,452,571.67
15,143,813,436.33
0.00

100.00%
5.67%
4.54%
1.00%
14.28%
63.73%
2.29%
8.49%
0.00%

Capital Structure
Items (average of 3 years)
Total liabilities
Total shareholders' equity

Bank Asia Ltd.

127,242,239,357.67
13,380,602,634.00

AB Bank Ltd.
9.52%
90.48%

162,328,084,250.33
15,942,185,147.67

8.94%
91.06%

Composition of Liabilities
Items (average of 3 years)
Total liabilities and Shareholders' equity
Total liabilities
Total shareholders' equity
Borrowings from other banks,
financial institutions and agents
Subordinated non-convertible
zero coupon bonds
Deposits and other accounts
Other liabilities

Bank Asia Ltd.

AB Bank Ltd.

140,622,841,992.00
127,242,239,357.67
13,380,602,634.00

100.00%
9.52%
90.48%

178,270,269,398.00
162,328,084,250.33
15,942,185,147.67

100.00%
8.94%
91.06%

1,964,167,002.33

1.40%

7,961,647,795.67

4.47%

4,529,333,892.00
112,894,082,877.67
11,615,990,537.00

3.22%
80.28%
8.26%

0.00
139,341,364,448.67
15,025,072,006.00

0.00%
78.16%
8.43%

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