Banks

Bangladesh Prime Bank

Credit Analysis

Ratings Rating Rationale

Assessment
Prime Bank ƒ Prime Bank is among the best of Bangladeshi banks. Our Individual rating
Individual D
Support 5
reflects its reasonably sound financial condition but also its relatively short
history, as well as the challenging operating environment in Bangladesh.
Sovereign Risk Although it has grown rapidly since its inception, it has maintained a far
Foreign Long-Term NR healthier financial profile than the problematic state banks or other private
Local Long-Term NR banks.
Outlook None
ƒ PB has been profitable since its first year of operations. Profits were low in
1998 when the bank incurred losses on its ill-timed stock market
investments, but PB has reported an average ROE of 41% (2002 ROE: 30%)
between 1999 and 2002. The fact that the average inflation in Bangladesh
Financial Data
Prime Bank
has been around 6% during this period, the bank's real return has been
31 Dec 2002 31 Dec 2001 strongly positive.
Total Assets (USDm) 346.2 276.1 ƒ PB's asset quality is remarkable compared with its peers. The banking
Total Assets (BDTm) 20,047.7 15,736.9 system average NPL ratio has been around 35% in recent years, and even for
Equity (BDTm) 1,526.4 1,258.3
Net Income (BDTm) 418.1 483.0 the private banks it has been around 20%. Prime Bank's NPL ratio in
ROA (%) 2.34 3.38 contrast was just 1.48% at end-2002 (1.89% at June 2003) and has rarely
ROE (%) 30.03 44.82
Equity/Assets (%) 7.61 8.00
been above 2% in the past. The bank maintains higher loan loss provisions
than regulatory stipulations, and its NPLs were 73% covered by specific
reserves at end-2002 (more than 100% in 2001). Together with general
reserves, which were nearly 1% of unclassified loans as at end-2002, total
Analysts reserves covered 135% of the bank's NPLs.
Ambreesh Srivastava, Singapore
+65 6336 5704 ƒ However, PB's NPL ratios are somewhat flattered by the dilution effect of
ambreesh.srivastava@fitchratings.com its rapid loan growth, which has averaged about 35% between 1999 and
2002. Also, inclusive of restructured loans, the bank's NPL ratio at June
Vivek Srivastava, Mumbai 2003 may be about 2.5%, but nevertheless, extraordinarily low compared
+91 22 5637 0923 with its peers. On the negative side, nearly 72% of the bank's NPLs (which
vivek.srivastava@fitchratings.com grew by 86% in absolute terms during 2002) are in the 'loss' category, but as
noted above, our concerns are somewhat muted thanks to the bank's ample
David Marshall, Hong Kong reserves.
+852 2263 9911
ƒ PB is well capitalised by local standards with a Total CAR of 12.43%
david.marshall@fitchratings.com
(although this ratio has been declining since 1999) and an equity to assets
ratio of 7.6% at end-2002.
ƒ Prime's low-cost customer deposits are understandably smaller compared
with larger banks, but with about 22% of its assets deployed in government
securities and deposits with banks, its liquidity position appears satisfactory.
ƒ PB is primarily a corporate bank focusing on trade finance. Its loan
distribution is about 40% towards large companies, 35% to SMEs, and 10%
to small companies. Consumer lending is very small.
Support
ƒ Given its small size and private ownership, Prime Bank would look to its
own shareholders for support should this be needed. However, in the
absence of a large, institutional controlling shareholder, we have
reservations as to their propensity or ability to provide funds in an extreme
situation. The government's propensity to provide timely support to Prime
Bank is also likely to be less than for larger state banks. We therefore, assign
a support rating of "5" to Prime Bank, which implies that support is possible
but cannot be relied upon.
Background
ƒ Prime Bank (PB) is one of the new private banks, which was established in
1995 by a group of entrepreneurs. With 27 branches and 730 staff, the bank
aims to be the 'most efficient bank in Bangladesh in terms of customer
service, profitability and technological abilities'.

31 December 2003

www.fitchratings.com

„ PROFILE
• A small but well managed private bank
• Progressive management which has
deliberately kept ‘insider lending’ at the
minimum, the primary cause of the poor
health of Bangladeshi private banks
Prime Bank is one of the new Bangladeshi private
banks, which was established in 1995 by a group of
businessmen. Private banks as a group are small in
Bangladesh; the banking system is dominated by the
state-owned banks, even as their market share (both
in loans and deposits) has been declining over the
past few years. While government banks are
insolvent many times over (and survive mainly on
the strength of the implicit sovereign support), most
private banks too are extremely weak and are beset
with many problems. Arguably, Bangladesh has too
many financial intermediaries in relation to the size
of its economy (2002 GDP: USD 46b): there are 30
private banks besides four nationalised commercial
banks, five government-owned specialised banks, 10
foreign banks and 28 non-bank financial institutions.
The large number of private banks is mainly because
the central bank liberally issued licenses to
entrepreneurs in the 1980s and 1990s (stopped since
2002) for setting up banks; even some ‘less credible’
entrepreneurs were able to obtain such licenses, and
the banks promoted by them eventually got into all
sorts of problems. Further, due to the narrow and
skewed nature of the Bangladesh economy
(development is concentrated in and around Dhaka
and Chittagong – the two main cities, while a large
part of the country is undeveloped), most banks
compete in a limited geographical area and with a
relatively limited set of ‘good’ borrowers.
Prime Bank is listed with ‘promoter shareholders’
collectively holding a 46% stake in the bank. One of
the main reasons for the bank’s good financial
condition is that the bank’s promoters, who have
other business interests as well, have refrained from
‘using’ the bank for insider lending. This is a huge
issue for Bangladeshi private banks, and together
with somewhat lax supervision, is the single biggest
factor for the poor financial condition of most
private banks. While Prime Bank has so far benefited
from its promoter shareholders’ approach of
maintaining an arms-length relationship between the
bank and their other businesses, whether this would
continue to be the case in future, particularly when
the second-generation promoters become directors of
the bank, remains to be seen.
The bank has a rather large board (20 members in
all) with representatives from all the major
shareholders. Until recently, central bank norms
prevented any one shareholder individually holding
Prime Bank: December 2003
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an equity stake of greater than 5% in the bank, which,
we are informed, is the reason for the twenty-
member board of directors. The central bank rules in
this regard have since undergone a slight change: the
individual holding has now been enhanced to 10%
and the size of the Board will now be restricted to 13
members, which should include at least two
independent (non-promoters) directors. In light of
these developments, Prime Bank’s board will likely
undergo some changes in the near future.
The bank’s board has a policy of rotating the
Chairman’s position amongst various members;
consequently, the bank has a new Chairman every
year. The executive management also appears a bit
top heavy (relative to the size of the bank) with one
additional managing director besides the managing
director, a Senior Executive Vice President, four
Executive Vice Presidents and many Senior Vice
Presidents. Prima facie, the ‘rotating’ Chairman and
the presence of effectively two managing directors
could lead to some overlapping responsibilities and
possible conflict; however, this does not seem to
have happened so far and the bank continues to
perform satisfactorily.
Prime Bank mainly caters to the trade finance market.
Manufacturing activity in Bangladesh is relatively
subdued, but there are certain industries such as
textiles, where the country has a competitive
advantage. Many textiles manufacturers export their
merchandise (garment exporters for example) and it
is this customer segment that the bank mainly caters
to. The bank is involved at all stages of the export
cycle: it gives pre-shipment finance for working
capital and also provides post-shipment facilities
such as bill discounting. In addition, the bank also
undertakes some amount of project financing for its
clients’ plant and machinery, or modernisation
requirements. The lending restrictions on state banks
(due to their poor capital position) have helped
private banks such as Prime, which have been
growing at rapid rates (30-35% per annum). While
the bank has done well so far, its relatively small size
makes it somewhat vulnerable to unexpected loan
losses if some large accounts go bad.
Over the last three years, Prime Bank has introduced
credit cards in association with MasterCard. The
credit card market in Bangladesh is still relatively
undeveloped with only about 250,000 cards in
circulation (population of Bangladesh: 130m). The
foreign banks (mainly Standard Chartered) are the
main players in this segment, although some local
banks such as Prime have been investing in this
market to position themselves for the future. While
delinquency rates on credit cards are relatively high
(Prime Bank: 10%; another local bank: 20%), the

annualised interest rates on outstanding balances are
more than 40%, so it is a lucrative business to be in.
Prime Bank has signed a co-branding agreement
with HSBC for issuing credit cards on their behalf,
and also plans to tie-up with VISA in the near future.
In addition to conventional interest-based banking,
Prime Bank operates two branches (completely
separate from conventional banking) on the Islamic
Shariah principle; however, Islamic banking
operations are relatively small and constituted only
about 5% of the conventional banking business.
„ PERFORMANCE
• The bank’s performance has been
exemplary in its limited history given the
challenging operating environment and
the track record of most other banks in
the system
Prime Bank has been profitable since the first year of
its operations. Profits were low in 1998 as the bank
incurred losses on its stock market operations.
Management described this as a ‘learning
experience’ and has since refrained from stock
trading activities. Indeed the bank’s profitability has
been exceptional compared with its Bangladeshi
counterparts, and it reported an average ROE of 41%
(ROE at end-2002 was 30%) between 1999 and 2002.
We were informed that the ‘promoter shareholders’
expect the bank’s ROE to be around 30%, and unless
the bank gets into trouble due to unforeseen reasons,
management expects to deliver similar returns over
the next few years. Similarly, Prime Bank’s ROA
(2.34% in FY02, and close to or above 3% in
previous years) was significantly superior to most
other local banks.
Net Interest Revenue: Prime Bank’s net interest
income has ranged between 43% and 47% of total
income for the past four years (47% in 2002). This
seems relatively low for conventional commercial
banks in developing countries, where such
proportion is usually around 70-75%. One reason for
this is that the bulk of the bank’s customers are
exporters, which enjoy relatively low rates of export
finance, but the customer relationships are
nevertheless remunerative for the bank as it also
earns reasonable amount of fee income (discussed in
subsequent paragraphs). Besides relatively low loan
yields, cost of funds is also relatively higher for
private banks compared with government banks.
Even so, Prime Bank’s net interest margin at around
3.5% is satisfactory, particularly compared with the
state banks whose NIM is either negative or only
marginally positive on account of the large non-
accrual drag due to their poor asset quality.
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Banks
Non-Interest Income: Prime Bank’s non-interest
income has historically been more than 50% of its
total income. Thanks to the fact that export finance is
a large part of its business, the bank is able to realise
relatively large amount of foreign exchange gains
due to a healthy spread between the customer quotes
and the inter-bank foreign exchange market.
Exchange gains constituted 28% and 37% of the
bank’s non-interest income in FY02 and FY01. The
bank also earns reasonable amounts of commission
on letters of credit, bills and guarantees and such
commissions constituted nearly 29% of the bank’s
non-interest income in FY02. Interestingly, interest
income on the bank’s treasury bills portfolio is not
booked as interest income but as ‘income from
investments’. This further tends to boost the share of
non-interest income; if such an adjustment were to
be made to the bank’s FY02 numbers, net interest
income would approximate 58% of total income,
instead of the reported 47%.
Operating Expenses: The bank’s operating
expenses have been rising in line with the growth in
its businesses, and salaries in particular rose by 36%
during FY2002. While personnel expenses as a
proportion of average earning assets were about
1.5% (similar to that of state banks which are hugely
overstaffed but much larger in size), Prime Bank’s
cost-income ratio at 38% was much lower than that
of government banks (around 90%), or even most of
the other private banks. Operating expenses may
however rise as the bank attempts to improve its
technological capabilities and expand its retail
banking activities. The bank has a budget of BDT
150m for its IT initiatives, which include adding
alternate delivery channels such as on-site ATMs
(and off-site ATMs in about two years) and phone
banking and Internet banking. The bank is also
currently working on changing its core banking
platform and telecommunication systems. Despite an
absolute rise in operating expenses, with net income
continuing to grow at reasonable rates, the bank’s
cost-income ratio should nevertheless not
substantially exceed 40% in the near-term.
Loan Loss Provisions: Prime Bank debited an
identical amount of BDT 51m as loan loss provisions
in FY02 and FY01 (specific provisions were BDT
15m in 2002 and BDT 30m in 2001). With an asset
quality that is excellent by Bangladesh banks’
standards, Prime Bank’s loan loss provisions are
modest and have rarely exceeded 1% of loans during
the past five years (0.46% in 2002 and 0.6% in 2001).
Similarly, loan loss provisions as a proportion of pre-
provision profits have typically been below 10%
(except in FY2000 when they were 11.22%); they
were 6.7% in 2002. Unless Prime Bank’s asset
quality unexpectedly deteriorates significantly, the
Prime Bank: December 2003

bank’s loan loss provisions should remain modest in
the near to medium term.
Half-Yearly Results: Bangladeshi banks report
extremely brief half-yearly results (which are
unaudited) and therefore, their utility is somewhat
limited. Even so, Prime Bank’s financial results as at
June 2003 indicate that the bank continued to grow
rather rapidly; loans grew by an annualized 30%
since end-2002 and profits before tax were almost
76% of the full years’ profit in 2002. The NPL ratio
too rose slightly to 1.89%, but as mentioned
elsewhere in the report, this is extremely low
compared with that of most other local banks.
Prospects: Size is a crucial issue in banking and
Prime Bank, being a very small bank has its
limitations. With an equity base of only BDT 1.5bn
(USD 26mn), Prime Bank does not have the critical
mass to cater to large borrowers or expand its
business (including its proposed consumer banking
initiatives) beyond a certain level. To be fair, the
bank has so far done an excellent job in catering to
the requirements of its traditional customers, the
small to medium exporters, despite operating in a
challenging environment. The bank has tentative
plans to strengthen its equity to BDT 5bn, but the
time frame is somewhat uncertain, and it is unclear
whether it will be through fresh equity infusion, or
through retained earnings over the years. As for all
Bangladeshi private banks, Prime Bank’s
shareholders are individuals, and their ability to
infuse large amounts of capital is unclear.
Nevertheless, in the near-term, Prime Bank should
continue to perform satisfactorily, even as its high
growth rate (albeit from a smaller base) is a slight
concern. However, it is difficult to comment on the
longer-term prospects of the bank (three years and
beyond). Although there is some recognition
amongst policy makers that there were too many
(private) banks in the country, and a consolidation at
some stage may be desirable, their near-term priority
seems to be to address the huge asset quality
problems of the state banks, and possibly privatise
some of those. Therefore, consolidation amongst
private banks does not appear likely over the next 2-
3 years.
„ RISK MANAGEMENT
• Although risk management systems are
rudimentary, the bank’s asset quality is
remarkable compared with other local
banks
• The bank’s loan loss reserves have
consistently exceeded its reported NPLs
and the net NPLs to equity ratio is
negative
Prime Bank: December 2003
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Risk management is not sophisticated in Bangladesh
by international standards, although it is improving
in private banks. Prime Bank’s Board of Directors is
responsible for setting strategic risk objectives and
the risk appetite of the bank. Reporting to the Board
are the Management Committee (which takes all
policy decisions and is chaired by the CEO) and the
Credit Committee, which is chaired by the
Additional Managing Director, and meets every
week. The bank has also recently set up an Asset and
Liability Committee (ALCO), which is headed by
the Additional MD, and is responsible for liquidity
management, management of interest rate and other
market risks and for maturity mismatches. The
ALCO also determines the pricing policy of the bank
for its various assets and liabilities. While audit and
inspection of various branches is an integral part of
internal operational management, the bank has also
set up a Board Audit Committee for the past one
year (on the recommendations of the central bank).
This committee monitors audit reports and reviews
audit objections and generally ensures compliance
with the rules and regulations of the central bank.
Bank management claims that the setting up of this
committee has improved the compliance culture and
corporate governance within the bank.
Credit Risk: Prime Bank primarily lends for trade
finance although some amount of project financing is
also undertaken. The bank has generally maintained
a conservative approach towards lending and
management claims that their credit appraisal
process is more stringent than that of its local peers
(we were informed that typically only one out of
three proposals originating at the branch level is
eventually approved). The bank follows a two-tier
credit screening process: the branch prepares a credit
proposal and sends it to the Head Office, where the
credit officers analyse the business risks and the
nature of the collateral. If acceptable, a detailed
credit memo is prepared and sent to the Credit
Committee, which comprises senior credit and
operations executives. The managing director can
approve proposals up to BDT 30m while proposals
between BDT 30m and BDT 50m are referred to the
management committee; proposals above BDT 50m
can only be approved by the Board.
Fitch understands that cash flow is the primary
consideration for all loan proposals although the
nature of collateral is also taken into account while
sanctioning proposals. As at end-2002, nearly 83%
of loans were fully secured while the balance 17%
were accompanied by personal guarantees of the
borrowers. The bank follows an internal loan grading
system, which is reviewed on a monthly basis. An
‘exceptional accounts list’ is prepared on a daily
basis, and wherever the limits have been breached,
 Banks
the borrower is asked to either top-up the collateral, Prime Bank’s asset quality is exceptional by
or pay off the overdrawn amount. A ‘Special Assets Bangladesh banks’ standards with reported gross
Group’ monitors all problematic accounts including NPL ratio at only 1.48% at end-2002 (1.89% at June
non-performing loans. Loan restructuring is only 2003). In contrast, the reported NPL ratio for state
done for borrowers which are facing temporary banks was in excess of 30%, and was about 20% for
liquidity problems. While such restructured loans are most private banks. Further, Prime Bank’s loan loss
not classified as non-performing as per local reserves (including general reserves) have
regulations, these would add about 50 basis points to consistently been in excess of the reported NPLs and
the bank’s headline NPL ratio of 1.89% as at June the reported NPL coverage was 135% at end-2002.
2003. Although Bangladesh banks do not classify Nevertheless, there are some adverse asset quality
loans under ‘special mention’ or ‘watch list’ trends, although not a major concern yet, which need
category, Prime Bank management informed us that to be watched. For example, absolute amounts of
such loans could potentially be about 2-3% of total NPLs are growing rather rapidly (+86% in 2002) and
loans in their case. the NPL ratios too are somewhat flattered by the
dilution effect of the bank’s rapid loan growth
With a view to refining its credit risk management (average 35% between 1999 and 2002, and 30% in
procedures, the bank introduced certain 1H2003). Also, as for most banks in Bangladesh, the
modifications in its risk assessment methods during relative composition of Prime Bank’s NPLs is poor
2002, which require a stricter separation of with nearly 72% of the NPLs being classified as
responsibilities between marketing and risk ‘bad/loss’. Although a part of such loans were
assessment functions. The bank also regularly backed by collateral (loan loss reserves were only
monitors its exposure to specific sectors, and is in 64% of ‘bad’ NPLs), the inadequate legal framework
the process of gradually bringing down its exposure and non-existent bankruptcy laws make it extremely
to the textiles sector to 25% of loans from 30% improbable to foreclose and seize such collateral.
presently. By customer accounts, the bank’s Consequently, in Fitch’s opinion, almost all such
outstanding loans were fairly well diversified and NPLs (plus a large part of doubtful NPLs) may
management claims that more than 50% of its eventually need to be written off. The impact of such
borrowers are ‘prime customers’, while 40-45% are a hypothetical exercise on the bank’s capital position
in the ‘middle’ category, and about 3% are is discussed under the “Capital” section of the report.
financially relatively ‘weak’.
Market Risk: Prime Bank is exposed to interest rate
Loan Loss Reserves: Prime Bank’s level of and liquidity risks on account of a structural maturity
financial disclosure is higher than most of its local mismatch arising from funding the loan and fixed-
peers. While it classifies NPLs in accordance with income investment portfolio (mainly government
Bangladesh Bank (Bangladesh’s central bank) bonds) primarily through short-term customer
regulations, which are somewhat liberal by deposits. These risks are slightly mitigated due to
international standards, it nevertheless makes loan high renewal rates of the bank’s deposits. Foreign
loss provisions in excess of statutory regulations. currency loans are fairly well matched with foreign
The excess amount is disclosed in the bank’s annual currency deposits (about 3% of total deposits) and
report, as is the huge shortfall in the case of the bank manages small mismatches through swaps
government banks’ annual reports. and foreign exchange contracts. We are informed
that most of the bank’s foreign exchange business is
Prime Bank’s asset quality trend for the past few client-driven although proprietary trading may
years is shown in Table 1. slightly increase in future with improved skill sets of
its traders. All foreign exchange activities are subject
Table 1: Prime Bank’s Asset Quality to central bank guidelines, and strict trading limits,
Trend such as intra-day, overnight and stop-loss limits.
Currently, the treasury activities of the bank are quite
(BDT ‘000 / %) FY02 FY01 FY00
limited and there appear to be satisfactory control
Gross NPLs 188,217 101,262 108,243
As % of Gross Loans 1.48 1.12 1.40
mechanisms to ensure segregation of duties between
Loan Loss Reserves (LLR) 254,542 206,179 158,226 dealers and the back office. However, the bank’s
incl. General Reserves ability to manage its overall operational risk,
LLR to NPLs (%) 135 204 146 particularly in light of the Basle 2 guidelines, is
Net NPLs to Equity (%) Negative Negative Negative
Grading of NPLs (%)
likely to be inadequate, similar to most of the
Substandard 17.0 11.2 23.0 Bangladesh banking sector. None of the banks in
Doubtful 11.5 11.3 23.8 Bangladesh are presently in a position to quantify the
Bad 71.5 77.5 53.2 amount of market risk in their books, although Prime
Source: Prime Bank

Prime Bank: December 2003

5

Bank has some tentative plans to introduce ‘VaR
type’ measurement tools in a few years’ time.
„ FUNDING AND CAPITAL
• Good franchise, growing customer
deposits and satisfactory liquidity
position
• Although reported capitalisation appears
adequate, the bank’s adjusted capital
position is less healthy given the
challenging operating environment, and
injection of new capital will be credit
positive.
Funding and Liquidity: Most Bangladeshi banks,
including Prime, are predominantly funded through
customer deposits. These accounted for more than
80% of Prime Bank’s total liabilities as at end-2002,
although the bank’s market share in the deposits
market is as yet small. Low-cost savings and demand
deposits constituted 26% of the total resource base, a
relatively high proportion given the bank’s short
history. In addition to customer deposits, the bank
occasionally issues certificate of deposits and also
sources funds from the inter-bank market. We are
informed that the depositor base is widely scattered
and the top ten depositors accounted for only about
14% of the bank’s total deposits. Although hard data
is not available, we understand that promoter
shareholders also maintain sizeable deposits in the
bank as a means of additional support. While Prime
Bank, similar to other private banks, understandably
pays a little more (25-50bps) than government banks
on its deposit accounts, in the opinion of the
management, the bank’s deposit base is fairly stable
and growing rapidly (total deposits rose by nearly
2.4 times over the past three years).
Bangladeshi banks are required to maintain statutory
liquidity and cash reserve ratios of 16% and 4%,
respectively. Prime Bank maintains these ratios at a
level slightly above the regulatory minimum
(16.83% and 4.92%, respectively as at end-2002),
and consequently, its liquid assets to total assets ratio
was nearly 22% at end-2002 (higher in previous
years). Although the government bond market in
Prime Bank: December 2003
6
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Bangladesh is less liquid than in developed countries
due to relatively limited (although improving)
secondary market trading, the liquidity position of
the bank is nevertheless adequate. The central bank
‘rates’ all local banks on various financial
parameters (including liquidity) and Prime Bank
reportedly enjoys the highest rating.
Capital: Prime Bank’s reported total capital
adequacy ratio was 12.43% at end-2002 (more than
15% between 1999 and 2001) against the regulatory
minimum of 9%; tier-1 ratio was a relatively healthy
11.4%. These ratios are quite healthy in the
Bangladesh context where the reported capital
adequacy ratios of all government banks are
significantly below minimum regulatory
requirements, and most private banks too are
undercapitalised. Further, Fitch remains somewhat
sceptical regarding accurate implementation of asset
classification norms in Bangladesh, and
consequently, is of the view that Prime Bank’s
reported capital position too may be slightly
overstated. If we hypothetically assume the bank’s
NPL ratio to be 6.5% (instead of the reported 1.89%
at June 2003; this would include restructured loans
of 0.5%, other problem loans of 3%, and another
1.1% of ‘hidden’ NPLs), and assume NPL coverage
of about 80% (instead of the reported 135%), the
adjusted equity to assets ratio declines to 5.6%
(against the reported equity to assets ratio of 7.61%
at end-2002). This ratio still compares favourably
with the capitalisation levels of most banks in
Bangladesh, where government banks have a
reported equity to assets ratio of only about 2%, and
‘good’ private banks are around 4-4.5% on this
indicator. However, it can also be argued that an
adjusted equity to assets ratio of 5.6% may be
somewhat inadequate in an emerging market such as
Bangladesh, given the small size of the bank and the
risks associated with an extremely challenging
operating environment in the country. Together with
the fact that the bank has been growing at a
breakneck speed (which is expected to continue in
the future), it may be desirable for Prime Bank to
augment its capital to sustain its healthy credit
profile.
 Banks
BALANCE SHEET ANALYSIS 31 Dec 2002 31 Dec 2002 31 Dec 2001 31 Dec 2000 31 Dec 1999
PRIME BANK LIMITED YEAR END YEAR END AS % OF AVERAGE YEAR END AS % OF YEAR END AS % OF YEAR END AS % OF
USDm BDTm ASSETS BDTm BDTm ASSETS BDTm ASSETS BDTm ASSETS
A. LOANS
1. Domestic Loans 194.3 11,247.3 56.10 9,240.5 7,233.8 45.97 5,887.4 45.83 4,100.6 47.08
2. Loans Outside Bangladesh n.a. n.a. - n.a. n.a. - n.a. - 0.0 0.00
3. Bills Discounted and Purchased 24.9 1,439.5 7.18 1,640.3 1,841.2 11.70 1,780.3 13.86 1,020.4 11.72
4. Loan Loss Reserves (memo) n.a. n.a. - n.a. 206.2 1.31 158.2 1.23 78.1 0.90
TOTAL A 219.1 12,686.8 63.28 10,880.9 9,075.0 57.67 7,667.7 59.69 5,121.0 58.80
B. OTHER EARNING ASSETS
1. Deposits with Banks 48.7 2,819.6 14.06 2,962.0 3,104.4 19.73 2,125.0 16.54 1,800.0 20.67
2. Government Securities 32.5 1,880.0 9.38 1,540.0 1,200.0 7.63 1,380.0 10.74 810.0 9.30
3. Special Treasury Bonds n.a. n.a. - n.a. n.a. - n.a. - n.a. -
4. Other Investments 2.0 116.2 0.58 293.8 471.4 3.00 75.7 0.59 80.6 0.93
5. Equity Investments n.a. n.a. - n.a. 59.3 0.38 68.9 0.54 74.2 0.85
TOTAL B 83.2 4,815.8 24.02 4,825.4 4,835.1 30.72 3,649.6 28.41 2,764.8 31.74
C. TOTAL EARNING ASSETS (A+B) 302.3 17,502.6 87.30 15,706.3 13,910.1 88.39 11,317.3 88.10 7,885.8 90.54
D. FIXED ASSETS 3.8 218.5 1.09 196.4 174.3 1.11 125.2 0.97 99.5 1.14
E. NON-EARNING ASSETS
1. Cash and Due from Banks 23.6 1,366.7 6.82 1,152.4 938.1 5.96 770.7 6.00 438.7 5.04
2. Other 16.6 959.9 4.79 837.1 714.4 4.54 632.7 4.93 285.8 3.28
F. TOTAL ASSETS 346.2 20,047.7 100.00 17,892.3 15,736.9 100.00 12,845.9 100.00 8,709.8 100.00
G. DEPOSITS & MONEY MARKET FUNDING
1. Fixed Deposits 182.0 10,536.4 52.56 9,876.5 9,216.7 58.57 7,059.3 54.95 4,306.4 49.44
2. Savings Bank Deposits 33.9 1,964.4 9.80 1,580.3 1,196.3 7.60 1,058.5 8.24 1,135.9 13.04
3. Current Accounts 56.7 3,280.2 16.36 2,889.9 2,499.6 15.88 2,214.3 17.24 1,256.7 14.43
4. Other Borrowing 12.6 730.0 3.64 440.0 150.0 0.95 650.0 5.06 840.0 9.64
TOTAL G 285.2 16,511.0 82.36 14,786.8 13,062.6 83.01 10,982.1 85.49 7,539.0 86.56
H. OTHER FUNDING
1. Long-term Borrowing n.a. n.a. - n.a. n.a. - n.a. - 0.0 0.00
2. Subordinated Debt 0.0 0.0 0.00 0.0 0.0 0.00 0.0 0.00 0.0 0.00
I. OTHER (Non-int. bearing) 34.7 2,010.3 10.03 1,713.2 1,416.0 9.00 966.8 7.53 501.8 5.76
L. EQUITY 26.4 1,526.4 7.61 1,392.3 1,258.3 8.00 897.0 6.98 669.0 7.68
M. TOTAL LIABILITIES & EQUITY 346.2 20,047.7 100.00 17,892.3 15,736.9 100.00 12,845.9 100.00 8,709.8 100.00
Exchange Rate USD1 = BDT 57.900 USD1 = BDT 57.000 USD1 = BDT 54.000 USD1 = BDT 51.000

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 Banks
NCOME STATEMENT ANALYSIS 31 Dec 2002 31 Dec 2001 31 Dec 2000 31 Dec 1999
PRIME BANK LIMITED INCOME AS % OF INCOME AS % OF INCOME AS % OF INCOME AS % OF
EXPENSES TOTAL AV EXPENSES TOTAL AV EXPENSES TOTAL AV EXPENSES TOTAL AV
BDTm EARNING ASSTS BDTm EARNING ASSTS BDTm EARNING ASSTS BDTm EARNING ASSTS
1. Interest Received 1,619.8 10.31 1,384.1 10.97 1,032.6 10.75 713.7 10.85
2. Interest Paid 1,054.8 6.72 887.4 7.04 677.8 7.06 480.1 7.30
3. NET INTEREST REVENUE 565.0 3.60 496.7 3.94 354.8 3.70 233.6 3.55
4. Other Operating Income 631.2 4.02 603.4 4.78 483.0 5.03 315.5 4.79
5. Other Income n.a. - n.a. - n.a. - n.a. -
6. Provision for Loan Losses 50.0 0.32 50.0 0.40 66.5 0.69 27.2 0.41
7. Personnel Expenses 238.9 1.52 177.5 1.41 126.8 1.32 88.2 1.34
8. Other Non-interest Expenses 210.5 1.34 167.5 1.33 118.3 1.23 116.9 1.78
9. PRE-TAX PROFIT 696.8 4.44 705.1 5.59 526.2 5.48 316.8 4.81
10. Taxes 278.7 1.77 222.1 1.76 165.8 1.73 110.9 1.69
11. NET INCOME 418.1 2.66 483.0 3.83 360.4 3.75 205.9 3.13
RATIO ANALYSIS
I. PROFITABILITY LEVEL
1. Net Income/Equity (av.) % 30.03 44.82 46.03 44.20
2. Net Income/Total Assets (av.) % 2.34 3.38 3.34 2.83
3. Non-int. Expenses/Net Int. Rev. +
Other Operating Income % 37.57 31.36 29.26 37.35
4. Net Interest Rev./Total Assets (av.) % 3.16 3.48 3.29 3.21
II. CAPITAL ADEQUACY (year end)
1. Internal Capital Generation % 21.41 30.90 17.93 18.44
2. Equity/Total Assets % 7.61 8.00 6.98 7.68
3. Equity/Loans % 12.03 13.87 11.70 13.06
4. Capital/Risks - Tier 1 % n.a. n.a. n.a. n.a.
5. Capital/Risks - Total % 12.43 17.50 15.18 15.14
III. LIQUIDITY (year end)
1. Liquid Assets/Deposits and
Money Market Funding % 25.35 30.95 26.37 29.69
2. Loans/Deposits and
Money Market Funding % 76.84 69.47 69.82 67.93
IV. ASSET QUALITY
1. Loan Loss Provisions/Loans (av.) % 0.46 0.60 1.04 0.66
2. Loan Loss Provisions/Profit
before Provisions and Taxes % 6.70 6.62 11.22 7.91
3. Loan Loss Reserves/Loans % n.a. 2.27 2.06 1.53

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