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1: Introduction:
Banking system occupies an important place in a nation's economy because of its intermediary
role; it ensures allocation and relocation of resources and keeps up the momentum of economic
activities. It plays an important role in the economic development of a country and forms the
core at the money market in any country. In a developing country like Bangladesh the banking
system as a whole has a vital role to play in the progress of the economic development. Bank
plays an important role in the business sector and in the industrialization of a country. Basically
the banks take deposits from the customers by giving interest and lend it to the borrowers by
taking interest for a specific period. In our country there are Government Banks, Semi-
Government Banks and Private Commercial Banks. They are the principal source of credit for
millions of individuals and families and many units of government.
Our private Banks are offering full range of Consumer, Corporate, International Trade, Foreign
Exchange, Lease Financing and Capital Market services in Bangladesh. Eastern Bank Limited is
the preferred choice in banking for friendly and personalized services, cutting edge technology,
tailored solutions for business needs, global reach in trade and commerce and high yield on
investments, assuring excellence in banking services. The EBL was formed as a public limited
company incorporated in Bangladesh with primary objective to carry on all kinds of banking
business in and outside Bangladesh. EBL has also taken over the business, assets, liabilities and
losses of previous Bank of Credit & Commerce International (Overseas) Limited, hereinafter
called BCCI, branches in Bangladesh with effect from 16th August 1992. In the project different
sides of this bank are focus to know the overall performance of Eastern Bank Limited.
This report is prepared primarily to fulfill the Bank Management course requirement.
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1.3: Scope & Methodology of the Study:
The scope of this project is limited to the overall description of the company, its services, its
functions and its performances. In this study I tried to appraise the principal activities and
financial performances of Eastern Bank Limited (EBL). For evaluating the financial performance
of EBL, I have collected and analyzed the data of the last ten years. These data has been used for
ratio analysis and growth percentage calculation. I have collected data from the annual report and
from the web site of EBL.
I have faced some limitations what I can not ignore. These are:
It was very difficult to get the actual information from the annual report; and some of
information which are not given to the annual report.
Large-scale research was not possible due to time constrains.
Banks don't want to disclose all the information.
In this case I have discussed about Eastern Bank Limited (EBL). I tried to focus EBL's history,
vision, mission, goal, organizational structure, capital structure and its value. We can have
overall idea about EBL through this chapter. The main objective of this chapter is to introduce
with the EBL.
The emergence of Eastern Bank Limited in the private sector is an important event in the
banking industry of Bangladesh. Eastern Bank Limited started its business as a public limited
company on August 8, 1992 with the primary objectives to carry on all kinds of banking business
in and outside of Bangladesh and also with a view to safeguard the interest of the depositors of
erstwhile BCCI (Bank of Credit and Commerce International (Overseas)) under the
Reconstruction Scheme, 1992, framed by Bangladesh Bank.
In 1991, when BCCI had collapsed internationally, the operation of this bank had been closed
Bangladesh. After a long discussion with the BCC! employees and taking into consideration the
depositors ' interest, Bangladesh Bank then gave permission to form a bank named Eastern Bank
Limited which would take over all the assets, cash and liabilities of erstwhile BCCI in
Bangladesh, with effect from 16th August 1992. So, it can be said that EBL is a successor of
BCCI.
EBL started its business as a scheduled bank with only four branches, which included Principal
Branch, Dhaka; Motijheel Branch, Dhaka; Agrabad Branch, Chittagong and Khulna Branch.
EBL started its business with a motto to grow as a leader in the banking arena of Bangladesh
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through better counseling and efficient service to clients. EBL resumed its operational activities
initially with an authorized capital of Tk. 1000 million, divided into 10 million shares of Tk. 100
each and paid up capital of Tk. 310 million. The initial shareholders were the NCBs, various
govt. agencies, and some of the depositors who had agreed to accept shares in the new bank in
lieu of their deposits. The first Board of Directors of EBL constituted under govt. supervision,
consisted of 7 directors from various business and professions. Eastern bank Limited was under
govt. control until the end of 2000 and therefore, there were lots of deficiencies in the Bank's
management. In 2001, the board of directors brought in new professional management from
various foreign banks who have been trying to modernize the bank ever since.
Eastern Bank Limited started the year 2006 with Paid-up Capital stood at Tk. 828 million and the
authorized capita] at Tk. 3300 million. At present, EBL is one of the fastest growing commercial
banks in the country & the largest capital based bank in Bangladesh. It has 25 branches scattered
all over the major cities of the country in major business areas.
To become the most valuable brand in the financial services in Bangladesh creating long-lasting
value for stakeholders and avobe all for the community we operate in by transforming the way
we do business and by delivering sustainable growth.
Will deliver service excellence to all our customers, both internal and external.
Will ensure to maximize shareholder's value.
Will constantly challenge our systems, procedures and training to maintain a
cohesive and professional team in order to achieve service excellence.
Will create an enabling environment and embrace a team based culture where
people will excel.
Openness
Trust
Commitment
Integrity
Service excellence
Responsible Corporate Citizen
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2.5: Organization Structure of Eastern Bank Limited:
EBL's Organizational structure is oracle. There are ditTerent department and these department
are manage by management team to envision the need of the business by bringing in a mixture of
advanced technology solutions know-how and revamping the organizational make-up for
maximum profitability.
Consumer Banking
Corporate Banking
Credit
Finance
Human Resources
Information Technology
Operations
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2.6: Capital Structure of Eastern Bank Limited:
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Table no-3.1: Capital Structure of EBL-
(In million BDT)
Year Authorized capital Paid Up Capital Growth % of Paid
Up Capital
2008 3300 1387 0
2009 3300 2496 80
2010 3300 2921 17
2011 3300 4527 55
2012 3300 6112 35
2013 3300 6112 0
2014 3300 6112 0
Source: Annual Report of EBL (2008 2014)
From the table we can see that authorized capital was same over the years. The amount of
authorized capital was Tk. 3300 million. On the other hand paid up capital was not same. It
differs from time to time. The highest growth percentage of paid up capital was 80% in year
2009.
Years
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The values on the common size statement are expressed as percentages of a statement component
such as Total Assets. This type of financial statement allows for easy analysis between
companies or between time periods of a company. The common size statement of Eastern Bank
is as follows -
Balance with - -
3.13 6.14 95.96 6.67 3.57
other bank 5.68% 44.89 8.73% 46.48
% % % % %
and financial % %
institution.
Money at -
2.25 0.07 0.00 0.61
call and 0.00% 96.98 -100%
% % % %
short notice %
-
11.91 14.38 20.72 14.73 16.45 11.70 14.37
Investment. 2.40% 12.66
% % % % % % %
%
Loans and 71.05 69.54 - 65.89 - 65.33 - 69.19
5.91%
Advances % % 2.12% % 5.24% % 0.85% %
-
3.80 3.93 4.37 11.16 4.09 -
Fixed Assets 4.40% 13.61 3.46%
% % % % % 6.32%
%
-
1.56 1.75 12.23 1.88 2.11 12.18
Other Assets 2.20% 28.83 7.43%
% % % % % %
%
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3.2.1: Return on Equity (ROE):
The return on equity measures the return earned on the owners investment. Generally, the higher
return is the better off the owners.
Graphical Presentation:
ROE
600.00%
500.00%
400.00%
Years
Interpretation:
The return on equity ratio was decreasing from 2010 to 2014. That was decreased from 20.51%
to 10.57%. This is not desirable. So, the management should work hard to increase the return
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associated with equity. Though return on equity has less decreased in 2013 from preceding years,
still it is significantly deviated from that of in 2010.
The return on asset (ROA), which is often called the firms return on total assets, measures the
overall effectiveness of management in generating profits with its available assets. The higher
the ratio is better.
Graphical Presentation:
ROA
3.50%
3.00% 3.05%
2.50%
2.17%
2.00%
1.63% ROA
ROA 1.50% 1.60%
1.23%
1.00%
0.50%
0.00%
2010 2011 2012 2013 2014
Years
Interpretation:
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Return on assets is an indicator of how profitable a company is. This ratio is used annually to
compare the business performance to its norms. The banks return on asset was decreasing over
the time. It can be said that EBLs earning capacity is decreasing year by year. This is not a good
sign for the Bank.
The net profit margin measures the percentage of each sales dollar remaining after all expenses,
including taxes, have deducted. The higher the firms net profit margin is better. The net profit
margin is a commonly cited measure of the companys success with respect to earnings on sales.
Graphical Presentation:
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Profit Margin
38.09%
40.00% 32.28%
35.00% 27.13%
26.46%
30.00%
25.00% 20.72%
20.00%
Profit Margin
Profit Margin 15.00%
10.00%
5.00%
0.00%
Years
Interpretation:
We know that this ratio shows the portion of total operating income that remains after deducting
all the costs and expenditure for particular period of time. From the graph I have seen that the net
profit margin is declining position over the years. This is not a good sign for the Bank.
The total asset turnover indicates the efficiency with which the bank is able to use all its assets to
generate income.
Graphical Presentation:
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Total Asset Turnover
0.08
0.08 0.07
0.07 0.06
0.060.06
0.06
0.05
0.04
Total Asset Turnover
Asset Turnover ( Times ) 0.03
0.02
0.01
0.00
Years
Interpretation:
We know that this ratio measures the efficiency of the bank in using its total assets to generate
operating income and the higher the ratio, the higher the efficiency of the bank is in using its
assets. The graph shows a downward trend in total asset turnover in the first three years. Then it
is stable. It is highest in 2010. This indicates that EBL is not efficient in using its assets to
generate operating income.
The times interest earned ratio, sometimes called the interest coverage ratio, measures the firms
ability to make contractual interest payments.
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Graphical Presentation:
Years
Interpretation:
Their Time Interest Earned ratio was not satisfactory because, they have only 1.4 taka against 1
taka interest obligation in year 2014 which is not good. Apart from this the Time Interest Earned
Ratio is reduces over the year. They should reduce their interest obligation or increase the EBIT
in order to smoothly operate their business.
The provision for loss ratio indicates the efficiency with which the bank will able to recover all
its granted loans & leases. The lower the ratio is the better it is.
Provision for Loss Ratio = ( Provision for lone losses / Total loans & leases ) 100
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Total loans 58,607,085,69 81,767,989,22 96,894,171,15 103,330,817,58
118,291,346,183
&Leases 3 1 1 2
Provision
for Loss 0.71% 1.20% 1.28% 0.92% 1.52%
Ratio
Graphical Presentation:
0.00%
Years
Interpretation:
The provision for losses is increases over the years except in 2013. This indicates that the
workforce of the bank are not that much efficient that they should be. This is not a good
indication for the bank. The creditors may dissatisfy with this situation.
It measures how much of the total asset is used as loan for generating revenue. The more the
ratio is the better it is. In this is regard it should not be very high.
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Total 82,530,978,4 117,584,778, 147,044,438, 158,163,357, 173,443,549,
Asset 39 252 547 490 792
Loan
66.03% 64.18% 59.53% 59.82% 64.80%
Ratio
Graphical Presentation:
Loan Ratio
68.00% 66.03%
66.00% 64.80%
64.18%
64.00%
Loan Ratio
% of Loan 62.00% 59.82%
59.53%
60.00%
58.00%
56.00%
2010 2011 2012 2013 2014
years
Interpretation:
Though there is a downwards in loan ratio in the year 2012 & 2013 but later in the year 2014 the
gets better. This means that the bank uses their assets against loan very well. The bank should
also take care of the 5 Cs of the creditors when granting loans.
The debt ratio measures the preparation of total assets provided by the firms creditors.
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Total 70,273,534, 102,992,575, 129,794,892, 139,604,536, 153,209,001,
Liabilities 050 660 351 856 083
Graphical Presentation:
Debt Ratio
0.890 0.883 0.883 0.883
0.876
0.880
0.870
0.860 0.851 Debt Ratio
Debt Ratio
0.850
0.840
0.830
2010 2011 2012 2013 2014
Years
Interpretation:
The graph shows that debt ratio of EBL is increasing over the years. But it is stable after 2012.
The EBL has increased its debt ratio and thereby it has increased financial leverage and financial
risk.
It measures how much of the banks total assets are invested in current assets. The more the ratio
is the more the bank is liquid to meet up its current obligation. The creditors are more concern
regarding this ration.
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Temporary Investment Ratio = (Treasury bill + Investment 1year + Due from other
Bank) / Total Asset
Temporary
Investment 0.09 0.06 0.20 0.13 0.06
Ratio
Graphical Presentation:
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Temporary Investment Ratio
0.250 0.203
0.200
0.129
0.150
0.089 Temporary
Temporary Investment Ratio 0.100 0.0620.063 Investment ratio
0.050
0.000
Years
Interpretation:
There is a fluctuation in the temporary investment ratio. This may demotivate the creditors. So
the bank should look into the matter carefully.
The firms Earning per share (EPS) are generally of interest to present or prospective
stockholders and management. The Earning per share represent the number of dollars earned on
behalf of each outstanding share of common stock. The earnings per share is calculated as
follows.
Earning Per Share =Earnings available for common stock holder/No of shares of common
stock outstanding
Graphical Presentation:
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EPS
10.0 8.6
8.0
5.6
6.0 4.1
3.9 3.5 EPS
EPS
4.0
2.0
0.0
2010 2011 2012 2013 2014
Years
Interpretation:
The graph shows that, EPS is highest in 2010 and there is a downward trend in EPS from year
2010 to 2014. There is a slightly upward trend in year 2013. This may demotivate the
shareholders.
The Dividend per Share is the sum of declared dividends for every ordinary share issued.
Dividend per share (DPS) is the total dividends paid out over an entire year (including interim
dividends but not including special dividends) divided by the number of outstanding ordinary
shares issued.
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Graphical Presentation:
DPS
5.5
6.0
5.0
3.5
4.0
3.0 2.0 2.0 2.0 DPS
DPS
2.0
1.0
0.0
2010 2011 2012 2013 2014
Years
Interpretation:
From the graph we can see that the DPS is declining over the year. The bank may retain the
earning more for its future expansion. This may motivate the shareholders. If this is not the case
this may have negative impact on the Shareholders motivation. So the bank should utilize its
retained earning effectively.
The price earning ratio or (P/E) ratio is commonly used to assess the investor appraisal of share
value. The P/E represents the amount investors are willing to pay for each dollar of the firms
earnings. The higher the P/E ratio, is the greater the investor confidence in the firms future. The
price Earning (P/E) ratio is calculated as follows
Price Earnings Ratio=Market price per share of common stock/Earning per share
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Graphical Presentation:
20 15.97
15
8.52 Price Earning
P/E ratio ( times ) 10 6.93 7.89
Ratio(times)
5
Years
Interpretation:
It measures the level of price that the investors are paying for per taka of earnings offered by the
bank. From the graph I have seen that in year 2010 the investors has paid maximum amount of
price for per unit of earnings. The price earning ratio is declining over the years with slightly
increase in 2014. They should pay more concern in this respect.
SWOT analysis is done for a company, to find out its overall Strengths, Weaknesses, Threats and
opportunities leading to gauging the competitive potential of the company. The SWOT Analysis
enables a company to recognize its market standing and adopt strategies accordingly. Here
SWOT analysis of Eastern Bank Limited is made to understand the positioning of the bank
better.
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3.3.1: Strengths
According to the customers, EBL is the leading provider of financial services identity worldwide.
With its strong corporate image and identity, it has better positioned itself in the minds of the
customers. This image has helped EBL grab the personal banking sector of Bangladesh very
rapidly.
EBL employees are one of the major assets of the company. The employees of EBL have a strong
sense of commitment towards organization and also feel proud and a sense of belonging towards
EBL. The strong organizational culture of EBL is the main reason behind its strength.
Efficient Performance
It has been seen from customers opinion that EBL provides hassle-free customer services to its
client comparing to other financial institutions of Bangladesh. Personalized approach to the
needs of customers is its motto.
The selection & recruitment of EBL emphasizes on having the skilled graduates & postgraduates
who have little or no previous work experience. The logic behind is that EBL wants to avoid the
problem of garbage in & garbage out. And this type of young & fresh workforce stimulates the
whole working environment of EBL.
The human resource of EBL is extremely well thought & perfectly managed. As from the very
first, the top management believed in empowering employees, where they refused to put their
finger in every part of the pie. This empowered environment makes EBL a better place for the
employees. The employees are not suffocated with authority but are able to grow as the
organization matures.
All office walls in EBL are only shoulder high partitions & there is no executive dining room.
Any of the executives is likely to plop down at a table in its cafeteria & join in a lunch, chat with
whoever is there.
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It has been seen that the net profit has been gradually rising over the years. Furthermore, EBL is
not just sitting on its previous years success, but also taking initiatives to improve.
3.3.2: Weaknesses
Presently EBL charges same rates for all types of import L/C. But for import L/C of exports-
oriented industry, EBL should reduce the charge of L/C. As a result, exporter will be benefited
and the country will earn more foreign exchange. The commission often even rises up to 30%.
Discouraging small entrepreneurs EBL provides clean Import Loan to most of its solvent clients.
But they usually do not want to finance small entrepreneurs whose financial standing is not clean
to them.
EBL currently dont have any strong marketing activities through mass media e.g. Television. TV
ads play vital role in awareness building. EBL has no such TV ad campaign. Although they do a
lot of CSR activities compared to other banks.
In order to be more competitive in the market, EBL should come up with more new attractive
and innovative products. This is one of the weaknesses that EBL is currently passing through but
plans to get rid of by 2010.
Diversification
EBL can pursue a diversification strategy in expanding its current line of business. The
management can consider options of starting merchant banking or diversify it to leasing and
insurance. As EBL is one of the leading providers of all financial services, in Bangladesh it can
also offer these services.
The salary at EBL is very decent, but it lacks other sorts of motivation. Incentives such as
bonuses are given for acquiring a particular figure, but all in all these are the only motivational
factors.
3.3.3: Opportunities
Repayment capacity as assessed by EBL of individual client helps to decide how much one can
borrow. As the whole lending process is based on a clients repayment capacity, the recovery rate
of EBL is close to 100%. This provides EBL financial stability & gears up EBL to be remaining
in the business for the long run.
The ultimate goal of EBL is to expand its operations to whole Bangladesh. Nurturing this type of
vision & mission & to act as required, will not only increase EBLs profitability but also will
secure its existence in the log run.
Experienced Managers
One of the key opportunities for EBL is its efficient managers. EBL has employed experienced
managers to facilitate its operation. These managers have already triggered the business for EBL
as being new in the market.
Huge Population
Bangladesh is a developing country to satisfy the needs of the huge population, a large amount of
investment is required. On the other hand, building EPZ areas and some Govt. policies easing
foreign investment in our country made it attractive to the foreigners to invest in our country. So,
EBL has a large opportunity here.
3.3.4: Threats
Upcoming Banks/Branches
The upcoming private, local, & multinational banks posses serious threats to the existing
banking network of EBL: it is expected that in the next few years more commercial banks will
emerge. If that happens the intensity of competition will rise further and banks will have to
develop strategies to compete against and win the battle of banks.
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Now-a-days different foreign and private banks are also offering similar type of products with an
almost similar profit margin. So, if all competitors fight with the same weapon, the natural result
is declining profit.
Default Loans
Industrial Downturn
Bangladesh is economically and political unstable country. Flood, draught, cyclone, and newly
added terrorism have become an identity of our country. Along with inflation, unemployment
also creates industry wide recession. These caused downward pressure on the capital demand for
investment.
Financial Crisis
Although people have recovered a bit from the shock, it may still pose as a threat. People are still
hesitant to take loans or even deposit them.
4: Conclusion
Modern Commercial Banking is exacting business. The reward are modest, the penalties for bad
looking are enormous. And Commercial banks are great monetary institutions, important to the
general welfare of the economy more than any other financial institution. Eastern Bank Limited
is one of the leading commercial banks in our country. In all economic condition of our country
Eastern Bank Limited has been working with great confidence and competing tremendously with
Government oriented bank, local commercial banks along with the multinational banks also.
Eastern Bank Limited always tried its level best to perform financially well. In spite of trying to
do well in some aspects Eastern Bank Limited faced some financial problems from time to time.
Some of the problems were-excessive bad loans, shortage of loans and advances, scarcity of cash
in hands due to vault limit etc. These problems arouse time to time due to economic slowdown,
interest rate fluctuation, emerging capital market, inflation in the money market and so on.
Fighting with all these problems and competing with other banks every moment the bank is
trying to do better to best. If this thing continues we hope that Eastern Bank Limited will develop
even more in the future.
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References
To prepare this report I have collected data mainly from annual reports of Eastern Bank Limited,
different books regarding ratio analysis, the websites of Bangladesh Bank and Eastern Bank
Limited and others websites about ratio analysis. The references are given below:
Annual Reports
Books
Peter S. Rose, Commercial Bank Management, 9th ed., McGraw Hill Irwin, Boston
Stanley, B. b., & Geoffrey, A. H. (2008 - 2009). Foundation of Financial Management.
International: McGraw-Hill.
Brigham, E. F., & Gapenski, L. C. (1995). Intermediate Financial Management (Fifth ed.).
International: The Dryden Press.
Madura, J. (2008). Financial Market and Institution. USA: Thomson South- Western.
Websites
http://www.bangladesh-bank.org/fnansys/bankfi.php
http://www.ebl.com.bd
http://www.activemedia-guide.com/busedu_banking.htm
http://www.shkfd.com.hk/glossary/eng/RA.htm
http://www.investinganswers.com/
http://www.investopedia.com/
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