Financial Performance Evaluation – A Study on

Social Islami Bank Ltd

[This Internship Report is submitted for the Partial Fulfilment of the Program of Bachelor
of Business Administration with a Major in Accounting and Information System]

SUBMITTED BY
Name:
ID NO:
Major:
Program:
Semester:
Internship Duration: April 15, 2018 to July14, 2018
Date of Submission: 12th August, 2018
SUPERVISED BY

………………………………………………………………

(Signature of Supervisor)
Internship Duration: April 15, 2018 to July14, 2018
Date of Submission: 12th August, 2018

Department of Business Administration

Faculty of Business Studies
International Islamic University Chittagong
Letter of Submission

12th August, 2018

To

1
The BBA internship committee
Department of Business Studies
International Islamic University Chittagong

Subject: Submission of Internship Report.

Dear Sir,
I am pleased to submit my Internship Report on “Financial Performance Evaluation – A
Study on Social Islami Bank Ltd”. While making the report I have come across many
experiences. The valuable experiences I have gained during the period will undoubtedly
benefit me in the years ahead. I have tried sincerely to comprehend and translate my
knowledge in writing this report. I am personally responsible for the quality of the report
and solely liable for shortcomings, if any.

Therefore, I request you to accept my report and give me a proper suggestion to work in
the battlefield life. I shall always be obligate to furnish my clarification regarding this
report, if required. If I did any mistake, I am looking forward to your important advice.

Sincerely yours

XXXXXXXXX
ID NO:
Major: Accounting & Information System)
Program: BBA
Semester: Autumn, 2018

Acknowledgements

2
AL-Hamdu-Lillah, at first I would like to thank Almighty Allah (SWT) Who gave me the
opportunity and showered me with endless Rahma for completion my internship report.

I am highly indebted and convey my gratitude to honorable supervisor xxxxxxxxx Assistant

Professor, Department of Business Studies, International Islamic University Chittagong. He is
the key personality whose repeated inspiration, guidance, support, advice was the main
foundation of this report.

I would like to show my warm hearted gratitude to the whole Social Islami Bank Limited. Which
has provided me with great deal of information’s, adequate data and finally cooperated me for
the accomplishment of the report successfully.

I would like to thank to XXXXXXXx (AVP & Manager) for giving me opportunity to
internship in his branch for getting Knowledge and successfully prepared my internship report. I
would like to thank XXXXXXXX, (Oparation Officer) for invaluable support and direction that
lead me to the successful completion of my internship report. I am also grateful to
XXXXXXXXXX (Executive Officer), XXXXXXX (Officer), for his valuable suggestions that
make me confident to walk my desire way to construct my report.

I also thank to my parents, friends and classmates who

encouraged me by providing inspiration, valuable suggestion and
co-operation.
Without them this study would have been very difficult.

3
 Table of Contents

CHAPTER ONE 1
INTRODUCTION
1.1 Introduction 2
1.2 Objective of the study: 3
1.3 Methodology of the study 3
1.4 Scope of the study 4
1.5 Limitations of the study 4
CHAPTER TWO 5

Overview of Social Islami Bank Ltd.

2.1 Background of SIBL: 6
2.2 Vision of SIBL 6
2.3 Mission of SIBL 6
2.4 Their values 7
2.5 Management of SIBL: 7
2.6 Organizational structure of SIBL: 8
2.7 Executive's level: 9
2.8 Officers' level: 10
2.9 Sources of fund: 11
2.10 Corporate profile of SIBL 11
2.11 Corporate structure hierarchy 12
2.12 Products and Services: 12
2.13 Slogan of SIBL 13
2.14 Services of SIBL: 13
CHAPTER- THREE 14
Theoretical Concept of Ratio Analysis
3.1 Financial performance analysis: 15
3.2 Balance sheet & Income statement: 15
3.3 Benefits of ratio analysis: 15
3.4 Ratio analysis: 16
CHAPTER FOUR 18

4
 Evaluation of Liquidity and solvency
Financial Highlights of SIBL 19
4.0 Introduction 20
4.1 Current ratio 20
4.2 Debt-equity ratio 22
4.3 Structure of funds 24
4.4 Efficiency ratio 27
4.5 Net working capital 30
CHAPTER FIVE 32
Evaluation of Profitability of
Social Islami Bank Ltd
5.0 Introduction: 33
5.1 Net profitability performance 33
5.2 Return on equity 35
5.3 Return on capital employed 37
5.4: Return on total assets 39
5.5 Dividend yield 41
CHAPTER SIX 44
Findings, Recommendations
and Conclusion
6.1 Findings 45
6.2 Recommendation 46
6.3 Conclusion 47

References 48

5
CHAPTER ONE
INTRODUCTION

6
1.5 Introduction
Financial sector of Bangladesh, like most developing countries, is dominated by banking
enterprises. Banks at early stages of history of Bangladesh were nationalized and there was
mismatch between assets and liabilities.

Performance evaluation of a Bank is usually related to how well a Bank can use it assets,
share holder equity and liability, revenue and expenses. Financial ratio analysis is one of
the best tools of performance evaluation of any Bank. In order to determine the financial
position of the SIBL Bank and to make a judgment of how well the bank is efficient, its
operation and management and how well the Bank has been able to utilize its assets and
earn profit.

I used ratio analysis for easily measurement of liquidity position, asset management
condition, profitability and market value and debt coverage situation of the SIBL for
performance evaluation. It analysis the bank use of its assets and control of its expenses. It
determines the greater the coverage of liquid assets to short-term liabilities.It measures
SIBL overall efficiency and performance. It also used to analysis the SIBL past financial
performance and to establish the future trend of financial position.

The earning and profitability of the banking sector have also improved in recent years and
it is generally measured by Net profitability performance ,Return on Assets (ROA) and
Return On Equity (ROE).

Hence, the banking sector would play a vital role in the development of the country and
efficient and sound banking management would lead the country to reach at the highest
peak of success.

7
1.6 Objective of The Study:

The main objective of the study is to evaluate the financial performance evaluation of Social Islami
Bank Ltd. Following specific objectives have been covered in order to accomplish the principal
objective:

a) To Provide theoretical concept of ratio analysis.

b) To examine the operating, financing and investing polices of the Social Islami Bank Ltd.
c) To examine the liquidity and solvency performance of the Social Islami Bank Ltd.
d) To examine the profitability performance of the Social Islami Bank Ltd.
e) To identify the problem facing by the Social Islami Bank Ltd in executing the different
financial activates.
f) To suggest some policy measures for improving the financial performance of the Social Islami
Bank Ltd.
1.7 Methodology of the study

1.3.1 Collection of Data

The study has used both primary and secondary data.

1.7.1.1 Collection of Primary Data

 Face to face conversation with the respective officers in the branch.
 Practical work experience on different desks of the branch.

1.7.1.2 Collection of Secondary Data

The secondary data has been collected from the following sources:

A) Annual reports of SIBL

B) Different text book and journals

C) Various reports and articles related to study

8
 D) Some of my course elements as related to this report.

E) Web base support from the internet.

1.7.2 Analysis of Data

The study has used both financial techniques- ratios; and statistical techniques – column, line,
graph etc by using Microsoft Word and Microsoft Excel for analysis of data.

1.8 Scope of The Study

Social Islamic Bank Ltd is one of the leading bank in Bangladesh. The scope of the study is
limited to muradpur branch only. This report covers liquidity and solvency performance,
profitability performance related knowledge about Social Islamic Bank Ltd.

1.5 Limitations of the study

Objective of the pract5cal orientation program is to have practical exposure for the students. Our
tenure was for four months only, which was somehow not sufficient.

The topic requires detail study. At the same time, it is a bit sensitive. So, it was not possible to
find out of the targeted clients. The bank was also unable to disclose the classified information
about its valued clients.
Other limitations are as follows:

 For the lack of our practical knowledge, some shortcoming may be available in the
paper.

 Due to time constraints, interview of personnel from Private sector banks could not be
taken which might have led to a better understanding of the internal performance of the
bank.

 The bank has naturally shown us some indifference connecting its most confidential
information.

9
 Since the research is based on Secondary sources only, the accuracy of the research
depends completely on the accuracy of the secondary data used.

10
 CHAPTER TWO:
Overview of Social Islami Bank Ltd.

11
2.1 Background of SIBL

Social Islamic Bank was established on 5th July 1995 and went on operation on 22nd November,
1995 as a Second Generation Islami Bank with close co-operation and assistance of some
renowned personalities of the Islamic world. The bank started commercial operation on 22nd
November ,1995 with a clear manifesto to demonstrate the operational meaning of particularly
economy , banking and financial activities as an integrated part of Islamic code of life targeting
poverty.

Social Islami Bank Ltd. is indeed a concept of 21st century participatory three-sector in one
banking model. In the formal corporate sector, this Bank would, offer the most upto date banking
services through opening of various types of deposit and investment accounts, financing trade,
providing letters of guarantee, opening letters of credit, collection of bills, leasing of equipment
and consumers‟ durable, hire purchase and installment sale for capital goods, investment in low-
cost housing and management of real estate, participatory investment in various industrial,
agricultural, transport, educational and health projects and so on.

It is a non-formal non corporate sector, it would , among others, involve in cash Waqfh
certificate and development and management of WAQFH and MOSQUE properties and Trust
funds. It is a non formal banking with informal finance and credit package that empowers and
humanizes real poor family and creates local income opportunities and discourage migration.

2.2 Vision of SIBL

Working together for a caring society.

2.3 Mission of SIBL

 Establishing Three Sector Banking Model.
 Transformation to a service oriented technology driven profit earning bank.
 Fast, accurate and satisfactory customer service.
 Balanced & sustainable growth strategy.
 Optimum return on shareholders’ equity .

12
  Empowering real poor families and creating local income opportunities.
 Providing support for social benefit organizations by way of mobilizing funds and social services.

2.4 Their Values

• Honesty

To be honest is ordained by the scripture – we stick to this value in all our service provision.

• Transparency

Remaining transparent in all acts is a virtue that's builds trust - we adhere to it.

• Efficiency

Efficiency implies perfection in any job done - we strive to render full satisfaction with it.

• Accountability

To be accountable is to be responsible and above any suspicion - we are dutifully there.

• Religiousness

SIBL enhances economic wellbeing with regard to the bliss of religious ethics.

2.5 Management of SIBL

The decision making process of SIBL is democratic and decentralized. The upper level
management hardly Mothers about the operational task of the bank.

The sponsor Directors of the bank are well-established businessmen and professionals of the
country having business in mid-t5ut Bangladesh. A board of Directors is formed taking 19

members out of the entrepreneurs and Mr. Saiful Alam (Masud) has elected as chairperson
unanimously.

13
Highly qualified and efficient professionals manage the bank. The managing Director of the bank
is Mr. A.A.M. Zakaria who has rich experience about managing both the nationalized and private
sector bank as Chief Executive.

Most of the cases pending at Head office level solved with higher priority for smooth functioning
of bank operation and quick disposal of the proposals. All the decisions made at Head office
level through different committee. At branch level all the decision taken by the Branch manager
complying rules and regulations set by the Head office. Branch manger has the supreme
authority to final disbursement of the facility to the customer. All Investment facilities under
branch delegation exercise through Investment committee. Deputy Manager coordinates all the
functions of the branch as manage Operation.

2.6 Organizational Structure of SIBL

Chairman

Vice-Chairman

Director

14
2.7 Executive's Level

Managing Director

Executive Vice President

Senior Vice President

Vice President

Senior Assistant Vice President

Assistant Vice President

First Assistant Vice President

15
2.8 Officers' Level

Senior Principal Officer (SPO)

Principal Officer (PO)

Senior Officer (SO)

Officer

Probationary Officer

Junior Officer

Assistant Officer

16
2.9 Sources of Fund

SIBL uses various sources to raise its funds. Among the available sources, deposits occupy the
lion share of the sources. SIBL has introduced various types of attractive saving schemes that
motivate the savers to save their money at a pretty provisional profit rate. The total amount of
deposit that was 78145.04 in million taka at the end of the year 2014 was 109906.57 has
increased to taka in million 231274.24 at the end of the year 2017. It shows a greater
improvement in creating funds. Besides deposits paid up capital, provisions and reserves and
other liabilities are the main sources of fund.

2.10 Corporate Profile of SIBL

Social Islami Bank Limited (SIBL) was established in the year 1995 as a public limited company
which is engaged in Shariah based commercial banking in the country and its modes of operation
are substantially different from other conventional banks. This is the second generation pioneer
Islami Bank in this country providing online banking facilities to its customers.

Table :2.1

Name of the Company Social Islami Bank Limited

Legal Form
Company Registration no.
Authorized Capital
Paid up Capital
Registered Office
Tax Payer Identification No
Credit Rating Agency
Public Limited Company
C-28763(44
Taka 10,000,000,000
Taka 703,14,15,640
City Center, Level 19, 20, 21, 22, 28 & 29, 90/1 Motijheel
C/A, Dhaka-1000 Phone PABX 88 02 09612001122 FAX 88
02 9568098 Email info@sibl-bd.com web www.sibl
bdcomswiftsoivbdd
035-200-4971
Emerging Credit Rating Ltd. Auditors : M/S KaziZahir Khan
& Co. Chartered Accountants, 67/4, Pioneer Road, Kakrail,

17

Chairman
Managing Director & CEO
Company Secretary
ACS Chief Risk Officer
Chief Financial Officer
FCMA Number of Employees
Number of Branches
Dhaka-1000
Professor Md. AnwarulAzimArif
Mr. Quazi Osman Ali
Md. HumayunKabir
Md. Yunus Ali
Walid Mahmud Sobhani
2130
132(one hundred thirty two)

2.11 Corporate Structure Hierarchy

Board of Directors

Executive Committee

Board Audit Committee

Shari”ah Supervisory Committee

2.12 Products And Services

 Al-Wadeeah Current Account

 Mudaraba Savings Account
 Mudaraba Notice Deposit Account
 Mudaraba Term Deposit Account

• 1 month

• 3 months

• 6 months

• 12 months

18
  Mudaraba Monthly Profit Deposit Scheme
 Mudaraba Hajj Savings Deposit (Kafela)
 Cash Waqf
 MudarabaLakhopati Deposit Scheme
 Mudaraba Double Benefit Deposit Scheme
 ShamridhirShopan Special Deposit Scheme
 Mudaraba Marriage Savings Scheme
 MudarabaMohorana Savings A/c (10 Years)
 MudarabaMohorana Savings A/c (5 Years)
 Shanchita Special Deposit Scheme
 Subarnalata Special Deposit scheme
 SubarnaRekha Special Deposit Scheme
 SabujChaya Special Deposit scheme
 ATM Service
 Locker service
 Online Banking

2.13 Slogan of SIBL

With the new journey SIBL has started its new slogan to add a new dimension in their service.
The slogan is the indicator o its continuous improvement to create the excellent service condition
for the clients.

2.14 Services of SIBL

• Online Banking

• SMS Banking

• Locker Service

• ATM Banking

19
 CHAPTER- THREE
CHAPTER- THREE
Theoretical Concept of Ratio Analysis
Theoretical Concept of Ratio Analysis

20
3.1 Financial performance analysis
Financial performance analysis of a company is very important to get an overall view about an
organization. It generally consists of interpretation of balance sheet and interpretation of income
statement. By using these two sources one can perform the ratio analysis and trend analysis
which are the major tools for analyzing the financial performance of a bank.

3.2 Balance sheet & Income statement

In financial accounting, a balance sheet or statement of financial position is a summary of the
financial balances of a sole proprietorship, a business partnership or a company. Assets,
liabilities and ownership equity are listed as of a specific date, such as the end of its financial
year. A balance sheet is often described as a "snapshot of a company's financial condition". Of
the four basic financial statements, the balance sheet is the only statement which applies to a
single point in time of a business' calendar year. A standard company balance sheet has three
parts: assets, liabilities and ownership equity.
Income statement also referred as profit and loss statement, earnings statement, operating
statement or statement of operations is a company's financial statement that indicates how the
revenue is transformed into the net income. It displays the revenues recognized for a specific
period, and the cost and expenses charged against these revenues, including write-offs (e.g.,
depreciation and amortization of various assets) and taxes. The purpose of the income statement
is to show managers and investors whether the company made or lost money during the period
being studied.

3.3 Benefits of Ratio Analysis

Ratio analysis give quick financial information to financial institute. By giving glance, anyone
can take decision regarding the financial statement.
There for manager, shareholder, creditor etc.
1. Useful in Financial Position Analysis
2. Useful in Simplifying Accounting Figures
3. Useful in Assessing the Operational Efficiency

21
 4. Useful in Forecasting Purposes
5. Useful in Locating the Weak Spots of the Business
6. Useful in Comparison of Performance

3.4 Ratio Analysis

Ratio is a method of interpreting the financial statement of a company. The purpose of ratio
analysis is identifying the risk of business firm and the financial statement of a business firm,
performance evaluation, compare income analysis.

3.4.1 Groups of Financial Ratios

Financial ratios can be divided into four basic groups or categories:
1. Liquidity Ratio:
1. Current Ratio = Current Assets/Current Liabilities
2. Working Capital= Current Assets – Current Liabilities
3. Cash conversion cycle = DSO + DIO – DPO
 Days sales outstanding = 365/receivables turnover ratio
 Days inventory outstanding = 365/inventory turnover ratio
 Days payables outstanding = 365/payables turnover ratio
 Cash conversion cycle = DSO + DIO − DPO
2. Asset Management/Efficiency Ratio
1. Inventory Turnover = Cost of Goods Sold/ Average Inventory
 Days inventory outstanding = 365/inventory turnover ratio = 365/10 = 36.4 days
2. Total Asset Turnover Ratio = Net Sales Average/ Total Assets
3. Days sales outstanding = 365/receivables turnover ratio
 Receivables Turnover = Net Credit Sales /Average Accounts Receivable
4. Average Payment Period= (Accounts Payable × Number of Working Days)/Net Credit
Purchase
3. Debt Management period
1. Debt Ratio = Total Liabilities /Total Assets
2. Times Interest Earned Ratio = Earnings before Interest and Tax /Interest Expense
22
4. Profitability Ratio
1. Net Profit Margin = Net Income /Net Sales
2. Gross Margin = Gross Profit /Revenue
3. Operating Margin = Operating Income /Revenue
4. ROE = Net income after tax / Average shareholder's equity
5. ROA = Annual Net Income /Average Total Assets

23
CHAPTER FOUR
Evaluation of Liquidity and
solvency
of Social Islami Bank Ltd.

24
Financial Highlights of SIBL:
Year 2013 2014 2014 2015 2017

Authorized Capital 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00

Paid-up Capital 7031.42 7031.42 7031.42 7382.99 7382.99

Shareholders equity 11083.43 12143.38 12950.32 14187.8 14166.45

Capital 11623.52 13078.26 16916.08 19195.04 21725.08

Current Assets 123962.68 154698.81 177040.07 224446.68 272868.13

Current Liabilities 102104.48 124535 149773.6 190564.5 228798.90

Total assets 126616.6 1537375 180112.1 227704.2 276348.95

Total liabilities 115533.13 141594.08 167161.78 213516.39 262182.51

Deposit 102104.5 124535 149773.6 190564.5 228798.90

Total Operating 2585.23 2746.60 3400.07 3931.91 4686.23

Expenses

Total Operating 5479.29 6710.88 8249.89 9630 10852.45

Incomes

Net working capital 21858.18 30163.81 27266.47 33882.18 44069.23

Net profit 1220.21 1903.74 2072.60 2292.19 1455.26

Net operating profit 2024.66 3307.52 3479.18 4192.19 3535.13

Capital employed 24512.1 32840 30338.5 37139.7 47550.05

Net income after 1220.20 1903.73 2072.59 2292.19 1455.25

taxes

DY 12% 18% 15% 20% 10%

Source: Annual report 2013-2017 Social Islami Bank Ltd..

25
4.0 Introduction

The ability of a bank to meet its current obligations for cash outflow and to respond to changes in
customer demand for Investments and cash withdrawals without selling assets at a substantial
loss. Bank assets are liquid it the extent that they may be easily converted into cash without
loss.Liquidity refers to the ability of a firm meet its short-term financial obligation when and as
they fall due. Current Ratio are frequently used to measure liquidity ratios

4.1 Current Ratio = Current Assets/Current Liabilities

(Current Assets = Cash + Balance with others banks & financial institutions + Money at call &
short notice + Investment& Advances + Other assets.)

(Current liabilities = Borrowing from others + Deposits & other accounts except fixed deposits
over two years + others liabilities.)

Table 4.1: Current ratio

Year 2013 2014 2015 2016 2017

Current Assets 123962.68 154698.81 177040.07 224446.68 272868.13
Current Liabilities 102104.48 124535 149773.6 190564.5 228798.90
Ratio 1.21 1.24 1.18 1.17 1.20
Growth(Taking 2013 as 0 1.02 0.97 0.96 0.99
base)
Source: Annual report 2013-2017, Social Islami Bank Ltd.

26
Fig 4.1: Increase / decreasing current ratio

1.26%

1.24%

1.22%

1.20%

1.18% 1.24%

1.21%
1.16% 1.20%
1.18%
1.17%
1.14%

1.12%
2013 2014 2015 2016 2017

Ratio

Growth

1.02
0.97 0.96 0.99

0
2013 2014 2015 2016 2017

27
Analysis: Current Ratio

The current ratio was 1.21 in 2013. Due to increase in assets current ratio increase as 1.24 in
2014.But due to increase in liabilities current ratio is decreasing from 2015-2016.In 2017 current
ratio is increase as 1.20.
From the above calculating it can be said that the liquidity position is quite satisfactory all the
five years from 2013-2017. There is a up and down trend of Cutrrent ratio. This indicates, over
the time period, greatly lose its capacity to pay their current obligations by using its current
assets. All of the ratios of the years are less the 2, which indicates they are in risky position in
current ratio and it reflect inefficiency of management.

4.2 Debt-equity ratio = total liabilities / shareholders equity

Table 3.2: debt- equity ratio

Year 2013 2014 2015 2016 2017

Total liabilities 115533.13 141594.08 167161.78 213516.39 262182.51
Shareholders equity 11083.43 12143.38 12950.32 14187.8 14166.45
Ratio 10.42% 10.01% 12.91% 15.05% 18.51%
Growth (taking 2013 as 0 0.97 1.24 1.44 1.78
base)
Source: Annual report 2013-2017, Social Islami Bank Ltd.

28
Fig 4.2 Debt-equity ratio

20
18.51

15 15.05
12.91
10.42
10.01
10

0
2013
2014
2015
2016
2017

Ratio

Analysis:

Debt-equity ratio was 2013 in10.42. In 2014 the debt equity ratio is certain decrease as
10.01.From 2015,2016&2017 increased liability. As a result, the debt-equity ratios which
increases 12.91,15.05 & 18.51. From avobe calculation we can understand that SIBL debt-
equity performance is higher risk and they relies more on external fund. because Lower value of
debt-equity ratio are favorable indicating less risk.

29
 Growth

1.78

1.44
1.24

0.97

0
2013 2014 2015 2016 2017

Growth Rate

The growth rate of debt-equity ratio is 100 in 2013(base). Increased liabilities the growth rate on
debt equity 108.08 in 2014. Growth rate reduce 75.62 in 2015. Again increase growth rate are
2016& 2017. This is the Growth rate on debt equity of 85.37 &86.25 From the above calculation
it can be said that the growth rate on debt equity ratio satisfactory the years of 2015.

4.3 Structure of funds

A fund that combines both equity and fixed-income products to provide investors with a degree
of both capital protection and capital appreciation. These funds use fixed-income securities to
give the fund capital protection through principal repayment along with the added gain of interest
payments. The fund uses options, futures and other derivatives, which are often based on market
indexes, to provide exposure to capital appreciation

Table 4.3: Structure of funds

Year 2013 2014 2015 2016 2017

Equity 11083.43 12143.38 12950.32 14187.8 14166.45
Capital 11623.52 13078.26 16916.08 19195.04 21725.08
Deposit 102104.5 124535 149773.6 190564.5 228798.90
Source: Annual report 2013-2017, Social Islami Bank Ltd.

30
Fig 4.3: Structure of funds

15000 12950.32 14166.45

14187.8
11083.43 12143.38

10000

5000

0
2013
2014 Equity
2015
2016
2017

Equity

Analysis:

In 2003, Equity of Social Islami Bank Ltd. is 11623.52. Their Equity Increasing next 2014-2016
respectively were 12143.38,12950.32,14187.8. But in 2017 their equity slightly decreased like as
14166.54.

31
 25000

21725.08
20000 19195.04
16916.08

15000 13078.26
11623.52

10000

5000

0
2013
2014
2015
2016
2017

Capital

Analysis:

In 2003, Capital of Social Islami Bank Ltd. is 11623.52. Their Capital Increasing next 2014-
2017 respectively were 13078.26,16916.08,19195.04,21725.08.It upwards increasing trend
indicates that their capital fund is enough to maintain business. SIBL can reduce their debt fund.

32
 250000
228798.9

200000 190564.5

149773.6
150000
124535
102104.5
100000

50000

0
2014 2013 2015 2017 2016

Deposit

Analysis:

In the year of 2013 Deposit of Social Islami Bank Ltd. is 102104.5 Next 2014-2017
respectively were increasing 124535,149773.6,190564.5,228798.90. So, their upward trend
indicates that, SIBL maintain good relationship with clients.

4.4 Efficiency Ratio

Efficiency ratio is calculated as operating expenses divided by operating income. Efficiency ratio
also known as activity ratio. This ratio is use to evaluate performance of generating income.

Efficiency ratio=(Total operating expenses/Total operating income)

Table: 4.4 Efficiency ratio

Year 2013 2014 2015 2016 2017

TOE 2585.23 2746.60 3400.07 3931.91 4686.23
TOI 5479.29 6710.88 8249.89 9630 10852.45
Ratio 47.18% 40.93% 41.21% 40.83% 43.18%

33
Growth 0 0.87 0.88 0.86 0.91
(taking 2013
as base)
Source: Annual report 2013-2017, Social Islami Bank Ltd.

Fig 4.4: Efficiency Ratio

48.00% 47.18%
47.00%
46.00%
45.00%
44.00%
43.00% 43.18%
42.00% 40.93% 41.21%
40.83%
41.00%
40.00%
39.00%
38.00%
37.00%
2013
2014
2015
2016
2017

Ratio

1
0.9
0.8 0.87 0.91
0.88 0.86
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
0
2013 2014 2015 2016 2017

Growth

34
Analysis:

In 2013 efficiency ratio is 47.18%.In 2014 this ratio is decreased as 40.93%.In 2015 this ratio is
few increased like as 41.21%.In 2016 this ratio is again decreased as 40.83%.In 2017 this ratio
again increased like as 43.18%.So from avobe calculation there is a up and down trend of
efficiency ratio.This trend means SIBL operating better but can not satisfactory.because the
maximum optimal efficiency ratio is 50%.

4.5 Net Working Capital

Net working capital= (current assets - Current liabilities )

Table: 4.5 Net Working Capital

Year 2013 2014 2015 2016 2017

Current assets 123962.68 154698.81 177040.07 224446.68 272868.13
Current 102104.48 124535 149773.6 190564.5 228798.90
liabilities
Net working 21858.18 30163.81 27266.47 33882.18 44069.23
capital
Growth 0 1.38 1.25 1.55 2.02
(taking 2013
as base)
Source: Annual report 2013-2017, Social Islami Bank Ltd.

35
Fig 4.5: Net Working Capital

50000
44069.23
45000

40000

35000 33882.18
30163.81
30000 27266.47

25000 21858.18
20000

15000

10000

5000

0
2013 2014 2015 2016 2017

Net Working Capital

36
 Growth
Growth

2.02

1.55
1.38
1.25

0
2013 2014 2015 2016 2017

Analysis

In 2013 net working capital of SIBL is 21858.18.From 2014 to 2017 their net working capital is
increasing year by year like as 30163.81, 27266.47, 33882.18 & 44069.23.High net working
capital prove excellent performance of SIBL. It means that SIBL has enough current assets to
meet its current liabilities. If all current liabilities are to be settled, SIBL could continue its
operation.

37
CHAPTER FIVE
Evaluation of Profitability of
Social Islami Bank Ltd.

38
5.0 Introduction
Being by both competition and regulatory pressure the importance of evaluating banks
profitability over the years and relative to other bank is increasing day by day. In order to
determine whether a bank’s management has been successful in achieving its goals and
objectives, interested parties analyze the bank return and risk measures. To evaluate Social
Islami Bank Ltd. profitability throughout the selected five years’ period that is 2013-2017. I have
calculated some of the key return and risk measures based on profitability dimensions of the
bank. Profitability is clearly the most important dimension of banks profitability evolution
because satisfactory profits preserve the bank’s capital, providing it with a base for future
survival and growth. To find out whether the Social Islami Bank Ltd. is achieving adequate
profitability over the years, the ratios that I have taken into consideration are mainly- Net
Profitability Performance, Return on Total Assets, Return on Equity, Return on Capital
Employed and Dividend Yield.

5.1 Net Profitability Performance

These measures evaluate the bank’s earnings with respect to a given level of sales, a certain level
of assets, the owner’s investment, or share value. Without profits, a firm could not attract outside
capital. Moreover, present owners and creditors would become concerned about the company’s
future and attempt to recover their funds. Owners, creditors, and Management pay close attention
to boosting profits due to the great importance placed on earnings in the marketplace.

39
Table: 5.1 Net Profitability Performance

Year 2013 2014 2015 2016 2017

Net profit 1220.21 1903.74 2072.60 2292.19 1455.26

Growth 0 1.56 1.70 1.88 1.19

(taking 2013
as base)

Fig: 5.1 Net Profits

2500 2292.19
2072.6
1903.74
2000
1455.26
1500 1220.21

1000

500

0
2013 2014 2015 2016 2017

Net Profits

40
 1.88

1.7
1.56
1.19

0
2013 2014 2015 2016 2017

Growth

Analysis:

In 2003, Net profit of Social Islami Bank Ltd. is 1220.21 . Their Net profit Increasing next 2014-
2016 respectively were 1903.74,2072.60,2292.19. . But in 2017 their Net Profit slightly
decreased like as 1455.26.

Though, the year of 2017’s net profit is not good but the net profit of 2014-16 is satisfactory.

Is prove that SIBL manages their income & expenditures effectively

5.2 Return on Equity

The ROE is the most important measurement of banking returns as well as a company’s returns
because it is influenced by how well the bank has performed on all other categories and indicates
whether a bank can complete for private source of capital in the economy. The higher the ROE
the better the company, as they are getting amount of net income over the equity.

41
Return on Equity = Net Income after Taxes/ Total Equity Capital.
Table: 5.2 Return on Equity
Year 2013 2014 2015 2016 2017
Net income after taxes 1220.21 1903.74 2072.60 2292.19 1455.26
Total equity capital 11083.43 12143.38 12950.32 14187.8 14166.45
ROE 11.01% 15.68% 16.00% 16.16% 10.27%
Growth (taking 2013 as 0 1.42 1.45 1.47 0.94
base)
Source: Annual report 2013-2017, Social Islami Bank Ltd.

Fig: 5.2: Return on Equity

18.00%
16.00%
14.00%
12.00%
Axis Title

10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2013
2014
2015
2016
2017

2013 2014 2015 2016 2017

ROE 11.01% 15.68% 16.00% 16.16% 10.27%

42
 1.42 1.47 1.45

0.94

2013 2014 2015 2016 2017

Growth

Analysis

In the ratio analysis, we see that Social Islami Bank Ltd. has maintained a sagnificant high ROE
during the years 2013,2014, 2015 & 2016 like as 11.01%,15.68%,16.00% & 16.16%,Though
the ROE fall at a quite higher rate in 2017.There is upward trend of Return on equity of SIBL.So
SIBL effectively use the money from shareholders to generate profits and grow .

5.3 Return on Capital Employed

Return on capital employed (ROCE) is the ratio of net operating profit of a company to its
capital employed. It measures the profitability of a company by expressing its operating profit as
a percentage of its capital employed. Capital employed is the sum of stockholders' equity and
long-term finance. Alternatively, capital employed can be calculated as the difference between
total assets and current liabilities. The formula to calculate return on capital employed is:

ROCE=Net Operating Profit/ Capital Employed

(Capital Employed= Total assets-Current laibilities)

43
Table 5.3: ROCE

Year 2013 2014 2015 2016 2017

Net operating profit 2024.66 3307.52 3479.18 4192.19 3535.13
Capital employed 24512.1 32840 30338.5 37139.7 47550.05
ROCE 8.25% 10.07% 11.48% 11.28% 7.45%
Growth(taking 2013 0 1.22 1.39 1.36 0.90
as base)
Source: Annual report 2013-2017, Social Islami Bank Ltd.

Fig 5.3 ROCE

12.00%
11.28% 11.48%
10.07%
10.00%
8.25%
8.00%
7.45%
6.00%

4.00%

2.00%

0.00%
2013
2014
2015
2016
2017

ROCE

44
 1.36 1.39
1.22

0.9

0
2013 2014 2016 2015 2017

Growth

Analysis

The ROCE is satisfactory over the period of 2013, 2014, 2015 and 2016 like as
8.25%,10.07%,11.48% & 11.28%.Though it slightly decreased in 2017 like as 7.45%.This
higher ratio is more favorable because it means that SIBL efficiently uses its capital employed as
well as its long term financing strategies. Investors are interested to invest their fund in SIBL.

5.4: Return on Total Assets

Return on total assets is measured by dividing net income after tax by total assets. By the
return from the assets, if the company’s net income increases the profitability ratios of the
company increase. Also by measuring ROTA, it can be determined that what percentage of total
assets is in the net income i.e., how much return are they getting over the assets. The higher the
ROTA, the better the company.

ROTA=Net income after tex/Total assets

45
Table 5.4: Return on Total Assets

Year 2013 2014 2015 2016 2017

Net income after 1220.20 1903.73 2072.59 2292.19 1455.25

taxes
Total assets 126616.6 1537375 180112. 227704.2 276348.
1 95
ROTA 0.96% 1.23% 1.16% 1.00% 0.53%
Growth 0 1.28 1.21 1.05 .55
Source: Annual report 2013-2017, Social Islami Bank Ltd.

Fig: 5.4: Return on Total Assets

1.40% 1.23%
1.20% 1.16%
0.96%
1.00% 1.00%
0.80%
0.60%
0.40% 0.53%
0.20%
0.00%
2013
2014 ROTA
2015
2016
2017

ROTA

46
 1.28
1.21
1.05

0.55

0
2013 2014 2015 2016 2017

Growth

Analysis
In 2013 Return on total asets of Social I slami Bank Ltd. is 0.96%.During the period 2014
ROTA is increased like as 1.23%.But during the period 2015-2017 the ROTA is decreased like
as 1.16%,1.00%&0.53.This downward trend is quite unsatisfactory for SIBL.It can be said that,
the management can not efficiently use its assets to generate profits. Management should give
continuous emphasis on quality assets, which resulted in a sound asset base for the bank.
Besides, positive trend of ROTA, the bank is also gaining control over its expenses and its bank
fee income and Investment revenues are increasing.

5.5 Dividend Yield

Dividend yield is a way to measure how much cash flow you are getting for each taka invested in
an equity position - in other words, how much "bang for your buck" you are getting from
dividends. Investors who require a minimum stream of cash flow from their investment portfolio
can secure this cash flow by investing in stocks paying relatively high, stable dividend yields.

47
Dividend Yield = Dividend per Share/Market Price of Share
(Dividend per Share = EPS × Dividend Payout Ratio)

Table 5.5: Dividend yield

Year 2013 2014 2015 2016 2017

DY 12% 18% 15% 20% 10%
Growth rate 0 1.5 1.25 1.67 .83
Source: Annual report 2013-2017, Social Islami Bank Ltd.

Fig 5.5 Dividend Yield

20% 18% 20%

15% 15%
12%

10%
10%

5%

0%
2013
2014 DY
2015
2016
2017

DY

48
 1.67
1.5

1.25

0.83

0
2013 2014 2015 2016 2017

Growth

Analysis:

In 2013 Devidend yield of Social Islami Bank Ltd. is 12.00%.During the period of 2014 this
ratio is highly increased like as 18%.But in 2015 DY ratio is slightly decreased like as 15%,Next
2016 DY ratio is highly increased like as 20%. In 2017 DT ratio again greatly fall like as 10%.

49
 CHAPTER SIX
Findings, Recommendations
and Conclusion

50
6.1 FINDINGS
o The current ratio of Social Islami Bank Ltd is stable.So it is not achieve with satisfactory
level.
o An increasing trend of Debt-Equity Ratio of SIBL is also alarming because SIBL
financed by the debts is increasing.
o Deposits of SIBL is increasing from 2013 to 2017 because they maintain good relation
with cients.
o Efficiency ratio of SIBL is not so good because it can not achieve standard value as 50% .
o Net Working Capital of SIBL is significant .Though in 2015 net working capital is low.
o Net profitability performence of SIBL is excellence.Though in 2017 net profites is low.
o An increasing trend of Return on Equity of SIBL is show that they using investors fund
effectively.
o Return on Capital Employed of SIBL be concerned because its up and down year by year.

o Return on assets of SIBL is not so bad but it can not prove management efficiency.

51
6.2 RECOMMENDATIONS

 Before giving long-term Investment, a bank should consider that whether a bank has long
term deposit or not. Otherwise the bank will surely face the liquidity problem.
 Bank should increase their equity by improving market price of share.

 Proper Banking software should be used to get best benefit and it reduce operating expenses

and increase operating income.

 They should effectively invest their idle fund in business or projects for availing high-return

and it increase their aassets.

 SIBL needs to utilize modern technologies to give better services to customer

52
6.3 Conclusion

Modern Commercial Banking is exacting business. The reward is 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. Social Islami Bank Ltd.
one of the leading commercial banks in our country. In all economic condition of our country
Social Islami Bank Ltd.has been working with great confidence and competing tremendously
with Government oriented bank, local commercial banks along with the multinational banks also.
Social Islami Bank Ltd. Always tried its level best to perform financially well. In spite of trying
to do well in some aspects Social Islami Bank Ltd. faced some financial problems from time to
time. Some of the problems were-excessive bad Investments, shortage of Investments 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 Social Islami
Bank Ltd. will develop even more in the future.

53
References

Books
 Stanley, B. b., & Geoffrey, A. H. (2008 - 2009). Foundation of Financial
Management. International: McGraw-Hill.
 Jeff Madura (2016-2017). International Financial management .9th edition ;
Thomson
 Dr. A R Khan (January, 2015). Bank Management A Fund Emphasis.
Brother publications.

Websites
 http://www.bangladesh-bank.org/fnansys/bankfi.php
 http://www.silb.com.bd
 Annual Report 2014-2017
 www.google.com

54