RATIO ANALYSIS OF EASTERN

BANK LTD.
BUS 635 (MANAGERIAL FINANCE)

Prepared by

Name ID
Mohammad Sakib Sujaet
Mohammad Murtoza Ali Quader
Shaikh Sarfaraz Ahmad
Md Khaled Rabbani
RATIO ANALYSIS OF
EASTERN BANK LTD.

Financial performance evaluation of EBL

2011 - 2014
 Return on Equity (ROE)
 Return on Assets (ROA)
 Profit Margin
 Net Interest Margin
 Asset Utilization

1. PROFIT RATIO
 Capital
 Equity Multiplier
 Asset quality
 Provision for Loan Loss Ratio
 Loan Ratio

2. RISK RATIO
 Interest Expense Ratio
 Wages and Salaries Ratio
 Occupancy Ratio
 Other Expenses Ratio

3. OPERATING EFFICIENCY RATIO

 Tax Rate
 Dollar Gap Ratio

4. OTHER FINANCIAL RATIO

 Return on Equity (ROE)
20.00%
19.03%
18.00%
16.00%
14.00% 14.48% 14.18%
12.00%
10.93%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2014 2013 2012 2011
ROE %

Return on Equity (ROE) 2014 2013 2012 2011

= 10.93% 14.48% 14.18% 19.03%
Net Income After Taxes/
Total Equity

Return on Equity (ROE)

The amount of net income returned as a percentage of shareholders equity.
ROE= (Net Income ÷ Total Equity) × 100
 Return on Assets (ROA)
3.00%

2.50% 2.52%

2.00%
1.60% 1.63%
1.50%
1.28%
1.00%

0.50%

0.00%
2014 2013 2012 2011
ROA %

Return on Assets (ROA) 2014 2013 2012 2011

= 1.28% 1.60% 1.63% 2.52%
Net Income After Taxes/
Total Assets

Return on Assets (ROA)

An indicator of how profitable a company is relative to its total assets. ROA gives an idea as
to how efficient management is at using its assets to generate earnings.
ROA= (Net Income ÷ Total Asset) × 100
 Profit Margin %
35.00% 32.28%
30.00% 26.46% 27.13%
25.00%
20.72%
20.00%
15.00%
10.00%
5.00%
0.00%
2014 2013 2012 2011
Profit Margin %

Profit Margin 2014 2013 2012 2011

= 20.72% 26.46% 27.13% 32.28%
Net Income After Taxes/
Total Operating Income

Profit Margin
A ratio of profitability calculated as net income divided by revenues, or net profits
divided by sales.
Profit Margin= (Net Income ÷ Operating Revenue) × 100
 Net Interest Margine%

2.87% 2.37%

3.12%
3.32%

2014 2013 2012 2011

Net Interest Margin 2014 2013 2012 2011

= 2.374% 3.13% 3.32% 2.87%
(Total Interest Income - Total
Interest Expense) /
Total Assets

Net Interest Margin

A performance metric that examines how successful a firm's investment decisions
are compared to its debt situations.
Net Interest Margin = [(Total Interest Income - Total Interest Expense) / Total
Assets] x 100
 Asset Utilization%

2011 6.73%

2012 6%

2013 6.10%

2014 5.99%

5.60% 5.80% 6.00% 6.20% 6.40% 6.60% 6.80%

Asset Utilization%

Asset Utilization 2014 2013 2012 2011

= 5.993% 6.06% 6.00% 6.73%
Total Operating Income/
Total Assets

Asset Utilization
An assets utilization (activity, turnover) ratio reflects the way in which a company
uses its assets to obtain revenue and profit.
Asset Utilization = (Total Operating Income/ Total Assets) x 100
 Equity Multiplier
8.8
8.72 8.71
8.6
8.51
8.4
8.2
8.06
8
7.8
7.6
2014 2013 2012 2011
Equity Multiplier

Equity Multiplier 2014 2013 2012 2011

= 8.51 times 8.72 times 8.71 times 8.06
Total Assets/ times
Total Equity

Equity Multiplier
The ratio of a company’s total assets to its stockholder’s equity. The equity multiplier is a
measurement of a company’s financial leverage.
Equity Multiplier = (Total Assets/ Total Equity)
 Provision for Loan Loss Ratio%

1.67% 1.51%

0.78% 0.76%

2014 2013 2012 2011

Provision for Loan Loss Ratio 2014 2013 2012 2011

= 1.51% 0.76% 0.78% 1.67%
Provision for Loan Losses/
Total Loans and Leases

Provision for Loan Loss Ratio

Banks use the loan-loss coverage ratio to define the quality of its assets and how well it
protects itself from losses caused by problematic loans. The higher this ratio is, the better
the bank is handling itself in regards to loans.
Provision for Loan Loss Ratio = (Provision for Loan Losses/ Total Loans and Leases) x 100
 Loan Ratio%
71.00%
69.72% 69.55%
70.00%
69.00%
68.00%
67.00%
65.89%
66.00% 65.33%
65.00%
64.00%
63.00%
2014 2013 2012 2011
Loan Ratio%

Loan Ratio 2014 2013 2012 2011

= 69.72% 65.33% 65.89% 69.55%
Total Loans and Leases/
Total Asset

Loan Ratio
A commonly used statistic for assessing a bank's liquidity by dividing the banks
total loans by its total assets.
Loan Ratio = (Total Loans and Leases/ Total Asset) x 100
 Interest Expense Ratio%

10.00%

5.16% 6.26%
5.00% 6.02%
5.42%
0.00%
2014
2013 Interest Expense Ratio%
2012
2011

Interest Expense Ratio%

Interest Expense Ratio 2014 2013 2012 2011

= 5.16% 6.26% 6.02% 5.42%
Interest Expense/
Total Asset

Interest Expense Ratio

The proportion of assets required to pay annual interest expenses of a bank is
known as interest expense ratio. The lesser the ratio, the better is for banks.
Interest Expense Ratio = (Interest Expense/ Total Asset) x 100
 Wages and Salaries Ratio%

1.26% 1.39%

1.20%
1.26%

2014 2013 2012 2011

Wages and Salaries Ratio 2014 2013 2012 2011

= 1.39% 1.26% 1.20% 1.26%
Wages and Salaries/
Total Asset

Wages and Salaries Ratio

In economics, the wage ratio refers to the ratio of the top salaries in a group
(company, city, country, etc.) to the bottom salaries.
Wages and Salaries Ratio = (Wages and Salaries/ Total Asset) x 100
 Occupancy Ratio%
0.60%
0.56% 0.53%
0.50%
0.40% 0.40% 0.37%
0.30%
0.20%
0.10%
0.00%
2014 2013 2012 2011
Occupancy Ratio%

Occupancy Ratio 2014 2013 2012 2011

= 0.40% 0.56% 0.53% 0.37%
Total Occupancy Cost/
Total Asset

Occupancy Ratio
The occupancy ratio is simply the sum of all operating expenses and debt
service, divided by total assets. This tells us what percentage of the total asset is
used to cover occupancy cost.
Occupancy Ratio = (Total Occupancy Cost/ Total Asset) x 100
 Other Expenses Ratio%
0.60% 0.55%
0.52%
0.50%
0.40% 0.33%
0.30% 0.27%

0.20%
0.10%
0.00%
2014 2013 2012 2011
Other Expenses Ratio%

Other Expenses Ratio 2014 2013 2012 2011

= 0.33% 0.55% 0.52% 0.27%
Other Expenses/
Total Asset

Other Expenses Ratio

The proportion of assets required to cover the operating expenses is called other
expenses ratio. The less is the ratio, the better is for banks.
Other Expenses Ratio = (Other Expenses/ Total Asset) x 100
 Tax Rate%
2011 39.22%

2012 45.24%

2013 47.62%

2014 47.21%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00%

Tax Rate%

Tax Rate 2014 2013 2012 2011

= 47.21% 47.62% 45.24% 39.22%
Total Tax Expenses/
Net Profit Before Taxes

Tax Rate
The tax rate describes the ratio (usually expressed as a percentage) at which a
business or person is taxed.
Tax Rate = (Total Tax Expenses/ Net Profit Before Taxes) x 100