Our Presentation topic

“Profitability determinants of banks in

Bangladesh”
SUBMITTED TO
Quazi Nur Alam (QNA)
Lecturer
Department of Business Studies
University of Information Technology & Sciences (UITS)
SUBMITTED By
NAME ID
YESRAT SHARMIN POLY 1844302007
Puja Roy 1844302015
Introduction :
The banking system is the most important element of the
financial system in Bangladesh. Various estimates puts the
share of banking assets to the total financial system assets
well over 60 per cent. The Banking assets to GDP ratio is
about 71 percent. In Bangladesh banks function as the
main players in channeling funds from lenders to
borrowers, therefore it is important that their intermediary
role provides a higher welfare for the society, possibly at
lower costs.
Description of the bank:
 City bank: The City Bank is a Bangladeshi private commercial bank,
operating throughout Bangladesh. It is one of the few banks in
Bangladesh with a centralized infrastructure. The present CEO is
Sohail RK Hussain.
Branches: 130
Capital: Authorized capital: 15,000,000,000
Paid-up capital: 9,218,926,640

 BRAC Bank: BRAC Bank is a private commercial bank in Bangladesh

focused on Small and Medium Enterprises. BRAC Bank was founded
on 4 July 2001 to reach the large number of unbanked people which
were not covered by traditional bank. The main concept of the bank
was to facilitate Small and Medium Enterprises (SME).
Branches: 186
Revenue: 9.26 billion BDT (US$120 million).
 Prime Bank: Prime Bank was created and commencement of
business started on 17 April 1995. It was incorporated under the
Companies Act of 1994. The Bank is traded at the Dhaka stock
exchange and Chittagong stock exchange. Prime Bank is the title
sponsor of the 2013 edition of Bangladesh Premier League cricket
tournament. They are also the owners of Prime Bank Cricket Club.
Branches: 60
Net income: ৳140.4 core (US$18 million).

 ONE Bank: ONE Bank Limited is a private sector commercial

bank in Bangladesh. It is in the business of taking deposits from
public through various saving schemes and lending the fund in
various sectors at a higher margin. ONE Bank Limited started its
activities in Bangladesh from May 1999.
Branches: 100
Net income: 2,330,975,300
 AB Bank: AB Bank is a leading private sector bank in
Bangladesh established in 31 December 1981. This was the first
joint venture private bank in Bangladesh. On 14 November 2007
Bangladesh bank approved the name change to AB Bank from
Arab Bangladesh Bank.
Branches: 83
Net income: 11.60%

 BANK ASIA : Bank Asia Limited is a private sector commercial

bank in Bangladesh. Mr. Arfan Ali is the President and Managing
Director of the bank. The Bank was established in 1999 and
incorporated in 1999. It expanded through the purchase of the
branches of Bank of Nova Scotia and Muslim Commercial Bank
Limited.
Branches: 127
Net income: 290,946,272,783
 Dutch-Bangla Bank: Dutch- Bangla Bank Limited is a bank in
Bangladesh. DBBL is a scheduled joint venture commercial bank
between local Bangladeshi parties by M Sahabuddin Ahmed and
a Dutch company FMO.
Branches: 184
Capital: 20,272.2 million

 Eastern Bank Limited: Eastern Bank Limited is a private

commercial bank headquartered in Dhaka, Bangladesh. It was
established in 1992, as a public limited company with limited
liability under the bank company’s act of 1991. Its share is listed
in Dhaka Stock Exchange and Chittagong Stock Exchange.
Branches: 85
Capital: Authorized capital: 12,000 million
Paid-up capital: 7,380 million
 Trust Bank Limited: Trust Bank Limited is a private commercial bank
established in 1999 in Bangladesh. It is backed by Army Welfare Trust
of Bangladesh Army. General Abu Belal Muhammad Shafiul Huq the
chief of Bangladesh army is its chairman.
Branches: 113
Capital: paid –up capital: 5,569,662,160

 Mercantile Bank Limited: Mercantile Bank Limited is

a commercial bank headquartered in Dhaka, Bangladesh. It is a public
limited company with limited liability under the bank companies act,
1991. Its share is listed in Dhaka Stock Exchange and Chittagong Stock
Exchange. The bank provide products and services in retail
banking, corporate finance, Islamic Finance, asset management, equity
brokerage and security. It has 119 branches in Bangladesh and employs
around 2,000 employees.
Capital: 17,645,133,273
Determination of the profitability:
 Variables& Profitability measures
There are two types of variables, one is dependent and another one is
independent :
 Dependent
Banks profitability can be measured by 3 dependent variable :
 ROA: Return on asset is measured by dividing profit after tax to total asset, it
shows how banks measure their profit by using management’s ability to utilize
banks real & financial investments.ROA indicates how effectively a bank
manages its assets to generate income. It indicates income earned on each unit
of assets. The problem of ROA is that it excludes off-balance sheet items of the
bank creating a positive bias in evaluating bank performance.
 ROE: Return on equity is measured by dividing profit after tax to total equity it
shows how banks are efficient in management by utilizing shareholders’
investment. ROE measures the return to shareholders on a unit of their capital.
The drawback of ROE is that banks with lower level of capital will generate a
higher ratio. These banks have a high level of financial leverage which is
undesirable and associated with high degree of risk.
 NIM: Net interest margin can be measured by dividing net interest income to
earnings assets. It shows how banks utilize their funds in good investment to
its expenses. If the interest expenses goes up in comparison to income that
indicates that the firm didn’t made an optimal investment decision.
 Independent
There are two types of independent variable which can be used to measure
banks profitability.
 Internal determinants
Internal determinants are those part of bank which varies from bank to bank,
it mainly represent banks specific variables, such as
 Liquidity: Liquidity can be measured by dividing liquid asset to total asset. If
the ratio is higher, it will indicate that banks are more liquid.
 Loans to asset ratio: The higher the ratio the higher the profitability. The ratio
is calculated by dividing total asset to loans.
 Asset management ratio: Asset management ratio calculated by operating
income divided by total asset. The higher the ratio, the higher the profitability.
 Gearing ratio: Gearing ratio calculated by debt to equity. The lower the ratio,
the good condition of the bank.
 Capital: It is the capital level of bank, measured by dividing total equity to
total asset.
 Cost to income ratio: This ration measures the management’s ability to
control the operating cost. Measured by dividing total operating expense
to total operating profit. The higher expense is associated with the lower
profitability.
 Capital: It is the capital level of bank, measured by dividing total equity
to total asset.
 Cost to income ratio: This ration measures the management’s ability to
control the operating cost. Measured by dividing total operating expense
to total operating profit. The higher expense is associated with the lower
profitability.

External determinants
For this study external variables of macroeconomics variables have
been used which can affect banks profitability.
 GDP: Gross domestic product indicates the economic activity. Loans&
deposits can be affected because of GDP.
 Inflation: In two cases banks profitability is depends on inflation. One is
anticipated and another one is unanticipated, Anticipated links positively
and unanticipated is negatively associated.
Regression Model

NIM
ROA ROE

PROFITABILITY
Conclusion

The objective of the study is to examine the profitability

determinants of banks in Bangladesh the study used
secondary data for the period of 2010-2017 and the sample
is 10 conventional bank of Bangladesh. The variables tested
here are loan, LOANTA, Asset management, Operating
efficiency, gearing ratio, Cost to income ratio, Capital level
of bank, GDP, Inflation. Multiple regression analysis were
performed to describe the profitability among banking
Bangladesh.
Thank you
THE END
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