Prepared By:
Anirban Das (12-95671-2)
Md. Imtiaz Uddin Khan (12-95684-2)
Rokun Uddin Ahmed Shawan (12-95660-2)
Arifur Rashid (12-95670-2)
Shuvo Taufiq Ahmed (12-95656-2)
Md. Mehedi Hasan (12-95685-2)
LETTER OF AUTHORIZATION
I, the undersigned Managing Director of Bank Asia, hereby authorize six MBA students from
AIUB undersigned bellow to act on our behalf in all manners relating to The Evaluation of Bank
Asia Limited, including signing of all documents relating to this matter. Any and all acts carried
out by your group on our behalf shall have the same effect as acts of our own.
This authorization is valid until further written notice from Bank Asia Limited.
Arifur Rashid
The attached report requested by our honorable faculty Azad Amin Ruhul describes the Industrial
analysis of commercial Banks in our country. We believe you will find the results of this study
useful evaluating the current situation of Bank Asia and the overall banking system on
Bangladesh.
The objective of this report was to gather practical knowledge about the corporate working
environment with the business firm and the experts who are leading and making strategic
decisions to enhance the growth of a financial institution. It’s an analysis of Banking Industry
and the competitive position of Bank Asia in the banking industry.
There are few limitations to our final report as it’s very hard to collect and organize vast amount
of data from a lot of annual reports of different banks in a very short period of time. Still, we
tried our best to utilize the time we had to make this report as complete as possible.
We would be pleased to discuss this report and its conclusions with you at your request. We are
also thankful to Faculty of Business Administration and Library facility of our esteemed
American International University of Bangladesh for providing us encouragement and resources
to successfully carry out our report. We would also like to take this opportunity to thank our
fellow classmates for their interest in our report.
Sincerely,
Anirban Das
Arifur Rashid
Executive Summary................................................................................................ 1
Introduction............................................................................................................. 2
Overview of Bank Asia............................................................................................ 3
Mission & Vision....................................................................................................... 4
Products & Services................................................................................................. 4
Organogram of Bank Asia........................................................................................ 6
At A Glance.............................................................................................................. 7
Branches................................................................................................................. 8
Analyzing Bank Asia............................................................................................... 9
External Analysis..................................................................................................... 9
Societal Analysis.............................................................................................. 9
Political Environment.............................................................................9
Economical Environment......................................................................10
Industry Analysis by Porter’s Five Forces Model.............................................12
Rival Firms............................................................................................ 12
Substitute Products..............................................................................12
Potential New Entrants.........................................................................12
Suppliers.............................................................................................. 12
Buyers.................................................................................................. 12
Internal Analysis.................................................................................................... 12
Resource and Competitive Position................................................................12
Finance................................................................................................. 12
Return on Equity........................................................................13
Return on Asset (ROA)...............................................................13
DuPont Analysis.........................................................................14
DuPont Chart.............................................................................15
Comparison with other commercial Banks.................................16
Marketing............................................................................................. 17
Business Development..............................................................17
Customer relations....................................................................17
Sales.......................................................................................... 17
Recovery.................................................................................... 17
Strength..................................................................................... 17
Weaknesses............................................................................... 18
Opportunity...............................................................................18
Threats...................................................................................... 18
CAMEL Rating............................................................................18
Capital Adequacy.......................................................................19
Asset Quality.............................................................................. 19
Earnings Records.......................................................................20
Liquidity Position........................................................................20
Management Quality.................................................................21
Composite Rating......................................................................22
Findings.................................................................................................................. 23
Recommendations................................................................................................. 24
Conclusion.............................................................................................................. 25
References............................................................................................................. 26
actually performing. The international or domestic financial market players, whether in capital or
money market, these are very important considerable thing in financial world. What kind of
financial instruments are being offered, is another big issue. Depository institutions, in particular,
are one of the key market players assuring flow of resources among participants whether
Banks are the leaders of all financial services industry, where the proper functioning of the
economy depends on the banking industries. Banks propel all the financial activities of certain
economy. Commercial banking industry is one of the most important financial intermediaries in
Bangladesh. It is playing great role to generate savings and it makes sure the proper investment
of this savings in different sectors of our economy. Commercial banks are cooperating different
types of business in various ways which is ensuring prosperity of business. By now, it has been
proved that literally bank is the heart of all commercial activities in Bangladesh.
Bank Asia is one of the third generation banks which are performing really well in the industry
over the years. Most of the financial indicators are carrying positive message to the share
holders. There are so many risks which Bank Asia is coming across and all of them are properly
taken care by the authority. A lot of banks are creating value to customers. They are trying
gradual shrink of Net Interest Income (NII) which magnifies their income in recent years. During
the year 2006 Bank Asia has not only made good profit but also enhanced its image further. Bank
Asia is now regarded as a local brand having regional and global potential. All these have been
possible with the efficiency of the authority and the loyalty of their customers.
INTRODUCTION
Financial development is essential for economic growth and development, and weak financial
systems make countries vulnerable to crises. A growing body of empirical literature shows these
relationships. This means that to enhance economic growth, developing countries must take
initiative to increase both the financial depth and diversity of their financial sectors. Banking
sector is one of the most important sectors for the economy of a country. Sometimes it is called
heart of the economy.
Bangladesh has bank based financial system. It means core financial services are provided by
banks. From 1971 to till today the total number of bank in Bangladesh is 49 (matrix online
limited); which include four nationalized banks, five governments owned specialized banks,
thirty domestic private banks and ten foreign banks. Besides that, there are twenty-eight non-
banking financial institutions also conducting their operation in this country.
The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are
Nationalized Commercial Banks (NCBs), 28 local private commercial banks, 12 foreign banks
and the rest five are Development Financial Institutions (DFIs). History of banking sector is
quite recent; the development of banking sector is so great. The number of private banks
increasing rapidly and it becomes a profitable sector. The banks with modernized banking
facilities, termed as ‘third generation banks’ are providing improved services both to the investor
and to the customers. Bank Asia Limited is one of the most renowned 3 rd generation banks which
are really contributing to the financial system of Bangladesh.
Bank Asia Limited is one of the private commercial banks (PCBs), incorporated in Bangladesh
on 28 September 1999 as a public limited company under the Companies Act 1994, and
governed by the Banking Companies Act 1991. The Bank went for public issue of its shares on
23 September 2003 and its shares are listed with Dhaka Stock Exchange Ltd. and Chittagong
Stock Exchange Ltd.
In this report, firstly, we will evaluate the banking industry then we will try to find out Bank
Asia’s competitive market position in that industry.
Overview of Bank Asia
Bank Asia Limited is a third generation commercial bank with 29 online branches across major
cities in Bangladesh and 1240 full time employees on year end 2011. It offers full range of
commercial banking products and services to the corporate, mid-market and retail segment. Bank
Asia is a new entrant in the private banking scenario of Bangladesh with a pledge to fulfill every
possible customer need with high efficiency and satisfaction. The Bank is led by experienced
bankers and providing high quality banking services to the investors and consumers.
In 1999, after starting the operations, Bank Asia acquired the business operation of the Bank of
Nova Scotia in Dhaka at the beginning where it again acquired the Bangladesh operations of a
In the year 2003 the Bank again came to the limelight with oversubscription of the Initial Public
Offering of the shares of the Bank, which was a record (55 times) in Bangladesh capital market’s
Bank Asia is maintaining a highly developed technical framework. It ensures the quality service
by using its Online Banking Software and modern IT infrastructure. Under its ATM Network the
Stellar Online Banking software enables direct linking of a client’s account, without the
requirement for a separate account. SMS Banking is the innovative idea that Bank Asia has
To assist in bringing high quality services to our customers and to participate in the
growth and expansion of our national economy.
To set high standards of integrity and bring total satisfaction to our clients, shareholders
and employees.
To become the most sought after bank in the county, rendering technology driven
innovative services by our dedicated team of professionals.
PRODUCTS
SMS Banking
Mobile Banking
Internet Banking
Real-Time Online Banking
Any Branch Banking
Customized Loan
Loan Syndication
Bonus Savings Schemes
Poverty Alleviation
ATM Service
Credit Card
Locker facilities
SERVICES
There are mainly three departments in Bank Asia Ltd for providing service to the clients.
Export
Accounts Term Loan
Remittance
Remittance Personnel Loan
Auto Loan
Clearing
Housing Loan
Customer
SOD
service
Consumer
Durable
Executive Officer
Senior Officer
Officer
Banking Ofcer
Teller ofcer
At A Glance
Branches
Bank Asia has spread its network over the country through twenty eight branches including all
the privileges like ATM, Locker & Foreign Exchange services. It has six rural branches as well.
Analyzing Bank Asia
In this report we’ll analyze Bank Asia’s current situation in two aspects, Internal and External
analysis.
EXTERNAL ANALYSIS
Societal Analysis
Societal analysis consists of two sections: Political Environment and Economic Environment.
POLITICAL ENVIRONMENT :
Each and every business entity in a particular country must follow the rules and
regulations set up by the government of that particular country. These rules and
regulations depend on the type of business and vary business to business. Banking
businesses are not exception to this and so is to Bank Asia Limited. Bank Asia
complies with all the laws and regulations required. Political instability is pretty
common in Bangladesh. Bank Asia has to overcome all those political problems.
Though, our country is experiencing little bit stable position.
ECONOMIC ENVIRONMENT :
Economic condition of a particular country plays an important role in conducting
any sort of business. Due to economic changes (both positive and negative), a
business might be benefited or interrupted. Economic factors such as inflation,
bank interest rate could control the business to an extent. When the bank interest
rate goes up the purchasing power of buyers who take loans from bank to buy
flats, goes down. Similarly the company’s investment on the business goes down
as they also take loan from the bank. Bangladesh Bank (central bank) is the major
player in this regard. Bangladesh Banks decision has direct influence on banking
industry so is to Bank Asia Limited.
Banks are not the most efficient institutions for providing all types of financial services. They are
good at mobilizing savings and providing payment services and liquidity, which
happens to be their main functions. The Porter’s five forces model of competition is an
excellent tool for understanding the main forces that drive competition in an industry.
Eventually, it gives us a better understanding of the existing competition in the Banking
industry.
1. RIVAL FIRMS
In the commercial banking industry, there are currently more than 30 commercial
banks and thus it is quite impossible for one firm or a group of firms to actually
dominate the market. Therefore there is no competition in terms of trying to
capture the overall market, even though there is slight competition in the case of
trying to capture the market of a specific location. The slight competition that we
find in this industry of trying to attract depositors is either in terms of facilities or
in terms of interest rate. It is totally up to the firms as to what they want to offer in
an attempt to attract more depositors. Bank Asia attracts depositors very quickly
by providing moderate facilities and interest rate.
2. SUBSTITUTE PRODUCTS
In case of the banking industry, the only substitute option is non banking financial
institution which is very small number in Bangladesh. Though the number of non
banking financial institution is increasing and Bangladesh bank is giving
motivation regarding this.
3. NEW ENTRANTS
The potential new entrants to the banking industry are quite a problem for the
already existing firms, especially for those that are still trying to make a mark.
New bank needs huge capital to offer extra facilities to make the existing
customers switch from existing bank. As it is very difficult to do therefore
potential new entrance threat is low for Bank Asia.
4. SUPPLIERS
Suppliers are depositors who deposit their savings to commercial banks. These
depositors have real control over commercial banks as well as on Bank Asia.
5. BUYERS
Here buyers mean loan taker. The bargaining power of buyers in this industry is
very low. In spite of the ever-increasing interest rate buyers have no other options
but to buy loan.
INTERNAL ANALYSIS
The business functioning of Bank Asia has been consists two departments. For internal analysis
we are following functional approach.
FINANCE
In this section we will analyze the financial condition of Bank Asia. Major and
main source of Bank Asia’s capital is from deposited money.
Ratio analysis is an analytical tool that can be applied to a bank’s financial
statements so that management and the public can identify the most critical
problems inside each bank and develop ways to deal with those problems. Some
selected ratios are analyzed here to give an insight about Bank Asia. For limited
information some are analyzed very briefly.
RETURN ON EQUITY
ROE is the measure for the stockholders’ benefit from their investments. This
ratio indicates the degree to which the firm able to convert operating income and
after tax income that eventually can be claimed by the shareholders. ROE is the
measure for the stockholders’ benefit from their investments.
The ratios of year 2006 and 2008 demonstrate instability towards the Return on
Equity (ROE) of the bank from year 2009 and 2010; there are no significant
changes in return on equity (ROE) and reflecting consistency in managing the
return on shareholders’ equity. This stability of return on equity (ROE) will help
to attract their investor but the stable ROE of Bank Asia reflects the returning
capability to their shareholders has not increasing much from last three years
which won’t be acceptable for the shareholders cause they shareholders prefer to
have a high return from their investment every year. So, the management should
take action to increase the return on equity (ROE). For increasing the return,
management should call attention to manage their expenses adequately and need
to increase their net income.
The ratio of year 2009 and 2010 was above Peer Group Average, which is really a
good sign. It tells Bank Asia is doing well comparing to its competitors.
Return on Asset (ROA) was lower in 2006 and 2008 compare with rest of the
years. This low returns resulting from the lower operating income and above
average use of debt. As their income rises and the usages of their own fund
increases from year to year consequently the ratio also rises. From the Financial
Statement it is evident that there Total Assets & Revenue rises from year to year
as well as they able to decrease their operating expenses comparing to previous
years. But the total amount of provision for loans increased every year which
lessen their net income. So, the ROA of 2006 and 2008 is lower than year 2009
and 2010.
The Return on Asset (ROA) ratio of Bank Asia is higher than the Peer Group
Average which proves that Bank Asia’s performance was better than its
competitor banks at year 2009 and 2010. So, we can say that the management is
utilizing their assets in an efficient way to generate more income.
Earnings per Share (EPS) measure the returns to the banks to the stockholders.
Earnings per Share is calculated by the following equation
Fig 3: EPS=Net income/ Number of Ordinary shares outstanding
The table shows that the performance of Bank Asia from the viewpoint of
profitability increases hugely over the years. Therefore the performance of the
bank is very much satisfactory. Nevertheless, there performance level decline
after 2007 because of the slower growth rate of net income due to increase in the
provision against loans and advances every years. But, still there EPS would able
to attract their investor.
Earnings per Share (EPS) of Peer Group Average are lower than Bank Asia’s
earning per Share (EPS) ratio. So, the investor’s choice will be positive towards
investing at Bank Asia rather than others.
DUPONT ANALYSIS
DuPont analysis breaks down the ROE into several different parts. Actually the
company’s managers developed this approach for evaluating performance of the
company as well as to find out the reason behind the increase/decrease of a firm’s
ROE. I can divide DuPont Analysis by two parts- DuPont Equation and DuPont
Chart.
DuPont Chart: A chart designed to show the relationships among return
on investment, asset turnover, the profit margin, and leverage.
DuPont Equation: A formula that gives the rate of return on assets by
multiplying the profit margin by the total assets turnover.
DUPONT CHART
The following chart is an example of DuPont chat. That chart shows the ROE of
year 2005 and all other components of ROE.
Generally we use the formula (ROE= Net income/ Total equity) to calculate the
ROE. For DuPont Analysis we need to breaking down ROE into following parts-
Net profit margin= net income after taxes/ Total operating revenue
Assets utilization= Total operating revenue/ Total assets
Equity multiplier= Total assets/ Total equity
ROE=Net Income/Total
Equity
15.48%
ROA=Net Equity
Income/Total Assets X Multiplier=Total
Assets/Equity
1.42% Capital
30.34% 0.0052
After that we get ROE by multiplying the above parts. So, here ROE= Net profit
margin × Assets utilization × Equity multiplier. Now, management needs to trace
out the reason behind the declining trend of the bank’s ROE. From management
view point it is now easy to find out the specific reason behind the declining trend
of ROE by using this DuPont analysis. This analysis shows that the equity
multiplier which will give hints why ROE is declining where the net profit margin
increased to raise the ROE, emphasize should be given on increasing Equity
Multiplier ratio as well as to asset utilization ratio. Utilizing the assets more
efficiently and effectively would help to increase the ROE.
Important Bank Asia Eastern Bank Jamuna Bank Shahjalal Bank Dhaka Bank
indicators Limited Limited Limited
Here, Shahjalal Bank has the highest ROE 24.71% where as Bank Asia has 38.4%. Net
profit margin is the main reason of this differentiation. Shahjalal Bank has 43.19% but Bank Asia
has only 30.34%. so Bank Asia has to increase its operating efficiency to have more profit
margin. Moreover Shahjalal Bank has bigger equity multiplier than Bank Asia. It means
Shahjalal Bank is using more debt than Bank Asia. Bank Asia has got second highest ROE
among all other three commercial banks. This is because; Bank Asia has more net profit margin
and bigger equity multiplier.
MARKETING
BUSINESS DEVELOPMENT
C USTOMER RELATIONS
The Customer relations department deals personally with the customers. This
department handles any queries or complaints from the customer’s part about
Bank Asia or any of its products.
SALES
RECOVERY
The recovery department is responsible for the timely collection of money after
the disbursement of loan and some other debt.
STRENGTHS
OPPORTUNITIES
THREATS
CAMEL RATING
CAMEL rating is a system that assigns a numerical rating to a bank or thrift based
on examiner judgment regarding its capital adequacy, asset condition,
management quality, earnings record and liquidity position. Actually, CAMEL
rating is a combination of all five dimensions of performance into one overall
numerical rating.
C - Capital adequacy
A - Asset quality
M - Management quality
E - Earnings record
L - Liquidity position
CAPITAL ADEQUACY
According to annual report BANK ASIA’s capital adequacy ratio is 9.54%, which
indicates the bank is staying at strong position with the ranking of 1. Therefore,
banks has more chance to survive in the market because their loss absorb power is
very high.
ASSETS QUALITY
It is determined by the ratio of total classified loans to total capital & reserve.
Total Classified Loan / Total Capital & Reserve
Total Classified Loan / Total Capital & Reserve=2200%. This measure reminds
that the bank is in unsatisfactory level with a ranking of 5.
EARNINGS RECORDS
.85% Strong 1
.65% Satisfactory 2
.45% Fair 3
.35% Marginal 4
Net Loss Unsatisfactory 5
Earnings Record
The calculation shows the result is 1.57% which proves that Bank Asia is in
strong position by holding rank 1.
LIQUIDITY POSITION
The banks whose are dependent on more outside source, such banks are more
likely to experience a liquidity crisis because they are forced to borrow excessive
amounts of funds from outside sources. We can measures the liquidity position by
the following two ratios:
1. Liquid assets/ total demand and time liabilities
2. Total loans/Total deposits
30% Strong 1
20% Satisfactory 2
19% Fair 3
15% Marginal 4
In case of first one, the ratio is 12.6%percent, which indicates the BANK ASIA is
staying at marginal position with a rating of 2.
2) In case of second ratio
60% Strong 1
80% Satisfactory 2
85% Fair 3
90% Marginal 4
91% Unsatisfactory 5
Showing Liquidity position (2)
In case of second ratio, the BANK ASIA ratio is 20% percent, which reveals that
it is in position one.
For next analysis, we can add the above two ratio and take the average.
That means, Unsatisfactory =5
Satisfactory =1
Liquidity position = (5+1)/2 =3
Finally, we can conclude that the bank liquidity position is in fair level. It means
Bank Asia depends more on internal funds. So, there is no chance of facing
liquidity crisis by Bank Asia.
MANAGEMENT QUALITY
1 to 1.49 Strong 1
1.5 to 2.49 Satisfactory 2
2.5 to 3.49 Fair 3
3.5 to 4.49 Marginal 4
4.5 to 5 Unsatisfactory 5
Showing Management Quality
Management administrative skill and ability is average or we can say well but
improvement is required since the relation falls under the category of fair and can
be ranked 3.
COMPOSITE RATING
1 to 1.4 Strong 1
1.5 to 2.4 Satisfactory 2
2.5 to 3.4 Fair 3
3.5 to 4.4 Marginal 4
4.5 to 5 Unsatisfactory 5
Showing the Composite Rating
Thus, Bank Asia falls under the category of 3 with a fair financial position and management quality.
Findings
In Bank Asia Limited, to sanction every loan decision is made by Area office or Head
Office. The branch manager has to take permission before granting any amount of loan or
advances from Head Office. It takes a lot of time to sanction. Even Zonal Head has no
authority to permit any loan.
During our observation we observed that many clients complain about ATM booth. In
city area, they have very small number of ATM booths which cause a bit of difficulty for
clients to withdraw the money with ATM card. In commercial capital city (Chittagong),
they have only two ATM Booths in Agrabad & EPZ.
3. LESS MOTIVATION :
We didn’t find any motivational activities for employees in Bank Asia. It’s a weakness of
the top level management. But in some other banks like EBL, their employees receive
awards every year based on their performance.
We observed that Bank Asia has no sales executive in their branch office. Sales executive
plays a significant role of collecting deposits as well as lending money. We found number
of sales executives in Dhaka Bank (Besides Bank Asia in GEC).
Recommendations
Bank Asia should give the authority to sanction the loan to the branch office. Right now the
Head Office sanctions the loan. To make loan sanction faster, branch offices should be
authorized to sanction loan otherwise zonal head office (Agrabad Branch knows as Zonal
Head Office) should be authorized to sanction a specific amount of loan.
Besides opening branches in rural areas, Bank Asia needs to increase its ATM facility,
especially in the major cities. Its major competitors have large number of ATM booths in
major areas.
To motivate the employees, Bank Asia should arrange an award ceremony for the employees.
Awards can be given to the employee of the year as well as manager of the year and so on.
This will motivate the employees and thus affect the whole performance of the bank in
appositive way.
Bank Asia should appoint sales executives in their branch offices and they should be well
trained and aware of the facilities provided by Bank Asia Limited.
CONCLUSION
A country’s future economic prosperity depends on the success of banking industry as it is the
most important financial intermediary. As long as the banking sector remains weak, the economy
won't achieve the growth necessary to eradicate poverty. Our country is realizing the importance
development in the commercial banking industry is the most important achievement in the last
decade for Bangladesh in that industry. Government’s support is needed to for more
We can conclude that Bank has been found consistent with their operations in this competitive
banking industry. This bank has positioned them as a leading depository institution. Moreover
the company profile tells us that Bank Asia is offering lucrative instrument for their existing and
potential customers. Their image to the market can help them to achieve more financial growth
in that industry. During the year 2006 the Bank has not only made good profit but also enhanced
its image further. Bank Asia Limited has now established itself as a local financial institution
with international corporate culture, flawless processes, superior business ethics, strong control
& compliance, good governance, visionary & dynamic leadership, commendable market &
product depth and strong financials. This would not have been possible without the strong
commitment of their people who have set a very high standard of service, which goes to promote
their image with their customers as well as the entire business community.
References
[1] Annual Report, (2011) Bank Asia Ltd.
[8] Brighan. F. E., Houston. J. F., (2001). Fundamentals of Financial Management, Ninth
Edition.
[10] Jones. P. Charels, (2005-2006), Investments, Analysis and Management, Ninth Edition.
[11] Kieso, D. E., Weygant, J. J., & Warfield, T. D. (2002). Intermediate Accounting, Tenth
Edition.
[12] R.Fraser, D., Gup, B. E., & Kolari, J. W. (2001). Commercial Banking the Management of
risk, Second edition.
[13] Rose, P. S. (1999). Measuring and Evaluating Bank Performance. Commercial Bank
Management, Fourth Edition.