Presentation iba ju-defense_rayana
Upcoming SlideShare
Loading in...5
×

Like this? Share it with your network

Share
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
472
On Slideshare
472
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
5
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Relative Efficiency of SelectedCommercial Banks in Bangladesh: A DEA Approach
  • 2. Shama Sarwat (Rayana) Exam Roll Number: 080058 Registration No.: 26036 4th Year, 8th SemesterBatch Number: 17, BBA Program Academic Session: 2007-08
  • 3.  ranked 8th in Fortune 500 companies 1st among bank holding companies 11th in the Business Weeks 2007 top global brands has the worlds largest financial services network spanning 140 countries with approximately 12,000 offices & 300,000 staffs holds over 200 million customer accounts across 6 continents world’s largest bank by revenues as of 2008
  • 4. PROBLEM STATEMENT Studies on commercial banks in Bangladesh , using regression and ratio analysis are available, showing ROI, ROE, EPS, DSCR etc. But, these studies do not tell us where to improve by what amounts. Further analysis is needed to provide insight to activity stages - through operation to intermediation till getting the final output.
  • 5. RATIONALEo Banks are the intermediaries that borrow from supply side and lend to the demand sideo Banks are thus in the centre of economyo High efficiency is of a great importanceo Analysis of current efficiency level required with solution – where to improve and to which extend to become fully efficient
  • 6. USA6,453
  • 7. India88
  • 8. Bangladesh 58
  • 9. REPORT OBJECTIVES Primary Objective: To measure productivity & profitability efficiency of selected private commercial banks, and to make a comparison between the performance efficiency of Citibank, N.A. and the other 14 sampled commercial banks.METHODOLOGY: RESEARCH DESIGN
  • 10. REPORT OBJECTIVES (CONT.) Secondary Objectives: To present a brief overview of Citigroup, Citibank N.A. and its operations in Bangladesh along with SWOT analysis. SWOT To compare the productivity & profitability efficiency of the sampled banks To identify the productivity efficiency factors for improvement to use it as a managerial tool. DEFINING VARIABLES
  • 11. SWOT• STRENGTHS • WEAKNESSES• Global product • Narrow operating span• Strong global image • Limited & low marketing• Personalized approaches • Short term presence• Expert local management• Citi’s global policy • THREATS • larger branch network of other• OPPORTUNITIES banks• Direct Custody and Clearing (DCC) • higher singe borrower limit of• Most profitable customers othersretaining policy • doesn’t offer retail banking• Product Innovation • Radical moves of the law and infrastructure• M&A expertise • Slowdown of global economy
  • 12. DEFINING VARIABLES Improvement Input-output mix ParametersOperation Approach:Input 1 (x1) = Total deposits in BDTInput 2 (x2) = Number of employeesInput 3 (x3) = Number of branchesInput 4 (x4) = Total Expenses (Interest + labor + other)Input 5 (x5) = Total Fixed AssetsOutput 1(y1) = Total loans in BDTOutput 2 (y2) = Net investments in BDT REPORT OBJECTIVES (CONT.)
  • 13. DEFINING VARIABLES Improvement Input-output mix ParametersIntermediation Approach:Input 1 (x1) = Interest ExpenseInput 2 (x2) = Commission, exchange and brokerageInput 3 (x3) = Labor expensesInput 4 (x4) = Operating expenses (net of Labor Expense)Output 1 (y1) = Interest incomeOutput 2 (y2) = Investment incomeOutput 3 (y3) = Other operating incomeREPORT OBJECTIVES (CONT.)
  • 14. METHODOLOGY: RESEARCH DESIGN Research category:o Secondary research: done on secondary data collected from published and unpublished database sources and interneto Quantitative research Sampling:o Stratified purposeful sampling - where each of the strata would constitute a fairly homogeneous sample. 14 PCBs & Citibank, N.A. as 1 FCB, operating in Bangladesh
  • 15. METHODOLOGY: RESEARCH DESIGNAnalysis Models:o DEA Approach : Input Orientedo CCR Model (Charnes, Cooper and Rhodes , 1978) Production process of the DMUs has been divided into two stages: Absorbing resources and spending resources. That means – productivity efficiency and profitability efficiency. The first stage is called ‘Intermediation Approach’ and the second stage is called ‘Operation Approach’.o Farrel (2003) measures. REPORT OBJECTIVES
  • 16. WHAT IS DEA APPROACH?o A linear programming application used to determine therelative efficiency for a set of homogenous Decision MakingUnits (DMU)o Very useful technique where the presence of multiple inputsand outputs makes comparison difficult ; such as banks
  • 17. DEA APPROACH (cont.)o Efficiency is measured by the ratio of output to inputoThe performance of a bank is conceptualized as the extent towhich the bank is able to utilize its resources to generatebusiness transactions and it is measured by an efficiency ratio.oDEA identifies the most efficient banks in a population andprovides a measure of inefficiency for all othersoThe most efficient banks are rated to have an efficiency scoreof 1 while the less efficient banks have a score between 0 and 1
  • 18. RESULT SHEETSThrough DEA solver, for each of the years from 2006-2010,3 result sheets were produced against the 1 data input sheet per approach–1) Efficiency2) Targets3) SlackTOTAL 40 SHEETS
  • 19. Table: DEA Solver input data via Intermediation approach (2010) Total Expenses(Interest + Investment with Gov. & DMU Name Total deposits # of Employees # of Branches Total Fixed Assets Loans and advances labor+ other) othersBank Asia 83,601,263,368 1,237 49 2,441,545,139 1,837,283,978.00 79,504,232,613 12,075,700,932Dhaka Bank 67,742,518,136 1,109 56 1,714,736,557 977,385,392.00 63,591,387,406 8,443,201,485City Bank 67,419,801,730 2,685 88 3,200,831,687 3,206,205,668.00 60,326,545,084 12,473,962,726DBBL 83,244,772,836 2,763 96 2,960,624,703 2,934,359,758.00 67,657,062,364 11,001,605,828Eastern Bank 56,425,228,517 973 49 2,073,766,734 3,614,398,915.00 58,607,085,693 9,827,197,073EXIM Bank 94,949,400,069 1,686 59 1,810,108,689 463,743,339.00 93,296,648,855 6,012,855,886Merchantile Bank 73,739,392,053 1,605 65 1,928,685,597 1,647,581,148.00 66,377,697,326 10,937,201,791One Bank 50,873,707,749 1,247 50 1,447,357,626 619,951,616.00 42,190,397,165 7,490,869,936Prime Bank 124,799,314,775 2,139 94 3,769,667,412 1,743,653,375.00 118,837,290,007 22,198,536,395Pubali Bank 98,850,499,250 5,534 399 3,769,667,412 3,330,313,913.00 89,106,206,559 16,516,388,559Shahjalal Bank 62,964,948,065 1,671 63 1,322,254,120 1,472,502,085.00 61,440,075,905 2,228,851,599Southeast Bank 107,253,190,318 1,373 76 1,737,739,216 4,463,638,993.00 93,981,202,323 18,869,071,237Trust Bank 50,413,290,971 1,376 52 1,365,390,204 431,006,157.00 39,799,923,991 8,559,939,769Mutual Trust Bank 45,846,309,207 1,050 67 1,351,934,730 722,053,009.00 37,730,458,690 9,098,954,386Citibank, N.A. 23,387,196,816 195 4 802,519,497 192,487,379.00 19,295,322,778 4,647,484,581
  • 20. Table: CRS efficiency scores and Optimal lambdas with benchmark via Intermediation approach (2007) Input-Oriented Optimal Lambdas with Benchmark CRS Sum of DMU Name Efficiency lambdas RTSBank Asia 1.00000 1.000 Constant 1.000 Bank AsiaDhaka Bank 1.00000 1.000 Constant 1.000 Dhaka BankCity Bank 1.00000 1.000 Constant 1.000 City BankDBBL 0.77664 0.566 Increasing 0.203 Merchantile Bank 0.363 Southeast BankEastern Bank 1.00000 1.000 Constant 1.000 Eastern BankEXIM Bank 1.00000 1.000 Constant 1.000 EXIM BankMerchantile Bank 1.00000 1.000 Constant 1.000 Merchantile BankOne Bank 0.89051 0.771 Increasing 0.041 Merchantile Bank 0.049 Southeast Bank 0.682 Mutual Trust BankPrime Bank 1.00000 1.000 Constant 1.000 Prime BankPubali Bank 0.87201 1.822 Decreasing 1.208 Eastern Bank 0.338 Shahjalal Bank 0.275 Mutual Trust BankShahjalal Bank 1.00000 1.000 Constant 1.000 Shahjalal BankSoutheast Bank 1.00000 1.000 Constant 1.000 Southeast BankTrust Bank 1.00000 1.000 Constant 1.000 Trust BankMutual Trust Bank 1.00000 1.000 Constant 1.000 Mutual Trust BankCitibank, N.A. 1.00000 1.000 Constant 1.000 Citibank, N.A.
  • 21. Table: Efficient input target and output target via Intermediation approach (2007) Efficient Output Target Efficient Input Target Total Expenses(Interest + Investment with Gov. &DMU Name Total deposits # of Employees # of Branches labor+ other) Total Fixed Assets Loans and advances othersBank Asia 30004088739.00000 639.00000 29.00000 1316315575.98913 498428682.00000 28456944137.00000 4203135875.00000Dhaka Bank 48730676321.82380 842.00000 41.00000 1159004257.00000 291259210.00000 39971903240.00000 5971748749.00000City Bank 40539634035.00000 1990.99998 83.00000 1316315570.41092 1390732179.94957 26788466306.80990 7550606492.00000DBBL 32704232138.28920 584.13632 25.03207 579338774.59499 740950482.80182 28369578068.10010 5909323040.00000Eastern Bank 29878501670.00000 690.00000 28.00000 951589162.00000 871267742.99915 30895706294.00000 3456990107.00000EXIM Bank 41546568591.80200 1104.00000 35.00000 912218527.99160 200702928.00000 40195239222.00000 2457716314.00000Merchantile Bank 38139901767.00000 945.00000 41.00000 1016510458.98400 593203096.00000 31877860104.14200 7099966878.00000One Bank 21803350013.01550 485.30847 24.37119 380910490.19792 313424932.98628 19709302397.02650 3587478621.00000Prime Bank 70544071295.00000 1400.00000 61.00000 1574232708.99945 662350336.00000 57781997118.23800 12698020628.00000Pubali Bank 50573951457.76940 1180.58613 50.88673 1372750637.45745 1178750255.19468 50549167102.00000 5556578405.00000Shahjalal Bank 22618187303.00000 555.00000 26.00000 313816132.00000 127055566.99791 20616605335.00000 858994699.00863Southeast Bank 68714672575.00000 1080.00000 46.00000 1026854672.00000 1708110172.00000 60281260389.00000 12299606871.00000Trust Bank 27101585100.71990 842.00000 31.00000 474951358.00000 194224790.00000 18682164654.04730 3785450925.00000Mutual Trust Bank 24776924968.00000 578.00000 30.00000 424484555.00000 301871320.99912 22683227657.00000 3956528943.00000Citibank, N.A. 24655856230.79660 173.00000 4.00000 520681707.99935 144102659.99957 16999528039.00000 2772355156.00000
  • 22. Table: Input slacks and output slacks via Intermediation approach (2007) Input Slacks Output Slacks Total Expenses(Interest + Investment with Gov. & DMU Name Total deposits # of Employees # of Branches labor+ other) Total Fixed Assets Loans and advances othersBank Asia 0.00000 0.00000 0.00000 0.01087 0.00000 0.00000 0.00000Dhaka Bank 0.17620 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000City Bank 0.00000 0.00002 0.00000 5.58908 18.05043 168.80992 0.00000DBBL 0.00000 28.62904 13.02307 470517486.23207 150080237.60495 0.10011 0.00000Eastern Bank 0.00000 0.00000 0.00000 0.00000 0.00085 0.00000 0.00000EXIM Bank 0.19801 0.00000 0.00000 0.00840 0.00000 0.00000 0.00000Merchantile Bank 0.00000 0.00000 0.00000 0.01600 0.00000 0.14200 0.00000One Bank 0.00000 210.17879 2.34407 152005060.53805 0.00000 0.02652 0.00000Prime Bank 0.00000 0.00000 0.00000 0.00055 0.00000 0.23804 0.00000Pubali Bank 0.00000 3414.91987 263.90979 0.00000 13490527.65916 0.00000 0.00000Shahjalal Bank 0.00000 0.00000 0.00000 0.00000 0.00209 0.00000 0.00863Southeast Bank 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000Trust Bank 0.28009 0.00000 0.00000 0.00000 0.00000 0.04731 0.00000Mutual Trust Bank 0.00000 0.00000 0.00000 0.00000 0.00088 0.00000 0.00000Citibank, N.A. 0.20337 0.00000 0.00000 0.00065 0.00043 0.00000 0.00000
  • 23. Summary of Intermediation approach 2006-2010o This is the productivity efficiency analysiso the average efficiency scores during 2006-2010 range from 0.95096 to 0.96928.o Haphazardly, in 2007 it increased by 1.6% from 2006, decreased in 2008 by 0.5% than 2007, and again decreased by 1.3% than 2008. Finally, it increased by 1.8% in 2010 than 2009o 4 DMUs were consistently efficient - Eastern Bank Ltd., EXIM Bank, Southeast Bank, Citibank, N.A.
  • 24. Summary of Operation Approach 2006-2010o This is profitability efficiencyo Average efficiency scores of the sampled DMUs during 2006- 2010 ranges from 0.94772 to 0.98916; stable for the latest three years (2010, 2009, 2008)o 4 DMUs found to be constantly maintaining efficiency score 1: Eastern Bank Ltd., Pubali Bank, Southeast Bank, Citibank, N.A.
  • 25. Summary of the two approaches 2006-2010o Only 3 DMUs have been proved to be efficient constantly every year - Eastern Bank, Southeast Bank and Citibank, N.A.o More efficient in operation approach than in intermediation approacho That means, during 2006-2010 the DMUs have been capable of efficiently utilizing labour, capital etc. to generate revenues; whereas these were incapable of efficiently utilizing intermediates.
  • 26. CONCLUSIONo In comparison to all the sampled banks, Citibank, N.A. was found to be constantly efficiento This report can serve as a very effective and descriptive tool for the managers for finding improvement opportunities in selected activities
  • 27. LIMITATIONS Only 14 PCBs & 1`FCB have been sampled due to unavailability of information and avoidance of complexity in DEA Qualitative data have been ignored Augmented sample would have provided more appropriate results