Evaluation of Financial Performance of SIBL

Presented by:
Name: Rakib Hossain
ID: 13142101409
Intake: 33rd
Program: BBA
Department of Accounting
Bangladesh University of Business & Technology (BUBT)

Presentation
on
“Evaluation of Financial Performance of Social Islami Bank Limited.’’

AREAS COVERED:
 Objectives of the Report
 Methodology of the Report
 Limitations
 Company Overview
 Ratio Analysis of Social Islami Bank Limited
 Findings of the Study
 Recommendations

OBJECTIVES OF THE REPORT:
Broad Objective:
The prime objective of the study is to evaluate the financial performance of
Social Islami Bank Limited.
Specific Objectives:
 To analyze the Liquidity of SIBL.
 To analyze the Activity of SIBL.
 To analyze the Debt Ratios of SIBL.
 To analyze the Profitability of SIBL.
 To analyze the Risk of SIBL.
 To analyze the Market Ratios of SIBL.

METHODOLOGY:
Research Design:
This report is descriptive in nature which revels the financial performance of
Social Islami Bank Limited. It has also been administered by collecting
secondary data. The secondary are collected from the annual report of Social
Islami Bank Limited , annual report of Bangladesh Bank, Website & book. The
data are collected for the period from 2012 to 2016. The use of primary data is
very limited in the report. Some information has been collected from observation
& discussion with officers of Social Islami Bank Limited .

INSTRUMENTS USED FOR ANALYSIS:
The ratio analysis is used to analyze the financial Performance of Social
Islami Bank Limited. Different types of computer software such as-
Microsoft word, Microsoft excel etc. are used for analyzing and reporting
purpose of the study. The ratio analysis is conducted in form of trend
analysis.
Trend Analysis: Trend analysis is the analysis of firm’s performance over
time using ratios. It is really important to analyze trend in ratio as well as
their absolute levels. This analysis informs us whether a company’s financial
condition improving or degenerating.

LIMITATIONS:
 The organization maintains strict confidentiality about their financial and
other information. They are afraid of any type of information leakage to
their competitors. So there was always difficulty to have appropriate
information from them.
 Large scale analysis is not possible due to constraints & restrictions posted
by the banking authority
 Duration of the study was too short to have a sound understanding of the
overall banking.
 This study completely depended on official records and annual reports.
 Lack of sufficient books, papers and journals etc.
 In many cases, up to date information may not be available.

Name of the company Social Islami Bank Limited
Chairman Major (Retd) Dr. Md. Rezaul Hoque
Managing Director & CEO (cc) Ihsanul Aziz
Date of Inauguration 07/05/1995
Number of Branches 125 (one hundred twenty five)
Number of Employees 2363 (Approximate.)
SWIFT SOIVBDDH
Registered Office
City Center, Level 19, 20, 21 & 22,28,29 90/1 Motijheel C/A,
Dhaka-1000
Authorized Capital Tk. 10,000,000,000
Paid up Capital Tk. 7,382,986,420
Phone PABX +88-09612001122
Fax 88-02-9568098
E-mail info@sibl-bd.com
Website www.siblbd.com
COMPANY OVERVIEW:

“EVALUATION OF FINANCIAL PERFORMANCE
OF SOCIAL ISLAMI BANK LIMITED.’’

4.1:Liquidity Ratio:
4.1.1 Current Ratio
4.1.2 Net Working Capital

Table 4.1: Current Ratio (Tk. in million)
4.1.1:CURRENT RATIO:
Year 2012 2013 2014 2015 2016
Current Asset 114,829.11 126,401.39 153,737.47 180,008.65 227,815.30
Current Liabilities 104,676.18 115,309.15 141,594.08 167,053.53 213,621.97
Current Ratio 1.096 1.10 1.09 1.08 1.07
Source: Social Islami Bank Limited , Annual Report 2012-16
The current ratio is one of the most commonly financial ratios measures
the bank’s ability to meet its short term obligations. The higher the current
ratio, the better the liquidity position of the bank.
Current Ratio= Current Asset/ Current Liabilities

1.096
1.1
1.09
1.08
1.07
1.06
1.06
1.07
1.07
1.08
1.08
1.09
1.09
1.10
1.10
1.11
2012 2013 2014 2015 2016
Current Ratio
Graphical Presentation:
Figure 4.1: Current Ratio
Interpretation:
A high current ratio indicates that a company is able to meet its short-term obligations. Increases in the current ratio over
time may indicate a company is "growing into" its capacity (while a decreasing ratio may indicate the opposite).So, its
failing able to meet its short-term obligations.

4.1.2 NET WORKING CAPITAL:
Current assets, commonly called working capital, represent the portion of investment that
circulates from to one form to another in the ordinary conduct of business.
Net Working Capital = Current Asset - Current liabilities
Table 4.2: Net working capital
Year 2012 2013 2014 2015 2016
Current Assets (Tk.) 114,829.11 126,401.39 153,737.47 180,008.65 227,815.30
Current Liabilities
(Tk.)
104,676.18 115,309.15 141,594.08 167,053.53 213,621.97
Net working capital 10152.93 11092.24 12143.39 12955.12 14193.33
(Tk. in million)

Graphical Presentation
10152.93
11092.24
12143.39
12955.12
14193.33
0
2000
4000
6000
8000
10000
12000
14000
16000
2012 2013 2014 2015 2016
Net working capital
Interpretation:
It refers that the bank management was not efficient enough in managing its working capital
position. An increase in net working capital indicates that the business has either increased
current assets or has decreased current liabilities—for example has paid off some short-term
creditors.
Figure 4.1.2: Net working Capital

4.2:ACTIVITY RATIOS
4.2.1 Credit to Deposit Ratio

Credit to deposit ratio shows the operating efficiency of a particular Bank in
promoting its investment product by measuring the percentage of the total
deposit disbursed by the bank
Credit to Deposit Ratio = Total Loans & Advances/ Total Deposits
Year 2012 2013 2014 2015 2016
Total Loans & Advances 2216.40 9847.36 21977.63 26056.89 39919.28
Total Deposits 93594.29 102104.48 124535.01 149773.62 190564.52
Credit to Deposit Ratio 2.4% 9.6% 17.7% 17.4% 20.95%
Table 4.3: Credit to Deposit Ratio
(Tk. in million)
4.2.1 Credit to Deposit Ratio

Figure 4.3: Credit to Deposit Ratio
2.40%
9.60%
17.70% 17.40%
20.95%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2012 2013 2014 2015 2016
Credit to Deposit Ratio
Interpretation:
It refers that the bank management was efficient enough in converting its deposit to
credit to generate more profit. A high ratio indicates more reliance on deposits for
lending and likely pressure on resources.

4.3:DEBT RATIOS
4.3.1 Debt Ratio
4.3.2. Debt to Equity Ratio

4.3.1 Debt Ratio:
Debt ratio measures the degree of protection of total assets provided by the
firm’s creditors. It is also a measure of risk because debt also consists of a
fixed commitment in the form of interest and principal repayments.
Debt Ratio = Total Liabilities / Total Assets
Table 4.4: Debt Ratio
Year 2012 2013 2014 2015 2016
Total Liabilities 104,676.17 115,309.14 141,412.32 167,053.52 213621.97
Total Assets 115165.95 126616.56 1537374.67 180112.11 227704.18
Debt Ratio (%) 90.9% 91.1% 92.0% 92.7% 93.83%
(Tk. in million)

90.90% 91.10%
92.00%
92.70%
93.83%
89.00%
90.00%
91.00%
92.00%
93.00%
94.00%
95.00%
2012 2013 2014 2015 2016
Debt Ratio
Figure 4.3.1: Debt Ratio
Interpretation:
It means that a larger protion of total asset was financed by the bank’s creditors fund.a higher
percentage means that a company is using more leverage and has a weak equity position.A
higher percentage means that a company is using more leverage and has a weak equity position.

4.3.2 DEBT TO EQUITY RATIO :
This ratio assesses the firm’s capital structure. It provides a major of risk to
creditors by considering the invested by creditors (debt) & investor (equity).
The higher percentage of debt is grater the degree of risk to any creditor.
Debt to Equity Ratio = Total Liability/ Shareholders Equity
Year 2012 2013 2014 2015 2016
Total Liability 104,676.17 115,309.14 141,412.32 167,053.52 213621.97
Shareholders’ Equity 10181.97 11087.44 12149.38 12955.11 14193.33
Debt to Equity Ratio (Times) 10.28% 10.40% 11.64% 12.90% 15.05%
Table 4.5: Debt to Equity Ratio (Tk. in million)

Figure 4.5: Debt To Equity Ratio
10.28% 10.40% 11.64%
12.90%
15.05%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
2012 2013 2014 2015 2016
Debt to Equity Ratio
Interpretation
It indicates that SIBL Bank using too much debt to finance is assets relative to shareholder’s
equity fund.A higher debt-to-equity ratio typically shows that a company has been aggressive
in financing its growth with debt, and there may be a greater potential for financial distress if
earnings do not exceed the cost of borrowed funds.

4.4: PROFITABILITY RATIOS
4.4.1 Return on Asset (ROA)
4.4.2 Return on Equity (ROE)
4.4.3 Net Profit Margin
4.4.4 Cost Income Ratio
4.4.5 Earnings per Share (EPS)

4.4.1 Return on Asset (ROA):
Return on asset measures the overall effectiveness of management in generating
profits with its available assets also called the return on investment the higher ratio is
better.
Return on Asset (ROA) = Earnings Available For Common Stockholder / Total Assets
Year 2012 2013 2014 2015 2016
Net Profit After Taxes 2747.89 2024.66 3307.52 3479.17 4192.19
Total Assets 115165.95 126616.56 153737.47 180112.11 227704.18
Return on asset (ROA) 2.75% 1.67% 2.36% 2.08 % 2.06%
Table 4.6: Return on Assets (ROA) (Tk. in million)

Figure 4.6 : Return On Assets (ROA)
2.75%
1.67%
2.36%
2.08% 2.06%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
2012 2013 2014 2015 2016
Return On Assets
Interpretation:
This indicates a good sign of the bank performance and refers that management was effective
in generating profit by using its available assets. When ROA is negative, it indicates that the
company trended toward having more invested capital or earning lower profits.

4.4.3 RETURN ON EQUITY (ROE):
The return on equity measures the return earn on the owners (both preferred
and common stockholders) investment. Generally, the higher this return, the
better of the owners.
Return on Equity (ROE) = Net Income / Stockholders Equity.
Year 2012 2013 2014 2015 2016
Net profits after taxes 1441.83 1220.20 1903.72 2072.59 2292.19
Shareholder’s equity 10181.97 11083.43 12143.38 12950.32 14187.80
Return on Equity 14.15% 11.01% 15.68% 16.00 % 16.16%
Table 4.7: Return on Equity (ROE) (Tk. in million)

Figure 4.7: Return on Equity (ROE)
14.15%
11.01%
15.68% 16.00% 16.16%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
2012 2013 2014 2015 2016
Return on Equity
Interpretation:
This indicates a good sign of the bank performance and refers that management was
effective in generating profit by using its shareholders equity capital. A rising ROE
suggests that a company is increasing its ability to generate profit without needing as
much capital. It also indicates how well a company's management is deploying the
shareholders' capital.

4.4.1 NET PROFIT MARGIN:
The net profit margin measures the percentage of each sales dollar remaining after all
expenses, including taxes, have deducted. The higher the net profit margin is better.
The net profit margin is calculated as follows:
Net profit margin = Net Profit after Taxes / Operating Income
Year 2012 2013 2014 2015 2016
Net Profit After Taxes 1441.83 1220.20 1903.72 2072.59 2292.19
Operating Income 5515.09 4146.25 15,718.08 17,305.68 19,174.34
Net Profit Margin 26.14% 29.43% 12.11% 11.98% 11.95%
Table 4.8: Net Profit Margin (Tk. in million)

26.14% 29.43%
12.11%
11.98% 11.95%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
2012 2013 2014 2015 2016
Net Profit Margin
Figure 4.8: Net Profit Margin
Interpretation:
The profitability position of the bank was good enough for over the year of analysis. A
lower net profit margin means that a company is less efficient at converting sales into
actual profit.

4.4.4 Cost to Income Ratio:
Cost income ratio is the ratio between operating expenses and operating
income it is measure of how cost are changing compared to income. It is one
of main key performance indicators of bank efficiency.
Cost income ratio = Operating Cost / Operating Income
Year 2012 2013 2014 2015 2016
Total Operating
Expenses
1897.27 2578.06 11753.80 12455.80 13476.26
Total Operating
Income
5515.09 5502.61 15718.08 17305.68 19174.34
Cost to Income Ratio 34.40% 46.85% 74.78% 71.98% 70.28%
Table 4.9: Operating cost income ratio (Tk. in million)

34.40%
46.85%
75.78%
71.98% 70.28%
34.40%
46.85%
75.78%
71.98% 70.28%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
2012 2013 2014 2015 2016
Operating Cost Income Ratio
Figure 4.9: Operating Cost Income Ratio
Interpretation:
This indicates that the profitability position of the bank decreased and the management was
failed to reduce its cost relative to its income.

4.5:RISK MEASUREMENT
4.5.1: Capital to Risk Weighted Assets Ratio

4.5.1: Capital to Risk Weighted Assets Ratio
Capital to Risk Weighted Assets Ratio = Tier 1 Capital + Tier 2
Capital / Risk-Weighted Asset
Year 2012 2013 2014 2015 2016
Total Capital (Tier I + Tier
II)
10596.51 11623.52 13078.26 16916.08 19195.04
Total Risk-Weighted Assets 91983.42 99834.16 115119.51 137155.24 166172.67
Capital to Risk Weighted
Asset Ratio
11.52% 11.58% 11.36% 12.33% 11.55%
Table 4.10: Capital to Risk Weighted Assets Ratio (Tk. in million)

11.52% 11.58%
11.36%
12.33%
11.55%
10.80%
11.00%
11.20%
11.40%
11.60%
11.80%
12.00%
12.20%
12.40%
12.60%
2012 2013 2014 2015 2016
Capital to Risk Weighted Asset Ratio (CRAR)
Figure 4.10: Capital to Risk Weighted Assets Ratio
Interpretation:
A bank with a high capital adequacy ratio is considered safe and likely to meet
its financial obligations. It is decreasing in recent year. So, it’s failed to consider
safe and likely to meet its financial obligations.

4.6: MARKET RATIOS
4.5.1 Earnings per Share (EPS)
4.5.2 Price Earnings Ratio (P/E)

4.6.1 EARNINGS PER SHARE (EPS):
Year 2012 2013 2014 2015 2016
Price Earnings Ratio (P/E)
15.88 15.78 17.27 18.42 19.22
Table 4.12: Price Earnings Ratio (P/E) (Amount in Tk.)
Calculated as:
Price Earnings Ratio= Market Value Price Per Share/ Earnings Per Share

2.05
1.75
2.71 2.81
3.1
0
0.5
1
1.5
2
2.5
3
3.5
2012 2013 2014 2015 2016
Earnings Per Share (EPS)
Figure 4.11: Earnings per Share
Interpretation:
It may create a positive impact on the future investor of SIBL. A higher PE as mentioned by
older god just means that the market believes that this company will do well in future.

4.5.1 PRICE EARNINGS RATIO (P/E):
Calculated as:
Price Earnings Ratio= Market Value Price Per Share/ Earnings Per Share
Year 2012 2013 2014 2015 2016
Price Earnings Ratio
(P/E) 15.88 15.78 17.27 18.42 19.22
Table 4.12: Price Earnings Ratio (P/E) (Amount in Tk.)

Figure 4.12: Price Earnings Ratio (P/E)
15.88 15.75
17.27
18.42 19.22
0
5
10
15
20
25
2012 2012 2012 2012 2012
Price Earnings Ratio (P/E)
Interpretation:
It may create a positive impact on the future investor of SIBL.A higher PE as mentioned by
older god just means that the market believes that this company will do well in future.

FINDINGS AND OBSERVATION:
 In case of Liquidity of SIBL’s net working capital shows that SIBL is able to meet up their obligations.
SIBL’s current ratio fluctuating from 2012 to 2016. However in 2016 the amount of current ratio was
decreased. These indicate that SIBL has improved its capacity to pay off its short term obligation.
 After analyzing the Activity ratio of SIBL. It has been seen that there is an upward trend in SIBL’s Total
Asset Turnover and Investment to Deposit Ratio. From 2012 to 2016, the bank was unable to reduce its cost
significantly. Therefore it can be said that the operating activity of SIBL’s is becoming bad.
 The Debt ratio and Debt to equity ratio of SIBL increased from2012 to 2016, which indicates that the
Solvency of SIBL is improving.
 It has been seen that SIBL’s profitability is declining year by year over 2012 to 2016.
 Risk Measurement Ratio it has been found that SIBL is quite successful in reducing its risk through
increasing the capital.
 While analyzing the Investor Ratio of SIBL it found that the earning per share, Price earnings ratio of 2012
to 2016 increased consistently.

RECOMMENDATIONS:
 Social Islami Bank Limited should increase its liquidity position by using long-term financing
rather than cash on hand to acquire inventory or selling unnecessary assets. The management
should also try to improve the working capital position of the Bank by properly forecasting the
cash flows.
 Although SIBL profitability ratios are in increasing trend in recent years, they should try more for
increasing their operating efficiency.
 The bank should try to increase its profitability ratios to maintain the current performance
comparing to industry average.
 The debt ratio was decreased year by year. The Debt ratio measures, the proportion of total asset s
provides by the firms creditors. Their debt ratio was decreasing trend indicates the negative sign
so SIBL should be about it.

Evaluation of Financial Performance of SIBL

Evaluation of Financial Performance of SIBL

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