An Evaluation of Financial Performance of NCCBL

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An Evaluation of Financial Performance of NCCBL:
A Study on Mirpur Branch
By
Masrur Rahman Faraz

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Abstract
Despite being a growth oriented company, NCC Bank Ltd. has been losing profitability since
2011. To deal with the situation, the bank has been moving away from their earlier growth
strategy towards profit strategy - by reducing the spread expenses. As a result, the trends
are showing signs of rise in 2016. The bank has done this by increasing term deposits, thus
growing size of loan operations and temporarily decreasing interest expenses. Such
dependence on term deposits, however, should be reduced in the long term due to higher
interest rates associated. There has been growth in both in deposits and loans, each having
low deviations from seasonal trends. The bank may keep more reasonable interest rates for
deposits in the 3rd quarters for loans in the 1st quarters ± to increase both in the mentioned
quarters. The bank has been trying to increase profits by operating in riskier liquidity ratios ±
which doesn't have significance to profitability due to increase in non-performing loans.
Profitability has significant negative relation with non-performing loans, so the bank should
give loans more carefully. The bank spreading their loan portfolio into other sectors in 2016
may also be a cause behind the profit rise, by decreasing the non-performing loans ±
especially ones due for above 9 months. Also external factors like market competition
inflation significantly affect bank's profitability. In long term, the bank should take
concentration strategy to reduce adverse effects of the increasing market competition by
increasing market shares.

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Acknowledgement
I would like to specially thank Mr. Shah Ridwan Chowdhury for supervising this study. My
gratitude goes to the HR Department, NCC Bank Ltd., for allowing me to conduct my
internship make this study. Also my heartiest thanks go to employees of Mirpur Branch,
NCC Bank Ltd., specially Mr. Feroz Mr. Touhidul Islam for answering my interview and
clarifying my queries. My gratefulness would also go towards respected Dr. Muhammad
Mohiuddin, who helped me a lot about financial ratios. I would like to thank my classmates,
especially Mr. Sabbir Farazi, for their contributions suggestions from the start of the study.

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Table of Contents
Title Page
Abstract
Table of Contents
List of Tables
List of Figures
List of Abbreviations, Acronyms Symbols
Chapter 1: Introduction of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.1. Problem Statement
1.2. Objectives of the Study
1.3. Scopes of the Study
1.4. Limitations of the Study
Chapter 2: Literature Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.1. Business Model of the Banking Sector
2.2. Factors Effecting Profitability
2.3. Factors for Measuring Banks¶ Financial Performance
Chapter 3: Research Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.1. Sources of Data
3.2. Econometric Models
3.3. Variable Definitions
3.4. Analysis Method
Chapter 4: Organizational Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.1. Vision
4.2. Mission
4.3. Deposit Products
4.4. Advance Products
Chapter 5: The Business Model of NCCBL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.1. Deposits
5.2. Loans Advances
iii
v
vii
ix
xi
15
15
16
16
17
18
18
21
23
24
24
25
28
30
31
31
31
31
32
33
33
34

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5.3. NII
5.4. OC
5.5. LLP
Chapter 6: Determining Factors for NCCBL¶s Profitability . . . . . . . . . . . . . . . .
6.1. Factors Related to NIM
6.2. Factors Related to ROA
Chapter 7: Financial Performance of NCCBL . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.1. Financial Ratios
7.2. Deposits and Loans
Chapter 8: Conclusion and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . .
8.1. Conclusion
8.2. Recommendations
References
Annex 1: Measuring Institutional Behavior Market Competition
Annex 2: NCCBL Financial Information (2007-2016)
Annex 3: Seasonal Trends in Deposits and Loans Advances (2012-2016)
Annex 4: Macroeconomic Data for Banking Industry in Bangladesh
(2007-2016)
Annex 5: Interview Questionnaire
36
36
37
38
38
40
44
44
66
79
79
80
82
84
85
91
95
96

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List of Tables
Fig Title Page
3.1
3.2
3.3
5.1
6.1
6.2
6.3
6.4
7.1
7.2
7.3
7.4
A2.1
A2.2
A2.3
A2.4
A2.5
A2.6
A2.7
A2.8
A2.9
Variable Definition for NIM Analysis
Variable Definition for ROA Analysis
Variable Definition for Lon (ROA) Analysis
Business Model of NCCBL
Multiple Regression Analysis Result of NIM (2011-2016)
Descriptive Statistics for HHI (Loans) for Bangladesh Banking Industry
(2010-2016)
Multiple Regression Analysis Result of ROA
Multiple Regression Analysis Result of Lon (ROA) (2010-2016)
Descriptive Statistics of Tax Paid from PBT (%)
Slope AOI in BE Analysis of NCCBL (2007-2011)
Descriptive Statistics Comparison of Deposits and Loans Advances in
NCCBL (2011-2017)
Slope AOI in Comparison of Deposit and Loans Advances Growth
in NCCBL (2011-2017)
NCCBL Financial Information Part-1 (2007-2016)
Deposit Distribution by Product Types (BDT Million) in NCCBL
(2010-2016)
Deposit Distribution by Product Types (%) in NCCBL (2010-2016)
Loans Advances Distribution by Geography (BDT Million) in NCCBL
(2011-2016)
28
29
29
37
38
39
40
42
52
55
76
78
85
86
86
87
87
88
88
89
89

ϴ

A2.10
A2.11
A2.12
A3.1
A3.2
A3.3
A3.4
A4.1
Loans Advances Distribution by Geography (%) in NCCBL
(2011-2016)
Loans Advances Distribution by Industry Type (BDT Million) in
NCCBL (2015-2016)
Loans Advances Distribution by Industry Type (%) in NCCBL
(2015-2016)
Specific Seasonal for Deposits in NCCBL (2012-2016)
Quarterly Index for Deposits in NCCBL (2012-2016)
Specific Seasonal for Loans Advances in NCCBL (2012-2016)
Quarterly Index for Loans Advances in NCCBL (2012-2016)
Macroeconomic Data for Banking Industry in Bangladesh (2007-2016)
89
90
90
91
92
93
94
95

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List of Figures
Fig Title Page
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
7.10
7.11
7.12
7.13
7.14
7.15
7.16
7.17
7.18
7.19
7.20
7.21
7.22
7.23
7.24
7.25
7.26
ROE of NCCBL (2007-2016)
ROA of NCCBL (2007-2016)
HHI for Market Competition in Bangladesh Banking Industry (2010-2016)
Equity Ratios of NCCBL (2007-2016)
NIM of NCCBL (2011-2016)
ADR of NCCBL (2007-2016)
Comparison of ADR LDR of NCCBL (2011-2016)
NPL of NCCBL (2007-2016)
LLP of NCCBL (2011-2016)
Comparison of NPL LLP of NCCBL (2011-2016)
ROI of NCCBL (2011-2016)
Comparison of Income from Investment NII of NCCBL (2011-2016)
Comparison of OP, PBT, PAT PAD (2007-2016)
BE Analysis of NCCBL (2007-2016)
TR TE Distribution in NCCBL (2011-2016)
Lending Rates Spread of NCCBL (2012-2016)
Lerner¶s Index of NCCBL (2007-2016)
EPS of NCCBL (2007-2016)
PE Ratio of NCCBL (2011-2016)
Comparison of Dividend Yield Total Dividends Paid (2011-2016)
Comparison of Dividends: Cash Bonus (2007-2016)
Comparison of Face Value Market Value of Shares (2011-2016)
Number of Shares of NCCBL (2011-2016)
Number of Shareholders of NCCBL (2011-2016)
Capital Growth in NCCBL (2007-2016)
Statutory General Reserves in NCCBL (2011-2016)
44
45
46
46
47
48
48
49
49
50
51
52
54
55
56
57
58
59
59
60
61
62
63
63
64
65

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7.27
7.28
7.29
7.30
7.31
7.32
7.33
7.34
7.35
7.36
7.37
7.38
7.39
Deposit Growth in NCCBL (2012-2016)
Specific Seasonal for Deposits (%) of NCCBL (2012-2016)
Quarterly Index for Deposits (%) in NCCBL (2012-2016)
Deposit Distribution by Product Types in NCCBL (2010-2016)
Portions of Deposits Generated by FD TD in NCCBL (2010-2016)
Rest of the Deposits Generated by Other Types in NCCBL (2010-2016)
Loans Advances Growth in NCCBL (2012-2016)
Specific Seasonal for Loans Advances (%) of NCCBL (2012-2016)
Quarterly Index for Loans Advances (%) in NCCBL (2012-2016)
Loans Advances Distribution by Industry in NCCBL (2015-2016)
Loans Advances Distribution by Geography (BDT Million) in NCCBL
(2011-2016)
Loans Advances Distribution by Geography (%) in NCCBL (2011-2016)
Comparison of Deposit and Loans Advances Growth in NCCBL
(2011-2017)
66
67
68
69
69
70
71
72
72
74
75
75
77

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List of Abbreviations, Acronyms Symbols
ADR - Advance to Deposit Ratio
AGM - Annual General Meeting
AOI - Angle of Incidence
B - Bills Payable
BB - Bangladesh Bank
BCG - Boston Consulting Group
BDT - Bangladeshi Taka
BE - Break Even
BL - Bad/Loss
BOD - Board of Directors
C - Current Other Accounts
CC - Cash Credit
CD - Certificate of Deposit
CDR - Credit to Deposit Ratio
CET 1 - Common Equity Tier 1
CFS - Consumer Finance Scheme
CRG - Credit Risk Grading
CSR - Corporate Social Responsibilities
D - Deposits
DF - Doubtful
DFIs - Development Financial Institutions/Specialized Banks
ECRL - Emerging Credit Rating Limited
EMs - Emerging Markets

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EPS - Earnings per Share
FCBs - Foreign Commercial Banks
FD - Fixed Deposits
FDR - Fixed Deposit Receipt
GDP - Gross Domestic Product
GEC - General Electric Nine-cell Matrix
HHI - Herfindahl-Hirschman Index
HY - Half Yearly
IBs - Islamic Banks
IMF - International Monetary Fund
KPI - Key Performance Indicator
L - Loans Advances
Lc/D - Loans in Chittagong division to Total Deposits Ratio
LCU - Local Currency Unit
Ld/D - Loans in Dhaka division to Total Deposits Ratio
LDR - Liquidity Deposit Ratio
LHS - Left Hand Side
li - Lerner's Index
LICs - Low Income Countries
LLP - Loan Loss Provision
LLP/OP - LLP to Operating Profit Ratio
Lo/D - Loans in other divisions to Total Deposits Ratio
mc - Marginal Cost
MDP - Money Double Program
MTP - Money Triple Program
NAV - Net Asset Value

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NCCBL - National Credit and Commerce Bank Limited
NII - Non-interest Income
NIM - Net Interest Margin
NPA - Non-performing Asset
NPL - Non-performing Loan
NVA - Net Value Added
OC - Operating Cost
OD - Other Deposits, including- Current, SB Bills Payable
OP - Operating Profit
p - Market Price
PAD - Profit Available for Distribution
PAT - Profit After Tax
PBT - Profit Before Tax
PCBs - Private Commercial Banks
PE Ratio - Price Earnings Ratio (times)
PLC - Product Life Cycle
PPP - Purchasing Power Parity
RHS - Right Hand Side
ROA - Return on Assets
ROE - Return on Equity
ROI - Return on Investment
S.D. - Standard Deviation
SB - Savings Bank Account
SBL - Stock Bangladesh Limited
SCBs - State-Owned Commercial Banks
SDS - Special Deposit Scheme

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SMA - Special Mention Account
SME - Small Medium-sized Enterprise
SND - Special Notice Deposit
SOD - Secured Overdraft
SS - Substandard
SSS - Special Savings Scheme
TA - Total Asset
TD - Term Deposits
TE - Total Expenses
TIE - Total Interest Expense
TIR - Total Interest Revenue
TR - Total Revenue
UC - Unclassified
USD - United States Dollar

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Chapter 1
Introduction of the Study
With all the history dogma against lending systems and interests, can we honestly think of
a world without banking? Have U.S. quitted banking after the subprime mortgage crisis?
With all the flaws in the banking system, we cannot even imagine going back to carrying
gold coin bags for our daily transactions! Business Economic growth, in general, is
impossible without banking services. Banks play an under-appreciated role in the economy.
To some extent, bank¶V loan officers decide which projects, businesses, sectors or industries
are worth pursuing and are deserving of capital (Simpson, n.d.).
In its 25th
year of dedicated service, NCC Bank Ltd. invests in the government, lends in
various industries in the country, involved in remittance, money exchange import-export
services and does CSR activities (NCCBL, 2016). NCCBL values sustainable growth for
stakeholders more than just profitability.
1.1. Problem Statement
A bank is a financial institution, licensed to receive deposits and give loans. Therefore,
banking is accepting deposits from public for lending or investment. Banks may also provide
financial services, such as- wealth management, currency exchange, safe deposit boxes etc.
Banks are regulated by a central bank in most countries (Investopedia, n.d.), Bangladesh
Bank for this country.

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On the other hand, financial performance is a measure of how well a firm is using assets to
generate revenues. It may be used as to measure the firm's financial health over a time period,
its performance in comparison to similar firms or the industry aggregate (Investopedia, n.d.).
NCC Bank Ltd., a bank with growth oriented mindset, has been losing profitability since start
of the 2010s ± even though having higher profitability ratios in the last decade. Their
financial performance is a topic worth investigating.
So, how is financial performance of NCCBL how do they maximize profits?
1.2. Objectives of the Study
1.2.1. General Objective
To review analyze financial performance of NCCBL.
1.2.2. Specific Objectives
1. To review how does the business model of NCCBL work.
2. To identify WKHIDFWRUVRQZKLFKWKHEDQN¶VSURILWDELOLWGHSHQGV.
3. To analyze the financial performance of NCCBL.
1.3. Scopes of the Study
Data is gathered from interviews of NCCBL employees observations; AGMs, HYs,
Quarterlies other financial statements published by the bank; Financial Stability Reports

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published by BB; World Bank website and Stock Bangladesh Limited website etc. The study
is constituted of 2 descriptive researches 1 causal research. The causal research, based on
Working Papers by BB IMF African Department, only discusses profitability- as NIM
ROA, to measure performance.
1.4. Limitations of the Study
1. Some data were missing. In necessary cases they are filled with values by statistical
measures mentioned in the report.
2. All the polynomial trends are considered till 3rd
orders, higher order curvatures are
excluded.
3. Only the AGM data by the bank are audited, the others are not. No off-balance sheet,
contra items or consolidated statements considered.
4. 7KHVWXGGRHVQ¶WFKDQJHWKHADR definition from 2011, so the values are different from
the AGMs.
5. Also some data of Performance Glance at 2012 contradicted with the AGMs, on those
cases values of the AGM 2015 are considered.
6. Only CET 1 has been discussed as Capital.
7. The causal research may contain Type-I II errors as well.
8. Many aspects have not been discussed in the study for time limitations lack of
information.

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Chapter 2
Literature Review
³Financial performance is a subjective measure of how well a firm can use assets from its
primary mode of business and generate revenues. This term is also used as a general measure
of a firm's overall financial health over a given period of time, and can be used to compare
similar firms across the same industry or to compare industries or sectors in aggregation
(Investopedia, n.d.).´ The concept can be discussed further for the banking sector in the
following literature.
2.1. Business Model of the Banking Sector
A bank can generate revenue in through interest income, transaction fees, financial advices
etc. Primarily, it is via charging interest on the capital it lends out to customers. According to
Simpson (n.d.), ... banks basically make money by lending money at rates higher than the
cost of the money they lend. In other words, banks profit from the difference between the
level of interest it pays for deposits other sources of funds, and the level of interest it
charges in lending (Carlassare, 2007).
2.1.1. Sources of Funds
2.1.1.1. Deposits
The largest source by far of funds for banks is deposits; money that account holders entrust to
the bank for safekeeping and use in future transactions, as well as modest amounts of
interest. If a bank cannot attract a sufficient level of core deposits, that bank can turn to
wholesale sources of funds. In many respects these wholesale funds are much like interbank

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CDs. While some banks de-emphasize the branch-based deposit-gathering model, in favor of
wholesale funding, heavy reliance on this source of capital can be a warning that a bank is
not as competitive as its peers (Simpson, n.d.).
2.1.1.2. Share Equity
While deposits are the primary source of funds for lending, shareholder equity is an
important part of a bank's capital. Several important regulatory ratios are based upon the
amount of shareholder capital a bank has and shareholder capital is, in many cases, the only
capital that a bank knows will not disappear. Common equity is straight forward. This is
capital that the bank has raised by selling shares to outside investors.
Equity capital is expensive, therefore, banks generally only issue shares when they need to
raise funds for an acquisition, or when they need to repair their capital position, typically
after a period of elevated bad loans. Apart from the initial capital raised to fund a new bank,
banks do not typically issue equity in order to fund loans (Simpson, n.d.).
2.1.1.3. Debt
Banks will also raise capital through debt issuance. Banks most often use debt to smooth out
the ups and downs in their funding needs. Like regular corporations, bank bonds may be
callable and/or convertible. Although debt is relatively common on bank balance sheets, it is
not a critical source of capital for most banks. Although debt/equity ratios are typically over
100% in the banking sector, this is largely a function of the relatively low level of equity at
most banks. Debt is usually a much smaller percentage of total deposits or loans at most
banks and is, accordingly, not a vital source of loanable funds (Simpson, n.d.).

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2.1.2. Use of Funds
2.1.2.1. Loans
For most banks, loans are the primary use of their funds and the principal way in which they
earn income. Banks profit from the difference between the level of interest it pays for
deposits other sources of funds, and the level of interest it charges in lending. Loans are
typically made for fixed terms, at fixed rates and are typically secured with real property;
often the property that the loan is going to be used to purchase (Simpson, n.d.).
Part and parcel of a bank's lending practices is its evaluation of the credit worthiness of a
potential borrower and the ability to charge different rates of interest, based upon that
evaluation. When considering a loan, banks will often evaluate the income, assets and debt of
the prospective borrower, as well as the credit history of the borrower. The purpose of the
loan is also a factor in the loan underwriting decision; loans taken out to purchase real
property, such as homes, cars, inventory, etc., are generally considered less risky, as there is
an underlying asset of some value that the bank can reclaim in the event of nonpayment
(Simpson, n.d.). Banks charge higher interest rates to those customers that are considered to
be a higher credit risk and thus increased chance of default on loans. This helps to make up
for the losses from bad loans. Banks, however, lowers the price of loans to those having
better credit histories (Carlassare, 2007).
Consumer lending (on residential mortgages), automobile lending, education loans Credit
cards are some of the popular lending. Compared to mortgage lending, auto loans are
typically for shorter terms and higher rates. Banks face extensive competition in auto lending
from other financial institutions, like captive auto financing operations run by automobile
manufacturers and dealers (Simpson, n.d.).

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2.1.2.2. Card Products
Banks also want to increase the methods of payment available to the clients. These products
include- debit cards, prepaid cards, smart cards, credit cards etc. Banks make money from
card products through interest charges and fees charged to cardholders, and transaction fees
to retailers who accept the bank's credit and/or debit cards for payments (Carlassare, 2007).
In credit card lending, the rates of default are traditionally much higher than in mortgage
lending or other types of secured lending. But credit card lending delivers lucrative fees for
banks (Simpson, n.d.).
2.1.3. Non-interest Income
Historically, profitability from lending activities has been cyclical- dependent on the needs
strengths of loan customers and the stage of the economic cycle. Fees, fines and financial
advice constitute a more stable revenue stream and banks have therefore placed more
emphasis on these revenue lines to smooth their financial performance (Carlassare, 2007).
2.2. Factors Effecting Profitability
2.2.1. Factors Effecting NIM
According to Dufresne et al. (2013) ³$ ODUJH ERG RI HPSLULFDO ZRUN KDV H[DPLQHG WKH
determinants of NIMs in developed economies, with a smaller but growing literature
examining NIMs in Emerging Markets (EMs) and Low Income Countries (LICs). However,
only a few firm conclusions appear to emerge. There is some consensus on the role of
macroeconomic and bank-specific variables in determining NIMs, but evidence is less clear
FXWIRUWKHUROHRILQVWLWXWLRQVDQGWKHGHJUHHRIEDQNFRPSHWLWLRQ´ In their research, they
considered 4 categories of variables related to NIMs:

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1. Bank Specific Factors: Studies have found a role of bank specific factors (Beck Hesse,
2009; Poghysan, 2010). Higher operating costs were found to be positively associated with
higher NIMs. Depending on their strategy, some banks may rely more on fee income which
negatively affect NIMs. Higher NPLs could also lead to higher margins through higher risk
premium.
2. Institutional Behavior: ,QWKHFDXVDOUHVHDUFKLWZLOOEHPHDVXUHGWKURXJK/HUQHU¶V,QGH[
(li). A value of 0 means that the institution has no market power, while value of 1 means it
has monopoly in the market (Policonomics, 2017), though lower spreads are linked to better
institutions and larger balance sheets (Beck Hesse, 2009).
3. Degree of Bank Competition: Standard theory predicts more intense competition to yield
lower spreads. Poghysan (2010) and Peria Moody (2004) find a significant effect of
market concentration. However, Petersen Rajan (1995) have argued that imperfect
competition may encourage efficient lending. In the research, market competition will be
measured as Herfindahl-Hirschman Index (HHI) - which is a commonly accepted measure of
market concentration. It can range from 0 to 10,000. An HHI value of 10,000 indicats
monopoly, while 0 indicates perfect competition (Investopedia, n.d.).
4. Macroeconomic Environment: Beck Hesse (2009) found a role for macroeconomic
variables. They found that faster GDP growth, rising inflation and increasing treasury bill
rates to be associated with higher margins.
Dufresne et al. (2013) also considered bank fixed biases in their research.
2.2.2. Factors Effecting ROA
$FFRUGLQJ WR %HJXP ³'HSRVLWV DUH WKH PDLQ VRXUFHV RI IXQGLQJ IRU WKH EDQNLQJ
sector in Bangladesh in addition to the capital, reserves and borrowings. Banks mainly use
their funds to provide loans and invest in debt securities. The ADR is, therefore, an useful
LQGLFDWRURIEDQNV OLTXLGLWLQ%DQJODGHVK´7KHUHVHDUFKLQGLVFXVVLRQLQFOXGHG$'5/'5
Excess Liquidity Ratio, Call Money Rates as Liquidity Ratios.

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However, Niresh (2012) Akter et al. (2014) found no significant relationship between
liquidity and profitability.
2.3. Factors for Measuring Banks¶Financial Performance
According to Simpson (n.d.), key ratios and factors for meDVXULQJEDQN¶VSHUIRUPDQFHVDUH
Return on Equity, Return on Assets, Credit Quality, Loan/Deposit Ratio, Deposit Growth,
Loan Growth, Efficiency Ratio, Capital Ratios. Net Interest Margin is also a key factor in
GHWHUPLQLQJDEDQN¶VSHUIRUPDQFH ,QYHVWRSHGLDQG
³The loan/deposit ratio helps assess a bank's liquidity, and by extension, the aggressiveness
of the bank's management. If the loan/deposit ratio is too high, the bank could be vulnerable
to any sudden adverse changes in its deposit base. Conversely, if the loan/deposit ratio is too
low, the bank is holding on to unproductive capital and earning less than it should (Simpson,
n.d.).´ It is also known as ADR (as discussed in this paper) CDR. Whereas Hitt et al.
(2007) discussed BE, NVA, EVA analysis as financial accounting strategies.

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Chapter 3
Research Methodology
The research can be divided into 3 parts. The 1st
3rd
parts are descriptive researches on the
business model of NCCBL its financial performances. The 2nd
part contains two causal
UHVHDUFKHVRQWKHFRPSDQ¶VSURILWDELOLWFonsidered as NIM ROA respectively.
3.1. Sources of Data
3.1.1. Primary Data
Primary data are open structured interviews (questionnaire shown in Annex 5) of NCCBL
Mirpur branch employees observations made by the author during his 3 months internship
period.
3.1.2. Secondary Data
Secondary data are taken from AGMs, HYs, Quarterlies other financial statements
SXEOLVKHG E 1%/ LQ WKHLU ZHEVLWH %%¶V )LQDQFLDO 6WDELOLW 5HSRUWV -2016);
macroeconomic data in World Bank website and public stock information in the Stock
Bangladesh Limited website.

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3.2. Econometric Models
3.2.1. Model for NIM Analysis
Considering the Hypotheses for Bank Fixed Bias, Bank Specific Variables, Institutional
Behavior Market Competition and Macroeconomic Variables effecting NIM, we may
consider the econometric model by ƵĨƌĞƐŶĞĞƚĂů͘;ϮϬϭϯͿ,
yt = Įyt-1 + ȕ[t Ȗ]t —Șt İ (3.1)
Where,
yt = NIM for year t
xt = Bank Specific Variables
zt = Institutional, Market Structure country-specific Macroeconomic Variables
For unbiased bank-specific effects ĮZLOOEHEXWLQSUHVHQFHRIEDQN-IL[HGHIIHFWVĮ
3.2.2. Models for ROA Analysis
Considering the model used by Begum (2016),
yt ȕ0 + ȕi xi İi (3.2)
Where,
yt = ROA of the bank in t year bank

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xi = Liquidity ratios, other bank specific variables, macroeconomic variables additionally,
Loan Distribution by Geography by dividing the ADR.
ȕ0 = Intercept
İi = Error term
The first econometric model contains TD FD percentages in Total Deposits. Additionally,
the effect of deposit distribution to profitability can be analyzed by dividing the Lon of ADR
by Lon values of the individual deposit categories as following:
ADR =
୐
ୈ
=
୐
୊ୈା୘ୈା୓ୈ
(3.3)
Where,
L = Total Loans
D = Total Deposits
FD = Fixed Deposits
TD = Term Deposits[1]
OD = Other Deposits, including- Current, SB Bills Payable.
Now,
ଵ
୊ୈǤ୘ୈǤ୓ୈ
= (
) (
ଵ
)
= (
ଵ
୘ୈǤ୓ୈ
+
ଵ
୊ୈǤ୓ୈ
+
ଵ
୊ୈǤ୘ୈ
) (
ଵ
)

΀ϭ΁
As discussed in Chapter 5.

Ϯϳ

= (
ଵ
) =
ଵ
(
ଵ
୘ୈǤ୓ୈ
+
ଵ
୊ୈǤ୓ୈ
+
ଵ
୊ୈǤ୘ୈ
)-1
(3.4)
Taking Lon values of each side of Equation (3.3) solving the denominator of RHS by
Equation (3.4),
ln (ADR) = ln (L) ± ln (FD) ± ln (TD) ± ln (OD) ± ln (
ଵ
୘ୈǤ୓ୈ
+
ଵ
୊ୈǤ୓ୈ
+
ଵ
୊ୈǤ୘ୈ
) (3.5)
So the econometric model of Equation (3.2) can be used again by adding up the divisions of
Deposits as shown in Equation (3.5). In the later econometric model,
yt = Lon value of ROA of the bank in t year bank
xi = Lon values of Loans, FD, TD, OD the combination term
ȕ0 = Intercept, which may also be expressed as a Lon of some value
İi = Error term
In the later econometric model, previously found significant variables were omitted to fit in
the linear regression.

Ϯϴ

3.3. Variable Definitions
Variables Measure
Dependent Variable
NIM (TIR-TIE)/Interest-bearing assets
Independent Variables
Bank Specific Variables
Operating Costs Ratio of total operating expenses to total assets (log)
Equity Ratio of total equity to total assets (log)
Loan Loss Provisions Ratio of loan loss provisions to total assets (log)
Liquid Assets Ratio of liquid assets to total assets
Size of Operations Logarithm of total loans
Non-interest Income Ratio of non-interest income to total assets
Market Competition
Lerner Index Equation (0.1) in Annex 1
HHI (Loans)[2]
Equation (0.2) in Annex 1
Macroeconomic
GDP per capita GDP per capita in BDT
Exchange rate BDT per 1 USD
Inflation % change in CPI
Table-3.1: Variable Definition for NIM Analysis

΀Ϯ΁
,,/ĨŽƌŽĂŶƐŚĂƐďĞĞŶƵƐĞĚ͕ĂƐŝŶĚĞǆĞƐĨŽƌĞƉŽƐŝƚƐΘƐƐĞƚƐǁĞƌĞŶŽƚĂǀĂŝůĂďůĞŝŶƚŚĞŝŶĂŶĐŝĂů^ƚĂďŝůŝƚǇ
^ĞƌŝĞƐ͘

Ϯϵ

Variables Measure
Dependent Variable
ROA Net income after taxes/total asset
Liquidity Ratios
ADR Ratio of total advance to total deposits
LDR Ratio of total liquidity to total deposit
Other Bank Specific Variables
NPLs Gross NPLs to total loans
Lending Rates Weighted average lending rates published by BB
FD Fixed Deposit to Total Deposits
TD Term Deposit to Total Deposits
Loans Distribution by Geography
Ld/D Loans in Dhaka division to Total Deposits Ratio
Lc/D Loans in Chittagong division to Total Deposits Ratio
Lo/D Loans in other divisions to Total Deposits Ratio
Macroeconomic
GDP per capita GDP per capita in BDT
Inflation % change in CPI
Table-3.2: Variable Definition for ROA Analysis
Variables Measure
Dependent Variable
ln (ROA) Lon value of Net income after taxes/total asset
ln (L) Lon value of Loans Advances
ln (FD) Lon value of Fixed Deposits
ln (TD) Lon Value of Term Deposits
ln (OD) Lon value of Other Deposits- Current, SB Bills
Table-3.3: Variable Definition for Lon (ROA) Analysis

ϯϬ

3.4. Analysis Method
The NIM Analysis is done through 3 Multiple Regression Analysis models, time period
considered is 2011-2016. Dependent variable is measured in interval scale. Yearly data is
considered only, no monthly analyses. All calculations are done on MS-Excel 2007.
The ROA analysis is done through 11 Multiple Regression Analysis models. Models 1-5
8-11 considers a time period of 2011-2016, while the model 6 7 considers 2007-2016 time
period (for variables with data available before 2011). Analysis of Lon (ROA) is done
through models 12-17 for 2010-2016 period. Dependent variables are measured in interval
scale. Yearly data is considered only, no monthly analyses. All calculations are done on MS-
Excel 2007.
For analyzing the financial performance of NCCBL, most of the trend curves used are 3rd
Order Polynomials[3]
. However Linear trends[3]
are also used in BE analysis, Deposit Loan
growth comparison and other mentioned cases. Also 4 Quarter Centered Moving Average is
used for separate analysis of deposit and loan growth seasonal trends. Missing data for
¶V++, /RDQV ZDVFRQVLGHUHGDYDOXHGHWHUPLQHGEnd
Order Lagrange Polynomial.
All of the ratios and monetary data are in Ratio Scale. In some cases, Descriptive Analysis,
i.e. Mean, Standard Deviation etc. are also used. All calculations are done on MS-Excel
2007.

΀ϯ΁
Calculated by Least Square Regression.

ϯϭ

Chapter 4
Organizational Profile
4.1. Vision
To become one of the most adorable commercial Bank in serving the Nation as a
progressive and socially responsible financial institution by bringing credit commerce
together for increased Shareholders value and sustainable growth.
4.2. Mission
Delivering excellent financial service to our communities based on strong customer
relationship.
³Providing long lasting solutions that combining our cutting edge technology, experience and
financial strength to our clients and stakeholders.
³Creating a cohesive and friendly environment where customers and our people can excel.
4.3. Deposit Products
1. Current Account
2. Savings Bank Account (S.B.)
3. Fixed Deposit Receipt (FDR)
4. Special Fixed Deposit Scheme (SFDS)
5. Money Double Program (MDP)

ϯϮ

6. Money Triple Program (MTP)
7. Special Savings Scheme (SSS)
8. Special Notice Deposit (SDS)
4.4. Advance Products
1. Agriculture Loan
2. Term Loan
3. Working Capital to Industry
4. Exports Credit
5. Commercial Loan
6. Housing Loan
7. Consumer Finance Scheme
8. Credit Card
9. Education Loan

ϯϯ

Chapter 5
The Business Model of NCCBL
The author was posted in the Mirpur Branch of NCC Bank Ltd. for 3 months Internship
period. Based on the interviews observations made there, 1%/¶VEXVLQHVVPRGHOFDQEH
summarized as follows:
5.1. Deposits
1%/¶V main source of liquidity is customer deposits. However, deposits are liabilities that
generate expenses for the bank as interest paid to the customers. 1%/¶VGHSRVLWSURGXFWV
can be broadly categorized into 5 types:
1. Savings Bank Account: Customers can withdraw their money two times a week, to a
certain limit keeping a minimum amount (NCCBL, 2017). According to an NCCBL
employee, this level of flexibility was not allowed a few years back. SB accounts pay
customers a modest 3.25% interest.
2. Current Account Others: Customers business entities can keep current accounts in
the bank. This account allows flexibility of withdrawals in anytime to clients. However,
current accounts pay no interests. Some other accounts are also considered under this
category.

ϯϰ

3. Fixed Deposits: Fixed Deposits can be for 3 months, 6 months, 1 year 2 years (allowed
from August, 2017). NCCBL pays 6% for all FDs (up to BDT 1 crore), which may be below
the current inflation rate of 6.7% (World Bank, 2016) ± but it is still greater than the industry
average of 5.39% in the country (BB, July 2016). FDs are a major source of liquidity for
NCCBL.
4. Term Deposits: Fixed Deposits are a kind of Term Deposits themselves, but here TDs are
considered other than FDs, with a maturity time of generally above 2 years. MDP, SDS, SSS
and SND are considered in this category. MDP has a maturity time of 9 year 7 months, with
around 10.43% interest. SDS has an interest rate of 7% with 3 years of maturity time, while
SSS can be matured in 5/10 years with BDT 500-25,000 deposits per month. SND can give
customers around 3-4.5%, depending upon tenure. Since 2011, the TDs are on the rise
(Chapter 7) ± a strategy by the bank whose effect in profitability would be measured later on
(Chapter 6).
5. Bills Payable: NCCBL also accepts electricity, water gas bills; generating liquidity. In
the year 2016, this portion of the deposits have risen dramatically (Chapter 7).
5.2. Loans Advances
These are the services which generate the main profit for the bank, according to Mr. Firoz in
the Advance Department. Loans reduce liquidity, but generate revenue through interests,
which are kept higher than the deposit interest rates. NCCBL provides SOD, CC, SME,
Agriculture, Car, House Building, Education, Personal loans in its Mirpur Branch.
The loan products can be broadly categorized into 4 types:

ϯϱ

1. Continuous Loans: Client pays the advance at once after a determined period at his/her
convenience, according to Mr. Touhidul Islam. Any Continuous Loan if not repaid or
renewed within the fixed expiry date for repayment or after the demand by the bank will be
treated as overdue from the following day of the expiry date. However, loans overdue for a
period of 2 months or more, will be put into the SMA, the prior status of becoming the loan
into classified/NPL. Any continuous loan will be classified as SS if it is past overdue for 3-6
months, DF if it is past overdue for 6-9 months, BL if it is past overdue for 9 months or
beyond (NCCBL, 2016).
2. Demand Loans: Client pays on demand after an agreed period. Some assets of the client
are kept as mortgage, according to Mr. Touhidul Islam. Any Demand Loan if not repaid
within the fixed expiry date for repayment or after the demand by the bank will be treated as
overdue from the following day of the expiry date. However, loans overdue for a period of 2
months or more, will be put into the SMA, the prior status of becoming the loan into
classified/NPL. Any Demand Loan will be classified as SS if it remains overdue for 3-6
months, DF if it remains overdue for 6-9 months, BL if it remains overdue for 9 months or
beyond from the date of claim by the bank or from the date of creation of forced loan
(NCCBL, 2016).
3. Fixed-term Loans: Client pays the loan in installments over a fixed time, according to
Mr. Touhidul Islam. The Car loan scheme falls under this category. In case of any
installments or part of installments of a Fixed Term Loan not repaid within the fixed expiry
date, the amount of unpaid installments will be treated as overdue from the following day of
the expiry date. However, loans overdue for a period of 2 months or more, will be put into
the SMA, the prior status of becoming the loan into classified/NPL. In case of any
installments or a part of installments of a Fixed Term Loan is not repaid within the due date,
the amount of unpaid installments will be termed as 'past due or overdue installment'. If the
amount is equal to or more than the amount of installments due within 3 months - the entire
loan will be classified as SS, if within 6 months - DF, if within 9 months - BL (NCCBL,
2016).

ϯϲ

4. Short-term Loans Micro Credit: Agricultural loans mainly fall under this category.
The Short-term Agricultural loans and Micro-Credit, if not repaid within the fixed expiry
date for repayment will be considered overdue after six months of the expiry date. However,
loans overdue for a period of 2 months or more, will be put into the SMA, the prior status of
becoming the loan into classified/NPL. The loans will be considered SS if the irregular status
continuous for a period of 1 year, DF if the irregular status continuous for a period of 3 year,
BL if the irregular status continuous for a period of 5 years from the stipulated due date as
per loan agreement (NCCBL, 2016).
5.3. NII
Non-interest income is generated from fees on Card, Payment Order, Loan, Deposit box,
Remittance, Money Exchange services fines. NCCBL also invests in stocks, bonds etc.,
which produces a large portion of its NII.
5.4. OC [4]
Personnel non-personnel costs, consists around 30-40% of the NVA each year (NCCBL,
2015 2016). Personnel costs include salaries bonuses paid to employees. Non-personal
costs are the costs for daily operations.
If we consider the overall system discussed till now, it can be expressed as follows:

΀ϰ΁
KŝŶƚŚŝƐƌĞƉŽƌƚǁŝůůďĞĐŽŶƐŝĚĞƌĞĚĂƐƚŚĞŶŽŶͲŝŶƚĞƌĞƐƚĐŽƐƚƐ͘tŚĞƌĞĂƐKWŝƐĐŽŶƐŝĚĞƌĞĚĂƐƚŚĞƚŽƚĂůƉƌŽĨŝƚƐ
ďĞĨŽƌĞŵĂŬŝŶŐƚŚĞƉƌŽǀŝƐŝŽŶƐĨŽƌůŽĂŶƐ͘

ϯϳ

Cash-flow In Cash-flow Out
Liquidity Generation
Deposits
Reserves
Revenue
Interest from loans
Income from Investments
Fees
Fines
Money Exchange rates
Liquidity Reduction
Loans
Investments
Remittance Services
Expenses
Interest paid on Deposits
Operating Costs
Personnel Costs
Non-personnel Cost
NPLs Asset devaluation
Table-5.1: Business Model of NCCBL
5.5. LLP
The Bank follows approaches in calculating the specific general provisions as per the
guideline of Bangladesh Bank regarding the provisioning of loans advances.
For consumer loans like- house building professionals and merchant banks, stock dealers
etc., the bank has provision approaches for 2%, for other Consumer loans 5% of UC SMA
(less than 3 months overdue). Also for the above mentioned categories, 20% of SS (3-6
months overdue), 50% of DF (6-9 months overdue) and 100% of BL (above 9 months
overdue).
For short term agricultural credit micro-credit, 2.5% of UC SMA (6 months to 1 year
overdue), 5% of SS DF (1-5 years overdue) and 100% for BL (above 5 years overdue). For
SMEs 0.25% for others 1% of UC SMA, and 20%, 50% 100% of SS, DF BL
respectively for both (NCCBL, Dec 2016).

ϯϴ

Chapter 6
'HWHUPLQLQJ)DFWRUVIRU1%/¶V3URILWDELOLW
This chapter will show two causal researches RQ1%/¶VSURfitability, measured as NIM
ROA, and related factors.
6.1. Factors Related to NIM
Though Bank Specific Variables were more influential to NIM according to literature, for
this particular bank Market Competition Macroeconomic Variables are more important.
Particulars Model-1 Model-2 Model-3
Intercept -1.08 0.26 -0.01
NIM of previous year (%) 0 - -
log (OC/TA) 0 - -
log (Equity/TA) 0 - -
log (LLP/TA) -0.19 0.03 -
Liquid Asset/TA 0 - -
log (Loans) 0 - -
NII/TA 0 - -
li 0 - -
HHI (Loans) 0.0017 0.0021 0.0020[6]
Inflation (%) 0.30 0.35 0.35[5]
GDP per Capita, PPP (BDT) 0.00 - -
Exchange Rate (BDT per $) -0.01 -0.03 -0.03
R Square 1.00 1.00 1.00
F - 134.98 342.71
Significance F - 0.06 0.003[6]
Table-6.1: Multiple Regression Analysis Result of NIM (2011-2016)

΀ϱ΁
^ƚĂƚŝƐƚŝĐĂůůǇƐŝŐŶŝĨŝĐĂŶƚĂƚƉфϬ͘Ϭϱ͘
΀ϲ΁
^ƚĂƚŝƐƚŝĐĂůůǇƐŝŐŶŝĨŝĐĂŶƚĂƚƉфϬ͘Ϭϭ͘

ϯϵ

6.1.1. Bank Specific Variables
Among the Bank Specific Variables, only Loan Loss Provision is economically significant. 1
unit in increase in the log value of it may increase NIM by 2.75%.
6.1.2. Market Competition
According to model-3, HHI (Loan) is statistically significant (p0.01). Apparently the
variable may not seem economically significant (.0017-.0021), but considering the index a
multiple of 10,000 the Standard Deviation 228 - 100 unit change in HHI may increase
NIM by 20% (model-3). Meaning, increase in market competition will increase the
company's profitability. As increasing market competition means reducing the concentration
ratio among the market leaders and getting some portion of the loan market.
HHI (Loans)
Mean 1479.44
S.D. 228.30
Range 517.67
Minimum 1269.00
Maximum 1786.67
Count 7
Table-6.2: Descriptive Statistics for HHI (Loans) for Bangladesh Banking Industry
(2010-2016)
6.1.3. Macroeconomic Variables
Inflation is both economically (0.30-0.35) statistically (p0.05) significant (model-3). 1%
increase in inflation may increase NIM by 35%. Exchange rate is economically significant,
though not statistically. 1 BDT increase per US$ may decrease NIM by 2.8%.

ϰϬ

6.1.4. Bank Fixed Bias Institutional Behavior
No Bank Fixed Biases found, Institutional Behavior is not relevant.
6.2. Factors Related to ROA
Let's have a separate research in determining if profitability is related to liquidity, after
seeing negligible relations to the liquidity component with NIM in the last sub-chapter.
Profitability will be measured here as ROA Lon of ROA.
6.2.1. Analysis of ROA
Primarily, all the variables are considered in a time span of 2011-2016 (model 1-5). No
variables are statistically significant (Table-6.3).
Term Deposit to Total Deposit Ratio is neither statistically nor economically significant. 1%
increase in NPL will decrease 1% of the ROA value, slight indication of non-profitability of
idle liquidity.
After increasing the time span to 2007-2016 (model-6-7), NPL (p0.001) Inflation
(p0.05) are found to be statistically significant (model-7). Term Deposit ratio omitted for
lack of correlation to profitability, so are the variables with insufficient data. Effect of TD
will be further analyzed in the next Subdivision 6.2.2.

Table-6.3:
Multiple
Regression
Analysis
Result
of
ROA
[10]

΀ϳ΁
΀ϴ΁
΀ϵ΁
^ƚĂƚŝƐƚŝĐĂůůǇƐŝŐŶŝĨŝĐĂŶƚĂƚƉфϬ͘ϬϬϭ͘
΀ϭϬ΁
DŽĚĞůƐϭͲϱΘϴͲϭϭĂƌĞĚŽŶĞĨŽƌϮϬϭϭͲϮϬϭϲƚŝŵĞƉĞƌŝŽĚĂŶĚŵŽĚĞůƐϲͲϳĂƌĞĚŽŶĞĨŽƌϮϬϬϳͲϮϬϭϲƉĞƌŝŽĚ͘
Particulars
Model-1
Model-2
Model-3
Model-4
Model-5
Model-6
Model-7
Model-8
Model-9
Model-10
Model-11
Intercept
7.53
7.53
1.92
2.36
3.53
7.56
[7]
7.67
[7]
19.63
10.73
10.73
19.27
ADR
(%)
0.05
0.05
0.03
0.03
-0.01
-0.02
-0.02
-
-
-
-
LDR
(%)
-0.11
-0.11
-0.03
-0.03
-
-
-
-
-
-
-
FD
(%)
0
-
-
-
-
-
-
-
-
-
-
TD
(%)
-0.18
-0.18
-0.01
-
-
-
-
-
-
-
-
NPL
(%)
-0.36
-0.36
-0.24
-0.27
0.08
-0.47
[8]
-0.43
[9]
-0.39
-0.21
-0.21
-0.41
Lending
Rates
(%)
0
-
-
-
-
-
-
-
-
-
-
GDP
per
Capita,
ppp
(BDT)
0.00
0.00
-
-
-
0.00
-
-
-
-
-
Inflation
(%)
0
-
-
-
-
-0.35
-0.35
[7]
-0.42
-
-
-0.40
Ld/D
-
-
-
-
-
-
-
-6.18
-3.23
-3.29
-7.74
Lc/D
-
-
-
-
-
-
-
-33.89
-24.58
-24.54
-32.56
Lo/D
-
-
-
-
-
-
-
-14.96
-0.55
-
-
R
Square
1.00
1.00
0.76
0.75
0.71
0.91
0.90
1.00
0.79
0.79
0.99
F
-
-
0.77
2.05
3.70
12.49
17.18
-
0.94
2.52
38.83
Significance
F
-
-
0.68
0.34
0.16
0.008
[8]
0.002
[8]
-
0.64
0.30
0.12

ϰϮ

ADR is not statistically significant in any of the models, however its coefficients vary
between 0.03-0.05 (model 1-4) - meaning 1% increase in ADR will increase 3% in ROA
value (model-3). However, the greater span (2007-2016) shows slight risk in too less
liquidity (coefficient of -0.02), as model 6 7 shows.
No statistically significant correlations with Loans Distribution by Geography (model 8-11),
economic values not considered for lack of significance of the models.
6.2.2. Analysis of Lon of ROA
Particulars Model-
12
Model-
13
Model-
14
Model-
15
Model-
16
Model-
17
Intercept 172.65 152.92 14.65 17.01 14.80 19.65[11]
ln (L) -1.68 - - - - -
ln (FD) -69.08 -64.58 - -0.85 0.24 -
ln (TD) -97.68 -91.30 -0.38 -1.53[11]
- -
ln (OD) -85.79 -80.58 2.59 1.52 2.92[11]
2.81[11]
ln (1/TD.OD +
1/FD.OD + 1/FD.TD)
-126.35 -117.64 1.52 - 2.01[11]
1.93[12]
R Square 0.99 0.98 0.92 0.92 0.92 0.92
F 33.06 29.03 11.57 11.83 11.49 22.52
Significance F 0.13 0.03[11]
0.04[11]
0.04[11]
0.04[11]
0.007[12]
Table-6.4: Multiple Regression Analysis Result of Lon (ROA) (2010-2016)
TD has statistically significant (p0.05) negative relation with ROA (model-15). 1 unit
increase in ln (TD) will decrease ln (ROA) by 1.5. It may be because of higher interest rates
associated with the Term Deposits.

΀ϭϭ΁
΀ϭϮ΁

ϰϯ

There is statistically significant (p0.05) relation with Other Deposits to ROA. 1 unit
increase in ln (OD) will increase the ln (ROA) by 2.8 (model-17). It may be because of
increasing liquidity by deposit categories with less or, in some cases, no interest rates
associated with them.

ϰϰ

Chapter 7
Financial Performance of NCCBL
7.1. Financial Ratios
7.1.1. Profitability, Liquidity Other Ratios
7.1.1.1. ROE
With great ROE values till 2010, from 2011 it took a downward trend. But the 2016 ROE of
12.9% promises better performances in coming years, so as the trend suggests.
Fig-7.1: ROE of NCCBL (2007-2016)
NCCBL's last year's ROE was better than the industry average of 9.7%, when only 10 banks
have more than 15% ROE (BB, 2016).
ϮϬ͘Ϯϯ
Ϯϭ͘ϳϲ
Ϯϴ͘ϰϵ
Ϯϱ͘ϯϱ
ϭϴ͘ϵϴ
ϭϭ͘ϴϭ
ϴ͘ϵϲ
ϭϬ͘ϴϳ
ϵ͘ϭϮ
ϭϮ͘ϵϭ
Ϭ͘ϬϬ
ϱ͘ϬϬ
ϭϬ͘ϬϬ
ϭϱ͘ϬϬ
ϮϬ͘ϬϬ
Ϯϱ͘ϬϬ
ϯϬ͘ϬϬ
ϮϬϬϳ ϮϬϬϴ ϮϬϬϵ ϮϬϭϬ ϮϬϭϭ ϮϬϭϮ ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ
ZK;йͿ

ϰϱ

7.1.1.2. ROA
With above 2% values in 2009-2011, NCCBL's ROA had a downward trend. The value of
1.3% in 2016 shows a turnaround in the trend.
Fig-7.2: ROA of NCCBL (2007-2016)
NCCBL's 2016 ROA is, however, greater than the industry average 0.7%. In a year, where
only 7 banks had more than 2%, it can be regarded moderate (BB, 2016).
It may be a result of increased market competition, as the decrease in HHI (Loans) suggests
(BB, 2010-2016). The Market Competition is more or less constant since 2014, which may
decrease in future as the trend suggests (Fig-7.3).
ϭ͘ϱϵ ϭ͘ϱϰ
Ϯ͘ϲϭ
Ϯ͘ϴϰ
Ϯ͘ϭϮ
ϭ͘ϭϰ
Ϭ͘ϵϭ
ϭ͘ϭϲ
Ϭ͘ϵϳ
ϭ͘ϯϬ
Ϭ͘ϬϬ
Ϭ͘ϱϬ
ϭ͘ϬϬ
ϭ͘ϱϬ
Ϯ͘ϬϬ
Ϯ͘ϱϬ
ϯ͘ϬϬ
ZK;йͿ

ϰϲ

Source: Bangladesh Bank Financial Stability Reports, 2010-2016[13]
Fig-7.3: HHI for Market Competition in Bangladesh Banking Industry (2010-2016)
7.1.1.3. Equity Ratio
The banking industry's norm is to have lower equity ratios (higher liabilities). NCCBL has a
more or less constant Equity ratio from 2010.
Fig-7.4: Equity Ratios of NCCBL (2007-2016)

΀ϭϯ΁
EŽĚĂƚĂĨŽƵŶĚĨŽƌϮϬϭϭ͕ǁŚŝĐŚǁĂƐĚĞƚĞƌŵŝŶĞĚďǇϮ
ŶĚ
KƌĚĞƌĂŐƌĂŶŐĞWŽůǇŶŽŵŝĂů͘
ϭ͕ϳϯϲ͘ϬϬ ϭ͕ϳϴϲ͘ϲϳ
ϭ͕ϲϯϭ͘ϬϬ
ϭ͕Ϯϲϵ͘ϬϬ ϭ͕ϯϮϰ͘ϬϬ ϭ͕ϯϬϬ͘ϲϬ ϭ͕ϯϬϴ͘ϴϬ
Ͳ
ϮϬϬ͘ϬϬ
ϰϬϬ͘ϬϬ
ϲϬϬ͘ϬϬ
ϴϬϬ͘ϬϬ
ϭ͕ϬϬϬ͘ϬϬ
ϭ͕ϮϬϬ͘ϬϬ
ϭ͕ϰϬϬ͘ϬϬ
ϭ͕ϲϬϬ͘ϬϬ
ϭ͕ϴϬϬ͘ϬϬ
Ϯ͕ϬϬϬ͘ϬϬ
ϮϬϭϬ ϮϬϭϭ ϮϬϭϮ ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ
,,/;ŽĂŶƐͿ
ϳ͘ϴϲ
ϳ͘Ϭϴ
ϵ͘ϭϲ
ϭϭ͘ϮϬ ϭϭ͘ϭϳ
ϵ͘ϲϱ ϭϬ͘ϭϲ ϭϬ͘ϲϳ ϭϬ͘ϲϰ
ϭϬ͘Ϭϳ
Ϭ͘ϬϬ
Ϯ͘ϬϬ
ϰ͘ϬϬ
ϲ͘ϬϬ
ϴ͘ϬϬ
ϭϬ͘ϬϬ
ϭϮ͘ϬϬ
ƋƵŝƚǇZĂƚŝŽ;йͿ

ϰϳ

7.1.1.4. NIM
The NIM was on a downward trend till 2015. In 2016, it rose to 2.8% - which may evidence
bank's overall upward trend in profitability.
Fig-7.5: NIM of NCCBL (2011-2016)
NCCBL's 2.8% is still less than the 2.93% of the average for PCBs, but higher than the
industry aggregate of 1.89% in 2016 (BB, 2016).
7.1.1.5. ADR[14]
As we can see from fig, the bank operates in a high risk fashion in case of liquidity. The safe
ADR ratio prescribed by Bangladesh Bank is 85% (Byron, 2011). The 94.9% of 2016 is
much higher than the PCB average of 81.3%. The author hasn't considered the flexible
definition given by BB of considering deposits by other banks in the ratio since 2011. The
value provided in the AGM 2016 is much closer (83.9%).

΀ϭϰ΁
EƵƐĞƐƚŚĞƚĞƌŵZƐǇŶŽŶǇŵŽƵƐůǇŝŶƚŚĞŝƌ'DϮϬϭϲ͘
ϰ͘ϯϭ
ϯ͘ϴϵ
Ϯ͘ϵϯ
Ϯ͘ϱϲ Ϯ͘ϰϴ
Ϯ͘ϴϬ
Ϭ͘ϬϬ
ϭ͘ϬϬ
Ϯ͘ϬϬ
ϯ͘ϬϬ
ϰ͘ϬϬ
ϱ͘ϬϬ
ϮϬϭϭ ϮϬϭϮ ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ
E/D;йͿ

ϰϴ

Fig-7.6: ADR of NCCBL (2007-2016)
From the comparison of ADR LDR in fig, we can get a better view on the liquidity. Here,
Liquid assets in LDR are considered as assets which can be liquidated within 1 year. It
VXJJHVWVEDQN¶VLQFUHDVHLQWHUPORDQV
Fig-7.7: Comparison of ADR LDR of NCCBL (2011-2016)
ϵϯ͘ϲϲ
ϵϴ͘ϳϴ
ϵϯ͘ϰϴ ϵϯ͘Ϭϰ
ϴϵ͘ϲϱ
ϴϮ͘ϰϵ
ϴϵ͘ϳϲ
ϴϲ͘Ϭϭ
ϵϯ͘ϬϮ
ϵϰ͘ϵϭ
ϳϬ͘ϬϬ
ϳϱ͘ϬϬ
ϴϬ͘ϬϬ
ϴϱ͘ϬϬ
ϵϬ͘ϬϬ
ϵϱ͘ϬϬ
ϭϬϬ͘ϬϬ
ϭϬϱ͘ϬϬ
Z;йͿ
ϴϵ͘ϲϱ
ϴϮ͘ϰϵ
ϴϵ͘ϳϲ ϴϲ͘Ϭϭ
ϵϯ͘ϬϮ ϵϰ͘ϵϭ
ϳϲ͘ϴϰ
ϳϰ͘ϱϵ
ϳϯ͘ϴϭ
ϲϮ͘ϳϮ
ϳϮ͘ϱϴ
ϴϮ͘ϲϮ
Ϭ͘ϬϬ
ϭϬ͘ϬϬ
ϮϬ͘ϬϬ
ϯϬ͘ϬϬ
ϰϬ͘ϬϬ
ϱϬ͘ϬϬ
ϲϬ͘ϬϬ
ϳϬ͘ϬϬ
ϴϬ͘ϬϬ
ϵϬ͘ϬϬ
ϭϬϬ͘ϬϬ
Z;йͿ
Z;йͿ

ϰϵ

7.1.1.6. NPL
NPL percentage decreased till 2010, and rose to highest in the timeline- 7.49% in 2014.
Afterwards it decreased to 5.92% in 2016, and may decrease further as the trend suggest.
Fig-7.8: NPL of NCCBL (2007-2016)
7.1.1.7. LLP
Fig-7.9: LLP[15]
of NCCBL (2011-2016)

΀ϭϱ΁
In BDT Million.
ϰ͘ϭϳ
ϰ͘ϭϰ
Ϯ͘ϴϰ
Ϯ͘Ϯϳ
Ϯ͘ϲϴ
ϱ͘ϱϭ ϱ͘ϱϲ
ϳ͘ϰϵ
ϳ͘ϭϴ
ϱ͘ϵϮ
Ϭ͘ϬϬ
Ϯ͘ϬϬ
ϰ͘ϬϬ
ϲ͘ϬϬ
ϴ͘ϬϬ
EW;йͿ
ϱϰϳ͘ϵϱ
ϭ͕Ϯϳϰ͘Ϭϳ
ϭ͕ϯϳϭ͘ϵϰ
ϭ͕Ϯϰϲ͘ϯϮ
ϭ͕ϲϯϴ͘ϱϱ
ϵϰϴ͘ϴϭ
Ͳ
ϱϬϬ͘ϬϬ
ϭ͕ϬϬϬ͘ϬϬ
ϭ͕ϱϬϬ͘ϬϬ
Ϯ͕ϬϬϬ͘ϬϬ
W

ϱϬ

The LLP trend started growing from 2011, but started decreasing from 2014 (Fig-7.9), even
though 2015 had the most NPL resulting LLP (Fig-7.10). As it can be seen from the NPL
LLP to OP comparison (Fig-7.10), the NPLs resulting LLPs are higher from 2012. The
NPL LLP curves are not same, although having similar trends. It is because of different
denominators- total loans advance assets for NPL[16]
OP for LLP (NCCBL, 2016), and
as the profit amounts are little compared to the asset amounts held by the bank. Also the
numerators also vary, as discussed in Chapter 5, with higher amount of BLs causing bigger
LLPs. As the 2015 data suggests, the NPLs had the most percentages of BL. Also 2013 NPLs
had higher BL than 2012, having almost the same NPL percentage. In 2016, the bank has
managed to bring down BLs, and as a result the big decrease in LLPs despite little decrease
in NPL.
Fig-7.10: Comparison of NPL LLP of NCCBL (2011-2016)
7.1.1.10. ROI
The return bank received upon investing in stocks, bonds etc.

΀ϭϲ΁
EĂůƐŽƵƐĞĚƚŚĞƚĞƌŵEWŝŶƚŚĞŝƌ'DϮϬϭϲ͘
Ϯ͘ϲϴ
ϱ͘ϱϭ ϱ͘ϱϲ
ϳ͘ϰϵ ϳ͘ϭϴ ϱ͘ϵϮ
ϭϯ͘ϬϬ
ϯϭ͘ϲϰ
ϯϳ͘Ϭϵ
ϯϯ͘Ϯϲ
ϰϮ͘ϯϴ
Ϯϭ͘ϭϯ
Ϭ͘ϬϬ
ϱ͘ϬϬ
ϭϬ͘ϬϬ
ϭϱ͘ϬϬ
ϮϬ͘ϬϬ
Ϯϱ͘ϬϬ
ϯϬ͘ϬϬ
ϯϱ͘ϬϬ
ϰϬ͘ϬϬ
ϰϱ͘ϬϬ
EW;йͿ
WͬKW;йͿ
WŽůǇ͘;EW;йͿͿ
WŽůǇ͘;WͬKW;йͿͿ

ϱϭ

Fig-7.11: ROI of NCCBL (2011-2016)
ROI is quite important factor for NII, as Income from Investment makes up around 56-71%
of the total NII (Fig-7.12). 2016 had the lowest percentage of NII through Income from
Investment.
As it can be seen from the two trends in Fig-7.12 of next page, the NII trend didn't fall as
sharply as the Income from Investment trend in 2016. It suggests NCCBL increased fees,
fines and other non-interest income sources to reduce the NII fall in the year.
ϭϯ͘ϵϵ
ϵ͘Ϭϱ
ϭϭ͘Ϭϰ ϭϭ͘ϱϬ ϭϭ͘Ϯϱ
ϴ͘ϰϭ
Ϭ͘ϬϬ
Ϯ͘ϬϬ
ϰ͘ϬϬ
ϲ͘ϬϬ
ϴ͘ϬϬ
ϭϬ͘ϬϬ
ϭϮ͘ϬϬ
ϭϰ͘ϬϬ
ϭϲ͘ϬϬ
ZK/;йͿ

ϱϮ

Fig-7.12: Comparison of Income from Investment NII [17]
of NCCBL (2011-2016)
7.1.1.11. Profits
Each year, the Bank keeps around 27-51% to pay taxes to the government, in average around
43%.
Tax Paid from PBT (%)
Mean 42.79
S.D. 7.83
Range 24.11
Minimum 26.99
Maximum 51.10
Count 10
Table-7.1: Descriptive Statistics of Tax Paid from PBT (%)

΀ϭϳ΁
BDT Million where applicable.
ϲϴ͘ϱϲй
ϳϬ͘ϵϯйϲϵ͘ϰϲй ϲϳ͘ϴϭй ϲϵ͘ϵϴй
ϱϲ͘ϯϮй
Ͳ
ϱϬϬ͘ϬϬ
ϭ͕ϬϬϬ͘ϬϬ
ϭ͕ϱϬϬ͘ϬϬ
Ϯ͕ϬϬϬ͘ϬϬ
Ϯ͕ϱϬϬ͘ϬϬ
ϯ͕ϬϬϬ͘ϬϬ
ϯ͕ϱϬϬ͘ϬϬ
ϰ͕ϬϬϬ͘ϬϬ
ϰ͕ϱϬϬ͘ϬϬ
/ŶĐŽŵĞĨƌŽŵ/ŶǀĞƐƚŵĞŶƚƐ
E//
WŽůǇ͘;/ŶĐŽŵĞĨƌŽŵ
/ŶǀĞƐƚŵĞŶƚƐͿ
WŽůǇ͘;E//Ϳ

ϱϯ

Reducing LLPs from the OP produces PBT. After paying taxes from PBT, portions from the
PAT are kept as Statutory Reserve, General Reserve other reserves for asset revaluations.
The rest is PAD, available for distribution upon BOD decision (to be discussed in sub-
division 7.1.4.5).
As it can be seen in the Fig-7.13, high rates of reserves were kept from the profit in the
period of 2007-2010. From 2011, reserves kept are reasonable (to be further discussed later)
and the PAD trend is gradually reaching towards a stationary inflexion point. 2011 was the
most profitable year for the bank. Though decrease in profits afterwards, the bank shows a
steep rise in OP, PBT PAT due to equivalent heights reached again in 2016.

Fig-7.13:
Comparison
of
OP,
PBT,
PAT

PAD
[18]
(2007-2016)

΀ϭϴ΁
ůůŝŶBDT
Million.
ϭ͕ϳϴϬ͘Ϯϱ
Ϯ͕ϯϲϯ͘ϰϵ
ϯ͕ϭϯϳ͘ϳϬ
ϰ͕ϭϬϬ͘ϮϬ
ϰ͕Ϯϭϰ͘ϳϲ
ϰ͕ϬϮϲ͘ϴϮ
ϯ͕ϲϵϴ͘ϴϭ
ϯ͕ϳϰϲ͘ϴϬ
ϯ͕ϴϲϲ͘Ϯϲ
ϰ͕ϰϵϭ͘ϮϮ
ϭ͕ϯϱϲ͘ϯϮ
ϭ͕ϳϴϴ͘ϵϲ
Ϯ͕ϲϴϲ͘ϰϵ
ϯ͕Ϯϰϴ͘Ϯϯ
ϯ͕ϲϯϬ͘ϭϱ
Ϯ͕ϳϰϮ͘ϳϱ
Ϯ͕ϯϮϲ͘ϴϴ
Ϯ͕ϱϬϬ͘ϰϴ
Ϯ͕ϮϬϮ͘ϳϭ
ϯ͕ϱϭϳ͘ϰϭ
ϲϳϳ͘ϭϴ
ϴϴϮ͘Ϯϴ
ϭ͕ϳϭϵ͘ϱϬ
Ϯ͕ϯϳϭ͘ϲϴ
ϭ͕ϵϰϲ͘ϭϭ
ϭ͕ϰϯϯ͘ϳϲ
ϭ͕ϭϯϳ͘ϴϰ
ϭ͕ϱϬϭ͘ϯϯ
ϭ͕ϯϲϯ͘ϴϮ
Ϯ͕Ϭϳϴ͘ϭϭ
ϴ͘ϭϯ
ϱ͘ϯϰ
ϰϲ͘ϰϳ
ϯϴϴ͘ϭϭ
ϭ͕ϴϱϴ͘Ϭϯ
ϴϴϲ͘ϭϱ
ϴϳϴ͘ϱϴ
ϭ͕ϬϰϮ͘ϭϳ
ϭ͕ϭϲϱ͘ϵϰ
ϭ͕ϰϭϲ͘ϰϲ
;ϭ͕ϬϬϬ͘ϬϬͿ
Ͳ
ϭ͕ϬϬϬ͘ϬϬ
Ϯ͕ϬϬϬ͘ϬϬ
ϯ͕ϬϬϬ͘ϬϬ
ϰ͕ϬϬϬ͘ϬϬ
ϱ͕ϬϬϬ͘ϬϬ
ϮϬϬϳ
ϮϬϬϴ
ϮϬϬϵ
ϮϬϭϬ
ϮϬϭϭ
ϮϬϭϮ
ϮϬϭϯ
ϮϬϭϰ
ϮϬϭϱ
ϮϬϭϲ
KW
Wd
Wd
W
WŽůǇ͘;KWͿ
WŽůǇ͘;WdͿ
WŽůǇ͘;WdͿ
WŽůǇ͘;WͿ

ϱϱ

7.1.2. BE Analysis
Comparing the TE TR linear trend, an AOI[19]
of 6° can be seen - with around BDT 1.16
0.94 Billion increase per year in TR TE respectively (Table-7.2).
Fig-7.14: BE Analysis [20]
of NCCBL (2007-2016)
Slope[19]
Angle[19]
(°)
TR 1.16 49.38
TE 0.94 43.36
AOI[19]
- 6.02
Table-7.2: Slope AOI in BE Analysis of NCCBL (2007-2011)

΀ϭϵ΁
Considering BDT 1,000 Million = 1 unit in TR TE.
΀ϮϬ΁
In BDT Million.
ϯ͕ϬϬϬ͘ϬϬ
ϰ͕ϬϬϬ͘ϬϬ
ϱ͕ϬϬϬ͘ϬϬ
ϲ͕ϬϬϬ͘ϬϬ
ϳ͕ϬϬϬ͘ϬϬ
ϴ͕ϬϬϬ͘ϬϬ
ϵ͕ϬϬϬ͘ϬϬ
ϭϬ͕ϬϬϬ͘ϬϬ
ϭϭ͕ϬϬϬ͘ϬϬ
ϭϮ͕ϬϬϬ͘ϬϬ
ϭϯ͕ϬϬϬ͘ϬϬ
ϭϰ͕ϬϬϬ͘ϬϬ
ϭϱ͕ϬϬϬ͘ϬϬ
ϭϲ͕ϬϬϬ͘ϬϬ
ϭϳ͕ϬϬϬ͘ϬϬ
ϭϴ͕ϬϬϬ͘ϬϬ
ϮϬϬϳϮϬϬϴϮϬϬϵϮϬϭϬϮϬϭϭϮϬϭϮϮϬϭϯϮϬϭϰϮϬϭϱϮϬϭϲ
dZ
d
ŝŶĞĂƌ;dZͿ
ŝŶĞĂƌ;dͿ

ϱϲ

As we can see from the Fig-7.14, there has been decline in both TR TE since 2013. Fall of
TR may be attributed to the decrease in lending rates and the spread. TR decrease rate in
2016 is due to lower NIIs, however dampened by increase in TIR in the year. TE decrease
may be because of their strategy to grow liquidity by increasing Term Deposits (discussed in
the Subdivision 7.2.1.2), thus delaying maturity dates and temporarily decreasing TIE (Fig-
7.15). This suggests a Profit strategy by NCCBL, which is opposed to their earlier Market
Development strategy - as suggested by around 50 branch openings in the 5 year (2007-2011)
period (NCCBL, 2012 2016). It may be rationalized by considering the stock market fall in
2011 (BBC Business, 2011) and consequent comparative stagnation in profitability.Another
contributing factor may be lower Income from Investments percentage of the NII in 2016, as
discussed earlier.
Fig-7.15: TR TE Distribution in NCCBL (2011-2016)
Ͳ
Ϯ͕ϬϬϬ͘ϬϬ
ϰ͕ϬϬϬ͘ϬϬ
ϲ͕ϬϬϬ͘ϬϬ
ϴ͕ϬϬϬ͘ϬϬ
ϭϬ͕ϬϬϬ͘ϬϬ
ϭϮ͕ϬϬϬ͘ϬϬ
ϭϰ͕ϬϬϬ͘ϬϬ
ϭϲ͕ϬϬϬ͘ϬϬ
ϭϴ͕ϬϬϬ͘ϬϬ
dZ
d
d/Z
d/
E//
K

ϱϳ

7.1.3. Institutional Behavior
7.1.3.1. Lending Rates Spread
NCCBL's average interest rate for deposit- 6.05% is greater than the PCB average of 5.61%
for 2016 (BB, 2017). Also the lending rate spread are lower than the PCB average (10.41
4.81) last year.
Fig-7.16: Lending Rates Spread of NCCBL (2012-2016)
Lending rates have been decreasing since 2012, ultimately below 10% in 2016. It may be a
result of BB's policy to help businesses grow. The spreads show little decrease in 2016-
3.91%, which is may be a Profit strategy by the bank.
ϭϰ͘ϳϲ
ϭϰ͘ϭϭ ϭϰ͘ϭϬ
ϭϮ͘ϭϭ
ϵ͘ϵϮ
ϰ͘ϰϴ ϰ͘ϱϬ ϱ͘ϮϮ ϰ͘ϳϵ
ϯ͘ϵϳ
Ϭ͘ϬϬ
Ϯ͘ϬϬ
ϰ͘ϬϬ
ϲ͘ϬϬ
ϴ͘ϬϬ
ϭϬ͘ϬϬ
ϭϮ͘ϬϬ
ϭϰ͘ϬϬ
ϭϲ͘ϬϬ
ϮϬϭϮ ϮϬϭϯ ϮϬϭϰ ϮϬϭϱ ϮϬϭϲ
ĞŶĚŝŶŐZĂƚĞƐ;йͿ
^ƉƌĞĂĚ;йͿ
WŽůǇ͘;ĞŶĚŝŶŐZĂƚĞƐ;йͿͿ
WŽůǇ͘;^ƉƌĞĂĚ;йͿͿ

ϱϴ

7.1.3.2. Lerner's Index
NCCBL's li ranges from 0.23 to 0.40 (mean 0.30), which shows moderate pricing behaviors
or monopolistic market power (0 for perfect competition, 1 for monopoly). If li considered as
displaying market power only, NCCBL had the highest power over its market in 2010. The
bank had greater market power in average in the 2007-2010 time span than the 2011-2016
period.
Fig-7.17: Lerner¶V,QGH[of NCCBL (2007-2016)
7.1.4. Shareholder Information
7.1.4.1. EPS
Till 2010, the EPS was higher than usual for NCCBL. But since 2011, the EPS values are
lower - due to increase in authorized capital fall in profits. But EPS is rising after 2015.
Ϭ͘ϯϰ
Ϭ͘ϯϮ
Ϭ͘ϯϰ
Ϭ͘ϰϬ
Ϭ͘ϯϬ
Ϭ͘Ϯϲ
Ϭ͘Ϯϯ Ϭ͘Ϯϯ
Ϭ͘Ϯϲ
Ϭ͘ϯϬ
Ϭ͘ϬϬ
Ϭ͘Ϭϱ
Ϭ͘ϭϬ
Ϭ͘ϭϱ
Ϭ͘ϮϬ
Ϭ͘Ϯϱ
Ϭ͘ϯϬ
Ϭ͘ϯϱ
Ϭ͘ϰϬ
Ϭ͘ϰϱ
ĞƌŶĞƌΖƐ/ŶĚĞǆ

ϱϵ

Fig-7.18: EPS of NCCBL (2007-2016)
7.1.4.2. PE Ratio
The highest PE ratio was 8.80 in 2013 and has been decreasing ever since. The trend has
reached a minimum point in 2016. The value 5.36 in 2016 is less than 10.97, the average PE
ratio of the banking sector in Bangladesh for this year (SBL, 2017). It means unattractive
market risky investment i.e. Dog in BCG Matrix.
Fig-7.19: PE Ratio of NCCBL (2011-2016)
ϱ͘Ϭϭ ϱ͘ϬϮ
ϳ͘ϱϯ
ϱ͘ϯϯ
ϯ͘ϳϬ
Ϯ͘Ϭϲ
ϭ͘ϰϵ ϭ͘ϳϬ ϭ͘ϱϰ
Ϯ͘ϯϱ
Ϭ͘ϬϬ
ϭ͘ϬϬ
Ϯ͘ϬϬ
ϯ͘ϬϬ
ϰ͘ϬϬ
ϱ͘ϬϬ
ϲ͘ϬϬ
ϳ͘ϬϬ
ϴ͘ϬϬ
W^
ϴ͘Ϯϭ
ϴ͘ϳϯ ϴ͘ϴϬ
ϲ͘ϱϵ
ϱ͘ϴϵ
ϱ͘ϯϲ
Ϭ͘ϬϬ
Ϯ͘ϬϬ
ϰ͘ϬϬ
ϲ͘ϬϬ
ϴ͘ϬϬ
ϭϬ͘ϬϬ
WZĂƚŝŽ

ϲϬ

7.1.4.3. Dividends
From 2011, as it can be seen in the Fig-7.20, 4 times total dividends (cash bonus) amount
more than the dividend yield. To be noted, the dividend given to shareholders are not always
equal to the dividend yield, as the dividend to be given out of the PAD is decided by the
BOD. However, there is no Dividend Equalization Fund shown in the AGMs. The fall of
yield in 2016 suggests increase in market price of share at a higher rate than PAD growth
(with constant number of shares paid up capital over 2015-16).
Fig-7.20: Comparison of Dividend Yield Total Dividends Paid (2011-2016)
The bank's dividend patterns can be seen in Fig-7.21 of next page. Before 2011, the
shareholders were paid no cash dividends, but paid in high rates of bonuses. The company
paid 10% out of the available 10.3% dividend yield and additionally paid 17% as bonus. In
2012 2014, no cash paid - bonus given only. 2013's 8.7% dividend yield is paid 6% in
cash, with the bonus exceeding the yield amount. Since 2015, the bank has been paying cash
ϭϬ͘Ϯϵ
ϳ͘ϬϬ
ϴ͘ϳϳ
ϭϭ͘ϱϵ
ϭϰ͘ϱϭ
ϭϮ͘ϳϯ
Ϯϳ͘ϬϬ
ϭϬ͘ϬϬ
ϭϭ͘ϬϬ
ϭϬ͘ϬϬ
ϭϮ͘ϳϱ
ϭϲ͘ϬϬ
Ϭ͘ϬϬ
ϱ͘ϬϬ
ϭϬ͘ϬϬ
ϭϱ͘ϬϬ
ϮϬ͘ϬϬ
Ϯϱ͘ϬϬ
ϯϬ͘ϬϬ
ŝǀŝĚĞŶĚzŝĞůĚ;йͿ
dŽƚĂůŝǀŝĚĞŶĚWĂŝĚ;йͿ
WŽůǇ͘;ŝǀŝĚĞŶĚzŝĞůĚ;йͿͿ
WŽůǇ͘;dŽƚĂůŝǀŝĚĞŶĚWĂŝĚ;йͿͿ

ϲϭ

dividends only- breaking the bank's trend of relying on bonuses than cash dividends to satisfy
the shareholders.
Fig-7.21: Comparison of Dividends: Cash Bonus (2007-2016)
As the trend curves suggest, there will be an upward trend in cash dividends, and may be few
additional bonuses if Paid Up or Authorized Capital increased in future.
7.1.4.4. Share Values
The market value has dropped sharply from 30.40 BDT in 2011 to 9.10 BDT in 2015.
However, the trend suggests that there will be increase in the market value in future. 2016's
market value rise to 12.60 BDT shows some evidence for it (Fig-7.22), but it's still below
16.91 BDT - the banking standard of the year in Bangladesh (NCCBL, 2016).
Ϭ͘ϬϬ Ϭ͘ϬϬ Ϭ͘ϬϬ Ϭ͘ϬϬ
ϭϬ͘ϬϬ
Ϭ͘ϬϬ
ϲ͘ϬϬ
Ϭ͘ϬϬ
ϭϮ͘ϳϱ
ϭϲ͘ϬϬ
ϯϬ͘ϬϬ ϯϬ͘ϬϬ
ϰϳ͘ϬϬ
ϯϮ͘ϬϬ
ϭϳ͘ϬϬ
ϭϬ͘ϬϬ
ϱ͘ϬϬ
ϭϬ͘ϬϬ
Ϭ͘ϬϬ Ϭ͘ϬϬ
ͲϭϬ͘ϬϬ
Ϭ͘ϬϬ
ϭϬ͘ϬϬ
ϮϬ͘ϬϬ
ϯϬ͘ϬϬ
ϰϬ͘ϬϬ
ϱϬ͘ϬϬ
ŝǀŝĚĞŶĚĂƐŚ;йͿ ŝǀŝĚĞŶĚŽŶƵƐ;йͿ
WŽůǇ͘;ŝǀŝĚĞŶĚĂƐŚ;йͿͿ WŽůǇ͘;ŝǀŝĚĞŶĚŽŶƵƐ;йͿͿ

ϲϮ

Fig-7.22: Comparison of Face Value Market Value of Shares (2011-2016)
The Face value is more or less constant over time, though there may be very little growth in
future.
7.1.4.5. Number of Shares Shareholders
Number of shares had rose up to 883,218,003 in 2015 and remained constant the next year
(Fig-7.23). On the other hand, number of shareholders has been decreasing since 2011 (Fig-
7.24). If we consider the findings in the dividend section, the bank has been increasing in
profitability for a band of shareholders getting smaller.
ϭϵ͘ϱϬ
ϭϳ͘ϰϲ ϭϳ͘ϯϱ
ϭϲ͘ϭϯ
ϭϳ͘ϳϮ
ϭϴ͘ϳϯ
ϯϬ͘ϰϬ
ϭϴ͘ϮϬ
ϭϯ͘ϭϬ
ϭϭ͘ϮϬ ϵ͘ϭϬ
ϭϮ͘ϲϬ
Ϭ͘ϬϬ
ϱ͘ϬϬ
ϭϬ͘ϬϬ
ϭϱ͘ϬϬ
ϮϬ͘ϬϬ
Ϯϱ͘ϬϬ
ϯϬ͘ϬϬ
ϯϱ͘ϬϬ
ĂĐĞsĂůƵĞŽĨ^ŚĂƌĞƐ
DĂƌŬĞƚsĂůƵĞŽĨ^ŚĂƌĞƐ
WŽůǇ͘;ĂĐĞsĂůƵĞŽĨ^ŚĂƌĞƐͿ
WŽůǇ͘;DĂƌŬĞƚsĂůƵĞŽĨ^ŚĂƌĞƐͿ

ϲϯ

Fig-7.23: Number of Shares of NCCBL (2011-2016)
Fig-7.24: Number of Shareholders of NCCBL (2011-2016)
7.1.4.6. Capital [21]
Growth
Although there is an upward trend in Shareholder's equity, Paid Up Capital has reached a
maximum value and constant since 2015. The little downward trend in the end suggests that
WKHFRPSDQPDEXXSVRPHSXEOLFVKDUHVLQIXWXUHSURYLGHGWKHGRQ¶WGHFLGHWRLQFUHDVH
Authorized Capital, which has been unchanged since 2010 (Fig-7.25).

΀Ϯϭ΁
CET 1 considered only.
ϱϵϰ͕ϭϲϱ͕ϰϯϱ
ϲϵϱ͕ϭϳϯ͕ϱϱϴ
ϳϲϰ͕ϲϵϬ͕ϵϭϯ ϴϬϮ͕ϵϮϱ͕ϰϱϴ
ϴϴϯ͕Ϯϭϴ͕ϬϬϯ ϴϴϯ͕Ϯϭϴ͕ϬϬϯ
Ͳ
ϮϬϬ͕ϬϬϬ͕ϬϬϬ
ϰϬϬ͕ϬϬϬ͕ϬϬϬ
ϲϬϬ͕ϬϬϬ͕ϬϬϬ
ϴϬϬ͕ϬϬϬ͕ϬϬϬ
ϭ͕ϬϬϬ͕ϬϬϬ͕ϬϬϬ
EŽ͘ŽĨ^ŚĂƌĞƐ
ϵϯ͕ϭϳϯ ϵϬ͕Ϭϴϵ
ϵϲ͕Ϯϭϯ
ϴϴ͕ϲϰϯ
ϳϲ͕Ϭϰϱ
ϲϮ͕ϰϭϭ
Ͳ
ϮϬ͕ϬϬϬ
ϰϬ͕ϬϬϬ
ϲϬ͕ϬϬϬ
ϴϬ͕ϬϬϬ
ϭϬϬ͕ϬϬϬ
ϭϮϬ͕ϬϬϬ
EŽ͘ŽĨ^ŚĂƌĞŚŽůĚĞƌƐ

Fig-7.25:
Capital
Growth
[22]
in
NCCBL
(2007-2016)

΀ϮϮ΁
ůůŝŶBDT
Million.
ϯ͕ϯϮϲ͘ϱϮ
ϰ͕ϲϮϭ͘Ϯϱ
ϲ͕ϲϱϲ͘ϱϮ
ϭϬ͕ϮϳϮ͘ϯϰ
ϭϭ͕ϯϯϬ͘ϵϱ
ϭϮ͕ϭϯϱ͘ϴϮ
ϭϯ͕Ϯϲϵ͘ϴϯ
ϭϰ͕Ϯϰϵ͘ϭϰ
ϭϱ͕ϲϱϰ͘ϲϰ
ϭϲ͕ϱϰϮ͘ϮϬ
ϭ͕ϯϱϮ͘Ϭϭ
ϭ͕ϳϱϳ͘ϲϮ
Ϯ͕Ϯϴϰ͘ϵϬ
ϰ͕ϱϬϭ͘Ϯϱ
ϱ͕ϵϰϭ͘ϲϱ
ϲ͕ϵϱϭ͘ϳϰ
ϳ͕ϲϰϲ͘ϵϭ
ϴ͕ϬϮϵ͘Ϯϱ
ϴ͕ϴϯϮ͘ϭϴ
ϴ͕ϴϯϮ͘ϭϴ
ϭ͕ϵϵϱ͘ϯϲ
Ϯ͕ϴϲϯ͘ϲϯ
ϰ͕ϯϳϭ͘ϲϮ
ϱ͕ϳϳϭ͘Ϭϵ
ϯ͕ϳϴϰ͘ϭϬ
ϰ͕Ϯϵϳ͘ϵϯ
ϰ͕ϳϰϰ͘ϯϰ
ϱ͕ϭϳϳ͘ϳϭ
ϱ͕ϲϱϲ͘ϱϯ
ϲ͕Ϯϵϯ͘ϱϱ
ϴ͘ϭϯ
ϱ͘ϯϰ
ϰϲ͘ϰϳ
ϯϴϴ͘ϭϭ
ϭ͕ϴϱϴ͘Ϭϯ
ϴϴϲ͘ϭϱ
ϴϳϴ͘ϱϴ
ϭ͕ϬϰϮ͘ϭϳ
ϭ͕ϭϲϱ͘ϵϰ
ϭ͕ϰϭϲ͘ϰϲ
;Ϯ͕ϬϬϬ͘ϬϬͿ
Ͳ
Ϯ͕ϬϬϬ͘ϬϬ
ϰ͕ϬϬϬ͘ϬϬ
ϲ͕ϬϬϬ͘ϬϬ
ϴ͕ϬϬϬ͘ϬϬ
ϭϬ͕ϬϬϬ͘ϬϬ
ϭϮ͕ϬϬϬ͘ϬϬ
ϭϰ͕ϬϬϬ͘ϬϬ
ϭϲ͕ϬϬϬ͘ϬϬ
ϭϴ͕ϬϬϬ͘ϬϬ
ϮϬϬϳ
ϮϬϬϴ
ϮϬϬϵ
ϮϬϭϬ
ϮϬϭϭ
ϮϬϭϮ
ϮϬϭϯ
ϮϬϭϰ
ϮϬϭϱ
ϮϬϭϲ
^ŚĂƌĞŚŽůĚĞƌΖƐƋƵŝƚǇ
ƵƚŚŽƌŝǌĞĚĂƉŝƚĂů
WĂŝĚhƉĂƉŝƚĂů
dŽƚĂůZĞƐĞƌǀĞƐ
ZĞƚĂŝŶĞĚĂƌŶŝŶŐƐ
WŽůǇ͘;^ŚĂƌĞŚŽůĚĞƌΖƐƋƵŝƚǇͿ
WŽůǇ͘;WĂŝĚhƉĂƉŝƚĂůͿ
WŽůǇ͘;dŽƚĂůZĞƐĞƌǀĞƐͿ
WŽůǇ͘;ZĞƚĂŝŶĞĚĂƌŶŝŶŐƐͿ

ϲϱ

Paid Up Capital have been increasing with years, even though number of shareholders are
decreasing (as shown in Fig-7.25) - till 2015. In 2015 2016, no change in Paid Up Capital
number of Shareholders.
Till 2010, there have been high amounts of total reserves kept. If we break down the total
reserves (Fig-7.26), we can see that from 2011 - Statutory Reserves increase linearly
General Reserves are decreasing slowly. This rise in reserves can be correlated with
FRPSDQ¶VVWUDWHJRIUDLVLng loan operations with risky in ADRs (to be discussed in the
Subdivision 7.2.3).
Fig-7.26: Statutory General Reserves in NCCBL (2011-2016)
ϯ͕Ϯϲϵ͘ϰϵ
ϯ͕ϴϭϴ͘Ϭϰ
ϰ͕Ϯϴϯ͘ϰϮ
ϰ͕ϳϴϯ͘ϱϭ
ϱ͕ϮϮϰ͘Ϭϳ
ϱ͕ϵϮϳ͘ϱϱ
ϱϭϰ͘ϲϭ ϰϳϵ͘ϴϵ ϰϲϬ͘ϵϮ ϯϵϰ͘ϮϬ ϰϯϮ͘ϰϲ ϯϲϲ͘ϬϬ
Ͳ
ϭ͕ϬϬϬ͘ϬϬ
Ϯ͕ϬϬϬ͘ϬϬ
ϯ͕ϬϬϬ͘ϬϬ
ϰ͕ϬϬϬ͘ϬϬ
ϱ͕ϬϬϬ͘ϬϬ
ϲ͕ϬϬϬ͘ϬϬ
ϳ͕ϬϬϬ͘ϬϬ
^ƚĂƚƵƚŽƌǇZĞƐĞƌǀĞ 'ĞŶĞƌĂůZĞƐĞƌǀĞΘKƚŚĞƌƐ
ŝŶĞĂƌ;^ƚĂƚƵƚŽƌǇZĞƐĞƌǀĞͿ ŝŶĞĂƌ;'ĞŶĞƌĂůZĞƐĞƌǀĞΘKƚŚĞƌƐͿ

ϲϲ

7.2. Deposits and Loans
7.2.1. Deposits
7.2.1.1. Growth and Seasonal Variations in Deposits
Starting at the 4th
quarter of 2011 with 81.13 Billion BDT, the Total Deposit reaches 142.44
Billion BDT in the 2nd
quarter of 2017 (Fig-7.27). The Total Deposits curve varies over time
from the 4 Quarter Moving Average trend. As we can see at the Moving Average curve, there
is a slow growth in a period of mid-2014 to end of 2015. But from start of 2016 there has
been a steep rise in the trend.
Fig-7.27: Deposit [23]
Growth in NCCBL (2012-2016)

΀Ϯϯ΁
/ŶDŝůůŝŽŶd͘
ϴϬ͕ϬϬϬ͘ϬϬ
ϵϬ͕ϬϬϬ͘ϬϬ
ϭϬϬ͕ϬϬϬ͘ϬϬ
ϭϭϬ͕ϬϬϬ͘ϬϬ
ϭϮϬ͕ϬϬϬ͘ϬϬ
ϭϯϬ͕ϬϬϬ͘ϬϬ
ϮŶĚ ϯƌĚ ϰƚŚ ϭƐƚ ϮŶĚ ϯƌĚ ϰƚŚ ϭƐƚ ϮŶĚ ϯƌĚ ϰƚŚ ϭƐƚ ϮŶĚ ϯƌĚ ϰƚŚ ϭƐƚ ϮŶĚ ϯƌĚ ϰƚŚ
ĞƉŽƐŝƚƐ ĞŶƚĞƌĞĚDŽǀŝŶŐǀĞƌĂŐĞ

ϲϳ

The Specific Seasonal for 10 Quarters were above the Moving Average trend out of the 19
Quarters under consideration (Fig-7.28). The maximum specific seasonal of 103.71% was at
2012 4th
quarter. Just the previous quarter produced the minimum value, though it goes under
the 98% mark 5 times.
Fig-7.28: Specific Seasonal for Deposits (%) of NCCBL (2012-2016)
Though the bank shows small deviations from the trends, but as we are dealing with large
proportions (100th
s of Billions in BDT) - the deviations may deserve notice.
ϵϳ͘ϴϲ ϵϳ͘Ϯϲ
ϭϬϯ͘ϳϭ
ϭϬϮ͘ϴϲ
ϭϬϬ͘ϭϵ
ϵϳ͘ϳϱ ϵϳ͘ϳϭ
ϭϬϮ͘ϴϬ
ϭϬϭ͘ϴϬ
ϵϴ͘ϯϲ
ϭϬϬ͘ϭϵ ϭϬϬ͘Ϭϴ
ϵϵ͘ϯϲ
ϵϴ͘ϵϯ
ϭϬϭ͘ϭϭ
ϵϳ͘ϯϳ
ϭϬϬ͘ϳϬ
ϵϴ͘ϭϰ
ϭϬϮ͘ϱϮ
ϵϰ͘ϬϬ
ϵϲ͘ϬϬ
ϵϴ͘ϬϬ
ϭϬϬ͘ϬϬ
ϭϬϮ͘ϬϬ
ϭϬϰ͘ϬϬ
ϭϬϲ͘ϬϬ
^ƉĞĐŝĨŝĐ^ĞĂƐŽŶĂůĨŽƌĞƉŽƐŝƚƐ;йͿ

ϲϴ

In average, the 3rd
quarter generates lowest deposits - around 2% below the trend. The
remaining quarters - 1st
, 2nd
4th
, generates little above the trend - with the 4th
quarter 1%
above the trend (Fig-7.29).
Fig-7.29: Quarterly Index for Deposits (%) in NCCBL (2012-2016)
7.2.1.2. Distribution of Deposits
A strategy NCCBL implemented is that they have increased Term Deposits over time - a
jump in 2013 and increasing gradually since (Fig-7.30). Probably they made it possible
through making disparities in their rates for deposit types. Term Deposits such as MDP, SDS,
SSS - all giving over 7% (over 10% for MDP), whereas all Fixed Deposit rates are 6% (as of
September, 2017).
ϭϬϬ͘ϴϬ
ϭϬϬ͘Ϭϭ
ϵϴ͘ϭϭ
ϭϬϭ͘Ϭϳ
ϵϲ͘ϬϬ
ϵϳ͘ϬϬ
ϵϴ͘ϬϬ
ϵϵ͘ϬϬ
ϭϬϬ͘ϬϬ
ϭϬϭ͘ϬϬ
ϭϬϮ͘ϬϬ
ϭƐƚYƵĂƌƚĞƌ ϮŶĚYƵĂƌƚĞƌ ϯƌĚYƵĂƌƚĞƌ ϰƚŚYƵĂƌƚĞƌ
YƵĂƌƚĞƌůǇ/ŶĚĞǆĨŽƌĞƉŽƐŝƚƐ;йͿ

ϲϵ

Fig-7.30: Deposit Distribution by Product Types in NCCBL (2010-2016)
NCCBL's major portions of deposits are always FD TD, but the portion held by these two
types is decreasing slowly after 2012 (Fig-7.31). It may evidence a growing liquidity
preference among the public.
Fig-7.31: Portions of Deposits Generated by FD TD in NCCBL (2010-2016)
ϭϭ͘ϯϵ
ϵ͘ϰϲ ϴ͘ϴϴ ϴ͘Ϯϯ ϵ͘Ϭϯ
ϵ͘ϴϲ ϭϬ͘ϰϰ
ϭ͘ϰϵ Ϯ͘ϭϵ ϭ͘ϲϲ ϭ͘ϯϰ ϭ͘ϵϯ ϭ͘ϲϳ ϯ͘ϴϰ
ϭϭ͘ϬϬ
ϭϬ͘ϭϭ ϭϬ͘ϭϱ ϭϭ͘ϯϳ ϭϮ͘Ϯϵ ϭϯ͘ϳϴ ϭϰ͘ϭϭ
ϱϳ͘ϴϱ ϱϲ͘ϱϳ
ϱϱ͘ϰϱ
ϰϴ͘ϳϭ
ϰϯ͘Ϯϯ
ϰϬ͘Ϭϲ
ϯϳ͘ϳϲ
ϭϴ͘Ϯϳ
Ϯϭ͘ϲϳ
Ϯϯ͘ϴϲ
ϯϬ͘ϯϱ
ϯϯ͘ϱϮ ϯϰ͘ϲϰ ϯϯ͘ϴϰ
Ͳ
ϭϬ͘ϬϬ
ϮϬ͘ϬϬ
ϯϬ͘ϬϬ
ϰϬ͘ϬϬ
ϱϬ͘ϬϬ
ϲϬ͘ϬϬ
ϳϬ͘ϬϬ
;йͿ
;йͿ
^;йͿ
;йͿ
d;йͿ
ϱϳ͘ϴϱ ϱϲ͘ϱϳ ϱϱ͘ϰϱ
ϰϴ͘ϳϭ
ϰϯ͘Ϯϯ ϰϬ͘Ϭϲ
ϯϳ͘ϳϲ
ϭϴ͘Ϯϳ
Ϯϭ͘ϲϳ Ϯϯ͘ϴϲ
ϯϬ͘ϯϱ ϯϯ͘ϱϮ ϯϰ͘ϲϰ ϯϯ͘ϴϰ
ϳϲ͘ϭϮ ϳϴ͘Ϯϰ
ϳϵ͘ϯϭ ϳϵ͘Ϭϲ
ϳϲ͘ϳϱ ϳϰ͘ϳϬ
ϳϭ͘ϲϬ
Ͳ
ϭϬ͘ϬϬ
ϮϬ͘ϬϬ
ϯϬ͘ϬϬ
ϰϬ͘ϬϬ
ϱϬ͘ϬϬ
ϲϬ͘ϬϬ
ϳϬ͘ϬϬ
ϴϬ͘ϬϬ
ϵϬ͘ϬϬ
;йͿ
d;йͿ
Θd;йͿ

ϳϬ

The rest portions of the deposits are held by Current SB accounts and Bills payable. While
there is a gradual decrease in Current deposits percentage in the Rest of deposits, SB deposits
are more or less constant after 2013 till 2015 (Fig-7.32), with a slight rise in portion in the
total (Fig-7.30). It may be due to increasing flexibility for customers in liquidating SB
deposits, which may also be the bank¶s new strategy to reduce dependency on TD FD.
Current deposits in total have increased since 2013, but in a slow rate compared to SB
deposits (Fig-7.30). There is a steep rise in Bills payable deposits in 2016 (Fig-7.32).
Fig-7.32: Rest of the Deposits Generated by Other Types in NCCBL (2010-2016)
7.2.2. Loans Advances
7.2.2.1. Growth and Seasonal Variations in Loans Advances
The Total Loans Advances also has a rise from 72.73 Billion BDT at 2011 last quarter to
138.40 Billion BDT in 2017 2nd
quarter, with a steep rise from 2015 2nd Quarter (Fig-7.33).
ϰϳ͘ϳϭ
ϰϯ͘ϰϳ ϰϮ͘ϵϭ
ϯϵ͘ϯϭ ϯϴ͘ϴϱ ϯϴ͘ϵϵ
ϯϲ͘ϳϴ
ϲ͘Ϯϯ
ϭϬ͘Ϭϵ ϴ͘Ϭϰ ϲ͘ϰϭ ϴ͘Ϯϵ ϲ͘ϲϬ
ϭϯ͘ϱϯ
ϰϲ͘Ϭϲ
ϰϲ͘ϰϰ
ϰϵ͘Ϭϰ
ϱϰ͘Ϯϴ ϱϮ͘ϴϱ ϱϰ͘ϰϱ
ϰϵ͘ϲϵ
Ͳ
ϭϬ͘ϬϬ
ϮϬ͘ϬϬ
ϯϬ͘ϬϬ
ϰϬ͘ϬϬ
ϱϬ͘ϬϬ
ϲϬ͘ϬϬ
ŽĨZĞƐƚ;йͿ
ŽĨZĞƐƚ;йͿ
^ŽĨZĞƐƚ;йͿ

ϳϭ

Fig-7.33: Loans Advances [24]
Growth in NCCBL (2012-2016)
Though there is a minimum value of 95.5% in the Specific Seasonal of 2015 1st
quarter, most
of the time the deviations are between 98-102% (Fig-7.34 in next page).

΀Ϯϰ΁
/ŶDŝůůŝŽŶd͘
ϳϬ͕ϬϬϬ͘ϬϬ
ϴϬ͕ϬϬϬ͘ϬϬ
ϵϬ͕ϬϬϬ͘ϬϬ
ŽĂŶƐΘĚǀĂŶĐĞƐ ĞŶƚĞƌĞĚDŽǀŝŶŐǀĞƌĂŐĞ

ϳϮ

Fig-7.34: Specific Seasonal for Loans Advances (%) of NCCBL (2012-2016)
In average, the 1st
quarter generates the minimum loans- a decrease of 1.2% from the trend,
the indexes more or less remains close - with the 1st
3rd
below the trend and 2nd
4th
above the trend;Fig-7.35).
Fig-7.35: Quarterly Index for Loans Advances (%) in NCCBL (2012-2016)
ϭϬϭ͘ϰϲ
ϭϬϭ͘ϭϬ
ϭϬϬ͘ϯϯ
ϵϵ͘Ϯϳ
ϵϵ͘ϲϲ
ϵϴ͘Ϯϲ
ϭϬϭ͘ϳϭ
ϭϬϭ͘ϭϰ
ϵϵ͘ϭϱ
ϭϬϭ͘ϲϲ
ϵϵ͘ϰϬ
ϵϱ͘ϱϯ
ϭϬϭ͘ϴϳ
ϵϵ͘ϰϰ
ϭϬϬ͘ϯϭ
ϵϴ͘ϴϴ
ϭϬϭ͘ϳϱ
ϵϲ͘ϲϮ
ϭϬϮ͘Ϯϭ
ϵϮ͘ϬϬ
ϵϰ͘ϬϬ
ϵϲ͘ϬϬ
ϵϴ͘ϬϬ
ϭϬϬ͘ϬϬ
ϭϬϮ͘ϬϬ
ϭϬϰ͘ϬϬ
^ƉĞĐŝĨŝĐ^ĞĂƐŽŶĂůĨŽƌŽĂŶƐΘĚǀĂŶĐĞƐ;йͿ
ϵϴ͘ϳϴ
ϭϬϬ͘ϴϲ
ϵϵ͘ϰϵ
ϭϬϬ͘ϴϳ
ϵϳ͘ϱϬ
ϵϴ͘ϬϬ
ϵϴ͘ϱϬ
ϵϵ͘ϬϬ
ϵϵ͘ϱϬ
ϭϬϬ͘ϬϬ
ϭϬϬ͘ϱϬ
ϭϬϭ͘ϬϬ
ϭϬϭ͘ϱϬ
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YƵĂƌƚĞƌůǇ/ŶĚĞǆĨŽƌŽĂŶƐΘĚǀĂŶĐĞƐ;йͿ

ϳϯ

7.2.2.2. Distribution of Loans Advances
7.2.2.2.1. Loans Advances Distribution by Industry
As we can see from Fig-7.36, the majority of loans are given to the Manufacturing Industry
Commercial Trade Financing. There has been a decrease in Food Products, Housing,
Telecommunications and Power Industry; with slight increases in the Service and Agriculture
Industry in 2016. Especially in the Telecommunication, Transport Communication portion
has dropped to a negligible percentage. Advance dispersion into other industries has
increased noticeably than 2015.

Fig-7.36:
Loans

Advances
Distribution
by
Industry
in
NCCBL
(2015-2016)
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,ŽƵƐŝŶŐ/ŶĚƵƐƚƌǇ;йͿ
dĞůĞĐŽŵŵƵŶŝĐĂƚŝŽŶ͕dƌĂŶƐƉŽƌƚΘŽŵŵƵŶŝĐĂƚŝŽŶ
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ŐƌŝĐƵůƚƵƌĞ;йͿ
^ŚŝƉƉŝŶŐ/ŶĚƵƐƚƌŝĞƐ;йͿ
KƚŚĞƌƐ;йͿ

ϳϱ

7.2.2.2.2. Loans Advances Distribution by Geography
As it can be seen in the Fig-7.37 Fig-7.38, Dhaka Chittagong gets the majority credit
exposures, while others getting less than the 8% mark. Also the Fig-7.38 shows that since
2012, Dhaka's portion in the total loans has been slowly increasing, while Chittagong's
decreasing. Mymensingh is a new addition to the NCCBL's market in 2015 (NCCBL, 2015).
Fig-7.37: Loans Advances Distribution by Geography (BDT Million) in NCCBL
(2011-2016)
Fig-7.38: Loans Advances Distribution by Geography (%) in NCCBL (2011-2016)
ϳϮ͕ϳϯϯ͘ϱϰ
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Ͳ
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ϳϲ

7.2.3. Comparison of Deposits and Loans Advances
The standard deviation 1.8% of Specific Seasonal for Loans Advances is lesser than the
2% in Deposits, although there is one incident of falling 4.5% below the trend in 1st
Quarter
of 2015. In general, both deposits loans curve, in average follows the trend almost
completely (Table-7.3).
Deposits
(BDT Million)
Loans
Advances
(BDT Million)
Specific
Seasonal for
Deposits (%)
Specific
Seasonal for
Loans
Advances (%)
Mean 105,969.73 95,436.77 99.93 99.99
S.D. 16,108.54 18,318.38 2.08 1.82
Range 61,309.82 66,387.38 6.46 6.68
Minimum 81,127.17 72,017.30 97.26 95.53
Maximum 142,436.98 138,404.67 103.71 102.21
Count 23 23 19 19
Table-7.3: Descriptive Statistics Comparison of Deposits and Loans Advances in
NCCBL (2011-2017)

ϳϳ

Fig-7.39: Comparison of Deposit and Loans Advances [25]
Growth in NCCBL
(2011-2017)

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ĞƉŽƐŝƚƐ ŽĂŶƐΘĚǀĂŶĐĞƐ ŝŶĞĂƌ;ĞƉŽƐŝƚƐͿ ŝŶĞĂƌ;ŽĂŶƐΘĚǀĂŶĐĞƐͿ

ϳϴ

If we compare the trends of Fig-7.39, we can see that the Loans trend is approaching towards
the Deposits trend, with an AOI[26]
of 3.67° between the linear trends - meaning bank is
increasing risk in liquidity to increase profitability, as was also seen in the earlier ADR
analysis. Deposits are growing by BDT 9.1 Billion per year, whereas Loans are growing by
BDT 10.3 Billion per year.
Slope[26]
Angle[26]
(°)
Deposits 0.91 42.15
Loans Advances 1.03 45.82
AOI[26]
- 3.67
Table-7.4: Slope AOI in Comparison of Deposit and Loans Advances Growth in
NCCBL (2011-2017)
Integrating with the earlier BE analysis, percentage of Income from Investment in NII and
the NII OC comparison- the bank has been increasing liquidity risk to make up for its
decrease in spread lending rates it took as Profit Strategy and reduction in Income from
Investments the consequent reduction in NII.

΀Ϯϲ΁
Considering BDT 10 Billion = 1 Unit in Deposits Loans and 1 Year = 1 Unit in Time Period.

ϳϵ

Chapter 8
Conclusion and Recommendations
The study started by discussing literatures of various financial management aspects. Then the
EDQN¶VEXVLQHVVPRGHOGHWHUPLQLQJIDFWRUVIRUSURILWDELOLW financial performances were
discussed. Based on the findings, the author would like to make the following conclusions
recommendations.
8.1. Conclusion
There is statistically significant negative correlation of NPL with profitability. Also external
factors like market competition inflation also affect bank's profitability.
Although the bank's performance ratios took an overall downward trend since 2011, in 2016
it has been showing signs of rise. The li, Market Price per Share, EPS PE ratio show that
the company is a Dog in the BCG Matrix, however the PAD trend suggests potential rise in
profitability in the long-run.
The bank's strategy was Market Development in the 2007-2013 period, from which they are
moving away - evidenced by Profit strategy to overcome the fall in their profitability since
2011. It is done by reducing the interest spread TE. TE decrease is done via temporary
reduction of TIE by increasing Term Deposits.

ϴϬ

Bank's strategy in last 6 years was to increase deposits, also through increasing Term
Deposits, thus achieving growth in size of loan operations - in addition to decreasing TIE.
But ultimately this resulted in a rise in NPLs lower profit growth because of high interest
rates to be paid on TDs. However, ROA is positively related with the amount deposited in the
other types of deposit accounts- SB, Current Bills. The bank has been increasing loans in
Dhaka region, with no relation to profitability. 0RVWSRUWLRQVRI1%/¶VDGYDQFHVJRWR
Manufacturing industry, though they have spread their loan portfolio into other sectors in
2016 ± which may have an effect on decrease in the NPL BL.
The bank has been trying to increase profits by operating in riskier ADRs - which doesn't
have much significance to profitability, and gradually increasing reserves to deal with
shocks. Lower EPS values suggest comparatively lower profits compared to the rise in
Authorized Capital since 2010.
7KHFRPSDQKDVQ¶WSDLGOHVVWKDQGLYLGHQGV (whether bonus or cash) to its shareholders
in last 10 years (2007-16). However, with the company's increasing dividends, shareholders
are decreasing.
The bank is quite successful in following trends of deposits and loans, though the 3rd
quarter
generates almost 2% less deposits than the trend, 1st
quarter generates 1.2% less loans and
there is one instance of lending amounts falling 4.5% below the trend. There is growth in
both deposits and loans over the years.
8.2. Recommendations
1. In general, decrease NPLs by giving loans more carefully. But special interest is to be
given to keeping down BLs. Analysis of effect by separate NPL categories can be

ϴϭ

included in further researches. Researches can also be conducted for effectiveness of the
current CRG system in the bank.
2. Reducing dependence on Term Deposits for liquidity. Instead, attracting customers to
deposit more in the Current, SB Bills Payable category to generate liquidity. Perhaps,
attracting more deposits in the Bills Payable category can be a viable option. It may be
done by increasing the queue lines. Separate researches can also be done on the
individual categories included in the Other Deposits considered.
3. In long term, attract more deposits through acquisition of fixed assets around the existing
branches, thus increasing size of loans advances - i.e. Concentration strategy rather
than the earlier Market Development and the present Profit strategy. Because the market
competition is increasing with passage of years, the banks with bigger chunks in the loan
market will stay profitable. The bank should target of going from Dog to Cash Cow.
4. Keeping more reasonable interest rates for deposits in the 3rd
Quarters of the year for
loans in the 1st
Quarters, to increase deposits loans in those quarters.
5. Investments in stocks bonds should be done with more caution, to keep a steady NII.
GE Nine-cell HofHU¶V /LIH FOH Analysis may be used in market analysis before
investment, in addition to considering share prices.
6. Adding Dividend Equalization Fund would enhance trust among the shareholders. If the
bank intends to increase shares in future, the increased trust may attract shareholders.

ϴϮ

References
Akter, A. Mahmud, K. (2014). Liquidity-Profitability in Bangladesh Banking Industry.
International Journal of Empirical Finance Vol.2, No. 4, 2014, pp. 143-151.
Bangladesh Bank. (2011-2017). Financial Stability Reports 2010 (1), 2012 (3), 2013 (4),
2014 (5), 2015 (6) 2016 (7). Bangladesh Bank. URL: www.bangladesh-
bank.org/pub/annual/fsr/
Bangladesh Bank. (2017). Interest Rate Spread for 2012-2016. Bangladesh Bank. URL:
https://www.bb.org.bd/econdata/w_avg_interest.php
BBC Business. (2011). Bangladesh stock market fall: Clashes hit Dhaka. BBC. URL:
http://www.bbc.com/news/business-12149340
Beck, T. Hesse, H. (2009). Why are interest spreads so high in Uganda?. Journal of
Development Economics (88), pp. 192-204.
Begum, M. N. (2016). Nexus between Bank's Liquidity and Profitability in Bangladesh: An
Empirical Overview. Bangladesh Bank. URL:
https://www.bb.org.bd/pub/research/workingpaper/wp1612.pdf
Byron, R. K. (2011). BB sets banks deadline to cut credit-deposit ratio. The Daily Star. URL:
http://www.thedailystar.net/news-detail-174912
Carlassare, E. (2007). How Banks Make Money. The Street. URL:
https://www.thestreet.com/story/10385783/1/how-banks-make-money.html
Dufresne, F. B., Peña, S., Williams, O. Zawisza, T. A. (2013). Benchmarking Banking
Sector Efficiency Across Regional Blocks in Sub-Saharan Africa: What Room for
Policy?. International Monetary Fund. URL:
https://www.imf.org/external/pubs/ft/wp/2013/wp1351.pdf
Hitt, M., Ireland, R. D. Hoskisson R. E. (2007). Strategic Management: Competitiveness
and Globalization (7th Ed). Thomson South-Western.
Ho, T. Saunders, A. (1981). The determinants of bank interest margins: theory and
empirical evidence. Journal of Financial Quantitative Analysis (16), pp. 581-600.
Investopedia. (n.d.). Bank. Investopedia. URL:
http://www.investopedia.com/terms/b/bank.asp#ixzz4oEHTSN6R
Investopedia. (n.d.). Financial Performance. Investopedia. URL:
www.investopedia.com/terms/f/financialperformance.asp

ϴϯ

Investopedia. (n.d.). Herfindahl-Hirschman Index. Investopedia. URL:
http://www.investopedia.com/terms/h/hhi.asp
Investopedia. (n.d.). Net Interest Margin. Investopedia. URL:
http://www.investopedia.com/terms/n/netinterestmargin.asp#ixzz4oEapcqmL
NCC Bank Ltd. (2011-2017). Annual Reports (2011-2012, 2014-2016), Half Yearly
Quarterly Financial Statements (2012-2017) and Performance at a Glance (2012 2015).
National Credit and Commerce Bank Limited [BD]. URL:
https://www.nccbank.com.bd/index.php/nccbfinancialreports/
NCC Bank Ltd. (2016). Disclosures on Risk Based Capital (Basel III). National Credit and
Commerce Bank Limited [BD]. URL:
https://www.nccbank.com.bd/files/disclosure_on_risk_based_capital_basel_III_2016.pdf
NCC Bank Ltd. (2017). NCC Bank Products. National Credit and Commerce Bank Limited
[BD]. URL: https://www.nccbank.com.bd/index.php/nccbproducts#deposit
Niresh, J. A. (2012). Tradeoff between Liquidity and Profitability: A Study of Selected
Manufacturing Firms in Srilanka. Researcher World-journal of Arts, Science
Commerce, Vol-III, Issue, E-ISSN 2229-4686, ISSN 2231-4172.
Peria, S. M. Moody, A. (2004). How Foreign Participation and Market Concentration
Impact Bank Spreads: Evidence from Latin America. Journal of Money Credit and
Banking (36), pp. 511-537.
Petersen, M. A. Rajan, R. G. (1995). The effect of credit market competition on lending
relationships, Quarterly Journal of Economics 110 407-443.
Poghosyan, T. (2010). Re-examining the impact of foreign bank participation on interest
margins in emerging markets. Emerging Markets Review 11 390-403.
Policonomics. (2017). Policonomics. URL: Monopoly I: Lerner index. Policonomics.
http://policonomics.com/lp-monopoly1-lerner-index/
Simpson, S. D. (n.d.). The Banking System: Commercial Banking - How Banks Make
Money. Investopedia. URL: http://www.investopedia.com/university/banking-
system/banking-system3.asp
Simpson, S. D. (n.d.). The Banking System: Commercial Banking - Key Ratios/Factors.
Investopedia. URL: http://www.investopedia.com/university/banking-system/banking-
system9.asp
Stock Bangladesh Limited. (2017). SECTOR P/E. Stock Bangladesh Limited. URL:
http://www.stockbangladesh.com/resources/sector_pe
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Official exchange rate (LCU per US$, period average). The World Bank. URL:
http://data.worldbank.org/indicator/

ϴϰ

Annex 1
Measuring Institutional Behavior Market Competition
Institutional Behavior is measureGDV/HUQHU¶V,QGH[
li =
୮ି୫ୡ
୮
(0.1)
Where,
p = Market Price
mc = Marginal Cost
Here, p is measured as ratio of TR to TA. And mc is measured as ratio TE to TA for
simplification of calculations, unlike the differentiation with respect to TA of the trans-log
equation of TE done by Dufresne et al. (2013).
Market Competition is measured as the Herfindahl-Hirschman Index,
HHI = ‫گ‬ sict
2
(0.2)
Where, sict is the market share (%) of i company for c country in year t.

ϴϱ

Annex 2
NCCBL Financial Information (2007-2016)
BDT Million considered where applicable.
Year ROA
(%)
ROE
(%)
Equity
Ratio
(%)
ROI
(%)
NIM
(%)
NPL
(%)
ADR[27]
(%)
LDR
(%)
Lending
Rates (%)
Spread
(%)
2007 1.59 20.23 7.86 - - 4.17 93.66 - - -
2008 1.54 21.76 7.08 - - 4.14 98.78 - - -
2009 2.61 28.49 9.16 - - 2.84 93.48 - - -
2010 2.84 25.35 11.20 - 4.38[28]
2.27 93.04 - - -
2011 2.12 18.98 11.17 13.99 4.31 2.68 89.65 76.84 16.35[30]
-
2012 1.14 11.81 9.65 9.05 3.89 5.51 82.49 74.59 14.76 4.48
2013 0.91 8.96 10.16 11.04 2.93 5.56 89.76 73.81 14.11 4.50
2014 1.16 10.87 10.67 11.50 2.56 7.49 86.01 62.72 14.10 5.22
2015 0.97 9.12 10.64 11.25 2.48 7.18 93.02 72.58 12.11 4.79
2016 1.30 12.91 10.07 8.41 2.80 5.92 94.91 82.62 9.92 3.97
Sources: AGM 2011-2016, Performance at a Glance 2012 2015 published by NCCBL at
National Credit and Commerce Bank Limited [BD] website; Interest Data (2012-2016) in the
%%ZHEVLWHDQG$XWKRU¶VFDOFXODWLRQV
Table-A2.1: NCCBL Financial Information Part-1 (2007-2016)

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