MBA Thesis Paper_HMT778

A Study on Performance Evaluation of the Commercial
Banks in Bangladesh: A Comparative Scenario of Private,
Foreign and Islamic Banks
A thesis paper that measures and compares the performaces of three banking groups in Bangladesh
form 2008 to 2014
Submitted to the Department of Banking and Insurance, University of Dhaka as
a partial requirement of MBA Program of 2015

A Study on Performance Evaluation of the Commercial
Banks in Bangladesh: A Comparative Scenario of Private,
Foreign and Islamic Banks
Supervised by
Dr. Md. Rafiqul Islam
Professor
Department of Banking and Insurance
Prepared by
Hasan Mohammad Tareq
ID.: 778
17th
Batch
MBA Program (Regular)
FACULTY OF BUSINESS STUDIES (FBS)
University of Dhaka
Dhaka -1000
Bangladesh
31 August 2016

ii
LETTER OF TRANSMITTAL
31 August 2016
Professor Dr. Md. Rafiqul Islam
Supervisor
Thesis Paper of regular MBA program
Faculty of Business Studies (FBS)
University of Dhaka
Dhaka - 1000
Subject: Submission of thesis paper on the topic of “A Study on Performance Evaluation of
the Commercial Banks in Bangladesh: A Comparative Scenario of Private, Foreign and
Islamic Banks”
Dear Sir,
This is a great pleasure to inform you that I have prepared the thesis paper on “A Study on
Performance Evaluation of the Commercial Banks in Bangladesh: A Comparative Scenario
of Private, Foreign and Islamic Banks” as a part of my regular MBA Program. The making
of the report gave me an opportunity to know about the banking sector of the country and the
comparative performances of the selected three banking groups. I tried the utmost I was
capable of preparing this paper and hope it will satisfy your expectation.
With due respect, I would like to request you to excuse for any mistake of mine that may
exist in this paper despite my best effort and to view them with your generous consideration.
I will be available at your convenient time if and when necessary for any further clarification
about this paper.
Sincerely Yours
………………………………………….
ID.: 778
17th
Batch
Regular MBA Program
University of Dhaka

iii
SUPERVISOR’S CERTIFICATE
This is to certify that the thesis paper on “A Study on Performance Evaluation of the
Commercial Banks in Bangladesh: A Comparative Scenario of Private, Foreign and Islamic
Bank”s in the bona fide record at the report is done by Hasan Mohammd Tareq, ID: 778, 17th
batch, regular MBA program as a partial fulfillment of the requirement of MBA degree from
the Department of Banking and Insurance, University of Dhaka.
The paper has been prepared under my guidance and is a record of the bona fide work carried
out successfully.
……………………………………………
Dr. Md. Rafiqul Islam
Professor
University of Dhaka

iv
DECLARATION
I, hereby, declare that this paper titled “A Study on Performance Evaluation of the
Commercial Banks in Bangladesh: A Comparative Scenario of Private, Foreign and Islamic
Banks” is an original of work mine and it has been prepared under the guidance of Professor
Dr. Md. Rafiqul Islam, the supervisor of my thesis paper as a requirement for the completion
of my MBA degree from Department of Banking and Insurance, Faculty of Business Studies
(FBS), University of Dhaka.
This report is prepared solely for Department of Banking and Insurance, Faculty of Business
Studies (FBS), University of Dhaka. This report neither fully nor partially has ever been
submitted for any other Certificate/Degree/Diploma or Qualification to any other
University/College/Institution or Organization.
………………………………………….
ID.: 778
17th
Batch
Regular MBA Program
University of Dhaka

v
ACKNOWLEDGEMENT
At the very outset, I would like to express my deepest gratitude to Almighty Allah Subhan
Wa Ta’ala for giving me the strength and patience to finish the paper within the scheduled
time.
From the core of my heart, I would like to thank my respectful supervisor of my thesis paper
program Dr. Md. Rafiqul Islam, Professor, Department of Banking and Insurance, Faculty of
Business Studies (FBS), University of Dhaka, who helped me in every step throughout the
program. It was an amazing experience with him. Without his help it would be almost
impossible for me to complete the paper within this short time.
I am very much thankful to my class mate Mr. Amrita Debnath for providing me logistic
supports.

vi
EXECUTIVE SUMMARY
The purpose of this paper is to analyze and compare the performances of three banking
groups of Bangladesh on the basis of eight selected tools from 2008 to 2014. The private
commercial banks (PCBs), the foreign banks (FCBs) and the Islamic banks (IBs) are the three
groups those the researcher selected for the study. The selected eight tools were: deposits,
total assets, net interest income, net income, return on assets, return on equity, number of
branches and number of employees. The researcher wanted to find out if the performances of
these three banking groups are significantly different from each other or not and if they differ
than in which areas they do this. The researcher also wanted to know if the net interest
incomes of these three banking groups can be predicted or not if deposits and the number of
branches are already known.
In order to prepare the paper the secondary sources of data were greatly used, specially the
annual reports published by Bangladesh Banks from 2008 to 2015. Trend analysis, hypothesis
testing and regression analysis of were conducted to find out the results. All of the ANOVA
tests were conducted at a 5% significance level for greater acceptance of the paper.
It has been found from the study that the performances of the three banking groups are
significantly different from each other in case of deposits, total assets, net interest income, net
income, return on assets, number of branches and employment generation. However the
performances of the banks in case of return on equity are not significantly different from each
other. In terms of volume and the market share of deposits and assets, the PCBs rank first. In
terms of the growth of deposits and assets, the IBs rank first. In terms of volume of net
interest income the PCBs rank first followed by the IBs. The FCBs are the best in terms of
return on assets ratio. But no bank is better in terms of return on equity ratio. The PCBs have
the maximum number of branches in the country with an upwarding slope, followed by the
IBs. Despite being similar to the IBs in size the FCBs have very few branches comparatively.
The PCBs generate the maximum amount of employment, followed by the IBs. Deposits and
branch expansion are negatively correlated with the net interest income in case of the PCBs
and the FCBs respectively. But thses two variables are strongly and positively correlated with
the net interest income in case of the IBs.
It is suggested that the banks who want to improve their profitability in terms of return on
equity ratio must focus on the use of optimum capital structure. The FCBs must not increase
their branches as long as they find out the reason for not increasing net interest income in
response to their branch expansion.
The researcher worked on the recent seven years’ data only for analyzing and drawing the
conclusion. If the data could be increased then the results would show almost the exact
scenario of the banking industry. Also, the work of this paper excluded the specialized
commercial banks and the state owned commercial banks from the study and hence does not
deal with their performances. Besieds these, the researcher suggest that a research be
conducted adressing the issue of the number of banks that should stay in an economy.
Keywords: SCBs, DFIs, PCBs, FCBs, IBs, Conventional Bank, Islamic Banks.

vii
TABLE OF CONTENTS
Chapters Titles Page
List of Abbreviation ix
Chapter - 1 Introduction
1.1. Origin of the Paper……………………………………………………... 1
1.2. Objectives of the Paper…………………………………………….. 1
1.3. Methodoly…………………………………………………………. 1
1.4. Scope of the Study………………………………………………… 4
1.5. Rationale of the Study……………………………………………… 4
1.6. Report Organization……………………………………………….. 5
1.7. Limitations…………………………………………………………… 5
Chapter - 2 Literature Review and Research Gap
2.1. Literature Review………………………………………………….. 7
2.2. Research Gap……………………………………………………….. 9
Chapter – 3 Industry Overview
3.1. The Current Banking Sector in Bangladesh………………………. 10
3.3. Position, Performance and Market sizes of the Banks………………….. 11
Chapter - 4 Analysis and Interpretation
4.1. Trend Analysis………………………………………………………… 15
4.1.1. General Business Measures…………………………………. 15
4.1.1.1. Total Deposits……………………………………. 16
4.1.1.2. Trend of Market Share of Total Deposits……….... 17
4.1.1.3. Total Assets………………………………………. 17
4.1.1.4. Trend of the market Share of total assets…………. 18
4.1.2. Profitability Measures……………………………………….. 18
4.1.2.1. Net Interest……………………………………….. 19
4.1.2.2. Net Income………………………………………. 19
4.1.2.3. Trend of the Return on Assets…………………. 20
4.1.2.4. The trend of Return on Equity……………………. 20
4.1.3. Social Profitability Measures……………………………….. 21
4.1.3.1. Number of Branches……………………………... 21
4.1.3.2. Trend of the market Share of Branches …………... 22
4.1.3.3. Total Employment………………………………... 22
4.2. Hypotheses Testing…………………………………………………….. 23
4.3. Regression Analysis……………………………………………………. 28
4.3.1. Variables……………………………………………………... 28
4.3.2. Models and Hypothesis………………………………………. 29
4.3.3. Results and Interpretation…………………………………….. 29
4.3.3.1. Private Commercial Banks……………………….. 29
4.3.3.2. Foreign Commercial Banks………………………. 31
4.3.3.3. Islamic Banks…………………………………….. 33
Chapter - 5 Findings and Recommendations
Findings and Recommendations……………………………………………. 35
References 38
Appendices 39

viii
LIST OF CHARTS AND TABLES
PARTICULARS Page
CHARTS
Charts No.
Chart 1 Market Share of Total Assets by Banks……………………………….. 12
Chart 2 Market Share of Total Deposits by Banks…………………………….. 13
Chart 3 ROA of all Banks in CY14…………………………………………………. 13
Chart 4 ROE of all Banks in CY14…………………………………………………. 14
Chart 5 The amount of Total Deposits…………………………………………. 16
Chart 6 Trend of Total Share of Deposits……………………………………… 17
Chart 7 The Amount of Total Assets………………………………………….. 17
Chart 8 Trend of Market Share of total Assets…………………………………. 18
Chart 9 Net Interest Income…………………………………………………….. 19
Chart 10 Net Income……………………………………………………………… 19
Chart 11 Trend of ROA………………………………………………………….. 20
Chart 12 Trend of ROE………………………………………………………….. 20
Chart 13 Number of Branches…………………………………………………… 21
Chart 14 Trend of Market Share of Branches…………………………..…………. 22
Chart 15 Number of Total Employees……………………………………………….. 22
TABLES
Tables No.
Table 1 Name of the Banks, Their Categories and Numbers…………………….. 11
Table 2 Position, Performance and Market Sizes of the Banks…………………... 12
Table 3 Correlation Analysis……………………………………………………... 19

ix
LIST OF ABBREVIATIONS
ANOVA Analysis of Variance
BD Bangladesh
BB Bangladesh Bank
CY Calendar Year
DFIs Developmen Finacial Institutions/Specialized Banks
FCBs Foreign Commercial Banks
IBs Islamic Banks
PCBs Private Commercial Banks
SCBs State-Owned Commercial Banks

CHAPTER - 1
INTRODUCTION
CHAPTER CONTENTS
ORIGIN OF THE PAPER
OBJECTIVES OF THE PAPER
METHODOLOGY
SCOPE O F THE STUDY
RATIONALE OF THE STUDY
REPORT ORGANIZATION
LIMITATIONS

A STUDY ON PERFORMANCE EVALUATION OF THE COMMERCIAL BANKS IN BANGLADESH Chapter - 1
PAGE 1
1.1. ORIGIN OF THE PAPER
This report is named as “A Study on Performance Evaluation of the Commercial Banks in
Bangladesh: A Comparative Scenario of Private, Foreign and Islamic Banks”. It had to be
prepared as a requirement of thesis paper under the regular MBA program of department of
Banking and Insurance, Faculty of Business Studies, University of Dhaka. The report aimed
at making a comparative analysis of different areas of performances among the Private
Commercial Banks (PCBs), Foreign Commercial Banks (FCBs) and Islamic Banks (IBs).
The report was completed under the supervision of our honourable Professor Dr. Md. Rafiqul
Islam, Department of Banking and Insurance, Faculty of Business Studies, University of
Dhaka.
1.2. OBJECTIVE OF THE PAPER
The study aimed at evaluating and comparising the performances of some selected tools of
private, foreign and Islamic banks of Bangladesh. The key objectives of the study are:
i. To study the current banking structure of Bangladesh
ii. To analyze whether there is any difference regarding the performances of the banks
on the basis of some selected tools
iii. To evaluate the category wise performances of the banks
iv. To understand how the net interest income of the banks are affected by their deposits
and the number of branches
1.3. METHODOLOGY
The research methodology of the selected topic follows in these dimensions:
1.3.1. POPULATION OF THE STUDY
The following three banking groups in Bangladesh:
i. Private Commercial Banks
ii. Foreign Commercial Banks
iii. Islamic Banks

PAGE 2
1.3.2. THE PERIOD OF THE STUDY
The study is covered for seven years from the year 2008 to 2014.
1.3.3. DATA SOURCES
This study is based on secondary data. The following sources of data and information have
been used widely for this purpose:
i. Annual Reports of different banks of Bangladesh
ii. Monthly, quarterly and yearly journals and reports published by Bangladesh Bank
iii. Survey Reports published by Bangladesh Bureau of Statistics and Bangladesh Bank
1.3.4. DATA ANALYSIS METHODS AND TOOLS
After collection, data were first carefully scrutinized. Then data gathered from the sources
were arranged orderly and analysed. Bar chart, line chart and pie chart have been used for
graphical representation for performance evaluation. Some statistical tests have been used
according to the nature and objectives of the study for the comparison between the groups.
The collected information is analyzed by ANOVA test and regression model. The
conclusions have been drawn on the basis of 5% level of significance. ANOVA test and
multiple regression test were performed with the help of Microsoft Excel 2007.
1.3.5. VARIABLES
To analyze the financial performance of banking sector different variables are included in this
study, they are as follow:
 Deposits
 Total Assets
 Net Interest Income
 Net Income
 Return on Assets
 Return on Equity
 Branch Expansion
 Employment Generation

PAGE 3
1.3.6. HYPOTHESES
The broader hypotheses are as under:
a) HO= There is no significant difference in total deposits among all the three banking
groups during 2008 to 2014.
H1= There is significant difference in total deposits among all the three banking
b) HO= There is no significant difference in total assets among all the three banking
H1= There is significant difference in total assets among all the three banking groups
during 2008 to 2014.
c) HO= There is no significant difference in net interest income among all the three
banking groups during 2008 to 2014.
H1= There is significant difference in net interest income among all the three banking
d) HO= There is no significant difference in net income among all the three banking
H1= There is significant difference in net income among all the three banking groups
during 2008 to 2010.
e) HO= There is no significant difference in return on assets among all the three banking
H1= There is significant difference in return on assets among all the three banking
f) HO= There is no significant difference in return on equity among all the three banking
H1= There is significant difference in return on equity among all the three banking

PAGE 4
g) HO= There is no significant difference regarding branch expansion among all three
H1= There is significant difference regarding branch expansion among all the three
h) HO= There is no significant difference regarding employement generation among all
three banking groups.
H1= There is significant difference regarding employement generation among all three
banking groups.
i) HO= Deposits of PCBs, FCBs and IBs have no significant relationship with Net
Interest Income.
H1= Deposits of PCBs, FCBs and IBs have significant relationship with net interest
income.
j. HO= The number of branches of PCBs, FCBs and IBs has no significant relationship
with net interest income.
H2= The number of branches of PCBs, FCBs and IBs has significant relationship with
net interest income.
1.4. SCOPE OF THE STUDY
This research paper addresses the performance only of the private, foreign and islamic
commercial banks of Bangladesh. Due to lack of time the non-scheduled banks, the SCBs and
the DFIs of Bangladesh are not included in the population of the study and hence their
performances are not addressed in this research work.
1.5. RATIONALE OF THE STUDY
The thesis paper on - “A Study on Performance Evaluation of Commercial Banks in
Bangladesh: A Comparative Scenario of Private, Foreign and Islamic Banks” will be helpful
especially for the students of banking in many ways. The benefits of the report are that
students can have a clear-cut idea about:

PAGE 5
 The current banking system of Bangladesh
 Their performances in different aspects
 Their problems and advantages
 Which banks are better than whom and for which reasons
 What are the differentiating factors among them
 Their prospects as well
These types of information gathered in the process of making the report will be helpful in
corporate life and most probably this is why the thesis paper has been assigned to the
researcher.
1.6. REPORT ORGANIZATION
The report is divided into the following six sections:
Literature Review and Research Gap deals with the results of the previously conducted
studies in the similar area. Industry Overview depicts the current banking structure of
Bangladesh in brief. Anlysis and Interpretation is all about data analysis and interpretation.
Finally Findings and Recommendation presents the results of the studies along with their
corresponding suggestions.
1.7. LIMITATIONS
While preparing the research paper, some difficulties had to be faced:
1.7.1. AVAILABILITY OF DATA
Category-wised data of Islamic Banks were found up to 2014 only. From 2014 to onwards,
the data of IBs are included in those of private commercial banks and hence cannot be
separated. For this reason the paper addresses the timeline of 2008-2014 of all of the three
banking groups.
Chapter 1
• The Introductory part
Chapter 2
•Literature Review
and Research Gap
Chapter 3
•Industry Overview
Chapter 4
•Analysis and
Interpretation
Chapter 5
•Findings and
Recommendations

PAGE 6
1.7.2. INDIVIDUAL INCAPABILITY
Nothing in this world is completely perfect. Due to many personal limitations many errors
and mistakes may exist in this report.

CHAPTER - 2
LITERATURE REVIEW AND
RESEARCH GAP
CHAPTER CONTENTS
LITERATURE REVIEW
RESEARCH GAP

A STUDY ON PERFORMANCE EVALUATION OF THE COMMERCIAL BANKS IN BANGLADESH
Literature
Review
PAGE 7
2.1. LITERATURE REVIEW
A literature review discusses published information in a particular subject area within a
certain time period. There is a few research works on the evaluation of the comparative
performances among the private commercial banks, foreign banks and Islamic banks of
Bangladesh. From different official journals as well as other reports from unofficial sources,
it was found that the performances of the three types of bank are different from each other.
The research works of Mahmud and Islam (2006), Islam and Ashrafuzzaman (2015), Sujan,
et al. (2013), Islam, Siddiqui, Hossain and Karim (2014) are worth mentioning and their
results are presented below in brie:
Mahmud and Islam (2006) tried to measure the comparative performances of four types of
conventional banks viz. National Commercial Banks (NCBs), State-owned Commercial
Banks (SBs), Private Commercial Banks (PCBs), Foreign Commercial Banks (FCBs) and
Islamic Banks (IBs) operating in Bangladesh from period 2000 to 2005. They used some
common indicators such as general business measures, profitability measures, management
soundness measures, and social profitability measures. The study found that, NCBs aggregate
deposits, market share of deposits, market share of advances, market share of total business
and total business were higher than any other types of bank during the years. On the other
hand the growth rate of deposits, the growth of the total investments, the growth rate of
advances, the growth rate of total business of Islamic Banks were the highest of all categories
of banks. The incomes of the PCBs and the IBs were relatively higher in the latest year than
any type of bank. That is, in terms of aggregate amount and share, the NCBs were doing well
while in terms of growth rate, the IBs were well.
Islam and Ashrafuzzaman (2015) evaluated the financial performance of Islamic and
conventional banks of Bangladesh through CAMEL test during the period of 2009 to 2013.
CAMEL test is a standard test to check the health of financial institutions and to determine
the performance of banks. A sample of five listed conventional banks and five listed Islamic

Literature
Review
PAGE 8
banks were selected to study the objectives. The study found that, Islamic banks performed
better in case of capital adequacy, asset quality, earnings ability and liquidity position.
Conventional banks, on the other hand, were found to be more efficient in managing
operating expenses as its mean ratio is lower than Islamic banks ratio.
Sujan, et al. (2013) studied the performance of five conventional and five Islamic banks of
Bangladesh from period 2008 to 2012 on banks profitability and liquidity. T-test and F-test
have been used in determining the significance of the differential performance of the two
groups of bank. The study found difference on the profitability. But they found no significant
difference in the liquidity position of the banks.
Safiullah (2010) focused on the financial performance analysis of both conventional and
islamic banks to measure superiority. The study indicated that financial performance viz.
business developments, profitability, liquidity and solvency, commitment to economy and
community, efficiency and productivity of both types of banks is notable. The study found
that, conventional banks were doing better than Islamic banks. But performance of interest-
free Islamic banks in business development, profitability, liquidity and solvency was superior
to that of conventional banks. That is, comparatively Islamic banks were superior in financial
performance to that of interest-based conventional banks.
Islam, Siddiqui, Hossain and Karim (2014) studied the performance of the overall banking
sector of the country from period 2004 to 2011. They divided the whole banking sector into
four categories: State-Owned Commercial Banks (SCBs), Development Financial Institutions
(DFIs), Private Commercial Banks (PCBs) and Foreign Commercial Banks (FCBs) where
Islamic Banks were included in the PCBs. The study found that, in terms of Capital
Adequacy Ratio (CAR), NPL to total Loan ratio and Return on Assets, the FCBs ranked first.
The SCBs on the other hand performed better in case of Expenditure-Income Ratio and
maintaining enough Liquid assets.

Literature
Review
PAGE 9
2.2. RESEARCH GAP
Mahmud and Islam (2006) in “A Comparative Study on Performance Evaluation of
Conventional Banks and Islamic Banks in Bangladesh with Special Reference to Islami Bank
Bangladesh Limited” paper attempted to measure the comparative performances among the
four types of conventional banks and Islamic Banks operating in Bangladesh from period
2000 to 2005. But this new research will address the data from 2008 to 2014. The result of
this research may vary from that of old research because of using newer data. This may
represent the more realistic scenario due to the changes of different macroeconomic variables
those have happened recently.
Islam and Ashrafuzzaman (2015) in “A Comparative Study of Islamic and Conventional
Banking in Bangladesh: Camel Analysis” paper evaluated the financial performance of
Islamic and conventional banks of Bangladesh solely through CAMEL test. This new
research will address various financial key variables. Also the researchers used a sample of
five listed conventional banks and five listed Islamic banks only. In this new research, the
group performance of all of the banks under the three categories (the PCBs, the FCBs and the
IBs) will be evaluated. In short, the newer research will deal with population, not with
samples.
Sujan, et al. (2013) studied the performance of only five conventional and five Islamic banks
of Bangladesh from period 2008 to 2012. This newer research will focus on the categorical
performances of all of the banks belonging to the three categories.
Islam, Siddiqui, Hossain and Karim (2014) in their “Performance Evaluation of the Banking
Sector in Bangladesh: A Comparative Analysis” paper studied the performance of the overall
banking sector of the country from period 2004 to 2011. They divided the whole banking
sector into four categories where Islamic Banks were included in the PCBs. They did not
analyze the performance of the IBs of the country separately. This newer research will
evaluate the performance of the IBs separately.

CHAPTER - 3
INDUSTRY OVERVIEW
CHAPTER CONTENTS
THE CURRENT BANKING
SECTOR IN BANGLADESH
POSITION, PERFORMANCE
AND MARKET SIZES OF THE
BANKS

PAGE 10
3.1. THE CURRENT BANKING SECTOR IN BANGLADESH
The banking industry of the country has different types of banks with different types of
objectives, commitment and motto. The industry is composed of 6 types of banks; Cenral
Bank, State owned Commercial Banks (SCBs), Specialized banks (DFIs), Foreign
Commercial Banks (FCBs), Private Commercial Banks (PCBs) and Islamic Banks (IBs).
According to the latest schedule published by Bangladesh Bank in 2016, there are 56
scheduled banks are running in the country - 6 SCBs, 2 DFIs, 29 PCBs, 9 FCBs and 8 IBs.
The number of branches of these banks is 9131.
Different types of banks give priority to different stakeholders. While the private sector banks
are guided primarily by profit motive, SCBs are committed to social and economic
considerations. Among private banks, islamic banks are different as they operate beyond the
narrow scope of commercial motive. Table 1 shows the names of the Banks along with their
numbers and categories:
Categories of the Banks
Number of the
Banks
Name of the Banks
State Owned
Commercial Banks
6
1. Agrani Bank Limited.
2. Janata Bank Limited
3. Rupali Bank Limited
4. Sonali Bank Limited
5. BASIC Bank Limited
6. BDBL
Specialised Banks
(DFIs)
2
1. Bangladesh Krishi Bank.
2. Rajshahi Krishi Unnayan Bank.
Foreign Banks 9
1. Standard Chartered Bank
2. State Bank of India
3. Habib Bank Limited
4. Citi Bank, N/A.
5. Commercial Bank of Ceylon Limited
6. National Bank of Pakistan
7. Woori Bank
8. The Hong Kong & Shanghai Banking
Corporation Limited
9. Bank Al-Falah Limited
Local Commercial
Banks
32
1. AB Bank Limited
2. Bangladesh Commerce Bank Limited
3. Bank Asia Limited
4. BRAC Bank Limited
5. Dhaka Bank Limited

PAGE 11
6. Dutch-Bangla Bank Limited
7. Eastern Bank Limited
8. IFIC Bank Limited
9. Jamuna Bank Limited
10. Meghna Bank Limited
11. Mercantile Bank Limited
12. Midland Bank Limited
13. Modhumoti Bank Limited
14. Mutual Trust Bank Limited
15. National Bank Limited
16. National Credit & Commerce Bank Limited
17. NRB Bank Limited
18. NRB Commercial Bank Limited
19. NRB Global Bank Limited
20. One Bank Limited
21. Prime Bank Limited
22. Pubali Bank Limited
23. Shimanto Bank Limited
24. South Bangla Agriculture & Commerce
Bank Limited
25. Southeast Bank Limited
26. Standard Bank Limited
27. The City Bank Limited
28. The Farmers Bank Limited
29. The Premier Bank Limited
30. Trust Bank Limited
31. United Commercial Bank Limited
32. Uttara Bank Limited
Islamic Banks 8
1. Al-Arafah Islami Bank Limited
2. EXIM Bank Limited
3. First Security Islami Bank Limited
4. ICB Islamic Bank Limited
5. Islami Bank Bangladesh Limited
6. Shahjalal Islami Bank Limited
7. Social Islami Bank Limited
8. Union Bank Limited
Total 56
Table 1: Name of the Banks, their categories and numbers (Source: Bangladesh Bank Annual Report, 2015)
3.2. POSITION, PERFORMANCE AND MARKET SIZES OF THE BANKS
Table 2 below shows the banking structure and market share of various types of banks in
Bangladesh in 2014. It is found that the five SCBs in the country have 3553 branches, which
is the highest among the bank types. Currently thirty one PCBs are operating in the country
but they have 3074 branches which is less than the SCBs. However, PCBs occupy 45.45% of
the total industry assets despite having less number of bank branches than SCBs. SCBs have
only 27.53% of industry assets which is almost half of the PCBs. Three DFIs have 1500 bank

PAGE 12
branches which is quite significant in number but they have the least percentage of market
share (3.65%) in the industry assets. Nine FCBs have only 70 bank branches which is the
least among the types of bank but they own almost six percentages (5.52%) of the total
industry assets. Eight Islamic Banks, on the other hand, own 17.85% of the total market asset
in CY2014.
Bank
Types
No. of
Banks
No. of
Branches
Total
Assets
% of
industry
Depos
its
% of
industry
RO
A
RO
E
SCBs 5 3553 2517.10 27.53 1952.1
0
28.03 -
0.6
0
-
13.6
0
DFIs 3 1500 333.80 3.65 237.60 3.41 -
0.7
0
-
5.97
PCBs 31 3074 4155.10 45.45 3099.7
0
44.50 1.0
0
10.3
0
FCBs 9 70 505.00 5.52 326.00 4.68 3.4
0
17.7
0
Ibs 8 843 1632.00 17.85 1349.7
0
19.38 0.8
0
11.5
0
Total 56 9040 9143.00 100.00 6965.1
0
100.00 3.9
0
19.9
3
Table 2: Position, performance and market sizes of the Banks in CY14 (Source: Bangladesh Bank Annual Report 2015)
Chart 1 shown below exhibits that the PCBs are currently dominating in terms of market
share of total assets despite having fewer branches than the SCBs. They have occupied the
highest place (45%) in terms of market share and the DFIs occupy the lowest (4%) of that.
Chart 1: Market Share of Total Assets in CY14
SCBs
28%
DFIs
4%
PCBs
45%
FCBs
5%
IBs
18%
Market Share of industry Asset

PAGE 13
Chart 2 shown reveals that the PCBs own the maximum amount of deposits (45%) of the
market than that of any other banks in the country. The SCBs stand second (28%) in taking
deposits, the IBs are in the third place (19%), the FCBs are in the fourth place (5%) and the
DFIs own the least amount of deposits having 3% of that.
Chart 2: Market Share of Deposits in CY14
Chart 3 shows the return on assets of all the scheduled banks in CY14. It is noticed that the
return on asset of the FCBs is higher than that of any other commercial banks but the DFIs
and the SCBs incur the negative ROA. The PCBs stand second in terms of the return on
assets and the IBs are in the third place.
Chart 3: ROA of the banks in CY14
Chart 4 that has been shown below depicts that the FCBs are in the first place in terms
earning the return on equity, the PCBs are in the second place and the IBs are in the third
SCBs
28%
DFIs
3%
PCBs
45%
FCBs
5%
IBs
19%
Market Share of Deposits
-0.60 -0.70
1.00
3.40
0.80
SCBs DFIs PCBs FCBs IBs
Return on Assets in CY14
Return on Assets in CY14

PAGE 14
place. The ROE ratio of the SCBs and the DFIs were negative and as a result they are the
least earners of the return on equity.
Chart 4: ROE of the banks in CY14
-13.60
-5.97
10.30
17.70
11.50
SCBs DFIs PCBs FCBs IBs
Return on Equity in CY14
Return on Equity in CY14

CHAPTER - 4
ANALYSIS AND
INTERPRETATION
CHAPTER CONTENTS
TREND ANALYSIS
HYPOTHESES TESTING
REGRESSION ANALYSIS

PAGE 15
4.1. TREND ANALYSIS
Mahmud and Islam (2006) opined that the following indicators are generally used for
measuring the profitability and the performance of the banking industry.1
Performance
Dimensions
Measures Operational Definition
General Business
Measure
Total Business Total Deposit+Total Advances
Total Deposits Time Deposit+Demand Deposit
Total Advances
Total Assets
Advance-Deposit ratio Advance/Deposit
Total Income
Profitability
Return on Equity Net Income/Equity
Return on Assets Net Income/Total Assets
Net Interest Income
Net Income
Management soundness
Total Expenditure to Total
Income
Total Expenditure/Total Income
Social Profitability
Branch Expansion Total number of Branches
Employment Generation Total number of Employees
Rural Branch to total Branch
Number of Rural Branch/Total
Branch
In this study, the researcher used total deposits and total assets under General Business
Measure to give a brief idea about the positions of the banks. The researcher also used return
on assets, return on rquity, net income and net interest/profit income under Profitability and
finally branch expansion and employment generation under Social profitability to make a
comparative analysis about the performance of the three banking groups from 2008 to 2014.
4.1.1. GENERAL BUSINESS MEASURES
Mobilizing deposits is one of the principal functions of commercial banks. Deposits are the
foundation upon which banks stand and grow, as they do business not with their own money
but with others’. The ability of a bank to attract deposits from individual and businesses is an
important measure of the bank’s acceptance by the public. Total assets, on the other hand, are
1
Abdullah Al Mahmud and M. Muzahidul Islam, A Comparative Study on Performance Evaluation of Conventional Banks
and Islamic Banks in Bangladesh with Special Reference to Islami Bank Bangladesh Limited, Thoughts on Economics, Vol. 18,
No. 05, University of Dhaka

PAGE 16
the principal source of income of a bank that ensures the viability and sustainability of the
bank. Growth of income is nothing but the outcome of a bank’s basic operations.
4.1.1.1. TOTAL DEPOSITS
Chart 5: The amount of total deposits. (Source: Bangladesh Bank Annual Report, 2008-2015)
Chart 5 shows a steady growth of the total deposit of the IBs, FCBs and PCBs. The total
deposits of Islamic banks were 387.1 billion in 2008 that increased to 1349.7 billion in 2014,
showing a growth of almost 249% within seven years. On the other hand, the total deposit of
PCBs increased to 3099.7 billion in 2014, showing a growth rate of almost 191%. But as
FCBs are fewer in number as well as in branches, total deposits of FCBs did not increase
significantly.
2008 2009 2010 2011 2012 2013 2014
PCBs 1063.6 1301.4 1350.6 1729.8 2469.5 2821.4 3099.7
FCBs 214.1 215 230.68 247.3 327 359.5 326
IBs 387.1 491 617.12 776.1 961.2 1117.9 1349.7
0
500
1000
1500
2000
2500
3000
3500
BillionTK
Total Deposits

PAGE 17
4.1.1.2. TREND OF MARKET SHARE OF TOTAL DEPOSITS
Chart 6: Trend of total share of deposits (%). (Source: Bangladesh Bank Annual Report, 2008-2015)
Chart 6 indicates that the market share trend of deposit by the FCBs has been decreasing over
the years. It came down from 12.86% in 2008 to 6.83% in 2014. Market share of deposit by
the PCBs were down in 2010, but increased in 2011. On the other hand, during the same
period the market share of the IBs went up from 23.25% in 2008 to 28.26% in 2014, showing
an upward slope.
4.1.1.3. TOTAL ASSETS
Chart 7: The amount of total assets. (Source: Bangladesh Bank Annual Reports, 2008-2015)
Chart 7 shows a significant growth of the total assets of the PCBs and the IBs. The aggregate
assets of all Islamic banks were 464.5 billion in 2008 that increased to 1432 billion in 2014
showing a significant increase within a short span of seven years. During the same period the
2008 2009 2010 2011 2012 2013 2014
PCBs 63.89 64.83 61.44 62.83 65.72 65.63 64.91
FCBs 12.86 10.71 10.49 8.98 8.70 8.36 6.83
IBs 23.25 24.46 28.07 28.19 25.58 26.00 28.26
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
%
Market Share of Deposits
2008 2009 2010 2011 2012 2013 2014
PCBs 1330 1699.7 1877.7 2282.2 3190 3589.2 4355.1
FCBs 265.8 292.6 308.7 344.2 441.8 488.7 505
IBs 464.5 576 733.57 923.2 1181.5 1359 1432
0
1000
2000
3000
4000
5000
Billion
Total Asset

PAGE 18
aggregate deposits of the PCBs increased to 4355.1 billion from 1330 billion. But the assets
of the FCBs did not increas significantly.
4.1.1.4. MARKET SHARE OF TOTAL ASSETS
Chart 8: Trend of market share of total assets (%). (Source: Bangladesh Bank Annual Reports, 2008-2015)
Chart 8 indicates that trend of the market share of total assets by the FCBs has been
decreasing over the last four years. It came down from 12.90% in 2008 to 8.03% in 2014. But
during the period PCBs grabbed the market share of deposit quite significantly from 64.55%
in 2008 to 69.22% in 2014. This trend does not show any consistancy in case of the IBs – the
trend is neither upward nor downward.
4.1.2. PROFITABILITY MEASURES
Profitability is an important index of operational efficiency of an organization. Analysis of
profitability of an enterprise provides an insight into the effectiveness in utilization of funds
in the enterprise and also managerial efficiency. Because of shortage of time the researcher
used only three indicators to measure the profitability performance.
2008 2009 2010 2011 2012 2013 2014
PCB 64.55 66.18 64.31 64.29 66.27 66.02 69.22
FCB 12.90 11.39 10.57 9.70 9.18 8.99 8.03
IB 22.55 22.43 25.12 26.01 24.55 25.00 22.76
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
%
Market Share of total Asset

PAGE 19
4.1.2.1. NET INTEREST INCOME
Chart 9: Net interest income. (Source: Bangladesh Bank Anual Reports, 2008-2015)
In Chart 9, we find that total interest income (profit income for the IBs) of PCBs, FCBs and
IBs are relatively higher in 2014. The net interest income of the FCBs fell down in 2011 but
they managed to recover it from the next year. On the other hand over the years the IBs kept
showing a gradual increasing trend and upward slope.
4.1.2.2. NET INCOME
Chart 10: Net income. (Source: Bangladesh Bank Annual Reports, 2008-2015))
Chart 10 indicates that the trend of net profit of the IBs and the FCBs fall in 2009. Later, IBs
managed to increase their net profit to 11.66 billion in 2010 from 5.71 billion, but FCBs
showed a decline in the trend of net profit; from 11.38 billion to 6.46 billion. On the other
2008 2009 2010 2011 2012 2013 2014
PCBs 48.5 56.7 82.5 91.4 114.7 118.2 205.8
FCBs 12.6 10.7 13 8.4 19.6 15.8 26.6
IBs 40.26 46.97 55.07 80.7 115.9 133 142.5
0
50
100
150
200
250
Billion
Net Interest Income
2008 2009 2010
PCBs 23.19 33.77 48.67
FCBs 11.38 7.08 6.46
IBs 5.76 5.71 11.66
0
10
20
30
40
50
60
Billions
Net Income

PAGE 20
hand, the profit trend of the PCBs always shows an upward slope. Their profit increased
109% during last three years.
4.1.2.3. TREND OF THE RETURN ON ASSETS
Chart 11: The trend of ROA. (Source: Bangladesh Bank Annual Reports, 2008-2015)
Chart 11 shows that the FCBs have a very significant high return on assets during last seven
CY than any other banks have. It stays always at the top in respect of ROA. Then the PCBs
come. The ratio of the PCBs and the IBs fluctuates very much over the time. From CY12 to
CY14 this ratio both of the PCBs and the IBs are almost same and are heading towards the
same direction.
4.1.2.4. TREND OF RETURN ON EQUITY
Chart 12: Trend of ROE. (Source: Bangladesh Bank Annual Reports, 2008-2015)
2008 2009 2010 2011 2012 2013 2014
PCBs 1.4 1.6 2.1 1.6 0.9 1 1
FCBs 2.9 3.2 2.9 3.6 3.3 3 3.4
IBs 1.24 0.99 1.59 1 1.1 0.89 0.8
0
0.5
1
1.5
2
2.5
3
3.5
4
Ratio
Return on Asset
2008 2009 2010 2011 2012 2013 2014
PCBs 16.4 21 20.9 15.6 10.2 9.8 10.3
FCBs 17.8 22.4 17 20.2 17.3 16.9 17.7
IBs 21.46 15.32 21.33 14.46 16.8 11.71 11.5
0
5
10
15
20
25
Ratio
ROE

PAGE 21
Chart 12 indicates a severe fluctuation in the trend of return of equity. It is very difficult to
say which bank stays at the top in respect of return on equity. There is no consistency in the
trends.
4.1.3. SOCIAL PROFITABILITY MEASURES
Social Profitability implies the contribution of a bank to the society. Creation of employment,
expansion of branches etc. are the key indicators of social profitability measures.
4.1.3.1. NUMBER OF BRANCHES
Chart 13: The number of total branches. (Source: Bangladesh Bank Annual Reports, 2008-2015)
Chart 13 shows that the numbers of Branches of the PCBs, FCBs and IBs have an increasing
trend. PCBs occupy the maximum number of branches among the three types of Banks. On
the other hand, FCBs occupy the least number of branches. Despite being similar to the FCBs
regarding the number of banks, the IBs hold more branches than those of the FCBs.
2008 2009 2010 2011 2012 2013 2014
PCBs 1724 1784 1840 2290 2589 2800 3074
FCBs 56 58 59 74 65 69 70
IBs 358 501 587 622 750 802 843
0
500
1000
1500
2000
2500
3000
3500
Number
Number of total Branches

PAGE 22
4.1.3.2. MARKET SHARE OF BRANCHES
Chart 14: Trend of the market share of branches. (Source: Bangladesh Bank Annual Reports, 2008-2015))
Chart 14 indicates that, although the PCBs own the highest percentage of branches in the
market, the IBs have the maximum growth rate of branch expansion. The percentage of the
Share of brranches by the IBs increases almost 26% during the last seven CY, while that of
the PCBs and the FCBs increased -4.38% and -32% respectively.
4.1.3.3. TOTAL EMPLOYMENT
Chart 15: The number of total employment by the banks. (Source: Bangladesh Bank Annual Reports, 2008-2015)
Chart 15 shows a declining trend in the number of employees of the PCBs over the period
under study. The FCBs have an increase in the number of employment during 2000 to 2005
by 39% while the IBs got the highest increase of employment (51%) during the same period.
2008 2009 2010 2011 2012 2013 2014
PCB 80.64 76.14 74.01 76.69 76.06 76.27 77.10
FCB 2.62 2.48 2.37 2.48 1.91 1.88 1.76
IB 16.74 21.38 23.61 20.83 22.03 21.85 21.14
0.00
20.00
40.00
60.00
80.00
100.00
%
Sahre of Barnches in the market
2000 2001 2002 2003 2004 2005
PCBs 22072 23521 23279 25980 26640 20367
FCBs 1280 1588 1305 1409 1508 1776
IBs 3903 4547 5057 6596 7440 7907
0
5000
10000
15000
20000
25000
30000
Number
Total Employment

PAGE 23
4.2. HYPOTHESIS TESTING
4.2.1. DEPOSITS
The researcher wanted to find out that if there is any significant difference regarding the
performance related to deposits among all the three banking groups during 2008 to 2014 or
not. This was tested as under:
Null Hypothesis
There is no significant difference in total deposits among all three banking groups during
2008 to 2014.
H0 = µ1 = µ2 = µ3
H1 = µ1 ≠ µ2 ≠ µ3
ANOVA
Source of Variation SS Df MS F P-value F crit
Between Groups 10594690.38 2.00 5297345.19 20.24 0.00 3.55
Within Groups 4710415.29 18.00 261689.74
Total 15305105.67 20.00
The above ANOVA table indicates that the calculated value of F is 20.24, which is more than
the table value of 3.55 at 5% level of significance. Hence, the null hypothesis is rejected. It
means that there is a significant difference in total deposits among all the three banking
groups.
4.2.2. TOTAL ASSETS
performance related to total assets among all the three banking groups during 2008 to 2014 or
Null Hypothesis
There is no significant difference in total assets among all the three banking groups during
2008 to 2014.

PAGE 24
H0 = µ1 = µ2 = µ3
H1 = µ1 ≠ µ2 ≠ µ3
ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 18941642.77 2.00 9470821.38 20.33 0.00 3.55
Within Groups 8385522.46 18.00 465862.36
Total 27327165.22 20.00
means that there is a significant difference in total assets among all the three banking groups.
4.2.3. NET INTEREST INCOME
performance related to net interest income (profit income for the IBs) among all the three
banking groups during 2008 to 2014 or not. This was tested as under:
Null Hypothesis
There is no significant difference in net interest income (profit income) among all the three
H0 = µ1 = µ2 = µ3
H1 = µ1 ≠ µ2 ≠ µ3
ANOVA
Between Groups 30566.38 2.00 15283.19 9.93 0.00 3.55
Within Groups 27704.35 18.00 1539.13
Total 58270.74 20.00

PAGE 25
means that there is a significant difference in net interest income among all the three banking
groups.
4.2.4. NET INCOME
performance related to net income among all the three banking groups during 2008 to 2010 or
Null Hypothesis
There is no significant difference in net income among all the three banking groups during
2008 to 2010.
H0 = µ1 = µ2 = µ3
H1 = µ1 ≠ µ2 ≠ µ3
ANOVA
Between Groups 1480.40 2.00 740.20 12.15 0.01 5.14
Within Groups 365.49 6.00 60.92
Total 1845.89 8.00
means that there is a significant difference in net income among all the three banking groups.
4.2.5. RETURN ON ASSETS
performance related to return on asset among all the three banking groups during 2008 to
2014 or not. This was tested as under:
Null Hypothesis
There is no significant difference in ROA ratio among all the three banking groups during
2008 to 2014.

PAGE 26
H0 = µ1 = µ2 = µ3
H1 = µ1 ≠ µ2 ≠ µ3
ANOVA
Source of Variation SS Df MS F P-value F crit
Between Groups 18.15 2.00 9.07 82.58 0.00 3.55
Within Groups 1.98 18.00 0.11
Total 20.12 20.00
means that there is a significant difference in ROA ratio among all the three banking groups.
4.2.6. RETURN ON EQUITY
performance related to return on equity among all the three banking groups during 2008 to
Null Hypothesis
There is no significant difference in ROE ratio among all the three banking groups during
2008 to 2014.
H0 = µ1 = µ2 = µ3
H1 = µ1 ≠ µ2 ≠ µ3
ANOVA
Between Groups 46.66 2.00 23.33 1.55 0.24 3.55
Within Groups 270.98 18.00 15.05
Total 317.64 20.00
The above ANOVA table indicates that the calculated value of F is 1.55, which is less than
the table value of 3.55 at 5% level of significance. Hence, the null hypothesis is cannot be
rejected. It means that there is no significant difference in ROE ratio among all the three
banking groups.

PAGE 27
4.2.7. BRANCH EXPANSION
performance related to branch expansion among all the three banking groups during 2008 to
Null Hypothesis
There is no significant difference regarding branch expansion among all the three banking
H0 = µ1 = µ2 = µ3
H1 = µ1 ≠ µ2 ≠ µ3
ANOVA
Between Groups 18879128.00 2.00 9439564.00 88.31 0.00 3.55
Within Groups 1924104.29 18.00 106894.68
Total 20803232.29 20.00
means that there is a significant difference regarding branch expansion among all the three
4.2.8. EMPLOYMENT GENERATION
performance related to employment generation among all the three banking groups or not.
This was tested as under
Null Hypothesis
There is no significant difference regarding employement generation among all three banking
groups.
H0 = µ1 = µ2 = µ3

PAGE 28
H1 = µ1 ≠ µ2 ≠ µ3
ANOVA
Between Groups 1650929021.44 2.00 825464510.72 299.23 0.00 3.68
Within Groups 41379787.50 15.00 2758652.50
Total 1692308808.94 17.00
The above ANOVA table indicates that the calculated value of F is 299.23, which is more
than the table value of 3.68 at 5% level of significance. Hence, the null hypothesis is rejected.
It means that there is a significant difference regarding employment generation among all the
three banking groups.
4.3. MULTIPLE REGRESSION TEST
When the relationship between one dependent variable and two or more independent
variables is intended to test in statistical terms, then multiple regression is used.
4.3.1. VARIABLES
i. Dependent Variable. A dependent variable is the variable that gets changes due to the
changes occured in other variable(s). It is the variable that a researcher wants to
predict in his research work.
ii. Independent Variable(s). An independent variable is the variable that brings changes
in the dependent variable.
The researcher wanted to analyze the determinants of net interest income of the three banking
groups. For this analysis, three variables are included in this study. One of them is the
dependent and the others are as explanatory or independent variables. The variables are as
follow:
Dependent Variable Independent Variables
Net Interest income 1. Deposits
2. The number of branches

PAGE 29
Net Interest Income is the difference between interest earned on loans and advances minus
interest paid on deposits. Deposits are considered as banks’ main source of funding and are
the lowest cost of funds. The more deposits are transformed into loans, the higher the interest
income and profit. Hence, deposits generally have positive impact on net inerest income.
But if a bank cannot transform its deposits into loans efficiently it may bring negative impact
on net interest income also. The banking business expands by the establishment of branches.
They must have some impact on net interest income.
4.3.2. MODEL AND HYPOTHESIS
Since the researcher wanted to predict the Net Interest Income by deposits and the number of
branches, the regression model was as follows:
Y1 = a+b1X1+b2X2
Where, Y1 = Net Interest Income
a = constant term
b1 = regeression coefficient for deposits
b2 = regression coefficient for number of branches
X1 and X2 = Deposits and Number of Branches respectively.
The researcher predicted the following hypothesized relationships:
Hypothesis H1a: Deposits of PCBs, FCBs and IBs have a significant relationship with Net
Interest Income.
Hypothesis H2a: The Number of Branches of PCBs, FCBs and IBs has a significant
relationship with Net Interest Income.
4.3.3. RESULTS AND INTERPRETATION
4.3.3.1. PRIVATE COMMERCIAL BANKS
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.91

PAGE 30
R Square 0.84
Adjusted R Square 0.75
Standard Error 26.15
Observations 7.00
ANOVA
Df SS MS F Significance F
Regression 2.00 13867.78 6933.89 10.14 0.03
Residual 4.00 2735.28 683.82
Total 6.00 16603.06
Coefficie
nts
Standard
Error
t
Stat
P-
value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Interce
pt
-119.59 139.38 -
0.8
6
0.44 -506.57 267.39 -506.57 267.39
Deposi
ts
-0.01 0.09 -
0.1
3
0.90 -0.26 0.24 -0.26 0.24
Branch 0.11 0.14 0.7
8
0.48 -0.27 0.48 -0.27 0.48
Multiple R represents the degree of correlation between the dependent and the independent
variables. For this regression model the value is 0.91. It means that the degree of correlation
between net interest income and deposits and the number of branches of the PCBs is positive
and strongly correlated.
R Square measures the variance in dependent variable that can be explained by the variance
of the independent variables. The value for this regression model is 0.84, meaning that 84%
variance in net interest income of PCBs can be explained by the variance of deposits and the
number of branches jointly.
The closer the value of Adjusted R Square to 1, the fewer the independent variables are
needed. The value of adjusted R square for this regression model is 0.75, meaning that the
researcher can include some other independent variables for the proper explanation of the

PAGE 31
model. As there are only two independent variables in the model, it is assumed that the
inclusion of other independent variables can make the model more predictory.
The multiple regression model that can be produced from the results is as follows:
NII = -119.59-0.01Deposit+0.11Branch
The slope of deposit is -0.01 in this model. That means one unit increase in deposits of the
PCBs will decrease 1% net interest income, if other things remain the same. On the other
hand the slope of the number of branches is 0.11. That means per unit increase in the number
of branches of the PCBs will increase 11% net interest income, if other things remain the
same. Since the F Value is greater than that of Significance F Value (10.14 > 0.03), we
reject the null hypothesis and accept Hypothesis H1a and H2a that deposits and the number
of branches of the PCBs have a significant relationship with Net Interest Income.
4.3.3.2. FOREIGN COMMERCIAL BANKS
SUMMARY OUTPUT
Multiple R 0.73
R Square 0.53
Standard Error 5.16
Observations 7.00
ANOVA
Regression 2.00 121.36 60.68 2.28 0.22
Residual 4.00 106.40 26.60
Total 6.00 227.76
Coefficient
s
Standar
d Error
t Stat P-
value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercep
t
7.34 20.07 0.37 0.73 -48.39 63.06 -48.39 63.06
Branch -0.25 0.39 -0.64 0.56 -1.33 0.83 -1.33 0.83
Deposit 0.09 0.04 2.00 0.12 -0.03 0.21 -0.03 0.21

PAGE 32
between net interest income and deposits and the number of branches of the FCBs is positive
variance in net interest income of the FCBs can be explained by the variance of deposits and
the number of branches jointly.
NII = 7.34+0.09Deposit-0.25Branch
The slope of deposit is 0.09 in this model. That means one unit increase in deposits of the
FCBs will increase 9% net interest income, if other things remain the same. On the other
hand the slope of the number of branches is -0.25. That means per unit increase in the number
of branches of the FCBs will decrease 25% net interest income, if other things remain the
same. Since the F Value is greater than that of Significance F Value (2.28 > 0.22), we reject
the null hypothesis and accept Hypothesis H1a and H2a that deposits and the number of
branches of the FCBs have a significant relationship with Net Interest Income.

PAGE 33
4.3.3.3. ISLAMIC BANKS
SUMMARY OUTPUT
Multiple R 0.98
R Square 0.97
Standard Error 9.66
Observations 7.00
ANOVA
Regression 2.00 10500.31 5250.16 56.27 0.00
Residual 4.00 373.23 93.31
Total 6.00 10873.54
Coefficients Standard
Error
t Stat P-value Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept -17.25 23.31 -0.74 0.50 -81.98 47.48 -81.98 47.48
Deposits 0.11 0.04 2.46 0.07 -0.01 0.23 -0.01 0.23
Branches 0.03 0.09 0.34 0.75 -0.21 0.27 -0.21 0.27
between net interest income and deposits and the number of branches of the IBs is positive
variance in net interest income of the IBs can be explained by the variance of deposits and the
number of branches jointly.

PAGE 34
NII = -17.25+0.11Deposits+0.33Branch
The slope of deposit is 0.11 in this model. That means one unit increase in deposits of the IBs
will increase 11% net profit income, if other things remain the same. On the other hand the
slope of the number of branches is 0.33. That means, per unit increase in the number of
branches of the IBs will increase 33% net profit income, if other things remain the same.
Since the F Value is greater than that of Significance F Value (56.27 > 0.00), we reject the
null hypothesis and accept Hypothesis H1a and H2a that deposits and the number of
branches of the IBs have a significant relationship with Net Profit Income.

CHAPTER - 5
FINDINGS AND
RECOMMENDATIONS
CHAPTER CONTENTS
FINDINGS
RECOMMENDATIONS

PAGE 35
5.1. FINDINGS AND RECOMMENDATIONS
There are many banks in the country. Among the banks, the PCBs are the best almost in
every cases. But this sector is facing a great competition by the IBs of the country. Despite
being fewer in number, the IBs have the ability to surpass the PCBs in near future. Based on
the overall study the findings found are presented below along with their corresponding
recommendations:
Objective No. 1: To study the current banking structure of Bangladesh
Findnig No. 1: The country’s banking sector is composed of six types of banks – one is the
central bank and the rest of them are different kinds of commercial banks. The commercial
banks are divided into five categories – Specialized Commercial Banks (DFIs), State Owned
Commercial Banks (SCBs), Private Commercial Banks (PCBs), Foreign Commercial Banks
(FCBs) and Islamic Commercial Banks (IBs). Currently they are fifty six in number. Six of
these the SCBs, two of these are the DFIs, twenty nine of these are the PCBs, nine of these
are the FCBs and eight of these are the IBs. The total number of the branches of the banks is
9131.
Recommendation No. 1: The number of classical banks in the world has reduced. In the
majority of countries the number of banks does not exceed 200. Many researchers drew the
conclusions of the economic theory about the optimum structure of the banking market. The
empirical analysis shows that the number of banks in a country is influenced by the size of its
territory, population number and GDP per capita. What should be the optimum banking
structure in Bangladesh is subject to a different study and the researcher highly recommends
that a research be conducted on this isuue.
Objective No. 2: To analyze whether there is any difference regarding the performances of
the three banking groups of Bangladesh on the basis of some selected tools
Findnig No. 2: Acording to the results produced by ANOVA test at 5% confidence level it
was found that the performances of the three banking groups are significantly different from

PAGE 36
each other in case of deposits, total assets, net interest income, net income, return on assets,
number of branches and employment generation. However the performance of the banks in
case of return on equity is not significantly different from each other. That means, no bank is
better or worse in case of return on equity ratio.
Recommendation No. 2: Return on equity is a measure of profitability that calculates how
much profit a company generates with each money of shareholders. The higher the ratio is the
better the company performs. It is the tool that the three banking groups have to differentiate
themselves from each other. Banks who want to improve the ratio must focus on the balanced
use of equity in their capital structure. More equity given some same returns results in lower
return on equity ratio. Lower returns given some same amount of equity also results in lower
return on equity ratio.
Objective No. 3: To evaluate the category wise performances of the banks
Findnig No. 3: In terms of volume and the market share of deposits and assets, the PCBs
rank first. In terms of the growth of deposits and assets, the IBs rank first. In terms of volume
of net interest income the PCBs rank first followed by the IBs. The FCBs on the other hand
are the best in terms of return on assets ratio – they are always at the top in this area. It means
that they are very much efficient in utilizing their assets in order to earn the maximum return.
But no bank is better in terms of return on equity ratio. The PCBs have the maximum number
of branches in the country with an upwarding slope; followed by the IBs. Despite being
similar to the IBs in size the FCBs have very few branches comparatively. The PCBs
generate the maximum amount of employment, followed by the IBs.
Recommendation No. 3: Although the number of the FCBs and the IBs are almost same,
the FCBs always lag behind the IBs except in the case of return on assets. The FCBs must
come forward with the concept of financial inclusion to achieve more market share. Given

PAGE 37
that no banking group is better in case of return on equity, the banks must focus on the use of
the optimum capital structure.
Objective No. 4: To understand how the net interest income of the banks are affected by
their deposits and the number of branches
Findnig No. 4: The researcher wanted to find found if the net interest income of the banks
can be predicted or not if deposits and the number of branches are already known. The null
hypotheses were rejected and it has been found that deposits and the number of branches are
significantly related with net interest income for every banking group. Deposits are
negatively correlated with net interest income for the PCBs, meaning that they cannot
transform their deposits into loans efficiently, alothough branch expansion is positively
correlated and the explanatory power of the model is very strong (R 0.91, R Square 0.84).
Branch expansion on the other hand is negatively correlated with net interest income for the
FCBs, meaning that they cannot earn net interest income solely by the expansion of branches
and the correlation is moderate to strong (R 0.73 and R Square 0.53). Net Profit income is
positively related with deposits and the number of branches for the IBs and the correlation is
very strong (R 0.98 and R Square 0.97).
Recommendation No. 4: The PCBs must be efficient enough in order to grab the market for
giving loan since they cannot use their deposits efficiently for converting into loans. The
FCBs must not increase their branches as long as they find out the reason for not increasing
net interest income in response to their branch expansion. This is possibly why they do not
establish branches very frequently.

A STUDY ON PERFORMANCE EVALUATION OF THE COMMERCIAL BANKS IN BANGLADESH References
PAGE 38
References:
Mahmud, Al, Abdullah and Islam, Muzahidul, M. (2006). “A Comparative Study on
Performance Evaluation of Conventional Banks and Islamic Banks in Bangladesh with
Special Reference to Islami Bank Bangladesh Limited”, Thoughts on Economics, Vol. 18,
No. 05, University of Dhaka
Islam, Ul, Tanzim, Md., and Ashrafuzzaman, Mohammad (2015). “A Comparative Study of
Islamic and Conventional Banking in Bangladesh: Camel Analysis”, Journal of Businessand
Technology (Dhaka), Volume –X, Issue–01, January–June, 2015
Safiullah, M. (2010). Superiority of Conventional Banks & Islamic Banks of Bangladesh: A
Comparative Study. International Journal of Economics and Finance
Islam, Ariful, Md., Siddiqui, Hasan, Mahmudul and Hossain, Fahim, Kh., (2014).
“Performance Evaluation of the Banking Sector in Bangladesh: A Comparative Analysis”,
Business and Economic Research, Macrothink Institute, ISSN 2162-4860, 2014, Vol. 4, No.1
Bank Parikrama, 2008-2015, Bangladesh Bank
Financial Position of Scheduled Banks, 2008-2015, Bangladesh Bank
Bangladesh Bank Quarterly, 2008-2015.
Monthly Economic trend, 2008-2015, Bangladesh Bank
Financial Stability Report, 2008-2015, Bangladesh Bank
Annual Reports, 2008-2015, Bangladesh Bank

A STUDY ON PERFORMANCE EVALUATION OF THE COMMERCIAL BANKS IN BANGLADESH Appendices
PAGE 39
Appendix 1: Total Deposits of the banks (Billion Tk)
Year PCBs FCBs IBs
2008 1063.60 214.10 387.10
2009 1301.40 215.00 491.00
2010 1350.66 230.68 617.12
2011 1729.80 247.30 776.10
2012 2469.50 327.00 961.20
2013 2821.40 359.50 1117.90
2014 3099.70 326.00 1349.70
Appendix 2: Total Assets of the banks (Billion Tk)
Year PCBs FCBs IBs
2008 1330.00 265.80 464.50
2009 1699.70 292.60 576.00
2010 1877.70 308.70 733.57
2011 2282.20 344.20 923.20
2012 3190.00 441.80 1181.50
2013 3589.20 488.70 1359.00
2014 4355.10 505.00 1432.00
Appendix 3: Net Interest Income of the banks (Billion Tk)
Year PCBs FCBs IBs
2008 48.50 12.60 40.26
2009 56.70 10.70 46.97
2010 82.50 13.00 55.07
2011 91.40 8.40 80.70
2012 114.70 19.60 115.90
2013 118.20 15.80 133.00
2014 205.80 26.60 142.50
Appendix 4: Net Income of the banks (Billion Tk)
Year PCB FCB IB
2008 23.19 11.38 5.76
2009 33.77 7.08 5.71
2010 48.67 6.46 11.66

A STUDY ON PERFORMANCE EVALUATION OF THE COMMERCIAL BANKS IN BANGLADESH Appendices
PAGE 40
Appendix 5: Return on Assets of the banks
Year PCBs FCBs IBs
2008 1.40 2.90 1.24
2009 1.60 3.20 0.99
2010 2.10 2.90 1.59
2011 1.60 3.60 1.00
2012 0.90 3.30 1.10
2013 1.00 3.00 0.89
2014 1.00 3.40 0.80
Appendix 6: Return on equity of the banks
Year PCBs FCBs IBs
2008 16.40 17.80 21.46
2009 21.00 22.40 15.32
2010 20.90 17.00 21.33
2011 15.60 20.20 14.46
2012 10.20 17.30 16.80
2013 9.80 16.90 11.71
2014 10.30 17.70 11.50
Appendix 7: Number of Branches
Year PCBs FCBs IBs
2008 1724.00 56.00 358.00
2009 1784.00 58.00 501.00
2010 1840.00 59.00 587.00
2011 2290.00 74.00 622.00
2012 2589.00 65.00 750.00
2013 2800.00 69.00 802.00
2014 3074.00 70.00 843.00
Appendix 8: Number of Employees
Year PCB FCB IB
2005 22072.00 1280.00 3903.00
2006 23521.00 1588.00 4547.00
2007 23279.00 1305.00 5057.00
2008 25980.00 1409.00 6596.00
2009 26640.00 1508.00 7440.00
2010 20367.00 1776.00 7907.00

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