Quality Analysis Of The Balance Sheet Of Premier Bank Limited And Jamuna Bank Limited

If we imagine about one question - In which sector our business is booming most - the answer would be certainly the banks. Bank includes all financial institutions, one of those principle activities is to take deposits and borrow with the objectives of lending and investing and which are with in the scope of banking or similar legislation. Bank represents a significant and influential sector of business worldwide. Most individuals and organizations make use of banks, either as depositor or borrowers. Banks play a major role in maintaining confidence in monetary system through their close relationship with regulatory authorities and governments and the regulation imposed on them by those governments. More than forty eight banks are serving in Bangladesh. These banks not only serve the people but also help the entrepreneurs to them in the track of business. As banks are the source of fund, they control the capital investment in our country most.

In this project we will analyze the two potential banks- Premier bank and Jamuna Bank- in Bangladesh.

* Financial Position and Strength:

The Premier Bank Limited started its operation from October, 1999 under the Bank Companies Act 1991. Since then, the Bank has emerged as a quality Financial Institute on and making significant contribution to the national economy. The Authorized Capital of the Bank is BDT 1000.00 million and the total Capital Funds as on 31.12.2003 is BDT 758.72 million including Paid-up Capital of Tk. 408.91 million. Capital Adequacy ratio is 11.76% as against required 9%. The Bank is a full service Commercial Bank and licensed by Bangladesh Bank. The Bank has a strong capital base, with no insider lending and low non- performing loans (0.36%)

* Future potential:

Premier bank has been a successful bank over five years. Its paid up capital has increased from Tk 222 million to Tk 681.45 million. Over the years premier bank is expanding its business region. As it has already opened 21 business branches, its investment also increased to Tk 2242.78 million. It means that the company has the potential to increase their investors. Premier Bank's net income is increasing over last five years. In 2001 income of this bank was 415.41 million, in 2003 it was 576.78 million and at last in 2005 it was 2863.86million.

This indicates that premier bank is in the growing stage.

* Financial indicator:

During the year, premier bank expanded our business and undertook a significant trade finance business and commercial lending operations. This strategy has resulted in an operating profit of Tk. 930.93 million in 2004 compared to Tk. 400.73 million in the previous year. Propelled by strong growth in both loans and deposits, the Bank's operating income increased substantially in 2004.

Its net interest income for 2002 was Tk. 129.75 million as compared to Tk. 107.89 million for 2001. Net income in 2002 was Tk. 132.37 million, compared to Tk. 112.20 million in 2001. Return on assets and return on equity were 4.87% and 67.44% respectively. Earnings per share were Tk. 28.30, compared to Tk. 26.09 in 2001.

Total assets at the end of 2002 were Tk. 6,036.92 million, an increase of Tk. 2,587.98 million or 75.03% for the year.

Key factors contributing to this significant improvement were strong revenue growth, net interest income and continued improvement in operating efficiency.

* Financial Position and Strength:

Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 with its Head Office at Printers Building (2nd & 8th Floor), 5, Rajuk Avenue, Dhaka-1000. The Bank started its operation from 3rd June 2001. Jamuna Bank Limited is a highly capitalized new generation Bank with an Authorized Capital and Paid-up Capital of Tk.1600.00 million and Tk.390.00 million respectively.

The Paid-up Capital has been raised to 429.00 million and the total equity of the bank stands at 725.00 million as on June 30, 2005. Currently the Bank has 23 (twenty three) branches.

The Bank undertakes all types of banking transactions to support the development of trade and commerce of the country. JBL's services are also available for the rest to set up new ventures and BMRE of industrial units.

* Future potential:

Jamuna Bank has an increasing trend in its paid up capital. In 2003 paid up capital was Tk 390 million and in 2005 the amount increased to Tk 429 million. Total deposits of this bank also increased from Tk 8 billion to 14 billion. That means people have enough faith on this bank to invest their money. Jamuna bank has the EPS of Tk 46.58 which was previously Tk 15.68 in 2003.

* Financial indicator:

Jamuna Bank expanded our business and undertook a significant trade finance business and commercial lending operations. This strategy has resulted in an operating profit of Tk. 704.81 million in 2005 compared to Tk. 512.47 million in the previous year. Propelled by strong growth in both loans and deposits, the Bank's operating income increased substantially in 2005.

Its net interest income for 2005 was Tk. 328.92 million as compared to Tk. 278.29 million for 2004. Net income in 2005 was Tk. 199.82 million, compared to Tk. 155.95 million in 2004. Return on assets and return on investment were 1.18% and 6.20% respectively. Earnings per share were Tk. 46.58, compared to Tk. 36.35 in 2004.

 By comparing the income statements of two banks we can take our investment decision.

 Through these income statements we can assess the risk of our investment.

 By providing information asset, liabilities and stockholders equity; we can compute the rates of return and evaluate the capital structure pf the two banks.

 In our project, we will analyze the two bank's liquidity and solvency. These two parameters will provide the ultimate position about their financial flexibility.

 We will also find out if their quality of the balance sheet is up to the standard of GAAP.

This section of paper reveals how the research has been done. It specially deals with where the data has been collected from, what kind of data has been collected, how the data has been recorded. Secondary data for the research has been collected form the annual report of