Financial Performance Analysis of Sonali Bank

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1.1 Introduction:
Today, the business world is considered to be a competitive world where a single mistake
can bring a great loss in the organization or may shutdown business forever. Yes, our era
is an era of globalization where business is getting more and more innovation through
product and strategy development. To sustain in the competition, Business organizations
are finding thousands paths for business innovation. As a student, we have no any practical
knowledge about business arena. Internship program is a program where both theoretical
and practical knowledge is possible to learn through real business situation. I really get a
great opportunity to learn some practical knowledge being an internee in Sonali bank ltd,
Mahigonj branch, Rangpur. This branch is specially related to the regional development
for business, industry, agriculture and governments deferent sectors. My report is on
“Financial Performance Analysis of Sonali bank ltd.” By different ratio analysis I tried to
show financial performance analysis over the last 5 years. For this, an organizational
attachment in Rangpur, Mahigonj Branch of Sonali Bank Limited has been given to me for
a period of three month commencing from 1st
November 2017 to 31th
January, 2018.
During this period, I have learnt about my host organization by the help of organizational
supervisor. I learnt about different operations of bank and how to handle customers,
employees and potential customers.
1.2 Objectives of the study:
The major objective of this study is to make a clear analysis of Financial Performance of
Sonali Bank Limited. There are some specific objectives mentioned bellow:
 To calculate various financial ratios of the Bank for last 5 years using Balance
sheets and income statements.
 To know some constraints that hinders the bank to perform better
 To improve the practical knowledge about banking performance that will be
essential for future career.
 Pointing out some suggestions based on results by calculations.
 To improve my skills of report writing ability.

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1.3 Methodology of the study:
This study is based on systematic procedure from the collection of raw data to the
preparation of final report. For the execution of study, the sources are identified and
collected with maintaining the rules and regulations of banking act. Then, the work of
classification, analysis, systematic organization has been made. The overall process of
methodology has been given as below:
Selection of the data: The information was collected properly to organize this report is
both from primary and secondary sources.
Primary Sources of Data:
 Oral conversation with employees and officers of the banks.
 Practical and manual experience gained by working different desks during
internship period.
 Oral conversation with the new and prospective clients.
 Interview
Secondary Sources of Data:
 Five years Annual Reports of Sonali Bank Ltd.
 Official Records of Sonali Bank Ltd.
 Web site of the Sonali Bank Ltd.
 Collections Prior research reports
 Different text book and journals
 Various reports and articles related to study
 Some of my course elements as related to this report
Data sources identification: Both primary and secondary data sources were identified
that are needed to carry on the study and complete this report.
1.4 Scope of the Study:
This report is mainly performed for the analysis of financial performance of Sonali Bank
Ltd. The time duration is set on the last 5 calendar years. I tried to show the analysis by

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different graphs and charts through trend and ratio analysis based on over the years’
performance. Findings and relevant recommendations are made based on that analysis. To
avoid complexity, some performance variables are taken into consideration while
analysing performance. A brief analysis of bank’s branch performance is done to represent
financial condition with regard to overall performance.
1.5 Limitation of the Study:
I have faced the following obstacles while preparing this report:
 Three months’ time is not enough for such an extensive study. It is very difficult to
collect all the required information in such a short period.
 Loan Disbursement and Recovery Position of Sonali bank ltd., Mahigonj Branch,
Rangpur is highly confidential for the employee.
 Large-scale research was not possible due to constrains and restrictions imposed by
the bank.
 Sufficient records, publications were not available.
 The information was not found in a structured way.
 There were some restrictions to have access to the information confidential by the
authority.
 There was no separate loan recovery division.
 Although bankers have tried their best to help, their nature of job is such that gives
them little time to discuss.
 It was very difficult to get the actual information, because the bank personnel and
officials were sometimes very busy with their Occupational activities. Hence it was
little bit difficult for them to help within their tight schedule.

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Literature review:
Many researches have been conducted to measure the corporate disclosure of financial as
well as non-financial companies. Generally, the financial performance of banks and other
financial institutions has been measured using a combination of financial ratios analysis,
benchmarking, measuring performance against budget or a mix of these methodologies
(Avkiran, 1995). (Spathis, and Doumpos, 2002) investigated the effectiveness of the
financial position of Greek banks based on their assets size. They used several criteria in
their study to classify Greek banks according to the return and operational factors. They
tried to show the differences of the bank’s profitability and efficiency between small and
large banks.
A research paper in the title of efficiency about customer service and financing
performance among Australian financial institutions (Elizabeth Duncan, and Elliott, 2004)
showed that all financial performance measures as interest margin, return on assets, and
capital adequacy are positively correlated with customer service quality scores. Bakar and
Tahir (2009) in their research paper used multiple analysis of linear regression technique
and simulated neural network techniques for predicting bank performance. ROA was used
as dependent variable of bank performance and seven variables including liquidity, credit
risk, cost to income ratio, size and concentration ratio, were used as independent variables.
O’Donnell and Van der Westhuizen (2002) measured the efficiency of a South African
bank at branch level. Their main focus was investigating branches which were performing
well and those that were doing badly, where efficiency could be improved. They found
that many branches were operating on a scale that is too small and could increase their
operational scales thereby improving the overall efficiency of the bank.
But the empirical results of the researches (Raza et al., 2011; Tarawneh, 2006) explained
that a company, which has better efficiency, it does not mean that always it will show the
better effectiveness.
However, the literature concerning the asset and liability management for banks strongly
suggests that risk management issues and its implications must be concentrated by the
banking industry. (Jon R.Presely, 1992) concluded from his study that there is a need for
greater risk management in relation to more effective portfolio management, and this

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requires a greater emphasis upon the nature of risk and return in bank asset structure, and
greater diversification of assets in order to spread and reduce the bank's risks.
Furthermore, Ho and Zhu (2004) have reported that the evaluation of a company’s
performance has been focusing the operational effectiveness and efficiency, which might
influence the company’s survival directly.
Finally, the performance analysis is a way to measure a company’s overall financial
performance by different ratios that reflects company’ financial position. The analysis
provides an idea about company’s operating efficiency and future prospects. For financial
performance analysis, liquidity, profitability, activity and debt ratios are common. Ratios
are key indicator that the performance of a company is poor or well.

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3.1. About Sonali Bank limited:
Sonali Bank Limited is a state-owned leading commercial bank in Bangladesh. It is the
largest bank of the country.
Sonali Bank was established in 1972 under the Bangladesh Banks (Nationalization) Order,
through the amalgamation and nationalization of the branches of National Bank of
Pakistan, Bank of Bahawalpur and Premier Bank branches located in Pakistan until the
1971 Bangladesh Liberation War. When it was established, Sonali Bank had a paid up
capital of 30 million taka. In 2001, it’s authorized and paid up capital were Taka 10 billion
and Taka 3.272 billion respectively. Presently, it’s authorized and paid up capital is Taka
10 billion and Taka 9 billion respectively. The bank's reserve funds were Taka 60 million
in 1979 and Taka 2.050 billion on 30 June 2000.The bank has been converted to a Public
Limited Company with 100% ownership of the government and started functioning as
Sonali Bank Limited from November 15, 2007 taking over all assets, liabilities and
business of Sonali Bank. After corporatization, the management of the bank has been given
required autonomy to make the bank competitive & to run its business effectively.
During 2013, $250,000 was stolen from the bank by Cyber criminals using the Swift
International payments network. In 2016, the Bank signed a legal Memorandum of
Understanding with PayPal.
Sonali Bank has a total of 1211 branches. Out of them, 343 are located in urban areas, 862
in rural areas, and 2 are located overseas. It also operates the Sonali Exchange Company
Inc. in USA and Sonali Bank (UK) Ltd., United Kingdom, to facilitate foreign exchange
remittances. Sonali Bank UK remits up to 14 destinations across Bangladesh directly, these
include Dhaka, Chittagong, Sylhet, Moulvibazar, Beanibazar, Balaganj, Biswanath, Jagan
nathpur, Sunamganj, Gopalganj, Nabigonj, Hobigonj, and Kulauraor Tajpur. There are
currently three branches in the UK, one located in Osborn Street, London, another in Small
Heath; Birmingham and in Manchester.
Sonali bank Limited is governed by a Board of Directors consisting of 11 members. It is
headed by the Managing Directors & CEO, who is a well –known Banker and a reputed

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professional. The corporate head quarter of the bank is located at Motijheel, Dhaka,
Bangladesh. The main commercial center of the capital.
3.2 Corporate Profile of Sonali Bank Limited:
Corporate Profile
Name of the Company : Sonali Bank Limited
Chairman : Mr. Md. Ashraful Moqbul
CEO & Managing Director : Mr. Md. Obayed Ullah Al Masud
Company Secretary : Mr Md. Ataur Rahman
Legal Status : Public Limited Company
Genesis :
Emerged as Nationalised Commercial Bank in 1972,
following the Bangladesh Bank (Nationlisation) Order
No. 1972 (PO No.26 of 1972)
Date of Incorporation : 03 June, 2007
Date of Vendor's Agreement: 15 November, 2007
Registered Office :
35-42, 44 Motijheel Commercial Area, Rangpur,
Bangladesh
Authorised Capital : Taka 6000.00 Crore
Paid-up Capital : Taka 3830.00 Crore
Number of Employee : 18,806
Number of Branches : 1211
Phone-PABX : 9550426-31, 33, 34, 9552924
FAX : 88-02-9561410, 9552007
SWIFT : BSONBDDH
Website : www.sonalibank.com.bd
E-mail : itd@sonalibank.com.bd

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3.3. Organogram of Sonali Bank Limited
Figure: Organogram of SBL
Board of Directors
Managing Directors and
CEO
Deputy Managing Directors - 1
Deputy Managing
Directors - 1
Deputy Managing
Directors - 1
General Managers Field GM at
Divisions - 7General Managers at Head Office -8
Deputy General Managers at Field
Office (GMO, PO and Corp. Br.)
Assistant General Managers at Head
Office
Other Executive SEO, EO, SO officer at
Field Office
Other Staffs at Field Office
Deputy General Managers at
Divisional Head of Head office
Assistant General Managers at Head
Office
Other Executive SEO, EO, SO officer
at Head Office
Other Staffs at Head Office

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3.4. Management Hierarchy of Sonali Bank Limited:
Chairman
↓
Board of Directors (BOD)
↓
Managing Directors (MD)
↓
Deputy Managing Directors (DMD)
↓
General Manager (GM)
↓
Deputy General Manager (DGM)
↓
Assistant General Manager (AGM)
↓
Senior Executive Officer (SEO)
↓
Executive Officer (EO)
↓
Officer
Figure: Management Hierarchy of SBL

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3.5. Vision of Sonali Bank Ltd:
Socially committed leading banking institution with global presence.
3.6. Mission of Sonali Bank Ltd:
Dedicated to extend a whole range of quality product that support divergent needs of people
aiming at enriching their lives, creating value for stakeholders and contributing toward
socio –economic development of the country.
3.7. Slogan:
Your trusted partner in innovative banking.
3.8. Objectives of Sonali Bank:
Sonali Bank has a various types of Objectives. Important objectives of Sonali Bank are as
follows:
1. To collect of deposits
2. To alleviate poverty
3. To secure deposit
4. To inspire savings
5. To create employment
6. To control loan
7. To create medium of exchange
8. To expand trade and commerce
9. To helps in industrialization
10. To increase the capital formation
11. To provide the customers service
12. To earn profit
13. To ensure Regional Development.

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Without those objectives, there are some others too. The bank is responsible to provide all
types of banking services to the door steps of people. The bank participates in various
socio-economic development activities and also takes part in implementation of various
polities and program made by government. As the largest state oriented and professional
managed leading bank of the country.
3.9. Strategic significance of Sonali bank:
As a commercial bank, Sonali Bank has some core responsibilities towards customers,
management, shareholders and other business organizations. The bank is responsible for
sound customer satisfaction through quality and timely services. Like every commercial
bank this bank has some common goals to be met. In the present world, security is a
common talk in wealth preservation .This bank helps clients to securitize their wealth
through secure banking system. Sonali Bank helps the regional development of Bangladesh
by the expansion of loan portfolio to the business, agro-sectors, industry. A unique feature
of sonali bank is that it works in favor of Bangladesh bank by settling commercial
transactions among commercial bank known as clearing house. It has expanded its online
services maintaining competition with others commercial banks such online checking
customers account, Issuing visa and master card to support online transactions, online
settlement of customers account etc. The bank does some social services to create positive
image in the country such as acceptance of scraped money, providing scholarship facility
to meritorious students. Finally, the bank is serving society and more responsive to the
environment through innovation and challenges.
3.10. Functions of Sonali Bank Ltd:
Main functions of Sonali Bank are:-
1 .Deposit collection from customers.
2. Cash transactions through client’s current account.
3. Attending bills of exchange and draft of customers.
4. Loan sanction

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5. Provide online services to the customers
6. Money transfer
8. Collecting different charges, interest dividends, rents, pension etc.
9. Acts as an advisor
10. During the food scarcity they provide food to the government.
11. They participate in the urban banking.
12. They arrange part-time hypothesis for the university’s student.
13. They provide the primary teachers’ salary as a representative of the government.
14. They distribute pension to the retired workers.
15. They distribute and collect the form of passport.
3.11. Sonali Bank core Business:
Figure: Sonali Bank’s core businesses
Project
finance
Corporate
banking
SME Finance
Trade
finance
Consumer
credit
NGO-linkage
loan
Loan
syndication
Rural and
micro Credit
Investment

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3.12. Small & Medium Enterprise (SME)
Sonali Bank Limited emphasizes highest priority on SME financing for eliminating
poverty by increasing SME loan flow at economically underdeveloped area & people
setting up priority base SME credit policy for women & underprivileged entrepreneurs.
Sonali Bank is working for the improvement of their socio – economic condition.
3.13. Corporate Social Responsibility (CSR)
To develop CSR engagements & practices the Bank has taken up leading programs at
lower rate of interest like:
 Special credit program for freedom fighters,
 Special Scholarship brilliant students
 Special credit program for Government Primary School Teacher ,
 Credit Program for overseas Employment,
 Collateral-free group –based Credit Program for the landless & sharecroppers,
 Green Banking programs like biogas & solar plants
3.14. Products of the Bank 3.15. Ancillary services:
 Deposit Products
 Credit Products
 E- services
 Rural Credits
 Ready Cash
 Gas bills.
 Electricity bills.
 Municipal holding Tax.
 Passport fees, visa fees
 Customs & Excise duties.
 Source tax and VAT.
 Jakat fund.
 Hajj deposit.

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3.16. Payment:
 Pension of employees of Government and other Corporate Bodies.
 Bangladesh Bank employee’s pension.
 Army pension.
 British pension.
 Students' stipend/scholarship.
 Govt. & Non-Govt. Teachers' salary.
3.17. Social Services:
 Old age allowances.
 Widows, divorcees and destitute women's allowances.
 Freedom Fighters' allowances.
 Rehabilitation allowances for acid survival women.
 Maternal allowances for poor women.
 Disability allowances.
 Savings Certificates.
 ICB Unit Certificates.
 Prize Bonds.
 Wage Earner's Development Bonds.
 US Dollar Premium & Investment Bond.
 Lottery tickets of different Semi-Govt. And Autonomous Bodies.
 Sanchaypatra.
 Public Service Commission's application form.
 Judicial Service Commission's application form.
 Exchange of soiled / torn notes.
 Misc. Services:
 Bank a/c information on the tax paying client according to demand of NBR.
 Local Governance Support Project.

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4.1. Introduction:
There are many commercial banks in Bangladesh. Sonali Bank Ltd. is one of them, now it
is one of the largest commercial govt. bank in Bangladesh .It has 1209 branches all over
the country and Mahigonj Branch is one of them. As it is situated at situated at the nearest
point of the Rangpur town, its function is very much large in nature.
4.2. Establishment and location of Sonali Bank Ltd., Mahigonj Branch:
Sonali Bank Ltd., Mahigonj Branch had started its operation in December 29, 1983 at the
nearest point of the Rangpur town. This branch covers the Mahigonj region side by side
other region for the betterment of services to the people.
4.3. Managerial function of the Sonali bank ltd., Mahigonj Branch:
The present manager of this branch is Md. Shekh Farid who is responsible for all sorts of
banking activities answerable to the Head Quarter and Regional officers for any kind of
failure and misdeeds. The manager is also responsible for overall development and
administration of the bank. Therefore, he keeps himself busy for mobilization and
management of fund. The officers are therefore delegated powers from the manager, who
exercise maximum power excepting few important cases .Other officers also enjoy powers,
of course, restricted to certain degree.

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4.4. Sonali Bank Ltd, Mahigonj Branch at a glance:
Name of the branch Sonali Bank ltd, Mahigonj Branch
Establishment Date December 29, 1983 as a branch of Sonali Bank. Then it starts
its function.
Location Nearest point at Rangpur town (Sorower Market, Mahigonj)
Head office 35-42,44 Motijheel Commercial Area, Dhaka, Bangladesh
Financial Year January 1 to December 31
Number of employees 12
Number of shift 1 (10 am to 5 pm)
Number of telephone 2
Thana Rangpur Sadar
District Rangpur
4.5. Organizational structure of this Branch:
Senior Executive Officer (SEO)
↓
Executive Officer (EO)
↓
Officer
↓
Peon
Figure sources: Sonali Bank, Mahigonj Branch, Rangpur

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4.6. Departments of Mahigonj Branch:
 Account Operating Department
 General Banking Department
 Loan & Advance Department
 Deposit Department
 Cash Department
 Clearing Department
 Accounts Department
4.7. Objectives of this Branch:
Since this branch situated at the Nearest Rangpur town, so its objective is to actively
participate in the economic development of this area by giving loan in the different sectors
and collect deposit from the people. By collecting deposit, the bank gives loans to its
clients. The objectives of this branch is not different from the objectives of Sonali Bank
Limited. Sonali Bank offers low interest rate, so that small traders can take loan from this
bank and invest to their trade. So, main objective of this branch is the participation in the
trade and commerce as well as socio-economic development of this area.
4.8. Financial Highlights of SBL, Mahigonj Branch :( amount in lakhs)
Particulars 2014 2015 2016 2017
Total Income 436.62 630.47 745.16 206.04
Total cost 299.87 485.65 775.39 202.75
Net profit 4 (74) (30.24) 3.29
Total Deposit 6180.87 7832.11 2118.2 1948.61
Total Loan &
advance
2921.55 2119.81 2337.86 2595.61
Total assets 9192.49 7562.84 15324.75 16909.98
Total Liabilities 9192.49 7562.84 14579.6 16703.05

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4.9. Three Years Comparative Financial Budget and Performance of SBL
Mahigonj Branch: (amount in lacks)
Items Target
(2015)
Actual
(2015)
Rate
(%)
Target
(2016)
Actual
(2016)
Rate
(%)
Target
(2017)
Actual
(2017)
Rate
(%)
Deposit 1897 1759 93% 2000 2118 106% 2350 1948 83%
Advance 2415 2120 88% 2400 2338 97% 2500 2597 104%
Income 3 (74) -
1850%
1 (30) -
3000%
1 3.39 339%
Foreign
remittance
8620 7170 83% 8500 7830 92% 8600 7940 92%
Comment: In this brief analysis, over last 2 financial year, the bank was in a great loss but
recovered in 2017 to 3.09 lacks. This was a great achievement for this branch. Others
sectors were consistent with the previous years. As per I know about the reason behind the
great loss of this branch is that the house building staff loan amount was a large amount
with a low interest rate. A large amount of deposits remained unused in unproductive sector
that means House loan for staff. In 2017, the amount was almost (135165993.71) half of
the total loan and advances. But the bank had to pay interest rate more than that of housing
loan. Without this, the interest suspense amount is increasing year to year proving the
inefficiency of bank’s branch authority to recover the suspense amount. In SME financing,
the amount of loan is negligible. The Bank’s manager should offer some attracting scheme
for Businessmen to take the banking facility to expand their Business.

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Analysis
The financial performance analysis of Sonali Bank is given below:
5.1. Liquidity Ratio Analysis
(a). Current ratio:
The current ratio, one of the most commonly cited financial ratios, measures the firm’s
ability to meet its short term obligations. The higher the current ratio, the better the liquidity
position of the firm. It is expressed as: “Current Ratio=Current Asset/Current
Liabilities”.
Table-1: Current Ratio
Graphical Presentation:
Figure-1: Current Ratio
Interpretation: The higher the current ratio; the more liquid the firm is considered to be.
SBL’s current ratio is good enough because it maintains more than 1 tk current assets
against 1tk current liabilities whereas normally banking industry maintains 1: 1 current
ratio. This graph shows that, the current ratio in 2012 is low but with the passage of time it
increases. In 2013, the ratio is so higher than 5 financial year but decreased to 1.46 in
2016.The ratio is good but somewhat worse performance than previous year’s
performance.
1.37
2
1.83 1.86
1.46
0
0.5
1
1.5
2
2.5
2012 2013 2014 2015 2016
Current Ratio
Current Ratio
Year 2012 2013 2014 2015 2016
Current Ratio 1.37 2 1.83 1.86 1.46

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(b). Net Working capital
Net working capital, although not actually a ratio is a common measure of a firm’s overall
Liquidity a measure of liquidity ratio calculated by “Net Working capital=Current Asset-
Current Liabilities”.
Year 2012 2013 2014 2015 2016
Net Working Capital( In million) 61798 152912 143848 170775 122847
Table-2: Net Working capital
Figure-2: Net Working Capital
Interpretation: Net working capital of SBL gradually decreasing in Year by Year
However, the bank cannot able to meet up its current obligations. So the Bank should
increase its Current asset.
61798
152912 143848
170775
122847
0
50000
100000
150000
200000
2012 2013 2014 2015 2016
Net working Capital
Net working Capital

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(c). Cash Ratio:
It is the ratio of a company’s total cash and cash equivalents to its current liabilities. The
cash ratio is most commonly used as a measure of company liquidity. It can therefore
determine if, and how quickly, the company can repay its short-term debt. A strong cash
ratio is useful to creditors when deciding how much debt, if any, they would be willing
to extend to the asking party. The ratio is calculated by “Cash ratio = Cash in hand at
banks/Total deposit x 100”.
Year 2012 2013 2014 2015 2016
Cash Ratio 7.75% 8% 6.7% 7.15% 7%
Table-3: Cash ratio
Figure-3: Cash ratio
The fall of 2014 and 2016 can be attributed to the growing loans and deposits given and
accepted by the bank. Growing loans make the cash in hand and at banks smaller, while
growing total deposits made the denominator of the cash ratio larger, thereby making the
numerical figure of the ratio smaller.
7% 7.15%
6.70%
8%
7.75%
6%
7%
7%
8%
8%
9%
2012 2013 2014 2015 2016
Cash Ratio
Cash Ratio

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5.2. Debt Ratio Analysis:
(a). Debt ratio:
The debt ratio measures the proportion of total assets financed by the firm’s creditors. The
higher this ratio, the greater the amount of other people’s money being used to generate
profits. The ratio is calculated by “Debt ratio= Total Liabilities/Total Assets x 100”.
Year 2012 2013 2014 2015 2016
Debt Ratio 97% 94% 94% 93% 94%
Table-4: Debt ratio
Figure-4: Debt ratio
Interpretation:
This graph shows that, the debt ratio was high in 2012 but sharply decreased in 2013. The
Debt ratio measures, the proportion of total assets provides by the firm’s creditors. Their
debt ratio were decreasing trend that indicates positive sign.
97%
94% 94%
93%
94%
90%
92%
94%
96%
98%
2012 2013 2014 2015 2016
Debt Ratio
Debt Ratio

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(b). Times interest earned ratio:
Times interest earned ratio, sometimes called the interest coverage ratio, measures the
Bank’s ability to make contractual payments. The higher its value, the better able the firm
is able the bank is to fulfill its interest obligations. The times interest ratio is computed by
“Times interest earned ratio=Earnings before interest and Tax/Interest”.
Year 2012 2013 2014 2015 2016
Times interest earned ratio 0.28 1.57 3.15 0.80 5.10
Table-5: Times interest earned ratio
Figure-5: Times interest earned ratio
Interpretation: This graph shows that, the times interest earned ratio was low but
gradually increased over 3 years. In 2015 the ratio sharply decreased and a sharp increase
in 2016. The time interest earned ratio, sometimes called the interest coverage ratio,
measures the firm’s ability to make contractual interest payments. The higher the value,
the better the firm’s ability to fulfill its interest obligations. A value of at least 3 to 5 is
often suggested. Here, the performance of 2016 is notable than previous years.
0
5
10
Times interest earned ratio
0.28
1.57
3.15
0.8
5.1
Times int. earned ratio
2012 2013 2014 2015 2016

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5.3. Activity Ratio Analysis:
(a). Cost Income Ratio: The “cost income ratio (CIR)” or “cost-to-income ratio” shows
the relation between income and the cost of acquiring that income. The CIR is an important
measure of bank performance. As a rule, the lower a bank’s cost-to-income ratio, the more
efficiently a bank operates. It is calculated by “Cost Income Ratio=Total operating
Expenses/Total Operating Income x 100”.
Year 2012 2013 2014 2015 2016
Cost income Ratio 50.72% 80.08% 60.16% 61.89% 94.01%
Table-6: Cost Income Ratio
Figure-6: Cost Income Ratio
Interpretation: We know that this ratio measures the operating efficiency of the bank by
measuring the portion if the total operating costs relative to the total operating income of
that bank and the higher the ratio, the lower the operating efficiency. In 2013 the operating
cost of Sonali Bank Ltd. is high but after that it sharply decreases 1n 2014 but sharply
increases in 2016. So it can be said that the operating efficiency of the Sonali Bank Ltd. is
in not good position that is they are not able to minimize their operating cost.
50.72%
80.08%
60.16% 61.89%
94.01%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
2012 2013 2014 2015 2016
Cost to income Ratio
Cost to income Ratio

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(b). Total Asset Turnover Ratio:
The total asset turnover indicates the efficiency with which the firm is able to use all its
assets to generate sales. But in Bank, I took operating income alternative to sales. It is
calculated by, “Total Asset Turnover= Operating Income/Total Asset x 100”.
Year 2012 2013 2014 2015 2016
Total Asset Turnover 1.46 .35 .91 .843 0.354
Table-7: Total Asset Turnover
Figure-7: Total Asset Turnovers
Interpretation: Generally, the higher a firm’s total asset turnover, the more efficiently its
assets has been used. This measurement is probably of greatest interest to management,
because it indicates whether the firm’s operations have been financially efficient. This
exactly means how many times the company turns over its assets per year. The greater the
total asset turnover, the company is more efficient and 4 to 6 times is standard position but
also depends on industry. Here, SBL’s total asset turnover ratio is decreasing after 2014 to
2016 which is not a good sign.
1.46
0.35
0.91 0.843
0.354
0
0.5
1
1.5
2
2012 2013 2014 2015 2016
Total asset turnover
Total asset turnover

26
(c). Capacity ratio:
Capacity ratio is the ratio of net loans and leases to total assets. It is a negative
liquidity indicator, because loans and leases are often among the most illiquid assets that a
bank can hold. SBL’s capacity ratio is given below. The ratio is “Capacity Ratio= Total
loan and Advances/Total assets”.
Table-8: Capacity ratio
Graphical Presentation
Figure-8: Capacity Ratio
Interpretation: The lower the capacity ratio of a bank, the better the position. The ratio is
decreasing gradually since 2012 to 2016 and the bank is performing well.
50%
40%
36% 34% 32%
0%
10%
20%
30%
40%
50%
60%
2012 2013 2014 2015 2016
Capacity Ratio
Capacity Ratio
Year 2012 2013 2014 2015 2016
Capacity Ratio 50% 40% 36% 34% 32%

27
(d). Investment to Deposit ratio:
Investment deposit ratio basically give information that where bank is using their deposits.
It may be in the economic wealth development or in some special area where regional
development must be done like Agriculture. SME loan for small and medium business is
another sector for investment to earn more interest. The ratio is “Investment to Deposit
Ratio=Total investment/Total Deposit”.
Table-9: Investment to Deposit Ratio
Figure-9: Investment to Deposit Ratio
Interpretation: Investment to deposit ratio shows that which amount of deposit is used
to as investment. Sonali Bank Ltd. investment to deposit ratio is increasing year by year
.That means, Bank is properly using their deposits in different profitable sectors in the
domestic and foreign arena.
Investment to deposit ratio
2012
2013
2014
2015
2016
0.25
0.4 0.42 0.47
0.45
Investment to deposit ratio
2012 2013 2014 2015 2016
Year 2012 2013 2014 2015 2016
Investment To Deposit
Ratio
0.25 0.40 0.42 0.47 0.45

28
5.4. Profitability Ratios:
(a). Operating profit per branch:
Profit per branch is also a good indicator of the financial performance of the bank. Sonali
Bank is expanding its branch year by year to innovate banking industry and to reach the
core areas of home country for providing banking services. The ratio is “Operating Profit
per branch= Total operating profit/No of branches”.
Year 2012 2013 2014 2015 2016
Operating profit per
branch(in million)
9.2 2.47 7.1 7.17 3.52
Table-10: Operating profit per branch
Figure-10: Operating profit per branch
Interpretation: The profit per branch is not the financial indicator because the branches
are increasing year to year. Last year 2 branches were increased without any contribution
to profit. But it is a good indicator that the profit figure is positive on an average per branch
but there actually losses for too many branches.
9.2
2.47
7.1 7.17
3.52
2012 2013 2014 2015 2016
Operating profit per branch
Operating profit per branch

29
(b). Net Profit Margin:
The net profit margin measures the percentage of each sales dollar remaining after all
operating expenses, VAT, preferred dividends and interest. The higher the firm’s net profit
margin, the better the financial condition of Bank. The net profit margin is a commonly
cited measure of the company’s success with respect to earnings on sales. Ratio is “Net
Profit Margin=Net profit after tax/operating income”.
Year 2012 2013 2014 2015 2016
Net Profit Margin (226%) 120% 71% 7% 36%
Table-11: Net Profit Margin
Figure - 11: Net Profit Margin
Interpretation: The Bank net profit margin in 2012 was negatively high that is (226%).
But in 2013 SBL recovered from worst situation and then slight increased but sharply
decreased in 2015. The last year’s position was positive and good.
-226%
120%
71%
7%
36%
-300%
-200%
-100%
0%
100%
200%
2012 2013 2014 2015 2016
Net Profit Margin
Net Profit Margin

30
(c). Return on Asset (ROA):
The return on asset (ROA), which is often called the firm’s return on total assets, measures
the overall effectiveness of management in generating profits with its available assets. The
higher the ratio, the better. The formula is “Return on Asset (ROA) =Net Profit after
tax/Total Asset x 100”.
Year 2012 2013 2014 2015 2016
Return on
Asset
3% 0.42% 0.65% .06% .13%
Table-12: Return on Asset
Figure-12: Returns on Asset
Interpretation: The bank’s return on asset was strongly positive in 2012 but sharply
decreased in 2013 and recovered somewhat in 2014. In 2015, it was lowest but increased
in the last year. The positive figure (ROA) indicates that the Bank is performing well. We
can notice that performance is positive but not as like as 2012. A slight increase in ROA
brings hope that the Bank’s performance is going to be well in near future.
2012
2013
2014
2015
2016
3%
0.42% 0.65%
0.06%
0.13%
Return on Asset (ROA)
2012 2013 2014 2015 2016

31
(d). Return on Equity (ROE):
The return on equity measures the return earned on the common stockholders’ investment
in the firm. Generally, the higher this return, the better off the owners are. Return on Equity
is calculated by, “Return on Equity=Net Profit after Tax/ Shareholders equity x 100”.
Year 2012 2013 2014 2015 2016
Return on Equity (104%) 7.2% 10% .82% 2.25%
Table-13: Return on Equity
Figure -13: Returns on Equity
Interpretation: The banks return on equity recovered from the worst situation in 2012 to
2014. In 2015 the ratio decreased to .82% only but increased in 2016 .The fluctuation of
ratio indicates management inefficiency. So, they should be attentive about shareholders
wealth. They should work hard to increase the return associated with equity.
-104%
7.20% 10.00% 0.82% 2.25%
-120%
-100%
-80%
-60%
-40%
-20%
0%
20%
2012 2013 2014 2015 2016
Return on Equity (ROE)
Return on Equity (ROE)

32
(e). Earnings per Share:
The firm’s earning per share (EPS) generally represents earning of shareholders on their
respective shares. The Earning per share represent the number of dollars earned on behalf
of each outstanding share of common stock. The higher the earnings, the better the financial
position. The earnings per share is calculated as follows: “Earnings per Share =Earnings
available for common stock holder/No of shares of common stock outstanding”
Table-14: Earnings per Share
Figure-14: Earnings per Share
Interpretation: The graph shows that, in 2012 earnings per share of SBL’s is highest
negative than next 4 years. But in 2013 and 2014 the ratio was so good but a gradual
decrease is the main concern for the 2015. Net profit margin reduction that means bank’s
operating result is decreasing. A slight increase in 2016 proves that management is trying
to overcome with the operating efficiency.
Year 2012 2013 2014 2015 2016
EPS(in Taka) (221.86) 31.82 32.12 1.53 3.96

33
(f). Equity to Net Loans
This ratio forms part of the Capital and Funding ratios of a bank and measures a
company’s financial leverage by calculating the proportion of equity and debt the company
is using to finance its assets. Total equity covers total equity reserves, total share capital
and treasury stock. Net loans include loans to banks or credit Institutions, customer net
loans and loans to group companies. The ratio is as follows, “Equity to net loans=Total
equity/Net loans”.
Year 2012 2013 2014 2015 2016
Equity to net loans 5.8% 14.5% 17.75% 21% 17%
Table-15: Equity to net loans
Figure-15: Equity to net loans
It was 5.8% in 2012 and developed to 14.50% in 2013. It dropped again to 17% in 2016.
The fluctuations in the ratio from 2012 to 2016 can be explained by changes in the manner
of financing. Both the total equity and net loans increase in 2015 which results in greater
equity to net loans ratio. But in 2016 the net loans increased significantly which took the
ratio down again.
2012
2013
2014
2015
2016
5.8%
14.50% 17.75% 21%
17%
Equity to net loans
2012 2013 2014 2015 2016

34
(g). No. of Loss Branches:
The branches of sonali bank are increasing year to year. In 2012, there were 1200 branches
but over 5 years they increased to 12011. The number of loss branches are as below:-
Table 16. No. of loss branches
The branch is increasing that’s no problem but the numbers of loss branch is increasing
that’s the main problem. From the 2012 the number of loss branches decreased to 2014 but
after that the sharp increase of loss branches is the main concern of SBL shareholders. The
overall profit did not decrease respectively with regard to the no. of loss branches, because
the profit of some branches are so much enough to recover the loss branches.
53
47
31
126
233
0 50 100 150 200 250
2012
2013
2014
2015
2016
No. of loss Branches
No. of loss Branches
Year 2012 2013 2014 2015 2016
No. of loss branches 53 47 31 126 233

35
5.5 Summary of Financial Ratios:
Particulars 2012 2013 2014 2015 2016
Current Ratio 1.37 2 1.83 1.86 1.46
Cash Ratio 7.75% 8% 6.7% 7.15% 7%
Debt Ratio 97% 94% 94% 93% 94%
Times interest
earned ratio
0.28 1.57 3.15 0.80 5.10
Cost income
Ratio
50.72% 80.08% 60.16% 61.89% 94.01%
Total Asset
Turnover
1.46 .35 .91 .843 0.354
Capacity Ratio 50% 40% 36% 34% 32%
Investment To
Deposit Ratio
0.25 0.40 0.42 0.47 0.45
Net Profit
Margin
(226%) 120% 71% 7% 36%
Return on
Asset
3% 0.42% 0.65% .06% .13%
Return on
Equity
(104%) 7.2% 10% .82% 2.25%
EPS(in Taka) (221.86) 31.82 32.12 1.53 3.96
Equity to net
loans
5.8% 14.5% 17.75% 21% 17%

36
A short summary is a slice reflection of whole analysis of the report. For time convenience,
I listed all the ratios in a single table that reflects the whole analysis. Here, we can see that
the liquidity ratio comprised of current and cash ratios is somewhat well though the current
ratio in last year (2016) is 1.46.
The debt ratio analysis comprised of debt ratio and times interest coverage ratio. As we
know, the higher the debt ratio, the higher the chance that the firm may fall into insolvency.
Here, the debt ratio is high over the years but not likely as 2012. The time interest coverage
ratio is another important ratio because the standard range is 3.0 to 5. Here, the ratio is
inconsistent over the years and there is a greater fluctuations though the last year’s position
was excellent.
The activity ratio analysis consist of cost income ratio, total asset turn over, capacity ratio
and investment to deposit ratio. The cost income ratio reflects efficiency. The lower the
ratio, the higher the performance. Here, over the years the ratio was somewhat consistent
but last year’s (2016) ratio is one of the main hindrance of good performance of SBL. The
total asset turnover ratio is decreasing over the years. It is one of the important ratio to
investigate because it is another cause of poor performance. In deposit collection SBL is
doing well.
The profitability ratio analysis consist of net profit margin, ROA, ROE, equity to net loans
ratio. The net profit margin was too much negative in 2012 because the bank had to pay a
large amount of deferred tax payment and over the years it is good enough. ROA and ROE
prove that management is not efficient to capture the all the branches because the number
of loss branches are increasing year to year that reduces the ROA and ROE. The equity to
net loans is on an average consistent over the years.

37
5.6. SWOT analysis of Sonali Bank Limited:
Strengths Weaknesses
 SBL has already established a
favorable reputation in the in
baking industry of the country
 It has more reliability and
feasibility than any other
commercial bank
 Bank has many attractive deposit
schemes.
 State owned bank
 The number of depositors are more
than other bank.
 A good number of experienced
bankers in its management
 Most profitable bank in
Bangladesh
 The activities of bank are
maintained manually in the rural
area
 Low remuneration package
 Training programs are not frequent
for the employees.
 Complex credit policy.
 Bureaucratic complexity in
Management
Opportunities Threats
 High contribution in economic
development
 The Branch has no efficient
marketing officers
 High demand of small
enterprise financing
 Money transfer easily in any
branches globally.
 Competitors have more flexible
deposit scheme.
 Increased competition for
market share in the industry
 There have no available high
technology
 The employees take more time
to work that people dislike

38
5.7. Findings
After collecting and analyzing data, I have got some findings. These findings are
completely from my personal point of view. Those are given below.
Sonali bank as a nationalized commercial bank achieved a favorable reputation in not only
Bangladesh but also in foreign country. It is one of the leading government Bank in
Bangladesh. The bank has already shown a tremendous growth in profits and deposits. The
bank successfully stepped in to the 45 year of operation having enjoyed the complete
confidence of the depositors and achieving significant growth in the entire areas of banking
operations. I saw that the profit of Sonali bank as a commercial bank, is low but as a
government commercial bank, it is remarkable in Bangladesh. It has a wide spread
networking facility. That means, the every Upzila has at least one branch of Sonali Bank.
But the others banks have no such facility.
To tell specifically, the liquidity position was well previous years but last year’s current
ratio was not up to the mark. The higher the ratio, the more the liquidity. But excess
liquidity reduces profitability. A manager must offset between liquidity and profitability.
Last year (2016) the liquidity ratio was 1.46 with maintaining on an average link with
previous years. Without this, cash ratio and net working capital was good enough. I think
the liquidity position is enough to run operations.
In Debt ratio, the debt position of a firm indicates the amount of other people’s money
being used to generate profit. In general, the financial analyst is most concerned with long
term debts, because these commit the firm to a stream payments over the long run. Because
creditors claim must be satisfied before the earnings can be distributed to shareholders,
current and prospective shareholders pay close attention to the firm’s to repay debts. Here,
the debt ratio is spread by (94%-97%).That means 94-97% is leverage on the total assets.
But the times interest ratio is good enough to meet up the fixed financial charges. My
analysis shows that the bank took deposits from the customer at a low rate but invested the
funds at high rate. To prove this, I can give a reference that Sonali Bank already declared
that they collected 1 trillion deposits from the customers. A great achievement for them
compering to all national commercial banks.

39
In activity ratio, we can see that the ratio fluctuates among the years. Cost to income ratio
measures that how much expenses are incurred to generate profit. The ratio of 2016 was
high than 2015. I found some reasons behind that increasing in Rent, Tax, and Electricity
and employee salary are the main elements. The same reason is applicable to total asset
turnover ratio. A good sign is found in investment to deposit ratio because the bank
collected idle deposits from the customers and invested properly. The bank recovered from
the poor positions in 2012 to rich position in 2016.
In profitability ratio, as per my analysis, I saw that sharp decrease in profit in 2012 was
caused by the large flow of deferred tax payment and other provisions. The diminution of
investment in 2015 causes a large cash flow out side of the bank for this the profit was low.
But in 2016 somewhat there no such large cash out flow. Everything was normal and the
profit margin was well. Hence, the ROA and EPS was consistent with the net profit margin.
But the equity loan and ROE ratio was low because of the bank’s ability to raise a well
collection of deposit from the Customer.
In summary, as a largest commercial bank and the agent of Bangladesh Bank Sonali Bank
has to do various types of work without thinking about the profit. For this reason we have
seen that in some cases bank has doing loss, but though loss we cannot directly say that its
bank’s failure. This is happening only for helping the nation. On the other hand we have
seen that the bank profit increasing rate is poor but increasing. The bank is highly liquid
and earns much profit on owner’s equity. Bank’s operating efficiency is good. EPS is
becoming double per year and earning spread is also increasing. So, after all we can say
that as a nationalized bank commercial bank Sonali Bank Limited is a bank which is
earning better than other nationalized bank.

40
6.1 Conclusion:
The Sonali Bank limited is not only a commercial bank but also a government bank. As a
commercial bank, it has many general functions like other commercial bank. Collection of
core deposits from the customers from urban and rural areas and investing those deposits
as an investment to different sectors in the economy like industry, agriculture, business,
power plants, telecommunications etc. Without those the bank has a great contribution in
the green banking to protect the environment with the climate change challenges globally.
As a government bank it has core responsibility to maintain pension services by the
government to the different govt. employees. A great responsibility is performed by the
bank is the clearing housing function on behalf of the Bangladesh bank. The Bank is
strongly positioned in the market and with its core strengths it can match shareholders’
expectations and thus raise their wealth in future through ethical banking and best pricing.
So, the motive of profit generation like private commercial bank is not the ultimate goal of
SBL but to provide a better services for the economic development of country. In spite of
trying to do well in some aspects Sonali Bank limited faced some financial problems from
the time to time. Some of the problems were – excessive bad loans, shortage of loans and
advances, quality deposits, scarcity of cash in hands due to vault limit etc. Those problems
arouse due to economic slowdown, interest rate fluctuation, emerging capital market and
inflation in the money market. For this, the helping hand of government is essential and it
is expected that govt. will broaden its hand for implementing the recommendations for the
welfare of the people of Bangladesh.

41
6.2 Recommendations:
In my internship period, I tried to look something deeply that what are the actual problems
behind the backward positions of Sonali Bank than other private commercial banks. From
my analysis and point of view, some recommendations are as follows-
1. Lack of proper utilization of human resources across the bank. Some branches have
excess employees without having works and some others have excessive work load
without human resources to tackle the pressure. There need a good optimization of
recruiting and employment of human resources.
2. ATM facility of Sonali bank is so low to run banking transactions for
ATM/VISA/Master Card holders. I personally visited Rangpur city area and saw
only one ATM booth of SBL in one place but a lots of other banks ATM booths.
3. Sonali bank is under online facility. That’s ok but the facility provided by the Bank
is too poor to maintain the cyber security. So, proper internet security and bearing
all branches under CC Camera is essential.
4. In bad debts recovery sectors, the bank sometimes indifferent to overlook the
clients. The management body should give proper guidance regarding this.
Director’s interference in case of giving loan should be lessened because in this
way risk may increase and bad debt may also increase. The root level managers
should be encouraged to recover bad debts from default clients.
5. The infrastructural facility of Sonali bank is not good enough to run the banking
system. Some offices are not provided with proper facility. So, this should be taken
in the special consideration.
6. There should be proper incentives for the employees to carry out the banking
functions properly. Because motivations, communication with employees are the
major tools to utilize the human forces properly. Over time allowances can be
allowed as per extra working hours.

42
7. Bangladesh Bank should impose the rule of uniformity for all types of schemes. By
this way customers can decide from where they will receive service based on the
service quality and organizational environment.
8. The website design is need to improve. Therefore, the website design should be
changed and can put more information about the bank. The existing design cannot
capture the customer’s attention.
9. Upper level management should give some power to the Branch Managers for
sanctioning loans for the purpose of foreign trade up to a certain limit. So that, they
can provide loan to their valuable clients when they are in shortfall of funds on
emergency basis.
10. The Top management of Sonali Bank Limited should be more effective to the
employee then current situation. Because they should take care the branch level
employee’s benefits, opportunities etc.
11. The Bank should use less debt financing and should give more emphasis on equity
financing.
12. Target of profit is an old trend of SBL. To increase profitability the management
body should point out that which sector needs development and must be done by
time frame.

43
6.3 References
To prepare this report I have collected data mainly from annual reports of Sonali Bank
Limited, different books regarding ratio analysis, the websites of Bangladesh Bank and
others websites about ratio analysis. The references are given below:
Annual Reports
 Annual Report of Sonali Bank Limited,2016
Books
Kemal Avkiran, N., 1994. Developing an instrument to measure customer service quality
in branch banking. International journal of bank marketing, 12(6), p.10-18.
Bakar, N.M.A. and Tahir, I.M., 2009. Applying multiple linear regression and neural
network to predict bank performance. International Business Research, 2(4), p.176.
Duncan, E. and Elliott, G., 2004. Efficiency, customer service and financial performance
among Australian financial institutions. International Journal of bank
marketing, 22(5), p.319-342.
Ho, C.T. and Zhu, D.S., 2004. Performance measurement of Taiwan's commercial
banks. International Journal of Productivity and Performance Management, 53(5),
p.425-434.
Presley, J.R., 1992. The problem of Risk management in banking in Oil-rich Gulf
Economies. International Journal of bank marketing, 10(1), p.36-40.

44
O’Donnell, C.J., and van der Westhuizen, G., 2002. Regional comparisons of banking
performance in South Africa. The South African Journal of Economics 70 (3),
p.485-518.
Raza, A., Farhan, M. and Akram, M., 2011. A comparison of financial performance in
investment banking sector in Pakistan. International Journal of Business and Social
Science, 2(9).
Spathis, C., Kosmidou, K. and Doumpos, M., 2002. Assessing profitability factors in the
Greek banking system: A multicriteria methodology. International Transactions in
operational research, 9(5), p.517-530.
Websites
 http://www.bangladesh-bank.org/fnansys/bankfi.php
 http://www.Sonalibankltd.com
 http://www.wikipedia/sonali bank ltd
 http://www.investinganswers.com
 http://www.investopedia.com

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