View
218
Download
0
Category
Preview:
Citation preview
8/3/2019 Finance Finance MBL Final Finished by MFM
1/40
ASA UNIVERSITY BANGLADESH
AssignmentOn
Ratio Analysis of Mercantile Bank Limited
Course title: Principles of Financial
Course Code: FIN-214
Submitted to:
Mohd. Takdir Hossan
Course Instructor
Faculty of Business Studies
ASA University Bangladesh
Submitted by
Name ID Section Semester
071-12-320 Summer-2010
071-12-320 Summer-2010
071-12-320 Summer-2010
071-12-320 Summer-2010
071-12-320 Summer-2010
Date of Submission: August 31, 2010
8/3/2019 Finance Finance MBL Final Finished by MFM
2/40
Acknowledgement
On behalf of the Board of Directors, I wish to extend our sincere gratitude to all of our
valued shareholders who have over the years supported us in our quest to take MercantileBank to greater heights of achievement and success. I also intend to thanks our valued
clients for their continuous support. The confidence that the shareholders and clients have
on us has always been the source of our strength and inspiration.
We are thankful to the Government of the People's Republic of Bangladesh, Governor of
the Bangladesh Bank, Securities and Exchange Commission, Dhaka Stock Exchange,
Chittagong Stock Exchange, our respected Shareholders, valued Customers, Patrons and
Well-wishers for keeping their faith and trust on us to move forward.
Finally, I wish to thank all my colleagues in the Board for their important contribution to
the Bank's strategic thinking and most for their strong leadership in view of the current
operating environment. Their relentless support and commitment during the year were
invaluable. I also appreciate the Management Team and the dedicated Staff Members of
the Bank for their untiring commitment, loyalty and sincerity to the Bank.
We believe Mercantile Bank Limited is in great shape and well poised to meet the
challenges of 2010 and beyond. We have a fine team of people, a shared set of priorities,
a proud tradition of success and are eagerly looking forward to another year of success.
2
8/3/2019 Finance Finance MBL Final Finished by MFM
3/40
History:
Mercantile Bank Limited emerged as a new commercial bank to provide efficient
banking services and to contribute socio-economic development of the country. The Bank
commenced its operation on June 2, 1999. The Bank provides a broad range of financial
services to its customers and corporate clients. The Board of Directors consists of
eminent personalities from the realm of commerce and industries of the country.
Vision: Would make finest corporate citizen.
Mission: will become most caring, focused for equitable growth based on diversified
deployment of resources, and nevertheless would remain healthy and gainfully profitable
Bank.
Objectives:
to achieve positive Economic Value Added (EVA) each year.
to be market leader in product innovation.
to be one of the top three Financial Institutions in Bangladesh in terms of cost
efficiency.
to be one of the top five Financial Institutions in Bangladesh in terms of
market share in all significant market segments we serve.
to achieve 20% return on shareholders' equity or more, on average.
3
8/3/2019 Finance Finance MBL Final Finished by MFM
4/40
Performance of the Bank in 2009: The Year 2009 was the challenging one for the
financial sector. The incessant fall-out of international credit market due to world
economic meltdown resulting sluggish growth has put significant pressure on financial
performance of banks and financial institutions worldwide. Mercantile Bank Ltd.
Achieved continuous growth in almost all arenas of its business despite this economic
crisis, facing intensified competition of the industry. The Bank remained in financial
strong position with its continued focus on the vision of becoming country's finest
corporate citizen, providing excellent and need-based customer service.
The Bank mobilized deposits of BDT 58.30 billion as at December 31, 2009 compared to
BDT 49.54 billion, till 2008. Total loans and advances stood at BDT 48.30 billion at the
end of 2009 that was BDT 41.99 billion at the end of 2008. Import business stood at BDT60.59 billion in 2009 compared to BDT 56.53 billion in 2008. Export business stood at
BDT 46.30 billion in 2009 as against BDT 43.11 billion in 2008. The Bank collected
foreign remittance of BDT 5.06 billion in 2009 compared to BDT 4.72 billion in 2008.
In 2009, the Bank was able to make profit before Tax of BDT 1.66 billion as compared to
1.28 billion indicating 29.73% growth. Net profit attributable to shareholders stood at
BDT 807.52 million. The return on equity remained 18.80% during 2009 and Earning per
Share (EPS) stood at BDT 37.41. Non Performing Loan (NPL) ratio reduced to 2.54% in
2009 as compared to 2.86% in 2008. MBL made adequate provision against Classified
Loans which is significantly higher than last year. Adequate provision made the Bank
stronger than before. Tier-1 Capital stood at BDT 4.24 billion at the end of 2009
compared to that of BDT 3.47 billion at the end of 2008. Tier-2 Capital reached to BDT
758.91 million at the end of December 2009 as compared to that of BDT 660.29 million
at the end of 2008. Return on Assets (ROA) increased to 1.22% in 2009 from 1.10% in
2008 and Return on Equity (ROE) also increased significantly to 18.80% from 17.75% in2008. The Capital Adequacy Ratio (CAR) increased to 10.48% in 2009 as against that of
10.17% in 2008. Net Interest Margin (NIM) stood at 3.58% at the end of 2009,
suggesting a healthy growth in Net Interest Income.
4
8/3/2019 Finance Finance MBL Final Finished by MFM
5/40
Prospects in 2010:
The year 2010 has started with a new hope and potential. New opportunities for the
banking industry are waiting, including Mobile and Internet Banking. With a political
government in power and a strong foreign exchange reserve of more than 10 billion USD,
the hope that the congenial business atmosphere will prevail is not illusory. Political
stability is an important issue in this regard. A stable political situation boasts up the
confidence of the investors. As a result, economic activities of the country are expected to
get its momentum. This vibrant economic condition will certainly go in favor of the
banking industry. Under these circumstances, we do strongly believe that with the
patronization and co-operation of our valued clients and shareholders, our efficient and
energetic workforce would be able to achieve significant growth in 2010 and subsequent
years by capitalizing the new opportunity created in the banking sector.
Future Outlook of MBL
While the year 2010 is expected to be a tough one for the financial service sector, as the
global financial turmoil is not over and the resurgence of the world economy is sluggish.
However the Board of Directors of the Bank is optimistic about the Bank's prospects and
success in upcoming days. The Bank in 2009 achieved continuous growth almost in all
arenas of its business and the Bank is well positioned to enter into the New Year 2010
with a strong management team. In 2009 we made good progress in executing the Bank's
strategic agenda and priorities. Opportunities to further strengthen our business are
becoming increasingly evident as the environment becomes more challenging, which
presents us with a range of organic growth and acquisition opportunities. However, the
Board recognizes that the future is uncertain and that in the current environment its first
priority is to ensure that the Bank continues to maintain its strong financial position. We
do believe that continuation of our superior services, adoption of new products and
technologies, harmonious banker-customer relationship, embellishment of our human
resources with various trainings, prudent business policies, better risk management and
corporate governance system will help us to handle this challenge more efficiently.
5
8/3/2019 Finance Finance MBL Final Finished by MFM
6/40
Challenges in 2010 for MBL
In FY2009, Bangladesh economy experienced a moderate growth rate of 5.88%, where
target level of growth for FY2010 is 6.0%. World Bank predicted that Bangladesh
Economy would grow by 5.4% whereas Asian Development Bank (ADB) came up with
yet another projection saying that the Bangladesh economy would shrink from 5.4% to
5.2%. Bangladesh experienced adverse effects from the global downturn, primarily
through slower growth of exports and workers' remittances, and damped investment
sentiment. Still, it has maintained relatively strong expansion, reduced inflation, and kept
a current account surplus mainly with the help of huge remittance inflow. The medium-
term trajectory will depend heavily on the Government's ability to implement reforms,
which include substantially boosting budget revenue and raising infrastructure investmentin FY2010 as dampened global demand could weigh on exports and workers remittances.
With this backdrop, 2010 will be another challenging year for the financial institutions of
Bangladesh. Decline in garments and other export items, continued pressure on interest
margins, fees, commission and exchange earnings and increased provision requirement
will pose a challenge to the financial institutions during 2010 also. Sound political
environment.
Financial Product and Services
The Bank has launched a number of financial products and services since its inception.
Among these, Monthly Savings Scheme, Family Maintenance Scheme, Double Benefit
Deposit Scheme, Quarterly Benefit Deposit Scheme, 1.5 Times Benefit Deposit Scheme,
Advance Benefit Deposit Scheme, Consumer Credit Scheme, Small Loan Scheme, Lease
Finance Scheme, Overseas Employment Loan Scheme, Car Loan Scheme, Home Loan
Scheme and SME Loan have received wide acceptance among the people.
6
8/3/2019 Finance Finance MBL Final Finished by MFM
7/40
Deposit Products
Monthly Saving Scheme
It is our significant product; introduced to attract small savers for building up their habit
of savings and thereby build up a healthy capital base for the economy. The monthly
installments are in various sizes and one can adopt the schemes for a period of 08 years
or 10 years. Investor gets a lump sum (principal plus interest) at the maturity of the
scheme. Installment amount should be deposited within the first 10 days of each month.
The incumbent depositor can get a loan facility of maximum 80% of his deposited
amount. At the end of 2009, BDT 13.58 billion was deposited against that of BDT 9.79
billion in 2008 recording 38.71% growth in this scheme.
Monthly Benefit Deposit Scheme
Under this scheme, depositor will get a certain sum of money in each month proportion to
his/her deposit during the entire tenure. Benefit starts right from the first month of
opening an account under this scheme and continues upto five years. On maturity, the
principal amount is paid back. Objectives of this scheme are: help the retired persons for
investing their retirement benefits, create investment opportunities for Non-Resident
Bangladeshi, etc. Minimum deposited amount is BDT 50,000 or its multiples and the
tenure is Five (05) years. This scheme is also known as "Family Maintenance Deposit
Scheme (FMD)". Under this scheme total amount of BDT 1.86 billion was deposited upto
the end of 2009.
Double Benefit Deposit Scheme
Under this scheme, deposited amount will be double in a tenure of Seven and Half (7.5)
years. Minimum deposited amount should be BDT 10,000 or its multiples. Loan may be
granted up to maximum 80% of the deposited amount, but minimum principle amount
7
8/3/2019 Finance Finance MBL Final Finished by MFM
8/40
must be BDT 20,000. At the end of 2009 total amount of BDT 6.93 billion was deposited
under this scheme.
Quarterly Benefit Deposit Scheme
The 'Quarterly Benefit Deposit Scheme' will be maintained for a period of 3 (three) years
and the minimum amount of deposit is BDT 50,000.00 (fifty thousand) or its multiples.
Interest will be paid on quarterly basis. Benefit starts right from the first quarter of
opening the account. On maturity, principal amount will be paid back. Savings account is
needed to maintain this scheme. Loan may be granted up to maximum 80% of the forced
encashment value on the date of loan processing. During the period of continuation of
loan, quarterly benefits will be credited only to the loan account. Deposit under this
scheme increased to BDT 229.40 million in 2009 from BDT 145.35 million in 2008.
Times Benefit Deposit Scheme
Under the '1.5 Times Benefit Deposit Scheme' a deposit of minimum BDT 50,000.00
(fifty thousand) or its multiples will be received for a period of 4.25 years. On maturity,
1.5 times of the deposited amount will be paid back to the account holder. In case of
premature encashment interest will be paid on Saving A/c Rate. However, no interest
shall be paid if premature encashment takes place before expiry of 1 (one) year. Loan
may be granted up to maximum 80% of the deposited amount.
Advance Benefit Deposit Scheme
Under this Scheme, one can deposit a certain amount of money for two years. The
depositor will receive the benefit on yearly basis. The benefit amount of first year will be
received in advance at the time of deposit. On maturity, the depositor will get back the
principal amount with the benefit amount of second year. That is Interest is paid in two
phases, first phase paid initially BDT 9,500 and second phase paid BDT109,520 after
maturity against BDT 1,00,000. Loan may be granted up to maximum 70% of the
deposit. This is Also known as "Agrim Munafa Amanat Prokolpo (AMAP)". BDT 76.92
million was deposited under this scheme at the end of 2009.
8
8/3/2019 Finance Finance MBL Final Finished by MFM
9/40
Loan Products
Consumer Credit Scheme
Consumer Credit Scheme is one of the popular areas of collateral-free finance of the
Bank. People with limited income can avail of credit facility to buy household goods
including computer and other consumer durables. Total exposure under this scheme was
BDT 49.83 million at the end of 2009.
Small Loan Scheme
This scheme has been designed especially for the businessmen longing for credit facility
for their business and can't provide tangible securities. Total amount of BDT 15.40
million was deployed under this scheme at the end of 2009.
Lease Finance
This scheme has been designed to assist and encourage the genuine and capable
entrepreneurs and professionals for acquiring capital machinery, medical equipments,
computers, vehicle and other items. Flexibility and term and conditions of this scheme
have attracted the potential entrepreneurs to acquire equipments of production and
services and repay gradually from earnings on the basis of "Pay as you earn." Total
exposure under this scheme was BDT 356.50 million at the end of 2009.
Doctors' Credit Scheme
Doctors' Credit Scheme is designed to facilitate financing to fresh medical graduates and
established physicians to acquire medical equipments and set up clinics and hospitals and
thereby make the medical facilities upgraded and available to the mass people. BDT 7.06
million was disbursed under this scheme till the end of 2009.
9
8/3/2019 Finance Finance MBL Final Finished by MFM
10/40
SME Loan Scheme
Small and Medium Enterprise (SME) Loan Scheme has been introduced to provide
financial assistance to new or experienced entrepreneurs to invest in small and mediumscale industries with a comparatively low rate of interest as the same is assisted by the
Bangladesh Bank with refinancing facilities. Exposure under this scheme experienced
significant growth of 44.39% and amounting to BDT 983.39 million at 2009 end from
that of BDT 681.08 million at the end of 2008.
Personal Loan Scheme
Personal Loan Scheme has been introduced to extend credit facilities to cater the needs oflow and middle-income group for any purpose. Total Loans and Advances under this
scheme increased to BDT 364.38 million up to 2009 from that of 279.78 million at the
end of 2008.
Car Loan Scheme
Car Loan Scheme has been introduced to enable middle-income people to purchase
Cars/SUVs/Jeeps. Government and semi-government officials, employees of autonomousbodies, banks and other financial organizations, multinational companies, reputed private
organizations, teachers of recognized public and private universities and businessmen are
eligible for this loan. Total amount of BDT 201.98 million was disbursed under this
scheme up to December 2009.
Home Loan Scheme
To meet the growing need of housing for middle and lower-middle income people, MBLhas introduced Home Loan Scheme. We also support the Bangladesh Bank's Home Loan
Refinance Scheme. The Scheme will also boost up the growth of housing sector. Such
loan shall be available for purchase or construction of new apartments for self-residing
purpose.
10
8/3/2019 Finance Finance MBL Final Finished by MFM
11/40
8/3/2019 Finance Finance MBL Final Finished by MFM
12/40
Bangladesh Economy in 2009
In spite of this world economic fall down since 1930's Great Depression, Bangladesh
Economy remained resilient in 2009, attaining 5.88 % Real GDP growth in the fiscal year2008-09. Though it was the lowest growth over the last 5 years, performance of the
economy was satisfactory compared to that of other developing nations. Almost all the
macro-economic indicators showed positive trend during the period under review. Export
earnings recorded 10.12% growth and import cost augmented by 4.06% in FY2009 over
FY2008. Inflation remained at tolerable stage in the last few months of 2009. Foreign
Exchange Reserve touched US$ 10 billion in November 2009, which is a milestone for
Bangladesh Economy. The GDP growth target has been set at 5.5-6% in the current fiscal
year 2009-10 considering the depressed world economic scenario. But recent emerging
trend of inflation, declination of both Export and Import over the first 5 months of current
fiscal, sluggish domestic as well as foreign investment certainly pose evident threat
towards 6% growth target in Fiscal Year 2009-10. However, Bangladesh Bank, in its first
Monetary Policy of FY 2010 (June-January) expressed its optimism to attain 6% growth
in the mentioned time period.
Bangladesh Bank
Bangladesh Bank (BB) has been working as the central bank since the country's
independence. Its prime jobs include issuing of currency, maintaining foreign exchange
reserve and providing transaction facilities of all public monetary matters. BB is also
Bangladesh Bank (BB) has been working as the central bank since the country's
independence. Its prime jobs include issuing of currency, maintaining foreign exchange
reserve and providing transaction facilities of all public monetary matters. BB is also
responsible for planning the government's monetary policy and implementing it thereby.
The BB has a governing body comprising of nine members with the Governor as its
chief. Apart from the head office in Dhaka, it has nine more branches, of which two in
Dhaka and one each in Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and
Barisal.
12
8/3/2019 Finance Finance MBL Final Finished by MFM
13/40
SERVICES (Accounts, FDR, PDS, Deposit Scheme)
Current Account
Generally this sort of account opens for business purpose. Customers can withdraw
money once or more against their deposit. No interest can be paid to the customers in this
account. If the amount of deposit is below taka 1,000 on an average the bank has
authority to cut taka 50 from each account as incidental charge after every six months.
Against this account loan facility can be ensured. Usually one can open this account with
taka 500. One can open this sort of account through cash or check/bill. All the banks
follow almost the same rules for opening current account.
Savings Bank Account
Usually customers open this sort of account at a low interest for only security. This is
also an initiative to create people's savings tendency. Generally, this account is to be
opened at taka 100. Interest is to be paid in June and December after every six months. If
money is withdrawn twice a week or more than taka 10,000 is withdrawn (if 25% more
compared to total deposit) then interest is not paid. On an average, all the banks give
around six percent interest.
Special Services
Some Banks render special services to the customers attracting other banks.
Internet Banking
Customers need an Internet access service. As an Internet Banking customer, he will be
given a specific user ID and a confident password. The customer can then view his
account balances online. It is the industry-standard method used to protect
communications over the Internet. To ensure that customers' personal data cannot be
accessed by anyone but them, all reporting information has been secured using Version
and Secure Sockets Layer (SSL).
Home Banking
Home banking frees customers of visiting branches and most transactions will be
automated to enable them to check their account activities transfer fund and to open L/C
sitting in their own desk with the help of a PC and a telephone.
13
8/3/2019 Finance Finance MBL Final Finished by MFM
14/40
Electronic Banking Services for Windows
Electronic Banking Service for Windows (EBSW) provides a full range of reporting
capabilities, and a comprehensive range of transaction initiation options. The customers
will be able to process all payments as well as initiate L/Cs and amendments, through
EBSW. They will be able to view the balances of all accounts, whether with Standard
Chartered or with any other banks using SWIFT. Additionally, transactions may be
approved by remote authorization even if the approver is out of station.
Automated Teller Machine (Atm)
Automated Teller Machine (ATM), a new concept in modern banking, has already been
introduced to facilitate subscribers 24 hour cash access through a plastic card. The
network of ATM installations will be adequately extended to enable customers to non-
branch banking beyond banking.
Tele Banking
Tele Banking allows customers to get access into their respective banking information 24
hours a day. Subscribers can update themselves by making a phone call. They can
transfer any amount of deposit to other accounts irrespective of location either from home
or office.
14
8/3/2019 Finance Finance MBL Final Finished by MFM
15/40
Mercantile Bank Limited
Performance Analysis
Related Items
Items 2007
(ml TK)
2008
(ml TK)
2009
(ml TK)
Current Asset 29160.93 21605 24348.69
Current Liabilities 28454.4 17280.4 19361.31
Total Debt 42011.23 52311.39 61870.26
Net- Profit before Tax 1385.14 1581.51 1911.70
Net-Profit After Tax 540.50 615.88 807.52
Earning before interest & Tax 3686.41 5106.00 6066.17
Interest 3159.29 4045.97 4755.90
Total Assets 44940.54 55928.72 66166.52
Market price per share of common stock 415.61 348.25 395.00
No. of shares outstanding 14988.98 17986.78 21584.13
Fixed Asset 593.20 683.00 1032.83
Total Shareholders Equity 2929.30 3470.09 4296.25
15
8/3/2019 Finance Finance MBL Final Finished by MFM
16/40
Current Assets &
Current Liabilities Calculation
(BDT in Million)
Current AssetsBDT inMillion
2007 2008 2009
Cash 3717.35 4374.12 4790.15
Balance with other Banks and FIs 209.2 327.91 1017.87
Money at call & short term otice 520
Short term Investment
8/3/2019 Finance Finance MBL Final Finished by MFM
17/40
2007
Liquidity and Funding
1. Current Ratio=Current Asset/ Current Liabilities
=29160.93/28454.4
=1.02483:1
2. Quick Ratio= Current Asset/ Current Liabilities
=29160.93/28454.4
=1.02483:1
Leverage
1. Debt Ratio=Total Debt/ Total Asset
= 42011.23/44940.54*100
=93.48
2. Debt Equity Ratio= Total Debt/ Total Equity=42011.23/2929.30
=14.34173011
3. Times Interest Earned Ratio=EBIT/Interest Charges
=3686.41/3159.29
=1.166847614
4. Fixed Charged Coverage= Earning before interest & Tax/ Interest
=3686.41/3159.29
=1.166847614
Since there is no Lease payment, the Fixed Charged Coverage is the same as Times
Interest Earned Ratio.
17
8/3/2019 Finance Finance MBL Final Finished by MFM
18/40
Profitability
1. Net Profit Margin= NOI/ Earning before interest & Tax
=540.49/3686.41*100
=14.66169
2. Return on Asset=NOI/Total Asset
=540.50/44940.54*100
=1.20%
3. Return on Equity=NOI/ Common Equity
=540.50/2929.30*100
=18.45%
4. Earning Per Share=NOI/ No. of Shares
=540499295/14988980
=36.06
Market
1. Price Earning Ratio=Market price per share of common stock/ EPS
= 415.61/36.06
=12 times (Approximately)
2. Book value Per Share =Common stock equity/ No. of shares outstanding
=2929303879/14988980
=195.4305
3. Market/Book value ratio=Market Price per share/Book value per share
=415.61/195.43
= 2.126643811
18
8/3/2019 Finance Finance MBL Final Finished by MFM
19/40
2008
Liquidity and Funding
1. Current Ratio=Current Asset/ Current Liabilities
=21605/17280.4
= 1.2502604:1
2. Quick Ratio= Current Asset/ Current Liabilities
=21605/17280.4
= 1.2502604:1
Leverage
1. Debt Ratio=Total Debt/ Total Asset
=52311.39/55928.72*100
=93.53%
2. Debt Equity Ratio= Total Debt/ Total Equity
= 52311.39/3470.09 =15.07:1
3. Times Interest Earned Ratio=EBIT/Interest Charges=5106.00/4045.97
=1.26
4. Fixed Charged Coverage= Earning before interest & Tax/ Interest
=5106.00/4045.97
=1.26
Since there is no Lease payment, the Fixed Charged Coverage is the same as Times
Interest Earned Ratio.
19
8/3/2019 Finance Finance MBL Final Finished by MFM
20/40
Profitability
1. Net Profit Margin= NOI/ Earning before interest & Tax
=615.88/5106.00*100
=12.061888
2. Return on Asset=NOI/Total Asset
=615.88/55928.72*100
=1.10%
3. Return on Equity=NOI/ Common Equity
=615.88/3470.09*100
=17.75%
4. Earning Per Share=NOI/ No. of Shares
=615883381/17986780
=34.24
Market
1. Price Earning Ratio=Market price per share of common stock/ EPS
=348.25/34.24
=10 times (Approximately)
2. Book value Per Share =Common stock equity/ No. of shares outstanding
=3470093732/17986780
=192.92
3. Market/Book value ratio=Market Price per share/Book value per share
=348.25/192.92
=1.8051524
20
8/3/2019 Finance Finance MBL Final Finished by MFM
21/40
2009
Liquidity and Funding
1. Current Ratio=Current Asset/ Current Liabilities
=24348.69/19361.31
= 1.257595:1
2. Quick Ratio= Quick Asset/ Current Liabilities
=24348.69/19361.31
= 1.257595:1
Leverage
1. Debt Ratio=Total Debt/ Total Asset
=61870.26/66166.52*100
=93.5069
2. Debt Equity Ratio= Total Debt/ Total Equity
=66166.52/4296.25
=15.401
3. Times Interest Earned Ratio=EBIT/Interest Charges
=6066.17/4755.90
=1.2755
4. Fixed Charged Coverage= Earning before interest & Tax/ Interest
=6066.17/4755.90
=1.2755
Since there is no Lease payment, the Fixed Charged Coverage is the same as Times
Interest Earned Ratio.
21
8/3/2019 Finance Finance MBL Final Finished by MFM
22/40
Profitability
1. Net Profit Margin= NOI/ Earning before interest & Tax
=807.52/6066.17*100
=13.31186
2. Return on Asset=NOI/Total Asset
=807.52/66166.52*100
=1.22%
3. Return on Equity=NOI/ Common Equity
=807.52/4296.25*100
=18.80%
4. Earning Per Share=NOI/ No. of Shares
=807516869/21584130
=37.41
Market
1. Price Earning Ratio=Market price per share of common stock/ EPS
= 395.00/37.41
=11 times (Approximately)
2. Book value Per Share=Common stock equity/ No. of shares outstanding
=4296251741/21584130
=199.05
3. Market/Book value ratio=Market Price per share/Book value per share
=395/199.05
=1.984426
22
8/3/2019 Finance Finance MBL Final Finished by MFM
23/40
Trend Analysis
Liquidity & Funding
2007 2008 2009
Current Ratio 1.02:1 1.25:1 1.25:1
Current Ratio
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2007 2008 2009
Year
Rati Current R
2007 2008 2009
Quick Ratio 1.02483 1.2502604 1.257595
Quick Ratio
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2007 2008 2009
Year
Rati
Quick Ratio
23
8/3/2019 Finance Finance MBL Final Finished by MFM
24/40
2007 2008 2009
Liquidity & Funding:Current Ratio 1.02483 1.25026 1.2576
Quick Ratio 1.02483 1.25026 1.2576
Total liquidity & Funding
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2007 2008 2009
Year
Rati
Liquidity & Funding:
Current Ratio
Quick Ratio
Interpretation & Comments on Liquidity & Funding: Since Mercantile Bank Limited
is a Banking financial institution; there are no inventories in the institution. For this
reason the current ratio and quick ratio are MBL increases its capacity in 2007 and after
that year its current and quick ratios are increased in every year. MBLs quick liability
payment capacity is very strong in every year and basically its trend of quick ratio is
satisfactory, but on the other hand companys current liability payment ability is not very
strong because it has near about one and something assets for meeting its short term
current liabilities. So this position is not satisfactory for a bank and it has to increase its
ability of paying and meeting its short term liability by increasing its current assets
portion. We know the standards for current ratio is 2:1, but the current ratios of MBL are
below the standard line. On the other hand standard level for quick ratio is 1:1 and the
quick ratios of MBL are belonging in the standard line. So current assets should be
increased or current liabilities should be decreased for increasing the level of current
ratio.
Leverage
24
8/3/2019 Finance Finance MBL Final Finished by MFM
25/40
2007 2008 2009
Debt Ratio 93.48181 93.53225 93.5069
Debt Ratio
93.45
93.46
93.47
93.48
93.49
93.5
93.51
93.52
93.53
93.54
2007 2008 2009
Year
Ratio
Debt Ratio
2007 2008 2009
Debt Equity 14.34173 15.074938 15.40099
Debt Equity
13.8
14
14.2
14.4
14.6
14.815
15.2
15.4
15.6
2007 2008 2009
Year
Ratio
Debt Equity
25
8/3/2019 Finance Finance MBL Final Finished by MFM
26/40
2007 2008 2009
Times Interest
Earned Ratio 1.166848 1.2619965 1.275504
Time interes
1.1
1.12
1.14
1.16
1.18
1.2
1.22
1.24
1.26
1.28
1.3
2007 2008 2009
Year
Ratio Times Interest
Earned Ratio
2007 2008 2009
Fixed Charged
Coverage 1.166848 1.2619965 1.275504
Fixed charge
1.1
1.12
1.14
1.16
1.18
1.2
1.22
1.24
1.26
1.28
1.3
2007 2008 2009
Year
Ratio Fixed Charged
Coverage
26
8/3/2019 Finance Finance MBL Final Finished by MFM
27/40
Leverage:2007 2008 2009
Debt Ratio 93.4818 93.5322 93.5069Debt Equity 14.3417 15.0749 15.401
Times Interest Earned Ratio 1.16685 1.262 1.2755
Fixed Charged Coverage 1.16685 1.262 1.2755
Liverage
0
500
1000
15002000
2500
Year
2007 2008 2009
0 93.4818 93.5322 93.5069
0 14.3417 15.0749 15.401
0 1.16685 1.262 1.2755
0
Leverage:
Interpretation & Comments:
Debt ratio measure the proportion of total assets financed by the firms creditors. Trend
of debt equity ratio is belongs near about 14 to 15 times. That indicates debt financing
were 14 to 15 times higher than equity financing. So this trend and this position are not
very good condition for a bank because it also discourages new creditors to lend their
money to MBL. This trend is increasing in each year but it should be improved by theMBL by financing more shareholders equity. Trend of Times Interest Earned Ratio is not
satisfactory for the organization because it earned near about one and something more
from the amount that they have to pay as interest. We said earlier that MBLs have big
amount of debt capital. For this reason they have to pay big amount of money as interest
charged by the creditors. MBLs follow this structure for getting tax deductibility. But
27
8/3/2019 Finance Finance MBL Final Finished by MFM
28/40
they have to a big amount for interest charging by the creditors. So, trend of Times
Interest Earned Ratio should be increased either by decreasing debt capital or by
increasing earning volume of the organization. Since there is no Lease payment, the
Fixed Charged Coverage is the same as Times Interest Earned Ratio. So, overall leverage
ratio shows that MBL finances their capital fund by debt financing most for getting tax
deductibility from the government. But at the same time they should consider the
creditors view point toward the more debt financing organization. So overall leverage
ratio and its trend are moderate satisfactory and should be improved and should be
modified by the management and the owners of the MBL.
Profitability:
2007 2008 2009
NPM 14.66169 12.061888 13.31186
NPM
0
2
4
6
8
10
12
14
16
2007 2008 2009
Year
Valu
NPM
28
8/3/2019 Finance Finance MBL Final Finished by MFM
29/40
2007 2008 2009
ROE 18.45151 17.748243 18.79593
ROE
17.2
17.4
17.6
17.8
18
18.2
18.4
18.6
18.8
19
2007 2008 2009
Year
Value
ROE
2007 2008 2009
EPS 36.05978 34.240891 37.41253
29
EPS
32
33
34
35
36
37
38
2007 2008 2009
Year
Value
EPS
8/3/2019 Finance Finance MBL Final Finished by MFM
30/40
2007 2008 2009
ROA 1.2027 1.1011874 1.220436
Profitability:
2007 2008 2009
NPM 14.6617 12.0619 13.3119
ROE18.4515 17.7482 18.7959
EPS 36.0598 34.2409 37.4125
ROA 1.2027 1.10119 1.22044
Profitability
0
5
10
15
20
25
30
35
40
NPM ROE EPS ROA
Year
Value 2007
2008
2009
30
ROA
1
1.05
1.1
1.15
1.2
1.25
2007 2008 2009
Year
Value
ROA
8/3/2019 Finance Finance MBL Final Finished by MFM
31/40
Interpretation and Comments: NPM measures the percentage of each sales dollar
remaining after all costs and expenses, including interest, taxes, and preferred stock
dividends, have been deducted. The higher the NPM the better will be the condition of
the firm. MBLs NPM ratio trend shows that NPM decreased unto 2008 from 2007 and
again increase in 2009. So NPM condition of MBL is satisfactory. Return on equity
measures the return earned on the stockholders investment in the firm. Generally the
higher the rate of ROE the better will be the condition of the firm. MBLs ROE trend is
deceasing in year to year. That indicates earning rate from MBLs is decreasing that
dissatisfy the owners to invest in the firm. We know the standard level for ROE is 10% to
15% and in this case the condition of MBLs is satisfactory for providing return to their
shareholders. ROA measures the overall effectiveness of management in generating
profit with its available assets. The rate of ROA of MBL is not satisfactory.
Market
2007 2008 2009
Price Earning Ratio 12 times 10 times 11 times
Price Earning Ratio
9
9.5
10
10.5
11
11.5
12
12.5
Price Earning Ratio
Price Earning
Ratio
12 10 11
2007 2008 2009
31
8/3/2019 Finance Finance MBL Final Finished by MFM
32/40
2007 2008 2009
BV 195.4305 192.92468 199.0468
BV
189
190
191
192
193
194
195
196
197
198
199
200
2007 2008 2009
Year
Valu
BV
2007 2008 2009
MBV 2.126643811 1.8051524 1.984426
MBV
1.6
1.7
1.8
1.9
2
2.1
2.2
2007 2008 2009
Year
Valu MBV
32
8/3/2019 Finance Finance MBL Final Finished by MFM
33/40
Market:2007 2008 2009
Price Earnings Ratio(times) 12 10 11BV 195.431 192.925 199.047
MBV 2.126643811 1.8051524 1.984426
Market
0
500
1000
1500
2000
2500
Market:
Price
Earnings
Ratio(times)
BV
MBV
Year to year(2007-09)
Values Series1
Series2
Series3
Interpretation and Comments: Price Earning Ratio (times) measures the amount that
investors are willing to pay for each dollar of a firms earnings, the higher the P/E ratio
the greater is investor confidence. The level of P/E ratio indicates the degree of
confidence that investors have in the firms future performance. Price Earning Ratio of
MBL is satisfactory in each year. MBV provides an assessment of how the investors view
the firms performance. Firms expected to earn high returns relative to their risk
typically sell at higher M/B multiple. It relates the market value of the firms shares to
their book- strict accounting value. Market to Book value ratio is satisfactory for MBL.
So, overall market ratios of MBL are also satisfactory.
33
8/3/2019 Finance Finance MBL Final Finished by MFM
34/40
Highlights of all Ratios
2007 2008 2009
Liquidity &Funding:
Current Ratio 1.02483 1.25026 1.257595
Quick Ratio 1.02483 1.25026 1.257595
Leverage:Debt Ratio 93.48181 93.53225 93.5069
Debt Equity 14.34173 15.07494 15.40099
Times Interest
Earned Ratio 1.166848 1.261997 1.275504
Fixed Charged
Coverage 1.166848 1.261997 1.275504
Profitability:NPM 14.66169 12.06189 13.31186
ROE 18.45151 17.74824 18.79593
EPS 36.05978 34.24089 37.41253
ROA 1.2027 1.101187 1.220436
Market:
Price Earning Ratio (times) 12 10 11
BV 195.4305 192.9247 199.0468
MBV 2.126643811 1.80515 1.98443
Final Comments: Overall Performance of MBL is satisfactory.
34
8/3/2019 Finance Finance MBL Final Finished by MFM
35/40
Appendix
Balance Sheet
Mercantile Bank LimitedBalance Sheet as at December 31, 2009
PROPERTY AND ASSETS
Notes
2009
(BDT)
2008
(BDT)
Cash 3 4,790,155,210 4,374,119,340
Cash in hand (Including Foreign Currencies) 498,486,173 443,342,558
Balance with Bangladesh Bank and Sonali Bank Limited
(Including Foreign Currencies)
4,291,669,037 3,930,776,782
Balance with Other Banks and Financial Institutions 4 1,017,865,437 3 27,911,508
In Bangladesh 764,122,864 177,928,388
Outside Bangladesh 253,742,573 149,983,120
Money at Call and Short Notice 5Investments 6 9,664,722,134 6,264,705,100
Government 9,175,729,563 5,681,107,430
Others 488,992,571 583,597,670
Loans and Advances 7 48,295,546,954 43,419,362,481
Loans, Cash Credit, Overdraft etc. 7.A 44,574,237,307 38,787,868,658
Bills Purchased and Discounted 7.B 3,721,309,647 4,631,493,823
Fixed Assets Including Premises, Furniture and Fixtures 8 1,032,825,043 682,999,856
Other Assets 9 1,365,400,824 859,623,164
Non-Banking Assets - -
Total Assets 66,166,515,602 55,928,721,449
LIABILITIES AND CAPITAL
Liabilities
Borrowings from other Banks, Financial Institutions and
Agents
10 1,842,825,721 2,326,325,000
Deposits and other Accounts 11 55,553,083,656 46,374,178,835
Current Accounts and Other Accounts 11.1 7,425,229,434 5,831,638,360
Bills Payable 11.2 789,044,669 677,763,825
Savings Bank Deposits 11.3 4,392,947,478 3,020,870,440
Fixed Deposits 11.4 19,215,499,453 17,501,418,866
Deposits Under Schemes 11.5 23,730,362,622 19,342,487,344
Other Liabilities 12 4,474,354,484 3,758,123,882
Total Liabilities 61,870,263,861 52,458,627,717
Capital/ Shareholders' Equity
Paid-up Capital 13.1 2,158,413,400 1,798,677,900Statutory Reserve 14 1,555,373,902 1,222,833,902
Other Reserves 15 105,410,663 86,769,523
Surplus in Profit & Loss Account 16 477,053,776 361,812,407
Total Shareholders' Equity 4,296,251,741 3,470,093,732
Total Liabilities and Shareholders' Equity 66,166,515,602 55,928,721,449
OFF BALANCE SHEET ITEMS
CONTINGENT LIABILITIES A
Acceptances and Endorsements 17 8,054,757,500 8,157,477,000
35
8/3/2019 Finance Finance MBL Final Finished by MFM
36/40
Letters of Guarantee 17.1 4,161,302,647 3,640,902,808
Irrevocable Letters of Credit 17.2 8,546,632,687 7,281,346,277
Bills for Collection 17.3 56,785,690 73,305,882
Other Contingent Liabilities 17.4 937,694,607 764,829,154
Total 21,757,173,131 19,917,861,121
Other Commitments B
Documentary credits and short term trade related transactions
Forward assets purchased and forward deposits placed
Undrawn note issuance and revolving underwriting facilities
Undrawn formal standby facilities, credit lines and other
commitments
Total
Total Off-Balance Sheet Items Including Contingent
Liabilities (A+B)
21,757,173,131 19,917,861,121
These Financial Statements should be read in conjunction with the annexed notes (1 to 38)
36
8/3/2019 Finance Finance MBL Final Finished by MFM
37/40
Profit and Loss Account
For the year ended December 31, 2009
Notes 2009 (BDT) 2008 (BDT)
Interest Income 18.1 6,066,171,939 5,106,008,463
Less : Interest Paid on Deposits, Borrowings etc. 19 4,755,901,859 4,045,970,142Net Interest Income 1,310,270,080 1,060,038,321
Investment Income 18.4 696,663,198 520,333,916
Commission, Exchange and Brokerage 20 1,059,887,629 917,199,841
Other Operating Income 21 425,089,853 333,960,039
2,181,640,680 1,771,493,796
Total Operating Income 3,491,910,760 2,831,532,117
Salaries and Allowances 23 807,198,037 611,587,111
Rent, Taxes, Insurance, Electricity, etc. 24 184,168,069 155,724,646
Legal Expenses 25 7,994,350 5 ,045,236
Postage, Stamps, Telecommunication etc. 27,205,921 27,045,459
Stationery, Printings, Advertisements etc. 26 82,341,385 6 3,499,399
Chief Executive's Salary and Fees 23.1 6,450,000 6 ,450,000
Directors' fees 22 4,055,400 2 ,163,600
Auditors' Fees 709,000 500,000
Depreciation & Repair of Fixed Assets 27 96,423,954 74,617,737
Other expenses 28 363,666,775 303,383,441
Total Operating Expenses 1,580,212,891 1,250,016,629
Profit before Provision 1,911,697,869 1,581,515,488
Provision against Classified Loans 12.5 159,621,000 117,958,107
Provision against Unclassified Loans 12.5 80,300,000 77,174,000
Other Provisions 12.5 9,000,000 104,700,000
Total Provisions 248,921,000 299,832,107
Total Profit before Taxes 1,662,776,869 1,281,683,381
Provision for Taxation 12.4 855,260,000 665,800,000
Net Profit after Taxation 807,516,869 615,883,381
Retained Surplus brought forward from previous year 2,076,907 2,266,026
809,593,776 6 18,149,407
Appropriations
Statutory Reserve 332,540,000 256,337,000
Retained Surplus 477,053,776 361,812,407
809,593,776 618,149,407
Earning Per Share (EPS) 29 37.41 28.53
These Financial Statements should be read in conjunction with the annexed notes (1 to 38)
Financial HighlightsHighlights for the year 2009 and 2008 (BDT in millions)
SL NO. PARTICULARS 2009 2008
1 Paid-up Capital 2,158.42 1,798.68
2 Total Capital Fund 4,995.43 3,387.17
37
8/3/2019 Finance Finance MBL Final Finished by MFM
38/40
3 Capital Surplus/Deficit 226.86 120.41
4 Total Assets 66,166.52 55,928.72
5 Total Deposits 58,033.47 49,538.35
6 Total Loans and Advances 48,295.55 43,419.36
7 Total Contingent Liabilities and Commitments 21,757.17 1 9,917.86
8 Credit Deposit Ratio (in %) 83.22 87.65
9 Percentage of Classified Loans against Total
Loans and Advances (in %)
2.59 2.96
10 Profit after Tax and Provision 807.52 615.88
11 Amount of Classified Loans during the year 261.24 348.47
12 Provision kept against Classified Loans 629.70 5 78.20
13 Provision Surplus 1.09 -14 Cost of Fund (in %) 8.81 9.19
15 Interest Earning Assets 57,471.28 4 9,941.85
16 Non-interest Earning Assets 8,695.24 5,986.87
17 Return on Investments (ROI) (in %) 8.75 10.46
18 Return on Assets (ROA) (in %) 1.22 1.10
19 Income from Investments 696.66 520.33
20 Earning Per Share (BDT) 37.41 28.53
21 Net Income Per Share (BDT) 37.41 28.53
22 Price Earning Ratio (approximate) 11 Times 12 Times
38
8/3/2019 Finance Finance MBL Final Finished by MFM
39/40
CASH FLOW STATEMENT
Mercantile Bank Limited
For the year ended December 31, 2009
2009 (BDT) 2008 (BDT)
A. Cash Flows From Operating ActivitiesInterest Received 6,539,977,880 5,423,137,314
Interest Paid (4,154,550,199) (3,424,865,486)
Fees and Commission Received 488,656,221 459,036,752
Payment to the Employees (807,198,037) (486,587,111)
Payment to suppliers (82,233,119) (63,499,399)
Income Tax Paid (687,994,874) (638,616,891)
Received from other operating activities 1,001,161,940 788,994,91
Exchange Gain 571,157,810 458,155,089
Other Operating Income 430,004,130 330,839,823
Payment for other operating activities (607,226,990) (386,477,514)
Rent, Taxes, Insurances and Electricity (181,530,859) (154,613,531)
Legal Expanses (7,994,350) (5,045,236)
Postage, Stamps and Telecommunication (26,386,862) (27,045,459)
Auditors' Fees ( 709,000) (500,000)
Repair and Maintenance (16,433,744) (11,329,772)
Chief Executive's Salary and Fees (6,450,000) (6,450,000)
Directors' Fees (4,055,400) (2,163,600)
Other Expenses (363,666,775) (179,329,916)
Operating profit before changes in Operating Assets and
Liabilities
1,690,592,822 1,671,122,577
Increase / Decrease in Operating Assets and Liabilities
Loans and Advances to other Banks - -
Loans and Advances to Customers (4,674,471,704) (5,316,085,710)
Other Assets (Item-wise) (375,768,145) (325,165,611)Advance Deposits ( 138,572) (1,000,588)
Stock of Stationery (3,349,021) (10,414,961)
Suspense Account (246,553,307) (23,985,407)
Stamps in Hand (98,143) (881,385)
Advance Rent (56,804,386) (88,559,508)
Excise Duty - 42,400
Clearing Adjustment - -
DD paid without advice (5,687,684) (240,000)
Premium on Bond ( 907,421) -
Mercantile Bank General Account - -
Adjusting Account Debit (62,229,611) (200,126,162)
Deposit from other Banks (483,499,279) 1,552,075,000
Deposit from Customers 9,780,256,481 4,194,277,066Other Liabilities on account of Customers - -
Other Liabilities 1,858,866,802 26,251,607
Net Cash Received from Operating Activities 7,795,976,977 1,802,474,929
B. Cash Flows From Investing Activities
Sale proceeds of Fixed Assets - 501,877
Dividend Received 7,590,576 2,457,119
Purchase/Sale of Property, Plant and Equipment (269,834,977) (154,376,501)
Purchase/Sale of Shares (148,225,421) 215,272,192
39
8/3/2019 Finance Finance MBL Final Finished by MFM
40/40
Other Investment activities (2,784,895,223) (805,427,081)
Net Cash from Investing Activities (3,195,365,045) (741,572,394)
C. Cash Flows from Financing Activities
Receipts from Issue of Loan Capital & Debt Securities - -
Paid for Repayment of Loan and Debt Securities - -
Received by Issue of Share - -
Dividend Paid - -
Net Cash from Financing Activities - -
D Net Increase/(Decrease) of Cash and Cash Equivalent
(A+B+C)
4,600,611,932 1,060,902,535
Effect of Exchange Rate Changes on Cash & Cash Equivalent
E Opening Cash & Cash Equivalent 10,383,138,278 9,322,235,743
F Closing Cash & Cash Equivalent (D+E)* 14,983,750,210 10,383,138,278
These Financial Statements should be read in conjunction with the annexed notes (1 to 38)
Recommended