1. Tier I or Core Capital

Tier I or Core Capital includes common stock and surplus, undivided profits (retained earnings), qualifying non-cumulative perpetual preferred stock, minority interest in the equity accounts of consolidated subsidiaries and selected identifiable intangible assets less goodwill and other intangible assets. However, banks in Bangladesh do have all the items of core capital. Tier I capital items of banks in Bangladesh do not have minority interest and cumulative perpetual preferred stock. For any bank it is mandatory to have tier I capital against its risk weighted assets, it describes the capital adequacy of the bank.

Tier I or Core Capital

  2008 2009 2010 2011 2012

Tier I or Core Capital

1,394,668,017

7,076,775,353

7,250,575,353

8,580,841,430

9,001,410,053

2009 2010 2011 2012 2013 -

500,000,000 1,000,000,000 1,500,000,000 2,000,000,000 2,500,000,000 3,000,000,000 3,500,000,000 4,000,000,000 4,500,000,000 5,000,000,000

Par Value Undivided Profit Tier I or Core Capital

The City Bank has increasing growth of Tier I capital. However, in 2010 and 2011 it did not have any surplus. Its par value increase over the year but retained earnings or undivided profit declined. This indicates that rate of increase in par value more than the declining rate of undivided profit which ensure increasing growth of tier I or core capital. Having sufficient amount of core capital is good for the bank and Trust Bank seems to have maintained increasing amount of core capital along with its increasing growth.

2. Tier II or Supplemental Capital

Tier II or Supplemental Capital includes allowance for loan and lease losses, subordinated debt capital instrument, mandatory convertible debt, intermediate-term preferred stock, cumulative perpetual preferred stock with unpaid dividends and equity notes and other long-term capital instruments that combine both debt and equity features. However, banks in Bangladesh does not have all these items. Provision for Loan losses and subordinated bonds are mainly found in the annual report of banks in Bangladesh.

Tier II or Supplemental Capital

  2009 2010 2011 2012 2013

Provision for Loan Losses

212,426,000

53,500,000

182,232,000

432,975,000

362,278,000

Unsecured Subordinated Non-Convertible Bond/ Subordinated Bonds

-

-

2,000,000,000

2,000,000,000

2,000,000,000

Mandatory Convertible Bond/Debenture

-

-

-

-

-

Cumulative Preferred Stock

-

-

-

-

-

Intermediate Term Preferred Stock

-

-

-

-

-

Equity Notes -

-

-

-

-

Tier II or Supplemental Capital

212,426,000

53,500,000

2,182,232,000

2,432,975,000

2,362,278,000

Tier II capital is considered to be less reliable than Tier I capital.

2009 2010 2011 2012 2013 -

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

PLL Subordinated BondsTier II or Supplemental Capital

Tier II capital has drastically increased after 2010 and remained at the same level. Provision for Loan losses and subordinated bonds are mainly found in the annual reports. Trust bank did not have subordinated bonds in year 2009 and 2010 as a result Tier II capital were low both the years. However, addition of this item drastically increased Tier II capital from year 2011 and it has was slightly higher in 2012 than 2011 and 2013.

2009 2010 2011 2012 20130

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

3,500,000,000

4,000,000,000

4,500,000,000

5,000,000,000

Tier I Tier II

Tier II Capital is limited to 100% of Tier I capital. Tier II capital cannot be greater than Tier I capital. It can either equal or less than Tier I capital. The comparative trend lines of Tier I and Tier II capital of Trust Bank shows that the bank has always maintained Tier I capital much higher than Tier II capital over last 5 years.

Hot money ratio

This reflects whether the bank has balanced its borrowings in the money market with increases in its money market assets that could be sold quickly to cover those money market liabilities. The formula for hot money ratio is

Hot money ratio= Money market asset/Money market liability

2008 2009 2010 2011 2012

Hot Money Ratio 1.806315749 1.646915013 1.2404307 0.779670081 0.631679607

In the most recent year the bank had 63% of its money market liabilities backed by its money market assets. The ratio is on a decreasing trend. 2008 saw the highest of its ratio with 180% backed.