An Appraisal of Dhaka Bank Limited

Abstract

The Dhaka Bank Limited was incorporated in Bangladesh as a public limited company with a limited liability as on 6 April 1995 under Companies Act 1994 and commenced commercial operation on 5 July 1995. The bank increased its authorized capital from Tk.l000 million to Tk. 2650 million in the year 2005 for its expansion. In the year 2003, the bank has increased its paid up capital by issuance of 2:1 right share at par. In the year 2005, bank has increased its paid up capital by issuance of 7:20 bonus share at par and by issuance of 1: 2 right share at par. In 2001, 68% shareholders hold in between 1 to 500 shares, which increase to near about 86% who holds shares in between 1 to 500. On the other hand, only 2.16% shareholders hold shares in between 100001 to 1000000, which represent about 49.85% of shareholdings in year 2001. In 2005 the percentage of shareholders even more reduced to 0.92%, while the percentage of holdings increased to 72.98%. The number of branches opened by the bank and the number of employees recruited during the period 2001 to 2005 shows an increasing trend. The deposit mix of Dhaka Bank from the year 2001 to 2005 has been shown in the report. Dhaka Bank's deposit mix is a combination of current deposits, savings deposits, short term deposits, fixed deposits, DPS, MDS, gift cheques, bills payable etc. The deposits growth rate shows a fluctuating trend during the period. The bank has a diversified advance and investment portfolio, which shows a positive association with the amount of deposits of the bank. Dhaka bank also engages in international trade (import and export) and foreign exchange activities. The risk management of bank covers five core risk areas of banking sector, namely credit risk management, foreign exchange risk management, asset liability management, prevention of money laundering, internal control and compliance. Dhaka Bank has introduced a variety of products and services for their customers. These include: corporate banking, floating of public issues, loan syndication, Islamic banking, personal banking, SME financing, finance and advisory services. The bank also performed CSR activities as it thinks it is an important responsibility of them toward the society. By analyzing the financial performance of Dhaka bank, it has been found that the operating expenditure of the bank shows a higher growth rate than the operating income in the year 2002 and 2003, which had impact on its net income. As a result, the profit indicating ratios (ROE, ROA, NIM, EPS, dividend payout ratio) and market ratios (price/ earnings ratio and Market/ Book ratio) are also affected. However, the solV'ency ratios show that the bank gradually decreases proportion of debt compared to its total assets and total equity. Also the risk ratios shows that the bank performed better during the period, it has been able to reduce the non performing loan as a proportion of total advances given to its customers, the provision for loan loss ratio, increases the amount of credit/ deposit ratio. The current ratio shows an increasing trend over the period, but its growth rate is declining. Finally some problems have been identified and suggestions have been given to the management to overcome these problems. At the end of the report, a conclusion has been given on the overall performance of Dhaka Bank Limited.