Executive Summary

The purpose of this report is to analyze and gain an in depth

understanding and knowledge about the banking industry by computing
different ratios and analyzing them. It is also a major part of our course
requirement which is BANK MANAGEMENT. In this report we have analyzed
the performance of Southeast Bank Limited and Jamuna Bank Limited over
the period of three years, that is, from 2009 to 2011. The aim of this
report is to get us introduced with real life analysis of financial data and
also to build and strengthen our knowledge through direct computation
and analysis. We also analyzed to find out whether the intrinsic value of
the banks actual share price reflects the true fundamentals of the bank or
not.
To fulfill our purpose we have collected data from Dhaka Stock
Exchange (DSE) library, used the Report of Condition and the Profit-Loss
statement of Southeast Bank Limited and Jamuna Bank limited to
help us analyze the financial performance of both the banks. We have
mainly used the following ratios: leverage ratios, Efficiency ratios, Market
position Ratios, Liquidity indicator ratios and profitability ratios to evaluate
their performance by doing both time series and cross sectional analysis.
This report covers the objective of this report, methodology used for
analyzing the report and includes any adjustments made during the
calculations, consists of Literature review which includes all the ratios
which has been carried out and the theory that guides these ratios. The
major part of this report is the findings and analysis part which includes
graphical representation and the details analysis of the financial ratios and
also includes time series analysis of our assigned bank -Southeast Bank
Limited and cross sectional analysis with our competitor bank Jamuna
Bank Limited. Finally, our report includes recommendation part which
includes what are the steps that should be carried out in order to improve
the performance of the bank.

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Introduction
Banks are now providing the widest menu of services including banking
and non-banking services. Banks are no more offering traditional services
rather they are offering a diversified menu of services. As banks are
dealing with public money they are highly regulated by the government
and that brings public confidence in banks so they invest in this industry.
But as they are highly dependent on borrowings and less on equity, they
are more financially leveraged. So to attract potential investors banks
must continually sustain and provide the required returns to investors.
Throughout this term paper, we will analyze the performance of Southeast
bank Limited (main bank) and the competitor bank Jamuna Bank Limited
over a period of three years i.e. from 2009 to 2011 with the help of the
concepts of ratio analysis and their interpretation so that a better
understanding can be developed about how these ratios are used to
assess the financial performance of the bank and how investors can use
that data to make their investment decisions.. The performance refers to
how adequately a financial firm meets the needs of its stockholders,
employees, depositors and other creditors and borrowing customers.
These ratios can also indicate the quality of management of the bank
since the ratios can be used to identify how well management has been
able to control the expenses and generating revenues. The stock price
could be another major indicator of managements or banks performance.
As we know that the main objective of management is to maximize
shareholders wealth so if we want to know if this objective is fulfilled by
management or not we can assess whether the share price is maximized
or

not.

Maximizing

shareholders

wealth.

the

share
A

price

critical

is

equivalent

measure

through

to

maximizing

which

banks

performance can be measured today is the quality of services that the

bank is offering.

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Objective
The main objective of this report is to evaluate the performance of
Southeast Bank Limited and compare its performance with Jamuna Bank
Limited over the period 2009 to 2011. Evaluation of the financial
performance of these banks will portray investors choices and willingness
to invest in these banks. We will use Ratio analysis for interpretation and
evaluation of the banks performance and also we can use share price as
a benchmark to understand the performance of banks. Since management
of banks has the objective to maximize shareholders wealth, we can
relate it to the market price of shares and then evaluate their
performances.
This can help us to identify the past and present financial condition of the
bank and the investment opportunities and also reflect the overall growth
opportunities and condition of the bank. We can analyze the performance
over the set period between the two banks and can gain a deeper
understanding of how this sector is working and we can provide
recommendations

about

how

the

problems

can

be

handled

and

performance improved.
Southeast Bank Limited and Jamuna Bank limited are one of the largest
Commercial Banks and third generation banks in Private Sector in
Bangladesh. Both of the banks provide mass banking services to the
customers through its branch network that are widespread all over the
country. These Banks has been playing a vital role in socio-economic,
industrial and agricultural development as well as in the overall economic
development

of

the

country

since

its

initiation

through

savings

mobilization and investment of funds.

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Methodology
The primary purpose of this report is to calculate the ratios and based on
that evaluate the financial performance of the two private banks namely
Southeast bank Limited and Jamuna Bank Limited operating in Bangladesh
and to gain an in depth knowledge about banks and the banking industry
by comparing and contrasting the performances of the respective banks.
The report is relying on financial ratio analysis of both banks within the
time frame of three years (2009-2011). In order to do so, the information
was mainly collected from Dhaka Stock Exchange (DSE) Library and also
from secondary printed sources i.e. from the respective annual reports of
both the banks. The ratio analysis for both the banks were compared
using time series and cross sectional analysis and also by computing and
composing graphs and table to study the trends of the banks over a
period of three years.
It must be noted that during the calculations some adjustments were
made such as while calculating the profitability ratios, earnings asset were
used instead of using total asset, so miscellaneous and other assets were
excluded from the total asset. Also, information was collected from DSE
for calculation of beta of the banks and the closing share price of banks
was collected to calculate DGEN return. We made adjustments in the
share price if there was no trading in a particular day by repeating the
previous days share price to make it equivalent to DGEN return. We have
annualized the return and standard deviation of DGEN and both the banks.
To calculate the required rate of return we have used the Capital Asset
pricing Model (CAPM) and the risk free rate was obtained from the website
of Bangladesh bank. The risk free rate used is the rate of a 91 day
treasury bill. We have also made some adjustments in calculating the

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dividends. In 2009 and 2011, Southeast bank limited paid cash dividend
but in the year 2010 the paid no cash dividend instead they issued bonus
shares and that amount has been used as dividend paid. Jamuna Bank
Limited has given stock dividend in all the years and the equivalent price
was taken from the owners equity statement and used as dividend. While
calculating intrinsic value we used the internal growth rate model. We
calculated the growth rate using the equation = retention ratio * Return
on equity.

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Limitation
Due to time constraint the analysis may be not be significant. If
more time was available the report could have been carried out in
details and could be more precise.
The performances of the banks were analyzed over a period of three
years which may be insufficient to give a true reflection of the
performance. If the analysis could be done for a longer period, the
analysis would have been more accurate.
A major drawback of our report could be not taking the macro factor
like inflation into consideration as we had analyzed based on ratio
analysis. This could lead us to draw an inaccurate condition of the
banks rather than portraying the true picture.

Difficulty in identifying the components of the ratios during

calculation in the financial statements since bank has a different
format of financial statement than other companies.

The share market did not reflect all the publicly available
information. It was inefficient.
Another major limitation is the decrease in Earnings per Share. Since
the face value dropped sharply from the year 2009 to 2011, it had
an impact on EPS. So the comparison may not be accurate within
those years.

Due to lack of data we could not calculate some ratios such as

deposit brokerage index, net federal fund position etc.

We have not used industrial average in analyzing the performance

and to understand the position of the bank in the market.
The financial information for the banks differed from one year to
another in different reports. Therefore, there might be minor
discrepancies in the figures that were used for the purpose of
analysis and thus giving us inaccurate results.

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 Interpretation of ratio is quite difficult, since it can have both good

and bad consequences for a firm. For example, a high current ratio
means greater liquidity for a firm, but at the same time it could
mean that the bank has a lot of idle cash and the bank could be
compromising on their profitability.

Overview of the Bank

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Vision Statement
To be a premier banking institution in Bangladesh and contribute
significantly to the national economy.

Mission Statement

High quality financial services with state of the art technology.

Fast customer service.
Sustainable growth strategy.
Follow ethical standards in business.
Steady return on shareholders equity.
Innovative banking at a competitive price.
Attract and retain quality human resource.
Commitment to Corporate Social Responsibility.

Southeast Bank Limited was established in March 12, 1995 as a third

generation private sector bank of Bangladesh. Till now it has developed
itself and contributed quite a lot to the national economy. In the year 2001
its authorized capital was BDT 500 million and in 2011 that grew up to
BDT 10,000 million. The Banks paid up capital reached to BDT 8317.01
million from BDT 363 million in 2001. The bank provides all of commercial
banking services to its clients. The major fields of activities may be
distinguished as follows: Conventional Banking, Islamic Banking, Credit
service, Foreign Trade and remittance service.
Currently the bank has 84 branches and 2 off-shore units across the
country and they are planning to open 12 more branches in the year
2012. They have achieved operational excellence by relying on their
skilled and experienced workforce. They offer high quality customer
service through the integration of the latest and state of the art banking
technology and products to achieve success. They are also trying to
provide a system of one-stop shopping for customers by providing a
spectrum of services.

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The bank has completed 17th year of their banking operations recording
significant growth in the entire performance indicator. In 2011, the bank
earned an after tax profit of 1912.19 million. The deposit of the bank grew
by 18.58 % compared to the previous year. During the last five years
(2007-2011), the bank achieved an average annual growth of 23.52% on
deposits.
Southeast Bank has become a synonym of quality banking services and
products. It has a diverse array of products and services tailored carefully
to cater to the needs of all segments of customers. Their operational
strategies are structured to address the special and often complex needs
of the customers. In the growth graph, the Bank has generated profit of
Tk.1, 912.19 million after provision and income tax in the year 2011. The
curve keeps soaring upward everyday making it one of the leading and
most successful banking institutions in Bangladesh with a total asset base
of Tk.158, 078.59 million as on December 31, 2011.

Jamuna Bank Limited started its journey in Bangladesh from 3 June, 2001,
under the Companies Act, 1994. This bank is led by some dynamic and
encouraging people who were from different sectors of commerce, trade
and industries.

Visions of Jamuna Bank Limited:

To become a leading banking institution and to play a significant role in
the development of the country.

Mission of Jamuna Bank Limited

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The Bank is committed for satisfying diverse needs of its customers

through an array of products at a competitive price by using appropriate
technology and providing timely service so that a sustainable growth,
reasonable return and contribution to the development of the country can
be ensured with a motivated and professional work-force.
Being a 3rd generation Bank of Bangladesh, it focuses on

Remaining with time

Managing change

Developing human capital

Creating true customers value

Jamuna Bank Limited (JBL) is a Banking Company registered under the

Companies Act, 1994 of Bangladesh with its Head Office currently at Chini
Shilpa Bhaban, Dilkusha , Dhaka-1000, Bangladesh. The Bank started its
operation from 3rd June 2001.
The Bank provides all types of support to trade, commerce, industry and
overall business of the country. JBL's finances are also available for the
entrepreneurs to set up promising new ventures and BMRE of existing
industrial units. Jamuna Bank Ltd., the only Bengali named 3rd generation
private

commercial

bank,

was

established

by

group

of

local

entrepreneurs who are well reputed in the field of trade, commerce,

industry and business of the country.
The

Bank

offers

both

conventional

and

Islamic

banking

through

designated branches. The Bank is being managed and operated by a

group

of

highly

educated

and

professional

team

with

diversified

experience in finance and banking. The Management of the bank

constantly focuses on understanding and anticipating customers' needs.
Since the need of customers is changing day by day with the changes of
time, the bank endeavors its best to device strategies and introduce new
products to cope with the change. Jamuna Bank Ltd. has already achieved

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tremendous progress within its past 10 years of operation. The bank has
already built up reputation as one of quality service providers of the
country.
At present the Bank has real-time Online banking branches (of both Urban
and Rural areas) network throughout the country having smart ITbackbone. Besides traditional delivery points, the bank has ATMs of its
own, sharing with other partner banks and consortium throughout the
country.

Literature Review

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We analyzed the performance of Southeast bank Limited and Jamuna

Bank Limited with the help of ratio analysis and we mostly evaluated with
the help of the Liquidity indicator ratios, profitability, efficiency, Market
position, leverage, and risk adjusted ratios. Now we will briefly discuss the
theoretical concepts guiding these ratios and how we can use the results
derived to analyze the performance of the banks.

Profitability Ratios:
The profitability ratios indicates how well a company is performing in
terms of profit and these measures often varies substantially over time
and from market to market. A number of profitability ratios can be used to
assess the performance of the banks at a different aspect and are listed
as follow:
1.
ROE

is

measure

of

the

rate of return flowing to the shareholders. It is assuming the benefit

that the stockholders are receiving against their invested capital
that they invested in the financial firm in the hope of receiving
profit. It indicates how proficient a firm is at generating adequate
profits per unit of shareholders equity. Stockholders expects
adequate return in terms of dividend income and also expects a
higher return in future because of the capital retained in the firm for
reinvestment indicating growth opportunity for the bank. So the
higher this ratio the better is the companys performance. Potential
investors look at this ratio to decide whether to invest in this firm.
ROE can also be calculated with the help of:
ROE= Net profit margin Asset utilization Equity Multiplier
And also,
ROE= Tax management Efficiency Expense management
Efficiency Asset management efficiency Funds management
Efficiency
2.

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ROA is an indicator of managerial efficiency. It indicates how well the

management has utilized the earning assets to contribute to the net
income. It indicates the percentage of profit earned against all the
assets invested so an increase in this ratio tells us the performance
is increasing.
ROA= Net profit margin Asset utilization
3. Net Operating
Margin =

This is an efficiency measure as well

as a profitability

measure indicating how well the management and staff have been
able to keep the growth of revenues (from loans , investment and
service fees) ahead of rising costs ( interests on deposits and
borrowings, employee salary and benefits).The higher this ratio the
better the performance of the firm.
4.
The net interest margin reflects how well management has achieved
a larger spread between interest revenues and interest costs by
careful control of earning assets and by pursuing the cheapest
source for funding. An increase in this ratio indicates performance is
improving

because

more

income

is

being

generated

and

simultaneously costs has been reduced or kept constant.( Here total

earning asset is used instead of total asset because all assets are
not generating an income for the firm).

5.

It measures the amount of non-interest revenues that is generated

from service fees against the services banks are offering relative to

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the amount of non-interest costs incurred (salaries, wages, repair

and maintenance of facilities and loan loss expenses.) Noninterest
income includes revenues earned from investing or fee income from
fiduciary activities, services charges on deposit accounts, trading
account gains and fees, revenues income from investment banking,
security brokerage and insurance services. Generally this ratio gives
a negative value as the non interest costs always exceeds the
noninterest revenues.
6.
This ratio indicates how much income after tax is generated against
each common share outstanding i.e. how much profit is available to
the shareholders against their investment. This is the income that is
available but not distributed to the shareholders. EPS is a good
indicator of a company's profitability, and is a very important metric
to look at while evaluating a certain stock.
7.

It reflects the effectiveness of expense management (cost control)

and service pricing policies. It indicates how well management is
contributing to the operating revenue so that enough income is left
after covering all the expenses.
It tells investors the percentage of money a company is actually
earning

per dollar of sales. This number is an indication of how

effective a company is at cost control. The higher the net profit

margin , the more effective the company is at converting revenue
into profit.

Efficiency (Activity Ratios):

1.

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The

banks

degree

of

asset

utilization

indicates

portfolio

management policies, especially the mix and yield on the bans

assets and how efficiently banks are utilizing their assets.

It is

similar to asset turnover ratio and measures the rate at which a

business is able to turn assets into revenues. The higher the ratio
the more effective a firm is to generate revenue.
2.
This ratio
indicates leverage or financing policies, the sources that are chosen
for the funding of bank. Banks get their funds mainly from equity
and by incurring debt. So this ratio indicates out of the total capital
how much is financed by equity and how much through debt. The
higher the ratio the more efficient the bank is. EM ratio going up
means debt is going up making it more financially leveraged.
3.
This

ratio

indicates how efficiently a bank is managing tax and what

percentages of a firms earnings are lost as taxation. If this ratio
goes up it is good for the company because more money is held in
the company and less money is paid to the government as tax. This
ratio reflects the use of security gains or losses and other
management tools to minimize tax exposure.
4.
This
ratio is indicating how much is contributed to revenue after covering
all the expenses. It depends on the efficiency of management since
their strategy will determine how well cost are controlled. If this
ratio goes up, it is good for a firm.
5.

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The ratio gives the result of how banks are efficiently and effectively
utilizing their asset in order to generate revenues.
6. Fund management efficiency=Total Asset/ Total equity capital
Fund management is equal to equity multiplier (EM) which is a
measure of financial leverage. It is used to identify how much of the
total assets are financed by the total equity capital invested by
equity holders. The higher the ratio, the more assets are generated
by the use of equity capital, the better the firm.
7.
This

ratio

highlights how the management utilizes its assets effectively and

turns into revenue. It depends on the banks ability to manage the
expenses .It offers a unique situation and firms will be happy if this
ratio goes down.

8.

It indicates how much each employee is contributing to the net

operating income of a firm. So management should focus to
motivate the employees for better performance which ultimately will
have a positive impact on employee productivity.

Leverage ratios:
1.
The

ratio

calculates the total liability of a firm, both long-term and short-term

liability, relative to the total equity invested by the shareholders. It
measures how the company is financing its debt obligations by

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using the capital employed by its owners. As we know that banks

are highly financially leveraged, this ratio is always is higher. This
ratio is higher also because of the financing policy of banks as banks
do not want financing through equity because it is an expensive
source.

Market Position ratio:

1. Price Earnings Ratio
It is a measure of

the

price

for a share that investors invested relative to the annual profit earned by
the firm per share. This ratio tells us about the market perception

regarding a bank. It is an important market ratio which indicates the

growth potential of bank and also the investors confidence on
banks. A high P/E ratio suggests that investors are expecting higher
earnings growth in the future compared to companies with a lower P/E.

2. Market to Book Ratio

Market
ratio

to

book

compare

stock's market value to its book value. It is calculated by dividing the

current closing price of the stock by the latest quarter's book value per
share. The higher the ratio,

the better the firms performance and the

higher the demand for the firms stocks. Potential investors know about
the current position of the firm in the market and also the potential
profitability the firm can bring.

3.
This
ratio indicates how much dividend per share is given to the
shareholders. The dividend is paid out from net income after tax and
interest expense is removed.

4. Dividend

Yield

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Dividend yield compares the relative attractiveness of various

dividend-paying stocks. It tells an investor how much yield he / she
can expect by purchasing a stock of the firm Moreover, it gives the
return that shareholders expect to get against each $1 of their
investment.
5.
This ratio
shows out of the total profit how much dividend is distributed to the
shareholders

or

the

percentage

of

earnings

given

out

to

shareholders in the form of dividends. Higher ratio reflects that firms

or banks have the ability to pay out more amounts of dividends to
its shareholders.

Liquidity Ratios:
1.

This ratio indicates the amount of cash out of the total assets of the
bank. Cash and deposits due from depository institutions divided by
total assets will give the cash position indicator where a greater
portion of cash implies a stronger position to handle immediate cash
needs. Investors can use this ratio to know about the financial
health of the company. If this ratio goes up means liquidity is good.
If this ratio goes down, liquidity requirement is going up. But if this
ratio is very high it means we are sacrificing our profitability by
keeping enough idle cash.
2.

These liquid portions of assets are equivalent to cash. This ratio tells
us out of the total asset how much is composed of liquid portion or
marketable securities. Government securities are the second most
liquid assets after cash. This ratio compares the most marketable

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securities an institution can hold with the overall size of its asset
portfolio; the greater the proportion of govt. securities, the more
liquidity a bank has.
3.

It is called a negative liquidity

ratio because the loans and leases are often the most illiquid of
assets and hence it is the most risky asset.It shows the tradeoff
between liquidity and profitability. It is very difficult to convert loans
into cash within a short time so if this ratio increases liquidity
requirement increases. If this ratio goes up, liquidity of the firm goes
down.
4.

Hot money ratio

Hot

money

ratio is the current ratio of

commercial banks. This ratio reflects whether the firm has balanced
the liability it has issued with the money market assets it has which
could be sold quickly to cover this liabilities. If the ratio is 1 or
greater than 1, it means the bank is managing a perfect balance
between short-term asset and liability. If the ratio is less than 1, it
means the amount of money market asset that it holds is not
enough to cover up the liabilities and indicates that the bank is in
trouble and its liquidity has gone down. In money market asset we
include money market instrument whose maturity is less than 1
year it includes treasury bills, bankers acceptance and money
market liabilities include borrowings which have maturity less than 1
year and included interbank lending and borrowing using security as
collateral.
5.

Core

deposit

consists

of

short-term

savings account where the possibility of withdrawing money is low

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during the whole accounting period. Any amount less than one lakh
taka deposited in a bank which can be held by the bank for the
entire accounting period is included in core deposit. The higher the
ratio the smaller the liquidity requirement and lower ratio signifies
higher liquidity requirement. This ratio does not indicate whether
the liquidity position of the bank is good or bad.
6.

Deposit composition ratio

This ratio indicates the relationship between demand deposits

( current account / checking account) and time deposits (long term
savings

account).Demand

deposits

are

accounts

from

where

customers can withdraw cash from their account at their will as

unlimited underwriting check facilities are provided by the banks
unlike time deposits. If demand deposit exceed time deposits, it
implies that there is greater deposit instability and will pose higher
need for liquidity requirement. The lower is the ratio, the better the
stability and fewer requirements for liquidity of the bank.
7.
Pledge Security
Pledges

securities

are

those

securities

which banks are using for borrowing by using them as collateral.

This ratio measures the securities a firm has used as collateral to
get debt financing compared to the total securities. If this ratio
increases it is a bad sign because it indicates your liquidity position
is not good which means liquidity requirement is going up. It is
another negative liquidity ratio.

CAMELS Rating
The CAMEL ratings system is a method of evaluating the health of credit
unions by the National Credit Union Administration (NCUA). The rating,
adopted by the NCUA in 1987, is based upon five critical elements of a
credit union's operations:

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(C) Capital Adequacy

(A) Asset quality
(M) Management quality
(E) Earnings
(L) Liquidity
(S) Sensitivity to market risk
This rating system is designed to take into account and reflect all
significant financial and operational factors examiners assess in their
evaluation of a credit union's performance. Credit unions are rated using a
combination of financial ratios and examiner judgment

Internal Capital Growth rate:

Internal Capital Growth rate ratio can be calculated by multiplying
retention ratio and return on equity. Increase in this ratio leads to a
declining cost of capital .
Internal Capital Growth Rate = ROE * Retention Ratio

Capital Asset Pricing Model:

The capital asset pricing model (CAPM) is used to determine a theoretical
required rate of return of an asset. The model takes into account the
asset's sensitivity to non-diversifiable risk, represented by the quantity
beta (), as well as the expected return of the market (R m) and the
expected return of a theoretical risk-free asset (Rf).
Required Rate of Return, Ke = Rf + (Rm-Rf)

Sharpe Ratio:
Sharpe ratio determines whether a portfolio's returns are due to quality
investment decisions or a result of excess risk. This dimension is very
useful because although one portfolio or fund can generate higher returns
than its equivalent portfolios, it can be considered as a good investment
decision if risk is not increasing. The greater a portfolio's Sharpe ratio, the
better the performance of the portfolio. A negative Sharpe ratio indicates
that a risk-less asset would achieve better results than the security being
analyzed. The formula for calculating sharpe ratio is as follows:

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(Average Return of the Portfolio - Risk-Free Rate) / Standard deviation of

the Portfolio

Treynor Ratio:
The Treynor ratio is a risk-adjusted measure of return based on systematic
risk. It is similar to the Sharpe ratio, only that the Treynor ratio uses beta
as the measurement of volatility. The Treynor ratio is calculated by the
following formula:
(Average Return of the Portfolio - Risk-Free Rate) / Beta of the Portfolio

Jensens Alpha:
A risk-adjusted performance measure that represents the average return
on a portfolio over and above that predicted by the capital asset pricing
model (CAPM), given the portfolio's beta and the average market return.
This is the portfolio's alpha. It is the difference between the expected
return and the required rate of return. Jensen's quantify if a portfolio is
earning the proper return for its level of risk. If the value is positive, then
the portfolio is earning excess returns or we can say that the stock is
underpriced and hence there is a possibility that the stock price will rise in
future.
Jensens alpha = annualized return -CAPM return

Intrinsic value:
Intrinsic value is the theoretical price of a stock which is the actual price
that a stock should have as reflected by the fundamentals of a company.
This value is the fair price of a companys stock and when we determine
the intrinsic value of a stock we can compare it with the current stock

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price in the market and find out whether the stock is fairly priced, over
priced or underpriced.
In this report we have calculated the intrinsic value and for that we have
used the non constant dividend growth model. Initially we calculated the
dividend per share of each year and using the growth rate we forecasted
the dividend for the coming year using the formula D 4=D3(1 + g). Then we
discounted D4 by calculating the average required rate of return from the
CAPM model of the 3 respective years and calculated all the future
dividends.

Findings and Analysis

Time series Analysis

From the graph above we can see that ROE of Southeast Bank Limited fell
slightly from 2009 to 2010 and then fell significantly from 2010 to
2011.Net Income increased in 2010 but at the same time shareholders
equity increased significantly producing a small increase in ROE but in
2011 net income fell significantly and shareholders equity rose by a
smaller amount resulting in declination in ROE. Their equity capital
increased significantly and as we know it is the most expensive source of
financing their ROE fell over the three years.
Cross sectional Analysis

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ROE of Jamuna Bank Limited fell significantly in 2010 and rose again in
2011. In 2010 their net income rose slightly but their equity capital almost
doubled because of which their ROE fell significantly and in 2011 their net
income and equity capital rose slightly as a result ROE again increased.
Comparing the two banks we can see that Jamuna Bank is performing
better than Southeast Bank in terms of ROE and is maximizing
shareholders equity. Southeasts ROE is decreasing over the years. So
shareholders of Jamuna maybe more satisfied with the performance of
Jamuna Bank and may have better public confidence compared to
Southeast.

Time series Analysis

ROA of Southeast almost doubled in 2010 this is because their Total
earning asset increased significantly and also the net income rose. ROA is
a measure of the overall operating efficiency which includes asset
utilization, asset management efficiency, expense control efficiency and
all of these ratios improved in 2010 so net income increased in 2010. But
fell drastically in 2011could be due to decrease in their net income but
rise in earnings asset and this is also indicated by asset management
efficiency ratio which increased slightly but expense control efficiency
reduced drastically contributing to the lower net income in 2011.

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Cross sectional Analysis

In 2010, ROA of Jamuna fell as we can see their expense control efficiency
ratio fell and also asset management efficiency ratio fell slightly offering a
smaller increase in net profit then increased slightly in 2011as their
earnings asset increased significantly and also asset management
efficiency ratio increased though their expense control efficiency ratio
increased offering a lower net income.
Comparison of both the bank shows that ROA of Jamuna fell over the three
years but ROA of Southeast is fluctuating. In 2010, Southeasts ROA was
significantly higher than Jamuna Bank so we can say that overall Jamuna
is in a better position since it is not fluctuating that much though ROA is
declining.

Time series Analysis

Southeast Banks net operating margin rose significantly in 2010 and also
their net interest margin and also net non-interest margin( usually this
ratio is negative) rose showing that public still had confidence. But in
2011 the ratio decreased and also the net interest margin fell in 2011
their net interest margin fell heavily as they took out most of their
investment from stock market as market condition was very bad at that

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time hence their net non interest margin decreased and

their net

operating margin also fell down.

Cross sectional Analysis
Net Bank operating margin in Jamuna fell over the three years as we can
see that they had only slight increase in their net interest margin and they
also had a declining net non interest margin
Comparing both the banks we can say that Southeast has a greater net
bank operating margin than Jamuna and hence in a better position
compared to Jamuna.

Time series Analysis

Southeast banks net interest margin increased in 2010 indicating that
they had been able to increase their interest income and maintain their
interest expenses effectively. We can also see in the income statement of
the bank that though their interest income has raised in 2010 but their
interest expenses on borrowings and deposits were fairly constant and
that is why their net interest margin ratio increased. But the ratio fell in
2011 which can be due to the bad market condition when the interest
expenses is likely to rise and we verified that by looking at the figures in
the income statement and we see that the expenses increased from BDT

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7,580,851,090.00 to BDT 11,783,384,765.00 and the ratio declined

because interest expenses risen suddenly beyond the increase in interest
income.
Cross sectional Analysis
Jamunas net interest margin increased in 2010 from 1.93% to 2. 24% and
this rise are due to the fact that management has been efficient in
managing the interest expenses effectively and it fell in 2011 to 2.15%
but Jamunas net interest margin ratio has been fairly constant. The
market condition was bad in 2011, so the ratio declined but it was in a
better position compared to 2009.
We can determine form the comparison that Jamuna had a better net
interest margin ratio overall than southeast bank Limited.

Time series Analysis

Southeast bank Limited has a good non interest margin ratio in 2009 and
it increased by a small amount in 2010 which means that the bank has
been able to maintain its non interest expenses well with the noninterest
revenues. They has also invested

in securities and the income from

investment has also increased. But it decreased in 2011because the stock

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market was in a very bad condition during that time and so received less
investment income but the expenses they were incurring could not be
reduced as a result the ratio declined.
Cross sectional Analysis
Over the period Jamuna bank shows a declining trend in their net noninterest margin ratio which indicates they had rising expenses compared
to non-interest revenues which possibly was declining. Though their noninterest expenses has gone up but compared to that non-interest revenue
has not increased.
After analyzing the condition of both the banks we can say that Southeast
is in a better condition than jamuna bank with a higher net non interest
margin ratio.

Time series Analysis

Southeast banks net profit margin increased in 2010 due to their increase
in net income in 2010 and also because their expense control efficiency
has gone up from 33.68% to 42.03%. In 2011 the ratio declined in value
as their net income also declined and their expense control efficiency ratio
fell to 29.29% which means they had not been able to control their

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expenses efficiently or could be due to the decrease in net income

because of the bad market condition for which the ratio has fallen and
reduced the profitability of the bank.
Cross sectional Analysis
On the other hand, Jamunas net profit margin was declining over the
years. They had little increase in their net income in the subsequent years
and a declining expense control efficiency ratio in 2009, 2010 & 2011 and
they are 32.91%, 32.22% & 24.41% respectively.
After analyzing both the banks we can say that Jamuna has been better in
maintain their net profit margin though recently they had been facing a
decline still they have a higher ratio than Southeast and southeast had a
rapid decline in 2011 could be due to the market condition.

Time series Analysis

From the above graph we can see that in 2009, EPS of Southeast bank
was in a good position but it fell in 2010 as we can see that the number of
shares outstanding almost doubled from 34226373 to 61134224 so
decrease in EPS does not say that company is performing poorly and net
income has also increased from BDT 1,870,185,240 to BDT 2,673,136,468

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though it not a significant increase. But in 2011, EPS dropped drastically

again due to an increase in the common shares outstanding in the market
and a decline in net profit after tax. So here it indicates performance is not
up to the mark.
Cross sectional Analysis
In 2009, EPS of Jamuna was also good but it fell radically in 2010 because
the number of shares outstanding increased in the market from 16218825
to 223008840 which is an increase by 13%. So we cannot say that their
performance went down because the fall In EPS is largely due to the large
increase in the shares outstanding .And again decreased slightly in 2011
because of increase in number of shares in the market and smaller
increase in the net income which indicates their performance is not good
enough during this period.
So comparing both the banks, we can say that both the bank had good
EPS in 2009 but in 2010 their performance was not that bad because their
EPS decreased due to increase in number of shares and in 2011 we can
see that both the bank is performing not like before as we can see
Southeast net income fell in 2011 and Jamunas Net income rose slightly.

Time series Analysis

Southeast shows

that its

asset

utilization ratio is increasing over

the years which means that its
earnings asset is generating more
operating
asset

revenue.

utilization

Southeasts

ratio

did

not

fluctuate much and was slowly

increasing

which

indicates

management has been efficient enough to utilize the earnings asset and
contribute to operating revenues and the operating revenue has been
increasing over the years and their earnings asset increased radically over

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the years compared to the increase in operating revenues thus resulting in

a smaller increase in its asset utilization ratio. This ratio tells us the
portfolio management policies, especially the mix and yield on the bank
assets.
Cross sectional Analysis
Jamunas asset utilization ratio decreased in 2010 because operating
revenues increased by a smaller amount in 2010 compared to the
earnings assets which rose from 46,676,439,423.00 to 65,961,459,631.00.
So their asset utilization ratio fell in 2010 and increased in 2011 because
operating revenue also increased.
Comparison in both the banks shows that Southeasts asset utilization
ratio has been higher for most of the period of three years compared to
Jamuna Bank though in 2011 Southeasts AU ratio was lower than Jamuna.
But Southeast is showing stability in how they are constantly utilizing the
earnings asset to generate revenues.

Time series Analysis

In 2010, expense control efficiency goes up which indicates that bank is
generating

satisfactory

amount

of

operating

revenues

which

is

contributing to the net income before tax. Also it indicates Southeast has

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been able to control their costs satisfactorily but in 2011 the ratio goes
down indicating their expenses went up at a higher rate at which revenue
was generated. Their expenses increased because the interest on deposits
and borrowings rose significantly in 2011(from 7,580,851,090.00 to
11,783,384,765.00) though their operating revenues increased over the
years.
Cross sectional Analysis
The expense control efficiency ratio of Jamuna bank fell both in 2010 and
2011 and this is due to the rising interest expenses on borrowing and
deposits. Over the three years interest expenses rose 2.5 times, even
though their operating revenue increased over the years and also their
net operating income before tax. The ratio decreased because the Jamuna
bank has not incurred huge expenses compared to the revenues
generated.
Comparing between the two bank shows that overall Southeast bank
Limited has been able to manage its expenses in a better way than
Jamuna Bank Limited though it faced ups and downs during the period but
Jamuna has not been able to manage its expenses as well which is clearly
indicated by the ECE ratio going down over the timeline.

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Time series Analysis

In 2010, Southeasts TME ratio went up slightly which indicates they
efficiently managed their taxes and reduced it and thus the ratio
improved. But in 2011TME ratio fall to 33.41 % indicating that
management has not been efficiently able to reduce taxes.
Cross sectional Analysis
Jamuna banks TME ratio decreased in 2010 but again increased in 2011
indicates that currently at that period they were managing taxes
efficiently.
Both the bank is managing their TME ratio effectively but If we compare
both the banks we can see that Jamuna bank has been better in managing
the TME ratio effectively than Southeast bank Limited which means
management has been effective in using tax management tools.

Time series Analysis

Equity Multiplier is also known as fund management efficiency. In 2010,
debt is almost 7 times of total equity capital and EM ratio fell in 2010. The
ratio decreased in 2010 because Southeast might have reduced their debt
financing and increased their equity financing. A decrease in EM ratio
indicates public confidence for the bank will go up. As we already know

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higher debt financing means higher financial leverage for the bank which
leads to an increase in the EM ratio. In 2011 the ratio increased slightly
indicating an increase in debt financing.
Cross sectional Analysis
The EM ratio for Jamuna Bank Limited fell in 2010 referring a decrease in
debt financing and in 2011 the ratio rose indicating an increase in equity
financing.
Both the banks are maintaining a good EM ratio and over the years
reduced the ratio which makes it less exposed to default risk and also they
increased their market reputation. But we can see that Southeast bank
limited is maintaining a good market reputation and greater public
confidence with less risk of being a defaulter but on the other hand as
Jamuna is more financed by debt , it is financially more leveraged and
giving a greater return to its shareholders. (ROE of Southeast and Jamuna
in 2011 are 10.03% & 18.27 % respectively).

Time series Analysis

Employee productivity ratio aims to find out how much the contribution of
each employee to the company is.

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As we can see in the graph, the ratio went up in 2010 reflecting the
potential of management and productivity of the workforce. But the ratio
fell again in 2011 and this could be due to the declining net operating
income and also hiring of new employees who are not that much trained
and these could be likely reasons for the declining ratio.
Cross sectional Analysis
The ratio has been constant more or less in case of Jamuna bank limited.
So we can conclude that southeast had better employee productivity than
Jamuna which means southeast has an efficient workforce.

Time series Analysis

Operating efficiency is a negative ratio because if it goes down then it is
good for a company. This is a unique situation. In southeast we can see in
the above graph that the ratio declined in 2010 which means greater
amount of operating revenue were generated to cover all the operating
expenses. It increased in 2011 which indicates that southeast has not
been able to control their expenses as efficiently as the previous year. This
period was not in a good economic condition and also the net income was
reduced in 2011 compared to 2010 and so it was difficult to cover all the
expenses.

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Cross sectional Analysis

In Jamuna the ratio increased to some extent in 2010 and rose further in
2011 indicating that Jamuna has been facing a tough situation as it was
difficult to control the expenses.
Comparing both the banks we can see that southeast has been in a better
position in controlling all the expenses which Jamuna Bank could not over
the period of 3 years.

LEVERAGE RATIO:

Time series Analysis

In 2010, the debt to equity ratio fell in southeast bank from 8.95 to 6.70
thus exposing the bank to less default risk and again rose in 2011 which
indicates debt increased again but at a lower rate. In 2009, debt was 8.95
times of equity capital but in 2011 debt was 7.15 times of equity.

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Cross sectional Analysis

Earlier in 2009, Jamuna Bank was financed more by debt. In 2010, Jamuna
Banks Debt to equity ratio fell to 10.04 meaning it has 10.04 times of
debt against equity capital and financing a bank through equity capital
can be expensive which increased again in 2011 means bank is again
financing its capital through more debt
Comparing both the banks we can see that both banks reduced the ratio
over the three years which means the decreased their debt financing
maybe to increase their market reputation. Here, we can say clearly that
Jamuna Bank Limited has been using more debt financing than Southeast
indicating Jamuna has been aggressively financing through debt but in
2011 both the bank reduced their ratio compared to 2009. When a bank is
performing well and earnings are high, financial leverage is beneficial for a
bank. But when the economy goes through recession, high financial
leverage can be very risky.

Time series Analysis

The debt to asset ratio fell in 2010 maybe because they are now
depending more on equity financing but it again rose in 2011 which
means they are depending more on debt financing again. Though equity
financing is expensive but debt financing is riskier.

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Cross sectional Analysis

Jamuna Bank reduced their debt to asset ratio slightly in 2010 means they
decreased their debt financing and the ratio increased in 2011 maybe
because debt financing reduces the cost of capital.
If we compare both the banks we can see that Jamuna bank is more
dependent on debt capital and hence is more risky and are financially
more leveraged than Southeast bank limited.

Time series Analysis

Southeast banks ratio went up in 2010 (from 6.34 to 7.83) which means
the bank is having a good liquidity because this ratio means out of the
total asset how much is cash and due from other institutions. A high ratio
means the bank has a good liquidity but too high ratio will mean a lot of
idle cash and it will be sacrificing profitability. The ratio fell again to 6.78
in 2011 meaning that cash and due from depository institutions declined
and as a result liquidity declined which means liquidity requirement is

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going up. The bank will not be able to meet its immediate cash
requirement as the ratio declined which means less amount of cash is
available than the previous year to meet liquidity needs.
Cross sectional Analysis
From the above graph we can see that Jamuna Bank has a higher cash
position (11. 05%) in 2009 than southeast. This ratio is high which
indicates Jamuna Bank has a higher liquidity and a lower liquidity
requirement and also it means that they are sacrificing profitability as
they are holding idle cash in 2009. In 2010, their liquidity decreased
means they are utilizing their idle cash and again in 2011 the ratio
increased implying an increase in liquidity and sacrificing profitability.
Overall we can see that Jamuna Bank was in a better liquidity position
than southeast in 2009 and 2011 and in 2010 they were more or less
constant. So it indicates Jamuna is sacrificing profitability more and
ensuring liquidity.

Time series Analysis

This ratio indicates out of the total assets how much is invested in
government or risk free assets. In 2009, southeast bank had a fair amount
invested in government securities while having a good liquidity (17.22 %)

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and it decreased (12.58%) in 2010 indicating that liquidity requirement is

going up. The ratio increased to 16.71% in 2011 which says the bank has
good liquidity and a larger amount invested in risk free government
securities in the period when the economy was going through a bad time.
Cross sectional Analysis
Jamuna and southeast were in a closer position in 2009 and then in 2010
the ratio fell for Jamuna Bank indicating that the liquidity requirement has
gone up for Jamuna. The ratio rose in 2011 which indicates liquidity
requirement has gone down.
Comparing both the banks we can see that Jamuna Bank has not invested
in government securities that much compared to Southeast overall,
Jamuna Bank had a good liquidity position than Southeast over the years.

Time series Analysis

Capacity ratio is a negative liquidity ratio. If this ratio goes up then
liquidity goes down. in 2010, the ratio increased which states that liquidity
of southeast has gone down and this could be because the bank has
issued more loans which are the least liquid. It declined in 2011 which
means liquidity is improving. So this ratio indicates a trade-off between
liquidity and profitability.

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Cross sectional Analysis

In 2009, Jamunas capacity ratio was low because at this point of time they had
very much idle cash in hand which is also indicated by their high cash position
indicator ratio and rose significantly in 2010 as they started investing their idle
cash which is also represented by the decrease in their cash position indicator
ratio in 2010 (which fell from 11.05 to 7.97%). The ratio again declined in 2011
which indicates they are again sacrificing profitability for liquidity.
So we can conclude that Jamuna;s liquidity position was much better than
southeast in 2009 and approximately closer in 2010 and varied again in 2011
with Jamuna being having a good liquidity.

Time series Analysis

Banks use pledged securities as collateral for other borrowings. This is
another negative liquidity ratio. In 2010, the ratio increased radically from
1.23 % to 3.27 % indicates that liquidity has gone down and liquidity
requirement has gone up. As the liquidity position is not good we had
used more securities as collateral to meet liquidity needs. The ratio went
down drastically in 2011 which means they are in a good liquidity position
and they have less amount of securities that are pledged as we have seen

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that their pledges securities drops from BDT 600,000,000.00 in 2010 to

400,000,000.00 in 2011.
Cross sectional Analysis
In case of Jamuna Bank the ratio has not been fluctuating that much. It
decreased slightly in 2010 which means the bank has fewer amounts of
pledges securities and also a good liquidity position. The ratio decreased
further in 2011.
Comparing both the banks we can say that the liquidity position of Jamuna
has been better than southeast and Jamuna had to use less securities as
collateral for borrowing purposes.

Time series Analysis

It is the current ratio of commercial banks. Hot money ratio of southeast
bank was very high in 2009 as they invested heavily in money market
assets whose maturity is less than one year. In 2010 when the market
condition was good they converted most of their money market assets
and invested them in loans and securities. In 2011, they again invested in
money market assets mostly treasury bills as they are risk free and as

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other investments were risky in a volatile market so the ratio increased in

2011. The ratio indicates that they have sufficient liquid securities to pay
off other obligations that falls due as the ratio is more than 1 in all the
three years.
Cross sectional Analysis
Jamunas hot money ratio fell in 2010 which says that they have less
money market assets but in 2010 and 2011 the ratio fell drastically to
0.38 and 0.33% which means their liquidity has gone down and the bank
is in trouble.
Comparing both the banks we can say that southeast was in a better
position in terms of liquidity and Jamunas ratio fall indicating liquidity
crisis.

Time series Analysis

Core deposits are short term savings account where the possibility of
withdrawal is low and banks can hold such money for the whole
accounting period. The core deposit ratio of southeast Bank Limited goes

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down in 2010 means core deposit is going down so the bank will be falling
short of liquidity and hence the banks liquidity requirement will be going
up. The ratio fell further in 2011 (5.23%) compared to 2010 (5.36%). So
we can determine from here that for the last 3 years liquidity requirement
of southeast has gone up.
Cross sectional Analysis
We can see that for the last 3 years the core deposit ratio of Jamuna Bank
is also reducing and that indicates the liquidity requirement has gone up
over the period.
Comparing both the bank , we can say that Jamuna is in a better position
than southeast because Jamuna has been maintaining a higher core
deposit ratio for which they maintained a better position in liquidity and
also liquidity requirement was lower than southeast.

Time series Analysis

The deposit composition ratio indicates the relationship between demand
deposit and time deposit (long term savings account). If this ratio goes up

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means demand deposit has gone up which refers to that most customers
are now withdrawing their money from bank and so the liquidity
requirement f the bank has gone up.
In 2010, the deposit composition ratio has gone up means the liquidity
requirement has gone up as more customers are withdrawing their money
which can be shown by the demand deposits in 2009 and 2010 and they
are BDT 6,226,255,141.00 and BDT

10,048,965,997.00 respectively. But

in 2011, the ratio declined which refers to a decrease in liquidity

requirement.
Cross sectional Analysis
The ratio was more or less constant in Jamuna Bank limited and in 2009 it
was 18.71% and in 2010 with a slight increase became 19.11% which
means customers are withdrawing money so liquidity is going up and the
ratio fell again in 2011 which means that need for liquidity has gone
down.
Comparing both the banks we can tell that southeast has been in a better
liquidity position over the three years than Jamuna Bank.

Market RATIO:

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Time series Analysis

P/E ratio of Southeast went up radically in 2010 (from 6.11 to 13.28)
reflecting that public has confidence on the bank and also indicating the
growth potential of the bank. It fell in 2011 and this can be justified by the
bad market condition in 2011 though the fall (from 13.28 to 12.88) was
only slight if we consider the market condition. Also indicates that even
the market condition is bad investors have confidence on the bank.
Cross sectional Analysis
In case of Jamuna Bank we can see that the P/E has not fluctuated much.
In 2010, it went up to 11.56 from 9.20 reflecting investors confidence and
the growth of bank. But in 2011, the ratio fell to 9.46 though it is better
than 2009.
So both the banks have not suffered drastically in the year when the
market condition was too bad. But southeast bank has achieved a higher
growth rate and has received more public confidence while Jamuna Bank
also good as they achieved stability and did not fluctuate that much in the
times when the economy was doing bad so they also have good public
confidence and growth potential.

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Time series Analysis

Southeast has a market to book ratio more than 1 in all the three years
and it reflects that it has a positive perception in the market. From the
above graph we can see that southeasts ratio has always been greater
than 1 and in 2010 it achieved a significant growth so we can see that in
2010 investors confidence was very high but the ratio fell in 2011 which
could be due to the collapse in the stock market and also we have seen
that their net income also declined in 2011. But if the overall situation is
considered we can see that even after the fall in 2011 the ratio is greater
than 2009 which indicates significant improvement in performance.
Cross Section analysis
Jamuna had a higher ratio than southeast in 2009 and it fell drastically in
2010 from 2.13 to 1.91 and it further decreased in 2011 perhaps due to
the worse condition of the stock market. But the ratio has always been
greater than 1 over the years but it declined throughout the period.
Comparing the two banks we can see that in 2009 Jamuna was performing
better but the next year it fell below Southeast but regained its position in
2011.

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Time series Analysis

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Southeast provided an amount of BDT 12.50 per share as dividend in 2009

which rose in 2010 to BDT 19.59 but actually southeast has not given any
cash dividend in 2010 rather they issued huge amount of bonus share
which aggravated the dividend per share but DPS fell in 2011 to 0.83 and
it

has

fallen

significantly

compared

to

2009

cause

only

BDT

693,084,040.00 was distributed as cash dividend whereas the number of

shares outstanding has increased by a greater amount and also net
income after tax has declined which leads to less dividend available for
the shareholders.
Cross sectional Analysis
Whereas Jamuna has not declared any cash dividend over the three years
rather they announced stock dividend and in 2009 they had a good DPS
but it fell drastically in 2010 and declined further in 2011 to BDT 1.79.
We can see that in 2009, Jamuna offered greater DPS than Southeast but
in 2010 Southeast was better and fluctuated less over these 2 years and
in 2011 the DPS fell for both the banks with Jamuna giving a greater DPS.

Intrinsic value:

Market Price
Intrinsic Value

Southeast
BDT 30.10
BDT 4.94

Jamuna
BDT 34.50
BDT 14.37

After calculating the intrinsic value from the data of the banks for last 3
(Three) years, we found out that Southeast Bank is overpriced. We found
an intrinsic value of BDT 4.94 from calculation whereas the last trading
price was BDT 30.10. And for Jamuna Bank Limited we found an intrinsic
value of BDT 14.37 whereas the last closing price in 2011 was 34.50. So
both the bank has the same position in their share price and as the
Bangladesh stock market is highly fluctuating one and the value of the
shares are more than it should be we have a little risk in investing but in
comparison of this two we can prefer Jamuna than Southeast ass the

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difference between the intrinsic value and the actual market price is lesser
then Southeast.

Sharpe Ratio:
Southeast Bank Limited
Year 2009
Year 2010
Year 2011
Sharpe Ratio -0.119320539 1.129874795 -1.184475467
Treynor ratio -0.100169345 0.492571181 -0.669831743
Jensen alpha -0.385021326 -0.333771731 -0.164767405
Annual

Jamuna Bank Limited

Year 2009
Year 2010
Year 2011
1.800517100 -0.062203706 -0.759540852
1.936773721 -0.032590561 -0.433953957
0.678893073 -0.828645976 0.073985984

return
CAPM
Beta
Annual stdev

1.047887646
0.368994573
0.482961761
0.519510560

Natures

0.051403820
0.436425146
0.609928922
0.512034063

0.773420304
1.107192034
1.341776234
0.584950037

-0.530143505
-0.365376100
0.959410347
0.542555353

0.077604664
0.906250640
1.070719085
0.560984837

-0.388072459
-0.462058443
1.153515137
0.659046129

Time series Analysis

From the above table we can see that in 2010 Southeast bank were able
to earn excess return without taking excess risk as their annual return
increased by 0.77 but their sharpe ratio increased at a very high rate and
treynor ratio was also increased significantly although their return was
more volatile than market which is shown by their beta greater than 1.
Jamuna has also got a beta greater than 1 in 2010 & 2011 as their beta
rose highly hence their required rate of return also rose. In 2011 The ratios
again fell down drastically, the main reason behind the reduction was that
at that time market was experiencing a down turn hence it was very
difficult to find investment which offered higher return than risk free rate.
Cross sectional Analysis
In 2010 unlike Southeast bank Jamuna risk adjusted ratios started to
decrease in 2009 they had a good position their alpha value was high
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which indicated that it was an under priced stock hence in the next year
its required rate of return decreased significantly and at the same time
they were not able to control their total and market risk and also at the
same time were not able to generate more return so their sharpe, treynor
and jensen alpha fell down. In 2011 started raising again, the ratios again
risen up but this time the result occurred because of the bad phase in
stock market so prices were falling heavily. If we compare the 2 banks we
can see that the condition of Jamuna is sligtly better than Southeast
because of its higher sharpe, treynor and jensen alpha.

CAMELS Rating:
According to the Camels rating both Southeast bank limited and Jamuna
Bank limited are rated as satisfactory and they fall under the B category
Banks.

Recommendation & Conclusion

Now if we consider both the banks, than we can see that Jamuna Bank is
in a better position compared to Southeast bank. But still we saw some
common features in both the banks, as the economy was going through a
depression period in 2011 it affected the returns of both the banks their
profitability, liquidity, efficiency and most importantly their stock price fell
down heavily in this period. Both of them enjoyed a successful period in
2009 especially Jamuna Bank they performed very well especially their
profitably ratios increased significantly. In case of Liquidity, some ratios
were favorable for Southeast bank and some were favorable for Jamuna
bank. But higher percentage of ratios shows that the Jamuna bank is
managing its liquidity level in a better way and also has lower liquidity risk
compared to Jamuna bank. Southeast bank has a decreasing cash position
ratio for which the liquidity risk is also going up. They need to manage the
cash position level in a better way, so that the liquidity requirement goes
down and to build up the market perception. They are having liabilities

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sensitive gap, so they are in need of more liquid asset to cover up the
liquidity requirement. We saw that Jamuna bank is a very stable bank all
of their ratios are quite stable compare to Southeast, of which the growth
was very high in 2010 but it fell down in 2011 Jamuna`s ratio also fell but
the change was little bit higher compare to Southeast.
Now after comparing the profitability ratio we saw that Jamuna is in a
better position compare to Southeast which is indicated by their higher
ROE, ROA, net profit margin ratios. The gap between the two is very little
in 2009 but in 2010 Southeast performed outstandingly and made huge
improvement in their profitability ratios and made the difference closer
but still they were lacking behind Jamuna but should take proper steps to
minimize the cost of capital (interest expenses). May be they should try to
increase their service level, so that they can generate adequate amount
of non-interest income as well.
After comparing the liquidity ratios we saw that in recent times Jamuna`s
condition is better than Southeast but in 2010 Southeast`s liquidity
position was closer to Jamuna but in 2011 the difference of both their
ratios gone apart and in 2011 Jamuna`s liquidity condition was better if
we compare the liquidity indicator ratios like cash indicator liquid
securities indicator. On the other hand Southeast`s is struggling to
maintain a balance in Liquidity ratio and profitability for the whole period.
We also notice one thing for Jamuna, while calculating this ratios that it
didn`t decrease as much as the other ratios fell down in 2011 the reason
may be that as economy was in a bad state so in order to reduce there
risk exposure they are keeping enough liquidity.
While comparing the efficiency ratios we saw that in some sectors Jamuna
outperformed Southeast but in some other case it was reversed. Like
expense control efficiency ratio of Southeast is fair enough high in
compare to Jamuna it means they are able to control their expenses much
better than Jamuna and if we see the employee productivity ratio we can

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see that Southeast is utilizing their employee in a better way to generate

more revenue.
Now after comparing the market both the banks gave almost similar
results. The difference between Jamuna and Southeast is truly significant.
If we compare the dividend payout ratio we can see that Jamuna is
offering very high dividend compare to Southeast. Market price of
Southeast is higher because of high PE ratio but market to book value
ratio is higher for Jamuna. And at last after comparing the risk adjusted
ratios we saw that Jamuna is getting better to gain higher return by
adjusting their risk which is indicated by their higher sharpe , treynor and
jensen alpha.

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Bibliography
http://www.bangladesh-bank.org/
http://www.dsebd.org/
https://www.southeastbank.com.bd/index.php
http://www.jamunabankbd.com/front/index
http://www.jamunabankbd.com/front/information/1/1
http://www.reportbd.com/blogs/11/CAMELS-Rating-of-Banks--Bangladesh.html
Annual report of Southeat Bank Limited (2009. 2010 & 2011)
Annual Report of Jamuna Bank Limited (2009,2010 & 2011)

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Appendix
All calculation of ratios, beta calculation , intrinsic value calculation and
graphical representation are given in the cd.

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