Key Financial Forecasting of Trust Bank Limited
1.0 LITERATURE REVIEW Regression analysis is a statistical tool with the help of which we are in a position to estimate (or predict) the unknown values of one variable from unknown values of another variable. With the help of regression analysis we can find out the average probable change in one variable given a certain amount of change in another. In fact it provides estimates of values of the dependent variables from the values of independent variables. (S.P.Gupta , M.P.Gupta, 2003) Time series analysis is the most popular method of business forecasting because it helps in understanding of past behavior, it helps in planning future operations, it helps in evaluating current accomplishments above all it facilitates comparison. ( S.P.Gupta, M.P.Gupta, 2003) The basic objective of the study of trend is to predict the future behavior of the data. If a trend can be determined, then the rate of change or progress can be ascertained and tentative estimates concerning the future be made accordingly. Mathematical methods of fitting trend are not foolproof – in fact, they can be a source of some of the most serious errors that are made in statistical work. They should never be used unless rigidly controlled by a separate logical analysis. Trend fitting depends upon the judgment of the statistician, and a skillfully made freehand sketch may often be more practical than a refined mathematical formula. (Riggleman, Frisbee, ). The straight line trends indicate the increase or decrease of a time series at constant amount but in many cases, straight line can not fit the data adequately. In such a case better description of the time series can be attained by non-linear curve rather than straight line. The
methods of measuring non-linear trends are: graphic method, moving average method, second degree polynomial equation method and so on. . ( S.P.Gupta, M.P.Gupta: 2003). Moreover, the trends discussed so far were plotted on arithmetic scales. Trends may also be plotted on semi-log chart in the form of straight line or a non-linear. The types of trend usually computed by logarithms are: exponential trends, and growth curves. However based on the trend/regression type (exponential, linear, logarithmic, polynomial, power, moving average) polynomial fits better because it is a measure of how well the data fits the trend line: the closer to one the better the fit. A trend line is most reliable when its R2 value, known as the correlation coefficient, is at or near 1. The reason for adoption of this polynomial regression is that this trend analysis is done with single dependent variable and single independent variable whereas the year is taken as the independent variable which actually does not have or have insignificant influence on dependent variable. Basically, trend line polynomial regression has been applied for processing of data and developing the trend equation on the last five years key financial data with the help of Microsoft Excel application.
2.0 OBJECTIVES OF THE STUDY The objectives of the study are to: •
Make a bridge between past and future performance of Trust Bank Ltd.
•
Forecast future performance based on the past performance of Trust Bank Ltd.
•
Analyze the past growth to predict the future growth of Trust Bank Ltd.
•
Identifying present strengths and weaknesses and future opportunities and threats.
•
Provide better insight of the Trust Bank Ltd.
3.0 RESEARCH METHODOLOGY This is a quantitative analysis based on some key financial data of Trust Bank Limited. For trend analysis and forecasting, secondary data have been collected from published annual report of Trust Bank Limited for the year 2009. Last five years data have taken into
consideration for forecasting financial performance of the year 2010 and 2011. For ease, the year 2005, 2006, 2007, 2008, 2009, 2010 and 2011 has taken as year 1, 2, 3, 4, 5, 6 and 7 respectively in a timeline. For processing of data and developing the trend equation and trend line polynomial regression has been applied on the last five years key financial data with the help of Microsoft Excel application. The reason for adoption of this polynomial regression is that this trend analysis is done with single dependent variable and single independent variable whereas the year is taken as the independent variable which actually does not have or have insignificant influence on dependent variable. As a result it works better than linear regression, logarithm regression, power regression, exponential regression and moving average regression. Moreover, a trend line is most reliable when its R 2 value, known as the correlation coefficient, is at or near 1. It is a measure of how well the data fits the trend line: the closer to one the better the fit. In this paper, polynomial showed highest R-squared compared with other trend regression. With each equation formulated from the polynomial regression, 2010 and 2011 value has been forecasted putting the value of year.
4.0 LIMITATIONS OF THE STUDY While going for forecasting, some limitations arise. These are: •
Forecasting may be far away of the reality of the market.
•
Forecasted value is derived from analyzing trend where year has been taken as independent variable, but year can not be independent variable or does not have direct impact on financial performance. There are some other micro and macro factors which may influence the result.
•
Corporate tax rate is assumed to be same.
•
Government policy, export-import policy may not be same in the future.
5.0 BANKING SECTORS IN BANGLADESH 5.1 INTRODUCTION The Jews in Jerusalem introduced a kind of banking in the form of money lending before the birth of Christ. The word 'bank' was probably derived from the word 'bench' as during ancient
time
Jews
used
to
do
money
-lending
business
sitting
on
long
benches.
First modern banking was introduced in 1668 in Stockholm as 'Svingss Pis Bank' which opened up a new era of banking activities throughout the European Mainland. In the South Asian region, early banking system was introduced by the Afghan traders popularly known as Kabuliwallas. Muslim businessmen from Kabul, Afghanistan came to India and started money lending business in exchange of interest sometime in 1312 A.D. They were known as 'Kabuliwallas'.
5.2 NUMBER AND TYPES OF BANKS The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are Nationalized Commercial Banks (NCBs), 28 local private commercial banks, 12 foreign banks and the rest five are Development Financial Institutions (DFIs). Sonali Bank is the largest among the NCBs while Pubali is leading in the private ones. Among the 12 foreign banks, Standard Chartered has become the largest in the country. Besides
the
scheduled
banks,
Samabai
(Cooperative)
Bank,
Ansar-VDP
Bank,
Karmasansthan (Employment) Bank and Grameen bank are functioning in the financial sector. The number of total branches of all scheduled banks is 6,038 as of June 2000. Of the branches, 39.95 per cent (2,412) are located in the urban areas and 60.05 per cent (3,626) in the rural areas. Of the branches NCBs hold 3,616, private commercial banks 1,214, foreign banks 31 and specialized banks 1,177. Bangladesh Bank (BB) regulates and supervises the activities of all banks. The BB is now carrying out a reform program to ensure quality services by the banks.
5.3 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.
5.4 BANK-LICENSING Bank Company Act, 1991, empowers BB to issue licenses to carry out banking business in Bangladesh. Pursuant to section 31 of the Act, before granting a license, BB needs to be satisfied that the following conditions are fulfilled: "that the company is or will be in a position to pay its present or future depositors in full as their claims accrue; that the affairs of the company are not being or are not likely to be conducted in a manner detrimental to the interest of its present and future depositors; that, in the case of a company incorporated outside Bangladesh, the Government or law of the country in which it is incorporated Bangladesh as the Government or law of Bangladesh grants to banking companies incorporated outside Bangladesh and that the company complies with all applicable provisions of Bank Companies Act, 1991."Licenses may be cancelled if the bank fails to comply with above provisions or ceases to carry on banking business in Bangladesh.
5.5 CENTRAL BANK AND ITS POLICIES Bangladesh Bank (BB), as the central bank, has legal authority to supervise and regulate all banks and non-bank financial institutions. It performs the traditional central banking roles of note issuance and of being the banker to the government and banks. Given some broad policy goals and objectives, it formulates and implements monetary policy manages foreign exchange reserves and lays down prudential regulations and conduct monitoring thereof as they apply to the entire banking system. Its prudential regulations include, among others: minimum capital requirements, limits on loan concentration and insider borrowing and guidelines for asset classification and income recognition. The Bangladesh Bank has the power to impose penalties for non-compliance and also to intervene in the management of a bank if serious problem arise. It also has the delegated authority of issuing policy directives regarding the foreign exchange regime.
5.6 CAPITAL ADEQUACY OF THE BANKS With a view to strengthening the capital base of banks and making them prepare for the implementation of Basel-II Accord, banks are required to maintain Capital to Risk-Weighted
Assets ratio 10% at the minimum with core capital not less than 5% effective from December 31, 2007. However, minimum capital requirement (paid up capital and statutory reserve) for all banks will be Tk.200 corer as per Bank Company (Amendment) Ordinance, 2007. Banks having capital shortfall will have to meet at least 50% of the shortfall by June, 2008 and the rest by June, 2009. Revaluation reserves of held to maturity (HTM) securities (up to 50% of the revaluation reserves) has been added to the components of supplementary capital. Besides, 'Hedging the price risk of commodity transactions' has been included in Short-term self liquidating trade related contingencies.
5.7 SERVICES OF BANKS 5.7.1 ACCOUNTS, CURRENT, 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. 5.7.2 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. This account guarantees loan. Almost all the banks follow the same rules in the field of savings account, except foreign banks for varying deposit. On an average, all the Banks give around six percent interest. 5.7.3 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). 5.7.4 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. 5.7.5 ELECTRONIC BANKING SERVICES FOR WINDOWS (EBSW) 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. 5.7.6 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. 5.7.7 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. 5.7.8 SWIFT SWIFT is a bank owned non-profit co-operative based in Belgium servicing the financial community worldwide. It ensures secure messaging having a global reach of 6,495 Banks and Financial Institutions in 178 countries, 24 hours a day. SWIFT global network carries an average 4 million message daily and estimated average value of payment messages is USD 2
trillion. SWIFT is a highly secured messaging network enables Banks to send and receive Fund Transfer, L/C related and other free format messages to and from any banks active in the network. Having SWIFT facility, Bank will be able to serve its customers more profitable by providing L/C, Payment and other messages efficiently and with utmost security. Especially it will be of great help for our clients dealing with Imports, Exports and Remittances etc.
6.0 BANKING SECTORS IN 2009 6.1 CASH RESERVE RATIO (CRR) Cash reserve ratio (CRR) for the scheduled Banks with Bangladesh Bank remained same at 5 percent of their total demand and time liabilities since October 1, 2005. That is, banks are required to maintain CRR daily at the rate of 5 percent on average on bi-weekly basis, provided that CRR would not be less than 4.5 percent in any day with effect from March 01, 2009.
6.2 STATUTORY LIQUIDITY REQUIREMENT (SLR) Statutory liquidity requirement (SLR) for the scheduled banks, except banks operating under Islamic Shariah and the specialized banks, remained same at 18 percent for their total demand and time liabilities, excluding inter-bank items, since October 01, 2005. SLR for the Islamic banks remained unchanged at 10 percent.
6.3 NON-PERFORMING LOAN (NPL) The ratio of gross NPL to total loans of the banking sector decreased from 11.1 percent during end Q3FY09 to 10.5 percent in end Q4FY09. During the period, gross NPL ratio for state-owned commercial banks (SCBs) decreased from 26.50 percent to 24.1 percent which contributed significantly to decreasing overall ratio. The ratios for private commercial banks (PCBs) and foreign Commercial banks (FCBs) increased marginally to 4.9 percent and 2.4 percent respectively, during end of Q4FY09 from 4.7 percent and 1.9 percent respectively at the end of Q3FY09.For the state-owned banks (SBs), a proportionately similar rate of decrease occurred, from 25.9 percent to 25.5 percent during the period. On the other hand, the net NPL ratio for all banks decreased from 3.0 percent in Q3FY09 to 2.5 percent in Q4FY09 contributed by sharp decline in the ratio for SCBs from 7.2 percent to 3 percent.
6.4 INTEREST RATE SPREAD During end Q4FY09, the interest rate spread (IRS) stood at 4.86 percent for all banks marginally higher than 4.81 in end Q3FY09. During Q4FY09, both deposit and lending interest rates decreased from 7.52 percent and 12.33 percent in Q3FY09 to 7.01 percent and 11.87 percent respectively. However, IRS decreased from 9.48 percent to 9.14 percent for FCBs and from 3.63 percent to 3.40 percent for SCBs while the same increased from 4.58 percent to 4.81 percent for PCBs; and marginally from 2.99 percent to 3.01 percent for SBs. The IRS in the banking sector of major South Asian countries shows that Pakistan has the highest spread rate followed by Bangladesh, India and Sri Lanka.
6.5 LIQUIDITY POSITION OF THE SCHEDULED BANKS Excess liquidity of scheduled banks stood at Tk.35 billion as of end June 2009 as against Tk.13 billion as of end June 2008. Total liquid assets of banks stood higher at Tk.78 billion as of end June 2009 against at Tk.48 billion as of end June 2008.
6.6 CONCLUDING REMARKS From aforementioned domestic and international factors, it may be concluded that FY 2009 was not much business friendly especially for financial institutions like a commercial bank. Entrepreneurs have been shaken by international crisis and less confidence on market barred them to make rigorous investment. However, Bangladesh Bank pursued growth supportive and prudent monetary policy stance during FY09 to support credit growth for creation and expansion of production capacity of real sector.
7.0 TRUST BANK LIMITED 7.1 HISTORY Trust Bank Limited, sponsored by the Army Welfare Trust (AWT), is first of its kind in the country. With a wide range of modern corporate and consumer financial products Trust Bank has been operating in Bangladesh since 1999 and has achieved public confidence as a sound and stable bank. Trust Bank Limited is one of the leading private commercial bank having a spread network of 45 branches and 5 SME center across Bangladesh and plans to open few more branches to cover the important commercial areas in Dhaka, Chittagong, Sylhet and other areas in 2010.
7.2 MENTIONABLE ACTIVITIES In 2001, the bank introduced automated branch banking system to increase efficiency and improve customer service. In the year 2005, the bank moved one step further and introduced ATM services for its customers. Since bank’s business volume increased over the years and the demands of the customers enlarged in manifold, its technology has been upgraded to manage the growth of the bank and meet the demands of its customers. In January 2007, Trust Bank successfully launched Online Banking Services which facilitate Any Branch Banking, ATM Banking, Phone Banking, SMS Banking, and Internet Banking to all customers. Customers can now deposit or withdraw money from any Branch of Trust Bank nationwide without needing to open multiple accounts in multiple Branches. Via Online Services and Visa Electron (Debit Card), ATMs now allow customers to retrieve 24x7 hours Account information such as account balance checkup through mini-statements and cash withdrawals. Trust Bank has successfully introduced Visa Credit Cards to serve it’s existing and potential valued customers.
Credits cards can now be used at shops & restaurants all around
Bangladesh and even internationally. Trust Bank is a customer oriented financial institution. It remains dedicated to meet up with the ever growing expectations of the customer because at Trust Bank, customer is always at the center 7.3 VISION Trust Bank has an aim to provide financial services to meet customer expectations so that customers feel Trust Bank is always there when they need us, and can refer us to their friends with confidence. Trust Bank wants to be a preferred bank of choice with a distinctive identity. 7.4 MISSION
Trust Bank has a mission is to make banking easy for its customers by implementing onestop service concept and provide innovative and attractive products & services through their technology and qualified human resources. Trust Bank always looks out to benefit the local community through supporting entrepreneurship, social responsibility and economic development of the country.
7.5 OVERVIEW OF TRUST BANK LIMITED IN 2009 The year 2009 was challenging for all of TBL due to global economic crisis. In the early part of the year, the global economy was in a severe recession inflicted by a massive financial crisis and an acute loss of confidence. However, although TBL is not insulated, Bangladesh economy was able to manage to ward off the global impact and maintained a commendable resilience by registering 5.9 percent GDP Growth in FY 2008-09. FY2009-10 started its journey at a time when lagged impact of the crisis, as apprehended, was becoming evident. Hence, a lower growth target of 5.5-6.0 percent was fixed for FY 2009-10 in view of the emerging challenge. Despite the challenges from crisis in the global economy and the shock of crisis on domestic economy, Trust Bank recorded a solid year of performance in 2009. The Bank, with untiring efforts and dedication of Board of Directors, Management and Employees, recorded deposits of Taka 48,464.64 million and loans and advances of Taka 32,663.11 million in 2009, registering growth of 47 percent and 18.65 percent respectively over preceding year. The operating performance of the Bank was also noteworthy showing net profit after tax of Taka 610.91 million recording a growth of 32 percent over preceding year. With opening of 5 new branches and 4 SME/Agri branches in 2009, network of Trust Bank has widened to 42 branches and 4 SME/ Agri branches, spreading to both urban and rural business strategic areas.
7.6 ACHIEVEMENTS IN 2009 The achievement of Trust Bank, in retail banking, merchant banking, Islamic banking, SME financing in terms of growth and diversification was commendable in the year 2009.TBL has achieved very impressive growth in foreign remittance. Total foreign remittance during the year was Taka 8,669 million against Taka 5,789 million in 2008 registering a growth of 50 percent. The endeavor of TBL to boost up foreign remittance includes signing contract with many world-renowned money transfer companies including Western Union, one of the largest of its kinds. Trust Bank Ltd has also made strategic alliance with Shakti Foundation
for Disadvantaged Women, one of the largest MFIs for distribution of foreign remittance remitted through Western Union. In 2009, the Bank entered into a new regime of banking reform, i.e. Basel Capital Accord II. In line with the stipulations of Basel Capital Accord, Bangladesh Bank has fixed up minimum paid up capital plus statutory reserve for scheduled banks at Taka 4000 million, which must be attained by 11 August 2011. Bangladesh Bank imposed a restriction on payment on cash dividend until the required minimum capital is attained. The Board of Directors has drawn up road map to reach Taka 4000 million within stipulated time. As part of the road map, the Board of Directors has recommended a moderate 20% bonus shares out of share premium, and balance if any, out of retained earnings for the year 2009. Under the Basel II requirement, minimum paid up capital should be Taka 2000 million.TBL intends to maintain the paid up capital at this level or marginally over the minimum requirement. This will help TBL give good dividend to the shareholders in future. The Board of Directors, above many aspects, puts its emphasis on the Bank to be a compliant organization in all its actions.
7.7 CORPORATE GOVERNANCE IN 2009 TBL says, you will agree with TBL that a compliant organization is less susceptible to various risks emanating from internal and external shocks. Trust Bank Ltd does not encourage making quick profit at the cost of compliance, integrity, and transparency in management. TBL encourages earning a sustainable profit that will ensure strong position of the Bank in the long run. To ensure compliance of applicable laws, rules, and regulations, risk based audits are conducted depending on risk analysis of branches or divisions of Head Office. Moreover, Board Audit Committee has an Auditor who reviews the internal audit report and conducts audit in branches, if it is felt necessary. As you know, good corporate governance system is vital for efficient and effective utilization of business resources, business operation, long-term stability and sustainable growth for any organization. The corporate governance system of the Bank has been designed to ensure transparency and accountability at all levels in doing business. The Board provides leadership and direction for the management, approves strategic and major policy decisions and oversees management to attain goals and objectives of the Bank.
8.0 KEY FINANCIAL FORECASTING OF TRUST BANK LIMITED This paper forecasts key financial performance of Trust Bank Limited from three major aspects: (1) Key Operating Results, (2) Key Financial Position and (3) Other Business. From key operating results aspect, total operating income, total operating expense, operating profit. Provision for loans, investments and other, profit before tax and profit after tax have further been studied for trend analysis and forecasting growth. 8.1 Total Operating Income Total operating income comprises of net interest income, income from investments, commissions, exchange and brokerage and other operating income. In 2009, total operating income was Tk. 2,467.67 million compared to 2006.11 in 2008. Bank has experienced a growth of 23% in total operating income. Last five years total operating profit is presented in table 1. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Total Operating Income
2005 2006 2007 1 2 3 511.46 844.19 1,328.66 Table 1: Five years total operating income
2008 4 2,006.11
2009 5 2,467.67
The formulated trend equation along with R-squared value is as follows: y = 32.189x2 + 314.3x + 134.64 R2 = 0.9937 From the equation the following forecasted data (table 2) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 2011 Time (x) 6 7 Total Operating Income (Forecasted) 3,179.24 3,912.00 Table 2: Forecasted total operating income for year 2010 and 2011 The forecasted operating income shows a forecasted growth of 29% and 23% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 1. 8.2 Total Operating Expense
In 2009, total operating expense was Tk. 1109.31 million compared to 753.67 in 2008. Bank has experienced an increase of 47 % in total operating expense. Last five years total operating expense is presented in table 3. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year 2005 2006 2007 2008 Time (x) 1 2 3 4 Total Operating Expense 215.19 297.29 474.95 753.67 Table 3: Five years Total Operating Expense
2009 5 1,109.31
The formulated trend equation along with R-squared value is as follows: y = 46.296x2 - 53.312x + 220.77 R2 = 0.9999 From the equation the following forecasted data (table 4) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 2011 Time (x) 6 7 Total Operating Expense (Forecasted) 3,179.24 3,912.00 Table 4: Forecasted total operating expense for year 2010 and 2011 The forecasted operating expense shows an increase of 41% and 35% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 2.
Figure 2: Total Operating Expense Trend 2500 y = 46.29x2 - 53.31x + 220.7 R² = 0.999
2000
Time (x)
1500
Total Operating Expense
l tiM n u o m A
1000 500 0 1
2
3
4 Year
5
6
7
8.3 Operating Profit In 2009, total operating profit was Tk. 1358.35 million compared to 1252.44 in 2008. Bank has experienced a growth of 8 % in total operating profit. Last five years total operating profit is presented in table 5. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Operating Profit
2005 2006 2007 1 2 3 296.27 546.9 853.71 Table 5: Five years Operating Profit
2008 4 1,252.44
2009 5 1,358.35
The formulated trend equation along with R-squared value is as follows: y = -14.109x2 + 367.62x - 86.136 R2 = 0.982 From the equation the following forecasted data (table 6) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 Time (x) 6 Total Operating Profit (Forecasted) 3,179.24 Table 6: Forecasted Operating Profit for year 2010 and 2011
2011 7 3,912.00
The forecasted operating profit shows an increase of 19% and 11% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 3.
l tiM n u o m A
Figure 3: Operating Profit Trend 2000 1800 1600 1400 1200 1000 800 600 400 200 0
y = -14.10x 2 + 367.6x - 86.13 R² = 0.982 Time (x) Operating Profit
1
2
3
4
5
6
7
Year
8.4 Provision for Loans, Investment and Other In 2009, total provision for loans, investment and other was Tk. 207.78 million compared to Tk. 262.97 in 2008. Bank has experienced a decrease of -21 % in total provision for loans, investment and other .Last five years total provision for loans; investment and other are presented in table 7. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year 2005 2006 2007 2008 Time (x) 1 2 3 4 Provision for Loans, Investment and Other 69.98 39.2 273.94 262.97 Table 7: Five years Provision For Loans, Investment and Other
2009 5 207.78
The formulated trend equation along with R-squared value is as follows: y = -21.038x2 + 176.16x - 126.3 R2 = 0.6488 From the equation the following forecasted data (table 8) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 2011 Time (x) 6 7 Provision for Loans, Investment and Other (Forecasted) 3,179.24 3,912.00 Table 8: Forecasted Provision for Loans, Investment and Other for year 2010 and 2011
The forecasted provision for loans, investment and other shows a decrease of 17% and 56% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 4.
Figure 4: Provision for Loans, Investment and other Trend y = -21.03x2 + 176.1x - 126.3 R² = 0.648
350 300
Time (x)
250 200
Provision for Loans, Investment and Other
150
l tiM n u o m A
100 50 0 1
2
3
4
5
6
7
Year
8.5 Profits before Tax In 2009, total profit before tax was Tk. 1,150.57 million compared to Tk. 989.47 in 2008. Bank has experienced an increase of 16 % in total profit before tax. Last five years total profit before tax is presented in table 9. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Profit before Tax
2005 2006 2007 1 2 3 226.29 507.7 579.77 Table 9: Five years Profit before Tax
2008 4 989.47
2009 5 1,150.57
The formulated trend equation along with R-squared value is as follows: y = 6.9293x2 + 191.46x + 40.166 R2 = 0.9671 From the equation the following forecasted data (table 10) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 Time (x) 6 Profit before Tax (Forecasted) 3,179.24 Table 10: Forecasted Profit before Tax for year 2010 and 2011
2011 7 3,912.00
The forecasted profit before tax shows an increase of 25% and 20% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 5.
n ilo M A tm u
Figure 5: Profit before Tax Trend 2000 1800 1600 1400 1200 1000 800 600 400 200 0
y = 6.929x 2 + 191.4x + 40.16 R² = 0.967 Time (x) Profit before Tax
1
2
3
4
5
6
7
Year
8.6 Profits after Tax In 2009, total profit after tax was Tk. 610.91 million compared to 463.05 in 2008. Bank has experienced an increase of 32 % in total profit after tax. Last five years total profit after tax is presented in table 11. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Profit after Tax
2005 2006 2007 1 2 3 121.29 263.16 239.03 Table 11: Five years Profit after Tax
2008 4 463.05
2009 5 610.91
The formulated trend equation along with R-squared value is as follows: y = 18.581x2 + 6.4287x + 115.81 R2 = 0.9436 From the equation the following forecasted data (table 12) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million)
Year 2010 Time (x) 6 Profit after Tax (Forecasted) 3,179.24 Table 12: Forecasted Profit after Tax for year 2010 and 2011
2011 7 3,912.00
The forecasted profit after tax shows an increase of 35% and 30% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 6.
Figure 6: Profit after Tax Trend 1200 y = 18.58x 2 + 6.428x + 115.8 R² = 0.943
1000 800
Time (x)
600
Profit after Tax
l tiM n u o m A
400 200 0 1
2
3
4
5
6
7
Year
From key financial position aspect, paid-up capital, total shareholder’s equity, deposits, loans and advances, total liabilities, investments, fixed assets, earning assets and total assets have further been studied for trend analysis and forecasting growth. 8.7 Paid-Up Capital In 2009, total paid-up capital was Tk. 1,848 million compared to Tk. 1,540 in 2008. Bank has experienced a growth of 20 % in total paid-up capital. Last five years total paid up capital is presented in table 13. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Paid-Up Capital
2005 2006 2007 1 2 3 500 500 1,166.67 Table 13: Five years Paid-Up Capital
2008 4 1,540.00
2009 5 1,848.00
The formulated trend equation along with R-squared value is as follows: y = 23.047x2 + 235.32x + 151.46 R2 = 0.9501 From the equation the following forecasted data (table 14) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 Time (x) 6 Paid-Up Capital (Forecasted) 3,179.24 Table 14: Forecasted Paid-Up Capital for year 2010 and 2011
2011 7 3,912.00
The forecasted paid-Up Capital shows an increase of 29% and 22% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 7.
Figure 7: Paid-Up Capital Trend 3500 y = 23.04x 2 + 235.3x + 151.4 R² = 0.950
3000 2500
Time (x)
2000
Paid-Up Capital
1500
l tiM n u o m A
1000 500 0 1
2
3
4
5
6
7
Year
8.8 Total Shareholders’ Equity In 2009, total shareholders’ equity was Tk. 3,754.87 million compared to Tk. 3,119.65 in 2008. Bank has experienced a growth of 20 % in total shareholders’ equity. Last five years total shareholders’ equity is presented in table 15. Polynomial regression has been applied on these data to formulate a trend equation.
(Taka in million) Year 2005 2006 2007 2008 Time (x) 1 2 3 4 Total Shareholders’ Equity 991.97 1,155.00 2,154.29 3,119.65 Table 15: Five years Total Shareholders’ Equity
2009 5 3,754.87
The formulated trend equation along with R-squared value is as follows: y = 65.032x2 + 358.85x + 443.25 R2 = 0.9758 From the equation the following forecasted data (table 16) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 2011 Time (x) 6 7 Total Shareholders’ Equity (Forecasted) 3,179.24 3,912.00 Table 16: Forecasted Total Shareholders’ Equity for year 2010 and 2011 The forecasted total Shareholders’ equity shows an increase of 31% and 24% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 8.
Figure 8: Total Shareholders’ Equity Trend 7000 y = 65.03x 2 + 358.8x + 443.2 R² = 0.975
6000 5000
Time (x)
4000
Total Shareholders’ Equity Poly. (Total Shareholders’ Equity)
3000
l tiM n u o m A
2000 1000 0 1
2
3
4
5
6
7
Year
8.9 Deposits In 2009, a total deposit was Tk. 48,464.64 million compared to Tk. 32,919.76 in 2008. Bank has experienced an increase of 47 % in total deposit. Last five years total deposit is presented
in table 17. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Deposits
2005 2006 2007 1 2 3 12,704.90 18,985.95 27,101.59 Table 17: Five years Deposits
2008 4 32,919.76
2009 5 48,464.64
The formulated trend equation along with R-squared value is as follows: y = 1159.3x2 + 1589.5x + 10514 R2 = 0.9869 From the equation the following forecasted data (table 18) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 Time (x) 6 Deposits (Forecasted) 3,179.24 Table 18: Forecasted Deposits for year 2010 and 2011
2011 7 3,912.00
The forecasted deposits show an increase of 27% and 27% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 9.
l tiM n u o m A
Figure 9: Deposits Trend 90000 80000 70000 60000 50000 40000 30000 20000 10000 0
y = 1159.x 2 + 1589.x + 10514 R² = 0.986 Time (x) Deposits
1
2
3
4 Year
5
6
7
8.10 Loans and Advances In 2009, total loans and advances was Tk. 32,663.11 million compared to Tk. 27,528.08 in 2008. Bank has experienced an increase of 19 % in total loans and advances. Last five years total loans and advances are presented in table 19. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Loans and Advances
2005 2006 2007 1 2 3 9,738.32 13,188.09 18,682.16 Table 19: Five years Loans and Advances
2008 4 27,528.08
2009 5 32,663.11
The formulated trend equation along with R-squared value is as follows: y = 480.17x2 + 3137.9x + 5664.3 R2 = 0.9883 From the equation the following forecasted data (table 20) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 2011 Time (x) 6 7 Loans and Advances (Forecasted) 3,179.24 3,912.00 Table 20: Forecasted Loans and Advances for year 2010 and 2011 The forecasted loans and advances show an increase of 28% and 22% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 10.
Figure 10: Loans and Advances Trend 60000 y = 480.1x 2 + 3137.x + 5664. R² = 0.988
50000 40000
Time (x)
30000
Loans and Advances
l tiM n u o m A
20000 10000 0 1
2
3
4
5
6
7
Year
8.11 Total Liabilities In 2009, total liabilities were Tk. 50,451.78 million compared to Tk. 35,355.99 in 2008. Bank has experienced an increase of 43 % in total liabilities. Last five years total liabilities are presented in table 21. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Total Liabilities
2005 2006 2007 1 2 3 13,790.18 19,905.77 28,227.93 Table 21: Five years Total Liabilities
2008 4 35,355.99
2009 5 50,451.78
The formulated trend equation along with R-squared value is as follows: y = 1197.6x2 + 1691.8x + 11297 R2 = 0.9932 From the equation the following forecasted data (table 22) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 Time (x) 6 Total Liabilities (Forecasted) 3,179.24 Table 22: Forecasted Total Liabilities for year 2010 and 2011
2011 7 3,912.00
The forecasted total liabilities show an increase of 28% and 27% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 11.
l tiM n u o m A
Figure 11: Total Liabilities Trend 90000 80000 70000 60000 50000 40000 30000 20000 10000 0
y = 1197.x 2 + 1691.x + 11297 R² = 0.993 Time (x) Total Liabilities
1
2
3
4
5
6
7
Year
8.12 Investments In 2009, total investment was Tk. 8,705.61 million compared to Tk. 4,962.66 in 2008. Bank has experienced a growth of 75 % in total investment. Last five years total investments are presented in table 23. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Investments
2005 2006 2007 1 2 3 2,447.95 3,122.81 3,785.45 Table 23: Five years Investments
2008 4 4,962.66
2009 5 8,705.61
The formulated trend equation along with R-squared value is as follows: y = 475.05x2 - 1414.8x + 3623.7 R2 = 0.9715 From the equation the following forecasted data (table 24) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year Time (x) Investments (Forecasted)
2010 6 3,179.24
2011 7 3,912.00
Table 24: Forecasted Investments for year 2010 and 2011 The forecasted investment shows an increase of 41% and 39% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 12.
l tiM n u o m A
Figure 12: Investments Trend 18000 16000 14000 12000 10000 8000 6000 4000 2000 0
y = 475.0x 2 - 1414.x + 3623. R² = 0.971 Time (x) Investments
1
2
3
4
5
6
7
Year
8.13 Fixed Assets In 2009, total fixed asset was Tk. 381.92.million compared to Tk. 342.39 in 2008. Bank has experienced an increase of 12% in total fixed asset. Last five years fixed asset is presented in table 25. Polynomial regression has been applied on these data to formulate a trend equation (Taka in million) Year Time (x) Fixed Assets
2005 2006 2007 1 2 3 110.62 146.05 194.22 Table 25: Five years Fixed Assets
2008 4 342.39
2009 5 381.92
The formulated trend equation along with R-squared value is as follows: y = 7.7286x2 + 27.523x + 67.458 R2 = 0.9532 From the equation the following forecasted data (table 26) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x:
(Taka in million) Year 2010 Time (x) 6 Fixed Assets (Forecasted) 3,179.24 Table 26: Forecasted Fixed Assets for year 2010 and 2011
2011 7 3,912.00
The forecasted fixed assets show an increase of 34% and 25% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 13.
Figure 13: Fixed Assets Trend 700 y = 7.728x 2 + 27.52x + 67.45 R² = 0.953
600 500 400
Time (x)
300
Fixed Assets
l tiM n u o m A
200 100 0 1
2
3
4
5
6
7
Year
8.14 Earning Assets In 2009, total earning assets was Tk. 49,000.5 million compared to Tk. 34,475.64 in 2008. Bank has experienced an increase of 42 % in total earning assets. Last five years earning assets is presented in table 27. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Earning Assets
2005 2006 2007 1 2 3 13,708.73 18,608.06 27,636.29 Table 27: Five years Earning Assets
2008 4 34,475.64
The formulated trend equation along with R-squared value is as follows: y = 1218.7x2 + 1332.7x + 11282
2009 5 49,000.50
R2 = 0.9935 From the equation the following forecasted data (table 28) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 Time (x) 6 Earning Assets (Forecasted) 3,179.24 Table 28: Forecasted Earning Assets for year 2010 and 2011
2011 7 3,912.00
The forecasted earning assets show an increase of 29% and 27% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 14.
l tiM n u o m A
Figure 14: Earning Assets Trend 90000 80000 70000 60000 50000 40000 30000 20000 10000 0
y = 1218.x 2 + 1332.x + 11282 R² = 0.993 Time (x) Earning Assets
1
2
3
4
5
6
7
Year
8.15 Total Assets In 2009, total asset was Tk. 54,206.65 million compared to Tk. 38,475.64 in 2008. Bank has experienced an increase of 41 % in total assets. Last five years total asset is presented in table 29. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Total Assets
2005 2006 2007 1 2 3 14,782.15 21,060.77 30,382.22 Table 29: Five years Total Assets
2008 4 38,475.64
2009 5 54,206.65
The formulated trend equation along with R-squared value is as follows: y = 1262.6x2 + 2050.6x + 11741 R2 = 0.9952 From the equation the following forecasted data (table 30) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 Time (x) 6 Total Assets (Forecasted) 3,179.24 Table30: Forecasted Total Assets for year 2010 and 2011
2011 7 3,912.00
The forecasted total assets show an increase of 27% and 28% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 15.
l tiM n u o m A
Figure 15: Total Assets Trend 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0
y = 1262.x 2 + 2050.x + 11741 R² = 0.995 Time (x) Total Assets
1
2
3
4
5
6
7
Year
Finally import, export, foreign remittance and guarantee issued have been analyzed in other business aspects. 8.16 Import In 2009, total import was Tk. 23,680 million compared to Tk. 16,660.98 in 2008. Bank has experienced an increase of 42 % in total imports. Last five years total import is presented in table 31. Polynomial regression has been applied on these data to formulate a trend equation.
(Taka in million) Year Time (x) Import
2005 2006 2007 1 2 3 9,746.00 11,483.00 13,816.16 Table 31: Five years Import
2008 4 16,660.98
2009 5 23,680.00
The formulated trend equation along with R-squared value is as follows: y = 791.12x2 - 1442.1x + 10701 R2 = 0.9876
From the equation the following forecasted data (table 32) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year Time (x) Import (Forecasted)
2010 6 3,179.24 Table 32: Forecasted Import for year 2010 and 2011
2011 7 3,912.00
The forecasted import shows an increase of 29% and 29% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 16.
l tiM n u o m A
Figure 16: Import Trend 45000 40000 35000 30000 25000 20000 15000 10000 5000 0
y = 791.1x 2 - 1442.x + 10701 R² = 0.987 Time (x) Import
1
2
3
4 Year
8.17 Export
5
6
7
In 2009, total export was Tk. 12,770 million compared to Tk. 6,078.79 in 2008. Bank has experienced a growth of 110 % in total exports. Last five years total export is presented in table 33. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Export
2005 2006 2007 1 2 3 2,911.00 2,884.00 3,980.87 Table 33: Five years Export
2008 4 6,078.79
2009 5 12,770.00
The formulated trend equation along with R-squared value is as follows: y = 1031.2x2 - 3896.2x + 6069.8 R2 = 0.9796 From the equation the following forecasted data (table 34) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year Time (x) Export (Forecasted)
2010 6 3,179.24 Table 34: Forecasted Export for year 2010 and 2011
2011 7 3,912.00
The forecasted export shows an increase of 55% and 48% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 17.
Figure 17: Export Trend 35000 y = 1031.x 2 - 3896.x + 6069. R² = 0.979
30000 25000 20000
Time (x)
15000
Export
l tiM n u o m A
10000 5000 0 1
2
3
4
5
6
7
Year
8.18 Foreign Remittance In 2009, total foreign remittance was Tk. 8,669 million compared to Tk. 5,788.87 in 2008. Bank has experienced an increase of 50 % in total foreign remittances. Last five years total foreign remittance is presented in table 35. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Foreign Remittance
2005 2006 2007 1 2 3 535.2 765 2,532.98 Table 35: Five years Foreign Remittance
2008 4 5,788.87
2009 5 8,669.00
The formulated trend equation along with R-squared value is as follows: y = 484.9x2 - 780.24x + 665.05 R2 = 0.9916 From the equation the following forecasted data (table 36) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x: (Taka in million) Year 2010 Time (x) 6 Foreign Remittance (Forecasted) 3,179.24 Table 36: Forecasted Foreign Remittance for year 2010 and 2011
2011 7 3,912.00
The forecasted foreign remittance shows an increase of 55% and 41% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 18.
l tiM n u o m A
Figure 18: Foreign Remittance Trend 20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0
y = 484.9x 2 - 780.2x + 665.0 R² = 0.991 Time (x) Foreign Remittance
1
2
3
4
5
6
7
Year
8.19 Guarantee Issues In 2009, total guarantee issues was Tk. 1,527.64 million compared to Tk. 847.7 in 2008. Bank has experienced an increase of 80 % in total guarantee issues. Last five years total guarantee issues is presented in table 37. Polynomial regression has been applied on these data to formulate a trend equation. (Taka in million) Year Time (x) Guarantee Issues
2005 2006 2007 1 2 3 1,627 726.51 1,114.84 Table 37: Five years Guarantee Issues
2008 4 847.7
2009 5 1,527.64
The formulated trend equation along with R-squared value is as follows: y = 178.96x2 - 1081.5x + 2444.7 R2 = 0.7011 From the equation the following forecasted data (table 38) is calculated putting 6 and 7 for the year 2010 and 2011 consecutively in the place of x:
(Taka in million) Year 2010 Time (x) 6 Guarantee Issues (Forecasted) 3,179.24 Table 38: Forecasted Guarantee Issues for year 2010 and 2011
2011 7 3,912.00
The forecasted guarantee issues show an increase of 57% and 52% in 2010 and 2011 respectively. The trend analysis with the forecasted value for year 2010 (referred as 6 in the graph) and 2011 (referred as 7 in the graph) is depicted in figure 19.
Figure 19: Guarantee Issues Trend 4000 y = 178.9x 2 - 1081.x + 2444. R² = 0.701
3500 3000
Time (x)
2500 2000
Guarantee Issues
l tiM n u o m A
1500 1000 500 0 1
2
3
4
5
6
7
Year
9.0 SUMMARY OF KEY FINANCIAL PERFORMANCE INDICATORS OF
TRUST BANK LIMITED
With the forecasted value, a summary of key financial performance indicators of Trust Bank Limited with actual and forecasted growth is presented below in a tabular format (table 39): (Taka in million) Performance Indicators Operating Result Total Operating Income Growth % Total Operating Expense
Forecasted Growth %
Actual Growth %
2011 3,912.00
2010 3,179.24
2009 2,467.67
2008 2,006.11
2007 1,328.66
2006 844.19
2005 511.46
23%
29%
23%
51%
57%
65%
N/A
2,116.09
1,567.55
1,109.31
753.67
474.95
297.29
215.19
Change %
35%
41%
47%
59%
60%
38%
N/A
1,795.86
1,611.66
1,358.35
1,252.44
853.71
546.9
296.27
11%
19%
8%
47%
56%
85%
N/A
75.958 -56%
173.292 -17%
207.78 -21%
262.97 -4%
273.94 599%
39.2 -44%
69.98 N/A
1,719.922 20%
1,438.38 25%
1,150.57 16%
989.47 71%
579.77 14%
507.7 124%
226.29 N/A
Profit after Tax Change %
1,071.28 30%
823.2982 35%
610.91 32%
463.05 94%
239.03 -9%
263.16 117%
121.29 N/A
Financial Position Paid-Up Capital
2,928.00
2,393.07
1,848.00
1,540.00
1,166.67
500
500
22%
29%
20%
32%
133%
0%
N/A
6,141.77 24%
4,937.50 31%
3,754.87 20%
3,119.65 45%
2,154.29 87%
1,155.00 16%
991.97 N/A
Deposits Change %
78,446.20 27%
61,785.80 27%
48,464.64 47%
32,919.76 21%
27,101.59 43%
18,985.95 49%
12,704.90 N/A
Loans and Advances Change %
51,157.93 22%
41,777.82 28%
32,663.11 19%
27,528.08 47%
18,682.16 42%
13,188.09 35%
9,738.32 N/A
Total Liabilities Change %
81,822.00 27%
64,561.40 28%
50,451.78 43%
35,355.99 25%
28,227.93 42%
19,905.77 44%
13,790.18 N/A
Operating Profit Growth % Provision for Loans, Investment and Other Change % Profit before Tax Change %
Change % Total Shareholders’ Equity Change %
Performance Indicators Operating Result Investments Change % Fixed Assets Change % Earning Assets Change % Total Assets Change % Other Business
Forecasted Growth %
Actual Growth %
2011 16,997.55
2010 12,236.70
2009 8,705.61
2008 4,962.66
2007 3,785.45
2006 3,122.81
2005 2,447.95
39%
41%
75%
31%
21%
28%
N/A
638.82 25%
510.83 34%
381.92 12%
342.39 76%
194.22 33%
146.05 32%
110.62 N/A
80,327.20
63,151.40
49,000.50
34,475.64
27,636.29
18,608.06
13,708.73
27%
29%
42%
25%
49%
36%
N/A
87,962.60 27%
69,498.20 28%
54,206.65 41%
38,475.64 27%
30,382.22 44%
21,060.77 42%
14,782.15 N/A
Import Change %
39,371.18 29%
30,528.72 29%
23,680.00 42%
16,660.98 21%
13,816.16 20%
11,483.00 18%
9,746.00 N/A
Export
29,325.20
19,815.80
12,770.00
6,078.79
3,980.87
2,884.00
2,911.00
48%
55%
110%
53%
38%
-1%
N/A
18,963.47 41%
13,440.01 55%
8,669.00 50%
5,788.87 129%
2,532.98 231%
765 43%
535.2 N/A
3,643.24
2,398.26
1,527.64
847.7
1,114.84
726.51
1,627
52%
57%
80%
-24%
53%
-55%
N/A
Change % Foreign Remittance Change % Guarantee Issues Change %
Table: 39 Key Financial Performance Indicators
10.0 FINDINGS While going through this study, many important factors have come out of the analysis. These findings are: 1. Trust bank is experiencing a downturn in the growth rate of its operating income from 2006. But with the expiry of the global financial crisis, it may expect a slight increase in growth rate of operating income in 2010 which forecasted value has shown in the analysis. But may not sustain long in the next year that is 2011. 2. Though operating expense is increasing year to year, but the increase rate from year to year is slowing down from 2006 and expected to continue up to 2011. 3. Another concerning issue for Trust Bank Limited is its down wording operating profit growth rate. The reason may be attributed to the decrease in the growth of the operating income from the year 2006. 4. Provision for loans and investment abnormally increased in 2007. The cause may be the instability of political situation in the country and the presence of the caretaker government at that period. After that period, the bank has observed normal negative growth or decrease in the provision for loans and investment.
5.
The bank has faced an abnormal growth in before tax profit in 2006 with a growth rate of 124% which suddenly fell to 14% growth in 2007. Again it boosted up its growth rate with a 71% growth in 2008. But after the tenure of caretaker government, it again failed to maintain its growth rate compared with 2007 and achieved a growth of 16% in 2009 in before tax profit.
6. Total deposit in the bank is growing constantly with unstable growth rate. Interestingly, though interest rate has cut down by the order of Bangladesh Bank, the bank has 47% increase in total deposit in 2009 from 2008. But forecasted deposits for 2010 and 2011 shows slight fall of this growth rate to 27% for both the 2010 and 2011. 7. 2009 shows an increase of 43% in total liabilities and expected to face increase of 28% and 22% in total liabilities in 2010 and 2011. 8. With the increase in deposits, investment has increased remarkably in 2009 with a 75% increase from 2008. Since banks are investing more in the stock market, the annual report shows only 19% increase in loans and advances in 2009 which was 47% increase for the same in 2008. 9. Annual report shows an growth of 12% in fixed assets in 2009 which was 33% and 76% for the year 2007 and 2008 consecutively. Moreover earning assets has shown an increase of 42 % which was 49% and 25% for the year 2007 and 2008 respectively. 10. Import business doubled in 2009 from 2008 with a increase of 42% for 2009 and 21% for 2008. It is expected from forecasting that the growth will be stable with 29% increase in 2010 and 2011 in import. 11. Export was almost doubled in 2009 from 2008 with an increase of 110%. And it is expected to have 55% increase in 2010 which is almost half of the increase rate of 2009. 12. Foreign remittance is increasing each year with a decreasing growth rate from 2007 and expected to increase slightly in 2010 with an increase of 55%.
11.0 CONCLUSION After the period global downturn, Trust Bank has regained its rhythm in 2009. It has increased its deposits by 47%in 2009 from 2008 and doubled its investment in the same year. In 2009 fixed assets growth has been cut off while accelerating the earning assets growth compared with 2008. Since provision for loans and advances has been reduced noticeably operating profit has been increased leading toward increased profit. But in both situations the growth is not to the level of expectation created from 2008. Moreover, import, export and guarantee issues played a wide range of role in 2009. The basic objective of the study of using trend is to predict the future behavior of the data of Trust Bank Limited especially to forecast the operating result, financial position and some other business to the forthcoming year 2010 and 2011.But mathematical methods of fitting trend are not foolproof – in fact, they can be a source of some of the most serious errors that are made in statistical work. They should never be used unless rigidly controlled by a separate logical analysis. Trend fitting depends upon the judgment of the statistician, and a skillfully made freehand sketch may often be more practical than a refined mathematical formula. Basically, trend line polynomial regression has been applied for processing of data and developing the trend equation on the last five years key financial data with the help of Microsoft Excel application. Here independent variable is assumed to be the time (year) and the dependent variables are some of the key performance factors e.g. operating income, operating expense, total assets, total liabilities etc. Trend analysis has been made based on the annual report of 2006, 2007, and 2008.and brought the performance of 2009 and on the basis of financial result of 2009 forecasting has been made on 2010 and 2011. In 2009 Trust Bank Limited has increased its Investment i.e.75% increase in comparison to the previous year. Certainly it is a good sign. One of the noteworthy aspects has come out throughout the study that is year-2007 during the tenure of caretaker government. Trust Bank Ltd could not reap its expected performance due to the fact that the political condition at that time was the worst one that Bangladesh has ever witnessed. If the political unrest and socio-economic deterioration prevail simultaneously, no business organization can perform well let alone Banks.
12.0 RECOMMENDATIONS After analyzing trend, some recommendations for Trust Bank Limited in respect of present and forecasted situation are presented in this section. Firstly, in the emerging banking business, competition is growing up. To sustain in the competition, customers should be valued and satisfied highly. Deposits should be increased. So, it is suggested to introduce new schemes to attract deposits from customers which ultimately help to accelerate loans and advances. Secondly, merchant banking could play a vital role in the bottom line of the bank. Since other banking and non-banking financial institutions are making maximum profit from stock market, Trust Bank should provide full concentration on merchant banking for its full swing operation. Thirdly, to spread its operation, Trust Bank should increase its operating branch to provide service to the customer’s door. For this purpose it is suggested to increase its fixed assets in that purpose as shown in the forecasted fixed assets. Fourthly, bank should provide its attention in the stable growth in profit, volatility in profit growth may decrease its share price in the market which may decrease company’s value. Finally, it is suggested that investment should be increased according to Bangladesh Bank’s rule, otherwise it may cause in risk increment, If risk is increased; the risk weighted assets will increase following increased required capital which may block valuable capital.
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7. Trust Bank Ltd, Annual Report 2008 8. Trust Bank Ltd, Annual Report 2009 9. http://www.bangladesh-bank.org 10. http://www.trustbank.com.bd