The commercial banks (CBs) have been playing a vital role in the economy of Bangladesh. Amongst the financial institutions, commercial banks constitute the heart of the financial structure since they have the ability to add the money supply and thus create additional purchasing power.
The banking sector is considered to be an important source of financing for most businesses. Banks take deposits from savers, paying interest on some of these accounts. They pass these funds on to borrowers, receiving interest on the loans. Their profits are derived from the spread between the rate they pay for funds and the rate they receive from borrowers. This ability to pool deposits from many sources that can be lent to many different borrowers creates the flow of funds inherent in the banking system.
Banks' performance monitoring, analysis and control needs special analysis in respect to their operation and performance results The common assumption, which underpins much of the financial performance research and discussion, is that increasing financial performance will lead to improved functions and activities of the organizations.
Though being the 2nd generation private bank of Bangladesh, First Security Islami Bank limited could not perform up to the standard due to different reasons and so they had to face some difficult years. But, in the recent past, the bank has rejuvenated its efforts and has been able to achieve some positive results.
In this study, the financial performance of First Security Islami Bank Limited has been evaluated on the basis of both financial statement analysis of the bank as well as the use of ratio indicators of performance.
The financial statement analysis provides relative measures of the bank's conditions and performance. In this study, the financial statements of 5 consecutive years have been collected and combined and trend analysis is used. The financial statement analysis reveals that First Security Islami Bank Limited had some difficulties in the past, but in the last five years, it experienced growth in their operations. Deposits and loans are increasing rapidly and it is getting a good response from the clients in different schemes.
On the whole, the profits (in absolute term) of the bank demonstrated an increasing trend, but the rate of growth of profit was very much uneven over the reference period. The Bank was also able to increase its investments significantly, which in turn led to significant investment income for the bank.
Turning on to the financial ratios, it was observed that all the ratio indicators are showing a better performance of the First Security Islami Bank, especially after 2011. The shareholders of the bank got a fair return on their investment as the earnings per share had increased to Tk.1.88.
Major ratio indicators of First Security Islami Bank Limited resulted at figures like ROI 2.06%, ROA 1.75%, Price Earning Ratio 13.98, Paid Up Capital 374 crore and Authorized Capital 1000 crore etc. All the productivity ratios showed better performance in the last 2 years.
Regarding the risk ratios, First Security Islami Bank Limited had significantly reduced its various risk elements. All of its credit risk exposures show that the management of the bank has been able to reduce the credit risk, one of the primary risks of any bank. The Liquidity risk ratios, solvency risk ratios and the earnings risk ratios all show signs of improvement in the last 5 years, but there are some elements in these ratios which need the management’s notice and has scope for further improvement.
Finally, some suggestions have been made which the bank can take into its considerations for improving their performance even more.
The banking sector is considered to be an important source of financing for most businesses. Banks take deposits from savers, paying interest on some of these accounts. They pass these funds on to borrowers, receiving interest on the loans. Their profits are derived from the spread between the rate they pay for funds and the rate they receive from borrowers. This ability to pool deposits from many sources that can be lent to many different borrowers creates the flow of funds inherent in the banking system.
Banks' performance monitoring, analysis and control needs special analysis in respect to their operation and performance results The common assumption, which underpins much of the financial performance research and discussion, is that increasing financial performance will lead to improved functions and activities of the organizations.
Though being the 2nd generation private bank of Bangladesh, First Security Islami Bank limited could not perform up to the standard due to different reasons and so they had to face some difficult years. But, in the recent past, the bank has rejuvenated its efforts and has been able to achieve some positive results.
In this study, the financial performance of First Security Islami Bank Limited has been evaluated on the basis of both financial statement analysis of the bank as well as the use of ratio indicators of performance.
The financial statement analysis provides relative measures of the bank's conditions and performance. In this study, the financial statements of 5 consecutive years have been collected and combined and trend analysis is used. The financial statement analysis reveals that First Security Islami Bank Limited had some difficulties in the past, but in the last five years, it experienced growth in their operations. Deposits and loans are increasing rapidly and it is getting a good response from the clients in different schemes.
On the whole, the profits (in absolute term) of the bank demonstrated an increasing trend, but the rate of growth of profit was very much uneven over the reference period. The Bank was also able to increase its investments significantly, which in turn led to significant investment income for the bank.
Turning on to the financial ratios, it was observed that all the ratio indicators are showing a better performance of the First Security Islami Bank, especially after 2011. The shareholders of the bank got a fair return on their investment as the earnings per share had increased to Tk.1.88.
Major ratio indicators of First Security Islami Bank Limited resulted at figures like ROI 2.06%, ROA 1.75%, Price Earning Ratio 13.98, Paid Up Capital 374 crore and Authorized Capital 1000 crore etc. All the productivity ratios showed better performance in the last 2 years.
Regarding the risk ratios, First Security Islami Bank Limited had significantly reduced its various risk elements. All of its credit risk exposures show that the management of the bank has been able to reduce the credit risk, one of the primary risks of any bank. The Liquidity risk ratios, solvency risk ratios and the earnings risk ratios all show signs of improvement in the last 5 years, but there are some elements in these ratios which need the management’s notice and has scope for further improvement.
Finally, some suggestions have been made which the bank can take into its considerations for improving their performance even more.
Finance is the life blood of economic development. It helps in capital formation and capital accumulation; which are essential for the growth of an economy. For ensuring capital formation, the financial resources of a country need to be mobilized in such a way that they are put in productive channels. However, to undertake massive capital formation there is a paucity of a sound financial infrastructure in most of the lender developed economics. As a matter of fact, a spectrum of financial institutions of diverse types becomes inevitable in economic development efforts that the developing economics desperately search for.
The Islami banks (IBs) have been playing a vital role in the economy of Bangladesh. Amongst the financial institutions, commercial banks constitute the heart of the financial structure since they have the ability to add the money supply and thus create additional purchasing power.
Banks and other financial institutions are a unique set of business firms whose assets and liabilities, regulatory restrictions, economic functions and operating make them an important subject of research, particularly in the conditions of the emerging financial sectors,
The banking sector is considered to be an important source of financing for most businesses. Banks take deposits from savers, paying Profit on some of these accounts. They pass these funds on to borrowers, receiving Profit on the investments. Their profits are derived from the spread between the rate they pay for funds and the rate they receive from borrowers. This ability to pool deposits from many sources that can be lent to many different borrowers creates the flow of funds inherent in the banking system. By managing this flow of funds, banks generate profits, acting as the intermediary of Profit paid and Profit received and taking on the risks of offering credit.
The Islami banks (IBs) have been playing a vital role in the economy of Bangladesh. Amongst the financial institutions, commercial banks constitute the heart of the financial structure since they have the ability to add the money supply and thus create additional purchasing power.
Banks and other financial institutions are a unique set of business firms whose assets and liabilities, regulatory restrictions, economic functions and operating make them an important subject of research, particularly in the conditions of the emerging financial sectors,
The banking sector is considered to be an important source of financing for most businesses. Banks take deposits from savers, paying Profit on some of these accounts. They pass these funds on to borrowers, receiving Profit on the investments. Their profits are derived from the spread between the rate they pay for funds and the rate they receive from borrowers. This ability to pool deposits from many sources that can be lent to many different borrowers creates the flow of funds inherent in the banking system. By managing this flow of funds, banks generate profits, acting as the intermediary of Profit paid and Profit received and taking on the risks of offering credit.
Banks' performance monitoring, analysis and control needs special analysis in respect to their operation and performance results from the viewpoint of different audiences, like investors/owners, regulators, customers/clients, and management themselves. The common assumption, which underpins much of the financial performance research and discussion, is that increasing financial performance will lead to improved functions and activities of the organizations.
Islami banks intermediate between the savers and the borrowers by mobilizing the financial surpluses of the savers and allocate these savings to the credit- worthy borrowers of the different sectors of economy. In this way they not only help in the financial development of a country but also facilitate its economic development. There are no disagreement that the performance of the commercial banks (in terms of mobilization and allocation of the financial resources) of a country should be judge in the context of the objectives of development and the Socio-economic condition prevailing in that country. At the same time, the question of cost-effectiveness of the operations of the commercial banks should also be given due credence
The Islami Banks allocate funds as an intermediary function and their operational efficiency in the sense of profitability and productivity should be the first priority while judging their performances. In this backdrop, an attempt has been made in this study, to analyze the Financial Performance of First Security Islami Bank Limited, the renowned islamic sector bank in Bangladesh.
Objective of the study
The specific objective of the study is to establish an analytical framework of the financial performance of First Security Islami Bank Limited.
The study has been undertaken with the following objectives:
The study has been undertaken on the basis of secondary information. For this extensive literature survey has been done. The secondary sources of information (i.e., published data or processed data) have been used here depending on the nature of the study. For this purpose, a good number of sources have been used. Most of the necessary information has been collected by from the personal observation and relevant officer and one to one discussion with the relevant officials. Throughout the tenure of my internship, I worked in different departments and that gave me a great opportunity to collect information and learn more .Secondary information has been collected from relevant officer and daily statement of affaires.
Islami banks intermediate between the savers and the borrowers by mobilizing the financial surpluses of the savers and allocate these savings to the credit- worthy borrowers of the different sectors of economy. In this way they not only help in the financial development of a country but also facilitate its economic development. There are no disagreement that the performance of the commercial banks (in terms of mobilization and allocation of the financial resources) of a country should be judge in the context of the objectives of development and the Socio-economic condition prevailing in that country. At the same time, the question of cost-effectiveness of the operations of the commercial banks should also be given due credence
The Islami Banks allocate funds as an intermediary function and their operational efficiency in the sense of profitability and productivity should be the first priority while judging their performances. In this backdrop, an attempt has been made in this study, to analyze the Financial Performance of First Security Islami Bank Limited, the renowned islamic sector bank in Bangladesh.
Objective of the study
The specific objective of the study is to establish an analytical framework of the financial performance of First Security Islami Bank Limited.
The study has been undertaken with the following objectives:
- To assess the overall performance and profitability level of First Security Islami Bank Limited.
- To examine the trends of performance and productivity of First Security Islami Bank Limited.
- To establish an Profit free economy.
- To establish a modern banking system for all kinds of people to take part in the economic growth of the country.
The study has been undertaken on the basis of secondary information. For this extensive literature survey has been done. The secondary sources of information (i.e., published data or processed data) have been used here depending on the nature of the study. For this purpose, a good number of sources have been used. Most of the necessary information has been collected by from the personal observation and relevant officer and one to one discussion with the relevant officials. Throughout the tenure of my internship, I worked in different departments and that gave me a great opportunity to collect information and learn more .Secondary information has been collected from relevant officer and daily statement of affaires.
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