Term paper on financial statement analysis of Janata bank ltd

Banks are financial intermediaries that have the primary responsibilities for accepting deposits and providing loans and advances. The return that banks earn is basically the difference between lending and deposit rate which is the interest rate spread. So, theoretically the next year profit could be predicted by using this spread analysis. This report analyses the spread and estimate the expected profit.

The first part of this report gives a calculation of interest rate spread using five year for Janata Bank Ltd. This rate is then used to estimate the expected profit next year and see if it can accurately predict the actual profitability. For Janata Bank the actual profit differs from the expected profit using spread analysis. There are differences due to presents of other non-banking income items like investment income, commission, brokerage fees etc.

The second part analyses the loan portfolio of Janata Bank. It also evaluates the sectors to which Janata Bank provides loans. An analysis of income and expenditure gives an insight into the factors affecting profitability.

The final part deals with foreign exchange activities and the income to be received from L/C operations, remittance transfer, discounting bills of exchange etc.

Banking business is very much competitive now-a-days. So, security and proper distribution of money as loan disbursement are very much essential. Bank management uses the depositors’ money as huge source of fund. The profitability of banks depends much on the interest rate spread that they earn. So, the interest rate spread is likely to be a good predictor of bank’s profitability. However, the interest rate spread cannot fully predict the profitability accurately. Since, banks now-a-days are involved in other non-banking activities like remittance service, capital market operations and export-import intermediation, hence the factors that contribute to the profitability of banks are diverse. So, a study on the factors affecting the profitability of Janata Bank will provide us with a deep attention to predict future earning ability of this bank.