International Journal of Research in Management & ISSN : 2348-6503 (Online) Business Studies (IJRMBS 2015) Vol. 2 Issue 2 Apr. - June 2015 ISSN : 2348-893X (Print) Performance Analysis of Nachanmahal Hat Branch of Sonali Bank Limited IKach Mondal, IINishad Nasrin, IIITanbir Hossain, IVShangkari Bala Sarkar IEconomics Discipline, Khulna University, Khulna, Bangladesh IIAssistant Professor, Economics Discipline, Khulna University, Khulna, Bangladesh III,IVEconomics Discipline, Khulna University, Khulna, Bangladesh Abstract This paper examines the performance of Sonali Bank Limited (SBL), Nachanmahal Hat Branch (NHB), Jhalakati of Bangladesh. It basically conducted through using CAMEL ratings, SWOT analysis and Gap model etc. CAMEL rating is one of the widely used tools for measuring performance on basis of capital adequacy, asset quality, management capacity, earnings ability and liquidity of the financial institutions including commercial banks by the principal regulators all around the world. In this paper, it is seen that capital adequacy ratio’s score is higher than standard score. Again, two ratios titled income per employee and expenses per employee under management capacity are also higher than standard score. Diversification ratio under earning ability is 47.38 which is near to match standard score (50.00). With regard to asset quality, management capacity and earning ability in this branch has been exhibiting moderately better performance in the context of Bangladesh. Finally, with regard to liquidity, loan to deposit ratio and earning assets to deposit ratio in the branch shows excellent performance but liquid asset to total deposit ratio shows poor performance. In case of credit disbursement and collection system, the branch has been improved in the recent years. Keywords Performance measurement, CAMEL ratings system, SWOT analysis, Gap model I. Introduction The objective of the study is to analyze the performance of NHB The banking system plays a critical role in underpinning economic of Sonali Bank Limited through CAMEL ratings system. development. Money is one of the most significant and necessary elements which can be compared with blood of our body when A. Review of Literature pecuniary institution like bank act as a artery system of that body Different authors across the globe have shown financial [1]. On the other hand, bank is a financial institution which deals performance of banks based on different methods and techniques with deposits and advances and other related services [2]. SBL of which financial ratio analysis, trend analysis, CAMEL rating, explores the opportunity of getting practical banking environment are the most common tools used. Banks play an important role in for the students every year. After independence of Bangladsh, the economic development of every state [4]. This study is intended Sonali Bank emerged as the largest and leading nationalized to measure the performance of selected private sector banks (five), commercial bank by proclamation of the Banks Nationalization listed on both the Dhaka Stock Exchange and Chittagong Stock Order 1972 (Presidential Order-26) liquidating the then National Exchange, in Bangladesh through widespread use of financial Bank of Pakistan, Premier Bank and Bank of Bhwalpur [3]. All ratios that mainly indicate the adequacy of the risk based capital, over the world, the dimension of banking has been changing rapidly credit growth, credit concentration, non-performing loan position, due to deregulation, technological innovation and globalization. liquidity gap analysis, liquidity ratio, return on assets (ROA), return To survive in such a competitive banking world, only theoretical on equity (ROE), net interest margin (NIM), etc. Elizabeth and knowledge in the field of banking studies is not sufficient. To cope Greg (2004) also discuss about three indicators namely, internal- with the changing banking environment, banks are now changing based performance measured by Return on Assets, market-based their pattern of activities delivery. Customers are mobile and they performance measured by Tobin’s Q model (Price/Book ratio) shifts from one bank to another for getting better service and in and Economic-asked performance measured by economic value this respect banks are ranked to their clients. The main focus of add has been used to measure financial performance of the this study is to analyze the banking performance of NHB through some financial institution of Australia [5]. CAMELS’ rating is CAMEL ratings system, though it is mainly used by Central bank. a managerial tool to identify those banking companies that are The study is considered to make huge contribution not only in having problems and involve increased supervision [6]. Under the field of academic research but also in helping managers to this rating system, banking companies are assigned two sets of improve banking performance. An extensive comparative study ratings- (i) performance ratings, and (ii) an overall composite of the financial performance is conducted among different year rating. On the other hand authors examine that in case of the of in order to understand the current scenario of the financial band ‘capital adequacy’, IFIC Bank’s, capital adequacy ratio health position of the branch. This study can be helpful tool for and leverage ratio show better performance than EXIM Bank the managers to pay more attention to the aspects where these but in respect of return on equity and net worth protection, IFIC banks are lagging behind which may result in improving both shows not as good as performance than the other [7]. Chowdhury their financial performance and ranking. The findings of this study (2002) analyses that the performance of banks requires knowledge may enrich the present literatures and it can help researchers in about the profitability and the relationships between variables like further study. This study will also pave the way of efficient and market size, bank's risk and bank's market size with profitability effective strategic decision making by the managers. [8]. The study concluded that the banking industry in Bangladesh is experiencing major transition for the last two decades. Chien © 2014, IJRMBS All Rights Reserved 14 www.ijrmbs.com International Journal of Research in Management & ISSN : 2348-6503 (Online) Vol. 2 Issue 2 Apr. - June 2015 ISSN : 2348-893X (Print) Business Studies (IJRMBS 2015) and Danw (2004) in his study concluded that Taiwan commercial Table 1: Ratios under CAMEL Ratings of Capital Adequacy banks with higher total deposits, credits, assets, and shareholders’ Component Ratios Formula Standard equity does not always result in better profitability performance Score (In of management [9]. Siddique and Islam (2001) have shown that %) the commercial banks of Bangladesh are performing healthy and Capital Capital Capital & 8 contributing to the economic development of the country [10]. Adequacy Adequacy reserve / Total However, Khandker (2011) examines the average profitability of Ratio risk weighted all Bangladeshi banks collectively was 0.09% during 1980 to 1995 assets×100…… [11]. Haque (2013) discusses about financial performance of some (1) selected private commercial banks in Bangladesh for the period Return on Net profit / 30 2006-2011 clarify whether any relationship exists between a bank’s Equity Paid up capital years of operation and its performance [12]. On the other hand, + free reserves Ahmed and Hasan (2007) compare and analyze the performance of ×100…………(2) Islamic banking and conventional banking system in Pakistan by Net- Total equity / 100 using of financial measures [13]. Therefore, this research examines worth Non-performing the performance of SBL through CAMEL ratings system. In the Protection loan ×100……… previous literature, there is lot of study about performances of (3) banks but there is no study which uses CAMEL rating exactly Source: Bangladesh Bank’s CAMEL Rating Analysis (Module 1 about a state owned commercial bank. From the academic point and 2), 2012 of view this research will provide a new perspective in evaluating the pecuniary performance of Bangladeshi commercial banks that 2. The CAMEL Ratings: Asset Quality belongs to different generations. The findings of this study will Percentage of classified loan to total loan granted is considered enrich the present literature and it will help researchers in their as the principal ratio for measuring the quality of the assets. At future venture. this stage, the performance of the asset under deferent ratios has been shown in Table 2. II. Methodology The research is descriptive well as qualitative in nature which Table 2: Ratios under CAMEL Ratings of Asset Quality has mainly conducted by secondary data which have both Ratios Formula Standard quantitative and qualitative value so that the performance level Component Score (In %) can be well understood and measured. The paper is secondary as Asset % of Non- 10 well as primary data base. The main sources of secondary data Quality Classified performing are annual report of SBL, different manuals of SBL, different Loan Loan / Total circulars of SBL, Bangladesh Bank website, different websites, Loan×10…(4) website of SBL, journals and articles. The sources of primary data are observation method. SBL is given more priority to Nalchity Source: Bangladesh Bank’s CAMEL Rating Analysis (Module 1 upazila because of this reason here three branches are located and 2), 2012 [14]. The tools for the performance of all the commercial banks under CAMEL