FINANCIAL PERFORMANCE ANALYSIS ON

NCC BANK LTD.

Independent University, Bangladesh

Internship Report (Draft) on Financial Performance of
“NCC BANK LTD”
Course Code: BBA499

Submitted to
Dr. Md. Taslim Uddin
Assistant Professor.
Department of Finance,
School of Business & Entrepreneurship,
Independent University, Bangladesh.

Submitted by

Md. Arshadul Hoque

ID: 2021270

Submission Date: 30th April 2023

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Letter of Transmittal

April 30, 2023

Dr. Md. Taslim Uddin
Assistant professor,
Department of Finance,
School of Business & Entrepreneurship,
Independent University, Bangladesh.

Subject: Submission of Internship Report on NCC Bank Limited.

Sir,
As per your request and permission, I would like to mention that I have submitted the internship
report for NCC Bank Limited. This report is a crucial component of the internship, and I have
done my best to work on it attentively and sincerely in order to produce a useful result.

This allowed me to learn a lot and get experience, both of which may be useful in the future. I
appreciate all of your help in making this paper a success. I did my best to prepare this report
with full attention. Any flaw or defect could be the result of unintentional mistakes on my end.

Regards,
Md. Arshadul Hoque

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Acknowledgment

I am extremely grateful for the chance to work on this study about NCC Bank Limited. I would
like to express my heartfelt gratitude to Dr. Md. Taslim Uddin sir and the Finance Department,
School of Business & Entrepreneurship, Independent University, Bangladesh, for giving us the
necessary resources, direction, and assistance during the project.

I want to express my gratitude to Mohammad Yousuf, FAVP and Deputy Manager of

Bashundhara Branch, my bank supervisor, for giving me the chance to do an internship with
NCC Bank and for helping me manage the complicated world of the banking industry with his
vast expertise.

I would also like to thank all of my family members and close friends who supported me
throughout this project. Their constant motivation helped me to stay focused and complete this
project successfully. Finally, I want to show my sincere gratitude to everyone who supported
me in any way they could throughout this project.

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Executive Summary

In this report, the financial performance of NCC Bank from 2017 to 2021 is analyzed, with a
focus on important financial ratios like liquidity, solvency, profitability, and efficiency. The
study is based on information from NCC Bank's annual reports and financial statements that
are open to the public.

Overall, the analysis indicates NCC Bank's successful performance over the previous five
years, with constant increases in key financial parameters like the current ratio, debt to equity
ratio, capital adequacy ratio, and Z-score. The bank has also kept up a high level of profitability,
as shown by its increasing EPS and relatively stable P/E ratio.

However, the report also points out significant difficulties for NCC Bank, especially with its
financial efficiency. The bank's efficiency ratio has declined over the previous few years, but
there are still ways for it to improve the quality of its assets and control costs.

Overall, this report includes suggestions for improvement and delivers valuable information
about NCC Bank's financial performance. It was created for stakeholders who are interested in
evaluating the bank's financial health and making informed decisions regarding investments.

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Table of Contents
Letter of Transmittal .............................................................................................................................. 2
Acknowledgment ................................................................................................................................... 3
Executive Summary .............................................................................................................................. 4
Chapter 1: INTRODUCTION ............................................................................................................. 6
1.1 Company Profile ......................................................................................................................... 7
Chapter 2: INTERNSHIP EXPERIENSE ........................................................................................ 10
2.1 My Internship Experience: ....................................................................................................... 11
2.2 Job responsibilities: ................................................................................................................. 11
2.3 Functions of the department ................................................................................................... 12
Chapter 3: RATIO ANALYSIS ......................................................................................................... 14
3.1 Profitability Ratio: .................................................................................................................... 15
3.2 Liquidity Ratio: ......................................................................................................................... 17
3.3 Market prospect Ratio ............................................................................................................. 19
3.4 Solvency Ratio: ......................................................................................................................... 21
3.5 Efficiency Ratio ......................................................................................................................... 26
3.6 Z Score: ..................................................................................................................................... 30
3.7 Pre-COVID and Post-COVID Scenario:...................................................................................... 31
Chapter 4: DISCUSSION & CONCLUSION .................................................................................. 38
4.1 Discussion: ...................................................................................................................................... 39
4.2 Conclusion: ..................................................................................................................................... 40
References:........................................................................................................................................... 41

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 Chapter 1:
INTRODUCTION

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 1.1 Company Profile
Bangladesh's National Credit and Commerce (NCC) Bank Limited is a commercial bank with
a mission to become the nation's leading institution in the banking industry. Beginning its
operations on May 17, 1993, the bank provided its clients with a wide variety of financial
services, including deposits, loans, remittance, foreign exchange, and internet banking.

NCC Bank has his headquarter in Dhaka, the capital of Bangladesh, NCC Bank serves both
individuals and businesses with financial services through a network of 114 branches. The goal
of the bank is to offer advanced banking products while putting a strong priority on customer
happiness and maintaining the highest levels of reliability and sincerity.

The bank's board of directors is made up of highly skilled individuals with a strong
understanding of the banking and financial sectors. The management team is managed by a
capable and committed CEO who is committed to employing good business processes, strategic
planning, and efficient risk management to take the bank to new heights of success.

NCC Bank received many kinds of awards and recognition for its outstanding performance in
the banking sector throughout the years. By providing top-notch services and maintaining a
high standard of corporate governance, the bank has been successful in establishing a solid
reputation among its clients, shareholders, and other stakeholders.

In conclusion, NCC Bank has a significant presence and reputation in Bangladesh's banking
industry and is one of the nation's top commercial banks. The bank has established a solid
reputation as a reliable and reputable financial institution thanks to its commitment to offering
innovative banking solutions, ensuring customer pleasure, and maintaining the highest
standards of morality and transparency.

1.1.1 Vision, Mission & Objective

Vision: To become one of the most adorable commercial Bank in serving the nation as a
progressive and socially responsible financial institution by bringing credit & commerce
together for increased Shareholders’ value and sustainable growth.

Mission: Delivering excellent financial services to our communities based on strong customer
relationships. Providing long-lasting solutions combining our cutting-edge technology,

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experience and financial strength to our clients and stakeholders. Creating a cohesive and
friendly environment where customers and our people can excel.

Objective: National Credit and Commerce Bank Limited bears a unique history of its own.
The organization started its journey in the financial sector of the country as an investment
company back in 1985. The aim of the company was to mobilize resources from within and
invest them in such a way so as to develop country's Industrial and Trade Sector and playing
a catalyst role in the formation of capital market as well. Its membership with the browser
helped the company to a great extent in this regard. The company operated up to 1992 with
16 branches and thereafter with the permission of the Central Bank converted into a full-
fledged private commercial Bank in 1993 with paid up capital of Tk. 39.00 crore to serve the
nation from a broader platform. Since its inception NCC Bank Ltd. has acquired a
commendable reputation by providing sincere personalized service to its customers in a
technology-based environment. The Bank has set up a new standard in financing in the
Industrial, Trade and Foreign exchange business.

Department
• Human Resource Division
• Advanced Division
• Personal Banking Division
• Operations Division
• Computer and Information Technology Division
• Finance and Accounts Division
• Audit & Risk Management Division
• Card Division
• Treasury Division, etc.

1.1.2 Details of the product lines or services: NCC Bank is a famous commercial bank
in Bangladesh, which offers a wide range of banking products and services to its
customers. Its main services and product categories include,

• Deposit Products: Customers of NCC Bank can choose from several deposit products,
such as savings accounts, current accounts, fixed deposit receipts (FDRs), and
recurring deposit receipts (RDRs).

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• Retail Banking Products: NCC Bank provides its clients with credit card, personal
loan, auto loan, home loan, and education loan options under retail banking.

• SME Banking Products: Working Capital Finance, Trade Finance, SME Term Loan,
Agro-based Business Loan, Women Entrepreneurs' Loan, and Green Energy Loan are
among the SME Banking Products and Services offered by NCC Bank.

• Corporate Banking Products: Working Capital Finance, Project Finance, Term Loan,
Syndicate Loan, Lease Finance, Letter of Credit, Bank Guarantee, and Remittance are
among the many of the Corporate Banking Products and Services provided by NCC
Bank.

• Investment Banking Products: Underwriting, IPO advisory, right share issue, merger
& acquisition, and debenture issue management are among the investment banking
services provided by NCC Bank.

• Treasury Products: Money Market Operations, Foreign Exchange Operations, and

Investment Operations are among the Treasury services that NCC Bank offers to its
clients.

• Remittance Services: Customers of NCC Bank can choose from a number of

remittance services, including Instant Cash, Outward Remittance, and Inward
Remittance.

• Card Products: Debit card, credit card, prepaid card, and Visa Infinite credit card are
just a few of the several card products that NCC Bank offers.

Overall, NCC Bank offers a broad range of products and services to cater to the diverse
financial needs of its customers, ranging from individuals to corporates.

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Chapter 2: INTERNSHIP
EXPERIENSE

10
2.1 My Internship Experience:
I had the chance to learn about and work on a variety of activities associated with opening
new accounts for customers while working as an intern in the NCC Bank's account opening
department. I was responsible for helping customers open new accounts, scanning their
signatures, providing checkbooks, and responding to their account-related questions.

Furthermore, I became aware of the significance of formalities such as mandating,

introduction by an account holder, taking photographs, and putting specimen signatures in
the specimen card. These procedures are required to protect the customer's account and stop
any acts of fraud.

Learning about the various account types of the bank offers, such as current accounts, savings
accounts, fixed deposit accounts, short term deposit accounts, special deposit accounts,
premium term deposit accounts, and demand deposit accounts, was one of the most interesting
parts of my internship. I also had the chance to learn about the several deposit plans that the
bank provides to its clients.

Though my primary responsibility was in the account opening division, I also had the chance
to work in the loan section. I was given the responsibility of entering cash flow and balance
sheet data into Excel sheets while working in the loan section. Through this experience, I was
able to develop my data entry and analytical abilities and learn the value of accuracy and
sensitivity in managing financial data.

Overall, my internship at NCC Bank's account opening department was quite beneficial. I got
the chance to work with a group of experienced professionals who guided and supported me
throughout my internship and helped me gain useful information and practical experience in
a variety of banking jobs.

2.2 Job responsibilities:

• Maintaining register book of Pay-order, ATM cards and issuing cheque books,
• All tasks of opening accounts,
• Receiving inward and outward mails,
• Helping my officers to find some data, mainly information from old accounts and
audit correction.

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 • Check cash supplementary and bill collection.
• Scanning different documents and inputting data in excel for different companies who
are trying to get loan.
• Verifying customer information and documents to ensure compliance with bank
policies and regulatory requirements.
• Providing information to customers regarding account services and products offered
by the bank.
• Assisting customers with account-related inquiries and concerns.
• Preparing necessary paperwork for account maintenance, such as address changes or
updating customer information.
• Assisting with the preparation and submission of regulatory reports and
documentation.
• Maintaining proper filing and record-keeping systems for account documents and
records.
• Performing administrative tasks such as photocopying, faxing, and emailing.
• Assisting with other duties and projects as assigned by superiors.

2.3 Functions of the department

NCC Bank is one of the leading banks in Bangladesh that offers a wide range of products and
services to its customers. The bank operates in different departments to provide efficient and
effective banking services. Here are some of the functions of the departments in NCC Bank:

1. Account opening Department: The department is responsible for opening new bank
accounts for customers, issuing cheque books, scanning signatures, closing, and
transferring accounts, and answering customer queries. The formalities include
completing the application form, providing photographs, introductions by existing
account holders, and providing specimen signatures on the specimen card.
2. Deposit Department: The Deposit Department manages various types of deposit
accounts such as Current Account, Savings Account, Fixed Deposit Account, Short
Term Deposit Account, Special Deposit Account, Premium Term Deposit, and
Demand Deposit.

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 3. Cash Department: The Cash Department is responsible for receiving and paying cash
from and to customers. The department also receives utility bills such as gas bills,
electricity bills, etc.
4. Accounts Department: The Accounts Department maintains a cashbook, prepares a
schedule bank statement, prepares a weekly statement of Bangladesh Bank, prepares
a supplementary sheet, and posts in various ledgers.
5. Remittance Department: The Remittance Department is responsible for receiving and
converting different types of mail through internal remittances. The department
provides reimbursement terms such as Pay Order (P.O), Demand Draft (D.D),
Telegraphic Transfer (T.T), Mail Transfer, Pay Slip, and Security Deposit Receive.
6. Advance Department: The Advance Department is responsible for providing loans
and advances to the customers of NCC Bank. The department offers loans and
promotions to the following customers: Car Loan, House Loan, General Loan
Scheme, Cash Credit Hypothecation, Security Overdraft, and Consumer Finance
Scheme.
7. Foreign Department: The Foreign Department deals with import and export
businesses. The department plays an important role in the overall economic
development of the country. The bank provides foreign currency exchange services
to its customers.
8. Clearing Department: The Clearing Department represents customers of NCC Bank
in check writing and depositing. The department manages inward and outward
clearing processes. Inward clearing occurs when a special branch receives instruments
sent by another member of the bank for collection. Outward clearing occurs when a
bank receives some legs of tools picked up for other banks in the removal area and
equipment collected with approved product approval.

Overall, NCC Bank's departments work together to provide efficient and effective banking
services to its customers.

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Chapter 3: RATIO ANALYSIS

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3.1 Profitability Ratio:

3.1.1 Return on Asset

The efficiency with which an organization generates profit from its assets is measured by the
financial ratio known as return on assets (ROA). From 2017 through 2021, NCC Bank's ROA
was 0.94%, 0.82%, 0.86%, 0.87%, and 0.93%, respectively.

This demonstrates that NCC Bank has been profitable in producing value from its assets over
time. It's important to notice that the ROA numbers are low, which can mean that the bank
needs to improve asset utilization to boost earnings.

Additionally, there is a small annual variation in the pattern of ROA values, but overall,
neither an upward nor downward tendency is noticeable.

Year 2017 2018 2019 2020 2021

ROA 0.94% 0.82% 0.86% 0.87% 0.93%
Table1: Return on asset (Source: NCCB Annual Report)

RETURN ON ASSET :
0.94%

0.93%
0.87%
0.86%
0.82%

2017 2018 2019 2020 2021

Figure1: Return on asset (Source: NCCB Annual Report)

3.1.2 Return on Equity

The ability of a business to make a profit from the capital that its shareholders have invested
is measured by the financial ratio known as return on equity (ROE). From 2017 to 2021, NCC
Bank's ROE was 10.49%, 10.45%, 11.51%, 11.10%, and 11.63%, respectively.

15
This demonstrates that the bank has consistently generated profits for its stockholders.
However, it is crucial to note that the ROE values are not very high, suggesting that there is
room for development. NCC Bank may think about reinvesting profits or issuing new shares
as ways to raise shareholder equity.

Although there isn't a noticeable upward or downward trend overall, the pattern of ROE levels
does vary slightly from year to year. In order to guarantee future success and growth, the bank
must continually maintain or raise its ROE.

Year 2017 2018 2019 2020 2021

ROE 10.49% 10.45% 11.51% 11.10% 11.63%
Table2: Return on equity (Source: NCCB Annual Report)

RETURN ON EQUITY :

11.63%
11.51%

11.10%
10.49%

10.45%

2017 2018 2019 2020 2021

Figure2: Return on equity (Source: NCCB Annual Report)

3.1.3 Net Interest Margin

The amount of income left over as profit after all costs have been paid is known as net margin,
which is a financial ratio of calculating profitability. The net margin for NCC Bank was
2.85%, 2.97%, 2.97%, 1.91%, and 2.33% for the previous five years, from 2017 to 2021.

These numbers show that despite some slight variations from year to year, NCC Bank has
been able to maintain a consistent level of profitability over the years. 2020's net margin was
reduced, most likely as a result of the COVID-19 pandemic's effects on the banking sector.

16
Additionally, the pattern of net margin values varies a little bit from year to year, but overall,
there isn't a noticeable tendency toward an increase or decrease. The bank must continually
assess its expenses and revenue streams in order to maintain or improve its profitability.

Year 2017 2018 2019 2020 2021

NIM 2.85% 2.97% 2.97% 1.91% 2.33%
Table3: Net interest margin (Source: NCCB Annual Report)

Net Interest Margin:

3.50%
2.97%
3.00% 2.85%
2.97% 2.33%
2.50%
2.00%
1.50% 1.91%

1.00%
0.50%
0.00%
2017 2018 2019 2020 2021

Figure3: Net interest margin (Source: NCCB Annual Report)

3.2 Liquidity Ratio:

3.2.1 Current Ratio

The ability of an organization to cover its current liabilities with its current assets is measured
by its current ratio. A current ratio of one or above is often regarded as a sign that an
organization has sufficient short-term assets to meet its short-term liabilities.

NCC Bank's current ratios have consistently exceeded 1 over the last five years, indicating
that the bank has enough current assets on hand to cover its current liabilities. The current
ratio was 1.67 in 2017, and it rose to 1.68 in 2018. The current ratio went up in 2019 to 1.72
and then went up even more in 2020 to 1.82. The current ratio, however, fell to 1.77 in 2021,
which could be due to COVID.

17
NCC Bank has been able to maintain a good level of current assets in comparison to its current
liabilities, according to the pattern of its current ratios, even though there has been some
fluctuation over the previous few years.

Year 2017 2018 2019 2020 2021

Current Ratio 1.67 1.68 1.72 1.82 1.77
Table4: Current Ratio (Source: NCCB Annual Report)

Current ratio:
2021 1.77

2020 1.82

2019 1.72

2018 1.68

2017 1.67

1.60 1.65 1.70 1.75 1.80 1.85

Figure4: Current Ratio (Source: NCCB Annual Report)

3.2.2 Net Working Capital Ratio

The ability of a business to fulfill its short-term financial obligations is determined by the Net
Working Capital Ratio. From 2017 to 2021, NCC Bank's Net Working Capital Ratio was
40.03%, 40.18%, 41.66%, 44.56%, and 43.18%, respectively.

Through the years, the bank's capacity to fulfill its short-term financial obligations has
steadily improved, as indicated by the Net Working Capital Ratio. It's crucial to remember
that the ratio increased significantly in the year 2020, which was impacted by the COVID-19
pandemic. This might be the cause of the measures taken by the bank to ensure liquidity
during uncertain times.

For stakeholders and investors, the Net Working Capital Ratio indicates that NCC Bank is in
a strong position to meet its short-term financial obligations.

Year 2017 2018 2019 2020 2021

NWCR 40.03% 40.18% 41.66% 44.56% 43.18%
Table5: Net working capital ratio (Source: NCCB Annual Report)

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 Net working capital
2021 43.18%

2020 44.56%

2019 41.66%

2018 40.18%

2017 40.03%

37.00% 38.00% 39.00% 40.00% 41.00% 42.00% 43.00% 44.00% 45.00%

Figure5: Net working capital ratio (Source: NCCB Annual Report)

3.3 Market prospect Ratio

3.3.1 Price per earnings Ratio (times)

The Price-to-Earnings (P/E) ratio is a crucial valuation metric that shows investors'
expectations for the future development of a company's earnings. The P/E ratio for NCC Bank
has changed over time. The ratio was 8.85 times in 2017; it fell to 7.73 times in 2018; it
further fell to 5.22 times in 2019; which showed reduced expectations for the bank's future
earnings growth.

When Bangladesh fell into lockdown in 2020 as a result of the COVID-19 pandemic, there
was a substantial impact on the global economy, particularly the financial industry, which led
to decreased economic activity and higher credit risks. Despite these difficulties, NCC Bank's
P/E ratio rose to 5.59 times in 2020, reflecting a more positive estimate of the bank's potential
for future profits growth.

The recovery of the banking industry and growing investor confidence in the bank's future
profits potential are reflected in the P/E ratio's further rise to 6.22 times in 2021. The shifting
expectations of investors regarding NCC Bank's potential for future earnings growth are
reflected in the P/E ratio over time, which is an important factor to take into consideration
when making an investment choice or performing a company analysis.

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 Year 2017 2018 2019 2020 2021
P/E 8.85 7.73 5.22 5.59 6.22
Table6: Price per earnings ratio (Source: NCCB Annual Report)

P/E Ratio:
8.85
7.73

6.22
5.22 5.59

2017 2018 2019 2020 2021

Figure6: Price per earnings ratio (Source: NCCB Annual Report)

3.3.2 Earnings per share (EPS)

Earnings per share (EPS) shows how much of a company's profit is divided among all
outstanding shares of common stock. From 2017 to 2021, NCC Bank's EPS went up
significantly. The EPS was 2.00 in 2017, 2.06 in 2018, and 2.30 in 2019, all increases over
the previous year's level. Despite the pandemic-related difficulties the banking industry was
experiencing in 2020, NCC Bank's EPS climbed to 2.36, showing an upward trend.

The bank's excellent recovery from the pandemic and investors' trust in its potential for future
earnings were reflected in a further increase in EPS to 2.46 in 2021. The rise in EPS over time
suggests that NCC Bank has been able to raise profits and provide shareholders a larger
portion of earnings. The financial stability and growth potential of the bank are shown
favorably by this trend. It also demonstrates the bank's ability to successfully navigate through
trying economic times and emerge stronger.

Year 2017 2018 2019 2020 2021

EPS 2.00 2.06 2.30 2.36 2.46
Table6: Earnings per share (Source: NCCB Annual Report)

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 EPS:

2.46
2.36
2.3
2.06
2

2017 2018 2019 2020 2021

Figure6: Earnings per share (Source: NCCB Annual Report)

3.4 Solvency Ratio:

3.4.1 Debt to Asset Ratio

The percentage of a company's assets that are financed by debt is indicated by the debt-to-
asset ratio. This ratio has changed over time for NCC Bank, suggesting improvements to the
bank's way of funding its assets..

The debt-to-asset ratio of NCC Bank decreased between 2017 and 2019, which indicated that
the bank was using less debt to finance its assets. However, the percentage significantly
dropped in 2020, probably as a result of the COVID-19 pandemic's effects on the banking
industry.

The overall debt-to-asset ratio of NCC Bank shows that the bank significantly depends on
debt financing to support its operations. While a smaller ratio may suggest a more careful
approach, it might also result in slower growth. On the other hand, if the bank's assets provide
enough income to pay off its debts, a higher ratio may signal greater risk but it can also result
in higher profits.

Year 2017 2018 2019 2020 2021

D/A 59.36% 59.23% 57.70% 54.65% 56.08%
Table7: Debt to asset ratio (Source: NCCB Annual Report)

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 DEBT TO ASSET RATIO:

59.36% 59.23%
57.70%
56.08%
54.65%

2017 2018 2019 2020 2021

Figure7: Debt to asset ratio (Source: NCCB Annual Report)

3.4.2 Debt to Equity Ratio

The debt-to-equity (D/E) ratio is a financial ratio that analyzes a company's total liabilities
with its shareholders' equity. It measures how much leverage a business uses to finance its
assets.

Over the years, the D/E ratio for NCC Bank has changed. The ratio was 1.46 in 2017, and it
slightly dropped to 1.45 in 2018. The ratio further dropped to 1.36 in 2019, showing that the
bank used debt to finance its assets less frequently compared to its equity.

The COVID-19 pandemic's effects on the banking industry, which reduced borrowing and
lending activity, may have played a role in the D/E ratio's significant decline to 1.21 in 2020.
However, the ratio went up slightly to 1.28 in 2021.

Overall, NCC Bank's D/E ratio indicates that, in order to fund its assets, the bank has
depended more on debt than on equity. A lower D/E ratio shows that an organization is
depending more on equity funding, which might suggest a more stable financial situation. A
larger D/E ratio, on the other hand, might indicate greater financial risk, but it can also result
in higher returns if the bank's assets generate enough income to pay off its debts.

Year 2017 2018 2019 2020 2021

D/E 1.46 1.45 1.36 1.21 1.28
Table8: Debt to equity ratio (Source: NCCB Annual Report)

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 DEBT TO EQUITY RATIO:

1.46

1.45

1.36

1.28
1.21
2017 2018 2019 2020 2021

Figure8: Debt to equity ratio (Source: NCCB Annual Report)

3.4.3 Capital Adequacy Ratio

Capital Adequacy Ratio (CAR) evaluates a bank's financial health by comparing its capital
with its risk-weighted assets. NCC Bank's CAR gradually increased from 11.51% in 2017 to
12.62% in 2018 and 13.41% in 2019, showing an improvement of its financial situation.

Due to the economic effects of the pandemic on the banking industry, the CAR significantly
dropped in 2020 to 13.21%. However, the bank showed great recovery in 2021, as seen by a
sharp increase in CAR to 15.86%.

The rising trend in CAR suggests that NCC Bank is managing its risks and maintaining a
strong capital position by taking the necessary precautions. The high CAR gives depositors
and investors peace of mind regarding the bank's capacity to manage future losses, which is
crucial for ensuring public confidence in the bank.

Year 2017 2018 2019 2020 2021

CAR 11.51% 12.62% 13.41% 13.21% 15.86%
Table8: Capital adequacy ratio (Source: NCCB Annual Report)

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 Capital adequacy ratio
18.00%
15.86%
16.00%
13.41%
14.00%
11.51%
12.00% 13.21%
12.62%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2017 2018 2019 2020 2021

Figure8: Capital adequacy ratio (Source: NCCB Annual Report)

3.4.4 Credit To Deposit Ratio

The Credit to Deposit Ratio (CDR) is a financial metric that evaluates how often a bank uses
its deposits as security for loans. The CDR has changed over the years for NCC Bank. The
bank was lending out nearly all of its deposits in 2017 as the CDR was 93.62%. However, the
CDR slightly dropped to 92.49% in 2018.

The CDR fell to 91.10% in 2019, which shows that the bank took more care when issuing
loans. But in 2020, the CDR grew to 92.05%, probably as a result of the COVID-19
pandemic's economic effects, which increased borrowing and lending in the banking industry.
The CDR significantly increased to 94.80% in 2021.

Overall, the NCC Bank CDR provides information about the bank's lending activities and
credit risk. A higher CDR indicates both increasing lending activity and credit risk. On the
other side, a lower CDR indicates decreased lending activity and credit risk.

Year 2017 2018 2019 2020 2021

CDR 93.62% 92.49% 91.10% 92.05% 94.80%
Table9: Credit to deposit ratio (Source: NCCB Annual Report)

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 Credit to deposit ratio:
96.00%
95.00%
94.00% 93.62% 94.80%
93.00%
92.05%
92.00% 92.49%
91.00%
91.10%
90.00%
89.00%
2017 2018 2019 2020 2021

Figure9: Credit to deposit ratio (Source: NCCB Annual Report)

3.4.5 Risk weighted asset ratio

The Risk-Weighted Asset (RWA) Ratio measures the capital stability of a bank and measures
its level of risk. Over the years, the RWA ratio for NCC Bank has changed. The ratio was
8.69% in 2017, fell to 7.92% in 2018, then to 7.45% in 2019, showing that the bank was
successfully handling its risks.

However, the RWA ratio climbed to 7.57% in 2020, probably as a result of the impact of
covid-19 on the banking industry. In 2021, the ratio significantly dropped to 6.30%, showing
that the bank's risk profile had improved, possibly as a result of the bank's risk management
strategy.

The RWA ratio for NCC Bank mainly indicates that the bank has been actively managing its
risks, and the fluctuating pattern shows the impact of economic and financial conditions on
the bank's risk profile. A lower RWA ratio indicates that the bank is less risky and may offer
a certain amount of safety to investors and depositors.

Year 2017 2018 2019 2020 2021

RWA 8.69% 7.92% 7.45% 7.57% 6.30%
Table10: Risk weighted asset ratio (Source: NCCB Annual Report)

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 Risk weighted asset ratio:
8.69
7.92 7.57
7.45
6.30

2017 2018 2019 2020 2021

Figure10: Risk weighted asset ratio (Source: NCCB Annual Report)

3.5 Efficiency Ratio

3.5.1 Asset turnover ratio

A company's ability to produce revenue from its assets is measured by the asset turnover ratio
(ATR). Over the years, the ATR for NCC Bank has changed. The ATR was 3.2484 in 2017
and significantly went up to 4.3301 in 2018. The ATR went up even more in 2019 to 5.1143,
which shows an improvement in the bank's ability to effectively use its assets to generate
profit.

However, the ATR dropped to 4.6587 in 2020, possibly as the result of the COVID-19
pandemic's negative economic effects. The ATR further fell in 2021 to 4.0329, which showed
a decline in the bank's ability to generate income from its assets. Because a lower ATR
suggests that the bank is not utilizing its assets effectively to produce revenue, this could be
an issue to concern.

Overall, the ATR may provide information about how effectively a business generates
income, but it should be evaluated along with other financial ratios to give a more complete
picture of the business's financial health.

Year 2017 2018 2019 2020 2021

ATR 3.2484 4.3301 5.1143 4.6587 4.0329
Table11: Asset turnover ratio (Source: NCCB Annual Report)

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 Asset turnover ratio:
5.11
4.66
4.33
4.03
3.25

2017 2018 2019 2020 2021

Figure11: Asset turnover ratio (Source: NCCB Annual Report)

3.5.2 NPL ratio

The Non-Performing Loan (NPL) ratio is used as a measure of a bank's loan portfolio's
performance. It shows the proportion of loans that are not being repaid by borrowers in order
with the conditions that were established.

Over the years, the NPL ratio for NCC Bank has changed. The NPL ratio was 5.79% in 2017,
and it remained at a comparatively constant 5.80% in 2018. In 2019, the ratio dropped to
4.81%, showing an improvement in the loan portfolio quality of the bank.

Due to the COVID-19 pandemic's effects on the economy, the NPL ratio slightly increased
in 2020 to 4.98%. However, the ratio dropped once again in 2021, to 4.57%, indicating that
the bank was able to effectively manage its credit risk and maintain the quality of its loan
portfolio.

A lower NPL ratio often indicates higher asset quality and reduced credit risk, which is good
news for the bank's stability and financial health.

Year 2017 2018 2019 2020 2021

NPL 5.79% 5.80% 4.81% 4.98% 4.57%
Table12: NPL ratio (Source: NCCB Annual Report)

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 NPL RATIO:
7.00%
5.80%
6.00%
5.79% 4.98%
5.00%
4.00% 4.81% 4.57%
3.00%
2.00%
1.00%
0.00%
2017 2018 2019 2020 2021

Figure12: NPL ratio (Source: NCCB Annual Report)

3.5.3 Classified loan ratio

The non-performing loan percentage of a bank's whole loan portfolio is calculated using the
Classified Loan Ratio (CLR). It provides information about the bank's asset quality and credit
risk management.

The CLR for NCC Bank has changed over time. The CLR was 3.16% in 2017, and it grew to
3.38% in 2018. The bank's credit risk management and asset quality improved in 2019, as
seen by the CLR's considerable drop to 1.82%. The CLR may have increased slightly in 2020
due to the COVID-19, reaching 2.09%, but it significantly reduced in 2021, dropping to
1.05%, showing the bank's improvement in credit risk management and asset quality.

A lower CLR usually denotes better asset quality and credit risk management for the bank.
The fact that NCC Bank's CLR has decreased over time indicates the bank has been successful
in minimizing its non-performing loans and properly managing its credit risk.

Year 2017 2018 2019 2020 2021

CLR 3.16% 3.38% 1.82% 2.09% 1.05%
Table13: Classified ratio (Source: NCCB Annual Report)

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 Classified Loan Ratio:
4.00%
3.50% 3.38%
3.00%
3.16%
2.50% 2.09%
2.00%
1.50% 1.82%
1.00% 1.05%
0.50%
0.00%
2017 2018 2019 2020 2021

Figure13: Classified ratio (Source: NCCB Annual Report)

3.5.4 Cost to income ratio

A bank's efficiency is determined by its cost-to-income ratio (CIR), which shows how much
it spends to make money. A lower CIR indicates improved cost control and higher profit
margins.

Over the years, the CIR for NCC Bank has changed. The CIR was 43.44% in 2017, fell to
40.31% in 2018, and showed an increase in cost management. But in 2019, the CIR jumped
to 41.81%, indicating a slight rise in costs.

The COVID-19 pandemic's economic effects, which increased costs and decreased revenue
for the bank, possibly resulted to the large rise in the CIR to 48.20% in 2020. The CIR fell to
44.80% in 2021, showing improved cost control and increased profitability for the bank.

Overall, NCC Bank's CIR shows that the bank is trying to enhance its cost management, with
different levels of success throughout the years.

Year 2017 2018 2019 2020 2021

CIR 43.44% 40.31% 41.81% 48.20% 44.80%
Table14: Cost to income ratio (Source: NCCB Annual Report)

29
 Cost to income:
50.00%
48.20%
48.00%
46.00%
43.44%
44.00%
41.81% 44.8…
42.00%
40.00%
40.31%
38.00%
36.00%
2017 2018 2019 2020 2021

Figure14: Cost to income ratio (Source: NCCB Annual Report)

3.6 Z Score:
The Z-score is a financial indicator that measures a company's financial stability and is used
to forecast the possibility of bankruptcy or other financial problems. A score below 1.81
indicates a significant danger of bankruptcy, whereas a Z-score above 2.99 is regarded as
safe.

The Z-score for NCC Bank has been continuously high over the previous five years. The
values for the years 2017, 2018, 2019, 2020, and 2021 are 8.276, 8.192, 8.250, 8.942, and
9.663 respectively.

These positive Z-scores show that there is no danger of bankruptcy or other financial
difficulty for NCC Bank. The improvement in the bank's financial position over time is
indicated by the rise in the Z-score from 2017 to 2021, which is a positive sign for
stakeholders and investors.

In conclusion, NCC Bank's Z-score indicates that the organization is consistent and
financially stable, with an increase in its financial stability over time.

Year 2017 2018 2019 2020 2021

Z-Score 8.276 8.192 8.250 8.942 9.663
Table15: Z Score (Source: NCCB Annual Report)

30
 9.663

8.942

8.276 8.192 8.250

2017 2018 2019 2020 2021

Figuree15: Z Score (Source: NCCB Annual Report)

3.7 Pre-COVID and Post-COVID Scenario:

Profitability Ratio:

Year 2017 2018 2019 Year 2020 2021

ROA 0.94% 0.82% 0.86% ROA 0.87% 0.93%
ROE 10.49% 10.45% 11.51% ROE 11.10% 11.63%
NIM 2.85% 2.97% 2.97% NIM 1.91% 2.33%
Table16: Pre-Covid (Profitability Ratio) Table17: Post-Covid (Profitability Ratio)

Pre-Covid (2017-2019):
• During this time, NCC Bank's ROA shifted slightly from 0.94% in 2017 to 0.86% in
2019.

• In the same way, during the three years, the bank's ROE fluctuated between 10.49%
and 11.51%, remaining largely constant.

• However, the bank's NIM showed a downward tendency, falling from 2.85% in 2017
to 2.97% in 2018 and 2019.

31
 Post-Covid (2020-2021):
• In the post-COVID scenario, NCC Bank's profitability ratios showed some
improvement, with ROA and ROE both rising from 0.87% and 11.10% in 2020 to
0.93% and 11.63%, respectively.

• In the post-COVID scenario, the bank's NIM also showed a large increase, rising from
1.91% in 2020 to 2.33% in 2021.

Liquidity Ratio:

Year 2017 2018 2019 Year 2020 2021

Current Ratio 1.67 1.68 1.72 Current Ratio 1.82 1.77
NWCR 40.03% 40.18% 41.66% NWCR 44.56% 43.18%
Table18: Pre-Covid (Liquidity Ratio) Table19: Post-Covid (Liquidity Ratio)

Pre-Covid (2017-2019):
• The current ratio of NCC Bank increased gradually over the course of the year from
1.67 in 2017 to 1.72 in 2019, showing that the bank had enough short-term liquidity to
meet its current liabilities.

• Additionally, the bank's net working capital ratio climbed from 40.03% in 2017 to
41.66% in 2019, indicating an improvement in the bank's capacity to fulfill its short-
term financial obligations.

Post-Covid (2020-2021):

• The NCC Bank's current ratio dropped slightly from 1.82 in 2020 to 1.77 in 2021,
indicating that the bank has a little less short-term liquidity to meet its current liabilities.

• Additionally, the bank's net working capital ratio dropped from 44.56% in 2020 to
43.18% in 2021, indicating a decline in the bank's capacity to fulfill its short-term
financial obligations.

The banking sector experienced an economic crisis during the COVID-19 pandemic, including
greater uncertainty, decreased consumer confidence, and higher credit risks. Like other banks,
NCC Bank must modify its procedures and guidelines in order to handle these difficulties.

32
Overall, despite a slight drop in liquidity ratios after the pandemic, NCC Bank was still in a
good financial position to handle the difficulties brought on by the COVID-19 epidemic.

Market prospect Ratio:

Year 2017 2018 2019 Year 2020 2021

P/E 8.85 7.73 5.22 P/E 5.59 6.22
EPS 2.00 2.06 2.30 EPS 2.36 2.46
Table20: Pre-Covid (Market prospect Ratio) Table21: Post-Covid (Market prospect Ratio)

Pre-Covid (2017-2019):
• The P/E ratio declined from 8.85 in 2017 to 5.22 in 2019, showing that investors were
ready to pay less for each unit of earnings.

• The EPS climbed from 2.00 in 2017 to 2.30 in 2019, showing that the company's
earnings were increasing.

Post-Covid (2020-2021):

• Probably as a result of the pandemic-related issues, the P/E ratio further dropped to 5.59
in 2020.

• However, the P/E ratio jumped to 6.22 in 2021, showing that investors were more ready
to pay for each unit of earnings compared to the previous year.

• Additionally, the EPS increased from 2.36 in 2020 to 2.46 in 2021, showing that the
company's earnings improved despite the pandemic.

Overall, during the epidemic period, there were some variations in NCC Bank's market
prospect ratio. Nevertheless, the company's earnings kept rising, which may have helped the
P/E ratio rise in 2021.

33
Solvency Ratio:

Year 2017 2018 2019 Year 2020 2021

D/A 59.36% 59.23% 57.70% D/A 54.65% 56.08%
D/E 1.46 1.45 1.36 D/E 1.21 1.28
CAR 11.51% 12.62% 13.41% CAR 13.21% 15.86%
CDR 93.62% 92.49% 91.10% CDR 92.05% 94.80%
RWA 8.69% 7.92% 7.45% RWA 7.57% 6.30%
Table22: Pre-Covid (Solvency Ratio) Table23: Post-Covid (Solvency Ratio)

Pre-Covid (2017-2019):

• The debt-to-assets ratio (D/A) of the bank fluctuated between 57.70% and 59.36%,
remaining comparatively constant.

• Due to the bank's heavy reliance on debt financing, the debt-to-equity ratio (D/E)
remained high throughout the time period. It varied between 1.36 and 1.46.

• The capital adequacy ratio (CAR) increased from 11.51% in 2017 to 13.41% in 2019,
showing a positive trend.

• Over the time period, the Credit to Deposit Ratio (CDR) declined significantly, from
93.62% in 2017 to 91.10% in 2019.

• The risk exposure of the bank declined over the time, as seen by the declining risk-
weighted assets (RWA) ratio.

Post-Covid (2020-2021):

• The debt-to-assets ratio (D/A) of the bank declined from 56.08% in 2020 to 54.65% in
2021, showing that the bank used debt financing less frequently.

• The bank's equity base increased as seen by the debt-to-equity ratio (D/E) declining
from 1.28 in 2020 to 1.21 in 2021.

• The capital adequacy ratio (CAR) increased significantly from 13.21% in 2020 to
15.86% in 2021, indicating the bank's improved ability to manage possible losses and
stronger financial position.

34
 • The coverage ratio (CDR), which measures a bank's ability to pay possible losses,
jumped from 92.05% in 2020 to 94.80% in 2021.

• The risk exposure of the bank declined even more in 2021, as seen by the risk-weighted
assets (RWA) ratio, which dropped from 7.57% in 2020 to 6.30% in 2021.

Due to the economic crisis and higher risk of loan defaults during the COVID-19 pandemic,
several banks faced major difficulties. NCC Bank was able to maintain a solid solvency
position, however, as seen by the rise in both its capital adequacy ratio and CDR. The decline
in the bank's debt-to-assets and debt-to-equity ratios further suggests that the bank was
successful in efficiently controlling its debt levels throughout the pandemic. NCC Bank was
able to survive the economic storm and have a good financial position since overall, its
solvency ratios were unchanged or even improved during the pandemic.

Efficiency Ratio:
Year 2017 2018 2019 Year 2020 2021
ATR 3.2484 4.3301 5.1143 ATR 4.6587 4.0329
NPL 5.79% 5.80% 4.81% NPL 4.98% 4.57%
CLR 3.16% 3.38% 1.82% CLR 2.09% 1.05%
CIR 43.44% 40.31% 41.81% CIR 48.20% 44.80%
Table24: Pre-Covid (Efficiency Ratio) Table25: Post-Covid (Efficiency Ratio)

Pre-Covid (2017-2019):
• The annual turnover ratio (ATR) of NCC Bank increased over time from 3.25 in 2017
to 5.11 in 2019, showing that the bank was making more money from its assets.

• An improvement in loan quality and a decrease in credit risk may be seen in the Non-
Performing Loan (NPL) ratio, which dropped from 5.79% in 2017 to 4.81% in 2019.

• The cost-to-income ratio (CIR), which fell from 43.44% in 2017 to 41.81% in 2019,
shows that the bank was able to better manage its costs.

• However, the Cost of Fund Ratio (CLR), which showed that the bank had to pay more
to attract deposits, increased from 3.16% in 2017 to 1.82% in 2019.

35
 Post-Covid (2020-2021):

• Due to the pandemic, NCC Bank's ATR declined from 4.66 in 2020 to 4.03 in 2021,
showing that the bank was earning less money from its assets.

• Despite the pandemic, the NPL ratio declined slightly from 4.98% in 2020 to 4.57% in
2021, showing that the bank was still maintaining its loan quality.

• The bank was able to lower its funding costs throughout the pandemic, as seen by the
fact that CLR significantly fell from 2.09% in 2020 to 1.05% in 2021.

• According to CIR, which increased from 48.20% in 2020 to 44.80% in 2021, the bank
saw greater expenditures during the pandemic as a result of increased operational costs
for safety measures and other factors.

Overall, NCC Bank was able to maintain the quality of its loans during the pandemic, lower
funding costs, and slightly control expenses, although it saw a decrease in the amount of
income generated from its assets.

Z Score:

Year 2017 2018 2019 Year 2020 2021

Z-Score 8.276 8.192 8.250 Z-Score 8.942 9.663
Table26: Pre-Covid (Z-Score) Table27: Post-Covid (Z-Score)

Pre-Covid (2017-2019):

• NCC Bank's Z-Score varied from 8.276 in 2017 to 8.250 in 2019.

• Due to the fact that the Z-Score measures an organization's total financial strength and
potential for bankruptcy, this suggests that the bank was in a relatively stable financial
situation.

• The relatively stable Z-Score over this time period, however, indicates that there was
no significant change in the bank's financial situation.

Post-Covid (2020-2021):

• In 2021, NCC Bank's Z-Score increased from 8.942 in 2020 to 9.663.

36
 • This shows that the bank's financial situation significantly improved during this time,
potentially as a result of successful actions made that reduced the pandemic's negative
effects on the bank's operations.

• According to the previous scenarios, increases in the bank's liquidity, profitability,

solvency, and efficiency ratios can be credited for the rise in Z-Score.

Overall, the rise in Z-Score and improvements to other financial metrics indicate that NCC
Bank has largely overcome the effects of the pandemic and is in a sound financial position to
handle future challenges.

37
Chapter 4: DISCUSSION &
CONCLUSION

38
 4.1 Discussion:
With a few slight variations in financial data analysis from year to year, NCC Bank has shown
stable financial success throughout the last five years. However, it becomes clear from
examining the bank's financial measures that there is opportunity for improvement in some
areas to boost profitability, raise shareholder equity, and guarantee long-term success and
growth.

The bank should first concentrate on increasing asset utilization, as shown by the poor ROA
numbers. To do this, NCC Bank can think about reducing credit risks and identifying potential
non-performing loans, which would raise the quality of its loan portfolio. The bank may also
make investments in assets that are more profitable, such as those with better yields or lower
risk. The bank can boost ROA, profitability, and overall asset utilization by doing this.

Second, while NCC Bank has been successful in generating profits for its owners, the ROE
figures are not very high, suggesting that there is space for development. The bank may think
about reinvesting income, issuing more shares, or purchasing other businesses as ways to
raise shareholder equity. These strategies might lead to more profits, an increased equity base,
and better ROE.

Thirdly, to maintain or improve its profitability, the bank must constantly evaluate its
expenses and revenue sources. The bank's total profitability can be increased through
identifying opportunities for expense cutting and revenue development. Reducing operational
costs, increasing loan interest rates, or launching new services that can increase income.

Fourthly, maintaining liquidity is crucial, especially during times of unexpected financial

difficulties like those brought on by the COVID-19 pandemic. The bank is well positioned to
meet its short-term financial obligations, according to NCC Bank's Net Working Capital
Ratio, but it is crucial to have enough liquidity to handle unexpected financial issues that may
arise.

Lastly, it is critical to keep an eye on and manage the demands of investors. The P/E ratio of
NCC Bank has changed over time as a result of shifting investor perceptions of the bank's
potential for future earnings growth. The bank needs to show continuous financial success
and communicate clearly to manage investor expectations.

In the end, NCC Bank's financial performance during the previous five years has been
consistent. However, there are several areas where the bank may do better, like raising

39
shareholder equity, profitability, and asset utilization; ensuring enough liquidity; and
observing and modifying what investors want. These suggestions can help NCC Bank boost
shareholder value while ensuring its long-term profitability and growth.

4.2 Conclusion:
In conclusion, the NCC Bank financial analysis indicates that the bank has been able to
maintain consistent financial performance during the past five years, despite some slight
variations in financial statistics. The bank has been effective in controlling its debt, making a
return for its investors, and maintaining enough liquidity. Even so, there is still room for
improvement in several areas, such as asset use, shareholder equity, cost reduction, and
investor awareness.

NCC Bank has a solid foundation that will support its achievement and development going
forward. By implementing the report's recommendations, the bank may increase shareholder
value, significantly improve its financial performance, and ensure its long-term sustainability
in the competitive banking industry. By frequently paying a special attention to financial
management and strategic planning, NCC Bank can keep its position as a prominent player
in the banking sector.

40
References:

➢ Annual report 2017,2018,2019,2020 of NCCBL

➢ [Link]
banking/financial-performance-analysis-of-ncc-bank-limited/11784678
➢ [Link]
415%2013_.pdf?sequence=1&isAllowed=y
➢ [Link]
➢ [Link]
➢ [Link]
➢ [Link]
➢ [Link]
analysis-of-ncc-bank-limited/
➢ [Link]
ance_of_Banking_Sector_in_Bangladesh_An_Empirical_Study_on_Selected_Listed_
Banks

41