1. Introduction:The report has been prepared to analyze the performance of two listed private commercial bank. For our research and analysis purpose we were given two banks: Jamuna Bank Limited and South East Bank Limited to compare the performance between the two. Being a 3rd generation Bank of Bangladesh, Jamuna Bank focuses on remaining with time, managing change, developing human capital and, creating true customers value. It was established on June 3, 2001 by a group of local entrepreneurs who are well reputed in the field of trade, commerce, industry and business of the country. On the other hand, Southeast Bank Limited is another private commercial bank in Bangladesh that began its journey when it was incorporated as a Public Limited Company on March 12, 1995. In this report, the analysis of the performance is done in terms of liquidity, leverage, efficiency, profitability, market position, provision for loan losses and capital adequacy, over the period of time starting from 2009 to 2012. Throughout the report we have tried to find out whether the overall performance of both the banks has improved or declined. Comparative analysis has also been done to find out the better performing bank in terms of liquidity, leverage, efficiency, profitability, market position and also the reason behind that. Other performance indicators have also been considered to analyze the performances of the banks. Throughout the report our focus is to understand the financial position of the banks in the banking industry and to find out what are the factors helping the banks to perform better and to suggest what other better strategies can be undertaken if the performance is not satisfactory.2. Objective:The main objective of the report is to compare the performance of two listed private commercial banks which are listed at Dhaka Stock Exchange (DSE) over a period of time starting from 2009 to 2012. In our report, we were required to analyze and compare the performance between South East Bank Limited and Jamuna Bank Limited in term of liquidity, leverage, efficiency, profitability, market position, provision for loan losses and capital adequacy. Also the purpose is to understand whether the banks are doing good or not and to find out the proper reasons behind those success or failure in achieving better performance. 3. Methodology:The report mainly consists of secondary data. Annual reports for the 4years of the two banks were used since most of the data were taken from the annual reports of the bank. For more updated information we collected data from Dhaka Stock Exchange. These data includes the DSE General Index to see the cash flow pattern and also to calculate beta for the banks, other company related information, information related to recent market position of the banks etc. Apart from that, to know the bank overview, capital structure of the banks, and their protection against loans and risks many online sources like journals, articles, news and websites were used. Different types of ratios were used to analyze the performance of the banks measuring profitability, efficiency, liquidity, market position, leverage of the banks through these ratios. In this regard, both time series and cross sectional analysis were done to evaluate the performance over time as well as compared to another bank of the same industry. Excel Sheets were used to do all the quantitative analysis of the report. Different methods like, CAPM, Intrinsic Value, Sharp and Treynor Ratio were used to calculate the return, intrinsic value and pricing of the stocks and thus analyze the bank position. Also to show the findings more clearly different charts, such as, pie chart, column charts were used.4. Limitations:Time constrain was the main limitation in terms of this report. Due to limited time we could not manage to have some sort of primary data analysis as well as some long term study. Apart from that, the adverse political situation has affected this study to some extent. Moreover, due to the unavoidable circumstances of the university it became quite difficult to have discussion with our instructor regarding the report topic. However, the report has been made very sincerely in a manner, keeping all these limitations in mind, so that they can be overcome. 5. Literature Review:Ratio Analysis Ratio Analysis is the starting point in developing the information desired by the analyst. Ratio analysis provides only a single snapshot, the analysis being for one given point or period in time. In the ratio analysis it is possible to define the company ratio with a standard one.Profitability RatioReturn on Equity (ROE)Return on equitymeasures a Bank's profitabilityby revealing how muchprofit a bank generateswith the money shareholders have invested.The equation for ROE is

It measures the return on the money the investors have put into the company. This is the ratio potential investors look at when deciding whether or not to invest in the company. Net income comes from the income statement and stockholders equity comes from the balance sheet. In general, the higher the percentage is the better.Return on Assets (ROA)ROA measures the efficiency with which the company is managing its investment in assets and using them to generate profit. It measures the amount of profit earned relative to the firms level of investment in total assets. Net Income is taken from the income statement, and total asset is taken from the balance sheet. The higher the percentage is better, because that means the company is doing a good job using its assets to generate sales. The equation for ROA is

Net Interest MarginNet Interest Margin (NIM) is a measurement of the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to their lenders. It is expressed as a percentage of what the financial institutions are earning minus the interest that it pays on borrowed funds to its investors. It examines howsuccessful a firm's investmentdecisions are compared to its debt situations.A negative value denotes that the firm did not make an optimal decision, because interest expenses were greater than the amount of returnsgenerated by investments. The equation for NIM is

Net Non Interest MarginWe calculate net non interest margin in this way:

It is expressed as a percentage of how much noninterest revenue the financial institutions are earning minus the non interest expense. Noninterest income includes revenues earned from loan and investments or fee income from fiduciary activities, services charges on deposit accounts, trading account gains and fees, revenues income from investment banking, security brokerage and insurance services. Noninterest expenses include salaries, wages and employee benefits.Net Bank Operating Margin A measure of how profitably the firm is operating. The ratio tells how well a company converts revenue from core operations into actual profit - how many cents of profit it gets from every dollar of sales. The operating margin shows how well the company controls costs. The equation is

Earnings Per share (EPS)The portion of a company's profit allocated to each outstanding share of common stock.Earnings per shareserve as an indicator ofa company's profitability. It tells an investor how much of the company's profit belongs to each share of stock. The equation is

Net Profit MarginIt tells investors the percentage of money a company actually earns per dollar of sales. This number is an indication of how effective a company is at cost control. The higher the net profit margin is, the more effective the company is at converting revenue into actual profit. The net profit margin is a good way of comparing companies in the same industry. The equation is

Asset Utilization

It indicates that how efficiently the firm is utilizing the asset to generate revenue or return. It concern on portfolio management policies, especially the mix and yields on the banks assets. By carefully allocating assets to the highest yielding loans and investments while avoiding excessive risk, management can raise the average yields on assets. Formula is-

Equity Multiplier

Equity Multiplier reflects the financing or leverage policies, the sources chosen to fund the financial institution (debt or equity). A higher equity multiplier indicates higher financial leverage, which means the company is relying more on debt to finance its assets. The equation shows degree of total assets is financed by total equity capital.

Efficiency RatioTax Management RatioIt reflects the use of security gains or loss to minimize tax exposure. It indicates what portion of operating income generates net income after tax. The equation is

Expense Control EfficiencyIt indicates the portion of revenue after the operating expense is deducted. Its a measure of operating efficiency and expense control. The equation is

Asset Management Ratio:Asset Management Ratio measures the portfolio management policy especially the mix and yield on assets. The higher the ratio, the more effectively assets are used to generate revenue.

Fund Management RatioFund Management Ratio reflects the financing or leverage policies, the sources chosen to fund the financial institution (debt or equity)

Operating Efficiency ratioThe efficiency ratio gives us a measure of how effectively a bank is operating. It is the cost required to generate each dollar of revenue. The equation is

An increase means the company is losing a larger percentage of its income to expenses. If it is getting lower, it is good for the bank and its shareholders. This measures non-interest expenses as a proportion of operating revenue. Costs include salaries, technology, buildings, supplies, and administrative expenses. Revenue includes net interest income (interest revenue less interest expenses) plus fees.Employee Productivity RatioThe equation is

The ratio measures the level of income that each employee generates. It helps to determine the efficiency of a bank in terms of employees.Market Position RatioPrice Earnings Ratio (P/E) It is a measure of the price paid for a share relative to the annual profit earned by the firm per share. A high P/Esuggests that investors are expectinghigher earningsgrowthin the future compared to companies with alower P/E. It gives us an indication of the confidence that investors have in the future prosperity of the business. The equation is

Market-Book RatioIt measures how much a company is worth at present, in comparison with the amount of capital invested by current and past shareholders into it. This ratio is used by some investors or analysts as an indicator of over- or undervaluation. If the balance sheet assets per share are much larger than the share price, this is taken to be a buy signal. The equation is

Dividend per Share:Thesum ofdeclared dividendsfor every ordinary share issued. Dividend per share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares-issued. DPS can be calculated by using the following formula:

Retention Ratio:This ratio calculates the percentage of net income which is retained as earning of the institution. This ratio also helps us to find the internal growth rate of the bank. The ratio is:

Book Value per Share - BVPSFinancial measure that representsper shareassessment of the minimum value ofa company'sequity is called Book Value. More specifically, this value is determined by relating the original value of a firm's common stockadjusted forany outflow (dividends and stock buybacks) and inflow (retained earnings) modifierstothe amount of shares outstanding.Calculated as:

Leverage RatioInterest Coverage RatioA ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company'sinterest expensesof the same period. The equation is

The lower the ratio, themore the company is burdened by debt expense. An interest coverage ratio below 1 indicatesthe company is not generating sufficient revenues to satisfy interest expenses. Debt-Equity RatioIt indicates what proportion of equity and debt the company is using to finance its assets. A high debt-equity ratio generally means that a company has been aggressive in financing its growth with debt. The equation is

Sometimes total debt is used instead of interest bearing long term debt in the calculation. I case of bank we use the long term debt at numerator. Liquidity PositionIt is a determinant of a firms liquidity position. The main equation is given bellow-A financial firms net liquidity position= Supplies of liquidity flowing into the financial Firm- Demand on the financial firm for Liquidity (Supplies of liquidity flowing into the financial Firm= Incoming deposits (inflows)+ Revenues from the sales of non deposit services+ Customer loan repayments+ Sales of assets+ Borrowings from the money marketDemand on the financial firm for Liquidity= Deposits withdrawals+ Volume of acceptable loan requests+ Repayments of borrowings+ Other operating expenses+ Dividend payments to stockholders.)If the ratio is negative, its a liquidity deficit. Management must decide the way of raising additional funds. In case of positive result, its a liquidity surplus. Then the additional liquid fund is invested somewhere profitable.Cash Position Indicator

Cash and deposits due from depository institution/total assets, where a great proportion of cash implies the institution in a stronger position to handle immediate cash need.Capacity RatioCapacity Ratio = This ratio is really a Negative liquidity indicator because loan and leases are often the most illiquid assets.Liquid Securities Indicator

This Ratio compares the most marketable securities an institution can hold with the overall size of its asset portfolio; the greater proportion of government securities, the more liquid the depository institutions position tends to be.Pledged Securities RatioIt is a negative liquidity indicator because the greater the proportion of securities pledged to back government deposit the fewer securities are available to sell when liquidity needs arise.

Hot Money RatioIt reflects whether the institution has roughly balanced the volatile liabilities it has issued with the money market asset it holds that could be sold quickly to cover those liabilities.

Core Deposit RatioThese are checking and saving accounts which are unlikely to be withdrawn on short notice and so carry lower liquidity requirement.

Deposit Composition Ratio It measures how stable a funding base each institution possess.

Loan Commitment RatioIt measures the volume of promises a lender has made to its customers to provide credit up to pre specified amount over a given period of time.

6. Findings and Analysis:6.1 Overview of Banks:Southeast Bank Limited:Southeast Bank Limited, a second generation private Bank, emerged in 1995 amid liberalization of global economies. Currently, its Authorized Capital is Tk.10, 000.00 million and its capital and reserve reached 19,597.16 million as of December 31, 2012. Its vision is to stand out as a premier banking institution in Bangladesh and contribute significantly to the national economy. The Bank, in the meantime, successfully completed 18th year of banking operations, recording significant growth in all the performance indicators. In 2012, the Bank earned an after tax profit of Tk.1648.72 million. The deposit of the bank grew by 20.23 percent to Tk.152, 901.24 million and loans and advance by 18.34 percent to Tk.126, 968. 97 million compared to those of 2011. At present, the Bank has 94 branches and 2 off-shore Units across the country. Plans have been drawn to raise another 10 branches and at least 10 more SME Centers by 2013.

As they face the stiff challenges ahead on the way to further improving the profitability of the Bank, they rely on our skilled and experienced workforce. Southeast Banks product-basket encompasses Real Time Online Any Branch Banking, Islamic Banking, Merchant Banking, Dual Currency Visa Credit Card, Visa Travel Card, ATMs, Education Loan Scheme, Double Benefit Scheme, Consumer Loan, Millionaire Deposit Scheme, SME Banking, Corporate Banking, Syndicate Loan, Monthly Savings Scheme, Monthly Income Scheme, Pension Saving Scheme, Wage Earner Pension Scheme, SMS Banking etc. in addition to the traditional credit and foreign trade related products and services.

High quality customer services through the integration of the latest and state of the art banking technology and products is their tool to achieve success. Customers are their first priority. They are trying hard to provide a system of one-stop banking for customers by providing a broad spectrum of services. Whether their customers are individuals, small businessmen, or commercial clients, they aim to deliver the best customer service by meeting their unique and different needs in a professional, ethical, friendly and knowledgeable manner. Its charted plans are aimed at boosting modern management, advanced technology, good profitability, sound financial strength and fair corporate image of the Bank. Southeast Bank Limited carries out business activities with due respect for existing value and norms and with an understanding of the importance a large financial institution has for the society and the environment. The bank wants to ensure its shareholders a competitive return in line with the best among peer institutions.

Jamuna Bank Limited:Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 of Bangladesh with its Head Office currently at Dhaka. The Bank started its operation from 3rd June 2001. Their vision is to become a leading banking institution and to play a significant role in the development of the country. The Bank is committed for satisfying diverse needs of its customers through an array of products at a competitive price by using appropriate technology and providing timely service so that a sustainable growth, reasonable return and contribution to the development of the country can be ensured with a motivated and professional work-force.

Their objective is to earn and maintain CAMEL Rating 'Strong', establish relationship banking and improve service quality through development of Strategic Marketing Plans, to be one of the best banks in Bangladesh in terms of profitability and assets quality, introduce fully automated systems through integration of information technology, ensure an adequate rate of return on investment, keep risk position at an acceptable range (including any off balance sheet risk), maintain adequate liquidity to meet maturing obligations and commitments and a healthy growth of business with desired image. The Bank provides all types of support to trade, commerce, industry and overall business of the country. JBL's finances are also available for the entrepreneurs to set up promising new ventures and BMRE of existing industrial units. Jamuna Bank Ltd., the only Bengali named 3rd generation private commercial bank, was established by a group of local entrepreneurs who are well reputed in the field of trade, commerce, industry and business of the country.

The Bank offers both conventional and Islamic banking through designated branches. The Bank is being managed and operated by a group of highly educated and professional team with diversified experience in finance and banking. The Management of the bank constantly focuses on understanding and anticipating customers' needs. Since the need of customers is changing day by day with the changes of time, the bank endeavors its best to device strategies and introduce new products to cope with the change. Jamuna Bank Ltd. has already achieved tremendous progress within its past 10 years of operation. The bank has already built up reputation as one of quality service providers of the country.

6.2 Provision for Loan Losses Policy: Jamuna Bank: Interest is calculated on daily product basis but charged and accounted for quaterly on accrual basis. Interest on classified loans is kept in interest suspense account as per Bangladesh Bank guidelines and such interest is not accounted for as income until realized from borrowers. Interest are not bad/ loss loans as per institutions of Bangladesh Bank. Advances are stated at gross value.Provision for loans and advances is made on the basis of year-end review by the management and on the basis of instructions contained in Bangladesh Bank BCD CIRCULAR No-34 of 1989, BCD Circular No-20 dated 27 December 1994,BRPD Circular No-12 dated 04 September 1995, BRPD Circular No-16 dated 06 December 1998, BRPD Circular No- 8 of 2005 at the following rates:ParticularsRate

General Provision on unclassified loan and advances1%

Provision on Small and Medium Enterprise Financing(SMEF)1%

Provision on Housing Finance, Loans for professionals and Small Enterprise2%

Provision on other consumer financing5%

Provision on short term Agri, Credit and Micro Credit other than Bad/Loss5%

Provision on Special Mention Account Loans and Advances5%

Provision on substandard loans and advances20%

Provision on doubtful loans and advances50%

Provision on Bad/Loss loans and advances100%

Provision on Off-Balance-Sheet Exposure1%

Loans and advances are written off to the extent that there is no realistic prospect to recovery as per guideline of Bangladesh Bank. However, write off will not reduce the claim against the borrower. Detailed records for all such write off accounts are maintained.

Southeast Bank Limited:The Bank always maintains the required provisions against classified, unclassified loans and off balance sheet items as per Bangladesh Banks guidelines. Provision for loans and advances is made on the basis of periodical review by the management and of instructions contained in Bangladesh Bank BRPD circulars no. 16 of 6 December 1998, 9 of 14 May 2001, 9 and 10 of 20 August 2005, 5 of 5 June 2006, 8 of 7 August 2007, 10 of 18 September 2007, 5 of 29 April 2008 and BRPD Circular No. 32 of 27 October 2010. The rates of provision for different classifications are given below:

ParticularsRate

General provision on:

All unclassified loans and advances/investments except followings1

Small and medium enterprise financing2

Consumer finance for house building loan and loans for professional setup2

Loan to BHs/MBs/SDs against shares2

Other consumer finance5

Special mention account5

Special provision on:

Substandard loans and advances/investments20%

Doubtful loans and advances/investments50%

Bad/loss loans and advances/investments100%

Loans and advances are written off to the extent that there is no realistic prospect of recovery, and against which legal cases are filed and classified as bad loss for more than five years as per guidelines of Bangladesh Bank. These write off however will not undermine/affect the claim amount against the borrower. Detailed memorandum records for all such write off accounts are maintained and followed up. Amounts receivable on credit cards are included in advances to customers at the amounts expected to be recovered.

Southeast Bank Limited classifies the loans and maintains the required provisions against classified, unclassified loans and off balance sheet items as per the guidelines of Bangladesh Bank. In 2009 the Bank kept provisions for Tk.2, 310.07 million against required provisions of Tk.2, 299.34 million leaving a surplus of Tk.10.73 million. In 2011, the bank kept provisions of Tk. 2,950.40 million against required provision of Tk. 2, 940.86 million. However, Bangladesh Bank introduced new rules and regulations for loan classification and provisioning with effect from December, 2012 quarter. At the end of 2012, the classified loans of Bank stood at Tk. 687.92 million and the bank kept total provision against classified, unclassified loans and off-balance sheet items for Tk. 4247.90 million against required provision of Tk. 4247.41 million. 6.3 Capital Adequacy:Being supervisory authority, Bangladesh Bank (BB) has decided to adopt the Risk Based Capital Adequacy for Banks in line with capital adequacy framework devised by the Basel Committee on Banking Supervision (BCBS) popularly known as Basel II. Banks operating in Bangladesh are maintaining capital since 1996 on the basis of risk weighted assets in line with BCBS capital framework published in 1988. Considering present complexity and diversity in the banking industry and to make the banks' capital requirement more risk sensitive, BB has prepared this guideline to be followed by all scheduled banks from January 2009. This is an endeavor towards more improved and risk sensitive capital requirement than the current regulation. This guideline is structured around the following three aspects: Minimum capital requirements to be maintained by a bank against credit, market and operational risk. Process for assessing overall capital adequacy in relation to a bank's risk profile and a strategy for maintaining its capital at an adequate level. To make public disclosure of information on the bank's risk profiles, capital adequacy and risk management (Bangladesh Bank, 2008).As per the guidelines of Bangladesh Bank the capital adequacy of the two banks are discussed below.

Southeast Bank Limited:Adequate capital means enough capital to compensate all the risks in the business and to develop and practice better risk management techniques in monitoring and managing risks. The Bank has formed an exclusive body called Supervisory Review Process (SRP) team under the directives of Bangladesh Bank where risk management unit is an integral part consisting of members from senior management approved by the Board. It will participate in dialogues with SREP of Bangladesh Bank for assessing overall risk profile and to develop strategy for maintaining adequate capital. Bangladesh Bank also advised the bank to prepare a process document called Internal Capital Adequacy Assessment Process (ICAAP) to facilitate the dialogue between SRP and SPER. South East Bank has already submitted the required information on ICAAP as per the prescribed format given by Bangladesh Bank.Apart from that, SCBL maintained capital adequacy ratio of 10.87% of the risk weighted assets as on December 31, 2012 and 11.46% of the risk weighted assets as on December 31, 2011 as against the minimum capital requirement of 10% set by Bangladesh bank under Basel-II reporting through Bangladesh Bank Curricular No. 10 dated, March 10, 2010. Again, on December 31, 2009 the Bank maintained a capital adequacy ratio of 11.72 percent and a ratio of 11.25 percent on December 31, 2010 of the risk-weighted assets as against the requirement of 10 percent. Table: Capital Adequacy Ratio of South East Bank Limited

2012201120102009

Requirement10%10%10%10%

Capital Adequacy10.87%11.46%11.25%11.72%

From the table above it can be said that, though the banks have maintained their capital to an adequate level, their ratio has fallen over time. So, their protection against their capital has fallen to some extent.Jamuna Bank Limited:With a view to strengthening the capital base of banks and implementation of Basel-II Accord, banks are required to maintain the minimum Capital as set by the Bangladesh Bank from time to time. As banks in Bangladesh are now in a stage of developing risk management models, Bangladesh Bank (BB) suggested the banks for using Standardized Approach for credit risk capital requirement for banking book and Standardized (rule based) Approach for market risk capital charge in their trading book. JBL used the Basic Indicator Approach (BIA), as prescribed by Bangladesh Bank in determining capital charge against operational risk. Under the Basic Indicator Approach (BIA), the capital charge for operational risk is a fixed percentage (denoted by alpha) of average positive annual gross income of the bank over the past three years. JBL focuses on strengthening and enhancing its risk management culture and internal control environment rather than increasing capital to cover up weak risk management and control practices. JBL has been generating most of its incremental capital from retained profit to support incremental growth of Risk Weighted Assets (RWA). Therefore, the Banks Capital Adequacy Ratio (CAR) remains consistently within the comfort zone since the parallel run from 1 January, 2009. In 2009 it was 12.83% and 9.49% in 2010. During the year 2011, the CAR ranges from 9.07% to 11.22% against minimum requirement of 9% (January to June 2011) and 10% (July to December 2011).

Assessing regulatory capital in relation to overall risk exposure of a bank is an integrated and comprehensive process. JBL, through its Basel-II Supervisory Review Committee (B2SRC) and Risk Management Unit, is taking active measures to identify, quantify, manage and monitor all risks to which the Bank is exposed to. Assessment of Regulatory Capital will be in alignment with the findings of these exercises.

6.4 Ratio AnalysisProfitability RatiosReturn on EquityReturn On Equity

Return On Equity= Net Income After Tax/ Total Equity Capital

2009201020112012

Jamuna Bank23.19%16.64%18.27%12.52%

South East Bank16.51%16.12%10.03%8.38%

Time Series Analysis:As we can see from the above chart, for Jamuna Bank the overall performance over the four years, in terms of return on equity has declined which is not a good sign for the company since the return for the shareholders of the bank has declined. 2011 though it has increased to some extent, in 2012 the performance has declined again. On the other hand, in terms of South East Bank the overall performance has declined. In 2009 it was 16.51% and has declined to 8.38% in 2012 which is unfavorable since the earning for shareholders of the bank has declined. Cross Sectional Analysis: From cross sectional analysis it can be said that, for both the company the performance has declined. However, for Southeast Bank the performance has declined more compared to Jamuna Bank. In 2009 it was 23.19% which has declined to 12.52% in 2012 for Jamuna Bank. Whereas, for South East Bank the performance has declined from 16.51% in 2009 to 8.38% in 2012 which indicates for both the companys performance was poor but for South East Bank the performance was poorer.Return on AssetReturn On Asset

Return On Asset=Net Income After Tax/ Total Assets

2009201020112012

Jamuna Bank1.89%1.52%1.53%0.95%

South East Bank1.66%2.09%1.23%0.87%

Time series Analysis:In the graph above, we see that the ROA was going down during the year 2009 to 2011, but decreased tremendously in the year 2012. In the year 2012 Jamuna Banks net income after tax was 1,042,052,580 BDT, which is the reason for the decrease since it was less than that of previous years. If we see the balance sheet, the total asset of the bank is decreasing, but this variation in ROA is mainly because of variations in the level of net profit after tax. On the other hand the performance of Southeast bank was not good. Only the year 2010 ROA was 2.09% which is good but in 2009, 2011 and 2012 ROA was shown the significant drop, which is unfavorable.Cross sectional analysis:From the table and the graph we see that, in 2009 JamunaBank and Southeast Bank were generating profit from assets almost same. However in 2010 Southeast Banks ROA was better than Jamuna Bank. Again in 2011 these two banks ratios have decreased but the rate of decrease is more for Southeast Bank. So Southeast Banks performance has declined more than Jamuna Bank.Net Interest MarginNet Interest Margin

Net Interest Margin= (Interest Income-Interest Exp.)/ Total Assets

2009201020112012

Jamuna Bank1.85%2.12%2.48%1.68%

South East Bank1.25%2.03%1.32%1.09%

Time series analysis: From the graph we can see that in Jamuna Banks Net interest margin was growing tremendously from 2009 to 2011, which was 1.85% to 2.48%.That means that time Jamuna Bank has taken a wise investment decision and was paying more interest on their debts than earning on their assets. But in 2012 the net interest margin was dropping down very badly which is bad. On the other hand in Southeast Banks net interest margin was growing from 2009 to 2010, but from 2011 it started to decrease. So whatever decision they were taking was not correct for which performance was not good.Cross sectional analysis:From the above figure it can be seen that Jamuna Banks net interest margin has increased highly from 2009 to 2011. This is because they had low interest expense during 2011. But in 2012 the net interest margin of Jamuna Bank can be seen decreased a little bit. For Southeast bank the net interest margin has also increased from 2009 to2010. But their rate of increase is lower than that of Jamuna Bank. So Jamuna Bank is in a better position than Southeast bank. Net Noninterest MarginNet Noninterest Margin

Net Noninterest Margin= (Noninterest Rev- Noninterest Exp.)/Total assets

2009201020112012

Jamuna Bank -0.71%-0.32%-0.86%-0.58%

South East Bank0.53%0.22%0.29%0.08%

Time series analysis:The Jamuna banks net non interest margin showed a negative trend from 2009 to 2012. It was showing that the bank was not generating enough noninterest income like revenues earned from loan, services charges on deposit accounts, trading accounts, revenues income from investment etc to cover its total noninterest expenses like salaries, wages and employee benefits, this is not a good sign. Southeast Banks net non interest income showed a falling trend which is not good.Cross sectional analysis:From the above figure it can be seen that from the year 2009 to 2012 Jamuna Banks net non-interest margin has decreased substantially. Southeast Banks net non-interest margin is also very low but compared to Jamuna Bank, Southeast Bank is in a better position since its non interest revenue is higher than that of Jamuna Bank.Net Operating MarginNet Operating Margin

Net Operating Margin= (Total Opt. Rev- Total Opt. Exp)/ Total Assets

2009201020112012

Jamuna Bank3.93%3.44%0.13%-0.22%

South East Bank4.10%5.12%3.68%2.86%

Time series analysis:The Jamuna Banks net operating margin seems to be quite unstable. Variations could be seen during the study period which is clearly depicted from the graph. In the year 2012, there was a very deeply drop in their net operating margin as rate of increase in their total operating expense was higher than the rate of increase of their total operating revenue; as a result the gap between total operating revenue and expense was small, thereby a decline was seen in 2012 net operating margin. The southeast banks net operating was good from 2009 to 2010 but from 2011 to2012 was slightly drop in their net operating margin.Cross sectional analysis:From the above figure it can be seen that both the banks net operating margin has decreased from 2011 to 2012. This is because their operating expense was increasing at a high rate. But Southeast Banks net operating margin is also being decreasing from 2011 to 2012. But this Bank is in a better position than Jamuna Bank since its net operating margin is higher than Jamuna Bank in almost every year.Earnings per ShareEarnings per Share(EPS)

EPS = Net Income After tax/Common Equity Shares Outstanding

2009201020112012

Jamuna Bank5.69%4.78%3.65%2.32%

South East Bank32.44%39.87%2.34%1.90%

Time series analysis:Earnings per share ratio give an idea of comparative earning power of companies. From the above calculation it can be seen that in terms of Jamuna Bank earnings per share was decreasing in every year, from 2009 to 2010 but slowly. Therefore the investors of Jamuna Bank will not have a higher return on investment in its stocks. The Southeast Banks EPS was very high in 2009 to 2010 but from 2011 to 2012 EPS was very low compare to 2009 to2010.There was a huge gap. This gap happened because there was found a huge increase in the number of common shares during that period. As a result, the earning per share has declined sharply.Cross sectional analysis:From the above figure it can be seen that at present Jamuna Banks earning per share is higher than that of Southeast Bank. Jamuna Bank is in a better position since its investors will get a higher return on investing in a stock.Net Profit MarginNet Profit Margin

Net Profit Margin= Net income/ Total Operating Revenue

2009201020112012

Jamuna Bank15.87%14.27%15.70%10.82%

South East Bank13.94%17.19%9.79%7.22%

Time series analysis:It tells investors the percentage of money a company actually earns per dollar of sales. This number is an indication of how effective a company is at cost control. The net profit margin of Jamuna Bank shows the effectiveness of the bank is at converting revenue into actual profit. The Southeast banks net profit margin was gradually improving in 2009 to 2010; this ratio gives a gross idea about a companys effectiveness on expense management and service pricing policies.Cross sectional analysis:From the above figure it can be seen that Southeast Banks Net Profit Margin is higher than Jamuna Bank from 2009 to 2010. But from 2011 to2012 the net profit margin of Southeast Bank has decreased substantially. Jamuna Bank might have started with some new services and banking facilities that made the cost less and increased the profitability of the bank. Asset Utilization (AU)Asset Utilization (Asset Management)

Asset Utilization= Total Operating Revenue/ Total assets

2009201020112012

Jamuna Bank11.94%10.67%9.73%8.78%

South East Bank11.91%12.18%12.57%12.12%

Time series analysis:From the graph we can see a little variation in Southeast banks asset utilization ratio over the period. In the year 2009, an increase in Jamuna Banks total operating revenue compared to the year 2010 to 2012 was seen along with fewer investments in their total assets. As a result, the company was successful enough to utilize their total assets in the year 2009 efficiently to generate revenue that eventually led to this increase in the ratio of Jamuna Bank but declined in the following years. Southeast bank in asset utilization had shown a great performance from 2009 to 2012.Cross sectional analysis:From the above figure it can be seen that Southeast Banks asset utilization ratio has been increasing at a higher rate from 2010 to 2012. It is in a better position than Jamuna Bank. Southeast Bank is earning more revenue for every dollar of asset it owns.Equity MultiplierEquity Multiplier (Fund Management)

Equity Multiplier= Total Assets/ Total equity capital

2009201020112012

Jamuna Bank12.24%10.93%11.96 %13.17%

South East Bank9.95 %7.70 %8.15%9.58%

Time series analysis: This ratio gives an idea about companys financing or leverage policies: the course chosen to fund the financial institution. Though the larger the multiplier the more exposed the company is towards risk but there will be greater potential for high return. It is direct measure of the companys financial leverage. The Equity Multiplier for Southeast Bank was almost similar on 2009 and 2012. For Jamuna Bank it has increased over the period. Jamuna Bank relies more on debt than Southeast Bank and the reliance has increased.

Cross sectional analysis:From the above figure it can be seen that both Jamuna Bank has higher equity multiplier than Southeast Bank from 2009 to 2012. However, both the banks have exposed themselves to higher risk and at the same time they have also the potential to make high return. Both of them are relying on debt to purchase its asset but.

Efficiency RatiosTax Management EfficiencyTax Management Efficiency

Tax Management Efficiency=Net Income/Net Operating Income Before Tax

2009201020112012

Jamuna Bank59.05%51.58%53.85%50.09%

South East Bank54.18%56.12%44.72%46.32%

Time series analysis:This ratio shows a decrease in value over the year from 2009 to 2012 for Jamuna Bank. This is mainly because of increase in pretax income. From this ratio, we can say that the banks expense control is quite stable. For Southeast Bank this ratio shows significant increased in the year from 2009 to 2010, but slightly lower from 2011 to 2012. This is because they have lost more money to tax.Cross sectional analysis:Southeast Banks Tax Management Ratio has declined a bit from the year 2009 to 2012 this means they have left less income after tax and they have less to offer to the shareholders. But Jamuna Banks Tax Management Ratio has been almost constant throughout 2009 to 2012. The figures are also higher than that of Southeast Banks.

Expense Control EfficiencyExpense Control Efficiency

Expense Control Efficiency=Net Operating Income Before Tax/ Total Operating Revenue

2009201020112012

Jamuna Bank26.87%27.65%29.15%21.61%

South East Bank25.73%30.63%21.89%15.58%

Time series analysis: From the chart we can see that the expense efficiency rate of Jamuna Bank had been increasing from 2009-2011. This happened because of a decrease in net income before security gains and losses. Expense efficiency ratio has been fallen 2012. Southeast bank has shown a straight increased from 2009 to 2010, then again started fallen 2011 to 2012, this is because of a increase in net income before security gains and losses.Cross sectional analysis:It can be seen that Jamuna Banks expense control efficiency is higher than Southeast Bank from 2009 to 2012. But it decreased in 2012 more compared to Southeast Bank in 2012. Therefore its efficiency in controlling expenses reduced in 2012. However, overall performance of Jamuna Bank is better than Southeast bank.Operating Efficiency RatioOperating Efficiency Ratio

Operating Efficiency Ratio= Total operating exp/ Total Operating Revenue

2009201020112012

Jamuna Bank34.62%17.87%24.15%21.59%

South East Bank9.28%10.80%11.35%9.87%

Time series analysis:From the graph we can see the operating efficiency ratio of the Jamuna Bank shows a quite unstable trend. Operating efficiency ratio was higher during the year 2009 compared to 2010. However, in the year 2011, it has increase and decreased again in 2012 which does reflect its ability to control cost, indicating lower operating expenses than the operating revenue. So, the overall operating efficiency is fine in 2009 compared to any other two years. In southeast bank operating efficiency ratio was increased in 2009 to 2011 and then decreased in 2012 which does reflect its ability to control cost, indicating lower operating expenses than the operating revenue.

Cross sectional analysis:From the above figure it can be seen that Jamuna Banks operating efficiency is high. Bank is in an average position than southeast Bank. The efficiency ratio indicates a managements ability to keep overhead costs low. Jamuna bank has successfully done this through the year, which indicates that they may have kept aside the expense preference behavior. Southeast bank needs to manage its non-interest expenses properly, so that the ratio goes down.Employee Productivity RatioEmployee Productivity Ratio

Employee Productivity Ratio= Net Operating Income/No. of fulltime Employees

2009201020112012

Jamuna Bank1575511.354061652.753598511.83762939.536

South East Bank8680925.388887658.149521643.510851085.88

Time series analysis:From the graph we can see the employee productivity ratio was good for the Jamuna bank .It was slightly low in 2009. However it had increased in a dramatic way in 2010 and 2011 it was slightly decreased. It was increasing due to increase in the net operating income. In 2010 Jamuna Banks number of employee is much greater where as other banks operating income was not as high as employees so its employee turnover ratio is well below. From 2009 to 2012 Southeast Banks employee productivity ratio has consistently increased which is good indicator for the company.Cross sectional analysis:From the above figure it can be seen that employee productivity ratio of Southeast Bank is higher than that of Jamuna Bank throughout. Southeast Banks employees are more productive than Jamuna Bank. So, Southeast Bank is in a better position.Market RatiosPrice earnings ratioPrice Earning Ratio

Price Earning Ratio= Market Price of the share/ Earning Per Share

2009201020112012

Jamuna Bank9.6611.519.339.47

South East Bank10.2715.0613.3110.52

Time series analysis:From the graph we can see that there was all almost a stable position in price earing ratio from year 2009 and year 2011 to 2012. It was a good sign for the the Jamuna Bank, because investors will not hesitate to invest in this bank if the P/E ratio is stable with increasing trend. This means their confidence for investing in this bank is increasing. The earning per share more increased in 2010 and this effect was shown by a great increased in the market price per share of the bank..This is also same for Southeast bank.Cross sectional analysis:From the above figure it can be seen that Southeast Banks P/E ratio is higher than that of Jamuna Bank and this investors are willing to pay more for one dollar of return in southeast Bank.Book value per shareBook Value per Share

Book Value = (Total Assets-(Liability+ Preferred share))/No. of Common Shares Outstanding

2009201020112012

Jamuna Bank24.5428.7419.9618.55

South East Bank196.50247.3823.3122.68

Time series analysis:From the graph and the ratio it can be seen that the book value per share was increased in 2009 and 2010. But in 2011 it was 19.96 and in 2012 it decreased to 18.55 which is a bad sign for the bank. The book value per share the shareholders can know the current position and the profitability position of the bank. It is a very important ratio for a bank. In southeast bank the book value per share was increased in 2009 and 2010 very highly but very worstly decreased in 2011 and 2012.Cross sectional analysis:In 2009 and 2010 southeast Bank was very much higher than jamuna Bank in BVPS. Even though Jamuna Bank was doing well through the last two years, but compared to southeast bank very low only in 2009 and 2010 but compared to 2011 and 2012 the jamuna bank is better than southeast bank.Dividend per shareDividend per Share(DPS)

Dividend per Share= Total dividend/ No. of Common Shares Outstanding

2009201020112012

Jamuna Bank1.931.821.280.91

South East Bank19.9410.001.501.50

Time series analysis:In Jamuna bank dividend per share ratio is stable from 2009 to 2011 but in 2012 the rate is slightly decreased. In southeast bank there was huge gap, from 2009 to 2010 dividend per share is 19.94 in 2009 and 10 in 2010, but 2011 to 2012 dividend per share was too low which means low dividend paid to the shareholders.Cross sectional analysis:Dividend per share represents the actual amount of dividend distributed to the shareholders. Again, the more dividends been paid the more better it is for the shareholders. So, the higher the value of DPS the better it is for the bank. Jamuna Banks DPS is very much lower than southeast bank.Dividend YieldDividend Yield

Dividend Yield= DPS/ Market Price of the stock

2009201020112012

Jamuna Bank3.50%3.31%3.76%4.13%

South East Bank5.99%1.67%4.82%7.50%

Time series analysis:From the graph we can see that in Jamuna bank dividend yield in a stable position, not a bad position. In Southeast Bank in 2009 the ratio was 5.99%, in 2010 1.67%, in 2011 4.82% and in 2012 7.50%, so there is ups and down position, the position is in average.

Cross sectional analysis:From the graph we can say that in average both the bank Jamuna and Southeast was performing well from 2009 to 2012.Dividend Payout RatioDividend Payout Ratio

Dividend Payout Ratio= DPS/EPS or Dividend/ Net Income

2009201020112012

Jamuna Bank33.87%38.05%35.08%39.10%

South East Bank61.48%25.08%64.20%78.91%

Time series analysis:From the graph we can see that dividend payout ratio of Jamuna Bank was increased in every year which is a good sign. In southeast bank the year 2009, 2011 and 2012 was increased dividend payout ratio, only in 2010 dividend payout ratio decreased.

Cross sectional analysis:From the above figure we can say that southeast bank is better than Jamuna Bank.Retention RatioRetention RatioRetention Ratio

Retention Ratio=1- Dividend Payout Ratio

2009201020112012

Jamuna Bank66.13%61.95%64.92%60.90%

South East Bank38.52%74.92%35.80%21.09%

Time series analysis:From the graph we can see that, the retention ratio of Jamuna Bank in every year is slightly different and not bad. In southeast bank there is huge gap in each year and not a good sign.Cross sectional analysis:From the graph we can say that Southeast Bank is better than Jamuna BankLeverage RatioDebt-equity ratioDebt-equity Ratio (Financial Leverage Ratio)

Debt-equity Ratio= Total Liabilities/ Total Assets

2009201020112012

Jamuna Bank91.83%90.85%91.64%92.41%

South East Bank89.95%87.01%87.73%89.57%

Time series analysis:It is a measure of a company's financial leverage calculated by dividingits total liabilitiesbystockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. The Jamuna bank has a debt-equity ratio which is nearly stable in every year, not very different. In case of Southeast the ratio has declined and then increased again.Cross sectional analysis:Both the banks heavily rely on debt. They are extremely leveraged companies like all other commercial banks.Times Interest EarnedTimes Interest Earned

Times Interest Earned=Total operating Revenue/Interest Expense

2009201020112012

Jamuna Bank2.012.011.341.24

South East Bank1.611.891.491.36

Time series analysis:A metric used to measure a company's ability to meet its debt obligations. If it is 1 it can pay debt obligations 1 time. If it is more than one than it is much better because debt obligation can be paid more than ones but if it is less than one it is a bad signal for the company. Jamuna Bank has a TIE of 2.01 to 1.24 which has decreased in year 2012, which means the banks ability to earn interest has decreased but still in a safe position. Southeast bank has a TIE 1.61 to 1.36; which is also declining.Cross sectional analysis:From the above figure it can be seen that Jamuna Banks TIE is increasing throughout 2009 to 2012. Southeast Banks TIE is also increasing. This ratio used to determine how easily a company can pay interest on outstanding debt. The lower the ratio, themore the company is burdened by debt expense. Though Southeast Banks TIE is increasing but still it is in a better position than Jamuna Bank. Liquidity RatioCash position IndicatorCash position Indicator

Cash position Indicator=Cash & deposits due from other banks/Total Assets

2009201020112012

Jamuna Bank11.05%8.06%12.32%9.55%

South East Bank6.34%7.83%6.78%7.43%

Time series analysis:The Cash Position Indicator of southeast Bank limited has up and down position. In 2009 the ratio was 11.05%, in 2010 8.06%, in 2011 12.32% and in 2012 9.55%. It can be seen that Jamuna Bank has higher proportion of cash. The Cash Position Indicator of Jamuna Bank in 2009 6.34% , 2010 8.06%. 2011 6.78%, 2012 7.43% higher proportion of cash in a stronger position to handle cash needs.

Cross sectional analysis: From the above figure it can be seen that the ratio of SouthEast Bank is lower than Jamuna Bank. This means Southeast Bank has lower capacity to meet up the immediate cash needs. Cash position of Jamuna Bank is better than southeast bank throughout 2009 to 2012. Jamuna Bank has higher proportion of cash than Southeast Bank.Liquid securities indicatorLiquid Securities Indicator

Liquid Securities Indicator=Govt. securities/ Total Assets

2009201020112012

Jamuna Bank17.39%15.11%18.36%22.28%

South East Bank17.22%12.58%16.71%17.96%

Time series analysis:It indicates ratio between government securities and total assets which means how much marketable security a company can hold. The greater the value the more liquid the depository institutions position tends to be Jamuna Banks liquidity Security Indicator in 2009 is 17.39%, then 2010 its going down 15.11%.,then again gone up in 2011 and that is 18.36% and in 2012 is 22.28%.Here is a good sign. During the period 2010 to 2012, both the marketable securities and total assets increased but the total percentage of marketable securities increased at a greater rate than the increase in the total asset. This means that the Jamuna Banks second line of defense has been strengthened which eventually means that it has increased its ability to get liquidity readily by selling off the liquid portion of the securities. But liquidity security indicator is lower for SouthEast Bank than Jamuna Bank in every year.Cross sectional analysis:From the above figure it can be seen that the liquidity ratio of Jamuna Bank is increasing from 2009 to 2012(though a slight fall from 2009 to 2010). The liquidity position of Jamuna Bank is higher than that of Southeast Bank. In southeast bank it increased substantially but overall Jamuna Bank is in a better position.Capacity RatioCapacity Ratio

Capacity Ratio=Net Loans & Leases/ Total Assets

2009201020112012

Jamuna Bank66.26%71.04%65.02%50.04%

South East Bank68.78%70.07%68.09%67.06%

Time series analysis:In case of Jamuna Bank, from 2009 to 2010 the capacity ratio increased because the total asset increased at a greater rate than that of the loans and leases. The capacity ratio decreased from 2010 to 2012 because the rate of increase of total loans and leases was greater than growth of the year. This means that in the year 2012 Jamuna Bank was concentrating more on the long term returns.The Capacity Ratio of Jamuna Bank is lower than that of southeast Bank in the year 2009. Capacity Ratio is a negative liquidity indicator which means higher the ratio, lower the liquidity position of a company. Therefore the liquidity position of Jamuna Bank is better than Southeast Bank Limited. In 2010 the capacity ratio is 71.04% which is greater than 2009. However, the Southeast Bank has lower capacity ratio of 70.04%. In 2011 the capacity ratio is 65.02% which is lower than 2010 capacity ratio of 71.04% of Jamuna bank. So, as the ratio has gone down the bank has become a little more liquid compared to previous year. However, the competitor Southeast Bank is having a higher liquidity position than Jamuna Bank so it has higher liquidity requirement. In 2012 Jamuna bank is better than Southeast Bank.

Cross sectional analysis:The capacity ratio for Jamuna Bank was lower than that of SouthEast Bank in 2009, 2011, and 2012 and this means that during these times Jamuna Bank had lower liquidity than SouthEast Bank and this means that Jamuna Bank is investing for more long term returns. In the year 2010 the ratio for SouthEast Bank was slightly lower than that of Jamuna Bank and this means that during that year SouthEast Bank was investing comparatively less in loans and leases.Hot money ratioHot Money ratio

Hot Money ratio= Money market assets/ Money Market Liability

2009201020112012

Jamuna Bank 9.76 2.26 0.99 0.24

South East Bank- 5.21 0.73 0.64

Time series analysis:This ratio reflects whether the intuitions has roughly balanced the volatile liability it has issued with the money market assets it holds that could be sold quickly to cover this liabilities. If the ratio is 1, it means the bank is managing a perfect balance between short-term asset and liability. If the ratio less than 1, it means the amount of money market asset that it hold is not enough to cover up the volatile liabilities. From 2009 to 2012 the hot money ratio of both Jamuna Bank and SouthEast Bank has decreased which means that both banks ability to pay off the current obligations when they fall due has decreased. In 2009, the bank has 9.76% of Hot Money Ratio so it has enough amount of money market asset in jamuna bank. The ratio has gone up significantly than previous year. Jamuna Bank also holds better money market amount than its competitor Southeast Bank.In 2010 southeast bank holds better money market amount than its competitor Jamuna bank. In 2011 and 2012 both the companys ratio is less than 1 , it means the amount of money market asset that it hold is not enough to cover up the volatile liabilities.Cross sectional analysis:Southeast Bank is maintaining a good balance between its short term asset and liabilities without sacrificing the long term gains where as Jamuna Bank is maintaining too low hot money ratio.

Core Deposit RatioCore Deposit Ratio

Core Deposit Ratio= Core deposits/ Total deposits

2009201020112012

Jamuna Bank67.51%82.86%82.00%82.00%

South East Bank84.50%76.87%70.63%75.55%

Time series analysis:In case of Jamuna Bank, the Core deposit ratio increased from 2009 to 2010 which means that its liquidity requirements has gone down and therefore decreases the chances of withdrawal. From 2011 to 2012, the ratio remained constant.From 2009 to 2011 the Core deposit ratio of SouthEast Bank decreased which means that its liquidity requirements has gone up because customers are opening and depositing more in the current account than that in the savings account therefore increasing the chances of withdrawal.Cross sectional analysis:The core deposit ratio of SouthEast Bank has always been lower than that of Jamuna Bank for the period of the 3 years (2010 to 2012) which means that during this period SouthEast Bank was having lower chances of having liquidity crisis compared to Jamuna Bank.

Deposit composition ratioDeposit Composition Ratio

Deposit Composition Ratio= Demand Deposit/ Time deposit

2009201020112012

Jamuna Bank18.71%19.11%18.37%19.56%

South East Bank4.03%6.49%4.57%4.79%

Time series analysis:The numerator consists of the deposits which are withdrawn at any time and the denominator consists of those deposits which have a fixed maturity dates. The ratio indicates whether the funding base is stable to meet the current requirement or not. If the ratio goes up, it is likely to have a higher liquidity requirement However, the ratio of Jamuna Bank and SouthEast Bank has slightly increased from 2009 to 2010 which means that its liquidity requirements has gone up but again in 2011 the ratio declined which meant lower liquidity requirements and again up in 2012.Cross sectional analysis:The ratio for Jamuna Bank has been higher throughout the period and this means that Jamuna Banks liquidity requirements is higher than that of SouthEast Bank because Jamuna Bank has relatively greater amount of demand deposit compared to SouthEast Bank.6.6 Beta Calculation and Analysis

Using the stock prices of the years 2009, 2010, 2011, and 2012 the beta for Jamuna Bank and Southeast Bank has been calculated and the results are as follows:Company

Jamuna Bank0.996318631

Southeast Bank0.926195217

For calculating the beta the stock prices has been adjusted for the stock split of 1:2.

Jamuna Bank Limited: The beta for Jamuna Bank is 0.996318631, this means that the market return and Jamuna Banks return move in the same direction but by different magnitude. This indicates that when the market return increases by 1 unit the return of Jamuna Bank increases by an amount of 0.996318631unit. Again when the market return decreases by 1 unit, Jamuna Banks return decreases by 0.996318631unit. The beta is favorable one when the market return declines because at that time Jamuna Banks return decreases by a smaller amount thus reducing comparative loss. Then again when the when the market return increases the return of Jamuna Bank increases but by a comparatively smaller amount.

Southeast Bank: The beta for Southeast Bank is0.926195217, this means that the market return and Southeast Banks return move in the same direction but by different magnitude. This indicates that when the market return increases by 1 unit the return of Southeast Bank increases by an amount of 0.926195217unit. Again when the market return decreases by 1 unit, Southeast Banks return decreases by 0.926195217unit. The beta is favorable one when the market return declines because at that time Southeast Banks return decreases by a smaller amount thus reducing comparative loss. Then again when the when the market return increases the return of Southeast Bank increases but by a comparatively smaller amount.The beta of Southeast Bank is lower than that of Jamuna Bank which signifies that Southeast Banks return is comparatively/slightly less sensitive to the market return movement.6.7 Capital Asset Pricing Model (CAPM)

The risk-free rate is 10.5% and using this risk free, the required rate of return for both Jamuna Bank and Southeast Bank has been calculated and the results are as follows:CompanyRequired Rate of Return

Jamuna Bank0.107168107

Southeast Bank0.10701551

The table shows that for Jamuna Bank the expected return is 0.107168107 and that for Southeast Bank is 0.10701551, this indicates that investors expect comparatively same return when they invest in any of these two banks.6.8 Stock Valuation

Intrinsic Value of the Shares of Jamuna Bank and Southeast Bank

Southeast:Required rate of Return: 10.7016%Dividend of 2011(D0) = 1.499998485Internal Growth Rate= Retention Ratio*ROE= 0.358018255* 0.100252206=0.035892D1 =1.499998485*1.035892=1.5538Intrinsic value, Po = D1/Ke-g=1.5538/ (0.107016-0.035892)= TK. 21.8464Market Price: Tk. 31.1Market Price: Tk.735Jamuna:Required rate of Return: 10.7168%Dividend of 2011 (D0) = 1.2791627Internal Growth Rate= Retention Ratio*ROE= 0.3508423* 0.1826818=0.064085D1 =1.2791627*1.064085=1.06408Intrinsic value, Po = D1/Ke-g=1.06408/ (.107168-.064085)=24.69Market Price: Tk.34

Jamuna Bank: Intrinsic value of 2011 is lower than the market value of 2011, which means this stock is overpriced and potential investors should sell this stock.Southeast Bank: Intrinsic value of 2011 is lower than the market value of 2011, which means this stock is overpriced and potential investors should sell this stock otherwise they might incur losses.Therefore, stocks from both banks are overpriced and no future gains are possible by holding these stocks.6.8 Findings

The overall liquidity management Jamuna Bank is quite good and in certain cases it is better than SouthEast Bank thus having lower chances of liquidity crisis. Jamuna Bank is less aggressively depending on debt compared to Southeast Bank. So, Jamuna Bank is running lower chances of going bankrupt due to lower liquidity risk and solvency risk. In terms of efficiency ratios again, Jamuna Bank is performing better than SouthEast Bank. From the perspective of the profitability ratio Jamuna Bank was performing better than SouthEast Bank. In recent years, Southeast bank scores lower EPS than Jamuna. For market ratios Jamuna Bank was doing pretty well. So among the 2 companies Jamuna Bank seems to be a better option from the perspective of an investor considering the ratio analysis.According to the risk return analysis, Jamuna Bank assumes slightly more risk per unit of return in comparison to SouthEast Bank. Investors who are risk takers would go for Jamuna Bank over SouthEast Bank; investors who are more risk averse would prefer SouthEast Bank over Jamuna Bank.According to the beta analysis the beta for SouthEast Bank is slightly lower than that of Jamuna Bank so this means that SouthEast Bank is a bit less sensitive to the swings in the market. And, in the case where the stock market is highly volatile it is better to invest in SouthEast Bank because though it does not give comparatively higher returns when the market return has an upswing, it reduces the amount of loss when the market return declines. It would be more of a defensive strategy to invest in SouthEast Bank if an investor is given the option to invest either in SouthEast Bank or Jamuna Bank.If the Capital Asset Pricing Model is considered, both have almost the same required rate of return so decision is indifferent. According to stock valuation, both Jamuna Bank and SouthEast Bank stocks are overpriced and no possible future gains by holding the stocks.

7. RecommendationAs we have seen so far both the banks are doing moderately well in the banking industry. However, over the last two years performance was found to deteriorate or be inconsistent with the previous performances. Hence, some recommendations can be made. In terms of provision for doubtful accounts both the banks are going well with their strategies. However, in terms of capital adequacy the CAR is determined by the Bangladesh Bank. Banks should maintain adequate level of capital which is little more than the adequacy ratio to assure further protection and also to have a competitive edge over other banks. Over the last two years the performance of the banks has declined. All the banks should take some precautionary steps against such situations. In this case, level of capital, asset management strategy, liability management strategy may give the companies some indication regarding the future scenario and if they can be identified again the banks may have some competitive advantage over the rival banks of the banking industry. In terms of Jamuna Bank the Non Interest margin is negative meaning they dont generate much noninterest revenue, which includes fees, charges, service charges etc. so they can increase the fees for new and newer services offered by the bank. In terms of Southeast Bank, an inconsistency in their performance was found. Hence, they should take proper measures to achieve sustainable growth which will not fluctuate very often with the market state. Jamuna Bank can also pay attention to their employees and their productivities. Consistency is a good positive factor about them so managing employees may assure the consistency in growth of the company by increasing employee productivity and thus reducing cost. Also Jamuna Bank may reduce the amount of its demand deposits to have more interest sensitive balances. Above all the main goal should be to maximize the wealth of the shareholders.8. ConclusionTo conclude it can be said that, Banks are dealing with public funds. Since the origination of the Banking Industry both the owners of the banks and the government are working together to do well in this sector since it not only deals with public fund but the government is also highly relying in this sector. Being a part of this industry Jamuna Bank Limited and Southeast bank limited are contributing to the countrys economy. Hence, it is a great concern to survive in this industry since it is the industry that is highly leveraged unlike other industries. And to perform well every bank should analyze their performance on a regular basis. Risk should be taken when they are likely to give higher return. Asset should be managed in a way so that it can match the liabilities of the bank. Hence, this report has been prepared to give some small but important ideas about the two banks to have a comparative understanding about the two.

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