Financial Management of Private Commercial Bank in Bangladesh : An Empirical Study on Prime Bank Limited

This paper purposes to explore the financial management practices of private commercial bank in Bangladesh based on the information provided in the financial statements. For this, Prime Bank Limited (PBL), a reputed private commercial bank operating in Bangladesh, has been studied for 2010-14. This study finds that major contributor of PBL’s operating revenue is funded income, major areas of fund employment are Secured overdraft / Quard against TDR, Cash credit / Murabaha, and Loans (General) while the major fund source is Term deposits / Mudaraba term deposits. PBL has always maintained higher return from credit than the cost of funds for deposit. However, the amount of unclassified loan is decreasing over the years while classifieds are increasing. The treasury income of PBL is increasing over the years and maximum portion of the income comes from interest income on Government Securities. In case of liquidity gap, overall positive gap is observed. The repricing gaps model for interest risk shows cumulative negative gap of PBL over the years while financing surpluses over the years are observed. Based on the analysis, this study calls for special focus of PBLs’ management in the areas of operating performance, credit risk management, and asset quality management.

PENGARUH RISIKO LIKUIDITAS DAN LEVERAGE TERHADAP KINERJA BANK YANG TERDAFTAR DI BURSA EFEK INDONESIA PERIODE 2010--2015

This empirical study aims for examining the influence of liquidity risk on bank performance from the period 2010 to 2015 listed on Indonesia Stock Exchange. The measurement of liquidity risk will involve deposits or third-party fund, cash, and liquidity gap whereas the leverage will involve total debts to total assets as the independent variables. Meanwhile, the dependent variables of this study involve ROA and Tobin’s Q. This study was conducted under the purposive sampling method which involved 22 banks as samples. This study also used a panel data regression method and three testing models, including Common Effect Model, Fixed Effect Model, and Random Effect Model. The findings suggest a positive and significant influence of the third-party fund on ROA and Tobin’s Q. In contrast, the liquidity gap has a negative and significant influence on ROA and Tobin’s Q. Besides, the findings also suggest a positive and significant influence of cash on ROA and negatively significant on Tobin’s Q. The leverage has negative and significant influence on ROA and positively significant on Tobin’s Q.

Liquidity Gap Report for Stress Testing Structural Liquidity Risk

The need to focus on banks funding structure and stress testing in an explicit way arose as a consequence of the crisis of past decades. Liquidity risks usually occur as a consequence of other kinds of risks, hence analysing scenarios in a prospective manner is essential for the assessment if the bank can fulfill its obligations as they come due and if its funding costs are appropriate. The structural liquidity risk and the degree of the liquidity mismatch can be measured based on the liquidity gap analysis, where expected cash-in- and outflows, divided in different time-buckets are depicted. The liquidity gap report (LGR) shows if a liquidity shortcoming appears in the future and how high is the amount a bank would have to pay, if any hedging were not possible. This paper shows how to build a comprehensive LGR which is the base for both, liquidity and wealth risk evaluation. To improve the accuracy of the forecast, the counterbalancing capacity will be incorporated into the LGR. This tool is a methodological basis for quantitative and qualitative risk assessment and stress testing.

Measurement Method for Bank Liquidity Risk Based on EGARCH-VaR

EGARCH-VaR model is established for measure the liquidity risk. Meanwhile, liquidity gap is selected as the measurement index. It is tested that logarithmic difference time series of the bank liquidity gap have the characteristics of peak and fat tail distribution and high-order ARCH effect. By using the maximum likelihood estimation method for EGARCH model’s perturbation parameter estimation, the value of VaR is calculated and tested. Comparing with GARCH model, EGARCH-VaR model is more accurate and efficient.

Comparative study of Profitability and Liquidity analysis of Islamic Banks in Bangladesh

In this depressed world financial scenario, Islamic banking has emerged as a strong alternate financial system. Its growth is not restricted to the Muslim societies but Islamic financial products are also gaining popularity among non-Muslim countries. The objective of this paper is to scrutinize and compare the liquidity and profitability performances of five Islamic banks in Bangladesh in between the period 2005 and 2011. In order to scan the performances, this study highlights on different standards of liquidity and profitability measurements logical to Islamic philosophy; such as liquidity and profitability ratios, liquidity reserves by the banks, net liquidity gap, profit creation from different sectors of the banks, etc. Multiple correlations among liquidity and profitability ratios are shown here. The results of all these measurements are quite apparent. In particular, among all the independent variables, at 90% confidence level only investment to total assets is found to be significantly affecting Return on Assets (a measurement of profitability ratio) for Islami Bank Bangladesh Ltd., Shahjalal Islami Bank Ltd. and EXIM Bank Ltd., whereas with Return on Equity for only Shahjalal Islami Bank Ltd. However, multicollinearity has been found to be a great issue when considering liquidity impact on profitability for Islami Bank Bangladesh Ltd., EXIM Bank Ltd. and Social Islami Bank Ltd. Overall P-values suggest that at 95% confidence level liquidity model proves significant on ROA for Islami Bank Bangladesh Ltd. and Social Islami Bank Ltd., while on ROE for Islami Bank Bangladesh Ltd. and Shahjalal Islami Bank Ltd. JEL Classification Code: G21; G30; M20