Foreign Exchange Activities and Profitability Analysis of the City Bank Limited

Abstract

The main objective of this report is to analyze the foreign exchange activities and profitability of the City bank limited. The report uses the three components of foreign exchange operations: imports, exports, and foreign remittances. The bank profitability has been measured by the return on assets and the return on common equity. The data for each variable over the period 2007 to 2019 are considered for the analysis and have been collected from the annual report of the City bank limited. To measure the relationship between foreign exchange operations and bank profitability, I applied multiple regression models. Before running multiple regression models, the normality test has been done for all variables and found that data are normally distributed. The multiple regression results indicate that there is a strong positive relationship between ROA and the import, export, and foreign remittance component of foreign exchange activities of the City bank. On the other hand, in the case of the ROE model, we found that. export and foreign remittance have a statistically positive relationship with ROE. Autocorrelation in error terms of the regression analysis has also been conducted and results indicate that ROA does not suffer from autocorrelation and the model is good to fit the data. But a serial correlation is present in the case of the ROE model. And therefore, this model has some problems to estimate the relationship between profitability and foreign exchange activities of the bank.