Liquidity Risk and Profitability Analysis of Prime Bank Limited

Abstract

In the present-day, financial institutions like banks play a dynamic force in the economic development of a country and research, survey and many activities are so significant to enhance its working outcomes. A bank offers different types of financial resources and at the same time, act as a reliable institution for stakeholders. The purpose of this report is to find out the liquidity risk of Prime Bank Limited and how liquidity risk influence bank’s profitability as well as performance. All the data are collected from Prime Bank’s annual reports, notes, website and analyzed the 15years data (Year 2003-2017) by using ‘Pearson Correlation Matrix and Linear Multiple Regressions’. However, analysis based on, relationship between liquidity risk indicators (i.e. cash-in-hand balance, total deposits, liquidity-gap and NPLs) and profitability (ROAA). Here, liquidity risk indicators are independent variables and profitability (ROAA) indicator dependent variable. Pearson Correlation Matrix shows that, all the independent variables are negatively significant. In addition, Multiple Regressions shows that, cash-in-hand and liquidity-gap are positively related. On the other hand, total deposits and NPLs are negatively related, it is mentioned that NPLs is highly significant. Finally, Prime Bank Limited will do better if they manage cost-of-deposit or cost-of-fund properly as well as gives importance on economic condition of Bangladesh.