Financial Performance Analysis of The City Bank Limited

Abstract

The objective of this report is to analyze, summarize and conclude, while making it as apparent as feasibly possible with the use of the available data, using ratio analyses across all five dimensions as well as a detailed DuPont Analysis, how The City Bank Limited is performing as one of the leading private commercial banks of Bangladesh. The data and their evaluations have been presented in both written explanations as well as graphical and tabular formats including flow charts. From 2017 to 2021, City Bank's financial performance over these five years have been examined. The primary ratios that exist under each of the 5 dimension of financial ratio analysis, namely the liquidity, solvency, activity, profitability and market value ratios have all been analyzed and compared over the course of the aforementioned 5 years in order to get insightful knowledge of the current financial condition of the bank. The City Bank Limited's liquidity position is adequate, with quick ratios, cash ratios, and statutory liquidity ratios consistently exceeding the benchmark of 1.00. The only drawback to this evaluation was the current ratio. The City Bank Limited's solvency status has also been determined to be satisfactory due to the company performing well in all three ratios pertaining to the dimension, with values exceeding the established benchmark. Only the elements related to the interest coverage ratio could receive more attention among the three ratios. The City Bank Limited has scored well in all three of the ratios that were used to evaluate its efficiency and activity. On the other hand, all five of the ratios used to calculate The City Bank Limited's profitability have had values that are essentially constant. Graphs for some of the ratios also showed upward moving trends for by the end of the latest years in comparison to the earlier years. And finally, out of the three ratios used to assess the Market Value of The City Bank Limited, the organization has shown positive performance for two of them. This trend is applicable to all of the market value ratios, only with the exception of the price-earnings ratio, which was demonstrated a disappointing decline over the years for The City Bank Limited. The two types of DuPont Analyses have demonstrated that although the ROE of the bank may have fluctuated over the years, the bank has been able to diagnose and determine the factors that were key and pivotal to it and thus, in the last years, the ROE saw an upward moving curve. City Bank has done an outstanding task in improving its EBIT Margin, lowering its Tax and Interest Burden as well as maximizing the full utilization of its assets to convert them into revenue generation ability. City Bank performed exceptionally as it was able to hold up its net profit margin even during the challenging times brought upon the economy by the emergence of the pandemic COVID-19. And the bank has managed to do so while lowering its financial leverage from 65% to 51% in the last two years. It can therefore, be conclusively claimed, that although the bank has had its ups and downs throughout these 5 years, the organization has made good progress from a holistic perspective towards the later years and thus, promises a better and brighter future to it shareholders.