FIN3322 : Bank Management PDF

FIN3322: Bank Management
Group Assignment 2016
Analyzing Bank Performance
By
Department of Finance
2016

FIN3322: Bank Management
Group Assignment 2016
Analyzing Bank Performance -Hatton
National Bank & Commercial Bank
By
Department of Finance
This Report submitted to the Department of Finance,
Faculty of Management Studies and Commerce, University of Sri Jayewardenepura, as a
partial fulfillment of the requirement of FIN:3322 Bank Management course
2016

Declaration
We certify that this project report does not incorporate without acknowledgement, any material
previously submitted for a course or a degree in any university, and to the best of our knowledge
and belief it does not contain any material previously published or written by another person,
except where reference is made in the text.
No. CPM Number MC Number Name of the Member Signature
01 10473 70155 M.L.N. Premarathne
02 11966 73973 W.K.A. Wanniarachchi
03 12002 73388 C.A Halambaarachchi
04 12079 73264 K.P.M Kumari De Silva
05 12089 73551 G.C. Lakshika
06 12096 73649 P.I. Nilmini
0712225 73248 D.S.Dahanayake
08 12361 73775 R.A.V. Ransinghe
09 12386 73818 K.V.D.Sakunika
10 12521 73393 K.W.C. Harshima

Acknowledgment
First and foremost, we would like to thank our Bank Management lecturer Mr. Wickrama
Narayana and our tutorial coordinator Ms. Gayani Kaushalya for the guidance and the
understanding provided towards achieving this assignment as a successful one.
Then we take this opportunity to convey our sincere gratitude to our beloved parents for
being with us.
Last but not least, we should acknowledge our group members who work together to get
this assignment as a successful one.
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ContentsCommercial Bank of Ceylon PLC.........................................................................................................1
Products.............................................................................................................................................1
Achievements....................................................................................................................................2
Hatton National Bank PLC....................................................................................................................3
Produts...............................................................................................................................................3
Achievements....................................................................................................................................4
Ratio Analysis.......................................................................................................................................5
Ratio calculation of Hatton National Bank........................................................................................5
Ratio calculation of Commercial Bank..............................................................................................9
Common size Financial Statements.................................................................................................12
Interpretation of Ratios....................................................................................................................18
Interpretation of Common Size Statements.....................................................................................22
Due Pont Analysis...............................................................................................................................25
Commercial Bank............................................................................................................................25
Hatton National Bank......................................................................................................................26
CAMELS Framework..........................................................................................................................28
Capital Adequacy............................................................................................................................29
Asset Quality...................................................................................................................................29
Management Quality.......................................................................................................................31
Smart Schools’ initiative..................................................................................................................32
Earnings...........................................................................................................................................33
Liquidity..........................................................................................................................................34
Sensitivity Analysis.........................................................................................................................34
Risk Management Framework.............................................................................................................35
Credit Risk.......................................................................................................................................39
Market risk......................................................................................................................................44
Liquidity risk...................................................................................................................................45
Operational Risk..............................................................................................................................48
Reputational risk..............................................................................................................................50
Legal and Documentation Risk........................................................................................................50
Capital Adequacy Ratio.......................................................................................................................52
Liquidity Management........................................................................................................................54
Non-Performing Loans Management...................................................................................................56
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Table of Figures
Figure 1 Commercial Bank Logo 1
Figure 2 HNB Logo 3
Figure 3 Duepont Analysis for Commercial Bank 25
Figure 4 Duepont ANalysis for Commercial Bank 26
Figure 5 Sectoral Distribution of Loans -Commercial Bank 30
Figure 6 - Sectoral Distribution of Loans as a percentage 30
Figure 7 Risk Government Strucute for HNB 37
Figure 8 HNB's Risk Profile 38
Figure 9 Commercial Bank Financial Risk Management Framework 39
Figure 10 Non-performing Advances 40
Figure 11 Credit Risk Management Cycle 41
Figure 12 Loan Portfolio 44
Figure 13 HNB Liquidity Gap Analysis 46
Figure 14 Liquidity Ratios 47
Figure 15 Exposure to Liquidity Risk 47
Figure 16 Liquidity Ratios 48
Figure 17 Liquidity Reserves 48
Figure 18 Key Risk Indicators 50
Figure 19 NPA Ratio 57
iii

Executive Summary
Our report concentrates on analyzing the financial performance of two most private leading
commercial banks in Sri Lanka, namely commercial Bank of Ceylon PLC and Hatton
National Bank PLC.
Instead of comparing two time periods of the same commercial bank, in our report we have
comparatively analyzed the same time duration of two different award winning commercial
banks in Sri Lanka. Our analysis on commercial bank and HNB bank has covered the areas
of,
Financial position statement ratios and numbers
Comprehensive income statement ratios and numbers
Due Pont analysis for each bank
CAMELS Framework
Risk management framework of each bank
Capital adequacy calculation
Liquidity management
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Commercial Bank of Ceylon PLC.
Commercial Bank of Ceylon PLC is an award winning Commercial Bank in Sri Lanka with
205 branches and an ATM network of 625 ATMs. It established under the vision of,
"To be the most technologically advanced, innovative and customer friendly financial
services organization in Sri Lanka, poised for further expansion in South Asia".
The birth of the bank occurred in 1920s, during the pre-independence era and currently
expanded its operations to Bangladesh as well. The bank has won several awards including
‘The Strongest Bank in Sri Lanka in 2016’award by the Asian Banker and “The Most
Respected Bank in Sri Lanka – 2016” by LMD rankings. With the commitment of the bank
current Chairman Mr. K. G. D. D. Dheerasinghe and his team, the bank is moving forward
being a successful Commercial Bank in Sri Lanka.
Products
Savings
oRegular Savings Account
oSuper Saver Account
oRFC Savings Account
oPower Savings Account
oUdara Senior Citizens Account
oArunalu Children’s Savings Account
oIsuru Minor’s Savings Account
oDotCom Youth Savings Account
Deposits and Investments
oMillionaire Account
oMoney Market Accounts
oTreasury Bonds
oTreasury Bills
oFixed Deposits
oCall Deposits
oRFC Fixed Deposits
Current Accounts
oCurrent Accounts
oAchiever Current Accounts
Loans
oHome Loans
oForeign Currency Home Loans
oPersonal Loans
Figure 1 Commercial Bank Logo