An Analysis of Financial Performance

An Analysis of
Financial Performance
of Citibank, N.A. in
Bangladesh
By Shah Kamal

ǡǤǤ

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ExecutiveSummary
The rationale behind this study is to explore performance of Citibank, N.A.

Bangladesh which is reflected on its financial statements and to provide some
comments to improve its banking business. This study is carried out by observing
several financial ratios, analyzing trends of various elements of Citibank’s past four
years performance results. I have used correlation and regression tools by applying
SPSS software package to determine the degree of relationship between variables with
their significance. A hypothesis is formulated to test whether there is a positive
correlation among the financial performance measured by return on assets & interest
income, and the independent variables (operating expense to net interest income,
operating income to total assets, and total assets).
The report is divided into the following four parts- Introduction, Company Overview,
Financial Performance Analysis, and Concluding Remarks. Introduction section deals
with some elementary issues regarding the background and the process of preparing
this report. The next section following the introduction helps to know the brief history
of Citigroup and Citibank, N.A. Bangladesh. Further, it focuses on the services
provided by Citibank, N.A. Bangladesh with its current organogram.
Financial performance analysis is the most imperative section which covers the focal
findings of the study. Financial highlights, common size financial statements, key
financial ratios, regression and trend analysis tools are applied to assess the financial
performance of the bank. Formulated hypothesis is tested in the last part of this section
using correlation matrix. Final section shows SWOT analysis of the selected bank
suggests some areas of perfection and draws a conclusion.
The study finds that almost all the performance measures show good performance on
the part of Citibank, N.A. Bangladesh. Bank’s riskiness measurements showed that
Citibank, N.A. Bangladesh is in a safe situation in terms of book value insolvency.
Regression results signify a significant impact of total deposit and total advance on net
profit independently. Trend analysis of total expense shows a significant increase of
total expense after the year 2005. Test of hypothesis provides evidence not to reject the
null hypothesis (i.e. there is a positive correlation among the financial performance
measured by return on assets & interest income, and the independent variables) for a
given level of significance. Most of all, Citibank, N.A. Bangladesh plays an important
role in mobilizing domestic resources with its stupendous operating performance.

TABLEOFCONTENTS

Chapter 1 INTRODUCTION
1.1 Introduction 1
1.2 Origin of the Report 2
1.3 Objectives of the Study 2
1.4 Literature Review 3
1.5 Hypothesis 5
1.6 Methodology 6
1.7 Limitations of the Study 7
Chapter 2 COMPANY OVERVIEW

2.1 The Background of Citigroup (Citicorp & Travellers Group) 8
2.2 Brief History of Citibank, N.A. in Bangladesh 9
2.3 Citibank, N.A. Bangladesh as a Branch of Citibank 10
2.4 Organizational Structure of Citibank, N.A. Bangladesh 11
2.5 Services of Citibank, N.A. Bangladesh 12
Chapter 3 FINANCIAL PERFORMANCE ANALYSIS

3.1 Financial Highlights 13
Total Income, Total Expenses & Net Profit 13
Total Deposits & Total Advances 13
Interest Income, Interest Expense & Net Interest Income 14
Total Assets & Shareholders’ Equity 15
3.2 Variable Definitions 16
3.3 Results & Discussion 17
3.3.1 Common Size Financial Statements 17
Common Size Income Statement 17
Common Size Balance Sheet 18
3.3.2 Ratio Analysis 19
Liquidity Measurement 19
Advances to Deposit 19
Liquid Asset to Liability 20
Advances to Liability 20
Efficiency Measurement 21
Cost to Income 21
Operating Expense to Assets 21
Operating Expense to Net Interest Income 22
Operating Expense to Operating Income 22
Provision for Loan Losses 23
Leverage Measurement 25
Debt to Equity 25
Debt to Assets 25
Solvency Measurement 26
Tier I Capital to Total Risk Weighted Assets 26
Profitability Measurement 27
Return on Assets 27
Return on Equity 28
Return on Deposit 29
Implicit Interest Rate Spread 29
Net Interest Margin 30
Noninterest Income to Assets 31
Noninterest Income to Operating Income 31
Asset Utilization Ratio 32
3.3.3 Measuring Bank Riskiness 33
3.3.4 Regression Analysis 34
Simple Regression 34
Regression equation of Net Profit on Total Deposits 34
Regression equation of Net Profit on Total Advances 35
Regression equation of Net Profit on ATD ratio 37
Regression equation of Net Profit on Total Assets 38
Regression equation of Operating Expense on Total Assets 39
Multiple Regression 40
Regression equation of Net Profit on
Total Deposits & Total Advances 41
Regression equation of Net Profit on
Total Advances & Total Assets 42
3.3.5 Trend Analysis 43
3.3.6 Testing Hypothesis 44
Chapter 4 CONCLUDING REMARKS

4.1 SWOT Analysis 46
4.2 Recommendations 47
4.3 Conclusion 49
Bibliography 50
APPENDIX
Tables I
AT-1 Selected financial elements with growth rates I
AT-2 Descriptive statistics of selected financial elements I
AT-3 Descriptive statistics of selected financial ratios II
AT-4 Common size Income Statement II
AT-5 Common size Balance Sheet III
Figures IV
AF-1 Trend analysis for total deposits IV
AF-2 Trend analysis for net interest income IV
AF-3 Trend analysis for total income V
AF-4 Trend analysis for total expense V
AF-5 Trend analysis for net profit VI
AF-6 Trend analysis for total loans & advances VI
AF-7 Trend analysis for total assets VII
AF-8 Trend analysis for shareholders’ equity VII
AF-9 Organogram of Citibank, N.A. Bangladesh VIII

HAPTER I
INTRODUCTION
An Analysis of Financial Performance of Citibank, N.A. in Bangladesh CHAPTER I

1.1 Introduction
In Bangladesh, the banking sector dominates the financial sector and it contributes to
economic growth by efficiently allocating investment funds among competing alternative
uses, by raising the rate of capital formation by separating the act of saving from the act of
investment, as well as by providing incentives for increased savings and investment1. The
overall performance of bank does not merely depend upon the banking industry itself but
also on the performance of economy wherever it is operating. The banking sector in
Bangladesh is disparate from the banking sector as seen in developed countries. This is
one of the foremost service sectors in Bangladesh economy.
However, a good number of foreign banks are operating in Bangladesh. Consistent with
(Engerer & Schrooten, 2004), the existence of foreign banks has been found to proffer at
least three key advantages:
x Improvement of financial intermediation in the domestic market by importing
financial institutions with a strong reputation from abroad and increasing reliance
in the banking sector,
x Importing apposite risk management and consequently reducing the transaction
costs within the financial sector, and
x Helping to launch a proper regulatory regime for the entire banking sector.
Moreover, economic planners of the country generally refer to a number of grounds in

favor of foreign banks operations in Bangladesh (stated in their paper Chowdhury, et. al;
1998). These rationales are as follows:
x Foreign banks are accredited with import of superior banking technology
developed in the industrially advanced countries at a huge cost on research and
development;
x Foreign banks are thought to be able to infuse new bank management skills and
training facilities, which can have a positive impact on the local banking practices;
x Foreign banks are expected to facilitate growth of a competitive atmosphere in the
banking sector, which is necessary for a sound financial system.

1
In their paper, (Khan, Ahmed & Latif, 1993) used this quotation as stated by (Drake, 1980; Howlader & Khan, 1988).
ͳ


Ever since foreign banks are implicated in our country in a greater way, evaluation of
performance of the foreign banks on the basis of recognized and significant facts may be
of some help to expose the true situation. Hence, this study is structured as follows: the
first chapter deals with some elementary issues regarding this paper and the next chapter
following the introduction gives some indication of the bank selected for the study. The
third chapter analyzes the results of financial statements and discusses the outcome. The
fourth and final chapter presents the main conclusions.
1.2 Origin of the Report
This report is an Internship Report prepared as a requirement for the completion of the
BBA program of University of Dhaka. The primary goal of internship is to provide an
on-the-job exposure to the student and an opportunity for translation of theoretical
conceptions in real life situation. Students are placed in enterprises, organizations,
research institutions as well as development projects. The program covers a period of three
months of organizational attachment.
After the completion of BBA program, I, Shah Kamal, was placed in Citibank, N.A.
Bangladesh for the internship program under the guidance of my faculty advisor Professor
Mr. Mustafizur Rahman. The duration of my organizational attachment was three months.
As a requirement for the completion of the program I needed to submit this report. I was
placed in the Cash Management Operations Unit of this bank, under the supervision of Mr.
Md. Saiful Malik, the head of Domestic Account Services of Citibank N.A. Bangladesh.
1.3 Objectives of the Study
The objectives of the paper are:

x Present a brief view of the Citigroup, Citibank and its operations (particularly in
Bangladesh) from the viewpoint of a neutral onlooker.
x To analyze the financial performance of Citibank, N.A. with the help of various
analytical models.
x To test the predetermined hypothesis relating to the financial performance of
Citibank, N.A. in Bangladesh.
ʹ


x To explore the financial trends of various elements with their significance as a
guide line for future development.
x Make a conclusion with some recommendations which can be used further to
analyze the financial performance of Citibank, N.A. in Bangladesh.
1.4 Literature Review
Generally, the financial performance of banks and other financial institutions has been
measured using a combination of financial ratios analysis, benchmarking, measuring
performance against budget or a mix of these methodologies2. (Tarawneh, 2006) showed
in his study that the bank with higher total capital, deposits, credits, or total assets does not
always mean that has better profitability performance.
However, there is a considerable debate whether foreign banks are really performing better
than the domestic banks in a country. In their paper, (Juan-Ramon,V.H., Randall, R. &
Williams, O., 2001) found that private foreign banks dominate the banking system in the
Eastern Caribbean Currency Union. Private foreign and private indigenous banks
exhibited similar distributions with respect to operating expenses but private foreign banks
were most profitable. (Sung-kyoo, H., Wikil, K. & Jong-Dae, J., 1995) also agreed with
this result by stating that net earnings of foreign banks operating in Korea in the past years
have been consistently increased. Further, (Engerer, H. & Schrooten, M., 2004) revealed
that in the EU accession countries on their way toward joining the European Monetary
Union (EMU), the share of foreign banks is extremely high. Usually, the presence of
foreign banks is considered to have a positive effect on financial sector development,
financial discipline, and institution building in emerging economies.
A comparative analysis of commercial banking performance in Bangladesh was

conducted by (Malek, May-June, 2005) who, for this purpose only, have taken
Nationalized Commercial Bank, Local Private Commercial Banks and Foreign
Commercial Banks operating during 1999 to 2002. He found that though majority of total
assets, total foreign business and total deposits are held by the local private and

2
Stated by (Tarawneh,M.,2006) as suggested by (Avkiran,1995).
͵


nationalized banks but foreign bank outperformed other in performance. Moreover, in
their paper, (Bayraktar & Wang, 2004) investigated firstly the impact of foreign bank
entry on the performance of domestic banks, and secondly how this relationship is affected
by the sequence of financial liberalization. Their data set is constructed from the
BANKSCOPE database including 30 developed and developing countries and covering
the period from 1995 to 2002. They observed that the degree of openness to foreign bank
entry varies a great deal which is not correlated with average income levels or with GDP
growth.
Furthermore, (Bayraktar & Wang, 2004) revealed that the sequence of financial
liberalization matters for the performance of domestic banking sector. After controlling for
macroeconomic variables and grouping countries by their sequence of liberalization,
foreign bank entry has significantly improved domestic bank competitiveness in countries
which liberalized their stock market first. In these countries, both profit and cost indicators
are negatively related to the share of foreign banks. Countries which liberalized their
capital account first seem to have benefited less from foreign bank entry as compared to
the other two sets of countries.
Predicting the profitability and efficiency of banks, searching for some key banking
characteristics is a relevant isssue. For this purpose, (Bashir, 2001) examined the
determinants of Islamic banks’ performance across eight Middle Eastern countries
between 1993 and 1998. The results indicate that high leverage and large loans to asset
ratios lead to higher profitability. The results also indicate that foreign-owned banks are
more profitable than their domestic counterparts. Everything remaining equal, there is
evidence that implicit and explicit taxes affect the bank performance measures negatively.
Moreover, favorable macroeconomic conditions impact performance measures positively.
Even stock markets are complementary to bank financing. (Grigorian & Manole, 2002)
suggested that foreign ownership with controlling power and enterprise restructuring
enhance commercial bank efficiency. Also, the effects of prudential tightening on the
efficiency of banks vary across different prudential norms, and consolidation is likely to
improve efficiency of banking operations.
Ͷ


In their paper, (Chowdhury, Anwar & Masum, 1998) revealed that almost all the
performance measures show good performance on the part of foreign banks. These
findings suggest that the Government decision to involve foreign banks in a greater way is
a right one and it will have a positive impact on the economy of the country. However,
(Khan, Ahmed & Latif, 1993) expressed that in Bangladesh a small number of foreign
banks with very slow rate of expansion are in operation and are providing large part of
capital in financing foreign trade and large scale activities, which reflects their risk
aversion psychology and profit oriented objective and lack of adequate concern to local
priorities i.e. the socio economic goals. But they concluded that despite all the criticism
foreign banks play important role in attracting international capital and in mobilizing
domestic resources.
1.5 Hypothesis
A test of hypothesis is a process that focuses on making a decision between two

hypotheses and the two hypotheses are formulated so that only one hypothesis can be true.
I have taken the following hypothesis regarding this study. (Tarawneh, 2006) also
hypothesized it. The result of this hypothesis testing is shown in Chapter III (section
3.3.6).
H0: There is a positive correlation among the financial performance measured
by ROA & interest income, and the independent variables (operating
expense to net interest income, operating income to total assets, and total
assets).
H1: There is no positive correlation among the financial performance measured
by ROA & interest income, and the independent variables (operating
expense to net interest income, operating income to total assets, and total
assets).
Null hypothesis (H0) is accepted if the coefficients of correlations of selected variables are
significant at 0.01 and/or 0.05 level of significance. Otherwise, alternative hypothesis (H1)
is accepted.
ͷ


1.6 Methodology
Data Sources
The data for this study was gathered from financial statements of Citibank, N.A. published
in selected Bangladeshi newspapers to accomplish the aforesaid research objectives. The
annual data for the selected bank during the year 2003 to 2006 are used in order to assess
the performance of the bank. Any progress of Citibank, N.A. thereafter is thus out of the
scope of the report. Help of other sources like relevant magazines, journals, newspapers,
websites, etc. have also been chosen whenever found necessary. This paper is based on
secondary data collection.
Analytical Techniques
In processing the data, various methods of conventional statistics were deployed.

Frequency distribution, measures of central tendency and dispersion, time series analysis,
growth rates, simple correlation and regression analysis were the main statistical
techniques used for revealing the innate characteristics of the phenomenon studied. Also
an effort was made to use multiple regression analysis and correlation matrix. In some
cases, calculated data are presented in graph to give the reader a better understanding of
the financial components.
This study uses the major banking activities and is comprised of total deposits, total
income, total expense, total loans & advances, shareholders’ equity, net interest income,
net profit, total assets, interest expense and interest income. Moreover, some selected key
financial ratios are used. Also, this study tries to explore any kind of variance according to
its different variables. Pearson correlation coefficient also used to investigate the
correlation between the variables at 5% level of significance according to the SPSS
software package. Statistical MINITAB software is used for the trend analysis.
͸


1.7 Limitations of the Study
There are numerous approaches to measure the performance of a bank. Calculation of

average cost and presenting it through curvature is one of the means to judge the
efficiency of commercial bank. Such curvature will demonstrate a relationship between
bank size and unit of production. The other most widely used methods are Data
Envelopment Analysis and the Stochastic Frontier Approach. Nevertheless, because of
data insufficiency neither of this method is trailed.
This study is also not without its limitations like any other study. One of its limitations
that it does not include all financial statements of Citibank, N.A. Bangladesh since it starts
producing financial statements in Bangladesh, because the policy of the company is not to
disclose those financial statements beyond the management of the company that were not
published in newspapers. Hence, financial data before 2003 were unavailable to the
researcher. There are other limitations that I have faced while preparing this report like the
time to prepare a report on such an important analytical topic was not sufficient and
knowledge of the makers was not sufficient to solve such an important issue.
͹

HAPTER II
COMPANY OVERVIEW
An Analysis of Financial Performance of Citibank, N.A. in Bangladesh CHAPTER II
2.1 The Background of Citigroup (Citicorp & Travelers Group)
Citicorp is the parent company of Citibank, which serves consumer and corporate
customers in over 100 countries around the world. Its Global Consumer Business is the
world’s largest issuer of credit cards with 60 million bank cards and provides financial
services through more than a thousand Citibank braches in over 40 countries. Through its
international network of offices, Citibank also provides funding and transaction services
for global corporations and local growth companies in emerging markets.
Travelers Group is a diversified, integrated financial services company engaged in

investment services, asset management, life insurance and property casualty insurance and
consumer lending. Its operating companies include Salomon Smith Barney, Salomon
Smith Barney Asset Management, travelers Life & Annuity, Primerica Financial Services,
Travelers Property Casualty Corp and Commercial Credit.
The merged company is named: Citigroup Inc. and it uses the trademark Travelers red
umbrella as its logo. The principal thrusts of the company are in traditional banking,
consumer finance, credit cards, investment banking, securities brokerage and asset
management, and property casualty and life insurance. The combined company serves
over 100 million customers in 104 countries around the world.
Figure 2.1: Logos of units operating under Citigroup

Source: Collected from official database of Citibank, N.A. Bangladesh
8
Citigroup is the first financial services company in the U.S. to bring together banking,
insurance, and investments under one umbrella. With the most diverse array of products
and the greatest distribution capacity of any financial firm in the world, our 275,000
employees manage 200 million customer accounts across six continents in more than 100
countries. The units operating under this red umbrella – signifying the unity under the
same parent group are listed in figure 2.1.
2.2 Brief history of Citibank, N.A. in Bangladesh
Citibank was formerly (1967–74) known as First National City Corporation (American
holding company incorporated in 1967) with its principal subsidiary the City Bank of New
York, National Association (a bank tracing to 1812). The name changed successively to
First National City Bank in 1968 and to Citibank, N.A. (i.e., National Association), in
1976.
Citibank, N.A. is a foreign private bank in Bangladesh commenced its banking operations
on 24 June 1995 after obtaining license from Bangladesh bank in January 1995. Before
starting full-fledged banking activity through the branch at Dhaka, it established a foreign
representative office here in 1987. The present branch of the bank is the upgraded and
transformed shape of the representative office. The much-awaited full-fledged branch was
finally opened on 25th June 1995 with a modest number of 17 employees. In 2000,
Citibank launched its 2nd branch in the port city of Chittagong to cater to the trade
requirements of corporate customers in Export Processing Zones (EPZ). In 2003, Citibank
Bangladesh opened its third branch in Gulshan. It further extended its presence by setting
up Offshore Banking Unit in Dhaka Export Processing Zone (DEPZ) in 2006 to facilitate
the export-oriented customers. Fourth branch of Citibank has been inaugurated in
December 2006 in Dhanmondi to extend the banking services to the customers clustered in
that area.
Citigroup Inc., a merger of Citicorp Inc. and Travelers Group Inc. formed on 8 October
1998, is a bank holding company under the laws of United States of America. It is the sole
shareholder of Citibank, N.A. and its head office in New York governs the businesses of
its Bangladesh branch. The bank commenced business in Bangladesh with a paid up
capital of Tk.204 million and total assets of Tk.809 million. The principal activities of the
9
Dhaka branch of Citibank, N.A. are to provide all kinds of commercial and merchant
banking services to its customers. Deposit mobilization of the bank during the initial six
months of its operations in Bangladesh amounted to Tk.541.89 million, which rose to
Tk.1,577 million in 2000.
2.3 Citibank, N.A. Bangladesh as a branch of Citibank
Citibank is virtually present throughout the entire globe with branches in more than 100
countries. For ease of operation Citibank broadly divides its market into two geographic
segments. GRB (Global Relationship Banking) includes all the markets in the developed
world, while EM (Emerging Market) indicates to markets in the developing world.
Naturally Bangladesh is one of 74 countries that fall under the head of Emerging Markets.
Emerging Market is again divided into three geographic segments: Latin America, Asia
Pacific and CEEMA (Central and Eastern Europe, Middle East and Africa). For various
historical reasons Middle East and South Asia was a single “cluster” within the CEEMA
group and was known as MESA. However only a few years back (in 1997 -98) South Asia
was given the status of a separate cluster still within CEEMA. This cluster includes India,
Bangladesh, Srilanka and Nepal. So, the position of Bangladesh in Citibank’s global
market can be shown as:
Figure 2.2: Position of Bangladesh in Citibank’s global market

10
2.4 Organizational Structure of Citibank, N.A. Bangladesh
The formal organogram of Citibank, N.A. Bangladesh has been presented in the appendix
figure 9 of this report. However, this organogram does not completely reflect the principle
on which the structure is based. Before we go into the details of department-by-department
description of the organization, it would helpful to get an overview of how these
departments are interlinked in terms of dealing with the customers. The entire organization
can be viewed as a three-tier entity encompassing the customers:
Figure 2.3: Three-Tier View of the Organizational Structure of Citibank N.A. Bangladesh
In the first tier, closest to the customer, there are the Relationship Managers (RMs). They
specialize in specific customers or groups of customers, and they are the primary point of
contact between the bank and the customer. They usually belong to either of the two
departments, which specialize in managing relationships: the Corporate Banking Group
(CBG) and the Financial Institutions (FI). The Treasury department also maintains direct
relationship with some specialized customers of treasury products.
In the second tier, there are product managers. They also interact with the customers, but
in doing so, the closely coordinate with the relationship managers. They may directly
interact with customers who are not designated to any specific RM or may interact with a
different level of managers when the customer is a corporate house. Often the RMs and
11
the Product Managers pay joint visits to customers or make joint presentations. While the
RMs are specialized in dealing with specific customers and know best what the needs of
the customers are, the product managers specialize in specific products and services and
better know the technical details of each product. Mostly the product managers belong to
departments like Cash Management and Treasury who deal with products of different
kinds. A few product managers also work in the operations department. It should be
mentioned that for core products like corporate loans or corresponding banking services,
there are no separate product managers, as the RMs themselves specialize in these
products.
In the third tier there are the support departments: the Technology and Operations, the HR,
Administration and Compliance, Credit Administration and the Financial Control Unit
(FCU). Technology and Operations is the largest department, headed by the SCOO
(Senior Country Operations Officer). Under this department there are the Data Center, The
FI, Treasury and Trade Operations, The Cash Management Operations and the Internal
Control Unit. Support departments usually don’t directly interact with the customers for
marketing purposes; rather they provide all type of supports to the product managers and
the relationship managers (RMs).
The organizational structure of Citibank is customized to best utilize the capabilities of

individuals. The relationships and personal network of the product managers and
relationship managers are used in the optimized way to market different offerings. Again
to make use of individual’s capabilities in multiple fields, it is often seen that the same
person is working in two different positions.
2.5 Services of Citibank, N.A. in Bangladesh
Operations of Citibank, N.A. encompass corporate bank, financial institutions, treasury

and e-business under the global corporate and investment banking umbrella. They provide
a comprehensive range of financial services including treasury management, transaction
services, foreign exchange and structured finance to corporate clients, governments, and
financial institutions. The bank has been offering its customers the highest standard of
financial services backed by sophisticated technology and innovative product solutions.
The bank also provides remittance services to the expatriate community largely in Middle
Eastern countries as well as across the world.
12

HAPTER III
FINANCIAL
PERFORMANCE
ANALYSIS
An Analysis of Financial Performance of Citibank, N.A. in Bangladesh CHAPTER III

3.1 Financial Highlights
Total Income, Total Expenses and Net Profit
During the four years (2003-2006) of study the total growth of total income, total expenses
and net profit of Citibank, N.A. Bangladesh were on average 80.3 percent, 30.9 percent
and 188.7 percent respectively (see appendix table 1). In appendix table 2, total income
ranges from Tk.1072.77 to Tk.2744.07 millions maintaining Tk.1719.21 millions on an
average with a standard deviation of Tk.746.02 millions per year. Total expenses ranges
from Tk.577.49 to Tk.1065.58 millions maintaining Tk.711.31 millions on an average
with a standard deviation of Tk.236.50 millions per year.
Moreover, net profit ranges from Tk.221.02 to Tk.881.69 millions maintaining Tk.533.73
millions on an average with a standard deviation of Tk.291.08 millions per year. Figure
3.1 shows a bar diagram of total income, total expenses and net profit for four years.
Figure 3.1: Bar Diagram of Total Income, Total Expenses and Net Profit.
Source: Data retrieved from Financial Statements of Citibank, N.A. for 2003 to 2006.
Total Deposits and Total Advances
During the four years of study the total growth of total deposits, total advances of
Citibank, N.A. Bangladesh were on average 79.6 percent, 33.9 percent respectively (see
appendix table 1). In appendix table 2, total deposits ranges from Tk.7222.55 to
Tk.21056.94 millions maintaining Tk.12543.47 millions on an average with a standard
13

deviation of Tk.6455.33 millions per year. Total advances ranges from Tk.5827.70 to
deviation of Tk.1607.29 millions per year. Figure 3.2 shows a bar diagram of total
deposits and total advances for four years.
Figure 3.2: Bar Diagram of Total Deposit and Total Advance.

Interest Income, Interest Expense and Net Interest Income
During the four years of study the total growth of interest income, interest expense and net
interest income of Citibank, N.A. Bangladesh were on average 70.3 percent, 12.5 percent
and 179.1 percent respectively (see appendix table 1). In appendix table 2, interest income
ranges from Tk.572.28 to Tk.1442.40 millions maintaining Tk.874.08 millions on an
average with a standard deviation of Tk.393.79 millions per year. Interest expense ranges
from Tk.304.20 to Tk.515.66 millions maintaining Tk.408.72 millions on an average with
a standard deviation of Tk.140.85 millions per year. Net interest income ranges from
Tk.198.62 to Tk.826.74 millions maintaining Tk.465.37 millions on an average with a
standard deviation of Tk.276.35 millions per year. Figure 3.3 shows a bar diagram of
interest income, interest expenses and net interest income for four years.
14

Figure 3.3: Bar Diagram of Interest Income, Interest Expense and Net Interest Income.
Total Assets and Shareholders’ Equity
During the four years of study the total growth of total assets and shareholders’ equity of
Citibank, N.A. Bangladesh were on average 77.7 percent, 126.1 percent respectively (see
appendix table 1). In appendix table 2, total assets ranges from Tk.10337.16 to
deviation of Tk.7402.63 millions per year. Shareholders’ equity ranges from Tk.1158.74
to Tk.3762.64 millions maintaining Tk.2254.34 millions on an average with a standard
deviation of Tk.1166.31 millions per year. Figure 3.4 shows a bar diagram of total assets
and shareholders’ equity for four years.
Figure 3.4: Bar Diagram of Total Assets and Shareholders’ Equity.

15

3.2 Variable Definitions
Table 3.1: Selected financial ratios with their definitions
Symbol Ratio Numerator Denominator Indicator

ATD Advances to Deposit Total Advances Total Deposits Liquidity
Advances to Liability
ATL Total Advances Total Liabilities Liquidity
Ratio
Total Operating
AUR Assets Utilization Ratio Total Assets Profitability
Income
Tier 1 Capital plus Total Risk Weighted Capital
CAR Capital Adequacy Ratio
Tier 2 Capital Assets Adequacy
CTI Cost to Income Total Cost Total Income Efficiency
DTA Debt to Assets Total Liabilities Total Assets Leverage
DTE Debt to Equity Total Liabilities Shareholders’ Equity Leverage
EM Equity Multiplier Total Assets Shareholders’ Equity Leverage
IDR Implicit Deposit Rate Interest Expense Total Deposits Profitability
Implicit Interest Rate
IIRS ILR-IDR Profitability
Spread
ILR Implicit Lending Rate Interest Income Total Advances Profitability
LATL Liquid Asset to Liability Liquid Assets Total Liabilities Liquidity
NIM Net Interest Margin Net Interest Income Total Assets Profitability
Noninterest Income to
NITA Noninterest Income Total Assets Profitability
Assets
Noninterest Income to Total Operating
NITOI Noninterest Income Profitability
Operating Income Income
Operating Expense to Total Operating
OETA Total Assets Efficiency
Assets Expense
Operating Expense to Total Operating
OETNII Net Interest Income Efficiency
Net Interest Income Expense
Operating Expense to Total Operating Total Operating
OETOI Efficiency
Operating Income Expense Income
Provision for Loan
PLL Provision for Loans Total Advances Efficiency
Losses
ROA Return On Assets Net Profit Total Assets Profitability
ROD Return On Deposit Net Profit Total Deposits Profitability
ROE Return On Equity Net Profit Shareholders’ Equity Profitability
RI Risk Index ROA + EM −1 σ ROA Risk
Tier 1 Capital to Total Total Risk Weighted
T1CTRWA Tier 1 Capital Solvency
Risk Weighted Assets Assets
Source: These ratios are retrieved from various papers, websites, etc. Their
respective sources are stated in section 3.3.2.
16

3.3 Results and Discussion
3.3.1 Common Size Financial Statements
Common Size Income Statement
In appendix table 4, there is a greater percentage of interest income in 2003 (81.86

percent) whereas 2005 has lower percentage of this item (56.01 percent). On an average,
the bank has maintained 68.87 percent of interest income. The percentage of interest
income is fluctuating over the years. There is a greater percentage of interest expense in
2003 (53.45 percent) whereas 2005 has lower percentage of this item (20.55 percent). On
an average, the bank has maintained 34.87 percent of interest expense. The percentage of
interest expense is decreasing over the years except it increases in 2006. There is a greater
percentage of net interest income in 2006 (38.84 percent) whereas 2003 has lower
percentage of this item (28.41 percent). On an average, the bank has maintained 34.01
percent of net interest income. The percentage of net interest income is increasing over the
years.
The other earnings of the bank came from income from investments made in the Treasury
Bills, commissions and other operating income. The latter constituted mainly of
consultancy fee. There is a greater percentage of noninterest income in 2003 (71.59
percent) whereas 2006 has lower percentage of this item (61.16 percent). On an average,
the bank has maintained 65.99 percent of noninterest income. The percentage of
noninterest income is decreasing over the years. There is a greater percentage of operating
expense in 2003 (29.16 percent) whereas 2005 has lower percentage of this item (20.49
percent). On an average, the bank has maintained 24.48 percent of operating expense. The
percentage of operating expense is decreasing over the years except it slightly increases in
2006.
Net profit is the final item of income statements. There is a greater percentage of net profit
in 2005 (43.75 percent) whereas 2003 has lower percentage of this item (31.61 percent).
On an average, the bank has maintained 39.49 percent of net profit. The percentage of net
profit is increasing over the years except it slightly decreases in 2006.
17

Common Size Balance Sheet
In the asset side of the balance sheet of Citibank N. A. Bangladesh (see appendix table 5),
cash in hand is increasing over the years except it decreases in 2006 (0.31 percent). The
highest and the lowest percentage of this item was 1.10 percent in 2005 and 0.31 percent
in 2006 respectively. On an average, the bank maintained 0.56 percent cash in hand per
year. Balance with Bangladesh Bank and Sonali bank is fluctuating over the years. The
highest and the lowest percentage of this item was 26.04 percent in 2005 and 11.72
percent in 2004 respectively. On an average, the bank maintained 19.38 percent balance
with Bangladesh Bank and Sonali bank per year.
Money at call and short notice is fluctuating over the years. The highest and the lowest
percentage of this item was 15.22 percent in 2004 and 0.28 percent in 2005 respectively.
On an average, the bank maintained 5.85 percent money at call and short notice per year.
Total investment is decreasing over the years except it increases in 2006 (15.06 percent).
The highest and the lowest percentage of this item was 15.06 percent in 2006 and 7.33
percent in 2005 respectively. On an average, the bank maintained 11.57 percent total
investments per year. Total loans & advance is decreasing over the years except it
increases in 2006 from 2004 (56.38 percent to 60.08 percent). The highest and the lowest
percentage of this item was 60.08 percent in 2004 and 36.51 percent in 2006 respectively.
On an average, the bank maintained 48.36 percent total loans & advances per year.
In the liabilities & equity side of the balance sheet of Citibank N. A. Bangladesh, deposits
& other account is fluctuating over the years. The highest and the lowest percentage of this
item was 80.55 percent in 2006 and 66.16 percent in 2004 respectively. On an average, the
bank maintained 75.13 percent deposits & other accounts per year. Total liabilities account
is decreasing over the years. The highest and the lowest percentage of this item was 88.79
percent in 2003 and 85.61 percent in 2006 respectively. On an average, the bank
maintained 86.53 percent total liabilities per year. Shareholders’ equity is increasing over
the years. The highest and the lowest percentage of this item was 14.39 percent in 2006
and 11.21 percent in 2003 respectively. On an average, the bank maintained 13.47 percent
shareholders’ equity per year.
18

3.3.2 Ratio Analysis
A bank’s balance sheet and income statement are valuable information sources for
identifying risk taking and assessing risk management effectiveness. Although the taka
amounts found on these statements provide valuable insights into the performance and
condition of a bank, financial analysts, bankers and bank supervisors typically use data
from them to develop financial ratios to evaluate bank performance. This is done to
provide perspective and facilitate making comparisons. There are literally hundreds of
useful financial ratios we can use to evaluate bank’s performance. However, in most
instances, directors only need a few basic ratios to identify fundamental performance
issues and help them formulate questions regarding any underlying problems and asking
management’s plans for correcting them. This section will discuss some selected ratios
from various perspectives.
Liquidity Measurement
Advances to Deposit
Advance to deposit (ATD) ratio is the most commonly used liquidity ratio of a bank.
(Misir, 1998) and (Hossain & Bhuiyan, 1990) have used this ratio for measuring liquidity
of a bank. Federal Reserve Bank of Dallas also uses this ratio. A low ratio of ATD
indicates excess liquidity, and potentially low profits, compared to other banks. A high
ATD ratio presents the risk that some loans may have to be sold at a loss to meet
depositors' claims. The ATD ratios of Citibank, N.A. Bangladesh are given below:
Year 2006 2005 2004 2003 AVG

ATD 45.32% 52.01% 90.81% 74.19% 65.58%
The bank’s ATD ratio increases from 2003 to 2004, after then it decreases till 2006. The
lowest ATD ratio was in 2006 which surely helps to lower risk of loan losses but it also
reduces profits in that period. On an average, the bank maintained 65.58 percent ATD
ratio which is moderate in terms of lesser risk and greater profits.
19

Liquid Asset to Liability
According to Bangladesh Banking companies Ordinance 1962, subject to amended time to

time, liquid assets of commercial banks consist of cash in hand, statutory reserves (with
Bangladesh Bank), balance with other banks, money at call and short-notice and approved
securities. This composition of liquid assets is known as structural allocation of liquid
assets. The Liquid Asset to Liability (LATL) ratio used in this study is measured by taking
the structural allocation of liquid assets. Misir (1998) have used this ratio for measuring
liquidity of a bank. The following table depicts the picture in this regard:
Year 2006 2005 2004 2003 AVG

LATL 66.97% 66.66% 42.50% 47.68% 55.95%
The LATL ratios of Citibank, N.A. Bangladesh slightly decreases from 2003 to 2004 but
after then it increases continuously till 2006. The focus of the bank is to maintain
sufficient liquidity rather than making higher profits with substantial risks. This is a
positive sign for the financial soundness. On an average the bank maintained LATL ratio
55.95 percent which is also a good sign.
Advances to Liability
Advances to Liability (ATL) ratio is another tool for measuring the liquidity of a bank.
Misir (1998) have used this ratio for measuring liquidity of a bank. ATD ratios of
Citibank, N.A. Bangladesh are given below:
Year 2006 2005 2004 2003 AVG

ATL 42.65% 47.15% 69.93% 63.49% 55.81%
The bank’s ATL ratio increases from 2003 to 2004, after then it decreases till 2006. The
highest ATL ratio was in 2004 (69.93 percent) and the lowest ATL ratio was in 2006
(42.65 percent). On an average, the bank maintained 55.81 percent ATL ratio which is
moderate in terms of lesser risk and greater profits.
20

Efficiency Measurement
Cost to Income
The Cost-to-Income (CTI) ratio is one of the most important performance indicators for
banks both locally and globally. The intention of a bank is to work hard towards driving
this ratio down significantly. (Peter, Raad, & Sinkey; 2004) have used this ratio for
measuring the efficiency of a bank. South African Reserve Bank also preferred to use this
ratio for such purposes. CTI ratios of Citibank, N.A. for selected years are given below:
Year 2006 2005 2004 2003 AVG

CTI 38.83% 34.04% 46.63% 53.83% 43.33%
The CTI ratios of Citibank, N.A. decreases from 2003 to 2004 (53.83 percent to 46.63
percent) and 2004 to 2005 (46.63 percent to 34.04 percent) which is a positive sign to me.
But it slightly increases in 2006 from 2005 (34.04 percent to 38.83 percent). On an
average the bank maintained 43.33 percent CTI ratio.
Operating Expense to Assets
Operating Expense to Assets (OETA) ratio is another important tool for measuring the
efficiency of a bank. The lesser the OETA ratio, the better for the company; and vice-
versa. (Juan-Ramon, Randall, & Williams; 2001) have used this ratio for measuring the
efficiency of a bank. (Public Bank Berhad, 2004) have also used this ratio in their
economic review. OETA ratios of Citibank, N.A. Bangladesh for selected years are given
below:
Year 2006 2005 2004 2003 AVG

OETA 1.72% 1.68% 2.32% 1.97% 1.92%
The bank’s OETA ratios look interesting to me because it consistently follows up-down-
up-down strategy. The lowest OETA ratio in sample years was 1.68 percent in 2005 and
the highest OETA ratio was 2.32 percent in 2004. On an average, the bank maintained
21

1.92 percent OETA ratio. According to CAMELS rating by Chowdhury S. K. (2007),
Operating Expense to Assets:
Criteria Indicator
9% or less Strong
11% to more than 9% Satisfactory
12% to more than 11% Fair
13% to less than 12% Marginal
Above 13% Unsatisfactory
The bank’s OETA ratios of selected years are less than 9 percent which is a strong
indicator according to Chowdhury (2007).
Operating Expense to Net Interest Income
In their paper, (Tarawneh, 2006) have used Operating Expense to Net Interest Income
(OETNII) ratio for measuring operational efficiency. It is also a good measure for
understanding the requirement of operating expense to generate the net interest income.
OETNII ratios of Citibank, N.A. for the selected years are depicted in the following table:
Year 2006 2005 2004 2003 AVG

OETNII 54.42% 57.78% 81.42% 102.62% 74.06%
Since 2003 (where the operating expense exceeds net interest income), the bank
continuously reduces OETNII ratio till 2006 (102.62 percent to 54.42 percent) which
indicates an outstanding performance and efficiency for maintaining the operation of the
bank. On an average, the bank maintained 74.06 percent OETNII ratio but I do feel that it
will decrease over the following years.
Operating Expense to Operating Income

In their economic review, (Public Bank Berhad, 2004) have used Operating Expense to
Operating Income (OETOI) ratio. It is an important tool for understanding the requirement
of operating expense to generate operating income and it only considers operating
22

activities other than non-operating activities. In that sense, its an effective tool for
measuring the efficiency. The selected bank’s OETOI ratios for four years are given
below:
Year 2006 2005 2004 2003 AVG

OETOI 21.14% 20.49% 27.12% 29.16% 24.48%
The highest OETOI ratio was 29.16 percent in 2003 and the lowest OETOI ratio was
20.49 percent in 2005. The bank successfully reduces this ratio from 2003 to 2005 but it
slightly increases in 2006 (21.14 percent). On an average, the bank maintained 24.48
percent OETOI ratio for four years. According to CAMELS rating by Chowdhury S. K.
(2007), Operating Expense to Operating Income:
Criteria Indicator
85% or below Strong
More than 85% to 90% Satisfactory
More than 90% to 95% Fair
More than 95% to 100% Marginal
Over 100% Unsatisfactory
The bank’s OETOI ratios of selected years are much less than 85 percent which is a strong
Provision for Loan Losses
The provision for loan losses (PFLL) is a charge to current earnings to build the
Allowance for Loan and Lease Losses (ALLL). Ideally this ratio should be low. The
ALLL is a general reserve kept by banks to absorb loan losses. The responsibility of a
director is to ensure that the loan loss reserve is sufficient to absorb probable loan losses.
When considering how much to take out of earnings to add to the ALLL, we should
consider factors that may affect loan losses. These include changing market conditions
where the bank operates, rising numbers of delinquent loans and significant loan growth.
23

All may bear on loan loss and the need to increase ALLL reserves. (Koch & MacDonald,
2006) clearly depicted the flow of PFLL shown in figure 3.5.
Figure 3.5: Flow of Provision for Loan Losses

Source: Koch, T. W., & MacDonald, S. S. (2006).
(Juan-Ramon, Randall, & Williams; 2001), (Peters, Raad & Sinkey; 2004), US Business
Reporter; and many more have used PFLL ratio as an effective tool for measuring the
operating efficiency of a bank. Citibank’s PFLL ratios are as follows:
Year 2006 2005 2004 2003 AVG

PFLL 0.27% 0.09% (0.31)% 0.74% 0.20%
The bank’s PFLL ratio was higher in 2003 (0.74 percent). In 2004, it has an excess
provision (0.31 percent) but PFLL ratio again increases from 2005 to 2006 (0.09 percent
to 0.27 percent). On an average, the bank maintained 0.20 percent PFLL ratio which is a
very positive sign to me.
24

Leverage Measurement
Debt to Equity
Debt to Equity (DTE) ratio is rarely used for measuring the financial performance of a
bank because usually the portion of debt of a bank is significantly higher than the portion
of its equities. My objective is to see whether this ratio is increasing over the years.
Though DTE ratio is a measure of leverage, it cannot be interpreted for the banking sector
in such a way which we usually do for several industries other than banking sector. DTE
ratios of Citibank, N.A. are shown in the following table.
Year 2006 2005 2004 2003 AVG

DTE 594.74% 605.41% 609.86% 792.10% 650.53%
The highest DTE ratio was in 2003 (792.10 percent) and the lowest DTE ratio was in 2006
(594.74 percent). Citibank’s DTE ratio is decreasing year by year which is a positive sign
to me. On an average, the bank maintained 650.53 percent DTE ratio.
Debt to Assets
Debt to Assets (DTA) is another tool for measuring the leverage of a company. The higher
the portion of DTA, the greater is the degree of risk because creditors must be satisfied
before owners in the event of bankruptcy. The lower ratio of DTA provides a cushion of
protection for the suppliers of debt. In Liabilities & Shareholders’ Equity side of a bank’s
balance sheet, it is very usual to see greater portion of debt than shareholders’ equity. So
DTA ratio of a bank can be interpreted in such a way that is only relevant for the banking
industry. The following table shows DTA ratios of Citibank, N.A. for four years.
Year 2006 2005 2004 2003 AVG

DTA 85.61% 85.82% 85.91% 88.79% 86.53%
The DTA ratio of Citibank is decreasing at a slower rate from 2003 to 2006. The highest
DTA ratio was 88.79 percent in 2003 and the lowest DTA ratio was 85.61 percent in 2006.
25

On an average, the bank maintained 86.53 percent DTA ratio. We can expect this ratio
will be much lower after 2006.
Solvency Measurement
Tier 1 Capital to Total Risk Weighted Assets
For most banks, Tier 1 Capital (Core Capital) generally consists of only common equity,
which is the sum of common stock, surplus and retained earnings. Because of this, the
leverage ratio gives an indication of the equity support for a bank’s assets. In other words,
this ratio is designed to indicate the amount of equity or capital support or assets that can
protect the bank from unexpected events. The smaller this support gets, the greater the
likelihood the bank may become insolvent. Thus, any significant decline in a bank’s
leverage ratio presents increased risk to the deposit insurance fund and raises regulatory
concern, especially if the bank becomes undercapitalized. Tier 1 Capital to Total Risk
Weighted Assets (T1CTRWA) ratios of Citibank, N.A. Bangladesh are as follows.
Year 2006 2005 2004 2003 AVG

T1CTRWA 30.34% 24.39% 23.45% 19.80% 24.50%
According to (Bangladesh Bank Annual Report, 2005), on an average the T1CTRWA

ratio for foreign commercial banks (FCB) was 20.33 percent taking eight years (1998 to
2005). In Citibank, N.A., such average is higher (24.50 percent) than that of FCBs. Also,
Citibank’s T1CTRWA ratio is increasing which is a very good sign for any bank.
According to CAMELS rating by Chowdhury S. K. (2007), Tier 1 Capital to Risk-
weighted Assets:
Criteria Indicator
More than 5% Strong
4.5% to 5% Satisfactory
3.5% to less than 4.5% Fair
3% to less than 3.5% Marginal
Below 3% Unsatisfactory
Citibank’s T1CTRWA ratios of selected years are much more than 5 percent which is a
strong indicator according to Chowdhury (2007).
26

Profitability Measurement
Profitability in the banking sector has been extensively examined in developed countries,
especially in North America and Europe. Evidence from these studies shows that bank
profitability depends on several factors (Peters, Raad & Sinkey, 2004). A model was
developed by (Koch & MacDonald, 2006) to measure bank performance which is given
below:
Figure 3.6: Bank Performance Model

Source: Koch, T. W., & MacDonald, S. S. (2006).
Return on Assets
Numerous researchers have used Return on Assets (ROA) ratio for measuring the
profitability of a bank. (Peters, Raad & Sinkey, 2004), (Wang, 2004), (Malek, 2005),
(Tarawneh, 2006); and many more have extensively used ROA ratio. The greater the ROA
ratio, the better for the bank. ROA ratios of Citibank, N.A. Bangladesh are shown below.
Year 2006 2005 2004 2003 AVG

ROA 3.37% 3.59% 3.52% 2.14% 3.16%
27

According to (Bangladesh Bank Annual Report, 2005), on an average the ROA ratio for
foreign commercial banks (FCB) was 3.13 percent taking eight years (1998 to 2005). In
Citibank, N.A., such average is higher (3.16 percent) than that of FCBs. Also, Citibank’s
ROA ratio is increasing which is a very good sign for any bank though it slightly
decreases in 2006 from 2005 (3.59 percent to 3.37 percent). According to CAMELS rating
by Chowdhury S. K. (2007), Return On Assets:
Criteria Indicator
1.3% or more Strong
0.8% to less than 1.3% Satisfactory
0.16% to less than 0.4% Marginal
Below 0.16% Unsatisfactory
Citibank’s ROA ratios of selected years are more than 1.3 percent which is a strong
Return on Equity
Numerous researchers have used Return on Equity (ROE) ratio for measuring the
profitability of a bank. (Peters, Raad & Sinkey, 2004), (Malek, 2005), (Tarawneh, 2006);
and many more have extensively used ROE ratio. The greater the ROE ratio, the better for
the bank. ROE ratios of Citibank, N.A. Bangladesh are shown below.
Year 2006 2005 2004 2003 AVG

ROE 23.43% 25.32% 25.00% 19.07% 23.21%
According to (Bangladesh Bank Annual Report, 2005), on an average the ROE ratio for
foreign commercial banks (FCB) was 28.13 percent taking eight years (1998 to 2005). In
Citibank, N.A., such average is slightly lower (23.21 percent) than that of FCBs. But the
average ROE ratio for FCBs is 23.75 percent taking six years (2000 to 2005). We can
consider the ROE ratio of FCBs for two years (1998 and 1999) as outliers because they are
much greater in comparison to other years (40.7 percent and 41.8 percent respectively). If
we exclude outliers, we can say Citibank’s average ROE ratio is higher than that of FCBs.
Also, Citibank’s ROE ratio is increasing which is a very good sign for any bank though it
slightly decreases in 2006 from 2005 (25.32 percent to 23.43 percent).
28

Return on Deposit
To most financial analysts, Return on Deposit (ROD) is one of the best measures of bank
profitability performance. This ratio reflects the bank management ability to utilize the
customers’ deposits in order to generate profits. (Tarawneh, 2006) have used this ratio as a
profitability measurement. ROD ratio for Citibank, N.A. Bangladesh is shown below.
Year 2006 2005 2004 2003 AVG

ROD 4.19% 4.61% 5.32% 2.81% 4.23%
Above table shows that ROD ratios over the years are positive and strong too. We can
clearly see that ROD ratios were fluctuating through the period. The highest ROD ratio
was 5.32 percent in 2004 and the lowest ROE ratio was 2.81 percent. The average of ROD
for Citibank is 4.23 percent during the period 2003-2006.
Implicit Interest Rate Spread
(Pak & Huh, 1995) and (Juan-Ramon, Randall & Williams; 2001) have used Implicit
Interest Rate Spread (IIRS) ratio in their paper for measuring the profitability of a bank.
IIRS can be found by deducting Implicit Deposit Rate (IDR) from Implicit Lending Rate
(ILR). ILR, IDR and IIRS ratios of Citibank, N.A. Bangladesh are as follows.
Year 2006 2005 2004 2003 AVG

ILR 15.11% 11.36% 9.95% 9.82% 11.56%
IDR 2.92% 2.17% 4.73% 4.76% 3.64%
IIRS 12.19% 9.19% 5.22% 5.06% 7.92%
On an average, Citibank, N.A. charges 11.56 percent interest for loans and pay 3.64
percent for deposits. ILR is significantly greater in 2006 (15.11 percent) and IDR is much
lower in 2005 (2.17 percent). The bank’s IIRS is increasing over the years at an increasing
rate which is strengthening the profitability of Citibank, N.A. Bangladesh. On an average,
the bank maintained 7.92 percent IIRS. According to CAMELS rating by Chowdhury S.
K. (2007), Net Spread:
29

Criteria Indicator
2% or more Strong
1.25% to less than 2% Satisfactory
0% to less than 0.5% Marginal
IIRS ratios of Citibank, N.A. Bangladesh for selected years are much more than 2 percent
which is a strong indicator according to Chowdhury (2007).
Net Interest Margin
Net interest income is the difference between interest income and interest expense. It is the
gross margin on a bank’s lending and investment activities. Analysts focus on Net Interest
Margin (NIM) ratio because small changes in a bank’s lending margin can translate into
large bottom line changes. The higher the ratio the cheaper the funding or the higher the
margin the bank is obtaining. A bank’s net interest margin is a key performance measure
that drives ROA. (Juan-Ramon, Randall & Williams; 2001), (Peters, Raad & Sinkey,
2004), (South African Reserve Bank, 2003); and many more have used this ratio. The
following data shows NIMs for Citibank, N.A. for four years.
Year 2006 2005 2004 2003 AVG

NIM 3.16% 2.91% 2.85% 1.92% 2.71%
NIM of Citibank is continuously increasing at an average rate of 2.71 percent per year.
The lowest NIM was 1.92 percent in 2003 and the highest NIM was 3.16 percent in 2006.
We can expect that this ratio will be increasing after 2006. According to CAMELS rating
by Chowdhury S. K. (2007), Net Interest Margin:
Criteria Indicator
5% or more Strong
4.5% to less than 5% Satisfactory
4% to less than 4.5% Fair
30

NIM ratios of Citibank, N.A. Bangladesh for selected years are less than 3 percent which
is an unsatisfactory indicator according to Chowdhury (2007) except in 2006 (3.16 percent
grouped as marginal indicator).
Noninterest Income to Assets
Noninterest Income to Assets (NITA) is an indicator of the operational performance. It

indicates the proportion of fees and other income in respect of total assets of banks. The
higher this ratio is the better. (Pak & Huh, 1995), (Juan-Ramon, Randall & Williams;
2001) have used this ratio as a measure of profitability indicator. NITA ratios of Citibank,
N.A. Bangladesh are shown below.
Year 2006 2005 2004 2003 AVG

NITA 4.98% 5.30% 5.70% 4.84% 5.21%
NITA of Citibank is continuously increasing at an average rate of 5.21 percent per year
but it slightly decreases in 2006 (4.98 percent). The lowest NITA was 4.84 percent in 2003
and the highest NITA was 5.70 percent in 2004. We can expect that this ratio will be
increasing after 2006.
Noninterest Income to Operating Income
Noninterest Income to Operating Income (NITOI) ratio is another indicator of the

operational performance. It indicates to what extent fees and other income represent a
percentage of operating income of banks. (South African Reserve Bank, 2003) have used
this ratio as a measure of profitability indicator. NITOI ratios of Citibank, N.A.
Bangladesh are shown below.
Year 2006 2005 2004 2003 AVG

NITOI 61.16% 64.54% 66.69% 71.59% 65.99%
31

NITOI of Citibank is continuously decreasing at an average rate of 65.99 percent per year.
The lowest NITOI was 61.16 percent in 2006 and the highest NITOI was 71.59 percent in
2003. We can say that Citibank, N.A. Bangladesh is not interested in increasing NITOI
ratios further.
Asset Utilization Ratio
In their paper, (Tarawneh, 2006) have used Asset Utilization Ratio (AUR). This ratio
indicates the proportion of total operating income to total assets. The higher this ratio is
the better. The following data shows AUR of Citibank, N.A. Bangladesh for four years.
Year 2006 2005 2004 2003 AVG

AUR 8.14% 8.20% 8.55% 6.76% 7.92%
AUR of Citibank is fluctuating at an average rate of 7.92 percent per year. The lowest
AUR was 6.76 percent in 2003 and the highest AUR was 8.55 percent in 2004. We can
expect this ratio will increase further. According to CAMELS rating by Chowdhury S. K.
(2007), Asset Utilization Ratio:
Criteria Indicator
13% or more Strong
11% to less than 13% Satisfactory
8% to less than 11% Fair
AURs of Citibank, N.A. Bangladesh falls into two categories according to CAMELS
rating. AUR in 2003 was marginal (6.73 percent) and AURs from 2004 to 2006 were fair
(8.55 percent, 8.20 percent and 8.14 percent respectively).
32

3.3.3 Measuring Bank Riskiness:
To investigate bank riskiness and the probability of book-value insolvency, I have used the
risk index as used by (Peters, Raad, & Sinkey; 2004) and suggested by Hannan and
Hanweck (stated in their paper Peters, Raad, & Sinkey; 2004). The empirical version of
the risk index (RI) is calculated as follows:
RI =
(ROA + EM ) −1
σ ROA
Where,
ROA = average return on assets,
-1
EM = the reciprocal of EM or the ratio of shareholders' equity to total assets, and
σROA = the standard deviation of ROA.
Hannan and Hanweck [1988] derive the upper bound probability of book value insolvency
2
(p) and show that it equals 1/[2(RI) ]. The RI and values of Citibank, N.A. Bangladesh
in 2006 are as follows:
RI =
(.03156 + 6.94738 ) = 25.65
−1
.00684
1
p=
[2(25.65) ] = .00076
2
The result shows that, there is a safety of Citibank, N.A. in Bangladesh because RI is not
significantly higher (25.65) and its associated probability of book-value insolvency is very
insignificant (.076 percent) in 2006. Another measure of risk I have used in this study is
the variability of ROA as measured by its standard deviation. Appendix table 3 shows that
the standard deviation is 0.683 with a mean standard error of 0.341, another indicator of
the reduced riskiness of Citibank, N.A. Bangladesh. The coefficient of variation (standard
deviation of ROA / mean ROA) is a relative measure of dispersion. This value is 21.64
percent over the sample period. Above all, all three measures of risk- the risk index, the
standard deviation of ROA, and the coefficient of variation of ROA, indicate that
Citibank, N.A. is safer in 2006.
33

3.3.4 Regression Analysis
Simple Regression
Simple linear regression analysis analyzes the linear relationship that exists between a
dependent variable and a single independent variable. Simple linear regression model is
described as:
y = β 0 + β1 x + ε
where:
y = Value of the dependent variable
x = Value of the independent variable
β0 = Population’s y-intercept
β1 = Slope of the population regression line
ε = Error term, or residual
Regression equation of Net Profit on Total Deposits
Table 3.4: Regression results of Net Profit & Total Deposits
Model Summary
Adjusted Std. Error of

Model R R Square R Square the Estimate
1 .957a .916 .873 103.58492
a. Predictors: (Constant), Total Deposits
Coefficientsa
Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) -7.459 127.227 -.059 .959
Total Deposits .043 .009 .957 4.657 .043
a. Dependent Variable: Net Profit
Source: Estimated regression results by SPSS software package using data from
financial statements of Citibank, N.A. Bangladesh for 2003 to 2006.
34

In table 3.4, the model summary table reports the strength of the relationship between
Total Deposits and Net Profit. R, the multiple correlation coefficient, is the linear
correlation between the observed and model-predicted values of Net Profit. Here it
indicates a high positive correlation (.957) between Total Deposits & Net Profit. R Square,
the coefficient of determination, is the squared value of the multiple correlation
coefficient. It shows that about 91.6 percent of Net Profit can be explained by Total
Deposits.
As a further measure of the strength of the model fit, I can compare the standard error of
the estimate in the model summary table to the standard deviation of Net Profit reported in
the descriptive statistics table (see appendix table 2). Without prior knowledge of Total
Deposits for the coming period, my best guess for Net Profit would be about Tk.533.73
millions, with a standard deviation of Tk.291.08 millions. With the linear regression
model, the error of my estimate is considerably lower, about 103.6.
Table 3.4 also shows the coefficients of the regression line. It states that the expected Net
Profit is equal to .043 * Total Deposits – 7.459. If the director of Citibank, N.A.
Bangladesh plans to deposit Tk. 24149.38 millions in 2007 according to trend equation for
total deposits (see appendix figure 1), the predicted net profit would be .043 * 24149.38 –
7.459 = 1030.96 millions taka. The model fit looks positive. The first section of the
coefficients table shows that there is a significant coefficient (.043) for Total Deposits,
indicating that this variable contribute to the model. To determine the relative importance
of the significant predictors, I can look at the standardized coefficients. Even though Total
Deposits has a small coefficient (.043), it actually contributes to the model because it has a
large absolute standardized coefficient (.957).
Regression equation of Net Profit on Total Advances
Table 3.5: Regression results of Net Profit & Total Advances
Model Summary

1 .963a .928 .892 95.72238
a. Predictors: (Constant), Total Advances
35

Coefficientsa
1 (Constant) -741.128 255.798 -2.897 .101
Total Advances .174 .034 .963 5.073 .037
Total Advances and Net Profit. R, the multiple correlation coefficient, is the linear
correlation between the observed and model-predicted values of Net Profit. Here it
indicates a high positive correlation (.963) between Total Deposits & Net Profit. R Square,
the coefficient of determination, is the squared value of the multiple correlation
coefficient. It shows that about 92.8 percent of Net Profit can be explained by Total
Advances.
Advances for the coming period, my best guess for Net Profit would be about Tk.533.73
Profit is equal to .174 * Total Advances – 741.128. If the director of Citibank, N.A.
Bangladesh plans to keep Advance Tk. 10280.78 millions in 2007 according to trend
equation for Total Advances (see appendix figure 6), the predicted Net Profit would be
.174 * 10280.78 – 741.128 = 1047.73 millions taka. The model fit looks positive. The first
section of the coefficients table shows that there is a significant coefficient (.037) for Total
Advances, indicating that this variable contribute to the model. To determine the relative
importance of the significant predictors, I can look at the standardized coefficients. Even
though Total Advances has a small coefficient (.174), it actually contributes to the model
because it has a large absolute standardized coefficient (.963).
36

Regression equation of Net Profit on ATD ratio
Table 3.6: Regression results of Net Profit & ATD ratio
Model Summary

1 .827 a .683 .525 200.59358
a. Predictors: (Constant), ATD
Coefficientsa
1 (Constant) 1290.272 377.685 3.416 .076
ATD -11.536 5.552 -.827 -2.078 .173
ATD ratio and Net Profit. R, the multiple correlation coefficient, is the linear correlation
between the observed and model-predicted values of Net Profit. Here it indicates a high
positive correlation (.827) between ATD ratio & Net Profit. R Square, the coefficient of
determination, is the squared value of the multiple correlation coefficient. It shows that
about 68.3 percent of Net Profit can be explained by ATD ratio.
the descriptive statistics table (see appendix table 2). Without prior knowledge of ATD
ratio for the coming period, my best guess for Net Profit would be about Tk.533.73
model, the error of my estimate is slightly lower, about 200.6.
Profit is equal to -11.536 * ATD ratio + 1290.272. If the director of Citibank, N.A.
Bangladesh plans to keep ATD ratio 65.58 percent on an average in 2007 according to
37

average ATD ratio (see appendix table 3-A), the predicted Net Profit would be -11.536 *
65.58 + 1290.272 = 533.74 millions taka. The first section of the coefficients table shows
that there is a non-significant coefficient (.173) for ATD ratio, indicating that this variable
does not contribute to the model.
Regression equation of Net Profit on Total Assets

Table 3.7: Regression results of Net Profit & Total Assets
Model Summary

1 .973a .947 .921 81.83065
a. Predictors: (Constant), Total Assets
Coefficientsa
1 (Constant) -92.370 112.142 -.824 .497
Total Assets .038 .006 .973 5.996 .027
Total Assets and Net Profit. R, the multiple correlation coefficient, is the linear correlation
between the observed and model-predicted values of Net Profit. Here it indicates a high
positive correlation (.973) between Total Assets & Net Profit. R Square, the coefficient of
determination, is the squared value of the multiple correlation coefficient. It shows that
about 94.7 percent of Net Profit can be explained by Total Assets.
Assets for the coming period, my best guess for Net Profit would be about Tk.533.73
38

Profit is equal to .038 * Total Assets – 92.37. If the director of Citibank, N.A. Bangladesh
plans to keep Total Assets Tk. 29994.29 millions in 2007 according to trend equation for
Total Assets (see appendix figure 7), the predicted Net Profit would be .038 * 29994.29 –
92.37 = 1047.41 millions taka.
The model fit looks positive. The first section of the coefficients table shows that there is a
significant coefficient (.027) for Total Assets, indicating that this variable contribute to the
model. To determine the relative importance of the significant predictors, I can look at the
standardized coefficients. Even though Total Assets has a small coefficient (.038), it
actually contributes to the model because it has a large absolute standardized coefficient
(.973).
Regression equation of Operating Expense on Total Assets
Table 3.8: Regression results of Operating Expenses & Total Assets
Model Summary

1 .977a .954 .931 27.93642
a. Predictors: (Constant), Total Assets
Coefficientsa
1 (Constant) 73.170 38.285 1.911 .196
Total Assets .014 .002 .977 6.436 .023
a. Dependent Variable: Operating Expenses
39

Total Assets and Operating Expenses. R, the multiple correlation coefficient, is the linear
correlation between the observed and model-predicted values of Operating Expenses. Here
it indicates a high positive correlation (.977) between Total Assets & Operating Expenses.
R Square, the coefficient of determination, is the squared value of the multiple correlation
coefficient. It shows that about 95.4 percent of Operating Expenses can be explained by
Total Assets.
the estimate in the model summary table to the standard deviation of Operating Expenses
manually calculated. Without prior knowledge of Total Assets for the coming period, my
best guess for Operating Expenses would be about Tk.302.60 millions, with a standard
deviation of Tk.106.29 millions. With the linear regression model, the error of my estimate
is considerably lower, about 27.9.
Table 3.8 also shows the coefficients of the regression line. It states that the expected
Operating Expenses is equal to .014 * Total Assets + 73.17. If the director of Citibank,
N.A. Bangladesh plans to keep Total Assets Tk. 29994.29 millions in 2007 according to
trend equation for Total Assets (see appendix figure 7), the predicted Operating Expenses
would be .014 * 29994.29 + 73.17 = 493.09 millions taka.
The model fit looks positive. The first section of the coefficients table shows that there is a
significant coefficient (.023) for Total Assets, indicating that this variable contribute to the
standardized coefficients. Even though Total Assets has a small coefficient (.014), it
actually contributes to the model because it has a large absolute standardized coefficient
(.977).
Multiple Regression
Multiple regression enables us to determine the simultaneous effect of several independent

variables on a dependent variable using the least squares principle. Multiple regression
model can be described as:
y = β 0 + β1 x1 + β 2 x2 + K + β k xk + ε
40

where:
β0 = Population’s regression constant
βj = Population’s regression coefficient for variable j; j=1, 2, … k
k = Number of independent variables
ε = Model error
Regression equation of Net Profit on Total Deposits & Total Advances
Table 3.9: Regression results of Net Profit, Total Deposits & Total Advances
Coefficientsa
1 (Constant) -454.936 717.051 -.634 .640
Total Deposits .018 .041 .404 .450 .731
Total Advances .104 .163 .574 .638 .638
In their paper, (Hossain & Bhuiyan, 1990) have used this multiple regression equation. In
table 3.9, the model summary table reports the strength of the relationship among Net
Profit on Total Deposits and Total Advances. The coefficients of the regression line states
that the expected Net Profit is equal to .104 * Total Advances + .018 Total Deposits –
454.936. If the director of Citibank, N.A. Bangladesh plans to Deposit Tk. 24149.38
millions in 2007 according to trend equation for total deposits (see appendix figure 1) and
Advances Tk. 10280.78 millions in 2007 according to trend equation for Total Advances
(see appendix figure 6), the predicted Net Profit would be .104 * 10280.78 + .018 *
24149.38 – 454.936 = 1048.95 millions taka.
The model fit does not look positive. The first section of the coefficients table shows that
there is a non-significant coefficient (.731) for Total Deposits and a non-significant
coefficient (.638) for Total Advances, indicating that these variables do not contribute to
the model. To determine the relative importance of the significant predictors, I can look at
the standardized coefficients. Total Advances has a greater coefficient (.104) and it
actually contributes more to the model because it has a larger absolute standardized
coefficient (.574).
41

Regression equation of Net Profit on Total Advances & Total Assets
Table 3.10: Regression results of Net Profit, Total Advances & Total Assets
Coefficientsa
1 (Constant) -286.128 727.799 -.393 .762
Total Advances .050 .185 .279 .272 .831
Total Assets .028 .040 .701 .685 .617
In table 3.10, the model summary table reports the strength of the relationship among Net
Profit on Total Assets and Total Advances. The coefficients of the regression line states
that the expected Net Profit is equal to .050 * Total Advances + .028 Total Deposits –
286.128. If the director of Citibank, N.A. Bangladesh plans to keep Advances Tk.
10280.78 millions in 2007 according to trend equation for Total Advances (see appendix
figure 6) and Total Assets Tk. 29994.29 millions in 2007 according to trend equation for
Total Assets (see appendix figure 7), the predicted Net Profit would be .050 * 10280.78 +
.028 * 29994.29 – 286.128 = 1067.75 millions taka.
The model fit does not look positive. The first section of the coefficients table shows that
there is a non-significant coefficient (.831) for Total Advances and a non-significant
coefficient (.617) for Total Assets, indicating that these variables do not contribute to the
standardized coefficients. Even though Total Assets has a smaller coefficient (.028), it
actually contributes more to the model because it has a larger absolute standardized
coefficient (.701).
42

3.3.5 Trend Analysis
Trend analysis for total deposits
According to MINITAB, fitted trend equation for total deposits:

(Yt = 937.575 + 4642.36*t) with a 20.93 percent mean absolute percentage error (MAPE)
and a mean absolute deviation (MAD) value 1912.39 (see appendix figure 1). The
forecasted total deposits in 2007 according to trend equation is Tk.24149.40 millions.
Trend analysis for net interest income
According to MINITAB, fitted trend equation for net interest income:

(Yt = -59.205 + 209.828*t) with a 13.57 percent MAPE and a MAD value 47.32 (see
appendix figure 2). The forecasted net interest income in 2007 according to trend equation
is Tk.989.94 millions.
Trend analysis for total income

According to MINITAB, fitted trend equation for total income:
(Yt = 338.35 + 552.343*t) with a 12.27 percent MAPE and a MAD value 189.21 (see
appendix figure 3). The forecasted total income in 2007 according to trend equation is
Tk.3100.07 millions.
Trend analysis for total expense

According to MINITAB, fitted trend equation for total expense:
appendix figure 4). The forecasted total expense in 2007 according to trend equation is
Trend analysis for net profit

According to MINITAB, fitted trend equation for net profit:
(Yt = -27.62 + 224.541*t) with a 5.52 percent MAPE and a MAD value 18.53 (see
appendix figure 5). The forecasted net profit in 2007 according to trend equation is
43

Trend analysis for total loans & advances
According to MINITAB, fitted trend equation for total loans & advances:
appendix figure 6). The forecasted total loans & advances in 2007 according to trend
equation is Tk.10280.80 millions.
Trend analysis for total assets
According to MINITAB, fitted trend equation for total assets:

(Yt = 2725.44 + 5453.77*t ) with a 14.41 percent MAPE and a MAD value 1878.95 (see
appendix figure 7). The forecasted total assets in 2007 according to trend equation is
Trend analysis for shareholders’ equity
According to MINITAB, fitted trend equation for shareholders’ equity:

appendix figure 8). The forecasted shareholders’ equity in 2007 according to trend
equation is Tk.4462.31 millions.
3.3.6 Testing Hypotheses
Financial performance is the dependent variable, and measured by return on assets (ROA)
and the interest income. The independent variables of this study are the following:
• The Bank Size measured by the total assets of the bank.
• Asset Management measured by asset utilization ratio (AUR)
• Operational Efficiency measured by the operating efficiency ratio (total operating
expenses divided by net interest income-OENII)
Based on analyzing the data for all variables of the study during the period 2003-2006,
correlations was calculated to examine the impact of independents variables on the
dependent variable.
44

Table 3.11: Correlation matrix of variables X1 to X6
Interest Total
ROA Income OETNII AUR Assets
ROA Pearson Correlation 1 .407 -.815 .975* .459
Sig. (2-tailed) . .593 .185 .025 .541
N 4 4 4 4 4
Interest Pearson Correlation .407 1 -.778 .346 .973*
Income Sig. (2-tailed) .593 . .222 .654 .027
N 4 4 4 4 4
OETNII Pearson Correlation -.815 -.778 1 -.701 -.863
Sig. (2-tailed) .185 .222 . .299 .137
N 4 4 4 4 4
AUR Pearson Correlation .975* .346 -.701 1 .353
Sig. (2-tailed) .025 .654 .299 . .647
N 4 4 4 4 4
Total Pearson Correlation .459 .973* -.863 .353 1
Assets Sig. (2-tailed) .541 .027 .137 .647 .
N 4 4 4 4 4
*. Correlation is significant at the 0.05 level (2-tailed).
Source: Correlation matrix by SPSS software package using data from financial
statements of Citibank, N.A. Bangladesh for 2003 to 2006.
In table 3.11, the result of correlations analysis between independent variables and
dependent variable showed that existence of strong positive correlation between financial
performance and the operational efficiency (+ .975). A moderate positive correlation
relationship (+ .459) exists between ROA and bank size (assets size). Moreover, there is
significant positive correlation between financial performance (interest income size) and
the independent variable total assets with correlation coefficient of +.973.
However, OENII is negatively correlated with independent variables with correlation

coefficients of -.815 for ROA and -.778 for interest income, but these are not significant at
0.05 level of significance. Based on these correlations, then the first hypothesis was
accepted. Thus, there is a positive relationship among return on assets, interest income,
asset management, operational efficiency, and the bank's size.
45

HAPTER IV
CONCLUDING REMARKS
An Analysis of Financial Performance of Citibank, N.A. in Bangladesh CHAPTER IV
4.1 SWOT Analysis
SWOT analysis is a tool for auditing an organization and its environment. It is the first
stage of planning and helps marketers to focus on key issues. SWOT stands for strengths,
weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors.
Opportunities and threats are external factors. The SWOT analysis headings provide a
good framework for reviewing strategy, position and direction of a company or business
proposition, or any other idea. SWOT analysis also works well in brainstorming meetings.
In SWOT, strengths and weaknesses are internal factors. For example, strength could be:
specialist marketing expertise; a new, innovative product or service; location of one’s
business; quality processes and procedures; any other aspect of one’s business that adds
value to his or her product or service. A weakness could be: lack of marketing expertise;
undifferentiated products or services; location of one’s business; poor quality goods or
services; damaged reputation; etc.
In SWOT, opportunities and threats are external factors. For example, an opportunity
could be: a developing market such as the Internet; mergers, joint ventures or strategic
alliances; moving into new market segments that offer improved profits; a new
international market; a market vacated by an ineffective competitor; etc. A threat could
be: a new competitor in one’s home market; price wars with competitors; a competitor has
a new, innovative product or service; competitors have superior access to channels of
distribution; taxation is introduced on one’s product or service; etc. The SWOT analysis
of Citibank, N.A. Bangladesh is given in table 4.1.
Table 4.1: SWOT Analysis of Citibank, N.A. Bangladesh
Strengths Weaknesses
• Global product strength / Success • Absence of consumer banking
Transfer • Inadequate physical presence (number
• Global strong image of Citibank of branches limited)
• Heightened customer / market • Not huge marketing campaign taken
awareness in hand to market the Citibank image
• Increased cluster support • Not long years of presence in this
• Senior local management with local country
market experience
• Strong control environment
46
Opportunities Threats
• Cheaper liability source to fund asset • Emergence of private banks with
growth by starting retail banking pooled ATMs/ EFTPOS, extended
• Growing need for alternate banking branch network, high rates and ex-
channel (ATMs, POS, Tele-banking foreign bankers
etc.) • Inadequate market information
• Growing upper middle class and • Large non-performing assets of
upper class population public sector banks
• New innovative products (already • Low Anti Money Laundering
tested in other markets) can be preparedness of banking sector
brought to Bangladesh • Low FX reserves with falling exports
• Overall improvement in the banking • Margin squeeze because of high
sector competition
• Unexplored Global Relationship • Product range needs to incorporate
Banking / Top Tier Local Corporates mobile banking, executive package,
market for credit and non-credit supplier financing, etc.
products • Slowdown in global economy
• Unexplored NFI / NGO segment • Weak legal structure
Source: This SWOT analysis is a subjective assessment of the researcher. It can be

used as guide but not a prescription.
4.2 Recommendations
It was really difficult for me to find out any significant negative sides of Citibank, N.A.
Bangladesh among its numerous positive sides in terms of efficiency and profitability.
However, there are few problems which need to be corrected by the management of the
bank. Some necessary steps are recommended below on the basis of collected data,
observation, expert staffs’ opinion and my knowledge and judgment.
• Citibank, N.A. Bangladesh should pay attention to increase their net interest
margin ratio since according to (Chowdhury, 2007), this margin is categorized as
unsatisfactory from 2003 to 2005. The bank may increase this ratio either by
increasing interest income by attracting more clients to invest or by decreasing
interest expense by making an optimum portfolio of investment which will reduce
the overall expense on interest; or both.

47
• Trend analysis of total expense from 2003 to 2006 reveals much more deviations
from the average total expense and this component is increasing at an increasing
rate. The management of Citibank, N.A. should focus on slow down the increasing
rate of total expense over the years by cutting down unnecessary costs without
impeding long-term objectives. They can implement activity-based costing (ABC)
to identify the appropriate cost drivers rather than traditional costing system.
• Although trend analysis shows upward sloping total loans & advances line but the
percentage of total loans & advances in terms of total assets are to some extent
falling over the years indicated by common size balance sheet. Since this element
has the highest percentage in the asset side of the company’s balance sheet,
management should look over this item carefully and should find out the way to
increase loans, cash credit & overdraft as well as bills purchased & discounted.
Besides the above recommendations regarding financial performance of Citibank, N.A.

Bangladesh, the following things should be considered for the well-being of the company:
• The decision making process is quite simple in Citibank N. A. Bangladesh. Any

decision that is taken by the MANCOM (Management Committee) goes down the
organization hierarchy. Which means the organization follows the top down
approach. In some cases bottom up approach is also followed. Innovative idea is
welcomed but that reaches to the Country head through a very formal process. So
sometimes the innovator is lost from the sight. To develop an intrapreneurial
culture is recommended.
• The entire department should be well informed regarding their goals and
objectives. It is essential to execute company objectives into individual target.
When the company launches a new product or signs a new agreement with another
company, these should be properly communicated to all employees because they
need to know what is happening within the company whether good or bad.
48
4.3 Conclusion
The findings in this paper cannot be taken as a conclusion and it will be wrong to end here
with such result. Because this study actually gives a simple picture and leaves room for
further study in different areas of banking functions such as product of banks, productivity
analysis, Data Envelopment Analysis (DEA) (for example, DEA used by Grigorian &
Manole, 2002), CAMELS rating (for example, used by Chowdhury, 2007), robust
estimation approach based on the competing efficient structure (ES) hypothesis (for
example, used by Katib, 2005), effect of commercial property price movements (for
example, used by Davis & Zhu, 2005), use of statistical tools (for example, parametric &
nonparametric techniques used by Pastor, Lovell & Tulkens, 2003) and more. The impact
of government policy on banking operation in Bangladesh is also not studied in this study
which must have significant impact on the performance of Citibank, N.A. in Bangladesh.
Further study also can be conducted on post and pre reforms of banking sector.
The significance of this study may be viewed from its involvement to fill an imperative
gap in literature. Explicitly, findings of this study can append to the existing body of the
literature, and can give out as a starting point on which future studies can be done. On the
realistic aspect, this study may possibly facilitate decision makers of Citibank, N.A.
Bangladesh to focus on the major banking activities that may amplify the bank ranking
and financial performance positions comparing with other banks. Such information should
assist the management of this bank in creating apposite financial strategies for attaining
the required planned financial performance.
However, the study provides bank managers with understanding of activities that would
improve their bank’s financial performance. The results of this study imply that it might
be necessary for the management of Citibank, N.A. Bangladesh to take all the required
decisions by consistently observing key financial ratios, financial trends and significant
deviations among various elements to enhance the financial positions of this bank.

49
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Some Evidence from Omani Commercial Banks. International Research Journal
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Horizonte (15 (1)), 73-93.
52

PPENDIX
An Analysis of Financial Performance of Citibank, N.A. in Bangladesh APPENDIX

APPENDIX
Tables
Appendix Table 1: Selected Financial Elements with Growth Rates
ELEMENTS1 2006 2005 2004 2003 AVG
Total Deposits 21056.94 14039.60 7222.55 7854.77
Growth 168.08% 78.74% (8.05)% 79.6%
Interest Income 1442.4 829.21 652.44 572.28
Growth 152.04% 44.90% 14.01% 70.3%
Net Interest Income 826.74 525.01 311.09 198.62
Growth 316.24% 164.33% 56.63% 179.1%
Total Income 2744.07 1784.76 1275.23 1072.77
Growth 155.79% 66.37% 18.87% 80.3%
Interest Expense 615.66 304.2 341.35 373.66
Growth 64.76% (18.59)% (8.65)% 12.5%
Total Expenses 1065.58 607.55 594.63 577.49
Growth 84.52% 5.21% 2.97% 30.9%
Net Profit 881.69 647.81 384.41 221.02
Growth 298.92% 193.10% 73.93% 188.7%
Total Loans & Advances 9543.51 7302.21 6558.77 5827.70
Growth 63.76% 25.30% 12.54% 33.9%
Total Assets 26140.48 18044.80 10917.04 10337.16
Growth 152.88% 74.56% 5.61% 77.7%
Shareholders' Equity 3762.64 2558.07 1537.91 1158.74
Growth 224.72% 120.76% 32.72% 126.1%
Source: Data retrieved from financial statements of Citibank, N.A. Bangladesh. Growth rates are
calculated taking 2003 as the base year.
Appendix Table 2: Descriptive Statistics of Selected Financial Elements2

Std.
N Minimum Maximum Mean Deviation
Total Deposits 4 7222.55 21056.94 12543.4650 6455.32529
Interest Income 4 572.28 1442.40 874.0825 393.78864
Net Interest Income 4 198.62 826.74 465.3650 276.34706
Total Income 4 1072.77 2744.07 1719.2075 746.02005
Interest Expense 4 304.20 615.66 408.7175 140.85041
Total Expenses 4 577.49 1065.58 711.3125 236.49904
Net Profit 4 221.02 881.69 533.7325 291.07526
Total Advances 4 5827.70 9543.51 7308.0475 1607.29298
Total Assets 4 10337.16 26140.48 16359.8700 7402.62916
Shareholders' Equity 4 1158.74 3762.64 2254.3400 1166.30929
Source: Calculated data from financial statements of Citibank, N.A. Bangladesh using SPSS

1
All figures expressed in millions taka and growth rates are expressed in percentage.
2
All figures expressed in millions taka except number of observations.

I


Appendix Table 3: Descriptive Statistics of Selected Financial Ratios3
Std.
N Minimum Maximum Mean Deviation
AUR 4 6.76 8.55 7.9125 .78932
DTE 4 594.74 792.10 650.5275 94.59467
DTA 4 85.61 88.79 86.5325 1.51024
CTI 4 34.04 53.83 43.3325 8.71195
OETA 4 1.68 2.32 1.9225 .29443
OETNII 4 54.42 102.62 74.0600 22.51378
OETOI 4 20.49 29.16 24.4775 4.31847
PFLL 4 -.31 .74 .1975 .43538
ATD 4 45.32 90.81 65.5825 20.85903
LATL 4 42.50 66.97 55.9525 12.72059
ATL 4 42.65 69.93 55.8050 12.99407
ECTRWA 4 19.80 30.34 24.4950 4.37074
IIRS 4 5.06 12.19 7.9150 3.43100
NIM 4 1.92 3.16 2.7100 .54351
NITA 4 4.84 5.70 5.2050 .38206
NITOI 4 61.16 71.59 65.9950 4.36964
ROA 4 2.14 3.59 3.1550 .68286
ROD 4 2.81 5.32 4.2325 1.05680
ROE 4 19.07 25.32 23.2050 2.87774
Source: Calculated data from financial statements of Citibank, N.A. Bangladesh using
SPSS software package.
Appendix Table 4: Common Size Income Statement
COMMON SIZE 2006 2005 2004 2003 AVG

INCOME STATEMENT
Interest Income 67.77% 56.01% 69.86% 81.86% 68.87%
Interest Expense (28.93) (20.55) (36.55) (53.45) (34.86)
Net Interest Income 38.84 35.46 33.31 28.41 34.01
Noninterest Income 61.16 64.54 66.69 71.59 65.99
Total Operating Income 100.00 100.00 100.00 100.00 100.00
Total Operating Expenses (21.14) (20.49) (27.12) (29.16) (24.48)
Profit Before Provision 78.86 79.51 72.88 70.84 75.52
Provision for Loan (1.20) (0.43) 2.17 (6.19) (1.41)
Total Profit Before Tax 77.67 79.08 75.05 64.65 74.11
Provision for Income Tax (36.24) (35.32) (33.89) (33.04) (34.62)
Net Profit 41.42 43.75 41.16 31.61 39.49
Total Operating Income
(Tk. in millions) 2128.41 1480.56 933.88 699.11 1310.49
Source: Data retrieved from financial statements of Citibank, N.A. Bangladesh.

3
All figures expressed in percentage except number of observations.

II


Appendix Table 5: Common Size Balance Sheet4
COMMON SIZE BALANCE SHEET 2006 2005 2004 2003 AVG
Cash in Hand 0.31% 1.10% 0.48% 0.34% 0.56%

Balance with B. Bank & Sonali Bank 18.48 26.04 11.72 21.30 19.38
Balance with Other Banks & Financial
23.77 22.50 (2.27) 1.37 11.34
Institutions
Money at Call & Short Notice 1.07 0.28 15.22 6.84 5.85
Investment in Government Securities 13.70 7.30 11.36 12.48 11.21
Other Investments 1.36 0.03 0.05 0.00 0.36
Total Investments5 15.06 7.33 11.41 12.48 11.57
Loans, Cash Credit & Overdraft 34.88 36.15 52.07 47.29 42.59
Bills Purchased & Discounted 1.63 4.32 8.01 9.09 5.76
Total Loans & Advances6 36.51 40.47 60.08 56.38 48.36
Fixed Assets 0.45 0.39 0.38 0.28 0.38
Other Assets 4.35 1.90 2.97 1.01 2.56
Non-banking Assets 0.00 0.00 0.00 0.00 0.00
TOTAL ASSETS 100.00 100.00 100.00 100.00 100.00
Borrowings from Other Banks,
0.02 1.27 11.08 7.68 5.01
Financial Institutions & Agents
Deposits & Other Accounts 80.55 77.80 66.16 75.99 75.13
Other Liabilities 5.04 6.75 8.67 5.13 6.39
TOTAL LIABILITIES 85.61 85.82 85.91 88.79 86.53
Fund deposited with B. Bank as capital 10.46 10.01 9.64 8.17 9.57
Profit & Loss account balance 3.93 4.17 4.44 3.04 3.90
SHAREHOLDERS’ EQUITY 14.39 14.18 14.09 11.21 13.47
TOTAL LIABILITIES &
100.00 100.00 100.00 100.00 100.00
SHAREHOLDERS' EQUITY
Total Assets (Tk. in millions) 26140.48 18044.80 10917.04 10337.16 16359.87
Source: Data retrieved from financial statements of Citibank, N.A. Bangladesh. Average values are
calculated.

4
All accounts are expressed in percentage except the last one Total Assets are expressed in millions taka.
5
The figures of Total Investments for four years are the sum of its above two items.
6
The figures of Total Loans & Advances for four years are the sum of its above two items.

III


Figures
Appendix Figure 1: Trend analysis for Total Deposits7
Source: Estimated trend equation by statistical software MINITAB using data

from Citibank, N.A.s financial statements.
Appendix Figure 2: Trend analysis for Net Interest Income8

from Citibank, N.A.’s financial statements.

7
1 to 5 in Time stands for year 2003 to 2007 respectively. Figures in Y-axis expressed in millions taka.
8

IV


Appendix Figure 3: Trend analysis for Total Income9

Appendix Figure 4: Trend analysis for Total Expense10


9
10

V


Appendix Figure 5: Trend analysis for Net Profit11

Appendix Figure 6: Trend analysis for Total Loans & Advances12


11
12

VI


Appendix Figure 7: Trend analysis for Total Assets13

Appendix Figure 8: Trend analysis for Shareholders’ Equity14


13
14

VII


Appendix Figure 9: Organogram of Citibank, N.A. Bangladesh
(Source: Official database of Citibank, N.A. Bangladesh)
ORGANOGRAM OF CITIBANK, N.A.
CORPORATE BANK

VIII


FINANCIAL INSTITUTIONS
TREASURY
GTS
PRIORITY BANKING

IX


RISK AND CREDIT ADMINISTRATION
OPERATIONS, TECHNOLOGY & FINANCIAL CONTROL
TECHNOLOGY
FINCON

X


ICU
GULSHAN OPS
CASH MANAGEMENT OPERATIONS

XI


FI & TREASURY OPERATIONS

XII

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An Analysis of Financial Performance

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An Analysis of

OTHER THAN IN RESPECT TO PUBLICLY AVAILABLE INFORMATION, THE

The rationale behind this study is to explore performance of Citibank, N.A.

Chapter 2 COMPANY OVERVIEW

Chapter 3 FINANCIAL PERFORMANCE ANALYSIS

Chapter 4 CONCLUDING REMARKS

Moreover, economic planners of the country generally refer to a number of grounds in

1.2 Origin of the Report

1.3 Objectives of the Study

The objectives of the paper are:

1.4 Literature Review

A comparative analysis of commercial banking performance in Bangladesh was

A test of hypothesis is a process that focuses on making a decision between two

In processing the data, various methods of conventional statistics were deployed.

There are numerous approaches to measure the performance of a bank. Calculation of

2.1 The Background of Citigroup (Citicorp & Travelers Group)

Travelers Group is a diversified, integrated financial services company engaged in

Figure 2.1: Logos of units operating under Citigroup

2.2 Brief history of Citibank, N.A. in Bangladesh

2.3 Citibank, N.A. Bangladesh as a branch of Citibank

Figure 2.2: Position of Bangladesh in Citibank’s global market

2.4 Organizational Structure of Citibank, N.A. Bangladesh

The organizational structure of Citibank is customized to best utilize the capabilities of

2.5 Services of Citibank, N.A. in Bangladesh

Operations of Citibank, N.A. encompass corporate bank, financial institutions, treasury

Total Income, Total Expenses and Net Profit

Total Deposits and Total Advances

Figure 3.2: Bar Diagram of Total Deposit and Total Advance.

Interest Income, Interest Expense and Net Interest Income

Total Assets and Shareholders’ Equity

Figure 3.4: Bar Diagram of Total Assets and Shareholders’ Equity.

Symbol Ratio Numerator Denominator Indicator

3.3.1 Common Size Financial Statements

Common Size Income Statement

In appendix table 4, there is a greater percentage of interest income in 2003 (81.86

Year 2006 2005 2004 2003 AVG

According to Bangladesh Banking companies Ordinance 1962, subject to amended time to

Year 2006 2005 2004 2003 AVG

Year 2006 2005 2004 2003 AVG

Year 2006 2005 2004 2003 AVG

Operating Expense to Assets

Year 2006 2005 2004 2003 AVG

Operating Expense to Net Interest Income

Year 2006 2005 2004 2003 AVG

Operating Expense to Operating Income

Year 2006 2005 2004 2003 AVG

Provision for Loan Losses

Figure 3.5: Flow of Provision for Loan Losses

Year 2006 2005 2004 2003 AVG

Year 2006 2005 2004 2003 AVG

Year 2006 2005 2004 2003 AVG

Tier 1 Capital to Total Risk Weighted Assets

Year 2006 2005 2004 2003 AVG

According to (Bangladesh Bank Annual Report, 2005), on an average the T1CTRWA

Figure 3.6: Bank Performance Model

Year 2006 2005 2004 2003 AVG

Year 2006 2005 2004 2003 AVG

Year 2006 2005 2004 2003 AVG

Implicit Interest Rate Spread

Year 2006 2005 2004 2003 AVG

Net Interest Margin

Year 2006 2005 2004 2003 AVG

Noninterest Income to Assets

Noninterest Income to Assets (NITA) is an indicator of the operational performance. It

Year 2006 2005 2004 2003 AVG

Noninterest Income to Operating Income

Noninterest Income to Operating Income (NITOI) ratio is another indicator of the