Effects of Liquidity Management on Banks’ Performance & Profitability: A Study on the Private Commercial Banks of Dhaka Stock Exchange

1. Effects of Liquidity Management on
Banks’ Performance & Profitability: A
Study on the Private Commercial Banks
of Dhaka Stock Exchange
Noshin Tasneem –ID 1304005
Tania Islam –ID 1304051
Hossain Mohammed Omar Khayum – ID 1304055
Tazkeer Azeez Chaudhuri – ID 1304061
Salsabil Rahman – ID 1304115

2. Liquidity
Liquidity Crisis
Liquidity Management
Introduction

3. Problem
Statement
Objectives
Literature
Review

4. Methodology
Population and Sample
Data and Data Analysis

5. Population and Sample
The study focuses on the Private Commercial Banks (PCBs)
which are presently enlisted as the member in DSE (Dhaka
Stock Exchange). There are 30 such banks presently in the
population. The whole population is considered as the subject
of the study.

6. Data and Data Analysis
Cumulative Average Growth rate (CAGR) of various
variables:
CAGR= (Value of the parameter in the year 2010/ Value of
the parameter in the year 2001)1/10 -1
The performance of the banks has been measured by several
variables:
ROA, ROE and the prominent variables that have been
found to have significant impact on profitability. Among
these variables, there are several ratios

7. Analysis
Bank’s Profitability
ROE ROA

8. ROE shows how well a company
uses investments to generate
earnings growth
ROA
ROE
ROA gives an idea as to how
efficient management is at
using its assets to generate
earnings

9. Determinants of Bank
Performance
various studies that were
conducted to identify the main
determinants of bank
performance
different authors came with
different conclusions
This implies that the 9 determinants of bank
performance are many and they range from firm
specific to macro variables.

10. Determinants of Bank
Performance
Capital Adequacy
Credit Risk
Gross Domestic Product
Deposit Growth
Inflation
Liquidity

11. Liquidity on Bank’s
Performance
Some found a positive association; some
found a negative association while others
found both results and a few found no
relationship at all.

12. Profitability and Liquidity
Trends of PCBs
Equity
Total Asset
Deposits

13. Interpretation
Advance/Deposit, total asset, equity/total
asset are the determinants of profitability
(considering ROA and ROE).
It is expected that equity/total asset will
have positive and significant impact on
profitability.
Advance/Deposit ratio is found to have
negative impact on profitability

14. Limitations
Information from secondary data –
so may not be completely accurate
It was time consuming to
collect the data
The findings could be
vague and not to the point
Restrictions to different
important articles

15. Recommendations
The finance managers should pay attention to
the liquidity of commercial banks
A bank should clearly articulate a liquidity
risk tolerance
Senior management should develop a strategy,
policies and practices to manage liquidity
risk
Banks should maintain liquidity to meet
payment and settlement obligations on a
timely basis

16. Efficiency of
liquidity
Management leads to more
profitability
optimal
liquidity
position