Economic Value Added _Formated_.pdf

Bank Posikrama
Volume XXVII,No.1, March 2002 (pp. 46-63)
Economic Value Added as a Management Tool-
A Study on Selected Banking Companies
in Bangladesh
-Mohammad Saleh Jahur*
- Al Nahian Riyadh ∗
Abstract
Economic Value Added (EVA) is now being considered as an important management
tool across the corporate world for measuring and rewarding performance inside the
companies. Most of the companies measure performance with accounting profits which
are often seriously biased measures of true profitability. EVA is an unbiased measure of
true profitability. Unlike accounting profits, EVA indicates the value to what extent
created by management or agent for shareholders or principal. In Bangladesh, neither
corporate sector nor banking sector applies EVA for analyzing their performance. Both
the sectors use accounting profits for measuring and rewarding performance. The paper
aims at analyzing banks' performance through EVA. For this purpose, EVA has been
calculated taking certain assumptions as to the cost of equity and operational profit
adjustments. A rank correlation coefficient between EVA and different criteria indicates
that ranking under “Return on Asset”, “Net Profit”,” "Profit Per Employee” and “Deposit
Per Employee” have close resemblances to the ranking under EVA, whereas the ranking
under “Interest Income ”and “Spread” does not match with the ranking under EVA.
1. Introduction
There has been a paradigm shift in setting corporate objectives
and performance measurement. This shift happened with the
changes in corporate mindset and the advent of professional
management. It is now well-recognized fact that the aim of every
business entity should be to maximize shareholders wealth and all
the activities of firm should be directed to achieve this objective
(Bhattacharyya and Phani, 2000).
In the initial years of the advent of Joint Stock Companies,
shareholders were treated as merely investors in the companies’
fortunes and required to be paid simply dividend. Management did
not feel the need to think in terms of shareholders wealth and their
gains participating in the equity of the company. Now, professional
managers feel a need not only to satisfy shareholders and the Board of
Directors, but also other stakeholders including potential investors
∗ The authors are Associate Professor and Lecturer, Department of Finance, University of
Chittagong. The views expressed in this article are authors' own.

Jahur & Riyadh:Economic Value Added as a Management Tool 47
(Parasuraman, 2000). With the opening up of the economy and
liberalized trade policy as well as the improved facilities for equity
investment, the pressure is on the corporate sector to prove to their
stakeholders that indeed their wealth out of the investment has increased.
Thus issues involved are relating to performance measures.
Performance measures are used in evaluating managerial performance.
Performance evaluation is an important ingredient in motivating
managers for achieving target. Traditional performance measures like
accounting numbers used for the assessment of the managerial
performance are incomplete or imperfect representation of the economic
consequences of the manager’s actions (Felham, 1994). Because of this
imperfection of accounting profits as a measure of managerial
performance, some texts (Magee 1986, Anthony et el. 1992) discuss the
use of additional, often non-financial, performance measure. McDonald,
for example, evaluated its store managers' performance on the basis of
product quality, service cleanliness, sales volume, personal training, and
cost control (Kaplan and Atkinson, 1989). The present study has
examined EVA along with other measures as management tools for the
selected banking companies in Bangladesh.
2. Performance Measurement
Investors measure overall performance of a firm to decide whether
to invest in the firm or to continue with the firm or to quit from it. In
order to accomplish goal congruence, managements compensation
package are tied to their firms stock price performance as well as profit
earning performance or their accounting measure of performance
(Brealey and Myres, 2000). Management’s compensation tied to stock
returns aligns their interests with stockholders. As stock price reflects
investors expectations of manager’s future performance. Most of the
conventional performance measures don’t deal with problems of goal
congruence. Besides, these involve tradeoff between the precision in
measurement and its cost of measurement. Therefore, selection of right
measure is critical to the success of a firm.
Each metric of performance claims its superiority over others.
Performance of a firm is usually measured with reference to its past and current
records and performance of other firms with comparable risk profile. The

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Bank Parikrama
superiority of a performance metric over others lies in providing better
and true information to the investors and ability to measure the
performance without being biased towards any of the stakeholders or
particular class of participants (Bhattacharyya and Phani, 2000).
Accounting numbers are frequently used in evaluating
management performance. Discussions of performance evaluation in
management accounting texts often raise issues regarding the
incompleteness and imperfections of the accounting numbers that are
used as performance measures. For example, accounting profit is
described as a short-term financial measure that may induce managers to
ignore the future economic consequences of their current actions (See,
for example, Hongren and Foster, 1991, pp. 892-894, and Anthony et
al.1992, pp.649-651). More generally, management accounting texts
discuss various problems that arise in inducing managers to have goals
that are congruent with those of the firm’s owners (See, Kaplan and
Atkinson, 1989, pp.534-540). Accounting measures of performance
directly relate to the current net income of a business entity with equity,
total assets, net sales or similar surrogates of inputs or outputs. Examples
of such measures are Return on Equity (ROE), Return on Assets (ROA)
and Operating Profit Margin. Each of these indices measures a different
aspect of performance. ROE measures the performance from the
perspectives of the equity holders, ROA measures the asset productivity,
and operating profit margin reflects the margin generated by the firm
from its operation.
Textbooks based discussions demonstrate that none of these
accounting measures truly reflect the complete picture by themselves but
have to be seen in conjunction with other metrics. These measures are
also plagued by the firm level inconsistencies in the accounting figure as
well as the inconsistencies in the valuation method used by accountants
in the valuation of assets and liabilities and measurement of income of
the firm. The value of a firm is collection of assets, is computed by
discounting future stream of cash flows. The net present value (NPV) is
the surplus that the investment is expected to generate over the cost of
capital. Measures of periodical performance of a firm, which is the
collection of assets in place, should follow the same underlying
principles. Economic Value Added (EVA) is a performance measure that
captures the valuation principle.

Jahur & Riyadh:Economic Value Added as a Management Tool 49
3. Economic Value Added - The concept
EVA is a term developed and used by a US based consulting firm named
Stren Stewart & Co. This measure is its registered trademark 1 . It has
done much to popularize and implement this measure of residual income.
But the concept of residual income has been around for some time2 and
many companies that are not Srern-Stewart clients use this concept to
measure and reward manager’s performance (Brealey and Myers 2000).
EVA is a measure to assess the extent to which companies have
succeeded in achieving the objective of enhancing shareholders' wealth. (
Brewer et al.1999). Conceptually simple, EVA is a method of
ascertaining whether and to what extent a company has been able to
enhance shareholder value at the end of a particular year. A firm creates
value only if it can generate return higher than its cost of capital. Cost of
capital is the weighted average cost of capital. The rationale of EVA is
that shareholders have an expectation about what to expect from the
company at the initial period. This is based on well-known principles of
calculation of equity cost of capital which is given by a company.
However, EVA measures what shareholders get over and above cost of
equity capital.
4. Computation of Economic Value Added (EVA):
There are three methods of computing EVA or for judging whether
management of the company has increased shareholder value.
Method I
Under this method, EVA is computed based on net return on investment.
In this method, the EVA is calculated by multiplying spread between return on
investment (ROI) and weighted average cost of capital with capital employed.
i.e. EVA = (ROI – Weighted Average Cost of Capital) × Capital Employed
1 For details please see G. Bennett Stewart, The quest for value, New York, Harper Collins,
1991.
2 EVA is conceptually the same as the residual income measure long advocate by some
accounting scholars (See, for example, R. Anthoney “Accounting for the cost of equity”,
Harvard Business Review, 51, 1973 pp.88-102).

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Bank Parikrama
Where, ROI = Return on Investment
Adjusted Net Profit before Interest (After Tax)
Capital Employed (Equity + Debt)
× 100%
Weighted Average Cost of Capital (WACC)
E
D
= Ke + Kd
AT
( E + D)
( E + D)
Equity
= Cost of Equity Capital ×
+
Equity + Debt.
Cost of
Debt
Debt after Tax×
Equity + Debt
Method II
Under this method, EVA is computed based on residual income.
This method calculates a net income (taka) return to shareholders.
EVA is the difference between adjusted net profit before interest
(after tax) and “Product of WACC and Capital Employed”. i.e.
EVA= Adjusted Net Profit before Interest (After Tax) – Capital
Employed × WACC Where, Adjusted NPBI = Net Profit after
Interest and Tax + Interest. Here, interest is added back to NPAT.
This effectively adjusts the tax liability for the effect of leverage to
arrive at adjusted net profit before interest (after tax). The weighted
average cost of capital represents the totality of what the company has
to pay out to its lenders and shareholders.
The total capital employed regardless of whether it is financed by debt or
equity is multiplied by the WACC to ascertain what the company must
earn to meet its cost of capital obligations. The surplus is the EVA.

Jahur & Riyadh:Economic Value Added as a Management Tool 51
Method III
Under this method, EVA = Net Profit after Interest and Tax
(NPAIT) – Shareholders Fund × Cost of Equity. Here, the interest and
tax liabilities are deducted from the Operational Profit to arrive at
NPAIT. Cost of Equity is normally estimated by using Capital Asset
Pricing Model (CAPM). That estimates return commensurate with the
riskiness of the assets.
Technically speaking, EVA is nothing but the residual income after
factoring the cost of capital into operating profit after tax. Other
consulting firms have their own versions of residual income. Mckinsey
& Company uses economic profit (EP), defined as invested capital
multiplied by the spread between return on investment and the cost of
capital. (Brealey and Myers, 2000, p.328). This is another expression of
residual income or EVA.
5. Definitions and Formulae of other performance measures
Return on Asset (ROA): It is one of the conventional ratios for
measuring managerial efficiency of a bank. It indicates how capably the
management of the bank has been converting the banks asset into net
income and computed in this process:
Return on Asset (ROA) =
Net Income after Tax
Total Asset
In this study net income is taken from the respective Banks Profit & Loss
accounts and total asset figure is taken from respective Balance Sheet.
Interest Income: Interest Income is the total interest earned on
loans and advances. In this analysis we arrived the total interest income
figure by sum up interest received for money at call, interest received
against Investment, and interest received for loans & advances.
Spread: The difference between the interest income and interest
expenses is known as Spread.
Spread = Total Interest Income- Total Interest Expenditure
Net Profit/Income: Net profit refers to the excess of income over
expenditure in a given period of time. It is a result of two functions: Revenue
function and Cost function. The revenue function shows the total income of a

52
Bank Parikrama
bank earned through its activities while cost functions show the total
expenditure incurred in a given year. It is an absolute measure of
performance of a bank. In this analysis net profit means net profit after
provision for taxation and depreciation.
Profit Per Employee: This ratio shows income generation
capacity of each employee in the Bank.
Formula for computing this ratio is:
Net Profit
Profit Per Employee=
Total Number of Employee
Deposit Per Employee: It shows the amount of deposit mobilized by each
employee of the Bank. The survival of a Banks totally depends upon the deposit
mobilization in a highly competitive and rapidly changing environment.
Total Deposit
Deposit Per Employee=
Total Number of Employees
6. Objectives of the Study
The principal objective of the study is to evaluate the performance
of selected Banking Companies in Bangladesh through the performance
measure of EVA. To accomplish this objective, the study covers the
following specific objectives:
1. To evaluate the performance of the selected Banking Companies in
Bangladesh through performance measure of EVA.
2. To carry out a comparative study of EVA of selected banking
companies with other parameters used for judging the performance
of Banks.
7. Hypotheses of the Study
Following hypotheses have been tested against the objectives of the
present study.
H o : There is no significant correlation between the various performance
measures such as EVA with ROA, Interest Income, Spread, Net Profit,
Profit Per Employee or Deposit Per Employee.

Jahur & Riyadh:Economic Value Added as a Management Tool 53
H a : There is a significant correlation between the various performance
measures such as EVA with ROA, Interest Income, Spread, Net Profit,
Profit Per Employee or Deposit Per Employee.
8. Scope of the Study
The study has covered 04(four) Nationalized Commercial Banks,
18 (eighteen) Private Commercial Banks, 12 (twelve) Foreign
Commercial Banks and 05 (five) Specialized Banks in order to make the
study more representative. The study has covered a period of 2001.
9. Methodology of the Study
The Study is both theoretical and empirical one. In order to prepare
theoretical framework of the Study, existing available textbooks, research
articles, journals, and magazines had been consulted. The study is primarily
based on secondary data. Secondary data used in the study include Chairman’s
Report, Income Statement, and Balance Sheet of the selected 39 Banks
covering the period 2001.
The Secondary data have been tabulated and analyzed manually.
EVA of all Selected Banks has been computed on the basis of method III
(net of interest and tax). This is because the concept of leverage as
applicable to banking company is different from that of any other type of
company. Banks are managed on the basis of their assets & liabilities,
and work on the principle of trying to earn more on their deployments
than what they pay for their funds. Method I and II would apply in
situation where leverage is priced or alternative level of leverage is
applicable. Hence, Method III had been followed in this paper.
The ranking of the 39 banks selected as sample has been done on the
basis of the following
separate parameters:
1. Return on Assets;
2. Deposits Per Employee;
3. Net Profit
4. Net Profit Per Employee
5. Interest Income
6. Spread; and
7. EVA

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Bank Parikrama
Ranking of all above measures are given separately. In order to test
the hypotheses of the study, rank correlation between EVA and other
measures of performance have been used. The formula is as follows:
r k
6 ∑ d
= 1 −
2
n
2
( n − 1)
Where, r k = Rank correlation co-efficient
d = the difference between the two ranks
n = number of observations
Then, appropriate test has been used/employed to know whether
correlation coefficients between measures are significant or not.
Findings and Their Analysis
While a lot of study has been made into the use and relevance of
EVA for the Corporate Sector across the world, very little attention has
been given hitherto to its applicability to the banking sector. The present
study on EVA as performance measure of 39 banks operating in
Bangladesh is of first kind. It must also be noted that the banking sector
has not so far addressed itself to the need for analyzing its performance
from the angle of shareholders value addition. One reason for this could
be the fact that EVA itself is a relatively new measure. With the
liberalized banking and financial environment, more banks seem to have
approached the public for subscription of shares in their companies and
over a period of time, they ought to be in a position to reward the
shareholders adequately, failing which, their standing will be adversely
affected. The study of EVA for the banking sector has been compared
with other parameters used for judging the performance of banks.
11. Measurement of Performance of the Selected Banking Companies
The present study has measured performance of 39 banks
operating in Bangladesh through measures of EVA and other parameters
such as Net Profit, ROA, Interest Income, Deposit Per Employee, and
Profit Per Employee. The computation of Cost of Capital, performance
measures of banks, and ranking of the select banks on the basis of EVA
and others measures have been exhibited in the Appendix 1-4
respectively. Table 1 shows the banks that have fallen into ranks ranges
from one to ten on the basis of EVA and others measures.

Jahur & Riyadh:Economic Value Added as a Management Tool 55
Table: 1 Ranking of the Select Banks Based on EVA and
others Performance Measures
Ranking EVA Net Profit ROA Interest
Income
Deposit
Per
Employee
Profit Per
Employee
Rank-1 G B UBL SBI SB CITI HANVIT
Rank-2 UBL GB HANVIT JB GB GB
Rank-3 SCB SCB SHAMIL RB AMEX CITI
Rank-4 PUBALI PUBALI CAI AGRANI SCB SCB
Rank-5 NBL NBL PRIME BKB MBL SBI
Rank-6 UCBL PRIME UBL PUBALI DUTCH AMEX
Rank-7 DUTCH EBL GB SCB DBL SHAMIL
Rank-8 NCCBL BSB EBL GB HANVIT EBL
Rank-9 CITY SB CITI IBBL SIBL MBL
Rank-10 SOUTH JB BASIC UBL EBL DUTCH
GB- Grindlays Bank NBL-National Bank Limited RB-Rupali Bank
JB-Janata Bank AGRANI-Agrani Bank BKB- Bangladesh Krishi Bank
SCB- Standard Chartered Bank SB-Sonali Bank IBBL-Islami Bank Bangladesh Limited
PUBALI-Pubali Bank AMEX-American Express Bank CITY- The City Bank Ltd.
CAI-Credit Agricole Indosuez MBL-Mercantile Bank Ltd. SHAMIL- ShamilIslamic Bank of Bahrain
EBL-Eastern Bank Limited UBL- Uttara Bank Ltd. SBI-State Bank of India
BASIC-Bank of Small Industies and Cottage DUTCH-Dutch Bangla Bank Ltd. HANVIT- Hanvit Bank
DBL-Dhaka Bank Limited SIBL- Social Investment Bank CITI- Citi Bank NA
A perusal of Table 1 has revealed that performance of selected
banks in respect of ranking differ from measure to measure. Table -1 shows
that based on EVA, Grindlays Bank, Uttara Bank Limited, and Standard
Chartered Bank have ranked first, second and third, respectively. Other
banks Pubali Bank Ltd., National bank Ltd., UCBL, Dutch Bangla Bank
Ltd., NCCBL, The City Bank Ltd., and the Southeast Bank Ltd. have ranked
from 4 th to 10 th in order of magnitudes. A perusal of ranking of the selected
banking companies under ROA indicates that State Bank of India, Hanvit
Bank and Shamil Islamic Bank have ranked 1 st , 2nd and 3 rd respectively.
These banks are followed by the banks Credit Agri Cole Indosuez, Prime
Bank Ltd., Uttara Bank Ltd., Grindlays Bank, Eastern Bank Ltd., Citi Bank
N.A., and BASIC in order of magnitudes. It has also been observed from the
Table-1 that ranking of the selected banks under other performance
measures such as “Interest Income”, “Spread”, “Net Profit”, and “Profit Per
Employee” and “Deposit Per Employee” give different rankings as
compared to EVA. Although some banks such as Grindlays Bank, Standard
Chartered Bank, have been found within top 10 ranking under almost all

56
Bank Parikrama
performance measures. It implies that these commercial banks have been
performing well in all perspectives. Considering the rankings of the
selected banks under different performance measures, EVA has been
found to be inconsistent with other parameters of measuring
performance. The difference in rankings of the selected banks between
EVA and other performance measures has led the researchers to note that
EVA is independent of other measures to a higher extent. To put it
differently, EVA can be a better tool for measuring managerial
performance of the selected banks.
12. EVA with Other Parameters
As we know, EVA is a solid measure to determine the efficiency
and efficacy of agencies how they perform in managing organization by
generating value over and above the cost of capital for the principal. To
study this, EVA of the selected banking sector has been compared with
other parameters used for judging the performance of Banks.
It has been observed in the above section that EVA is different
from other measures of performance such as ROA, Interest Income,
Spread, Net Profit, Profit Per Employee, and Deposit Per Employee
considering the rankings of the select banks. Because the ranking results
of the selected banks under EVA are found independent of other
aforesaid measures to a higher extent. The present section of the study
has examined whether EVA is independent of other measures of
performance significantly or not with the help of rank correlation
coefficients.
Appendix -4 shows the rank correlation coefficients between EVA
and other measures of performance. A perusal of the Appendix -4
indicates that rank correlation coefficients between “EVA and ROA”,
“EVA and Net Profit”, and “EVA and Profit Per Employee” are found
statistically insignificant at 1% level and “EVA and Deposit Per
Employee” at 5% level because rank correlation coefficient lies outside the
acceptance region. These statistical results have led the researcher to reject
the null hypothesis (Ho) that there is no significant correlation between
“EVA and ROA”, “EVA and Profit Per Employee” and “EVA and
Deposit Per Employee”. It implies that EVA has statistically significant
relationship with other parameters of performance measures such as

Jahur & Riyadh:Economic Value Added as a Management Tool 57
ROA, Net Profit, Profit Per employee, and Deposit Per Employee. On
the other hand, the rank correlation coefficients between “EVA and
Interest Income” and “EVA and Spread” have been found insignificant.
In these cases, the null hypothesis “There is no significant correlation
between ‘EVA and Interest Income’ and ‘EVA and Spread’ has been
accepted.
EVA has been found to have a moderate degree of correlation with
ROA, Net Profit, Profit Per Employee and Deposit Per Employee. These
relationships are reasonably expected. Higher ROA, Net Profit, Profit Per
Employee and Deposit Per Employee are expected to produce higher
EVA. It is also not surprising that Bank which has higher ROA, Net
Profit, Deposit Per Employee and Profit Per Employee have a negative
EVA. It is therefore, imperative that Banks underscore the importance of
measuring EVA separately.
13. Conclusion
The above analysis had led researchers to conclude that EVA is an
important measure to judge a bank’s performance in view of the current
scenario of Banks having to satisfy a large number of shareholders.
It has been found in the study that EVA does have a moderate
degree of correlation with ROA, Spread, Net Profit, and Profit Per
Employee. It has also been found in some of the cases that the ranking
under EVA is high but not so high under the criterion of ROA. This is
explained by the fact that banks essentially work on the principle of
Asset-Liability Management and the funds employed in the business will
therefore be considerable more than the Net Worth. When return is
computed as a percentage of net worth the rank is pretty low, whereas in
terms of EVA, which just takes the return as a percentage of Net Worth
the banks are doing pretty well. In fact, the later is the better strategy
from the viewpoint of Shareholders.
It can therefore be concluded in view of the current scenario and
intense competition anticipated in the coming years that Banks will
replace other performance measures with EVA and eventually, will get
to be judged by the extent of value generated for shareholders over and
above the weighted average cost of capital.

58
Bank Parikrama
REFERENCES
Anthony, R.N., J.Dearden, and V. Govindarajan(1992), “Management
Control System”. Seventh Edition, Boston: Irwin p.651
Bhattacharyya, A.K. and B.V. Phani (2000), “Economic Value Added: In
search of Relevance Decision”.Vol.27, No.2, July-December, pp.25-54
Brealey, R.A. (2000). “Principles of Corporate Finance”, New Delhi: Tata
McGraw Hill Publishing Company Ltd.
Calabarese, V.J. (1999). “Economic Value Added: Finance 101 on
Steroids”, The Journal of Bank Cost & Management Accounting, San
Francisco, pp.3-34.
Dierks, Paul A. and A. Patel (1997), “What is EVA and how can it help your
company”, Management Accounting. New York, November, pp.52-58.
Feltham, G.A. (1994). “Performance Measure Congruity and Diversity in
Multi-Task Principal/Agent Relation”, Accounting Review, Vol.69, No.3,
July, pp.429-453.
Hongren, C.T. and G. Foster (1991). “Cost Accounting: A Managerial
Emphasis”, 7th Edition. New Jersey: Prentice Hall. Englewood cliffs,
pp.892-894
Kaplan, R. and A.A. Atkinson (1989), “Advanced Management
Accounting”, New Jersey: Prentice Hall. Englewood cliffs, pp.534-540
Karmakar S.R.S.N. (1999), “Economic Value Added”, The Economic
Times, Calcutta, July 15 (quoted by Bhattacharyya, A.K and Phani, B.V
(2000))
Magee, R.P. (1978), “Accounting Measurement and employment Contracts:
Current Value Reporting”, Bell Journal of Economics, spring, pp.145-158
Parasuraman, N.R. (2000). “Economic Value Added: Its Computations and
Impact on Select Banking Companies”, The ICFAI Journal of Applied
Finance, Vol.6, No.4, October, pp.14-29.

Jahur & Riyadh:Economic Value Added as a Management Tool 59
Benchmark Cost of Capital for
Determining EVA for 2001.
Appendix I
Bank
Eastern Bank Limited
IFIC Bank
Sonali Bank
Uttara Bank
United Commercial Bank
AB Bank Limited
Citi Bank N.A.
Standard Chartered Bank
American Express Bank
Al Arafa Islami Bank
Dutch Bangla Bank Ltd.
Islami Bank Bangladesh Ltd.
Dhaka Bank Limited
South East Bank Limited
Prime Bank Limited
BASIC
NCCBL
Simple Arithmetic Mean
Weighted Arithmetic Mean
(Taking net worth as weight)
ROANW
(%)
39.65
55.28
17.51
129.93
52.84
18.93
54.03
155.55
54.03
12.83
98.35
13.78
48.99
62.30
60.98
43.55
75.52
58.41%
NW (In
Million)
1700
966
5408
802
579
840
533
675
533
1216
243
2395
447
565
974
698
577
19151
NW X ROANW
(%)
67400
53400
94700
104200
30600
15900
28800
105000
28800
5600
23900
33000
21900
35200
59400
30400
43000
791200
41.31%
Note:
1. Return on Net Worth for 2000 have been computed and average
of the resultant return taken to determine the benchmark of cost
of capital of the individual bank. this has been used as the
benchmark of cost of capital for determining EVA for 2001
2. ROANW -Return on Average Net Worth, NW = Net Worth
Source: calculated from annual reports of the selected banks

60
Bank Parikrama
Appendix 2
Banks NP NW NP/NW
(%)
(Tk. In Million)
RR
EVA
Agrani Bank 351 3306 10.62 1365 -1014
Al Arafa Islami Bank 32 544 5.88 225 -193
American Express Bank 389 533 72.98 220 169
Arab Bangladesh Bank 263 958 27.45 396 -133
BASIC 356 761 46.78 314 42
BSRS 118 1574 7.50 650 -532
Bangladesh Krishi Bank 30 1821 1.65 752 -722
Bangladesh Shilpa Bank 678 2147 31.57 887 -209
The City Bank Ltd. 407 423 96.21 175 232
Citi Bank N.A. 220 776 28.35 320 -100
Credit Agri Cole Indosuez 431 861 50.00 356 75
Dhaka Bank Ltd. 454 661 68.68 273 181
Dutch-Bangla Bank Ltd. 397 319 124.45 132 265
Eastern Bank Ltd. 704 1917 36.72 792 -88
Shamil Bank 80 171 46.78 71 9
Grind lays Bank 1583 66 2398.48 27 1556
HSBC 132 5013 2.63 2071 -1939
Hanvit Bank 201 772 26.03 319 -118
Habib Bank 47 80 58.75 33 14
IFIC 540 1030 52.42 425 115
Islami Bank Bangladesh Ltd. 576 2638 21.83 1090 -514
Janata Bank 666 3133 21.26 1294 -628
Muslim Commercial Bank 25 175 14.28 72 -47
National Bank Ltd. 1020 1702 59.93 703 317
National Bank of Pakistan 22 113 19.47 47 -25
NCCBL 568 798 71.18 330 238
Prime Bank Ltd. 757 1358 55.74 561 196
Pubali Bank 1171 1274 91.92 526 645
RAKUB 24 1288 1.86 532 -508
Rupali Bank 287 1515 18.94 626 -339
Sonali Bank 673 5408 12.44 2234 -1561
Social Investment Bank Ltd. 302 356 84.83 147 155
Standard Chartered Bank 1287 675 190.67 279 1008
State Bank of India 129 556 23.20 230 -101
Mercantile Bank Limited 404 527 76.66 218 186
United Commercial Bank Ltd 504 579 87.05 239 266
Uttara Bank Ltd. 1603 1323 121.16 547 1056
Al Baraka Bank 99 340 29.18 140 -41
South East Bank Ltd. 502 712 70.50 294 208
Note
1. RR( Required Return) has been Computed by Applying the Cost of Capital of 41.31% on
the Net Worth.
2. EVA= NP - RR
Source: Calculated from annual reports of the selected banks

Jahur & Riyadh:Economic Value Added as a Management Tool 61
Ranking Under Various Measures of Selected Banks for 2001
Appendix 3
Agrani Bank
Al Arafa Bank
American Express Bank
Arab Bangladesh Bank
BASIC
BSRS
Bangladesh Krishi Bank
Bangladesh Shilpa Bank
The City Bank Ltd.
Citi.N.A
Credit Agri Cole Indosuez
Dhaka Bank Ltd.
Dutch Bangla Bank Ltd.
Eastern Bank Ltd.
Shamil Bank
Grind lays Bank
HSBC
Hanvit Bank
Habib Bank
IFIC
Islami Bank Bangladesh Ltd.
Janata Bank
Muslim Commercial Bank
Banks EVA ROA
37
29
14
28
18
34
36
30
9
25
17
13
7
24
20
1
39
27
19
16
32
35
23
36
40
12
30
10
32
39
18
26
9
4
23
17
8
3
7
22
2
28
25
29
34
27
Interest
Income
4
27
24
14
20
29
5
17
16
28
37
26
30
11
36
8
32
38
33
13
9
2
34
Spread
22
23
10
24
7
19
37
30
26
17
4
25
28
12
9
2
14
5
6
35
36
20
8
Net
Profit
23
36
21
26
22
31
36
8
18
27
17
16
20
7
33
2
29
28
34
13
11
10
37
Profit Per
Employee
36
34
6
31
20
21
39
17
27
3
14
13
10
8
7
2
22
1
18
26
30
35
25
Deposit Per
Employee
32
25
3
23
19
39
36
38
26
1
22
7
6
10
11
2
15
8
20
27
21
34
28

62
Bank Parikrama
Appendix 3 (Contd.)
National Bank Ltd.
National Bank of Pakistan
NCCBL
Prime Bank Ltd.
Pubali Bank
RAKUB
Rupali Bank
Sonali Bank
Social Investment Bank Ltd.
Standard Chartered Bank
State Bank of India
Mercantile Bank Limited
United Commercial Bank Ltd.
Uttara Bank Ltd.
Al Baraka Bank
South East Bank Ltd.
Banks EVA ROA
5
21
8
11
4
32
31
38
15
3
26
12
6
2
22
10
24
14
20
5
16
37
33
35
21
11
1
15
19
6
31
13
Interest
Income
12
39
23
22
6
25
3
1
35
7
31
19
15
10
18
21
Spread
34
3
27
13
33
39
29
31
38
11
1
15
21
32
16
18
Net
Profit
5
29
12
6
4
38
25
9
24
3
30
19
14
1
32
15
Profit Per
Employee
24
12
19
11
29
38
33
37
16
4
5
9
28
23
32
15
Deposit Per
Employee
24
18
17
14
35
37
30
31
9
4
12
5
33
29
13
16
Source: Calculated from annual reports of the selected banks

Jahur & Riyadh:Economic Value Added as a Management Tool 63
Computation of Rank Correlation Coefficient Between EVA and Other Criteria
Appendix 4
EVA with
EVA with
EVA with ROA EVA with Interest Income EVA with Interest Spread EVA with Net Profit
Banks
Profit Per Employee
Deposit Per Employee
EVA ROA (a-b) Interest a-c (a-c) Spread
(a-d) Net Profit (a-e) Profit per
(a-f) Deposit Per a-g (a-g)
(a) (b) a-b Square Income (c) Square (d) a-d Square (e) a-e Square Employee (f) a-f Square Emp(g)
Square
Agrani Bank
Al-Arafah Islami Bd. Ltd.
American Express Bank
ABBL
BASIC Bank Ltd.
BSRS
BKB
BSB
The City Bank Ltd.
Citibank N.A.
Credit Agrocole Ind.
Dhaka Bank Ltd.
Dutch-Bangla Bank Ltd.
Eastern Bank Ltd.
Shamil Bank Ltd.
Grindlays
HSBC
Hanvit Bank
Habib Bank
IFIC
Islami Bank Bd. Ltd.
Janata Bank
Muslim Comm. Bank
National Bank Ltd.
NBP
NCCBL
Prime Bank Ltd.
Pubali Bank Ltd.
RAKUB
Rupali Bank Ltd.
Sonali Bank
SIBL
SCB
SBL
Mercantile Bank Ltd.
UCBL
Uttara Bank Ltd.
Al-Baraka Bank
Southeast Bank
37
29
14
28
18
34
36
30
9
25
17
13
7
24
20
1
39
27
19
16
32
35
23
5
21
8
11
4
32
31
38
15
3
26
12
6
2
22
10
36
40
12
30
10
32
39
18
26
9
4
23
17
8
3
7
22
2
28
25
29
34
27
24
14
20
5
16
37
33
35
21
11
1
15
19
6
31
13
1
-11
2
-2
8
2
-3
12
-17
16
13
-10
-10
16
17
-6
17
25
-9
-9
3
1
-4
-19
7
-12
6
-12
-5
-2
3
-6
-8
25
-3
-13
-4
-9
-3
1
121
4
4
64
4
9
144
289
256
169
100
100
256
289
36
289
625
81
81
9
1
16
361
49
144
36
144
25
4
9
36
64
625
9
169
16
81
9
4
27
24
14
20
29
5
17
16
28
37
26
30
11
36
8
32
38
33
13
9
2
34
12
39
23
22
6
25
3
31
35
7
1
19
15
10
18
21
33
2
-10
14
-2
5
31
13
-7
-3
-20
-13
-23
13
-16
-7
7
-11
-14
3
23
33
-11
-7
-18
-15
-11
-2
7
28
7
-20
-4
25
-7
-9
-8
4
-11
1089
4
100
196
4
25
961
169
49
9
400
169
529
169
256
49
49
121
196
9
529
1089
121
49
324
225
121
4
49
784
59
400
16
625
49
81
64
16
121
22
23
10
24
7
19
37
30
26
17
4
25
28
12
9
2
14
5
6
35
36
20
8
34
3
27
13
33
39
29
31
38
11
1
15
21
32
16
18
15
16
4
4
11
15
-1
0
-17
8
13
-12
-21
12
11
-1
25
22
13
-19
-4
15
15
-29
18
-19
-2
-29
-7
2
7
-23
-8
25
-3
-15
-30
6
-8
225
36
16
16
121
225
1
0
289
64
169
144
441
144
121
1
625
484
169
361
16
225
225
841
324
361
4
841
49
4
49
529
64
625
9
225
900
36
64
23
36
21
26
22
31
36
8
18
27
17
16
20
7
33
2
29
28
34
13
11
10
37
5
29
12
6
4
38
25
9
24
3
30
19
14
1
32
15
14
-7
-7
2
-4
3
0
22
-9
-2
0
-3
-13
17
-13
-1
10
-1
-15
3
21
25
-14
0
-8
-4
5
0
-6
6
29
-9
0
-4
-7
-8
1
-10
-5
196
49
49
4
16
9
0
484
81
4
0
9
169
289
169
1
100
1
225
9
441
625
196
0
64
16
25
0
36
36
841
81
0
16
49
64
1
100
25
36
34
6
31
20
21
39
17
27
3
14
13
10
8
7
2
22
1
18
26
30
35
25
24
12
19
11
29
38
33
37
16
4
5
9
28
23
32
15
1
-5
8
-3
-2
13
-3
13
-18
22
3
0
-3
16
13
-1
17
26
1
-10
2
0
-2
-19
-9
-11
0
-25
-6
-2
1
-1
-1
21
3
22
21
-10
-5
1
25
64
9
4
169
9
169
324
484
9
0
9
256
169
1
289
676
1
100
4
0
4
361
81
121
0
625
36
4
1
1
1
441
9
484
441
100
25
32
25
3
23
19
39
36
38
26
1
22
7
6
10
11
2
15
8
20
27
21
34
28
24
18
17
14
35
37
30
31
9
4
12
5
33
29
13
16
5
4
11
5
-1
-5
0
-8
-17
24
-5
6
1
14
9
-1
24
19
-1
-11
11
1
-5
-19
3
-9
-3
-31
-5
1
7
6
-1
14
7
-27
-27
9
-6
25
16
121
25
1
25
0
64
289
576
25
36
1
196
81
1
576
361
1
121
121
1
25
361
9
81
9
961
25
1
49
36
1
196
49
729
729
81
36
Rank Correlation 0.5213 0.0611 0.0847 0.5465 0.4426 0.3885