This research examines the relative performance of  private commercial banks vis-a-vis nationalized commercial banks over the 1984-1993 period by statistically analyzing several accounting ratios that reflect risk-return characteristic of these institutions. This study will discuss two key dimensions on bank performance: profitability and exposure to risk. Profitability is clearly more the important, because satisfactory profits preserve the bank’s capital, providing it with a base for future survival and growth. Due to the lack of well-functioning stock market, stock prices of private banks provide no reliable guide for bank performance. Therefore this research focuses on various profitability and efficiency ratios of the banking sector in Bangladesh. By examining these ratios, the strength and weakness of private versus public banks can be ascertained, and appropriate remedial action can be undertaken (Sinkey, 1992).

More specifically, this research examines the NCBs, private sector banks and Islamic bank by employing five efficiency criteria: productive efficiency measures how efficiently a bank is utilizing its resources to produce a given level of output. Operational efficiency measures how well a bank is managing its cost structure. Distributive efficiency refers to how equitably a bank is collecting deposits and disseminating credit to various account size classes.

The primary source of data utilized in this research is Scheduled Bank  Monthly Bulletin published by Bangladesh Bank, and Statistical Yearbook of Bangladesh by the Government of Bangladesh and annual Reports of Concerned Banks. Individual interviews and discussion with top management of private banks and NCBs and senior staff at Bangladesh Bank and Ministry of Finance provide a secondary source of information when the necessary information cannot be obtained in the published documents.

Analysis of Empirical Results
The domestic and foreign private banks performed better than the NCBs and the denationalized banks on operational efficiency criteria. Table 8 and the denationalized banks on operational efficiency criteria. Table 8 shows that the large private sector banks are more private banks are almost twice as that of at NCBs. The private banks also mobilize almost three times more deposits and loans per branch than do the NCBs. A commercial bank’s cost structure shows the most important determinant of its intermediation margins, and significant difference in margins indicate differences in efficiency.

Table 9 shows the gross intermediation margin (which includes the interest margin and fee income) of NCBs and private banks. Margins at NCBs have been consistently lower than at private banks, and furthermore, have been declining since 1989. These differences are due to their uncommercial approach to pricing loans, exacerbated by direct credit to jute and other sectors, their higher share of non-earning assets and their lower fee income. Private banks are charging higher lending rates and more fee income, so that they can afford to pay slightly higher interest rates and still earn higher gross profit margins. However, these data do not reveal the emerging problems with the quality of loans in domestic private banks, which is likely to increase as banking supervision and capital control intensifies.

Table 10 presents various productive efficiency ratios of public, private and Islami Bank. Three specific proxies are used to measure productive efficiency of commercial banks: fund utilization ratio, per employee fund utilization ratio and profit-employed fund ratio. The fund utilization ratio is defined as the ratio of fund employed over loanable  fund. This ratio shows the ability of a bank to convert its loanable fund into income earning assets such as loans and advances . These ratios indicate that Btu private and Islami banks are more efficient than the NCBs in terms of these ratios. Table 11 provides various  profitability ratios of selected public, private and Islami banks. Four Measures of profitability such as incme-xpense ratio, profit-expense ratio, profit-loanable fund ratio and profit-employed fund ratio indicate very strongly that the private sector banks have been more profitable than NCBs over the 1984-1992 period. The average profitability ratio over this time period also supports this conclusion. It is also important to note that the profitability ratios have been declining over this time-period for all three types of banks. The profit-employed fund ratio of the NCBs has declined from 2percent in 1984 to. 1 percent in 1992, while the same ratio for the private banks has declined from 5.3 percent in 1985 to 2 percent in 1992.

Table 12 provides the operational efficiency ratios of selected public, private and Islami bank. Islami bank has the highest per employee administration cost, with private banks in the second and the public banks in the third position. However, the administrative cost per taka employed is the third position. However, the administrative cost per taka employed is the lowest for Islami bank, and this ratio is the same for public and private sector banks. Table 13 presents a composite productivity index for each type of bank. We constructed this ratio because private banks have the highest profit and operating cost, and this ratio provides us a common yardstick to comer relative performance of these banks. cording to this trio, the private sector banks are the most profitable, with the Islami bank in the second, and the public sector banks in the third position. The average value of this composite productivity index over the 1984-1992period was 0.66 for private banks, 0.57 for Islami banks and 0.23 for the public sector banks.

Table 14 shows a bank inequality index that explains the distribution of deposits and advances within the various types of banks in the banking sector. bank Inequality indexes is calculated as a ratio of cumulative percentage of total deposits over cumulative percentage of total advances in a given account size class. This index ranges from 0to 1 with a higher value indicating a more equitable distribution between deposits and loans. To public sector banks are found to be more equitable than its private sector counterparts in collecting deposits and disseminating loans and advances. The NCBs did not collect deposits from small savers and disburse them to rich borrows disproportionately like their private sector counterparts.

Table 15 shows the allocation of employable funds to various sectors by the three types of banks. Private sector banks and Islami banks are behind in lending to agriculture and manufacturing sector. Not only these banks lend less to these two sectors, but also their lending to these sectors have been declining over the years. Private sector banks are motivated towards short-term profit, and this is evident in their huge involvement in trade financing. The real of the Islami Bank is not according to the norm.  Islami Bank is far behind of public sector banks in long-term lending. The term financing of Islami Bank has come down from 29.7 in 1984 to 14.72 in 1992. Islami Bank also lags behind in terms of distribution equality of bank deposits and advances. The performance of the private sector banks is banks is generally better than NCBs in productive, profitability and operational efficiency criteria, but worse than NCBs in allocate and distributive criteria.