Brac Bank


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Brac Bank

  1. 1. 1
  2. 2. 2 A Report On Financial performance and analysis of Brace Bank Submitted To: Ms. Reshma Nowreen Lecturer in Finance Submitted By: SL NO. Name ID 1. Farzana Zerin 141 2. Rebeka Sultana 148 3. Md.Sakib Ahmed 154 4. Mahfuza Akter 155 5. Mohammad Shibly Rahman 163 Bangladesh University of Business & Technology (BUBT) Date of submission-
  3. 3. 3 Letter of Transmittal Date To Ms. Reshma Nowreen Lecturer in Finance Subject: Approval of Report Dear Sir, With due respect we would like to inform you that it’s a great pleasure for us to submit our report “Financial performance and analysis of BRAC Bank” as integral requirement of our BBA program. Throughout the completion of this report we have earned in depth, knowledge about the bank. We feel this report writing experience will help us to prepare more quality one in future. Therefore, I firmly believe that our report will meet your approval. I would genuinely aspire any corrections and guideline as you feel necessary. Your kind advice will lead me further to the best. Sincerely yours, On behalf of All group members of Group Orions
  4. 4. 4 Acknowledgement At the very beginning we are very pleased to successfully complete our Report writing “Financial performance and analysis of BRAC Bank”. We would like to express our gratitude to our honorable Ms. Reshma Nowreen, Lecturer in Finance Studies without whose proper supervision the report would have remain incomplete.
  5. 5. 5 Table of Contents Contents Page Executive summary 6 Introduction 7 Background 7-8 Objectives 8 Methodology 8-9 Limitation 9 Overview of BRAC Bank 10-12 Theoretical Aspect 13-17 Trend Analysis Status of loan classification Ratio analysis 18-20 21-22 22-26 Finding analysis 27 Conclusion 27
  6. 6. 6 Executive summary The information received from the secondary data. We visit the Branch of the BRAC Bank. Then we find out the services availability to the customer. Then we find out the financial performance and analysis of that bank. At the same time we are faced some problem such as there are some information lacking. Some web- pages of that bank are not displayed etc. BRAC Bank Limited is a scheduled commercial bank in Bangladesh. BRAC Bank is providing various services to its customers and trying to improve every time. The service providers of BRAC bank are the people who are related to the development of bank and customer. .
  7. 7. 7 Chapter: 1 1.1 Introduction BBL is a full service scheduled commercial bank. It has both local and international institutional shareholder. The bank is primarily driven with a view of creating opportunities and pursuing. Market niches not traditionally meet by conventional banks. BRAC Bank has been motivated to provide “best-in- the-class” services to its diverse assortment of customers spread across the country under an on-line banking dais. Today, BRAC Bank is one of the fastest growing banks in the country. In order to support the planned growth of its distribution, network and its various business segments. The bank wants to build a profitable and socially responsible financial institution. The bank maintains a high level of standards in everything for our customers, our shareholders, our Acquaintances and our communities upon, which the future affluence of our company rests. 1.2 Background BBL is a scheduled commercial bank in Bangladesh. It established in Bangladesh under the Banking companies Act, 1991 and incorporated as private limited company on 20 May 1999 under the companies Act, 1994. The primary objective of the bank is to provide all kinds of banking business. BRAC Bank Limited is a fully operational commercial bank that was founded in July 2001 by BRAC NGO, one of the largest development finance institutions in the world. The bank’s objectives include providing comprehensive commercial banking services, building a profitable and modern, full-service financial institution, and
  8. 8. 8 pursuing profitable market niches in the Small and Medium Enterprise (SME) business sector not traditionally met by conventional banks. 1.3 Objectives The main purpose for making is to known the financial performance of BRAC Bank Ltd. The specifics objective maybe show as under-  To know the historical background of BBL  To know the trend analysis of BBL  To know the loan classification of BBL  To know the ratio analysis of BBL  To acquire knowledge about the overall banking system 1.4 Methodology In order to meet the needs of fulfilling the objectives of the report secondary data are required. The information for the organization part of the report was collected from secondary sources. There are two types of sources  Primary Data Sources.  Secondary Data Sources. In this report we don’t used any kind of primary data source.
  9. 9. 9 Secondary data are collected through  Manuals & Annual Report of BRAC Bank Limited.  Official web site.  Banking Journals. Research Paper. 1.5 Limitation There might be some information that might be inaccurate, since the time invested in the work is not sufficient enough to completely know about the company. Another limitation was getting the information and interpreting it, on the basis of our understanding and then implementing it. The main constraint of the study was insufficiency of information that was highly required for the study.
  10. 10. 10 Chapter: 2 2.1 Overview of BRAC Bank BRAC Bank Limited (BBL) is a fully operational commercial bank that was founded in July 2001 by BRAC NGO, one of the largest development finance institutions in the world. The bank’s objectives include providing comprehensive commercial banking services, building a profitable and modern, full-service financial institution, and pursuing profitable market niches in the Small and Medium Enterprise (SME) business sector not traditionally met by conventional banks. The bank’s main portfolio products include loans for small and medium sized entrepreneurs; personal loans, credit cards and multiple deposit accounts for retail customers; and specialized retail products tailored to religious restrictions. The bank also provides corporate deposit and loan products as well as non-resident Bangladeshi remittance services. BRAC’s distribution network of 151 branches including 81 branches, 48 SME Krishi Branches, 22 SME service center, 429 SME unit offices and 280 ATMs across Bangladesh and now reach more than 10,00,000 retail customers. The Bank is constantly coming up with new products. Recently BBL has introduced Visa Silver and Visa Gold both Local and International credit cards; and further more the Bank is in the process of introducing VISA Debit card. In the years ahead BRAC Bank expects to introduce many more services and products as well as add a wider network of SME unit offices, Retail Branches and ATMs across the country. The Banks operate under a “Double Bottom Line” agenda where profit and social responsibility to hand in hand as it strives towards a poverty free, enlightened Bangladesh
  11. 11. 11 Vision for the Future Building profitable and socially responsible financial institution focused on market and business with growth potential thereby assisting BRAC and stakeholders to build a just enlightened healthy democratic and poverty free Bangladesh. Corporate Mission  Sustained growth in Small & Medium Enterprise sector  Continuous low-cost deposit Growth with controlled growth in retail assets.  Corporate Assets to be funded through self-liability mobilization. Growth in Assets through syndications and investment in faster growing sectors.  Continuous endeavor to increase non-funded income  Keep our debt charges at 2% to maintain a steady profitable growth  Achieve efficient synergies between the bank’s branches, SME unit offices and BRAC  field offices for delivery of remittance and Bank’s other products and services  Manage various lines of business in a full controlled environment with no compromise on service quality  Keep a divers, far flung team fully controlled environment with no compromise on service quality  Keep a diverse, far flung team fully motivated and driven towards materializing the bank’s vision into reality.
  12. 12. 12 Organ gram The Board of Directors is the top management and policy-making body of BRAC Bank Limited. Presently the Boars consist of a chairman and four directors. It is to be noted that the managing Director, is also a member of the Board. Directors are appointed from amongst those who have had experience and shown capacity in the field of finance and banking, trade, commerce, industry agriculture. The Chief Operations officer executes all the activities under the direction of the board. The officers and the other line and staff personnel are appointed by Bank’s own Recruitment Committee. Managing Director Deputy Managing EVP & Chief operation VP& Head of SME A VP & Head of credit
  13. 13. 13 Chapter: 3 Theoretical Aspect Trend analysis Deposit: In deposit terminology, the terms Bank Deposit refers to an amount of money in cash or check form or sent via a wire transfer that is placed into a bank account. The target bank account for the Bank Deposit can be any kind of account that accepts deposits. Bank Deposit Example: For example, a Bank Deposit is generally made when opening an account or in the course of routine business or personal transactions that involve placing funds with the bank for future use. Growth rate of deposit: Growth rate of deposit is calculated by= (Current year-previous year)/previous year *100 Loans & Advances: Loan- The act of giving money, property or other material goods to another party in exchange for future repayment of the principal amount along with interest or other finance charges. A loan may be for a specific, one-time amount or can be available as open-ended credit up to a specified ceiling amount.
  14. 14. 14 Advance- Sums paid or received before the fulfillment of an obligation, such as supply of goods or provision of services. Growth rate of loan: Growth rate of loan is calculated by = (Current year-previous year)/previous year Investment trends: An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price. Growth rate of investment: Growth rate of investment is calculated by= (Current year-previous year)/previous year
  15. 15. 15 Status of loan classification Classified loan: Any bank loan that is in danger of default. Classified loans have unpaid interest and principal outstanding, and it is unclear whether the bank will be able to recoup the loan proceeds from the borrower. Banks usually categorize such loans as adversely classified assets on their books. Substandard loan: Bank loan or other interest-earning asset that is protected inadequately by current net worth and paying capacity of the borrower, or the collateral pledged. Loans classified as substandard are characterized by the distinct possibility that the lender will sustain some loss if the deficiencies are not corrected. Some loss of interest is anticipated, or may have already occurred, but loss of principal is considered unlikely. Doubtful Loan: Loan in which full repayment is considered uncertain. Some losses are expected. A loan classified as doubtful has all the characteristics of a substandard loan well- defined credit weaknesses, with the added characteristic that credit weaknesses make full collection or liquidation in full highly questionable and improbable. Fifty percent of loans classified as doubtful are deducted from adjusted bank capital in computing regulatory capital adequacy.
  16. 16. 16 Bad/Loss: A classified loan which period is 1 year and seems no chance to recover the money from borrower can be traced as Bad/Loss loan. Ratio Analysis Current Ratio: A liquidity ratio that measures a company's ability to pay short-term obligations. The Current Ratio formula is: Debt ratio: A ratio that indicates what proportion of debt a company has relative to its assets. The measure gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load.
  17. 17. 17 Credit to Deposit Ratio: The amount of a bank's loans divided by the amount of its deposits at any given time. The higher the ratio, the more the bank is relying on borrowed funds, which are generally more costly than most types of deposits. Forming part of the Liquidity ratios of a bank, this ratio is often used by policy makers to determine the lending practices of financial institutions. The higher the Loan-to-deposit ratio, the more the bank is relying on borrowed funds. Formula = Net Loans / Total Deposits Cost Income Ratio: The cost-to-income ratio is a key financial measure, particularly important in valuing banks. It shows a company’s costs in relation to its income. To get the ratio, divide the operating costs (administrative and fixed costs, such as salaries and property expenses, but not bad debts that have been written off) by operating income. The ratio gives investors a clear view of how efficiently the firm is being run – the lower it is, the more profitable the bank will be. Changes in the ratio can also highlight potential problems: if the ratio rises from one period to the next, it means that costs are rising at a higher rate than income, which could suggest that the company has taken its eye off the ball in the drive to attract more business. Cost Income ratio = Operating Cost/Operating Income
  18. 18. 18 Chapter: 4 4.1 Trend Analysis Year 2008 2009 2010 2011 2012 Deposit 58007 75220 88158 103726 134646 Growth rate of deposit 30% 17% 18% 30% Interpretation: Here the analysis of data five years shows that the total amount of deposit are increasing yearly which is a good for the bank and the growth rate of deposit are fluctuating yearly. In recent year 2012s this rate is 30%.As the higher growth rate is better for the bank for more investment, so the bank should try to maintain high growth rate for deposit. 2008 2009 2010 2011 2012 58007 75220 88158 103726 134646 Deposit Year Deposit Year 2009, 30 % Year 2010, 17 % Year 2011, 18 % Year 2012, 30 % Growth rate Growth rate of deposit
  19. 19. 19 Loans and Advances Year 2008 2009 2010 2011 2012 Loans & Advances 52677 64151 82461 90882 103624 Growth rate of Loans & Advances 22% 29% 10% 14% Interpretation: Here the analysis of data five years shows that the total amount of loans and advances are increasing yearly which is a good for the bank but on the other hand growth rate of loans and advances fluctuating yearly. So the bank should try to increase the growth rate for profitability. 2008 2009 2010 2011 2012 52677 64151 82461 90882 103624 Loan and Advances Loans & Advances Year Year 2009, 22% Year 2010, 29% Year 2011, 10% Year 2012, 14% Growth rate of loan & advances Growth rate of Loans & Advances
  20. 20. 20 Investment Year 2008 2009 2010 2011 2012 Investment 8245 10375 12856 1419 25373 Growth rate of Investment 26% 24% -89% 105% Interpretation: The analysis shows that investment of bank increase yearly from 2008 to 2010 and decreases in 2011but in 2012 the amount of investment goes up which is better for bank to earn more profit but the growth rate is fluctuating so the bank should try to invest more in safe sector after maintaining the required liquidity for earnings. 2008 2009 2010 2011 2012 8245 10375 12856 1419 25373 Investment Investment Year Year 2009, 26 % Year 2010, 24 % Year 2011, - 89% Year201 2, 105% Growth rate Investment
  21. 21. 21 4.2 Status of loan classification Classified Loan Year 2009 2010 2011 Substandard Loan 1504126278 1142795194 1584001808 % 39% 29% 41% Doubtful 990855828 1430876989 1288798013 % 26% 37% 33% Bad/Loss 1382674637 2355885993 2366742729 % 36% 61% 61% Total Classified Loan 3877656743 4929558176 5239542550 Graph: 29% 37% 61% 2010 Substandard loan Doubtful Bad & loss 41% 33% 61% 2011 Substandard loan Doubtful Bad and loss
  22. 22. 22 Interpretation: Here the analysis of loan classification of 2010and 2011 show that, the percentage of bad/loss loan on total classified loans is higher than the substandard and doubtful loan, which is not good for the bank. So the bank should try to reduce the amount of bad/loss loan and also the amount of total classified loans. Chapter: 5 Ratio Analysis Current Ratio: Year 2008 2009 2010 2011 2012 Current assets 21076570130 56253999506 59190423909 43441909590 64713854091 Current liabilities 32038481403 48134555867 40886797840 56533704881 71235869906 Current Ratio 0.657851721 1.168682218 1.447665922 0.768424954 0.908444779
  23. 23. 23 Graph: Interpretation: In this analysis we can show that the current ratios of the bank are fluctuating yearly and the past two years this ratio shows that the bank has less current asset to meet up its liabilities which is not a good sign for the bank. Debt Ratio: Year 2008 2009 2010 2011 2012 Total Liabilities 72441893391 95127222246 119150087964 133201048438 173676792029 Total Assets 67004367741 86976267833 109738202407 123598443600 163522243477 Debt Ratio 108% 109% 109% 108% 106% Year 2008, 0.65785 1721 Year 2009, 1.16868 2218 Year 2010, 1.44766 5922 Year 2011, 0.76842 4954 Year 2012, 0.90844 4779 Current Ratio
  24. 24. 24 Graph: Interpretation: In this problem analysis we see that the percentage of ratio has increased from 2008 to 2009 and 2010 but decreased from 2010 to 2011 and 2012 in the bank because their asset was increased at a higher rate than from the last year. Here the bank maintains approximately same level of debt ratio from past five years. This is a good sign for the bank. Cost income ratio: Year 2008 2009 2010 2011 2012 Operating expense 2862277587 3546573197 4571309242 574960576 5164822269 Operating income 6036183837 7264162137 9539934262 1089480177 1013473342 Cost income ratio 47% 49% 48% 53% 51% Year 2008, 108% Year 2009, 109% Year 2010, 109% Year 2011, 108% Year 2012, 106% Debt Ratio Debt Ratio
  25. 25. 25 Graph: Interpretation: The analysis shows that the cost of ratio fluctuating yearly. It is one of the main key performance indicators of a bank's efficiency: the lower the ratio the more efficient the bank. Here the ratio is higher in recent year, so it is not a good sign for bank business. Credit Deposit Ratio: Year 2008 2009 2010 2011 2012 Loans 52676716740 64150835159 84302789317 103624438 9082217467 Deposits 58006887010 75219615155 88157908331 1346464485 1037255292 Credit Deposit Ratio 91% 85% 96% 77% 88% Year 2008, 47% Year 2009, 49% Year 2010, 48% Year 2011, 53% Year 2012, 51% Cost income ratio Cost income ratio
  26. 26. 26 Graph: Interpretation: The credit deposit ratio state that the higher the ratio the better but too much higher is not good because it can create liquidity risk. Here the ratio is fluctuating yearly but the bank should maintain moderate cost to deposit ratio. Year 2008, 91% Year 2009, 85% Year 2010, 96% Year 2011, 77% Year 2012, 88% Credit Deposit Ratio Series4
  27. 27. 27 Chapter 6 6.1 Finding and analysis:  We find the deposit growth of 2009-12. The rate of deposit was decreasing in 2010-11 but increasing in 2012.  The loan rate was decreasing in the year of 2010 to 2012.  Investment growth was decreasing over 2010-2011 but highly increased in 2012.  Classified loan situation or percentage is increasing year to year.  We found the Current ratio, Debt ratio, Cost income ratio and Credit to deposit ratio.  Found the financial position of BRAC Bank at a glance over 2009-2012. 6.2 Conclusion: Overall the financial position of BRAC Bank is quite well over the previous year. But somehow in some specific area it’s doing not so good. It’s may be either the operational or technical fault of bank management and finance department of the bank. The BRAC Bank can overcome these situations quickly because as we all know it’s one of the leading banks of our country.