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Daffodil International
University
A Report on the Fund ManagementandPerformance Evaluation of
BRAC Bank Limited.
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Course Code: FIN- 435.
Course Title: Bank Fund Management.
AssignmentOn:
The Fund Management andPerformance Evaluation ofBRAC Bank Limited
PREPARED FOR:
Sabrina Akhter
Lecturer
Department of CommerceFaculty of Business & Economics
Daffodil International University
PREPARED BY:
Batch: 17th
BBA
Date of Submission:March 31, 2010
March 31, 2010
Sabrina Akhter
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Course Instructor of Bank Fund Management
Department of Commerce.
Faculty of Business and Economics
Daffodil International University
Subject: Regarding the submission of this report on the Fund Management and
Performance Evaluation of BRAC Bank Limited.
Dear Madam,
Its gives us immense pleasure in presently here with the report entitled the Fund
Management and Performance Evaluation of BRAC Bank Limited. which was
assign to us as a student of FIN-435 course. In preparing this assignment we had the
unique opportunity to expose ourselves.
We tried our best to follow your instruction, schedule, format, and suggestion in every
step of our report writing.
Please grant my earnest apology for any issue of the report, let me be informed.
Sincerely Yours,
------------------------
(On behalf of the group)
ACKNOWLDGEMENT
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First of all we would like to thank to our respectable teacher Sabrina Akhter to give us
the opportunity to do this assignment under her guidance. She is so much an inspiration
and guidance to us. We are short of words in expression our gratitude.
Then we would like to thank to officials of BRAC Bank limited for their excellent
support to produce the data and relevant information. We want to convey our special
thank to Mr. Zahirul Islam, company secretary of BRAC Bank who apart from his very
busy office work, has spared time to discuss the ins and outs of the assignment and guide
us by giving suggestions. We worked there under his direct supervision.
We would like to thank for entire honorable person whose are cooperating with me,
without whose we can not touch our destination.
EXECUTIVE SUMMERY
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The topic of this report was The Fund Management and Performance Evaluation of
BRAC Bank Limited.. This report is partial requirement of BBA program, faculty of
business & Economics of Daffodil International University. To prepare this report as an
apprentice we have taken necessary assistance from Sabrina Akhter during report writing.
The report is conducted with the purpose of introduction the financial operation and
providing the chance to analyze and make assignment accordingly.
TABLE OF CONTENTS
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Chapters Name Page No.
Acknowledgement
Executive summary
Table of contents
Introduction
Motivation of the Report
Objective of the report
Methodology
Limitation of the report
Background of the Report
Operation of the Bank
Business Performance
Recommendation
Conclusion
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INTRODUCTION
Motivation of the Report:
We are the students of BBAprogram of Daffodil International University. As we are
studying the Bank Fund Management in this semester, we have to gather huge amount of
knowledge about the Bank fund operation. To acquire practical knowledge about the
banking operation our course instructor has motivated us to do this type of assignment.
Thats why we have motivated to prepare this report.
Objective of the Report:
A study in banking operation of AB Bank Limited to find out its activities and
performance in terms of anticipated customers requirements and provide them with the
service, which meet their market, quality and service need.
To give a brief about the history and information of this bank.
To inform about the bank mission and vision market performance of BRAC Bank
Limited.
Setting a general idea about operation performance of BRAC Bank Limited.
To explain about the sources and uses of BRAC Bank fund.
Methodology:
The study is based on secondary data methodology of this final report is given below:
Data regarding the organization profile collected in the following ways:
From the organizations Annual report.
Online information.
By interviewing the organizations officials.
Observational method will also be used in this study.
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Limitation of the study:
Any assignment paper needs high degree of involvement regarding collection of
information, creation of database, literature review and analysis of data. In this study, we
have tried our level best to collect the related information within the time constraint.
Blackguard of BRAC Bank Limited:
BRAC Bank is a scheduled commercial bank established under the Banking companies
Act, 1991 and incorporated as a public company limited by shares on 20 May, 1991
under the companies Act, 1994 in Bangladesh. The primary objective of the Bank is to
carry on all kinds of banking business. The bank could not start its operating till 03 June,
2001 since the activity of the bank was suspended by the High Court of Bangladesh.
Subsequently, the judgment of the High court was set aside and dismissed by Bank has
started operations from 04 July, 2001.
Vision Statement:
Building a profitable and socially responsible financial institution on Market and
Business with growth potential, thereby assisting BRAC and stakeholders to build a just
enlightened, healthy, democratic and poverty free Bangladesh.
Mission Statement:
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 Banks branches, SME unit offices and
BRAC field offices for delivery of remittance and Banks other products and
services
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CORE VALUES:
Value the fact that one is member of the BRAC family.
Creating an honest, open and enabling ENVIRONMENT.
Have a strong customer focus and build relationships based on integrity, superior
service and mutual benefit.
Strive for profit & sound growth.
Work as a team to serve the best interest of our owners
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Source of BRAC Bank funds:
Year 2009 2008 2007 2006 2005
Borrowings 2450000000 2280000000 2240000000 1332974167 1473391667
Deposit and
Other A/C
75219615155 58006887010 37368407774 23001921689 13409010390
OtherLiabilities
8760734892 6717480730 3702158970 3559726180 1210675172
Shareholders Equity
8150954413 5437525651 3072028674 2117193037 782931910
Total Funds 94581304460 72441893391 46382595418 30011815073 16876009139
Contributions of each Component in percentage:
Year 2009 2008 2007 2006 2005
Borrowings 2.59 3.15 4.83 4.44 8.73Deposit and
Other A/C
79.53 80.07 80.57 76.64 79.46
Other
Liabilities
9.26 9.27 7.98 11.86 7.17
Shareholders
Equity
8.62 7.51 6.62 7.05 4.64
Portion of each fund sources 2009
3%
79%
9%
9%
Borrrowi
Deposit a
Other A/C
Other
Liabilities
Sharehol
s Equity
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Portion of each fund sources 2008
80.07
9.277.51 3.15
Borrowing
Deposits andother account
Other lialilities
Shareholers equit
Portion each fund sources 2007
4.83
80.57
7.986.62
Borrowings
Deposits another accou
Other
liabilities
Shareholder
equity
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Portion of each fund sources 2006
76.6
11.9
7.05 4.44
Borrowing
Deposit and ot
account
Other liabilitie
Shareholderequity
Portion of each fund source 200
79.46
7.17 8.734.64Borrowing
Deposit and
other accoun
Other liabiliti
Shareholderequity
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Uses of Bank Funds:
Contributions of each Component in percentage:
Year 2009 2008 2007 2006 2005
Cash 6619009730 4315888000 3114571471 2172387439 1011470878
Balance withthe Bank 5593933873 3194971113 3064562581 2335200830 1162526288
Investment 10972204419 8245373273 4996856717 3768012071 2163814600
Loan &
advance
64150835159 5267671674
0
3246112018
0
1955716538
0
11791312522
Fixed Asset 1637898063 1472024279 942929286 389375132 156335491
Other Asset 4307431216 2536919986 1702573183 1189674221 1510529360
Money at call
and on shortnotice
1300000000 100000000 100000000 600000000 80000000
Total Fund 88987378587 6934692227
8
4331805083
7
2767661424
3
16713462851
Year 2009 2008 2007 2006 2005
Cash 7.43 6.22 7.19 7.84 6.05
Balance with the
Bank
6.28 4.60 7.07 8.43 6.95
Investment12.33 11.89 11.53 13.61 12.94
Loan & advance 72.08 75.96 74.93 70.66 70.54
Fixed Asset 1.84 2.12 2.17 1.40 0.93
Other Asset 4.84 3.65 3.93 4.29 9.03
Money at call and
on short notice
1.46 0.14 0.23 2.16 0.47
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Portion of fund uses 2009
7.436.28
12.33
72.08
1.84 4.84 1.46
Cash
Balance with
theBankInvestment
Loan & Advance
Fixed Asset
Other Asset
Money at call and
on short notice
Portion of fund Uses 2008
6.22 4.6
75.96
2.17 3.930.14
11.89
Cash
Balance with the Bank
Investment
Loan & Advance
Fixed Asset
Other Asset
Money at call and on shor
notice
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Portion of fund Uses 2007
7.197.07
11.53
74.93
2.17 3.930.23
Cash
Balance wit
the Bank
Investment
Loan &
advance
Portion of fund Uses 20067.84
8.43
13.61
70.66
1.4 4.29
2.16 Cash
Balance with the
Bank
Investment
Loan & Advance
Fixed Asset
Other Asset
Money at call and
short noticeSlice 8
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6.05
6.95
12.94
70.54
0.93
9.03 0.47 Cash
Balance withthe Bank
Investment
Loan &Advanace
I
nvestment Sector of BRAC BankLike other bank The BRAC Banks interest to investment is the use of money for the
purpose of making more money to gain income or increase capital or both. As we know
there is always lies default risk in loan making. To avoid this, the bank goes through the
investment because debt instruments can be converted into cash with little risk of loss of
principal value. The BRAC bank authority ahs analyzed that the investment in debentures
is less affected by local economic condition rather than national economic condition in
the money market and capital market. Incomes on debentures are tax free.
The BRAC banks investment items are T-bill/bond, share, and debenture. The Chief
Investment officer of the investment committee has designed the investment area mainly
invest in government sector.
The total invests in government securities (5&2 years Treasury bill) are
3,240,000,000/- and it was 3,822,669,100/- in Government bond in2005.
As we know, credit risk is the barrier in maximizing shareholders wealth. So, banks make
investment by part of their Lon able funds to earn profit and maximize the shareholders
wealth without any risk. This is the reason to invest a large amount in T-bill thus it can be
converted in cash at any time when required.
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Deposit Mix:Year 2009 2008 2007 2006 2005
Current Deposit and
other A/C
24549608278 7652002774 5543600799 3060293660 328852
Bills payable 453829731 424445762 409015536 11744828 122593
Savings bankdeposits
13043725795 4627686658 3985564159 2936582930 186376
Fixed Deposit 36731258306 43399790445 27307976283 16742577461 805155
Other Deposit 441193045 1902951371 122250997 148722810 825661
Deposit Mix in 2009
17
Current Depositand other
A/C, 24549608278
Bills
payable, 453829731
Savings bank
deposits, 13043725
795
Fixed
Deposit, 36731258
306
Other
Deposit, 44119304
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Deposit Mix in 2008
Deposit Mix in 2007
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Deposit Mix in 2006
Deposit Mix in 2005
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Performance Evaluation:
Return of Equity:
Year 2009 2008 2007 2006 2005
Income After Tax 1373364872 973450830 618335637 334261127 192680101
Total Equity Capital 8150954413 5437525651 3072028674 2117193037 782931910
ROE 16.85% 17.90% 20.13% 15.79% 24.61%
Return on Equity
16.85 17.920.13
15.79
24.
0
5
10
15
20
25
30
2009 2008 2007 2006 2005
Year
Percentage
Return on Equity: Return on Equity is a measure of the rate of return flowing to the
banks shareholders. It approximates the net benefit that the shareholders have received
from investing their capital in the bank (i.e. placing their funds at risk in the hope of
earning a suitable profit).
Here the Bank earns tk. 16.85, tk 17.90, tk. 20.13, tk. 15.79 and tk. 24.61 by using total
capital of tk. 100 for the year 2009, 2008, 2007, 2006 and 2005 respectively.
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Return on Asset:
Year 2009 2008 2007 2006 2005
Net IncomeAfter Tax
1373364872 973450830 618335637 334261127 192680101
Total Asset 9458130446
0
7244189339
1
4638259541
8
3001181507
3
16876009139
ROA 1.45% 1.34% 1.33% 1.11% 1.14%
Return on Asset
1.451.34 1.33
1.11 1.1
0
0.5
1
1.5
2
2009 2008 2007 2006 2005
Year
Percentage
Return on Assets: Return on Assets is an indicator of managerial efficiency, it indicates
how capable the converting the institutions Assets into earnings.
Here the Bank earns tk. 1.45, tk 1.34, tk. 1.33, tk. 1.11 and tk. 1.14 by using total assets
of tk. 100 for the year 2009, 2008, 2007, 2006 and 2005 respectively.
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Net Interest Margin:
Year 2009 2008 2007 2006 2005
Net Interest
Income
3129115435 3156009869 2062110340 1157615437 607331119
Total Asset 9458130446
0
7244189339
1
4638259541
8
3001181507
3
16876009139
NIM 3.31% 4.36% 4.45% 3.86% 3.60%
3.31
4.36 4.453.86 3.6
0
1
2
3
45
Percentag
e
2009 2008 2007 2006 2005
Year
Net Interest Margin
Net Interest Margin: The net interest margin measures how large a spread between
interest revenue and interest cost. Management has been able to achieve by close controlover the banks earning assets and the pursuit of the cheapest sources of funding. This is a
measure of efficiency as well as profitability indicating how well management and staff
have been able to keep the growth of revenue ahead of rising cost.
Here the Banks net interest income tk. 3.31, tk 4.36, tk. 4.45, tk. 3.86 and tk. 3.60 by
using total assets of tk. 100 for the year 2009, 2008, 2007, 2006 and 2005 respectively.
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Net Non Interest Margin:
Year 2009 2008 2007 2006 2005
Non NetInterests
Revenue
4275511368 2880173968 1481039542 919810085 565986540
Non Net Interest
Expense
3603569530 2862277587 1597657356 1027018495 592999647
Total Asset 94581304460
72441893391
46382595418
30011815073
16876009139
NNIM 0.71% 0.025% -0.25% -0.36% -0.16%
0.71
0.025
-0.25-0.36
-0.16
-0.4
-0.2
0
0.2
0.4
0.6
0.8
Percentage
2009 2008 2007 2006 2005
year
Non Net Interest Margin
NNI
Net Non Interest margin ratio: Non interest margin measures the amount of non
interest revenue stemming from deposit service charges and other service fees the bankhas seen able to collect (called fee income) relative to the amount of non interest cost
incurred including wages, Salaries repair maintenance cost and loan loss expensesforemost bank, the non interest margin is negative that means generally non-interest costare more than fee income.
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From the above picture it can be stated that the Banks net non interest income tk. 0.71, tk
0.025, tk. -0.25, tk. -0.36 and tk. -0.16 by using total assets of tk. 100 for the year 2009,2008, 2007, 2006 and 2005 respectively.
Earnings per Share:
Year 2009 2008 2007 2006 2005
Net Income After
Tax
1373364872 973450830 618335637 334261127 192680101
No. of Share 22521700 15840000 120000000 11373300 5000000
EPS Tk.60.98 Tk. 61.46 Tk. 42.30 Tk. 29.39 Tk. 38.54
60.98 61.46
42.3
29.3938.54
010
20304050
6070
Percentag
e
2009 2008 2007 2006 2005
Year
Earnings Per Share
E
Earnings per share: Earnings per share indicate how much a share on stock of a bankcan earn income from investment.
]
That means here one stock of this bank can earn tk 60.98, tk.61.46, tk. 42.30, tk. 29.39and tk. 38.54 for the year 2009, 2008, 2007, 2006 and 2005
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Degree of Asset Utilization:
4.02 4.38 4.193.5 3.44
0
1
2
3
45
Percentage
2009 2008 2007 2006 2005
year
Degree of Assets Utilization
Asset Utilization: The banks degree of Asset Utilization reflects portfolio management
policies, specially the mixed and yields on the banks assets Equity Multiplier
From the above picture it can be stated that the Banks total operating income tk.4.02, tk
4.38, tk. 4.19, tk. 3.50 and tk. 3.440.16 by using total assets of tk. 100 for the year 2009,2008, 2007, 2006 and 2005 respectively.
Year 2009 2008 2007 2006 2005
Total Operating
Revenue
3801057273 3173906250 1945492529 1050407027 580318012
Total Asset 9458130446
0
7244189339
1
4638259541
8
3001181507
3
16876009139
Asset Utilization 4.02% 4.38% 4.19% 3.50% 3.44%
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The Banks Equity Multiplier:
Bank equity Multiplier: Equity multiplier reflects leverage on financing policies thatmeans the sources chosen to fund the bank (debt/equity)
The multiplier is a direct measure of the banks degree of financial leverage.
How many dollar of assets must be supported by each dollar of equity capital and howmuch of the banks recourses, therefore must rest on debt. Because equity must absorb
losses on the banks assets the larger the multiplier the more exposed to failure risk the
bank is.
From the above picture it can be stated that the Banks total assets is 11.6 times, 13.32times, 15.10 times, 14.18 times and 21.55 times higher than total equity capital for the
year 2009, 2008, 2007, 2006 and 2005 respectively. The financial leverage for the bankdeclines gradually.
Year 2009 2008 2007 2006 2005
Total Asset 94581304460
72441893391
46382595418
30011815073
16876009139
Total Equity
Capital
8150954413 5437525651 3072028674 2117193037 782931910
EquityMultiplier
11.60 13.32 15.10 14.18 21.55
26
11.613.32
15.1 14.18
21.55
0
5
10
15
20
25
2009 2008 2007 2006 2005
Year
Equity Multiplier
EM
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Recommendation
The overall scene says that The BRAC bank has the strong efficient management in loan
management. Although there a chance to default loan and some non performing loan the
bank always prefer to utilize their deposit fund in the loan sector than in investment
sector. The Prime bank always takes necessary steps by analyzing the credit approaches
thus the bank does not need to face the loan default problem. But the efficiency also
affected by economic condition of the country beside the political situation. The BRAC
Bank is always promising satisfied its customer.
Conclusion
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Todays business is very competitive and complex. To survive in the related sector the
organization need competitive people and has to take some effective policy. Every
country must given a plan for important role in economic activities Bangladesh is no
exception of that. Commercial Banks financial development and economic development
are closely related. Thats why the private commercial banks are playing significant role
in this regard.
From the analysis of the BRAC Bank, we got understand about the performance. Also
well performance of BRAC Bank.
The Bank should have to up a new standard in financing in the industrial, Trade and
foreign exchange business. Its various deposit and credit products should have also
attracted the clients- both corporate and individuals who feel comfort in doing business
with the Bank. The bank should take initiative effort to accelerate the non interest income
performance for avoiding negative non net interest income.