Dissertation Report On United Commercial Bank Ltd. (UCBL)

Performance Analysis of UCB Bank ltd. 0 | P a g e

Chapter 01 Introductory of the Report


1.1- EXECUTIVE SUMMARY

United Commercial Bank is one of the largest Banks in Bangladesh. Day by day UCBL

has become a giant in the banking sector. United Commercial Bank has two main

divisions of operation-Corporate and General/Consumer Banking. General banking deals

with retail banking services to customers. Banks perform this function in two ways-1

.taking deposits from various areas in different forms.2 1ending that accumulated amount

of money to the potential investors in other different forms.

Financial Institutions have historically have been distinguished by the types of services

they provide. In recent years Financial Institutions have diversified their services by

creating new subsidiaries that perform additional services or by merging with other types

of financial institutions. The result has been the creation of financial conglomerates,

composed of various units offering specialized services. Diversification also offers

benefits to financial institutions.

United Commercial Bank is the largest local commercial bank operating in Bangladesh.

They have a huge customer base that is ever growing. United Commercial Bank is mainly

providing two types of service.

1) Corporate Financial Services

2) Consumer Financial Services.

Consumer financial services include account opening, card services, loan facilities, and so

on. General Banking is one of the parts of customer financial service. General banking

consists of account opening for various types of deposit and saving scheme, card issue,

cheque book issue, receiving foreign remittance, and such which will be discussed on the

following chapters.

This report is based on finding out their way to satisfy the consumer as well as how

UCBL is financially performing. My overall objective of UCBL financial statement

Analysis is the examination of financial position and returns in relation to risk. This must

be done with a view to forecasting the firm & future prospective. At the end part of the

report I have stated some recommendations, which I hope will be helpful for ban to

recover all the weaknesses.


1.2- ITRODUCTION

The United Commercial Bank Limited was incorporated in Bangladesh as a banking

company. I worked in the General Banking (account opening, clearing, transfer, deposit

and cash), loan department, and LC department of this bank. This gives me the

opportunity to know more on different aspects of the company. So, I prepare my intern

report on general banking and financial performance of United Commercial Bank

Limited.

United Commercial Bank Limited (UCB) is a public limited company incorporated on

June 26, 1983 and started its business operations from June 27, 1983 onwards. On

November 30 in the year 1986, UCBL got enlisted at Dhaka Stock Exchange (DSE) and

many years later, on 15th of November in the year of 1995, UCBL got enlisted at

Chittagong Stock Exchange (CSE). The total authorized capital of UCB is TK 15,000

million and possesses a paid up capital of TK 10,039.34 million.

These are General Operation Division, Corporate Banking Division, and International

Division. There are five different Deputy Managing Directors (DMD) supervise the work

of these departments.

1.3- BACKGROUND OF THE STUDY

The United Commercial Bank Limited is a one of the largest private commercial bank in

Bangladesh. The bank has played a pivotal role in creating, nourishing and establishing

leading entrepreneurs of the country and they have significant role in economically strong

Bangladesh. UCB offer a wide range of Banking products and financial service to

corporate, SME customer through variety of delivery channel and through its subsidiaries

company. And the banks help business owners manage their accounts, including checking,

savings and loans. The sources of funds in commercial banks are varied.

United Commercial Bank Ltd. has passed a successful year of 2015 performing a remarkable

achievement in term of profitability, business growth, new business initiatives and

implementation. The year 2014 and 2015 was an historic year for UCB as the Bank has

successfully implemented world renowned core banking solution i.e. Oracle Flex-cube

Universal Banking Solution in its 158 branches including Head Office and Off-shore Banking

Unit. Considering the economic scenario of 2015, the bank moved for balanced expansion of

its businesses and also concentrated on strategic business decision, reform and restructuring

the processes and policies.

As a result of which, the bank has impressive growth in its profitability with high quality of

assets. The management focuses on the right decision at the right time which has ultimately

maximized the bottom line of operating results.


1.4- OBJECTIVE OF THE STUDY

The main objective of the study is to know the Business Review and Performance Evaluation

of United Commercial Bank Ltd. The related specific objectives are as follows:

To know an overview of UCB;

To observe the business review of UCB of Bangladesh;

To analyze the financial performance of UCB of Bangladesh;

To study the factors which lead to evaluate current financial performance; and

To suggest some recommendations on the basis of the study results and to improve

further financial performance of UCB.

1.5- SCOPE

There is a lot of scope to come up with detailed segmental analysis and review of Business as

well as financial performance of United Commercial Bank Ltd. As instructed by the faculty,

here focus will be placed on the theory as well as table & graphs and how they are practiced

will be observed by investigating the practice of performance evaluation of United

Commercial Bank Ltd. In this regard, information has been collected from the employees

working in the bank, as they have experienced about the company’s performance. Moreover,

the scope of this paper is limited to the organizational structure, background, objectives,

functions and investment performance of UCBL as a whole. The scope is also limited to

different investment schemes, modes, mechanism, investment proposal, appraisal procedures,

monitoring and documentation of UCBL.

1.6- LIMITATIONS OF THE STUDY

Internship gives the students to achieve the practical knowledge of business. So it is easy to

say that the importance of internship is knows no bounds. But while the internship program is

going on, I have faced some problems. The limitations of such activities are given below:

Time constraint: A period of internship time is insufficient to scrutinize the activities

of all departments of a pioneer banking company like UCBL.

Job pressure of the employees: Every employee of the office was so busy in their

work, so they were not able to provide sufficient care about different topics to the

internees’.

Restrictions to disclose: One of the main barriers in writing this report was the

confidentiality of data. Though I saw their internal procedure that is being used in

Finance & Accounts Division, but I was told strictly not to disclose that even in my

report.

Lack of practical knowledge: For the lack of practical knowledge, some shortcoming

may be available in the report. In some cases I could not practically involved because

of bank’s limitation.


Chapter 02 Literature Review


2.1- LITERATURE REVIEW

Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition

and performance of a business concern. Simply, ratio means the comparison of one figure to

other relevant figure or figures. According to Myers, “Ratio analysis of financial statements

is a study of relationship among various financial factors in an organization as disclosed by a

single set of statements and a study of trend of these factors as shown in a series of

statements.”

There are various groups of people who are interested in analysis of financial position of an organization. So, using the ratio analysis to work out a particular financial characteristic of

the UCB Bank Ltd. Ratio analysis helps the various groups in the following manner:

Accounting ratio help to measure the profitability of the UCB bank by calculating the various profitability ratios. It helps to know me about the earning capacity of the organization concern. In this way profitability ratios show the actual performance of the UCB Bank Ltd.

UCB Bank Ltd has the profit margin and returns are good. No major change the profitability ratios. The Bank has more profitability margin as compare to previous year.

With the help of solvency ratios, solvency of the Bank can be measured. These ratios show

the relationship between the liabilities and assets. In Case External liabilities are more than

that of the assets of the bank; it shows the unsound position of the organization. But the UCB

Bank financial position is good in last year.

2.2- HISTORY OF UCBL

United Commercial Bank Limited (UCB) is a public limited company incorporated on June

26, 1983 and started its business operations from June 27, 1983 onwards. On November 30 in

the year 1986, UCBL got enlisted at Dhaka Stock Exchange (DSE) and many years later, on

15th of November in the year of 1995, UCBL got enlisted at Chittagong Stock Exchange

(CSE). The total authorized capital of UCB is TK 15,000 million and possesses a paid up

capital of TK 10,039.34 million. UCB has a total manpower of 3,837 on an average. Out of

total 158 branches, UCB has 28 AD branches, 2 Agricultural branches. In addition, UCB has

151 ATM booths all around the country.

Along with off-shore banking unit, mobile finance service (UCash), Priority banking (UCB

Imperial), renitence service, credit card service with dedicated human capital of 3,837 the

bank has already made a distinct mark in the realm of private sector banking through

boutique service, innovative practices, dynamic problem solving approach and efficient

Management. The Bank has very special focus on import-Export, agriculture, SME sector

and retail business with a view to lead in nationwide financial inclusion and green banking


initiatives. The bank has two wholly owned subsidiaries namely UCB capital Management

Limited. (Provide brokerage service in capital market) and UCB investment Limited (aim to

carry out full-fledged merchant banking activities in Bangladesh.

Corporate Slogan of UCB:

2.3- MANAGEMENT

The Bank has in its Management a combination of highly skilled and eminent bankers of the

country of varied experience and expertise successfully led by Mr. Muhammed Ali, a prolific

and dynamic Leader, as CEO, Mr. Ali has always cherished the sustainable growth as a team

person and believe in the amalgamation of economic and social selection which come as

people, planet and profit growth and progress of the institution. Skilled manpower is the most

important strategic resources of any organization. With this end in view, human resources

development has always been receiving highest priority in the bank.

UCB has a strong focus on imparting training towards enhancement of the skills and

competencies of the employees to take over the challenge of modern banking. Since there is


no alternative to training foe acquiring the required efficiency and professional excellence,

Bank’s Training Institute was busy throughout the year to focus on creating awareness about

the best principles and practices in banking through imparting training on different aspects of

banking. Employee’s performances are regularly evaluated and a good number of them have

been promoted as a reward and recognition of their good performances.

Corporate information of UCBL:

Registered Office (Head Office):

Bulus Center

Plot - CWS- (A)-1

Road No - 34

Gulshan Avenue, Dhaka-1212

Phone : +88-02-8852500

Fax : +88-02-8852500-6000

+88-02-8852504

E-mail : [email protected]

Website : www.ucbl.com

S.W.I.F.T : UCBLBDDH

mailto:[email protected]

http://www.ucbl.com/


2.4- HIGHLIGHTS OF MILESTONE ACHIEVED BY UCB


2.5- MISSION, VISION, OBJECTIVES, STRATEGIES, CORE VALUES

& GOALS OF UCB

Vision

To be the bank of first choice through maximizing value for our clients, shareholders & employees and to contribute to the national economy with social commitments

Mission

To offer financial solutions that create, manage and increase our clients’ wealth while improving the quality of life in the communities we serve.

Objectives

Ensure 100% recovery of all advances. Ensure a satisfied work force.

Make sound loan and investment.

Build up a low cost fund base.

Meet capital adequacy recruitment at all the time.

Focus on fees based income.

Install MIS to monitor banks activities.

Adopt an appropriate management technology.

Strategies

Utilize all available resources to develop various plans and polices. Procedures in each of the objective and goal areas.

Synchronized and steady growth of the bank.

Implement plans, policies and procedures.

Utilize term of professional employees.

Search for a total customized solution for the purpose of full automation step.

Core Values

We put our customers first

We emphasize on professional ethics

We maintain quality at all levels

We believe in being a responsible corporate citizen

We foster participative management

We say what we believe in

Goals

Develop a plan for offering better customer services

Develop a realistic deposit mobilization plan

Develop appropriate ending risk assessment system

Develop capital plan

Develop a system to make good advance

Develop appropriate management structure, system, procedures and approaches

Develop scientific MIS to monitor bank’s activities


2.7- COMPANY’S ORGANOGRAM

The Bank has in its Management with a combination of dedicated highly skilled and eminent

bankers of the country of varied experience and expertise successfully led by Mr. Muhammad

Ali. Around 3,837 dedicated employees are working in UCB. The bank is operating its

business by divided into three main segments. These are General Operation Division,

Corporate Banking Division, and International Division. There are five different Deputy

Managing Directors (DMD) supervise the work of these departments. The total work flow of

the level of employees of UCB is as shown by an organ gram of UCB is given bellow.

Organ gram of Corporate Office:


2.8- MAJOR FUNCTIONS & FUNCTIONAL DEPARTMENTS OF

UCBL

Functions of UCB

To maintain all types of deposit A/Cs.

Provides loans on easy terms and conditions

It transfers money through Pay Order (PO) , BEFTN, BACH, and RTGS

It assist in Foreign Exchange by issuing Letter of Credit (LC)

To make investment in profitable sectors.

UCB insures the securities of valuable documents of clients

To conduct Off-shore Banking services.

To conduct social welfare activities (CSR).

To work for continues business innovation and improvements.

Functional Department of UCBL

Like other commercial banks UCB performs all traditional banking business including

introduction of a wide range of saving and credit products, retail banking and subsidiary

service with the support of modern technology and professional management.

UCB Capital Management

UCB Investment

UCB

Subsidiaries


2.9- PRODUCTS AND SERVICES OF UCB

UCB is always attentive to give the highest value to their customers. That’s why UCBL is

offering the modern products and banking services to their customers. UCBL is offering the

segmented Products & Services to different level of customers along with their

generalProducts and Services. That is very help-full for UCB to create value for their

customers.


2.9.1- General Banking of UCB:

UCB provides all general banking services to its clients through its 158 branches all over the

country. These include savings and current accounts, SMS banking, deposits and schemes.

DPS plus, Earning plus, Multimillionaire, Money maximize, Time deposit scheme, Monthly

saving and Royal savings deposit etc. are some of their deposit services. Clients having

requisite qualifications may have Foreign Currency Deposit accounts in UCBL. UCBL

Multimillionaire scheme is a deposit service providing you a great opportunity of saving a

good amount in a short time. The interest rate is quite high for idle money. There are three

levels in this scheme, namely 1 million, 5 million, and 10 million Taka. A client has to

deposit an amount every month for 5 to 15 years and at the end client get the full amount as

declared. UCBL Money Maximized was a lucrative deposit scheme for limited income

people. This scheme pays 9.10% of interest and the deposit is doubled just in 8 years.

UCB provides different types of debit and credit card facilities. The features of UCB credit

card are as follows:

Truly global: Locally & Internationally transact-able with the same card. This is a dual

product

Higher coverage of acceptance globally in POS terminals & ATMs.

Latest & best quality product at lowest price (annual fee) in the market.

Reward point for spending leads to wining of attractive prizes.

Choice of colors in Classic (Silver) products.

Credit Card for ladies - first time in Bangladesh.

2.9.2- Loans and Retail Services:

The United Commercial Bank with their financing items under CCS loan is given below:

Household Durable Loan: Motor Cycle, Personal Computer, Photocopier, Fax machine,

Small PABX system, Television, Mobile Phone set, Refrigerator, Audio-video equipment,

Other home electric appliances, Furniture and any other household items.

Table: Types of Loan

Household Durable Loan For purchasing household durables.

Car loan Car, Jeep, Station Jeep, Pick up Van, Cover Van, Bus,

Truck, Ambulance and any other vehicle for own use.

Doctors’ Loan For the Doctors only.

Loan against salary Any qualified person

Any purpose loan For emergency need

Education loan For Study purpose only

Travel Loan For traveling purpose,

Marriage loan For wedding only.

CNG Conversion Loan To convert into CNG

Hospitalization Loan For treatment in hospital


2.9.3- Commercial Banking:

Commercial Credit services are quite different from consumer credit banking due to its

flexibility of customization and it depends entirely on commercial customer’s requirements.

Hence, generic offerings for commercial clients are as follows:

One Stop Service

Time Deposit Scheme

Monthly Savings Scheme

Deposit Insurance Scheme

Inward & Outward Remittances

Travelers Cheques

Import Finance

Export Finance

Working Capital Finance

Loan Syndication

Underwriting and Bridge financing

2.10- FUNCTIONAL DEPARTMENT OF FINANCE AND ACCOUNTS

DIVISION OF UCB:

Figure: Different departments of Finance and Accounts Division (FAD)


Mr. Habibur Rahman Chowdhury (FCA) is the Chief Financial Officer (CFO) and Head of the Division.

The descriptions of sub departments of different functions in the Finance and Accounts Division (FAD) are given below:

Management, Reporting, Budgeting and MIS: The Management is responsible for

managing all areas of accounting, financial reporting and budgeting functions of United

Commercial Bank, Bangladesh. The Management Information System (MIS) in UCB helps

to manage all the information properly in the bank. Internal controls and policies are

maintained as they relate to financial matters to assure accuracy and integrity of financial

information.

Financial Reporting: This unit helps to prepare the publicly available consolidated bank

statements and annual report in a precise manner.

Central Bank Reporting: This unit is responsible to make quarterly reports to the central

banks regarding different rules and regulations of Central bank as well as during times of

bank audits.

Business Finance/ Business Intelligence Unit: Business Intelligence Unit of UCB is a

strategic banking unit that monitors industry events and competitor movements on a regular

basis. This unit provides strategic insight into industry coverage of key events. It offers

analysis of key competitor activity and gauges the future impact of current developments.

Accompanying this analysis are insights into new product development activity, industry

trends, marketing, merger and acquisition trends in the financial industry.

Taxation: This unit looks after issues of corporate tax, Value added tax and issues such

employee’s personal tax.

GL Control, Financial Risk and BASEL II: This unit maintains the General Ledger

account (GL) using the bank software Flex cube. The general ledger (GL) control or controls

selected on this sheet determine the accounts and journal codes used to post transactions to

which the record applies.

IT and IS Finance: The Information Technology (IT) and Information System (IS) unit at

UCB is responsible for developing software such as “Financial Solution” to make

transactions easier to record and thus more organized.

Payments: This unit is responsible for collecting and paying different types of bank bills

such as other financial benefits for employees in the rank of Assistant Vice President and

above, office contingency bills etc.

Funds: This unit is responsible for the management of funds at United Commercial Bank.

This unit is responsible for the maturity schedules of the deposits coincide with the demand

for loans by managing the asset and liability properly in terms of volume and mix.

Reconciliations: The role and the purpose of the accounting function can be identified 'to

ensure the business's transactions are recorded and processed completely accurately and

securely and that relevant information is given to management.


2.11- SWOT OF UNITED COMMERCIAL BANK LIMITED

STRENGTHS:

It is an internal factor. It deals with the organizations own strength. UCB’s strengths are:

Usage of Core Banking Software.

Efficient administration.

Corporation with each other.

Fewer default loans.

Membership with SWIFT.

Good banker-customer relationship.

Energetic as well as smart work force.

Well furnished and air conditioned bank which indicates favorable working

conditions for employees.

Not engage in unfair business practice.

Presence of Learning and development center that provides training to its employees.

WEAKNESS:

Weakness is also an internal factor of SWOT analysis. UCBL’s weaknesses are:

Existing manual vouchers.

Limited consumer credit scheme.

Enhance of new private banks.

Lack of promotional activities.

OPPORTUNITIES:

Opportunities are external factors which indicate the industry’s advantages available for the

bank. They are:

Huge business area.

Introducing different debit and credit card.

Industry’s positive growth.

Introducing any branch banking through online.

Flexible credit schemes.

Reliably to local public.

THREATS:

Threats are external factors of SWOT analysis. The threats for UCB are:

Different classic services of foreign banks.

Better developed card division of other private banks.

Uses of modern technologies by the rival banks.

Political unrest and government restricted banking strategies.

The number of rivalry is too high into the banking industry.


Chapter 03 Methodology


3.1- METHODOLOGY

Sources of information:-

Both primary and secondary data have been collected for the purpose of the report. The

primary and secondary data sources are as follows:

Primary data

Primary data has been collected from the following sources:

The report is prepared on the basis of collecting date from different Division on the

other hand I am the regular employee of Branches Control & Development Division.

Notes taken during in any Business review meeting, quarterly half yearly and Annual

Conference.

Data is collected from the opinions of the officers of the bank, face to face contact.

Some important data are collected from the observation within the bank.

Secondary data

Secondary information has been collected from the following sources:

Data gathered within the organization itself.

Data gathered from Texts

Internet sources.

General reports.

Annual reports

Official documents

Credit manual and foreign exchange manual of the bank


Chapter 04 Business Review & Performance Analysis of UCB


4.1. AREAS OF PERFORMANCE REVIEW

The management has reviewed the performance from different point of view which is stated

below:

4.1.1- Branch Network

Presently the Bank is functioning with its country wide network of 158 branches covering all

divisions of the country. Division wise urban and rural branches are given below:

Division Name Urban Rural Total

Dhaka

Chittagong

Rajshahi

Rangpur

Sylhet

Khulna

Barishal

44

30

09

02

07

06

01

30

20

01

00

07

01

00

74

50

10

02

14

07

01

Total 99 59 158

The Bank has set up a Zonal Office at Chittagong to facilitate services to the customers of

the branches located under the Chittagong division. Moreover, the Bank currently has 532

correspondents covering 60 important countries in all the continents of the world which is

continuously expanding to meet the growing cross-border banking needs of the customers.

4.1.2- Human Resource Development

UCB has consistently been feeding the development requirements of employees in various

job grades with the requisite competencies enabling them to meet the changing business

needs and also to replenish employees retiring from Bank’s services. HR continued to infuse

fresh graduates and post-graduates as Probationary Officers and Trainee Officers during 2015

through a rigorous selection process. At the end of 2015, bank’s total number of employees is

3,837 as against 3,679 of the same date of 2014.

4.1.3 Information Technology

UCB is modern tech savvy bank. UCB is using latest, world proven infrastructure, hardware,

network, applications, and database etc solutions. Most of the solutions are centralized as a

result to manage; monitor, control and performance are optimum.

Currently, following technology functionality and solutions are running in UCB

Core Banking System (CBS) – Flex cube Universal Banking System.

Credit Card Management System – CardPro

Switching and Debit Card Management System – Tranzware Online.

Automated Clearing System – BACH & RTGS, EFTN

Mobile Financial System – Semicon

Central MIS System – UCB MIS

CBS Annexure System - Unex


4.1.4- Treasury Operations

Treasury of UCB generates income by the most efficient utilization of investment and

arbitrage opportunities in the market. It also responsible for measuring and monitoring of all

risks associated with the Bank’s local and foreign exchange exposure. The treasury team is a

combination of the most committed and skilled personnel capable of providing all kinds of

treasury solutions through wide range of products to our customers with superior service

quality. In 2015, UCB Treasury has played around with its specific priorities set at the

beginning of the year. We acted to optimize our priorities through following means in

maximizing overall profitability of UCB Treasury.

Discovering new avenues of investment which maximize portfolio size as well as

portfolio return.

Monitoring market behavior to take the market opportunities in the form of arbitrage

pricing etc

Exploring new opportunities especially in the fields of derivatives.

Optimum effort to build rapport with all our inter-bank and corporate counterparts.

Treasury Income Highlight

Year Amount (BDT Crore) Growth

2015 523.00 +14.28%

2014 457.66

To provide superior service with respect to pricing and cater the best possible solution to the

customers, UCB has four separate desks in Treasury Division which are:

Foreign Exchange Desk:- FX desk offers full range of FX Derivative products to the

customers which include Spot, Forward and Swap in FCY-BDT and other major cross

currencies. FX Desk makes forecast about future exchange rate movement on a

regular basis and maintains its open position according to its future projection

throughout the year.

Foreign Exchange Income


2015 86.01 +8.92%

2014 78.96

Money Market Desk:- Money market desk is involved in management of assets and

liabilities of the Bank. UCB Money Market Desk is one of the most active and

efficient desk in the interbank market.

Money Market & Investment Income


2015 50.70 +52.01%

2014 33.35

Fixed income & Security Desk:- UCB Fixed Income & Security Desk is responsible

for investment in various Govt. approved securities like Treasury Bill, Bond,

Bangladesh Bank Bill and other instruments which are qualified for Statutory

Liquidity Requirement (SLR). This desk ensured Banks SLR as per Bangladesh Bank

requirement.


Asset Liability Management Desk:- Treasury is the driving force of the Asset

Liability Management Committee (ALCO). It continuously offered strategies to

reduce dependency on rate sensitive deposit. In the year 2015 Bank successful

achieved healthy deposit Mix reducing High cost of deposit and increasing low & no

cost deposits without hampering growth of deposit

Asset Liability Management desk income


2015 386.29 +11.86%

2014 345.34

4.1.5- Import & Export Business

Bangladesh economy is growing at an average rate of 6% over the last two decades despite

natural disasters, political unrest and infrastructural deficiencies. In the year 2015, UCB

achieved a significant growth both import & export business. Total import business handled

was BDT 169,557.70 million while the export business transacted during 2015 was BDT

148,229.30 million. The growth rate of import & export trade was 9.19% and 13.63%

respectively over the corresponding period of 2014. The items of imports were industrial

raw materials, industrial machineries, commodities, wheat, Sugar, Lentils, Edible oil,

Cotton etc. Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

Import 169,577

.70

155,282

.40

117,542

.90

94,843.

80

90,919.

70

86,666.

50

58,857

.00

60,009.

00

60,329 39,853

Export 148,229

.30

130,447

.20

94,288.

50

78,309.

10

76,962.

80

50,712.

10

38,519

.00

36,500.

00

27,230 20,803

0.00

50,000.00

100,000.00

150,000.00

200,000.00

Import

0.00

50,000.00

100,000.00

150,000.00

Export


4.1.6 Foreign Remittance

In Bangladesh, remittance is one of the most important economic variables in recent times as

among others it helped in maintaining equilibrium in balance of payments, increasing foreign

exchange reserves and enhancing national savings. For about two decades, remittance has

contributed around 35% of export earnings of the country.

Considering the importance, UCB has entered into drawing arrangement with a good number

of Exchange companies in U.A.E, Bahrain, Oman, Kuwait, Qatar and in K.S.A. Bank has set

up a Remittance Processing Centre at Head Office with skilled and efficient human resources

in order to ensure seamless delivery of the proceeds of remittances through its 158 branches

in strategic locations having concentration of inward foreign remittance. Compare to previous

year 2014 (US$ 14.23 billion), the volume of remittances increases significantly in 2015

(US$ 15.32 billion). Business growth is 7.60% than the previous year (2014). Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006

Remittance 11,098.5

0

1,667.

90

10,788

.07

14,848.

30

16,802

.80

5,452.

10

4,914.

00

4,466.

00

5,456.7

1

2,671.53

4.2- SOURCES OF FINANCING

Banks need financing to fund operating constraints, invest in short- and long-run projects,

acquire or merge with other organizations and develop new products. They also raise funds to

meet financial market requirements or regulatory minimum balances. Corporate finance

specialists help banks evaluate and identify adequate capital structure models. Entities may

receive financing from investors or regulators

Main sources of financing that are commonly known and used by commercial banks are:

Deposits

Reserve Funds

Shareholders Capital

Retained Earnings

Central Bank Financing

Equity Issuance

Let’s have some theoretical knowledge about these sources:

0.00

5,000.00

10,000.00

15,000.00

20,000.00

Foregin Remittance


Deposits

The largest source by far of funds for banks is deposits; money that account holder entrust to the

bank for safekeeping and use in future transactions, as well as modest amounts of interest.

Generally referred to as Core Deposit, these are typically the checking and savings accounts

that so many people currently have.

Reserve Funds

A commercial bank builds a reserve fund with deposits so it can pay interest on accounts and

complete withdrawals. Ideally, a bank's reserve fund should be equal to its capital. A bank

builds its reserve fund by accumulating surplus profits during healthy financial years so that the

funds can be used in leaner times. On average, a bank tries to accumulate a fixed

percentage of its net profit to build and maintain its reserve fund.

Shareholders Capital

Some commercial banks that trade on the stock exchange can use shareholders' capital to

receive the money it needs to stay in business. For example, if a company sells shares on the

market, it increases both its cash flow and its share capital. This process is also known as

equity financing. Banks can only report the amount of capital that was initially on their

balance sheet. Appreciation and depreciation of shares do not count toward the total sum of a

shareholder's capital. Each time a bank makes a profit it can generally make two choices that

include paying dividends to their shareholders or reinvesting the money back into the bank.

Most banks utilize both options as they will retain a portion of the profit and pay the

remainder to their shareholders. The amount reinvested into the bank typically depends on the

company's policy and the condition of the stock market.

Retained Earnings

Banks use retained earnings, portions of income not distributed as dividends, to fund short-or

long-run investment needs. They analyze whether internal costs of funds are lower than

external costs. Entities usually don't use all profits retained for financing purposes because

they need to keep minimum cash balances to meet operating or regulatory requirements. A lot

of commercial banks earn retained earnings or fees to help fund their business. A retained

earning can be collected through overdraft fees, loan interest payments, securities and bonds.

Banks also charge fees for providing customers with services such as maintaining an account,

offering overdraft protection and also monitoring customers' credit scores.

Central Bank Financing

Banks may also raise funds for short-term initiatives from central banks. Commercial Banks

can sometimes face fund deficit and that time they can borrow money from central bank

with a fixed interest rate which is known as Call rate. In Bangladesh, Present call rate is

5.5%.

Equity Issuance

Banks may raise funds on securities exchanges by selling shares of equity also called stocks.

Buyers of equity or shareholders receive periodic dividends. They also make profits when

share prices increase. Banks not listed on securities exchanges may acquire funding

through private share sales to investors such as other banks, insurance companies or

private equity firms.


4.3- TEN YEARS FINANCIAL SUMMARY OF UCBL

(Figures in million Taka except ratios and per share data)

Profit and Loss Statement:

For the year ended 31 December

Result of operation Y2015 Y2014 Y2013 Y2012 Y2011 Y2010 Y2009 Y2008 Y2007 Y2006

Interest Income 22,434.

57

22,361

.83

22,999

.36

21,319

.92

15,352.

63

9,468.36 6,965.

32

5,749.2

9 4354 3036

Interest Expense 14,711.

18

14,430

.24

15,920

.86

14,705

.21

10,203.

21

5,632.95 4,348.

23

3,740.7

7 2727 1749

Net interest

Income

7,723.3

9

7,931.

59

7,078.

50

6,614.

71

5,149.4

2

3,835.41 2,617.

09

2,008.5

2 1627 1287

Non-interest

Income

7,824.0

0

7,279.

00

5,319.

00

3,564.

00

4,146.0

0

4,017.47 2,574.

97

2,100.9

1

1,696.

00

1,081.

00

Noninterest

Expenses

7,145.6

6

6,489.

93

5,272.

21

4,415.

44

3,321.4

6

3,120.76 2,066.

89

1,659.5

4

1,306.

00

1,047.

00

Gross Revenue 30,256.

19

29,639

.63

28,318

.44

24,882

.87

19,497.

58

13487 9540 7850 6052 4118

Gross Profit 15,548.

00

15,209

.39

12,398

.58

10,177

.66

9,294.3

7

7,853.88 5,192.

06

4,109.4

3

3,324.

00

2,368.

00

Operating Profit 8,402.3

4

8,719.

00

7,126.

00

5,762.

00

5,973.0

0

4,733.12 3,125.

17

2,449.8

9

2,017.

00

1,320.

00

Earnings before

Interest long,

debt,& Tax

8,254.7

3

7,571.

27

6,413.

71

4,008.

94

5,375.3

5

profit Before

Tax

7,252.0

0

6,836.

00

5,887.

00

3,739.

00

5,173.0

0

3,632.60 1,514.

86

1,463.0

1

1,667.

00

1,057.

00

Profit After Tax 3,977.00

3,669.00

3,065.00

1,586.00

2,946.00

2,182.43 932.9 764.75 815 581

Balance Sheet: Authorized

Capital

15,000.

00 15,000

15,000

.00

15,000

.00

8,000.0

0 8,000.00

1,000.

00

1,000.0

0 1,000 1,000

Paid-up Capital

10,039.

34

8,366.

00

8,366.

00

8,366.

00

7,275.0

0 2,910.00

1,194.

00 299 299 230

Shareholders'

Equity

25,588.

82 22,492

20,505

.00

18,171

.00

15,966.

00 7,817.27

5,705.

47

4,384.2

4 3,137 2,322

Borrowing

10,705.

57

6,024.

88

6,993.

51

4,713.

33 -

Deposit

220,866

.48

211,07

2

184,89

7.00

170,53

1.00

139,485

.00

113,071.

00

77,730

.00

54,485.

00 42,295 33,015

Loan & Advance

197,413

.64

174,14

6

148,66

5.00

136,07

2.00

115,506

.00

93,460.0

0

61,692

.00

4,446.0

0 37,566 26,110

Investments

44,345.

73

44,288

.6

35,587

.25

26,090

.32

19,383.

42

15,048.0

0

9,346.

00

7,201.0

0 5,517 6,100

Fixed Assets

8,586.7

3

8,510.

00

7,957.

31

5,222.

78

3,288.0

9 1,966.35

1,305.

81 999.91 422 291

off Balance sheet

Exposure

150.713

.79

144,55

4

67,094

.00

52,153

.00

40,255.

00

40,797.7

4

22,098

.19

18,085.

80 24,162 15,260

Total Asset

293,847

.23

266,10

1

226,33

3.00

207,44

8.00

168,892

.00

129,877.

03

90,483

.78

64,794.

86 50,180 38,547

Total Liability

268,258

.41

243,60

9.00

205,82

8.00

189,27

7.00

152,925

.00

122,059.

76

84,778

.32

60,410.

62

47,043

36,225


Share

information Y2015 Y2014 Y2013 Y2012 2011 2010 Y2009 Y2008 Y2007 Y2006

Market Price Per

Share

21.3 29.3 25.1 23.6 43.9 34.12 31.9 31.9 33.1 32.9

No. of Share

outstanding

1,003.9

3

836.61 836.61 836.61 836.61 - 11.94 2.99 433 433

Earnings Per

share basic

3.96 4.39 3.66 1.9 4.2 7.49 3.21 2.63 2.8 2

Earnings Per

share restated

3.96 3.65 3.05 1.58 2.93 2.61 1.12 0.91 1.55 2.33

Dividend

Percent

25 30 20 10 27 25 30 25 27 25

Cash dividend

Percent

20 10 20 10 12

Stock Dividend

Percent

5 20 - - 15

Net Asset Value

Per Share

25.49 26.88 24.51 21.72 21.95 2.86 4.77 14.65 20.3 21.1

Price Earnings

Ratio (times)

3.38 6.68 6.85 12.42 10.45 30.23 10.23 12.48 13.5 15.1

Dividend Cover

Ratio

158.47 146.17 183.2 189.59 149.97

Dividend Yield (percent)

11.74 10.24 7.97 4.24 6.15

Market Capitalization

21,383.79

24,512.72

20,998.95

19,744.03

31,936.74

659,686.46

380,830

95,446.36

60,295.34

45,560.02

Financial ratio (%) Y2015 Y2014 Y2013 Y2012 Y2011 Y2010 Y2009 Y2008 Y2007 Y2006

Cost- income

ratio 45.96 42.67 42.52 43.38 35.74 39.74 39.81 40.38 40..39 38.39

Credit- Deposit

Ratio 84.57 78.92 79.81 79.79 82.81 82.35 79.37 81.85 85.06 80.03

Debt Equity

ratio (time) 9.36 9.85 9.19 9.45 8.74 14.46 13.62 12.43 13.12 14.3

Gross profit ratio 51.38 51.31 43.78 40.9 47.67

Current ratio 113.92 112.94 112.57 80.48 87.05

Return on

capital

Employed 12.27 13.1 12.17 8.17 24.77

fund Operational

efficiency ratio 40.46 45.35 44.47 -20.38 -30.61

operational profit

% work fund 44.02 49.86 44.77 -17.75 -35.51

Return on

Assets 1.42 1.49 1.41 0.84 1.97 1.68 1.03 1.18 1.62 1.51

Return on

equity 16.54 17.07 15.85 9.29 24.77 27.92 16.35 17.44 25.98 25.05

Burden

coverage ratio 109.5 112.16 100.89 80.72 124.82 128.77 124.58 126.6 115.09 109.05

CASA deposit

% Total deposit 25.14 21.08 16.69 14.97 124.82

Cost of fund 9.18 10.16 11.66 12.46 10.09 9.81 10.72 11.32 10.76 10.48

Yield on

advance 11.75 13.87 16.21 16.23 14.81 12.89 13.78 14.02 12.36 13.09

Spread 2.57 3.71 4.55 3.77 3.72


Foreign

Business: Y2015 Y2014 Y2013 Y2012 Y2011 Y2010 Y2009 Y2008 Y2007 Y2006

Import 169,577

.70

155,28

2.40

117,54

2.90

94,843

.80

90,919.

70

86,666.5

0

58,857

.00

60,009.

00 60,329 39,853

Export 148,229

.30

130,44

7.20

94,288

.50

78,309

.10

76,962.

80

50,712.1

0

38,519

.00

36,500.

00 27,230 20,803

Remittance 11,098.

50

1,667.

90

10,788

.07

14,848

.30

16,802.

80 5,452.10

4,914.

00

4,466.0

0

5,456.

71

2,671.

53

No foreign

correspondence 537 532 363 357 333 296 274 257 235 213

Capital

Measures: Y2015 Y2014 Y2013 Y2012 Y2011 Y2010 Y2009 Y2008 Y2007 Y2006

Total risk

weighted

Assets

273,327

.11

243,25

0.40

197,38

0.55

177,90

0.41

155,231

.89

145,130.

09

128.23

3.14

117,432

.06

109.30

0.11

96,654

.45

Tire 1 Capital 22,406.

21

19,265

.48

17,269

.97

15,041

.18

14,278.

04

13,021.0

3

11,235

.66

10,924.

37

8,564.

13

6,965.

44

Tire 2 Capital 10,820.

24

6,425.

70

5,488.

79

3,414.

56

2,599.0

2 2109.06

1905.1

1 1500.07

1104.4

4 805.33

Total Capital 33,226.

45

25,691

.18

22,758

.76

18,455

.74

16,877.

06 15955.77

13,088

.09

11344.3

4

9875.0

5

8674.0

3

Tier 1 Ratio % 8.2 7.92 8.75 8.45 9.2 8.04 7.8 9 7.02 8.11

Tier 2 Ratio % 3.96 2.64 2.78 1.92 1.67 1.55 1.88 2.44 1.76 2.01

Capital

Adequacy

Ratio %

12.16 10.56 11.53 10.37 10.87 10.55 13.03 11.33 10.37 9.88

Required

Capital

27,332.

71

24,325

.04

19,738

.05

17,790

.04

15,523.

19 14,215 12875 11,453 10,689 9,745

Capital Surplus

(shortage)

5,893.7

4

1,366.

14

3,020.

71 6657

1,353.8

7

Liquidity

Measures: Y2015 Y2014 Y2013 Y2012 Y2011 Y2010 Y2009 Y2008 Y2007 Y2006

Cash received

Requirement % 6.82 7.4 6.35 6.29 6.8 7.08 6.33 6.64 5.99 6.49

Statutory

Liquid ratio% 19.68 23.57 21.85 17.84 16.67 17.13 16.22 16.98 15.31 16.44

Current Assets

156,194

.81

152,64

4.65

142,57

0.40

133,80

4.72

113,016

.55 10,029

7,003.

75

4,745.9

0

4,116.

91

Current

Liability

137,106

.88

135,15

6.26

126,65

2.28

166,26

2.80

129,836

.06

Net Current

Assets

19,087.

93

17,488

.39

15,918

.12

-

32,458

.08

-

16,819.

51

Long term

Liability

131,151

.53

108,45

2.94

79,175

.89

21,814

.54

23,089.

63

Long term

Liability/

Current

Liability

95.66 80.24 62.51 13.12 17.78


4.4- KEY OPERATING AND FINANCIAL RESULTS

UCB recorded a remarkable growth in last eight years in term of business volume and

profitability. At the end of 2011, total assets of the Bank was BDT 168,892 million whereas in 2015 it stood at BDT 293,847 million recording a growth of more than 74%. In last ten year, deposit growth was about 58.34% and loans & advances growth was about 72.00%.

With the increase of business volume, the profitability of the bank has also increased significantly. In 2006, operating profit of the bank was BDT 1,320.00 million whereas it was

BDT 8,402.34 million in 2015 recording a growth of more than 242.97%.

4.4.1 Net Interest Income

Net interest income during the year stood at BDT 7,723.38 million less than previous year of

BDT 1,287.00 million which is equivalent to -3.69% negative growths over previous year.

4.4.2 Operating Profit

The total operating profit of the Bank for the year 2015 stood at BDT 8,402.34 million in

comparison to BDT 8,719.46 million of 2014. The bank’s operating profit in 2015 which

shown negative growth of (3.77%) over previous year. But significant growth of non-interest

income contributed the highest to reach at the operating profit of 2015. Non-interest income

was BDT 7,824.92 million which was 7.49% higher than previous year.

4.4.3 Net Profit

In 2015, Bank’s net profit after tax increased by BDT 308.61 million which equivalents to

8.41% over the year 2014. On 31 December 2015, net profit after tax stood at BDT 3,977.34

million.

0.00

5,000.00

10,000.00

Net interest Income

0.00

5,000.00

10,000.00

Operating Profit

0.00

5,000.00

Net Profit


4.5- BALANCE SHEET REVIEW

At the end of 2014, total assets of the Bank stood to BDT 266,100.74 million from BDT 226,333.13 million in 2013 registering a growth of 17.57%. Total liabilities also increased to BDT 243,609.20 million from BDT 205,828.17 million in previous year. All the major

elements of balance sheet have shown a significant growth over previous year. All the major elements of balance sheet have shown a significant growth over previous year. Performances

of major elements of balance sheet are shown as under:-

Year 2015 2014 Growth %

Total assets 293,847 266,101 10.43%

Total liabilities 368,258 243,609 51.17%

Paid up capital 10,039 8,366 20.00%

Shareholders' equity 25,589 22,492 13.77%

Deposits 220,866 211,072 4.64%

Loans and advances 197,414 174,146 13.36%

Investments 44,345 44,289 0.13%

Fixed assets 8,587 8,510 0.90%

4.5.1 Total Assets

Total asset of UCB stood at BDT 293,847.23 million as on 31 December 2015 as against

BDT 266,100.74 million of previous year registering a growth of 10.43% over the year 2014.

Among total assets, loans and advances is BDT 197,413.64 million in 2015 recording a

growth of 13.36% over previous year. Performance of assets in 2015 of UCB is shown in

following table:-

Assets 2015 2014 Growth (%)

Cash 17,960.68 18,387.16 -2.32%

Balance with other banks & FIs 10,705.57 6,024.88 77.69%

Money at call on short notice 390.00 2,190.00 -82.19%

Investments 44,345.73 44,288.60 0.13%

Loans & advances 197,413.64 174,146.10 13.36%

Fixed Assets 8,586.73 8,510.00 0.90%

0.00

100,000.00

200,000.00

300,000.00

400,000.00

Total Asset


4.5.2 Loans and Advances

UCB’s loans and advances increased by BDT 23,367.54 million during the year 2015 and stood at BDT 197,914.64 million which was BDT 174,146.10 million in 2014 showing a substantial growth of 13.36% over the previous year. Concentration of loan and advances was

well managed. The ratio of non-performing loan was 5.23% which is much lower than the industry average. The Bank continued its participation in different credit program for

financing in industrial projects, import, export, house-building, retail, agricultural etc.

4.5.3 Deposits

During the year 2015, total deposits of the Bank increased by BDT 9,794.42 million and stood at BDT 220,866.48 million which was BDT 211,072.06 million in 2014 representing growth of 4.64% over the year 2014. There are 34 deposits products in the Bank.

4.5.4 Investment

UCB’s investment has almost remained the same as previous year. It increased by only about 0.13% during the year 2015 and stood at BDT 44,345.73 million which was BDT 44,288.60

million in 2014. Investment in Govt. securities decreased by 0.14% enough to maintain surplus Statutory Liquidity Ratio (SLR) of BDT 14,723.44 million at the end of 2015. Direct

investment increase in capital market by Tk. 112.64 million which growth 6.55% than year 2014.

0.0050,000.00

100,000.00150,000.00200,000.00250,000.00

Loan & Advance

0.00

100,000.00

200,000.00

300,000.00

Deposit

0.00

20,000.00

40,000.00

60,000.00

Investments


4.6- GRAPHICAL PRESENTATION OF FINANCIAL RATIOS

4.6.1 Earnings per Share (EPS) In the year under review, Earnings per share (EPS) stood at BDT 3.96 which was BDT 3.65 in previous year. Bank’s EPS increased during the year 2015 due to substantial increase of

net profit.

4.6.2 Return on Equity (ROE) ROE calculated by Net Income after Taxes by Total Equity demonstrate the rate of return generated by the funds invested on the bank by its shareholders. ROE indicates the level of risk of banks associated with borrowed money in order to finance their assets. A lower index

means that banks rely on borrowed money, thus aggravating capital risk. In the year 2015, ROE stood at 16.54% which was 17.07% in the previous year.

4.6.3 Return on Asset (ROA) ROA calculated by Net Income after Tax by Total Asset, is the rate of return earned on a bank’s total asset. Return on Asset indicates management efficiency in producing net income

from all its resources (assets) available to the bank. The measure of ROA is attributed to the fact that using net income for the purpose of funding within the financing structure to establish an incentive and target for many institution to increase their return on investment

(ROI). In the year 2015, ROA stood at 1.42 whereas it was 1.49 in the previous year.

0

10

Earning Per share (EPS)

0102030

Return on equity

00.5

11.5

2

Return on Assets


4.6.4 Cost of Fund

In the year 2015, the Bank’s cost of fund stood at 9.18. On the other hand, it was 10.16 in the

previous year of 2014.

4.7- GRAPHICAL REVIEW IN IMPORTANT AREA

0

5

10

15

Cost of fund

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

Y-2

01

5

Y-2

01

4

Y-2

01

3

Y-2

01

2

Y-2

01

1

Y-2

01

0

Y-2

00

9

Y-2

00

8

Y-2

00

7

Y-2

00

6

Shareholders' Equity

0

2

4

6

8

10

12

14

Capital Adequacy Ratio %

0

2

4

6

2015 2014 2013 2012 2011

5.2

3%

4.6

2%

4.0

3%

3.6

9%

1.7

9%

NPL %

0

5

10

15

20

25

30

Net Asset Value Per Share


Chapter 05 Findings, Recommendation & Conclusion


5.1- FINDINGS OF STUDY

The topic of my report is “Performance Analysis of United Commercial Bank Limited” The

total number of historical data that was taken inconsideration was Ten years starting from 31,

December 2006 to 31 December 2015.

There are some important findings are given below which is discovered during the research

and work experience in UCB;

Performances of different segments of UCB have found.

Key operational functions that involve in making business.

Different financial ratios have been evaluated.

A brief discussion about the sources of financing of UCB.

Factors that involved in evaluating performance have found broadly but discussed in

this report in very short manner.

Graphical presentation of different financial ratios showed its current achievement.

5.2- RECOMMENDATIONS

As an employee under Branches Control & Development Division (BCDD) of the United

Commercial Bank, I feel proud because most of the time I prepared different report for the

Top Management of the Bank with the help of Finance & Accounts Division in United

Commercial Bank Ltd. Corporate Head Office, where I found that every division are helpful

in respect of business issue of the bank’s. Some of my senior colleagues in my Division and

Finance & Account Division were help me to prepare this report. The bank corporate office is

highly well-planned than the Branch office.

I would like to recommend the following things:

Different segmental performance should be increased more.

Evaluations of operational functions are not satisfied.

Performance of financial ratios should be increased more.

Maintain their sources of financing strictly according to their budget.

Some of the performance evaluation factor should be concentrated.

Sometimes, they cannot observe the accurate achievement because of their

unconsciousness.


5.3- CONCLUSION

Private commercial banks are playing a vital role in the development of our economy.

Government and Bangladesh Bank also play a crucial role in banking sector by regulating the

overall banking systems and setting rules and regulation in the activities of commercial

banks. In recent years of banking sector, UCBL has shown better performance comparing

with other first generation banking. So I want to find the determinants that determine UCB’s

profitability. The main objective this study was to determinate and evaluate the effects of

banking profitability of UCB. The objective was to determine and evaluate the effects of

bank-specific factors expressed within the segmental analysis. From the discussion of the

findings above, it can be concluded that the bank-specific factors such as net profit, total

asset, non-interest income, ROE, ROA etc. The study sought to investigate factors that

influence profitability of UCB. But it can be extended to include other banks to study the

determinants of profitability of banking industry in Bangladesh. However if this study is

extended to the entire banking industry in Bangladesh where all banks operate then the

variables used in the study were not exhaustive. Future research could incorporate

macroeconomic variables such as GDP, inflation and exchange rates. Also a study on the

factors influencing the liquidity position of commercial bank in the country could add great

value to the performance of local banks and academic literature.


5.4- REFERENCES

Books:

1. Bank Management & Financial Services” 6th Edition. McGraw-Hill Singapore.-

Peter S. Rose & Sylvia C. Hudgins (2005)

2. Aburime, U. (2008). Determinants of Bank Profitability: Company-Level Evidence

from Nigeria. [Online].October 2008. Retrieved from:

http://ssrn.com/abstract1106825.

3. Bashir, A.H.M. (2008). Determinants of Profitability in Islamic Banks, Islamic

Economic Studies, Vol. 11, No. 1, pp 31-57.

4. Kargi, H.S. (2011). Credit Risk and the Performance of Nigerian Banks,

AhmaduBello University, Zaria.

Reports:

5. United Commercial Bank (2006-2015) Annual Report. United Commercial Bank Ltd.

Websites:

6. United Commercial Bank website: http://www.ucbl.com/

7. United Commercial Bank Limited: http://bankinfobd.com/banks/44/United_Commercial_Bank

8. http://www.Assignment point.com

9. www.google.com

http://ssrn.com/abstract

http://www.ucbl.com/

http://bankinfobd.com/banks/44/United_Commercial_Bank

http://www.google.com/

Dissertation Report On United Commercial Bank Ltd. (UCBL)

Education

Transcript of Dissertation Report On United Commercial Bank Ltd. (UCBL)