3. last part

Financial Performance Analysis of LankaBangla Finance Ltd.

Chapter One : Introductory Part

1.1 Background of the Report

1.2 Origin of the Report

1.3 Objective of the Report

1.4 Scope of the Report

1.5 Methodology of the Report

1.6 Limitations of the Report

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1.1. Background of the Report

Today more and more people are converging to NBFI. This is because of the fact

that comparing to the banks, NBFIs process the customer request for credit quick. In

addition, some clients do not qualify for bank finance because of the organization’s

preset policies. The NBFI take advantage of this. Further more, bank finance

frequently asks for collateral security and even more security deposit is asked when

equipment is financed. On the other hand, NBFIs, as they finance equipment and

machineries on lease, in most cases they do not ask for additional security. Many

clients prefer leasing on account of the tax advantage Moreover, Leasing offers

opportunities for higher returns to the NBFI.

In Bangladesh, The financial market is extremely competitive. Today the number of

NBFIs is 29 which are large for a country like ours. The competition is getting

intense among the institutions everyday. The competitive environment for FIs is

even more challenging, as they have to compete with banks, which have low cost

and even zero cost funds. To have better response from the customers, better quality

is highly necessary. The more efficient and prompt service NBFI provide, the more

competitiveness they attain.

Being a NBFI, LankaBangla Finance Limited (LBFL) has to concentrate on that

theme. Since leasing is the core business of LBFL, the policy and practice of lease

financing is crucial for them. LBFL runs periodical client demand analysis on the

existing and future clients. Based on that analysis they have reached to a proposition

that clients look for better quality of services rather than lesser interest rate.

This research is aimed to find out the Lease financing performance of LBFL and its

competitive position in the Leasing industry.

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1.2. Origin of the Report

The MBA internship program is a mandatory requirement for the students who wish

to be a MBA degree holder. In the internship program, I was attached to host

organization named “LankaBangla Finance Limited” for three months at their

“Credit and Investment Department”. This paper has been prepared to submit to

Chairman, Department of Finance of Dhaka University as a partial requirement for

MBA program.

1.3. Objective of the Report

1.3.1. Broad Objective

Finding out and analyze the lease financing performance of LBFL as well as

competitive position in the industry.

1.3.2. Specific Objective

LBFL is a key player in Bangladesh lease market. It plays a vital role in industrial

development of Bangladesh as well as developing other sectors. The specific

objective of this report is to find out:

The amount and growth rate of different type of investment by LBFL

The sources of fund for investment

Changes in investment pattern over the years

Amount of income from different investment segments and their changes

and growths

Key performance of the company in comparison to other players in the

industry

Lease financing activities : amount of investment, amount of income,

average and growth rates over the year in time series basis

Lease financing activities: amount of investment, income, average,

growth rates in comparison to other companies, etc.

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1.4. Scope of the Report

The research is done with in the limit of financial activities like investment portfolio,

income from investments, different type of expenses, provisions made for these

investments, different type of investments, changes in investment amount and

interest income, etc.

1.5. Methodology of the Report

Both primary sources and secondary sources had been used for the analysis.

Primary Data: Primary sources of data included interviews with officials of

the organization as well as other knowledgeable person in the industry. Some

data are not available in the financial statements which are collected directly

from institutions officials.

Secondary Data: The secondary sources of data were financial statements,

year books, published information, information in the Internet and theoretical

knowledge and suggestions of the intern supervisor and respondents.

Different tools are used to analyze the financial performance of LBFL. Some of

them are different mathematical formulas used for finding growths, average, etc.

Time series and cross sectional analysis also done. Table, bar chart, line graphs,

etc are used to present the findings of the research.

For this paper, both qualitative and quantitative methods have been followed to find

the lease financing performance of LankaBangla Finance Limited (LBFL).

The quantitative methods are used to analyze the performance of lease

activities of LBFL, its position with other companies. The quantitative

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methods includes but not limited to time series analysis, cross-sectional

analysis, analysis on the basis of average, growth rates, etc.

The qualitative approach was used to learn about the theoretical back

ground including policies, strategies procedures, attributes of specific

investment segments and other issues

1.6. Limitation of the Report

The study may be subject to following limitations:

Inadequate data and information;

Validity and reliability of data and information;

Confidentiality and reluctance of the target group;

Time and resource constraints.

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Chapter Two : Study of the Organization

2.1 LankaBangla Finance Limited (LBFL) at a Glance

2.2 Shareholding Structure

2.3 Name of Directors of Board

2.4 Services Offered by LBFL

2.4.1 Lease & Loan

2.4.2 Credit Card

2.4.3 Corporate Finance

2.4.4 Merchant banking

2.4.5 Stock Brokerage Services

2.4.6 Treasury Operations

2.5 Strategic Analysis

2.5.1 Mission of LBFL

2.5.2 Vision

2.5.3 Corporate Goals

2.5.4 Values

2.6 Organizational Structure

2.7 Human Resource Practice at LankaBangla

2.8 Credit and Investment Department

2.8.1 Services Offered

2.8.2 Business Strategy

2.8.3 Major Functions

2.9 Performance Analysis

2.9.1 Market Scenario

2.9.2 Credit Rating of LBFL

2.9.3 Market Share of LankaBangla Finance

2.9.4 Ratio Analysis of LankaBangla Finance Limited

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1.7. LankaBangla Finance Limited (LBFL) at a

Glance

LankaBangla Finance Limited (LBFL) is a joint venture financial institution having

sponsor shareholder from Bangladesh, Srilanka and Singapore. It started its

operations in Bangladesh as “Vanik Bangladesh Limited (VBL)” as a multi product

financing company in 1997 under the Financial Institutions Act-1993.

VBL was established through collaboration between Vanik Incorporation Limited, a

leading financial institution of Sri Lanka and some foremost Bangladeshi

entrepreneurs. Within a few years VBL has marked its strong presence in the leasing,

credit card and corporate finance sector.

In 2003, the company entered into a new dimension with fresh equity investments

from Sampath Bank Limited, one of the leading commercial banks of Sri Lanka and

the then Chinkara Capital Limited (now First Gulf Asia Holdings Limited), a

Singapore based multi faceted asset management and investment banking company

with investments throughout ASEAN, South Korea and the Middle East and Europe.

This investment doubled the paid up capital of the company and helped it to expand

its operations tremendously. The trend continued in the following years and in 2004

One Bank Limited became equity partner. Thus the total paid up capital rose to Tk.

260 million in early 2005 from Tk. 100 million in 1998.

In order to reflect the ongoing changes in ownership and operations, the company

was renamed as ‘LankaBangla Finance Limited’ in May 2005 with a commitment

to contribute more in building up a robust financial sector in the country.

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1. Study on the Organization


In August 2006, the Company offered shares to the general public amounting Tk. 90

million through IPO. With this raise the paid up capital of the Company will reach

Tk. 350 million.

Some major milestones of the company are listed below –

Milestones Year

Incorporation of the company 5th November 1996

Issuance of Bangladesh Bank License as NBFI 30th October 1997

Commencement of Business 5th November 1996

Registration of First Subsidiary(LBSL) 3rd July, 1997

Licensed as Financial Institution by Bangladesh Bank 30th October, 1997

Listing on Dhaka Stock Exchange 17th October, 2006

Listing on Chittagong Stock Exchange 31st October, 2006

Licensed as Merchant Banker 22nd January 1998

Trading of share in Stock Exchanges 1st November, 2006

Commencement of Operation of Chittagong Branch 10th February, 2007

Registration of Second Subsidiary (LankaBangla Asset

Management Company Ltd.)

16th July, 2007

First disbursement of Domestic Factoring 11th December, 2007

First disbursement of Mortgage Loan 18th February, 2007

Launching of MasterCard 5th September 2005

Commencement of Operation of Sylhet Branch 27th April, 2009

Commencement of Leasing Business March 1998

Signing of First lease Agreement 30th March 1998

Commencement of Credit Card Business August 1998

Issuance of First Credit Card 16th August 1998

Licensed as Primary dealer 23rd November, 2009

Issuance of First VISA Card 24rt November, 2009

Participation in the 1st Auction of Govt. Security as Primary 1st December, 2009

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Dealer

Registration of Third Subsidiary (LankaBangla Investments

Limited)

29th March, 2010

Table 1: Major Milestones

The registered office of LankaBangla Finance Limited is located at 20, Kemal

Ataturk Avenue, Banani, Dhaka. It also has a branch office at Agrabad, Chittagong.

LBFL incorporates the operation of its 99.99% owned subsidiary LankaBangla

Securities Limited (LBSL) which is a leading share brokerage house in Bangladesh

and LankaBangla Investments Limited (LBIL).

1.8. Share Holding Structure

LBFL holds a strong parental support reflected in its shareholding structure with

foreign and domestic investors. Its foreign shareholders hold 46.15% of total

outstanding shares, while local shareholders hold 53.85% of outstanding shares (As

on December 2008)

Shareholding position of LBFL is given below:

Name Share Holding (in Taka) Percentage

Foreign Shareholder

(Institution)

60,000,000 11.29%

Sampath Bank PLC, Sri

Lanka

720,000 0.14%

First Gulf Asia Holdings

Limited

Local Share Holder

(Institution)

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One Bank Limited 40,000,000 7.53%

SSC Holdings Limited 5,700,000 1.07%

Shanta Apparels Limited 9,800,000 1.84%

Individual

Mr. Mohammad A. Moyeen 22,522,990 4.24%

Ms. Jasmine Sultana 6,000,000 1.13%

Ms. Aneesha Mahial

Kundanmal

41,474,000 7.81%

Mr. Mahbubul Anam 23,663,000 4.45%

Mr. Tahsinul Haque 20,700,000 3.90%

Table 2: Shareholding Structure

1.9. Name of Directors of the Board

Sl.

No

.

Name of Equity Sponsor Name of Director Designation

1 Mr. Mohammad A. Moyeen Mr. Mohammad A. Moyeen Chairman

2 Mrs. Jasmine Sultana Mrs. Jasmine Sultana Director

3 Mrs. Aneesha Mahial

Kundanmal

Mrs. Aneesha Mahial Kundanmal Director

4 Mr. Tahsinul Huque Mr. Tahsinul Huque Director

5 Mr. Mahbubul Anam Mr. Mahbubul Anam Director

6 Sampath Bank Limited Mr. I. W. Senanayake Director

7 Sampath Bank Limited Mr. G.L.H. Premaratne Director

8 SSC Holdings Limited Mr. Mirza Ejaz Ahmed Director

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9 One Bank Limited Mr. Farman R. Chowdhury Director

10 Mr. Salahuddin Ahmed Mr. Salahuddin Ahmed Independent

Director

11 Ex Officio Mr. Mohammad Nasiruddin

Chowdhury

Managing

Director

(Acting)

Table : List of Directors

1.10. Services offered by LBFL

The mainstream (revenue generating) divisions of the organization are Credit &

Investment Division (CID), Credit Card Division, Merchant Banking Division

(MBD), and Stock Brokerage Service Division (though its subsidiary – LankaBangla

Securities Limited

1.10.1. Lease & Loan

The company started its leasing operations in March 1998. Initially the focus was

only on Lease for purchase of machinery, equipment needed for new project

establishment, expansion, replacement, and modernization of business, and Sale &

Leaseback facilities. Gradually product range has been increased to include Medium

Term Loan, Short-Term loan for corporate houses and Car Lease for Individuals

(professionals & businessman). The Company is in the process of initiating work

order financing, bill discounting, etc.

1.10.2. Credit Card

LBFL started its Credit Card Operations with its own brand ‘Vanik’ during the year

1998. LBFL (then VBL) is the only company among the Non-Banking Financial

Institutions (NBFI’s) to launch the first indigenous credit card. Since then customer

base has exceeded 15,000 and merchant (shops, hotels etc. who accepts credit card)

base is over 2,800.

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Credit Card Department of LBFL provides two types of Credit Cards:

1) Gold Credit Card

2) Classic Credit Card.

The distinguishing features for these two Cards basically lie in the salary or income

group. The minimum fixed monthly income expected for Classic Cardholder is Tk

15,000 or Security Deposit of Tk 50,000. And for a Gold Cardholder is Tk 50,000

fixed monthly income or a Security Deposit of Tk 200,000.

Credit card operations were expanded to Chittagong & Cox’s Bazar in 2003. In

September 2005, the Company started issuing MasterCard Credit Card, an

internationally reputed brand Credit Card with more features and benefits to the

customers.

Credit Card offered by LBFL, an indigenous domestic credit card has got technical

back up from Golden Key Credit Card Company of Sri Lanka. The product is unique

to other international cards in many respects. They can streamline product attributes

anytime to suit the requirements of the customers.

1.10.3. Corporate Finance

Corporate Finance is another key business of LBFL. The activities of the Corporate

Finance department concentrate on offering the following services:

Mergers and Acquisition Activities

Financial Restructuring

Syndication of Loans

Placement of Equity Capital And Debt Instruments

Venture Capital Financing

Financial and Corporate Advisory Services

The legacy of LBFL is rich with participation in financing projects having social

commitments both in service and manufacturing sector

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1.10.4. Merchant Banking

The Merchant Banking license from Securities & Exchange Commission (SEC) was

obtained in 1998. Underwriting of Initial Public Offering (IPOs), active participation

as Issue and Portfolio Manager to important issues to be floated will continue to be

intensified. Some of the landmark issues successfully managed is the IPO and Right

Issue of Dhaka Bank Limited and Al-Arafah Islami Bank Limited including

underwriting a number of issues namely Daffodil Computers Limited, Bank Asia

Limited, Exim Bank Limited etc.

1.10.5. Stock Brokerage Service

LBFL has inherited a resourceful subsidiary stock Brokerage Company which is one

of the leading Brokerage House in Dhaka Stock Exchange (DSE) and Chittagong

Stock Exchange (CSE). It is also the authorized broker for internationally reputed

fund managers.

1.10.6. Treasury operations

Treasury operations are carried out by Treasury Department Current funding sources

of LankaBangla consist of 5 instruments, which are as follows:

o Term loan (long term/ short term/ placement0

o Term deposit

o Overnight borrowing (call loan)

o Overdraft facility (secured/unsecured)

o Lease deposit

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1.11. Strategic Analysis

1.11.1. Mission of LBFL

To be the most sought after facilitator in creating wealth.

To recognize shareholders’ expectations and optimize their reward

1.11.2. Vision

LBFL cherishes the vision to be one of the five big NBFIs in terms of volume of

business and establish itself as a true multi-product financial institution

1.11.3. Corporate Goals

To exceed customer expectations through innovative financial products and

services

To establish a strong regional presence

To recognize shareholders’ expectations and optimize their reward

To be in top 5 in 2008 and top 3 within 2011.

1.11.4. Values

To maintain the highest ethical standards

To foster entrepreneurial spirit amongst employees

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1.12. Organizational Structure

LBFL Operates on a functional organizational structure. The functional divisions are

leasing Credit card corporate financing and merchant banking finance and

ministration and information technology. The total workforce strength of LBFL is

63. Managing Director Heads the organization, MD is assisted by various

Management committees besides audit Department and the company secretariat

Department directly report the Board. Lease /Loan Merchant Banking and

Administration Department are headed by senior Executive Vice President. Credit

card Department is headed by senior Vice president. The total Strengths of Lease

/loan, credit card and corporate and merchant banking is 44 and that of finance

administration and IT is 19.

1.13. Human Resource Practice at LankaBangla

Human Resources (HR) is about supporting and developing people to deliver

outstanding business performance. To do this Lanka bangle is creating a culture that

empowers people, that they can play a full role in achieving LankaBangla’s business

objective; as well as their personal and career goals. They’re also involved in

creating future leaders through promoting their 'leadership behaviors.' Roles in HR

involve developing and implementing strategies and policies that ensure they have

the right people with the right skills. LankaBangla is a professionally managed

company that has built for itself a stimulating work culture that empowers people,

promotes team building and encourages new ideas. This has, over the years, enabled

this company

Human Resource programmers and initiatives, in LankaBangla’s are aligned to meet

the business needs. The Company believes in investing in people to develop and

expand their capability. The Company has been able to create a favorable work

environment that motivates performance, customer focus and innovation.

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The company strategies are based, inter alias, on processes of continuous learning

and improvement. It has a unique process of performance enhancement through

deployment of MBR (Management by Results) to create an environment of challenge

and provide opportunities for realization of optimum performance.

1.14. Credit and Investment Department

During my three months of work experience with LankaBangla Finance Limited on

my internship program, I was placed in the Credit and Invest Department Card

Service. I joined the program in October 01, 2009. The department provides loan and

lease facilities which is the core business of LBFL. I have gathered valuable

knowledge regarding lease financing practice in last three months

1.14.1. Services Offered

Lease Financing Activities are carried out by Credit and Invest Department. They

provide credit facility on Lease for purchase of machinery, equipment needed for

new project establishment, expansion, replacement, and modernization of business,

and Sale & Leaseback facilities. Product range also includes Medium Term Loan,

Short-Term loan for corporate houses and Car Lease for Individuals (professionals &

businessman). The Company is in the process of initiating work order financing, bill

discounting, etc.

1.14.2. Business Strategy

The business strategy of the leasing operation was adopted through a detailed macro

economic analysis, sectoral analysis of business, market segment analysis and

competitor analysis. Based on the above analyses a sectoral policy, client selection

policy, appraisal procedure and criteria and five years’ roll over business plan had

been adopted.

a) Long Term Strategy: The long-term strategy is to build up a portfolio,

which is a balanced mix of organized & matured segments and emerging

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segments. The ultimate objective is to achieve an above normal profit level.

The organized segment will contribute to regular cash flow while the

emerging segments will provide premium for profit.

b) Short Term Strategy: The short term strategy of VBL is to develop

portfolio having concentration of organized segments to attain regular cash

flow, e.g. Banks, Insurance companies and financial Institutions

Multinational Companies, etc.

1.14.3. Major Functions

The major functions of Credit and Investment Department

i. Marketing

ii. Credit implementation

iii. Credit administration

The marketing function of Credit and Investment Department starts from making

promotional offer to the probable borrower, proposal collection, making appraisal

report on applicants and interpreting income up to approval for lease. LBFL follows

well structured credit appraisal and approval process for its lease and loan division.

Credit implementation functions include documentation of lease agreement and

disbursement of credit amount. Disbursement takes place only after doe approval and

when the documentation is fully completed.

Credit administration function is mainly monitoring and recovery of lease amount. It

has credit risk committee to monitor credit administration.

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Chapter Three : Performance Analysis

3.1 Market Scenario

3.2 SWOT Analysis

3.3 Credit Rating of LBFL

3.4 Market Share of LankaBangla Finance

3.5 Ratio Analysis of LankaBangla Finance Limited

3.6 Strategy for the upcoming Future

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2.

2.1.Market Scenario

There are 54 Scheduled Banks (SB) in the Country at the end of December 2010.

These include State-owned 4 Commercial Banks & 5 Specialized Banks, 34 local

Private Commercial Banks (PCB) and 9 Foreign Commercial Banks. Among 30

local PCBs 7 and among 9 FCBs 4 are run by Islami Sariah. On end March 2010,

total SB branches stood at 6,784 out of which 3,865 are in rural areas. State-owned

bank branches are 3,386, PCB Branches are 1,643, FCB branches are 41 and

Specialized Bank branches are 1,342. Other than scheduled banks, there are 1

National Co-operative Bank, 1 Ansar-VDP development bank, 1 Employment Bank

and 1 Grameen Bank.

Besides the banking sector, there were also 29 NBFIs (Non Banking Financial

Institution) at end December 2008, which are also competing with the banks directly

in some cases and indirectly in other cases. Among these 29 NBFIs, 26 are Leasing

Companies, 2 are House Finance Companies and 1 is Micro finance Company.

LankaBangla Finance Limited is directly competing with 26 leasing companies for

its core business Lease and Loans, and also competing with 15 Banks for Credit Card

business. Moreover, LankaBangla is engaged in Merchant Banking business for

which it is competing with 8 Merchant Bankers.

2.2.SWOT Analysis

Strength

o Experienced top tier management supported by strong mid and front-tier

personnel.

o It has a good corporate governance practices. They maintain an attractive

and stable operating environment promoting employee development.

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o LBFL has a good capital strength and parental support with institutional

shareholding, support from home and abroad

o It is utilizing credit line facilities of a good number of reputed

commercial banks and non-banking financial institutions as their source

of fund.

o Risk management lies at the core of any financial institution. LBFL has

commissioned a separate credit committee which mitigates risk as well as

monitors asset-liability mismatches on a regular basis.

o LBFL has an exclusively diversified and innovative operations in

different service areas. Product innovation is a major strength it and apart

from providing better service LBFL constantly thrives to innovate and

introduce new products.

o Country’s largest brokerage house, LankaBangla securities Ltd .is the

lone subsidiary of the company.

o The subsidiary is making significant money each year.

o LBFL has a separate IT department which is maintaining sophisticated IT

infrastructure. It is using a software “FinTelligent” which is an integrated

accounting and lease/loan software. The company has also introduce the

internal control system.

Weaknesses

o Relatively higher administrative expenses compared to similar

NBFIs.

o High turn over ratio of employees.

Opportunity

o Since banks focuses on trade finance and short term financing, there is still gap

long term financing. LBFL has enough opportunity to prosper

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o Term deposit scheme provided by LBFL is very attractive as it gives very high

interest to the clients. If proper marketing is carried out to make it more

attractive to people, it will be very good source of their fund.

Threats

o LBFL‘s operations are governed by the changes in regulation that occur from

time to time. Ceiling in the call money market participation and interest rate

fluctuation may affect the company to a large extent

o Few banks are providing leasing services. If more and more banks start lease

financing the market for NBFIs will get distorted as banks have lower cost of

fund. As a non bank financial institute, LBFL is prone to this risk.

2.3.Credit Rating of LBFL

Credit rating agency of Bangladesh Limited (CRAB) has assigned “AA2”(meaning

Very Strong Capacity) rating in the long term and “ST-3”(meaning good grade) in

the short term to LBFL on the basis of the company fundamentals such as good

capital base, satisfactory level of corporate governance, experienced management,

moderate liquidity & profitability, moderate franchise value and average market

share.

2.4.Market Share of LankaBangla Finance

LankaBangla Finance is in 14th year of its operation and overall share of the

Company during the last 3 years remained at over 3.85% on an average. Market size

and LankaBangla market share for last five years were as follows:

Business Disbursement

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Graph : Business Disbursement

The market share trend of LankaBangla shows a growing market share over last 5

years.

Shareholders Equity

Graph: Shareholder's Equity

The market share trend of LankaBangla shows a growing market share over last 5

years.

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2.5.Ratio Analysis of LankaBangla Finance Limited

Financial Strength 2006 2007 2008 2009 2010

Return on assets (ROA) 3.00% 4.89% 4.66% 5.54% 8.805

Return on equity (ROE) 19.32%41.23

%

40.94

%

35.42

%35.49%

Operating profit margin 11.69%12.51

%

13.01

%

18.49

%16.85%

Current ratio (times) 1.07 1.14 1.16 1.20 1.14

Debt-equity ratio (times) 5.67 8.68 7.79 5.40 3.03

Financial Expense

Coverage Ratio1.41 1.50 1.53 1.79 2.67

Long term debt to long

term assets (times)1.02 1.18 0.68 0.68 0.75

Dividend Payout Ratio 49.73%76.50

%

69.45

%

44.15

%72.49%

Dividend Yield 5.035 2.50% 1.53% 1.12% 1.10%

Table : Ratio Analysis

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2.6.Strategy for the upcoming Future

To adapt and cope up with the economic and market scenario LankaBangla has

involved itself in the process of diversification, reengineering, restructuring and see a

good prospect from redefining its market segment in existing market and attend the

unattended market with innovation, reengineering and customizing. Moreover, it

expects to go into other segments that are already existed in the existing market but

not attended by LankaBangla. To this effect, LankaBangla has already entered work

order finance and real estate developers’ finance scheme under its credit &

investment department which it plans to intensify in coming years. It is also

concentrating in capital market operations through investors’ portfolio management,

managing own investment portfolio in marketable securities, margin loan for

investors, brokerage services through its subsidiary. Moreover, LankaBangla also

will focus on investment banking and corporate finance and services like

syndication, issue management & underwriting, securitization, etc. Moreover, loyalty

programs and focused marketing drive will be launched to increase card bas

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Chapter Four : Lease Financing Scenario

4.1 Chapter Overview

4.2 Lease Financing in Bangladesh: Brief Overview

4.2.1 Background

4.2.2 Current Scenario

4.2.3 Lease Financing: LankaBangla Perspective


3. Lease Financing Scenario

3.1. Chapter Overview

Lease Financing in Bangladesh has a long history. Several companies are dealing

with this business for a long period of time. In this chapter background of lease

finance, overall scenario of lease financing in Bangladesh and the stand point of

LankaBangla in this regard is discussed.

3.2.Lease Financing in Bangladesh: Brief Overview

3.2.1. Background

The leasing operation in Bangladesh was first originated in 1984 with the setting up

of Industrial Development Leasing Company of Bangladesh Limited (IDLC). Due to

suspension of long term funding operation by the local DFIs, International Finance

Corporation (IFC) of World Bank, took the initiative to set up an equipment leasing

company, IDLC, to mobilize long term fund to finance industrialization. The rapid

industrialization and acute scarcity of long term finances impelled the

commissioning of United Leasing Company (ULC) in 1989 with the participation of

ADB and CDC. The leasing industry in fact got full momentum after Financial

Institutions Act 1993 take effect. In 1999 there were 15 leasing companies in the

country. Some of the banks and Financial Institutions also added leasing divisions to

their existing operations. LankaBangla started its leasing operations in March 1998

3.2.2. Current Scenario

There are 29 Financial Institutions at present, which are competing with the banks

directly in some cases and indirectly in other cases. Among these 29 NBFIs, 26 are

Leasing Companies, 2 are House Finance Companies and 1 is Micro finance

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3.2.3. Lease Financing: LankaBangla Perspective

At the time when LankaBangla started its leasing operations, the focus was on Lease

for purchase of machinery, equipment needed for new project establishment,

expansion, replacement, and modernization of business, and Sale & Leaseback

facilities. At present Lease financing is the core business of LBFL. The following

chart shows the core investment sectors of LBFL and the amount of investment in all

the sectors.

Graph: Investment Mix

We can see that about only 9.34% of the total investment went to lease. We can see

that core business of the organization is not only belongs to lease financing rather the

company is more interested in margin trading and term finance.

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LankaBangla Finance Limited is directly competing with 26 leasing companies for

its core business (i.e. lease).The financial market is extremely competitive at present.

Investors in this sector were initially attracted because the market was niche and

ready for the business. So in no time the market became crowded with NBFIs. Today

the number of NBFIs is large for a country like ours. The competition is also getting

intense among the institutions everyday. To have better response from the customers,

better quality is highly necessary. The more efficient and less time consuming

service an organization provide, the more competitiveness they attain.

LBFL also believes on that theme. LBFL runs periodical client demand analysis on

the existing and future clients. Based on that analysis they have reached to a

proposition that they have to provide greater value to their customers to remain

competitive as well as to grow robustly.

The policy of LankaBangla regarding Lease Financing is based on adding greater

value to customers. They emphasize on maintaining prudent fund management,

strong credit policies, offering innovative products, prompt services, better

transparency thus providing greater value to their customers.

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Chapter Five : Lease Financing Strategic of LBFL

5.1 Goals and Targets of Leasing Operation

5.2 Strategies in Lease Financing

5.2.1 Strategy Timeframe

5.2.2 Client Segment Selection Strategy

5.3 An overview of Lease Financing Services of LBFL

5.3.1 Organization Structure of Credit and Investment Department

5.3.2 Types of Lease Financing Services offered by LBFL

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4. Lease Financing Strategic of LBFL

4.1.Goals and Targets of Leasing Operation

LankaBangla Finance Limited aims at building up a balanced portfolio in the

long run. LBFL’s target market consists of the following two categories:

1. Organized and Matured Market Segments

2. Emerging Growth Market Segments

LBFL has decided to offer the financial lease facilities to the selected clients

customized to their needs of actual fund requirement and comfortability of

payback.

The principal attribute will be the quality service, prompt action in decision-

making and fund disbursement.

4.2.Strategies in Lease Financing

Strategy of the leasing operation was adopted through a detailed macro economic

analysis, sectoral analysis of business, market segment analysis and competitor

analysis.

4.2.1. Strategy Timeframe

Long Term Strategy: LBFL’s long-term strategy is to build up a portfolio, which is

a balanced mix of organized & matured segments and emerging growth segments.

The ultimate objective is to achieve an above normal profit level. The organized

segment will contribute to regular cash flow while the emerging segments will

provide premium for profit.

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Short Term Strategy: The short term strategy of LBFL is to develop a portfolio

having concentration of organized segments to attain regular cash flow, e.g.

Banks, Insurance companies and financial Institutions

Multinational Companies, etc.

Large Corporate Houses

As a risk diversifying strategy LBFL has adopted the policy of syndication in case

of leases of large amount.

4.2.2. Client Segment Selection Strategy

A detailed analysis on the business and corporate houses’ financial exposure,

borrowing behavior, repayment behavior, etc was carried out. Based on the above

analyses and analysis of own strengths and weaknesses, client selection criteria is

adopted. The selection criteria are divided into three sections as follows:

General Criteria

Lease Portfolio specific criteria

Client specific criteria

4.3.An overview of Lease Financing Services of LBFL

Lease Financing Activities are carried out by Credit and Invest Department. They

provide credit facility on Lease for purchase of machinery, equipment needed for

new project establishment, expansion, replacement, and modernization of business,

and Sale & Leaseback facilities. Product range also includes Medium Term Loan,

Short-Term loan for corporate houses and Car Lease for Individuals (professionals &

businessman). The Company is in the process of initiating work order financing, bill

discounting, etc

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4.3.1. Organization Structure of Credit and Investment

Department

In this Lease Financing Service, the head of Credit and Investment Department holds

the topmost position in the hierarchy. However, decision-making authority regarding

lease approval lies with the top management. Separate credit committee has the

authority of approving lease. The assistant vice president holds the second position

with 2 subordinate managers. Lastly, some officers are working under these

managers. For more information please refer to the organogram listed on earlier

page.

4.3.2. Types of Lease Financing Services offered by LBFL

Lease Financing Activities are carried out by Credit and Invest Department.

Services of the Credit and Investment Department can be categorized into the

following:

Lease

Lease, in simpler words, means renting an asset in exchange of regular lease rentals

for a specified period of time. Leasing is a contract between a Lessor (the asset

lender) and a Lessee (borrower of the asset), for hire of a specific asset. The Lessee

selects the asset according to his requirement and the supplier. If found acceptable,

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the Lessor procures that asset and rents it to the Lessee. The supplier of the asset is

paid directly by the Lessor. The ownership of the asset lies with the Lessor. The

Lessee has possession of the asset and uses that asset against payment of a fixed

rental over the lease period to the Lessor. At the end of the lease period the Lessee

has the option to return the asset to the Lessor or re-lease the asset for a further

period or purchase the asset at a predetermined nominal transfer price.

In short, leasing is asset financing differing from lending, which is cash financing.

Sale & Leaseback

Sale & Leaseback is a form of lease facility whereby an existing asset is purchased

by the Lessor from the Lessee, instead of a supplier, at an agreed upon price and the

same asset is leased to that Lessee. Thus the ownership of the asset is transferred

from the Lessee to the Lessor. The payment is made to the Lessee for purchase of the

asset.

Through Sale & Leaseback the Lessee is provided with liquidity against his

investment in asset. This can also be called a form of cash financing.

Car Lease

Car Lease is a separate product only to finance vehicles to individuals and

proprietorship concerns. This is a standard product with predetermined attributes,

which would not change depending on client.

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Chapter Six : Lease Finance Performance Analysis

6.1 Chapter Overview

6.2 Key Performance Analysis

6.2.1 Operating Revenue

6.2.2 Operating Profit

6.2.3 Investment Portfolio

6.2.4 Term Deposit

6.2.5 Financial Expense Coverage Ratio

6.2.6 Return on Equity

Time Series Analysis of Lease Finance of LBFL

6.3.1 Lease, Loan & Advances

6.3.2 Aging Analysis

6.3.3 Interest Income

6.3.4 Analysis of Provision for Doubtful Accounts

6.3.5 Comparative Analysis of Lease Finance & Term Finance

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4.4.Chapter Overview

This part consists of the analysis of Lease Financing performance of LankaBangla

Finance Limited. An overview of their competitive positioning is given in this part.

The aim is to know how they add value to each phase of the lease financing process

to get competitive advantage and how effectively they do this. Their competitive

positioning will show how effective they are in making wealth for shareholders to

cope up with the challenging and highly competitive leasing sector.

The whole analysis is divided into three parts. First part discusses about the key

performance indicators of business and LBFL position. Second part includes the time

series analysis of LBFL. The third part is about comparative analysis of leasing

companies. In order to compare seven companies including LBFL are taken as

industry representative. The companies are:

LankaBangla Finance Limited (LBFL)

IDLC Finance Limited Company (IDLC)

Prime Finance Limited (PFL)

Union Capital Limited (UCL)

People's Leasing and Financial Services Limited (PLFSL)

International Leasing and Financial Services Limited (ILFSL)

United Leasing Company Limited (ULC)

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2. Lease Finance Performance Analysis


IDLC Finance Ltd, a leading financial institution of the country achieved

significant growth in all areas of business up to 3rd quarter of the year 2009. IDLC

began its operation in 1985 as the first leasing company in Bangladesh. In 1995,

IDLC was licensed as a Financial Institution by the country's central bank and during

the last two decades, the company has grown in tandem with the country's growing

economy. The company's wide array of products and services range from retail

products, such as home and car loans, corporate and SME products including lease

and term loans, structured finance services ranging from syndications to capital

restructuring and capital market services. The company also strengthened its

presence in the country's growing stock market with launching a subsidiary-IDLC

Securities Limited-which is offering full-fledged brokerage service for retail and

institutional clients.

people’s Leasing and Financial Services Limited (PLFS) is a financial institution

established within the ambit of Financial Institutions Act-1993 and was incorporated

as a Public Limited Company under Companies Act-1994 on August 12, 1996.

Company obtained license from Bangladesh Bank on November 24, 1997 to carry on

lease finance business. Authorized Capital of the Company is Tk. 500 million

divided into 5 million ordinary shares of Tk. 100/- each while Paid-up Capital as on

September 30, 2004 stands at Tk. 130 million subscribed by the sponsors. Now a

days Company become successful and has made a well built base to create its

position as a progressive Leasing Company and an individual self in versatile arena

of FI of the Country.

Uttara Finance and Investments Limited (UFIL), a joint venture leasing and

financing company, registered as a non banking financial institution under the

Financial Institutions Act 1993 and the Companies Act 1994 with the license from

Bangladesh Bank to operate and transact all kinds of businesses as provided under

the relevant laws. This company has been incorporated on May 07, 1995 but the

company received license from Bangladesh Bank on 07 September 1995 so then the

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company started commercial operation from 01 November 1995 and continuing with

success. Mainly UFIL upholds its commitment towards the development of financial

service sector by offering high quality services to the local entrepreneurs. UFIL

always focuses to the ever changing and challenging business environment, thus

endeavor to diversify into other financial services, which have long-term prospects.

With its continuous drive to improve, UFIL is well on track to be considered as one

of the leading leasing company of the country.

United Leasing Company Limited provides financial services. The

company offers investment services, such as sanchay scheme, term deposit,

earner scheme, insured deposits scheme, and loan against deposits; and

secured finance services, including lease finance, term finance, and home

loans. It also provides channel financing services, such as factoring, work-

order finance, distributor finance, revolving loan, and assignment

discounting; and corporate financing services comprising syndication loans.

In addition, the company offers investment marketing services, including

deposit collection; and SME financing services comprising medium and short

term loans. United Leasing Company Limited was founded in 1989 and is

headquartered in Dhaka, Bangladesh

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4.5.Key Performance Analysis

4.5.1. Operating Revenue

Operating revenue contains interest income, income from investment,

commission, exchange and brokerage income, etc. This is the amount a

company primarily receives from clients.

Graph : Operating Revenue-LBFL

Operating revenue of LBFL is constantly increasing from its inception. The

above graph it is evident of this trend. In 2006 it was 365.66 million taka and

at the end of 2010 it stands at 4176.11 million taka.

Graph : Operating Revenue in 2010

Among the seven company under consideration, LBFL’s operating revenue is

highest in 2010 followed by PFL of taka 3069.20 million.

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Graph: Average Operating Revenue

This graph shows the average amount of operating revenue for the period of

2006 to 2010. In this category LBFL stands at first place with taka 1891.60

million followed by ILFSL with taka 1503.18 million.

Graph : Growth Rate-Operating Revenue

Growth rate graph shows the growth of operating revenue from 2006 to 2010.

LBFL’s revenue grows by 1042.07% in these 5 years which is the highest

amount among the seven companies. UCL stands in second position with

680.35%. The average growth rate of revenue of LBFL is 260.52%.

4.5.2. Operating Profit

Operating profit represents the amount of profit after deducting all operating

expenses. This is the amount of profit earned from all business operation by a

company.

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Graph : Operating Profit-LBFL

LBFL’s operating profit is also increasing over the years as its operating

revenue. The amount was only taka 66.60 million at the end of 2006 which

grows to taka 2331.10 million at the end of 2010.

Graph: Operating Profit in 2010

Among the seven company, LBFL’s operating profit is taka 2331.10 million

which is the highest amount followed by PFL with taka 1985.83 million.

Graph : Average Operating Profit

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Average operating profit of seven companies is given in the above graph.

Here we see that the highest average profit is earned by IDLC of taka 939.48

million taka followed by LBFL with taka 815.28 million.

Graph : Growth Rate-Operating Profit

Growth rate of operating profit of LBFL is 3400.15% which is far behind

than other companies. PFL’s profit growth is 1499.80%. The average growth

of PFL’s operating profit is 850.04%.

4.5.3. Investment Portfolio

Investment portfolio represents the picture of a company’s business sectors –

different kinds of business where a company invests its fund. The wider the

portfolio the lower the risk and higher the business opportunity.

Graph : Investment Portfolio -LBFL

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The above graph shows the amount of investment portfolio of LBFL over the

years. It is increasing at an increasing rate. In 2006 it was only taka 2420

million which increased to taka 15064.60 million after the end of 2010.

Graph : Investment Portfolio in 2010

In 2010, the highest amount of portfolio was of IDLC’s which was taka

22199.67 million followed by LBFL’s taka 15064.60 million. So LBFL

incomes more profit than IDLC with investing lower amount.

Graph: Average Investment Portfolio

IDLC’s average investment portfolio is highest among the seven companies

with taka 12675.29 million who is followed by ILFSL with taka 10384.92

million. LBFL’s average investment was taka 7954.18 million which is third

in ranking.

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Graph: Growth rate -Investment Portfolio

But the picture of growth rate of investment portfolio is different. LBFL’s

growth rate of investment portfolio is in the first position with 522.50%

where the second position holder PLFSL’s growth

4.5.4. Term Deposit

Non-Banking Financial Institutions (NBFIs) are not entitled to operate

exactly like banks. That is they have no opportunity to open current accounts.

They have to take deposit from clients for a minimum period of time most

commonly for six months. These types of deposits are known as “Term

Deposit” and it is the main source of fund for NBFIs.

Graph: Term Deposit-LBFL

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The amount of term deposit collected by LBFL is also increasing year by

year although the speed is lessened in the last year. The amount of term

deposit was 761.80 million in 2006 and it rose to taka 4560 million in 2010.

Graph: Term Deposit in 2010

LBFL’s collected amount of term deposit is not competitive in comparison to

other major companies. IDLC collected highest amount of term deposit of

taka 12373.16 million where LBFL collected 4th highest amount of taka

4560.00 million.

Graph: Average Term Deposit

The average amount of term deposit of LBFL is also not up to the mark. The

highest amount is collected by IDLC of taka 8853.82 million where LBFL

collected 4th highest of taka 2840.10 million.

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Graph: Growth Rate-Term Deposit

The growth rate of term deposit of LBFL is 498.58% where the tremendous

growth is achieved by ULC which is 7428.54%. LBFL is in the 3rd position

according to the growth rate.

4.5.5. Financial Expense Coverage Ratio

The financial expense coverage ratio is a very important indicator of a

financial company’s capacity to survive. It indicates the capacity to serve the

debt of a company efficiently. It says how many times a company can

entertain its interest expenses.

Graph: Financial Expense Coverage Ratio-LBFL

The above graph indicates that the financial health of LBFL is good over the

years. It almost doubled with in five years. In 2006 it was 1.41 where it

becomes 2.67 in 2010.

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Graph: Financial Expense Coverage Ratio in 2010

In 2010, under the consideration of financial expense coverage ratio, UCL is

the best performer with ratio of 5.27. LBFL is the next with a ratio of 2.67.

Graph: Average Financial Expense Coverage Ratio

The average financial expense coverage ratio of LBFL is not bad at all. It

stands at 2nd position with ratio of 1.78 where the 1st position is held by UCL

with ratio of 3.54.

Graph: Growth rate-Financial Expense Coverage Ratio

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The growth rate of LBFL’s ratio is not appraisable in comparison to other

companies. Its growth rate is only 89.36 where highest growth rate is

299.24% by UCL.

4.5.6. Return on Equity

Return of equity indicates who much money a company can produce after tax

for its owner. The higher the percentage, the better the condition of the

company and share holder will prefer this company a good one for

investment.

Graph: Return on Equity -LBFL

The overall trend of ROE of LBFL is not charming. It’s ROE in constantly but by a

little amount is decreasing in every year. It was 41.23% in 2007 but it decreased to

35.49% in 2010.

Graph: Return on Equity in 2010

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In 2010, the highest amount of return for equity holders is produced by UCL

which was 61.03% when LBFL make only 35.49% which is 4 th highest

among the seven companies.

Graph: Average Return on Equity

The average amount of ROE of PFL is highest with 42.00%. UCL is in the

second position with 35.33%. LBFL provide 34.48% ROE which is the 3rd

highest.

Graph: Growth rate-Return on Equity

The growth rate of ROE of LBFL is severely lower than other comparable

companies. From the graph we see that it is also 83.70% which is 5th highest

among seven companies. The highest growth was achieved by PFL with

182.61% followed by UCL with 177.61%.

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4.6.Time Series Analysis of Lease Finance of LBFL

In this section, performance of LBFL in different type of activities over a period of time will

be discussed. In this time series analysis, discussion will focus on different type of lease-

loans, their aging, interest income from different investments, provision for doubtful

accounts and comparison among different investment category.

Lease & Loan

Advances (in

Million Taka)

2006 2007 2008 2009 2010 Average

Average

Growth

Rate

Lease Portfolio

782 1,080 983 1,712 969 1,105 5.95%

Advance against Lease

113 83 175 39, - 102 -21.80%

Term Finance 194 714 1,226 1,578 2,183, 1,179 256.30%

Mortgage Loan

125 631 1,111 622 394.03%

Margin Loan 3,503 4,176 3840 19.21%

Short Term Finance

244 220 232 -9.83%

Factoring Debtors

18 34 26 88.89%

Credit Card receivables

365 430 398 17,81%

SME - 182 182 -

Auto Loan - 128 128 -

Work Order Finance

- 5 5 -

Work Order

Finance

- 37 37 -

Total 1,090 1,879 2,511 8,093 9,480 4,610 192.43%

Table : Investment Portfolio

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4.6.1. Lease, Loan & Advances

NBFIs normally invest through different investment windows like lease, term

finance, mortgage, margin loan, etc. below some of them used by LBFL is

discussed. In 2010, largest portion of total investment was made in margin

loan section followed by term finance and mortgage loan.

Graph: Lease Portfolio

LBFL’s investment in lease is increasing over the year except for the last year

when it fell slightly. It investment was taka 782.85 million in 2006 and it rose

to taka 17120.21 million in 2009 but fell to taka 969.27 million in 2010.

Graph: Advance against Lease

LBFL decreased its advances provided against lease consistently over the

year and by huge amount in the last couple of years. In 2006 it was taka

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113.21 million and in 2009 it was taka39.18 million. But in 2010 LBFL did

not provide any advance against lease.

Graph: Term Finance

As the allocation in lease finance and other sectors decreased, LBFL

increased its investment gradually in term finance. From the graph we see

that investment in term finance in 2006 was taka 194.07 million and in 2010

it became taka 2183.63 million. In 2010, it was the second largest investment

sector.

Graph: Mortgage Loan

Year by year, LBFL increased its sector of investments. From 2008 it started

to mortgage finance. But with in 3 years, it occupied the third largest portion

of total investment in lease, loan & advances. In 2010 total investment in

mortgage was taka 1111.70 million.

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Graph: Total Lease & Loan Advances

If we look at the situation of total lease, loan & advances, we will observe

huge growth of total investment. Most of the growth was achieved in 2009

and 2010. In 2006 total investment was taka 1090.12 million and in 2010 it

became taka 9480.98 million.

4.6.2. Aging Analysis

Aging analysis focuses on the timing of reimbursement of loan disbursed in

different sectors. LBFL’s investments are categorized in two groups on the basis

of aging. Receivable with in one year and receivable later than one year but not

later than five year. That is LBFL do not make any loan with tenure more than

five years.

Graph: Aging of Lease Portfolio

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The above graph it can be said that LBFL maintained a certain target amount

of investment in two aging categories. As with increase in lease finance,

allocation in each section increased and with fell of lease investment,

allocation also fell. In all the years, amount of receivable within one year is

far below than the amount of receivable within one to five years.

4.6.3. Interest Income

Interest income is the main source of revenue and profit for all NBFIs. It is

not exceptional for LBFL. It earns interest from different secretors where it

makes investments. Some main sources of interest are given below.

Graph: Interest Income from Lease

The amount of interest income was increasing till 2009 though at a

decreasing rate, but it fell in 2010. This fall is logical as the amount of

investment in lease finance also fell in 2010, in 2006 total interest income

from lease finance was taka 116,43 million and in 2009 it was taka 264,27

million. But in 2010 this amount was down to taka 195.99 million.

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Graph: Interest Income from Term Finance

The above graph shows that the total interest income from term finance is

increasing by huge amount every year. Earlier we saw that LBFL was

increasing its investment in term finance. This huge amount of interest

income was the main reason for this increased investment. In 2006 term

finance interest amount was only taka 24.95 million and in 2010 it became

taka 277.44 million.

Graph: Interest Income on Margin Trading

Interest income from margin trading activities is also gaining huge growth in

recent years. In 2006 it was taka 19.84 million and only in 4 years in 2010 it

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became taka 735.48 million. Last year the highest amount of investment was

made in margin trading as a result the highest amount of income was also

earned from this activity.

Graph: Unearned Finance Income

The excess of aggregate rentals receivable over the cost of the leased assets

constitutes the total unearned finance income. It indicates the efficiency in

buying good lease assets at lower price. The amount of unearned finance

income was taka 364.80 million and it increased to taka 589.54 million in

2009. But with the decrease of lease finance, this income also fell in 2010 at

taka 297.95 million.

4.6.4. Analysis of Provision for Doubtful Accounts

Provision is made in fear of nonpayment of receivables from different

investment sectors. In the graph provided below analyze the provision

scenario in three main investment categories.

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Graph: Provision for Doubtful Accounts and Future Losses

From 2006 to 2008, most of the provisions were made for lease finance and

less provision was required by credit card investment where provision for

term finance and short term finance was steady. But in 2009 and 2010,

provision for term finance exceeded the amount of provision for lease.

Graph: % of Lease & Term Finance Provision

This graph shows the percentage of total provision allocated for lease and

term finance. The percentage of provision in lease finance was gradually

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decreasing when the percentage of provision in term finance was gradually

increasing from 2006 to 2010.

4.6.5. Comparative Analysis of Lease Finance & Term Finance

In this part of discussion, some comparative analysis is made between two

major categories of investment that is lease finance and term finance.

Graph: % of Lease & Term Finance Investment to Total Investment

If we closely hold our eyes into the graph we will observe that the almost

71% of total investment in 2006 was made in lease finance where only 17%

investment was made in term finance. But gradually the investment in lease

finance was decreasing when the investment in term finance and short term

finance was increasing. But the most important observation is that over the

year investment in this two sector are falling by huge percentage and these

parts of investment goes to other sectors like margin loan, auto loan, real

estate finance, etc. In 2010 only 10% and 23% of total investment was made

in lease finance and term finance.

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Graph: % of Lease & Term Finance Income to Total Income

Though the portion of total investment made in lease finance was decreasing

over the year in compare to term finance, but till 2009 more percentage of

total income came from lease finance than term finance. In 2010 percentage

of total income of term finance was more than the percentage of income from

lease finance. The important thing is that percentage of total income from

term finance also fell in 2009 and 2010.

Graph: % Change in Lease Income & % Change in Lease Portfolio

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In the graph positioned above is showing the year to year percentage change

in lease investment and resulted change in lease income. From 2006 to 2007,

percentage of lease investment increased by 38.05% but the lease income

increased by 89.07%. in the nest year investment lowered by 8.98%. In 2009

investment increased by 74.06% but income increased by only 5.38%. In

2010 both the investment and income decreased.

Graph: % Change in Term Finance Income & % Change in Term

Finance Portfolio

The percentage of investment in term finance in 2007 was 268.19% higher

than 2006 but the percentage of income increased by 338.48% than that of

2006. But in later period both the percentage of investment and income fell

every year. In 2010 investment was increased only by 38.30% and income

increase by 21.04%.

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Chapter Seven: Comparative Analysis

7.1 Lease Portfolio

7.2 Term Finance Investment

7.3 Total Investment

7.4 Unearned Lease Income

7.4.1 Lease Interest Income

7.4.2 Term Finance Interest Income

7.4.3 Total Interest Income

7.4.4 Provision Analysis

7.4.5 Status of Lease loan & Advances

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5. Comparative Analysis

In this part of analysis seven companies are selected as representative of the

industry on the basis of availability of data. Analysis will focus on the market

leader in each consideration and the position of LankaBangla Finance Limited

(LBFL).

7.1 Lease Portfolio

Graph: Lease Portfolio

This graph shows the amount of lease investment in 2010 and 5 year average

lease investment from 2006 to 2010 by seven companies respectively. The

graph shows the highest lease investment in 2010 and highest average lease

investment was made by ULC. PLFSL was in the second position in lease

investment in 2010. LBFL made the lowest lease investment in 2010 and

lowest average lease investment among seven companies.

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Graph: Average Growth Rate of Lease Portfolio

In consideration of growth of lease investment, PLFSL occupied the highest

position with an average growth rate of 72.71% for the period of 2006 to

2010. All other companies are far behind in growth rate. IDLC is in second

position with 14.94%. LBFL is in the fourth position with 5.95%.

7.2 Term Finance Investment

Graph: Term Finance Investment

The above given graph shows the highest term finance investment in 2010

and highest average lease investment also was made by PLFSL. ILFSL was

in the second position in term finance investment in 2010. LBFL made the

fifth term finance investment in 2010 and average lease investment among

seven companies.

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Graph: Average Growth Rate of Term Finance Investment

In consideration of growth of term finance investment, UCL occupied the

highest position with an average growth rate of 321.58% for the period of

2006 to 2010. All other companies are far behind in growth rate except LBFL

with 256.30%.

7.3 Total Investment

Graph: Total Investment

In case of total investment, highest investment was made by IDLC in 2010

followed by ILFSL. LBFL was in the fourth position. IDLC also made the

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highest average total investment followed by ILFSL. LBFL is in the fifth

position in making average investment.

Graph: Average Growth Rate of Total Investment

But the average growth rate of total investment is little bit different. LBFL

achieved the highest growth rate of 192.43%. UCL was in the second

position with 84.58%.

7.4 Unearned Lease Income

Graph: Unearned Lease Income

The highest unearned finance income in 2010 and highest average unearned

finance income was earned by ULC. IDLC was in the second position in

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unearned finance income in 2010. LBFL made the fifth highest unearned

finance income in 2010 and average unearned finance income among seven

companies.

Graph: Average Growth Rate of Unearned Lease Income

Among the seven companies, four companies had negative average growth

rate of unearned lease income including LBFL with -4.58%. The highest

growth rate was gained by PLFSL with 31.40%. IDLC is in the second

position with 8.58%.

7.4.1 Lease Interest Income

Graph: Interest Income from Lease

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ULC made highest interest income and average income from lease

investment in 2010 as it made the highest investment in 2010 as well. IDLC

is in the second position in this regard. LBFL is in the fifth position in lease

income and fourth position in average income.

Graph: Average Growth Rate of Interest Income from Lease

LBFL is in the second position with 17.08% in average growth rate of

interest income from lease investment though its investment in this sector

was gradually decreasing. Highest growth rate was achieved by PLFSL

which was 25.66%.

7.4.2 Term Finance Interest Income

Graph: Interest Income from Term Finance

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In case of interest income from term finance, highest income was made by

IDLC in 2010 followed by ILFSL. LBFL was in the fourth position. ILFSL

made the highest average term finance income followed by IDLC. LBFL is in

the fifth position in making average term finance interest income.

Graph: Average Growth Rate of Interest Income from Term Finance

LBFL is in the second position with 252.96% in average growth rate of interest

income from term finance though its investment in this sector was gradually

decreasing. Highest growth rate was achieved by UCL which was 255.40%.

7.4.3 Total Interest Income

Graph: Total interest Income

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The highest total interest income in 2010 and highest average unearned

finance income was earned by IDLC. LBFL was in the second position in

total interest income in 2010 and fourth position in average total income.

Graph:: Average Growth Rate of Interest Income

But the average growth rate of total income is different. LBFL achieved the

highest growth rate of 117.89%. UCL was in the second position with

70.35%.

7.4.4 Provision Analysis

Graph: Provision for Doubtful Accounts

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ULC made the highest provision for lease finance and IDLC made the second

highest provision for lease finance. For term finance IDLC made the highest

provision and LBFL made the second highest provision.

Graph: Average Growth Rate of Provisions

The average growth rate of provision for lease and term finance is given in

the above graph. LBFL had the highest average growth rate in both the

category with 239.75% in lease and 931.51% in term finance. ULC is in the

second position.

7.4.5 Status of Lease loan & Advances

Status of leas, loan & advances depict the condition of loans indifferent

sectors that this whether they are collectable or not. The graphs given below

are made on the basis of data of 2010.

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Graph: Standard (S) in %

From the graph we see that PLFSL’s loan contains the highest percentage of

standard loan which are very good loan in kind and almost surely collectable.

Its standard portion of loan is 96.24%. IDLC is in the second position in this

regard with 95.47%. LBFL is in the fourth position with 89.33% of standard

loan.

Graph: Doubtful (DF) in %

In case of doubtful accounts LBFL is in a very good position with only

0.69% of doubtful loans. ILFSL is in big risk attaining highest percentage of

doubtful accounts which amounts to 3.76% of its loan.

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Graph: Bad & Loss (B/L) in %

Bad and loss accounts are those loans which are not collectible or collecting

is not feasible. In this category, LBFL is the riskiest player among the seven

companies. It’s percentage of bad and loss loan is 6.24% which is the highest

among the seven companies. PFL is in the second position with 4.90%.

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Chapter Eight : Conclusion of the Report

8.1 Findings

8.2 Recommendation

8.3 Conclusion


6. Conclusion of the Report

6.1. Findings

From this performance analysis, some interesting findings are found which have very

important policy implication. The findings are given below:

LBFL is a major player in leasing market of Bangladesh in

consideration of its total investment portfolio. It is in a very strong

position on the basis of business, product, profit, equity return, market

share, etc.

LBFL has the highest operating revenue among the seven companies

taken into consideration in this report. The average growth of revenue in

last five years was 1042%. Operating profit is also the highest among

the seven though its investment was not highest among them.

It collects funds for most part of its investment from term deposit and

bank loan. Its financial expense coverage ratio became double almost

double in last five years. Return on equity is also satisfactory according

to the industry practice.

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In every type of investment category, LBFL showed increasing trend as

well as introducing some new products every year. In some category it

had the highest investment than other company. But the most important

thing is that, LBFL was reducing its investment in lease finance and

term finance, the most common business of leasing companies. Rather it

was increasing investment in Margin trading and real estate finance.

In 2010, LBFL lost its leadership as highest investor and highest interest

earner from lease and term finance as it was more interested in other

business. Most of the cases IDLC or ULC showed extraordinary

improvement.

According to the status of loan portfolio, LBFL is in risky portfolio. 6.24 % of its

total investment is bad or Loss which was the highest percentage among the

seven companies.

6.2. Recommendation

On the basis or performance analysis findings, here are some recommendations for

LBFL to improve its performance and stand better in competition in the leasing

industry in future:

LBFL has to emphasize on reducing their cost of fund. They are mainly

depending on credit lines and call money loan as their source of fund. But

these are expensive as their interest rate is very high. Term deposit can be

lower cost of fund. In term deposit, interest rate is lower than the other two

sources.

The main reason of LBFL for deviating from its main business was the

decrease of tax advantage by Bangladesh Government on capital or finance

lease. But in this context LBFL should introduce operating lease in

Bangladesh as market leader.

It should reduce its investment share from margin trading and real estate

finance. Secondary market of share is the most volatile portion of our capital

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market. Recently this sector had experienced major down fall. On the other

hand the world wide economic crackdown was initiated by investing in the

real estate sector more than demand. So Bangladesh may also experience

same picture. LBFL should carefully redesign its investment portfolio. It

should increase its investment in new sectors like ship building, solar panel l

system, light machinery production, etc.

6.3. Conclusion

LankaBangla over its 14 years of operation has been thriving for continuous

growth and improvement. After having adverse situation up to 2005 it has

massively reorganized its management, human resources, strategies and

policies from 2006 to expand its business and profitability with caution and

care and gradually improved its position up to 2010. In 2008, it has achieved

a significant growth in lease financing business. All the performance

indicators show that it is making continuous improvement in this promising

sector. In 2010, it was ranked 1st among the 29 NBFIs. It had a satisfactory

growth in both contract and disbursement in 2010 that was much greater than

industry average. Its credit administration performance was also sound. Its

product portfolio is highly impressive. It had emphasized on new product

segments. LBFL had been able to get competitive advantage with its lease

financing policy and have successfully carried out the practice. If it can keep

continue its success in future years, it will be legendary leader in Leasing

Industry of Bangladesh.

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Bibliography

1. S. Rose, Peter. Commercial Bank Management. Edition 2004-2005. McGraw

Hill Irwin.

2. J. Keown, Arthur, John D. Martin, & J. Willam Petty. Financial

Management: Principles and Application, 10th edition. New Jersey:

McGraw- Hill.

3. K.V.Kamath & S.A. Kerkar & T.Viswanath. The Principle& Practice of

Leasings,10th edition,.England: Lease Asia

4. Annual Report of LankaBangla Finance Limited 2006-2010

5. Annual Report of IDLC Finance Limited 2006-2010

6. Annual Report of Prime Finance Limited 2006-2010

7. Annual Report of Union Capital Limited 2006-2010

8. Annual Report of People’s Leasing and Financial Services Limited 2006-

2010

9. Annual Report of International Leasing and Financial Services Limited 2006-

2010

10. Annual Report of United Leasing Company Limited 2006-2010

11. BLFCA Year Book 2008

12. http://www.blfca.org.bd

13. http://www.bangladesh-bank.org

14. http://www.lankabangla.com

Interview Respondents:

1. A.K.M. Kamruzzaman

Senior Vice President

Credit and Investment Division

LankaBangla Finance Limited

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http://www.lankabangla.com/

http://www.bangladesh-bank.org/

http://www.blfca.org.bd/


2. Nazimuddin Ahmedt

Senior Manager

Treasury Department

LankaBangla Finance Limited

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Appendix

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1. Key Performance Analysis Data

Operating Revenue (in million Taka)2006 2007 2008 2009 2010 Average Growth RateAverage Growth Rate

LBFL 365.66 946.96 1542.18 2427.07 4176.11 1891.596 1042.07 260.519IDLC 479 883 1179 1912.73 3026.99 1496.144 531.94 132.985PFL 448.67 724.42 819.62 1425.36 3069.2 1297.454 584.07 146.017UCL 206.92 400.08 651.4 844.7 1614.7 743.56 680.35 170.087

PLFSL 196 273 412 598 1386 573 607.14 151.786ILFSL 842.2 1035.3 1773.7 1591.32 2273.37 1503.178 169.93 42.483ULC 323 387 419 447.03 509.04 417.014 57.60 14.399

Operating Profit (in million Taka) 2006 2007 2008 2009 2010 Average Growth RateAverage Growth RateLBFL 66.6 298.4 472.2 908.1 2331.1 815.28 3400.15 850.038IDLC 230.13 367.72 595.3 1423.23 2081 939.476 804.27 201.068PFL 124.13 201.96 288.55 701.63 1985.83 660.42 1499.80 374.950UCL 72.21 185.61 275.95 357.05 1062.6 390.684 1371.54 342.885

PLFSL 158.33 224.43 349.95 516.98 1252.36 500.41 690.98 172.745ILFSL 91.7 115.2 180.87 307.27 836.52 306.312 812.24 203.059ULC 163.09 199.63 203.36 302.36 416.09 256.906 155.13 38.782

Investment Portfolio (in million Taka) 2006 2007 2008 2009 2010 Average Growth RateAverage Growth RateLBFL 2420 4717.5 6869.6 10699.2 15064.6 7954.18 522.50 130.626IDLC 5953.76 7023.89 7999.57 20199.54 22199.67 12675.286 272.87 68.217PFL 3197.81 4464.39 5079.41 9275.31 11621.04 6727.592 263.41 65.852UCL 1514.79 2811.1 3903.97 4963.41 6784.16 3995.486 347.86 86.965

PLFSL 2412.75 3523.31 5136.04 7411.92 12313.35 6159.474 410.35 102.586ILFSL 6572.1 8164.9 10044.22 12291.95 14851.42 10384.918 125.98 31.494ULC 6048 7175 7433 7212.45 7556.13 7084.916 24.94 6.234

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Term Deposit (in million Taka) 2006 2007 2008 2009 2010 Average Growth RateAverage Growth RateLBFL 761.8 1818.5 2627.3 4432.9 4560 2840.1 498.58 124.646IDLC 5610 8257 8249 9779.963 12373.16 8853.8246 120.56 30.139PFL 1349.25 2124.82 2177.94 4632.59 3760.31 2808.982 178.70 44.674UCL 422.53 875.822 1121.79 2721.87 3202.46 1668.8944 657.92 164.481

PLFSL 1234.11 1457.38 2086.66 2882.87 4818.66 2495.936 290.46 72.614ILFSL 2972.7 3253.8 4317.35 6968.22 8001.69 5102.752 169.17 42.293ULC 53.6 1084.98 1650.14 3888.3 4035.3 2142.464 7428.54 1857.136

Financial Expense Coverage Ratio 2006 2007 2008 2009 2010 Average Growth RateAverage Growth RateLBFL 1.41 1.5 1.53 1.79 2.67 1.78 89.36 22.340IDLC 1.29 1.38 1.46 1.75 2.07 1.59 60.47 15.116PFL 1.07 1.33 1.37 1.66 1.89 1.464 76.64 19.159UCL 1.32 1.61 1.4 8.12 5.27 3.544 299.24 74.811

PLFSL 1.12 1.25 1.53 1.4 2.51 1.562 124.11 31.027ILFSL 1.14 1.15 1.17 1.25 1.65 1.272 44.74 11.184ULC 1.4 1.4 1.3 1.3 1.6 1.4 14.29 3.571

Return on Equity ( in %) 2006 2007 2008 2009 2010 Average Growth RateAverage Growth RateLBFL 19.32 41.23 40.94 35.42 35.49 34.48 83.70 20.924IDLC 17.45 27.59 28.43 41.05 43.64 31.632 150.09 37.521PFL 23 35 37 50 65 42 182.61 45.652UCL 22.02 33.76 27.45 32.41 61.03 35.334 177.16 44.289

PLFSL 29 26 21.26 28.91 30.59 27.152 5.48 1.371ILFSL 20.14 17.05 14.93 22.19 27.07 20.276 34.41 8.602ULC 13.8 14.6 14 13.5 26.2 16.42 89.86 22.464

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2. Time Series Analysis Data

Lease & Loan Advances (in Taka) 2006 2007 2008 2009 2010 Average Average Growth rateLease Portfolio 782,849,222.00 1,080,714,585.00 983,666,302.00 1,712,211,315.00 969,270,162.00 1,105,742,317.20 5.95%Advance against Lease 113,205,069.00 83,801,573.00 175,451,481.00 39,182,896.00 - 102,910,254.75 -21.80%Term Finance 194,065,559.00 714,532,179.00 1,226,725,382.00 1,578,919,369.00 2,183,632,003.00 1,179,574,898.40 256.30%Mortgage Loan 125,183,381.00 631,459,061.00 1,111,701,735.00 622,781,392.33 394.03%Margin Loan 3,503,515,672.00 4,176,039,592.00 Short Term Finance 244,235,565.00 220,083,054.00 Factoring Debtors 18,254,693.00 34,859,180.00 Credit Card receivables 365,563,953.00 430,637,948.00 SME - 182,990,057.00 AutoLoan - 128,751,080.00 Work Order Finance-Factoring - 5,584,300.00 Work Order Finance - 37,429,524.00 Total 1,090,119,850.00 1,879,048,337.00 2,511,026,546.00 8,093,342,524.00 9,480,978,635.00 4,610,903,178.40 192.43%

Aging of Lease Portfoilo 2006 2007 2008 2009 2010Receivable within One Year 536,382,980.00 709,560,988.00 778,983,492.00 537,072,294.00 326,678,325.00 Receivable Later Than One Year Not Later Than Five Years 981,304,334.00 1,536,545,809.00 1,578,183,581.00 1,175,139,021.00 642,591,837.00 Receivable Later Than Five Years - -

Unearned Finance Income 2006 2007 2008 2009 2010Less Than One Year 167,072,750.00 245,566,100.00 257,053,479.00 336,383,841.00 133,088,945.00 More Than One Year Below Five Years 197,727,361.00 335,981,942.00 337,463,800.00 253,154,486.00 164,861,567.00

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Interest Income 2006 2007 2008 2009 2010 Average Average Growth rateInterest Income from Lease 116,429,433.00 220,137,271.00 250,775,153.00 264,267,029.00 195,988,715.00 209,519,520.20 17.08%Interest During Construction Period 40,177,345.00 29,480,076.00 30,723,272.00 20,920,332.00 - Interest Income from Term Finane 24,953,064.00 109,414,760.00 214,292,320.00 229,216,400.00 277,441,913.00 171,063,691.40 252.96% Interest Income from Short Term Lending 16,210,229.00 42,046,451.00 66,080,763.00 52,690,172.00 43,130,803.00 Income from Credit Card 56,020,853.00 61,604,426.00 82,887,052.00 107,094,659.00 115,073,862.00 Interest Income on Margin Trading 19,840,271.00 121,825,882.00 241,341,616.00 421,626,541.00 735,477,515.00 308,022,365.00 901.75%Interest Income from Factoring 66,387.00 2,625,500.00 1,206,777.00 1,570,294.00 Interest Income from Mortgage Loan 4,215,349.00 48,228,056.00 90,549,842.00 Interest Income from SME - 9,618,156.00 Interest Income from Auto Loan - 5,212,362.00 Interest Income on Fixed Deposit 43,272,644.00 48,091,555.00 Interest Income Short Term Deposit 1,586,272.00 3,178,398.00 Interest Income on Current Account with Subsidiaries 18,179,915.00 38,619,611.00 Total 273,631,195.00 584,575,253.00 892,941,025.00 1,208,288,797.00 1,563,953,026.00 904,677,859.20 117.89%

Provision for Doubtful Accounts and Future Losses 2006 2007 2008 2009 2010 Average Average Growth rateLease Finance 22,000,112.00 48,898,744.00 77,940,745.00 148,213,325.00 232,978,950.00 106,006,375.20 239.75%Term Finance and short Term Lending 6,535,612.00 26,903,999.00 65,305,000.00 160,308,775.00 250,055,837.00 101,821,844.60 931.51%Credit Card 10,728,941.00 15,249,000.00 17,575,527.00 21,018,391.00 27,560,436.00 Mortgage Loan 3,195,000.00 12,533,254.00 23,165,770.00 Total 39,264,665.00 91,051,743.00 164,016,272.00 342,073,745.00 533,760,993.00

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3. Comparative Analysis Data

IDLC

Lease & Loan Advances (in Taka) 2006 2007 2008 2009 2010 Average Average Growth rateLease Portfolio 2,563,631,258.00 2,473,920,183.00 2,832,241,970.00 4,187,605,411.00 4,095,573,845.00 3,230,594,533.40 14.94%Advance against Lease 57,982,958.00 22,146,765.00 54,071,249.00 195,347,173.00 11,250,500.00 68,159,729.00 -20.15%Term Finance 1,091,177,101.00 1,356,014,263.00 1,579,037,088.00 3,437,116,151.00 4,206,981,254.00 2,334,065,171.40 71.39%Mortgage LoanMargin Loan 5,861,960,297.00 5,633,191,635.00 5,747,575,966.00 Short Term Finance 316,976,537.00 467,566,629.00 392,271,583.00 Factoring DebtorsCredit Card receivablesSMEAutoLoan 184,073,553.00 249,647,841.00 235,225,755.00 344,592,105.00 339,287,534.00 270,565,357.60 21.08%Work Order Finance-FactoringReal Estate Finance 2,114,873,194.00 2,674,309,427.00 3,318,460,624.00 4,788,544,980.00 5,604,572,075.00 3,700,152,060.00 41.25%Loan Against Deposits 2,674,309,427.00 205,730,137.00 552,699,126.00 1,144,246,230.00 -39.67%Personal Loan 34,991,535.00 100,411,695.00 212,274,782.00 115,892,670.67 253.32%Interest Receivable 100,875,277.00 122,397,256.00 111,636,266.50 21.34%Work Order FinanceTotal 6,011,738,064.00 6,776,038,479.00 10,728,337,648.00 19,539,159,763.00 21,245,794,636.00 12,860,213,718.00 63.35%

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Interest Income 2006 2007 2008 2009 2010 Average Average Growth rateInterest Income from Lease 622,292,160.00 698,728,072.00 661,016,673.00 608,716,365.00 541,222,163.00 626,395,086.60 -3.26%Interest During Construction PeriodInterest Income from Term Finane 165,735,704.00 312,455,425.00 411,454,677.00 459,182,777.00 590,887,886.00 387,943,293.80 64.13% Interest Income from Short Term Lending 32,006,390.00 36,778,958.00 48,081,940.00 41,633,129.00 48,877,791.00 41,475,641.60 13.18%Income from Investment in Securities 70,385,123.00 142,604,315.00 174,524,169.00 210,156,935.00 353,629,661.00 190,260,040.60 100.61%Interest Income on Margin Trading 196,490,815.00 601,036,262.00 794,182,177.00 Interest Income from FactoringInterest Income from Mortgage LoanInterest Income from Structured Finance 5,250,962.00 13,451,786.00 16,993,619.00 Interest Income from Auto Loan 24,732,112.00 44,350,635.00 56,411,191.00 56,171,010.00 56,085,030.00 Interest Income on Fixed DepositInterest Income Short Term Deposit 53,639,724.00 66,552,981.00 87,533,296.00 96,951,314.00 154,956,703.00 Interest Income on Current Account with Subsidiaries Interest Income from Real Estate Finance 304,232,278.00 434,080,675.00 558,383,284.00 655,814,001.00 750,919,776.00 Interest Income on Personal Loan 22,491,911.00 44,024,780.00 11,299,363.00 23,924,964.00 Interest Income on Call Loans 74,410.00 46,260,278.00 Interest Incomefrom Loan Against Deposits 40,075,080.00 30,618,261.00 Total 1,278,274,453.00 1,771,494,758.00 2,254,914,444.00 2,781,110,646.00 3,391,564,690.00 2,295,471,798.20 41.33%

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Prime Finance

Lease & Loan Advances (in Taka) 2006 2007 2008 2009 2010 Average Average Growth rateLease Portfolio 1,430,791,277.00 1,572,115,916.00 1,414,635,048.00 1,623,101,749.00 1,339,525,803.00 1,476,033,958.60 -1.59%Advance against Lease 44,725,797.00 62,391,632.00 133,347,303.00 78,822,210.00 58,584,203.00 75,574,229.00 7.75%Term Finance 1,273,940,359.00 1,309,751,251.00 1,491,665,143.00 3,137,451,762.00 4,198,313,791.00 2,282,224,461.20 57.39%Mortgage Loan - 3,935,852.00 1,967,926.00 Real Estate Finance 84,625,487.00 91,223,528.00 82,500,000.00 118,847,109.00 138,807,764.00 103,200,777.60 16.01%Margin Loan 56,574,636.00 282,343,845.00 642,115,517.00 2,209,370,632.00 2,910,729,240.00 1,220,226,774.00 1261.23%Short Term Finance - - Factoring Debtors - - Loan Against Deposits 1,815,000.00 2,491,445.00 12,040,120.00 1,696,006.00 1,886,078.00 SME - - AutoLoan - - Hire Purchase Finance 11,505,433.00 10,844,479.00 15,587,466.00 11,136,337.00 11,297,522.00 Staff Loan 56,541,444.00 57,619,810.00 Other Finance - - Total 2,903,977,989.00 3,331,162,096.00 3,791,890,597.00 7,236,967,249.00 8,720,700,063.00 5,196,939,598.80 50.08%

Interest Income 2006 2007 2008 2009 2010 Average Average Growth rateInterest Income from Lease 184,947,325.00 198,368,106.00 208,573,206.00 187,826,222.00 184,804,342.00 192,903,840.20 -0.02%Interest During Construction PeriodInterest Income from Term Finane 170,487,527.00 195,717,474.00 217,499,136.00 246,632,366.00 523,347,216.00 270,736,743.80 51.74% Interest Income from Short Term LendingIncome from Credit CardInterest Income on Margin Trading 8,103,981.00 26,609,857.00 68,954,429.00 196,980,764.00 459,900,048.00 Interest Income from FactoringInterest Income from Mortgage LoanInterest Income from Real Estate Finance 14,126,168.00 5,423,373.00 160,080.00 2,730,471.00 7,251,039.00 Interest Income from Auto LoanInterest Income on Fixed DepositInterest Income Short Term Deposit 7,690,828.00 8,436,563.00 Income from other SourcesTotal 377,665,001.00 426,118,810.00 495,186,851.00 641,860,651.00 1,183,739,208.00 624,914,104.20 53.36%

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Union Capital

Lease & Loan Advances (in Taka) 2006 2007 2008 2009 2010 Average Average Growth rateLease Portfolio 963,781,158.00 1,286,565,465.00 1,646,656,139.00 1,581,731,788.00 1,403,047,724.00 1,376,356,454.80 11.39%Advance against Lease 196,898,099.00 286,748,622.00 64,232,123.00 123,595,267.00 118,847,351.00 158,064,292.40 -9.91%Term Finance 114,395,413.00 422,749,989.00 660,015,181.00 751,950,250.00 1,585,887,915.00 706,999,749.60 321.58%Mortgage LoanMargin Loan 61,398,781.00 499,283,408.00 868,798,634.00 2,138,231,172.00 2,722,259,841.00 1,257,994,367.20 1083.43%Short Term FinanceFactoring DebtorsCredit Card receivablesPersonal Loan 1,165,372.00 1,067,682.00 13,076,821.00 15,547,376.00 32,908,792.00 AutoLoanWork Order Finance-FactoringWork Order FinanceTotal 1,337,638,823.00 2,496,415,166.00 3,252,778,898.00 4,611,055,853.00 5,862,951,623.00 3,512,168,072.60 84.58%

Interest Income 2006 2007 2008 2009 2010 Average Average Growth rateInterest Income from Lease 142,853,145.00 210,116,382.00 265,151,599.00 191,769,415.00 164,456,976.00 194,869,503.40 3.78%Interest During Construction Period 22,828,592.00 22,641,493.00 22,735,042.50 Interest Income from Term Finane 14,339,577.00 34,978,866.00 83,734,247.00 112,422,543.00 160,831,834.00 81,261,413.40 255.40% Interest Income from Short Term LendingIncome from Credit CardInterest Income on Margin Trading 2,540,790.00 29,843,175.00 62,334,014.00 202,386,801.00 368,980,797.00 Interest Income from FactoringInterest Income from Mortgage LoanDelinquent Charges 30,202,602.00 44,305,147.00 24,504,582.00 13,725,127.00 7,473,546.00 Interest Income from Auto LoanInterest Income on Fixed DepositInterest Income Short Term DepositInterest Income on Current Account with Subsidiaries Total 189,936,114.00 319,243,570.00 435,724,442.00 543,132,478.00 724,384,646.00 442,484,250.00 70.35%

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Peoples Leasing and Financial Services Limited

Lease & Loan Advances (in Taka) 2006 2007 2008 2009 2010 Average Average Growth rateLease Portfolio 1,070,298,197.00 1,359,808,665.00 1,696,706,881.00 2,386,794,877.00 4,183,289,386.00 2,139,379,601.20 72.71%Unearned Lease Income 190,552,121.00 199,350,148.00 235,981,054.00 299,576,703.00 429,859,913.00 271,063,987.80 31.40%Advance against Lease 115,869,584.00 196,363,747.00 398,114,196.00 310,736,938.00 118,840,432.00 227,984,979.40 0.64%Term Finance 1,968,796,030.00 1,361,340,236.00 3,041,217,080.00 4,562,401,425.00 7,752,475,881.00 3,737,246,130.40 73.44%Mortgage Loan 1,447,541.00 256,214,263.00 Margin LoanShort Term FinanceFactoring DebtorsCredit Card receivablesSMEAutoLoanWork Order Finance-FactoringOther Loans 1,447,541.00 2,532,100.00 Total 3,345,515,932.00 3,116,862,796.00 5,372,019,211.00 7,562,405,025.00 12,743,211,975.00 6,428,002,987.80 70.23%

Interest Income 2006 2007 2008 2009 2010 Average Average Growth rateInterest Income from Lease 144,700,732.00 172,046,728.00 174,893,241.00 191,703,528.00 293,250,341.00 195,318,914.00 25.66%Interest During Construction PeriodInterest Income from Term Finane 85,713,280.00 191,355,821.00 269,659,534.00 383,757,683.00 457,861,423.00 277,669,548.20 108.54% Interest Income from Short Term LendingIncome on Loan against TDR 924,779.00 135,643.00 359,109.00 1,115,071.00 1,675,969.00 Interest Income on Margin Trading 69,017,445.00 82,922,271.00 134,634,318.00 197,824,559.00 436,657,994.00 Interest Income from FactoringInterest Income from Mortgage Loan 57,141,567.00 57,181,768.00 1,652,124.00 9,343,941.00 18,120,752.00 Interest Income from SMEInterest Income from Auto LoanInterest Income on Fixed DepositInterest Income from Personal Loan 84,013.00 53,096.00 43,339.00 55,845.00 88,199.00 Interest Income on Current Account with Subsidiaries Total 357,581,816.00 503,695,327.00 581,241,665.00 783,800,627.00 1,207,654,678.00 686,794,822.60 59.43%

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International Leasing and Financial Services Limited

Lease & Loan Advances (in Taka) 2006 2007 2008 2009 2010 Average Average Growth rateLease Portfolio 2,556,932,875.00 3,221,587,662.00 3,558,556,773.00 3,523,780,249.00 2,823,982,328.00 3,136,967,977.40 2.61%Unearned Lease Income 562,398,505.00 761,551,102.00 697,672,142.00 994,763,541.00 662323685 735,741,795.00 4.44%Advance against Lease 225,665,187.00 545,088,137.00 391,299,897.00 347,008,634.00 179,280,385.00 337,668,448.00 -5.14%Term Finance 2,333,654,178.00 2,444,788,418.00 3,214,773,031.00 4,468,997,633.00 5,645,549,193.00 3,621,552,490.60 35.48%Mortgage Loan - 43,875,838.00 223,503,864.00 473,891,715.00 Margin LoanShort Term Finance 250,000,000.00 300,000,000.00 685,500,000.00 1,456,631,705.00 3,327,174,949.00 Factoring DebtorsCredit Card receivablesSMEAutoLoanWork Order Finance-Factoring 10,994,675.00 34,428,895.00 Personal Loan 18,246,964.00 18,680,067.00 Total 5,928,650,745.00 7,273,015,319.00 8,591,677,681.00 11,043,927,265.00 13,165,311,217.00 9,200,516,445.40 30.52%

Interest Income 2006 2007 2008 2009 2010 Average Average Growth rateInterest Income from Lease 485,226,775.00 568,724,268.00 619,449,698.00 514,965,682.00 406,754,907.00 519,024,266.00 -4.04%Interest During Construction PeriodInterest Income from Term Finane 456,012,885.00 340,158,175.00 446,828,410.00 524,654,975.00 511,041,070.00 455,739,103.00 3.02% Interest Income from Short Term Lending 52,316,669.00 100,210,402.00 92,364,755.00 341,031,406.00 Income from Work Order Finance 1,600,613.00 1,766,727.00 Interest Income on Margin Trading 5,050,965.00 7,703,371.00 Interest Income from FactoringInterest Income from Mortgage Loan - 3,598,170.00 18,107,634.00 48,557,329.00 Interest Income from SMEInterest Income from Personal Loan 1,064,880.00 1,653,822.00 Interest Income on Fixed Deposit 87,392,370.00 51,774,391.00 Interest Income Short Term Deposit 2,895,063.00 2,082,334.00 Interest Income on Current Account with Subsidiaries Total 946,290,625.00 968,902,483.00 1,170,086,680.00 1,243,045,972.00 1,364,661,986.00 1,138,597,549.20 11.05%

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United Leasing limited

Lease & Loan Advances (in Taka) 2006 2007 2008 2009 2010 Average Average Growth rateLease Portfolio 4,296,569,800.00 4,909,881,581.00 5,193,584,702.00 5,016,232,986.00 5,087,058,876.00 4,900,665,589.00 4.60%Unearned Lease Income 1,255,272,092.00 1,361,446,745.00 1,342,812,783.00 1,138,705,262.00 1,162,645,871.00 1,252,176,550.60 -1.84%Advance against Lease 166,293,613.00 25,696,041.00 9,150,203.00 38,091,609.00 59,807,866.50 -19.27%Term Finance 881,674,399.00 1,291,616,869.00 1,318,312,920.00 2,196,219,363.00 2,469,073,258.00 1,631,379,361.80 45.01%Mortgage LoanMargin LoanShort Term Finance 205,648,246.00 296,739,989.00 498,700,651.00 615,980,083.00 1,013,498,527.00 Factoring DebtorsCredit Card receivablesSMEAutoLoanWork Order Finance-FactoringWork Order FinanceTotal 6,639,164,537.00 8,025,978,797.00 8,379,107,097.00 8,976,287,897.00 9,770,368,141.00 8,358,181,293.80 11.79%

Interest Income 2006 2007 2008 2009 2010 Average Average Growth rateInterest Income from Lease 562,620,394.00 712,897,103.00 767,052,536.00 755,287,466.00 733,900,962.00 706,351,692.20 7.61%Interest During Construction PeriodInterest Income from Term Finane 83,349,182.00 153,845,841.00 193,273,017.00 164,977,920.00 201,167,104.00 159,322,612.80 35.34% Interest Income from Short Term Lending 23,649,297.00 22,416,358.00 15,983,998.00 73,903,949.00 95,536,550.00 46,298,030.40 75.99%Income from Credit CardInterest Income on Margin TradingInterest Income from FactoringInterest Income from Mortgage LoanInterest Income from Hire Purchase 38,283,629.00 59,308,543.00 Interest Income from Auto LoanInterest Income on Fixed Deposit 24,115,188.00 16,318,138.00 19,766,125.00 97,414,870.00 96,070,556.00 Interest Income on Call Loan 96,853.00 923,338.00 3,911,873.00 8,974,792.00 10,952,722.00 Interest Income on Current Account with Banks 2,285,389.00 17,828,408.00 47,765,298.00 5,790,328.00 2,674,209.00 Total 734,399,932.00 983,537,729.00 1,047,752,847.00 1,106,349,325.00 1,140,302,103.00 1,002,468,387.20 13.82%

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3. last part

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