Group Project on Business Plan for a Financial Institution

Fin 340

Working Capital Management

Prepared For MrRaisul Islam (Rsm)

School of Business

North South University

32

Prepared By

Name ID e-mail

Maruf Rahman (Sec 05) 093 0697 030 maruf02livecom

Parsha Sanzana (Sec 04) 091 0266 030 parshasanzanayahoocom

Jaharatul Kobra (Sec 04) 092 0476 530 jkgunjongmailcom

Rafat Hashan (Sec 04) 091 0220 030 rumanrafatgmailcom

Date of Submission 03052012

Letter of Transmittal

May 3rd 2012

Raisul Islam (Rsm)Lecturer School of BusinessNorth South University Dhaka-1213

Dear Sir

Subject Submission of project report

We were advised to prepare a Project on ldquoBusiness plan for a Financial Institutionrdquo It gives us immense pleasure to tell you that working on this Project has given us a wide range of exposure We are truly delighted to complete our report successfully We hope the report would be meeting your expectations and standards We are really thankful for this assignment as we got to know more about those issues It will be a great honor for us if you require us to explain any sort of queries

Thanking you

32

Prepared By

Name ID e-mail

Maruf Rahman (Sec 05) 093 0697 030 maruf02livecom

Parsha Sanzana (Sec 04) 091 0266 030 parshasanzanayahoocom

Jaharatul Kobra (Sec 04) 092 0476 530 jkgunjongmailcom

Rafat Hashan (Sec 04) 091 0220 030 rumanrafatgmailcom

Date of Submission 03052012

Letter of Transmittal

May 3rd 2012

Raisul Islam (Rsm)Lecturer School of BusinessNorth South University Dhaka-1213

Dear Sir

Subject Submission of project report

We were advised to prepare a Project on ldquoBusiness plan for a Financial Institutionrdquo It gives us immense pleasure to tell you that working on this Project has given us a wide range of exposure We are truly delighted to complete our report successfully We hope the report would be meeting your expectations and standards We are really thankful for this assignment as we got to know more about those issues It will be a great honor for us if you require us to explain any sort of queries

Thanking you

32

____________________ ____________________ ________________

Maruf Rahman Parsha Sanzana RafatHasan

(093 0697 030) (091 0266 030) (091 0220 030)

____________________

Jaharatul Kobra

(092 0476 530)

Declaration

This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin

340 course in spring 2012 semester This report is thoroughly for academic in

purpose It was never submitted before in any course or institution

_____________________ ______________________ ____________________

Maruf Rahman Parsha Sanzana RafatHasan

(093 0697 030) (091 0266 030) (091 0220 030)

____________________

Jaharatul Kobra

(092 0476 530)

32

Acknowledgement

Apart from the efforts of us the success of any project depends largely on the

encouragement and guidelines of many others We take this opportunity to express

our gratitude to the people who have been helpful to give us valuable information

regarding this project so that it can be successful

We would like to show our greatest appreciation to honorable faculty Raisul Islam

(Rsm) Lecturer North South University We cannot thank him enough for his

tremendous support and help throughout the semester We felt motivated and

encouraged every time we attend his classes and effective class lectures Without his

encouragement and guidance this project would not have materialized Undoubtedly

this assignment would help us in future in our career

The guidance and support received from all our group members who contributed were

vital for the success of the project We are grateful to each other for the constant

support and help

32

32

TABLE OF CONTENTS

TOPICS PAGE

NO

EXECUTIVE SUMMARY 06

OVERVIEW OF FINANCIAL

STRUCTURE OF BANGLADESH

07

An Overview of Bangladeshrsquos

Banking Environment

08

BANK AND BANKING SYSTEM

OF BANGLADESH

09

BANKING SECTOR AND ITS

CONTRIBUTION TO THE

NATIONAL ECONOMY

09

PROBLEMS AND PROSPECT OF

BANKING SECTOR IN

BANGLADESH

10-11

Competitor Analysis 11-23

Overview of PRMG Bank LTD 23-30

Estimations amp findings 30-31

Recommendation 31-32

32

EXECUTIVE SUMMARY

This analytical report is prepared as a course requirement for FIN 340 or Working

Capital Management to get familiar with real-life business plan and to strengthen the

concept that is learned from the text In this report a proper Business plan is made for

a financial institution and supportive calculations have been made

To derive comparative performance of PRMG Bank Ltd and find the opportunity in

the real market place forecasted balance sheet income statements Cash flow

statements have also been made and derive a recommendation from that analysis

All data has been forecasted and also followed the competitorrsquos reports Profit-Loss

Statement and Balance Sheet have been used as primary sources of data to predict

performance From the performance we can be able to find out the proper step which

will be taken in the long run The major parts of the report are Banking Environment

Forecasting and analysis and Recommendation

Banking environment section provides with an overall idea about the past and recent

conditions of banking sector in Bangladesh and help to find a suitable position where

there will be no business loss for the company

Forecasting amp analysis section is one of the main parts of this report as it reveals all

the facts with potential understanding to an investor whether they should invest in this

project or not The Net Present Value (NPV) and also the Internal Rate of Return

(IRR) are calculated to forecast what will be the position if we work in this manner

The recommendation part is based on the forecasting and analysis section and reveals

what an investor should decide about hisher investment decision for this project

Finally all the detailed calculations have been provided at the appendix section

32

OVERVIEW OF FINANCIAL STRUCTURE OF

BANGLADESH

Financial structure primarily depends on the level of economic and social

development of a particular country It involves through a historical process along

with the level of development different kinds of financial institutions grow and

develop to meet different kinds of needs of economic and social development Hence

financial structure or system varies from one country to another As for Bangladesh

financial structure is at the formative stage Its classification is beset with problems

because rigid classification often becomes unrealistic However for academic

proposes financial institutions in Bangladesh may broadly be divided into two

groups

a Banking institutions and

b Non-bank financial institutions

A chart showing the above classification is given below

Banking institution Non-banking financial

institutionA Functional

i Central Bank

ii Commercial Banks

iii Industrial Banks

iv Agricultural Banks

v Specialized Banks

vi Banks Run On Islamic Principles

vii Cooperative Banks

B Ownership

i Government Or Nationalized Banks

ii Private Banks

iii Joint Venture Banks

C Origin

i Insurance companies

ii Investment and Finance companies

iii Leasing companies

iv Merchant banking companies

v House holding Finance companies

vi Stock exchanges

32

i Local Banks

II Foreign Banks

An Overview of Bangladeshrsquos Banking EnvironmentThe Banking Industry in Bangladesh is one characterized by strict regulations and

monitoring from the central governing body the Bangladesh Bank The chief concern

is that currently there are far too many banks for the market to sustain As a result the

market will only accommodate only those banks that can transpires the most

competitive and profitable ones in the future Currently the major financial institutions

under the banking system include

1 Bangladesh Bank

2 Commercial Banks

3 Islamic banks

4 Leasing Companies

5 Finance companies

Of these there are four nationalized commercial banks (NCB) 9 specialized banks

11 foreign banks and 30 domestic private banks 4 Islamic banks currently operating

in Bangladesh

Generally the commercial banks and finance companies provide a myriad of banking

productsservices to cater to the needs of their customers However the Bangladeshi

banking industry is characterized by the tight banking rules and regulations set by the

Bangladesh Bank All banks and financial institutions are highly governed and

controlled under the Banking Companies Act-1993

The range of banking products and financial services is also limited in scope all local

banks must maintain a 4 Cash Reserve Requirement (CRR) which is non-interest

bearing and a 16 Secondary Liquidity Requirement (SLR) With the liberalization

of markets competition among the banking products and financial services seems to

be growing more intense each day In addition the banking products offered in

Bangladesh are fairly homogeneous in nature due to the tight regulations imposed by

the central bank Competing through differentiation is increasingly difficult and other

banks quickly duplicate any innovative banking service

BANK AND BANKING SYSTEM OF BANGLADESH

32

Bangladesh inherited from the British via banking during Pakistani period the todays

banking structure It presently consists of several categories or classes of banks

excluding bon-bank financial institutions like investment and finance companies

leasing companies merchant banking companies housing development finance

companies and stock exchanges etc categorization or classification of banks is a very

difficult task since no single basis is good enough to classify them appropriately

Despite that and attempt may be made to classify them o the basis of

a Functions and

b Ownership and

c Origin

BANKING SECTOR AND ITS CONTRIBUTION TO THE

NATIONAL ECONOMYThe Economic structure of Bangladesh is agricultural based Most of the industries of

our country are depend on agriculture For savings and formation of capital is

normally difficult on view of Bangladesh Moreover now days there are various

financial institution (government private and foreign) have been set-up in the

country Side by side government has also set-up various specialized banks and

financial institutions

These banks and financial institutions contribute in different way on our economic

development Especially bank business plays an important role on development of

economic situation of our country Some of important contribution criteria are listed

below

1 Creation of medium of exchange

2 Collection of savings and formation of capital

3 Supply of capital

4 Development of home trade

5 Help of foreign trade etc

PROBLEMS AND PROSPECT OF BANKING SECTOR

IN BANGLADESHBanks in Bangladesh in the present form are more than half a century old During

this period they have undergone many changes both qualitatively and qualitatively

32

Numbers of banks and their branches have increases significantly Services provided

by them have also multiplied It is by now a mix of both Government banks and banks

in the private sector Despite these changes can it be said that they have played an

expected role in economic development The answer will tend to be negative The

question is why the banks could not initiate the process of development The reasons

may by summarize as under the heading of problems of banking sector in Bangladesh

These are

Problem of banking sector in Bangladesh1 The operations of the banks were and are still limited to city and commercial areas

only Though they have spread to rural areas yet they are engaged in transferring

funds from rural or less developed areas to urban areas instead of investing in the

areas of their location

2 Commercial banks mostly financed the trade and commerce amp did not pay adequate

attention to small medium and large industries not to spread of agriculture which still

contributes largely to GDP

3 Lending operations of banks were and are still based on security including

collateral This security oriented lending deprived the creditworthy borrowers who

could not offer collateral but had potentialities

4 When banks were nationalized after liberation in 1972 they went to rural areas and

expended their business both vertically and horizontally But in doing so they lost

control over their operations resulting in increasing number of losing branches and

loan default The result has been disastrous for the banking sector in the sense that

they are not in a position now to contribute significantly economic growth by

mobilizing more resources for meeting growing credit needs Instead of expansion

they are now found engaged in housekeeping

5 Economic structure of Bangladesh is agricultural based For this reason

industrialization is not spread all over the country As result banking operation is not

extend if banks have a great desire to expand their business

6 Bureaucratic process of our country is also barrier for expanding banking business

7 Government policies amp practice and legal issues are not favorable for banking

business

32

8 Infrastructure facilities and security systems of our country is also another problem

of expanding banking business

Prospect of banking sector in Bangladesh1 Although Bangladesh is agricultural country but day by day its economic

activities would be increased

2 Garments Industries is an important economic sector of our country So it is

another sector where banks can invest their money

3 Banks can establish new industry on their own capital because Bangladesh has low

price raw materials and low cost manpower

4 Banks can provide credit in small sectors ie micro credit scheme (cottage industry

handicraft fishing etc) and make new entrepreneur For example Grameen Bankrsquos

banking system

5 Mobilization of funds and investment in the desired sectorsproductive sectors As a

result people would be aware of banking sectors and transact with banks

Competitor AnalysisHSBC BankHSBC started operations in 1996 The bank primarily focuses on urban areas and has

branches in most areas of the capital city of Dhaka it also has branches in the cities of

Chittagong and Sylhet The bank also has a good number of ATM booths in the cities

present it also has booths in most five star hotels

HSBC Bangladesh is rated lsquoAAArsquo in the Long-term and ST-1 rating in the Short-

term which are the highest level of ratings for any bank or financial institution in

Bangladesh

HSBC Bangladesh offers a comprehensive range of financial services such as

commercial banking consumer banking payments and cash management trade

services treasury and custody and clearing The bank also offers offshore banking in

the Export Processing Zones this is only limited to investors in the EPZs A special

service called NRB Services is also available for nonresident Bangladeshis this

service allows consumers to maintain accounts in US Dollars Pound Sterling and

Euros People using this service can freely remit money from Bangladesh to any part

of the world and can access their money from any HSBC booth around the world

32

HSBC Bangladesh has a help center which operates on daily basics It is one of the

very few banks in the country to offer day night banking

HSBCs global Islamic banking system called Amanah is available in Bangladesh

There is a special branch dedicated just for this service

Services Provided By HSBC Bank

Retail

bull Home Loan

bull Personal Loan

bull NRB Services

bull HSBC Select

bull Power Vantage

Commercial

bull Export Services

bull Import Services

bull Electronic DC Advising

bull Cash Management

Amanah

bull Amanah Retail

bull Amanah Commercial

HSBCs operations in Bangladesh

bull Retail Banking and Wealth Management

bull Commercial banking

bull Corporate and institutional banking

bull Trade amp Supply Chains

bull Payments and cash management

bull Custody and clearing

bull Investment banking and markets

bull Treasury and capital markets

bull Amanah

(SWOT Analysis)

Strengths

The strengths of HSBC rival companies include the ability to provide the needs and

demands of different customers all over the world Through the use of information

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

Acknowledgement

Apart from the efforts of us the success of any project depends largely on the

encouragement and guidelines of many others We take this opportunity to express

our gratitude to the people who have been helpful to give us valuable information

regarding this project so that it can be successful

We would like to show our greatest appreciation to honorable faculty Raisul Islam

(Rsm) Lecturer North South University We cannot thank him enough for his

tremendous support and help throughout the semester We felt motivated and

encouraged every time we attend his classes and effective class lectures Without his

encouragement and guidance this project would not have materialized Undoubtedly

this assignment would help us in future in our career

The guidance and support received from all our group members who contributed were

vital for the success of the project We are grateful to each other for the constant

support and help

32

32

TABLE OF CONTENTS

TOPICS PAGE

NO

EXECUTIVE SUMMARY 06

OVERVIEW OF FINANCIAL

STRUCTURE OF BANGLADESH

07

An Overview of Bangladeshrsquos

Banking Environment

08

BANK AND BANKING SYSTEM

OF BANGLADESH

09

BANKING SECTOR AND ITS

CONTRIBUTION TO THE

NATIONAL ECONOMY

09

PROBLEMS AND PROSPECT OF

BANKING SECTOR IN

BANGLADESH

10-11

Competitor Analysis 11-23

Overview of PRMG Bank LTD 23-30

Estimations amp findings 30-31

Recommendation 31-32

32

EXECUTIVE SUMMARY

This analytical report is prepared as a course requirement for FIN 340 or Working

Capital Management to get familiar with real-life business plan and to strengthen the

concept that is learned from the text In this report a proper Business plan is made for

a financial institution and supportive calculations have been made

To derive comparative performance of PRMG Bank Ltd and find the opportunity in

the real market place forecasted balance sheet income statements Cash flow

statements have also been made and derive a recommendation from that analysis

All data has been forecasted and also followed the competitorrsquos reports Profit-Loss

Statement and Balance Sheet have been used as primary sources of data to predict

performance From the performance we can be able to find out the proper step which

will be taken in the long run The major parts of the report are Banking Environment

Forecasting and analysis and Recommendation

Banking environment section provides with an overall idea about the past and recent

conditions of banking sector in Bangladesh and help to find a suitable position where

there will be no business loss for the company

Forecasting amp analysis section is one of the main parts of this report as it reveals all

the facts with potential understanding to an investor whether they should invest in this

project or not The Net Present Value (NPV) and also the Internal Rate of Return

(IRR) are calculated to forecast what will be the position if we work in this manner

The recommendation part is based on the forecasting and analysis section and reveals

what an investor should decide about hisher investment decision for this project

Finally all the detailed calculations have been provided at the appendix section

32

OVERVIEW OF FINANCIAL STRUCTURE OF

BANGLADESH

Financial structure primarily depends on the level of economic and social

development of a particular country It involves through a historical process along

with the level of development different kinds of financial institutions grow and

develop to meet different kinds of needs of economic and social development Hence

financial structure or system varies from one country to another As for Bangladesh

financial structure is at the formative stage Its classification is beset with problems

because rigid classification often becomes unrealistic However for academic

proposes financial institutions in Bangladesh may broadly be divided into two

groups

a Banking institutions and

b Non-bank financial institutions

A chart showing the above classification is given below

Banking institution Non-banking financial

institutionA Functional

i Central Bank

ii Commercial Banks

iii Industrial Banks

iv Agricultural Banks

v Specialized Banks

vi Banks Run On Islamic Principles

vii Cooperative Banks

B Ownership

i Government Or Nationalized Banks

ii Private Banks

iii Joint Venture Banks

C Origin

i Insurance companies

ii Investment and Finance companies

iii Leasing companies

iv Merchant banking companies

v House holding Finance companies

vi Stock exchanges

32

i Local Banks

II Foreign Banks

An Overview of Bangladeshrsquos Banking EnvironmentThe Banking Industry in Bangladesh is one characterized by strict regulations and

monitoring from the central governing body the Bangladesh Bank The chief concern

is that currently there are far too many banks for the market to sustain As a result the

market will only accommodate only those banks that can transpires the most

competitive and profitable ones in the future Currently the major financial institutions

under the banking system include

1 Bangladesh Bank

2 Commercial Banks

3 Islamic banks

4 Leasing Companies

5 Finance companies

Of these there are four nationalized commercial banks (NCB) 9 specialized banks

11 foreign banks and 30 domestic private banks 4 Islamic banks currently operating

in Bangladesh

Generally the commercial banks and finance companies provide a myriad of banking

productsservices to cater to the needs of their customers However the Bangladeshi

banking industry is characterized by the tight banking rules and regulations set by the

Bangladesh Bank All banks and financial institutions are highly governed and

controlled under the Banking Companies Act-1993

The range of banking products and financial services is also limited in scope all local

banks must maintain a 4 Cash Reserve Requirement (CRR) which is non-interest

bearing and a 16 Secondary Liquidity Requirement (SLR) With the liberalization

of markets competition among the banking products and financial services seems to

be growing more intense each day In addition the banking products offered in

Bangladesh are fairly homogeneous in nature due to the tight regulations imposed by

the central bank Competing through differentiation is increasingly difficult and other

banks quickly duplicate any innovative banking service

BANK AND BANKING SYSTEM OF BANGLADESH

32

Bangladesh inherited from the British via banking during Pakistani period the todays

banking structure It presently consists of several categories or classes of banks

excluding bon-bank financial institutions like investment and finance companies

leasing companies merchant banking companies housing development finance

companies and stock exchanges etc categorization or classification of banks is a very

difficult task since no single basis is good enough to classify them appropriately

Despite that and attempt may be made to classify them o the basis of

a Functions and

b Ownership and

c Origin

BANKING SECTOR AND ITS CONTRIBUTION TO THE

NATIONAL ECONOMYThe Economic structure of Bangladesh is agricultural based Most of the industries of

our country are depend on agriculture For savings and formation of capital is

normally difficult on view of Bangladesh Moreover now days there are various

financial institution (government private and foreign) have been set-up in the

country Side by side government has also set-up various specialized banks and

financial institutions

These banks and financial institutions contribute in different way on our economic

development Especially bank business plays an important role on development of

economic situation of our country Some of important contribution criteria are listed

below

1 Creation of medium of exchange

2 Collection of savings and formation of capital

3 Supply of capital

4 Development of home trade

5 Help of foreign trade etc

PROBLEMS AND PROSPECT OF BANKING SECTOR

IN BANGLADESHBanks in Bangladesh in the present form are more than half a century old During

this period they have undergone many changes both qualitatively and qualitatively

32

Numbers of banks and their branches have increases significantly Services provided

by them have also multiplied It is by now a mix of both Government banks and banks

in the private sector Despite these changes can it be said that they have played an

expected role in economic development The answer will tend to be negative The

question is why the banks could not initiate the process of development The reasons

may by summarize as under the heading of problems of banking sector in Bangladesh

These are

Problem of banking sector in Bangladesh1 The operations of the banks were and are still limited to city and commercial areas

only Though they have spread to rural areas yet they are engaged in transferring

funds from rural or less developed areas to urban areas instead of investing in the

areas of their location

2 Commercial banks mostly financed the trade and commerce amp did not pay adequate

attention to small medium and large industries not to spread of agriculture which still

contributes largely to GDP

3 Lending operations of banks were and are still based on security including

collateral This security oriented lending deprived the creditworthy borrowers who

could not offer collateral but had potentialities

4 When banks were nationalized after liberation in 1972 they went to rural areas and

expended their business both vertically and horizontally But in doing so they lost

control over their operations resulting in increasing number of losing branches and

loan default The result has been disastrous for the banking sector in the sense that

they are not in a position now to contribute significantly economic growth by

mobilizing more resources for meeting growing credit needs Instead of expansion

they are now found engaged in housekeeping

5 Economic structure of Bangladesh is agricultural based For this reason

industrialization is not spread all over the country As result banking operation is not

extend if banks have a great desire to expand their business

6 Bureaucratic process of our country is also barrier for expanding banking business

7 Government policies amp practice and legal issues are not favorable for banking

business

32

8 Infrastructure facilities and security systems of our country is also another problem

of expanding banking business

Prospect of banking sector in Bangladesh1 Although Bangladesh is agricultural country but day by day its economic

activities would be increased

2 Garments Industries is an important economic sector of our country So it is

another sector where banks can invest their money

3 Banks can establish new industry on their own capital because Bangladesh has low

price raw materials and low cost manpower

4 Banks can provide credit in small sectors ie micro credit scheme (cottage industry

handicraft fishing etc) and make new entrepreneur For example Grameen Bankrsquos

banking system

5 Mobilization of funds and investment in the desired sectorsproductive sectors As a

result people would be aware of banking sectors and transact with banks

Competitor AnalysisHSBC BankHSBC started operations in 1996 The bank primarily focuses on urban areas and has

branches in most areas of the capital city of Dhaka it also has branches in the cities of

Chittagong and Sylhet The bank also has a good number of ATM booths in the cities

present it also has booths in most five star hotels

HSBC Bangladesh is rated lsquoAAArsquo in the Long-term and ST-1 rating in the Short-

term which are the highest level of ratings for any bank or financial institution in

Bangladesh

HSBC Bangladesh offers a comprehensive range of financial services such as

commercial banking consumer banking payments and cash management trade

services treasury and custody and clearing The bank also offers offshore banking in

the Export Processing Zones this is only limited to investors in the EPZs A special

service called NRB Services is also available for nonresident Bangladeshis this

service allows consumers to maintain accounts in US Dollars Pound Sterling and

Euros People using this service can freely remit money from Bangladesh to any part

of the world and can access their money from any HSBC booth around the world

32

HSBC Bangladesh has a help center which operates on daily basics It is one of the

very few banks in the country to offer day night banking

HSBCs global Islamic banking system called Amanah is available in Bangladesh

There is a special branch dedicated just for this service

Services Provided By HSBC Bank

Retail

bull Home Loan

bull Personal Loan

bull NRB Services

bull HSBC Select

bull Power Vantage

Commercial

bull Export Services

bull Import Services

bull Electronic DC Advising

bull Cash Management

Amanah

bull Amanah Retail

bull Amanah Commercial

HSBCs operations in Bangladesh

bull Retail Banking and Wealth Management

bull Commercial banking

bull Corporate and institutional banking

bull Trade amp Supply Chains

bull Payments and cash management

bull Custody and clearing

bull Investment banking and markets

bull Treasury and capital markets

bull Amanah

(SWOT Analysis)

Strengths

The strengths of HSBC rival companies include the ability to provide the needs and

demands of different customers all over the world Through the use of information

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

32

TABLE OF CONTENTS

TOPICS PAGE

NO

EXECUTIVE SUMMARY 06

OVERVIEW OF FINANCIAL

STRUCTURE OF BANGLADESH

07

An Overview of Bangladeshrsquos

Banking Environment

08

BANK AND BANKING SYSTEM

OF BANGLADESH

09

BANKING SECTOR AND ITS

CONTRIBUTION TO THE

NATIONAL ECONOMY

09

PROBLEMS AND PROSPECT OF

BANKING SECTOR IN

BANGLADESH

10-11

Competitor Analysis 11-23

Overview of PRMG Bank LTD 23-30

Estimations amp findings 30-31

Recommendation 31-32

32

EXECUTIVE SUMMARY

This analytical report is prepared as a course requirement for FIN 340 or Working

Capital Management to get familiar with real-life business plan and to strengthen the

concept that is learned from the text In this report a proper Business plan is made for

a financial institution and supportive calculations have been made

To derive comparative performance of PRMG Bank Ltd and find the opportunity in

the real market place forecasted balance sheet income statements Cash flow

statements have also been made and derive a recommendation from that analysis

All data has been forecasted and also followed the competitorrsquos reports Profit-Loss

Statement and Balance Sheet have been used as primary sources of data to predict

performance From the performance we can be able to find out the proper step which

will be taken in the long run The major parts of the report are Banking Environment

Forecasting and analysis and Recommendation

Banking environment section provides with an overall idea about the past and recent

conditions of banking sector in Bangladesh and help to find a suitable position where

there will be no business loss for the company

Forecasting amp analysis section is one of the main parts of this report as it reveals all

the facts with potential understanding to an investor whether they should invest in this

project or not The Net Present Value (NPV) and also the Internal Rate of Return

(IRR) are calculated to forecast what will be the position if we work in this manner

The recommendation part is based on the forecasting and analysis section and reveals

what an investor should decide about hisher investment decision for this project

Finally all the detailed calculations have been provided at the appendix section

32

OVERVIEW OF FINANCIAL STRUCTURE OF

BANGLADESH

Financial structure primarily depends on the level of economic and social

development of a particular country It involves through a historical process along

with the level of development different kinds of financial institutions grow and

develop to meet different kinds of needs of economic and social development Hence

financial structure or system varies from one country to another As for Bangladesh

financial structure is at the formative stage Its classification is beset with problems

because rigid classification often becomes unrealistic However for academic

proposes financial institutions in Bangladesh may broadly be divided into two

groups

a Banking institutions and

b Non-bank financial institutions

A chart showing the above classification is given below

Banking institution Non-banking financial

institutionA Functional

i Central Bank

ii Commercial Banks

iii Industrial Banks

iv Agricultural Banks

v Specialized Banks

vi Banks Run On Islamic Principles

vii Cooperative Banks

B Ownership

i Government Or Nationalized Banks

ii Private Banks

iii Joint Venture Banks

C Origin

i Insurance companies

ii Investment and Finance companies

iii Leasing companies

iv Merchant banking companies

v House holding Finance companies

vi Stock exchanges

32

i Local Banks

II Foreign Banks

An Overview of Bangladeshrsquos Banking EnvironmentThe Banking Industry in Bangladesh is one characterized by strict regulations and

monitoring from the central governing body the Bangladesh Bank The chief concern

is that currently there are far too many banks for the market to sustain As a result the

market will only accommodate only those banks that can transpires the most

competitive and profitable ones in the future Currently the major financial institutions

under the banking system include

1 Bangladesh Bank

2 Commercial Banks

3 Islamic banks

4 Leasing Companies

5 Finance companies

Of these there are four nationalized commercial banks (NCB) 9 specialized banks

11 foreign banks and 30 domestic private banks 4 Islamic banks currently operating

in Bangladesh

Generally the commercial banks and finance companies provide a myriad of banking

productsservices to cater to the needs of their customers However the Bangladeshi

banking industry is characterized by the tight banking rules and regulations set by the

Bangladesh Bank All banks and financial institutions are highly governed and

controlled under the Banking Companies Act-1993

The range of banking products and financial services is also limited in scope all local

banks must maintain a 4 Cash Reserve Requirement (CRR) which is non-interest

bearing and a 16 Secondary Liquidity Requirement (SLR) With the liberalization

of markets competition among the banking products and financial services seems to

be growing more intense each day In addition the banking products offered in

Bangladesh are fairly homogeneous in nature due to the tight regulations imposed by

the central bank Competing through differentiation is increasingly difficult and other

banks quickly duplicate any innovative banking service

BANK AND BANKING SYSTEM OF BANGLADESH

32

Bangladesh inherited from the British via banking during Pakistani period the todays

banking structure It presently consists of several categories or classes of banks

excluding bon-bank financial institutions like investment and finance companies

leasing companies merchant banking companies housing development finance

companies and stock exchanges etc categorization or classification of banks is a very

difficult task since no single basis is good enough to classify them appropriately

Despite that and attempt may be made to classify them o the basis of

a Functions and

b Ownership and

c Origin

BANKING SECTOR AND ITS CONTRIBUTION TO THE

NATIONAL ECONOMYThe Economic structure of Bangladesh is agricultural based Most of the industries of

our country are depend on agriculture For savings and formation of capital is

normally difficult on view of Bangladesh Moreover now days there are various

financial institution (government private and foreign) have been set-up in the

country Side by side government has also set-up various specialized banks and

financial institutions

These banks and financial institutions contribute in different way on our economic

development Especially bank business plays an important role on development of

economic situation of our country Some of important contribution criteria are listed

below

1 Creation of medium of exchange

2 Collection of savings and formation of capital

3 Supply of capital

4 Development of home trade

5 Help of foreign trade etc

PROBLEMS AND PROSPECT OF BANKING SECTOR

IN BANGLADESHBanks in Bangladesh in the present form are more than half a century old During

this period they have undergone many changes both qualitatively and qualitatively

32

Numbers of banks and their branches have increases significantly Services provided

by them have also multiplied It is by now a mix of both Government banks and banks

in the private sector Despite these changes can it be said that they have played an

expected role in economic development The answer will tend to be negative The

question is why the banks could not initiate the process of development The reasons

may by summarize as under the heading of problems of banking sector in Bangladesh

These are

Problem of banking sector in Bangladesh1 The operations of the banks were and are still limited to city and commercial areas

only Though they have spread to rural areas yet they are engaged in transferring

funds from rural or less developed areas to urban areas instead of investing in the

areas of their location

2 Commercial banks mostly financed the trade and commerce amp did not pay adequate

attention to small medium and large industries not to spread of agriculture which still

contributes largely to GDP

3 Lending operations of banks were and are still based on security including

collateral This security oriented lending deprived the creditworthy borrowers who

could not offer collateral but had potentialities

4 When banks were nationalized after liberation in 1972 they went to rural areas and

expended their business both vertically and horizontally But in doing so they lost

control over their operations resulting in increasing number of losing branches and

loan default The result has been disastrous for the banking sector in the sense that

they are not in a position now to contribute significantly economic growth by

mobilizing more resources for meeting growing credit needs Instead of expansion

they are now found engaged in housekeeping

5 Economic structure of Bangladesh is agricultural based For this reason

industrialization is not spread all over the country As result banking operation is not

extend if banks have a great desire to expand their business

6 Bureaucratic process of our country is also barrier for expanding banking business

7 Government policies amp practice and legal issues are not favorable for banking

business

32

8 Infrastructure facilities and security systems of our country is also another problem

of expanding banking business

Prospect of banking sector in Bangladesh1 Although Bangladesh is agricultural country but day by day its economic

activities would be increased

2 Garments Industries is an important economic sector of our country So it is

another sector where banks can invest their money

3 Banks can establish new industry on their own capital because Bangladesh has low

price raw materials and low cost manpower

4 Banks can provide credit in small sectors ie micro credit scheme (cottage industry

handicraft fishing etc) and make new entrepreneur For example Grameen Bankrsquos

banking system

5 Mobilization of funds and investment in the desired sectorsproductive sectors As a

result people would be aware of banking sectors and transact with banks

Competitor AnalysisHSBC BankHSBC started operations in 1996 The bank primarily focuses on urban areas and has

branches in most areas of the capital city of Dhaka it also has branches in the cities of

Chittagong and Sylhet The bank also has a good number of ATM booths in the cities

present it also has booths in most five star hotels

HSBC Bangladesh is rated lsquoAAArsquo in the Long-term and ST-1 rating in the Short-

term which are the highest level of ratings for any bank or financial institution in

Bangladesh

HSBC Bangladesh offers a comprehensive range of financial services such as

commercial banking consumer banking payments and cash management trade

services treasury and custody and clearing The bank also offers offshore banking in

the Export Processing Zones this is only limited to investors in the EPZs A special

service called NRB Services is also available for nonresident Bangladeshis this

service allows consumers to maintain accounts in US Dollars Pound Sterling and

Euros People using this service can freely remit money from Bangladesh to any part

of the world and can access their money from any HSBC booth around the world

32

HSBC Bangladesh has a help center which operates on daily basics It is one of the

very few banks in the country to offer day night banking

HSBCs global Islamic banking system called Amanah is available in Bangladesh

There is a special branch dedicated just for this service

Services Provided By HSBC Bank

Retail

bull Home Loan

bull Personal Loan

bull NRB Services

bull HSBC Select

bull Power Vantage

Commercial

bull Export Services

bull Import Services

bull Electronic DC Advising

bull Cash Management

Amanah

bull Amanah Retail

bull Amanah Commercial

HSBCs operations in Bangladesh

bull Retail Banking and Wealth Management

bull Commercial banking

bull Corporate and institutional banking

bull Trade amp Supply Chains

bull Payments and cash management

bull Custody and clearing

bull Investment banking and markets

bull Treasury and capital markets

bull Amanah

(SWOT Analysis)

Strengths

The strengths of HSBC rival companies include the ability to provide the needs and

demands of different customers all over the world Through the use of information

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

TABLE OF CONTENTS

TOPICS PAGE

NO

EXECUTIVE SUMMARY 06

OVERVIEW OF FINANCIAL

STRUCTURE OF BANGLADESH

07

An Overview of Bangladeshrsquos

Banking Environment

08

BANK AND BANKING SYSTEM

OF BANGLADESH

09

BANKING SECTOR AND ITS

CONTRIBUTION TO THE

NATIONAL ECONOMY

09

PROBLEMS AND PROSPECT OF

BANKING SECTOR IN

BANGLADESH

10-11

Competitor Analysis 11-23

Overview of PRMG Bank LTD 23-30

Estimations amp findings 30-31

Recommendation 31-32

32

EXECUTIVE SUMMARY

This analytical report is prepared as a course requirement for FIN 340 or Working

Capital Management to get familiar with real-life business plan and to strengthen the

concept that is learned from the text In this report a proper Business plan is made for

a financial institution and supportive calculations have been made

To derive comparative performance of PRMG Bank Ltd and find the opportunity in

the real market place forecasted balance sheet income statements Cash flow

statements have also been made and derive a recommendation from that analysis

All data has been forecasted and also followed the competitorrsquos reports Profit-Loss

Statement and Balance Sheet have been used as primary sources of data to predict

performance From the performance we can be able to find out the proper step which

will be taken in the long run The major parts of the report are Banking Environment

Forecasting and analysis and Recommendation

Banking environment section provides with an overall idea about the past and recent

conditions of banking sector in Bangladesh and help to find a suitable position where

there will be no business loss for the company

Forecasting amp analysis section is one of the main parts of this report as it reveals all

the facts with potential understanding to an investor whether they should invest in this

project or not The Net Present Value (NPV) and also the Internal Rate of Return

(IRR) are calculated to forecast what will be the position if we work in this manner

The recommendation part is based on the forecasting and analysis section and reveals

what an investor should decide about hisher investment decision for this project

Finally all the detailed calculations have been provided at the appendix section

32

OVERVIEW OF FINANCIAL STRUCTURE OF

BANGLADESH

Financial structure primarily depends on the level of economic and social

development of a particular country It involves through a historical process along

with the level of development different kinds of financial institutions grow and

develop to meet different kinds of needs of economic and social development Hence

financial structure or system varies from one country to another As for Bangladesh

financial structure is at the formative stage Its classification is beset with problems

because rigid classification often becomes unrealistic However for academic

proposes financial institutions in Bangladesh may broadly be divided into two

groups

a Banking institutions and

b Non-bank financial institutions

A chart showing the above classification is given below

Banking institution Non-banking financial

institutionA Functional

i Central Bank

ii Commercial Banks

iii Industrial Banks

iv Agricultural Banks

v Specialized Banks

vi Banks Run On Islamic Principles

vii Cooperative Banks

B Ownership

i Government Or Nationalized Banks

ii Private Banks

iii Joint Venture Banks

C Origin

i Insurance companies

ii Investment and Finance companies

iii Leasing companies

iv Merchant banking companies

v House holding Finance companies

vi Stock exchanges

32

i Local Banks

II Foreign Banks

An Overview of Bangladeshrsquos Banking EnvironmentThe Banking Industry in Bangladesh is one characterized by strict regulations and

monitoring from the central governing body the Bangladesh Bank The chief concern

is that currently there are far too many banks for the market to sustain As a result the

market will only accommodate only those banks that can transpires the most

competitive and profitable ones in the future Currently the major financial institutions

under the banking system include

1 Bangladesh Bank

2 Commercial Banks

3 Islamic banks

4 Leasing Companies

5 Finance companies

Of these there are four nationalized commercial banks (NCB) 9 specialized banks

11 foreign banks and 30 domestic private banks 4 Islamic banks currently operating

in Bangladesh

Generally the commercial banks and finance companies provide a myriad of banking

productsservices to cater to the needs of their customers However the Bangladeshi

banking industry is characterized by the tight banking rules and regulations set by the

Bangladesh Bank All banks and financial institutions are highly governed and

controlled under the Banking Companies Act-1993

The range of banking products and financial services is also limited in scope all local

banks must maintain a 4 Cash Reserve Requirement (CRR) which is non-interest

bearing and a 16 Secondary Liquidity Requirement (SLR) With the liberalization

of markets competition among the banking products and financial services seems to

be growing more intense each day In addition the banking products offered in

Bangladesh are fairly homogeneous in nature due to the tight regulations imposed by

the central bank Competing through differentiation is increasingly difficult and other

banks quickly duplicate any innovative banking service

BANK AND BANKING SYSTEM OF BANGLADESH

32

Bangladesh inherited from the British via banking during Pakistani period the todays

banking structure It presently consists of several categories or classes of banks

excluding bon-bank financial institutions like investment and finance companies

leasing companies merchant banking companies housing development finance

companies and stock exchanges etc categorization or classification of banks is a very

difficult task since no single basis is good enough to classify them appropriately

Despite that and attempt may be made to classify them o the basis of

a Functions and

b Ownership and

c Origin

BANKING SECTOR AND ITS CONTRIBUTION TO THE

NATIONAL ECONOMYThe Economic structure of Bangladesh is agricultural based Most of the industries of

our country are depend on agriculture For savings and formation of capital is

normally difficult on view of Bangladesh Moreover now days there are various

financial institution (government private and foreign) have been set-up in the

country Side by side government has also set-up various specialized banks and

financial institutions

These banks and financial institutions contribute in different way on our economic

development Especially bank business plays an important role on development of

economic situation of our country Some of important contribution criteria are listed

below

1 Creation of medium of exchange

2 Collection of savings and formation of capital

3 Supply of capital

4 Development of home trade

5 Help of foreign trade etc

PROBLEMS AND PROSPECT OF BANKING SECTOR

IN BANGLADESHBanks in Bangladesh in the present form are more than half a century old During

this period they have undergone many changes both qualitatively and qualitatively

32

Numbers of banks and their branches have increases significantly Services provided

by them have also multiplied It is by now a mix of both Government banks and banks

in the private sector Despite these changes can it be said that they have played an

expected role in economic development The answer will tend to be negative The

question is why the banks could not initiate the process of development The reasons

may by summarize as under the heading of problems of banking sector in Bangladesh

These are

Problem of banking sector in Bangladesh1 The operations of the banks were and are still limited to city and commercial areas

only Though they have spread to rural areas yet they are engaged in transferring

funds from rural or less developed areas to urban areas instead of investing in the

areas of their location

2 Commercial banks mostly financed the trade and commerce amp did not pay adequate

attention to small medium and large industries not to spread of agriculture which still

contributes largely to GDP

3 Lending operations of banks were and are still based on security including

collateral This security oriented lending deprived the creditworthy borrowers who

could not offer collateral but had potentialities

4 When banks were nationalized after liberation in 1972 they went to rural areas and

expended their business both vertically and horizontally But in doing so they lost

control over their operations resulting in increasing number of losing branches and

loan default The result has been disastrous for the banking sector in the sense that

they are not in a position now to contribute significantly economic growth by

mobilizing more resources for meeting growing credit needs Instead of expansion

they are now found engaged in housekeeping

5 Economic structure of Bangladesh is agricultural based For this reason

industrialization is not spread all over the country As result banking operation is not

extend if banks have a great desire to expand their business

6 Bureaucratic process of our country is also barrier for expanding banking business

7 Government policies amp practice and legal issues are not favorable for banking

business

32

8 Infrastructure facilities and security systems of our country is also another problem

of expanding banking business

Prospect of banking sector in Bangladesh1 Although Bangladesh is agricultural country but day by day its economic

activities would be increased

2 Garments Industries is an important economic sector of our country So it is

another sector where banks can invest their money

3 Banks can establish new industry on their own capital because Bangladesh has low

price raw materials and low cost manpower

4 Banks can provide credit in small sectors ie micro credit scheme (cottage industry

handicraft fishing etc) and make new entrepreneur For example Grameen Bankrsquos

banking system

5 Mobilization of funds and investment in the desired sectorsproductive sectors As a

result people would be aware of banking sectors and transact with banks

Competitor AnalysisHSBC BankHSBC started operations in 1996 The bank primarily focuses on urban areas and has

branches in most areas of the capital city of Dhaka it also has branches in the cities of

Chittagong and Sylhet The bank also has a good number of ATM booths in the cities

present it also has booths in most five star hotels

HSBC Bangladesh is rated lsquoAAArsquo in the Long-term and ST-1 rating in the Short-

term which are the highest level of ratings for any bank or financial institution in

Bangladesh

HSBC Bangladesh offers a comprehensive range of financial services such as

commercial banking consumer banking payments and cash management trade

services treasury and custody and clearing The bank also offers offshore banking in

the Export Processing Zones this is only limited to investors in the EPZs A special

service called NRB Services is also available for nonresident Bangladeshis this

service allows consumers to maintain accounts in US Dollars Pound Sterling and

Euros People using this service can freely remit money from Bangladesh to any part

of the world and can access their money from any HSBC booth around the world

32

HSBC Bangladesh has a help center which operates on daily basics It is one of the

very few banks in the country to offer day night banking

HSBCs global Islamic banking system called Amanah is available in Bangladesh

There is a special branch dedicated just for this service

Services Provided By HSBC Bank

Retail

bull Home Loan

bull Personal Loan

bull NRB Services

bull HSBC Select

bull Power Vantage

Commercial

bull Export Services

bull Import Services

bull Electronic DC Advising

bull Cash Management

Amanah

bull Amanah Retail

bull Amanah Commercial

HSBCs operations in Bangladesh

bull Retail Banking and Wealth Management

bull Commercial banking

bull Corporate and institutional banking

bull Trade amp Supply Chains

bull Payments and cash management

bull Custody and clearing

bull Investment banking and markets

bull Treasury and capital markets

bull Amanah

(SWOT Analysis)

Strengths

The strengths of HSBC rival companies include the ability to provide the needs and

demands of different customers all over the world Through the use of information

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

EXECUTIVE SUMMARY

This analytical report is prepared as a course requirement for FIN 340 or Working

Capital Management to get familiar with real-life business plan and to strengthen the

concept that is learned from the text In this report a proper Business plan is made for

a financial institution and supportive calculations have been made

To derive comparative performance of PRMG Bank Ltd and find the opportunity in

the real market place forecasted balance sheet income statements Cash flow

statements have also been made and derive a recommendation from that analysis

All data has been forecasted and also followed the competitorrsquos reports Profit-Loss

Statement and Balance Sheet have been used as primary sources of data to predict

performance From the performance we can be able to find out the proper step which

will be taken in the long run The major parts of the report are Banking Environment

Forecasting and analysis and Recommendation

Banking environment section provides with an overall idea about the past and recent

conditions of banking sector in Bangladesh and help to find a suitable position where

there will be no business loss for the company

Forecasting amp analysis section is one of the main parts of this report as it reveals all

the facts with potential understanding to an investor whether they should invest in this

project or not The Net Present Value (NPV) and also the Internal Rate of Return

(IRR) are calculated to forecast what will be the position if we work in this manner

The recommendation part is based on the forecasting and analysis section and reveals

what an investor should decide about hisher investment decision for this project

Finally all the detailed calculations have been provided at the appendix section

32

OVERVIEW OF FINANCIAL STRUCTURE OF

BANGLADESH

Financial structure primarily depends on the level of economic and social

development of a particular country It involves through a historical process along

with the level of development different kinds of financial institutions grow and

develop to meet different kinds of needs of economic and social development Hence

financial structure or system varies from one country to another As for Bangladesh

financial structure is at the formative stage Its classification is beset with problems

because rigid classification often becomes unrealistic However for academic

proposes financial institutions in Bangladesh may broadly be divided into two

groups

a Banking institutions and

b Non-bank financial institutions

A chart showing the above classification is given below

Banking institution Non-banking financial

institutionA Functional

i Central Bank

ii Commercial Banks

iii Industrial Banks

iv Agricultural Banks

v Specialized Banks

vi Banks Run On Islamic Principles

vii Cooperative Banks

B Ownership

i Government Or Nationalized Banks

ii Private Banks

iii Joint Venture Banks

C Origin

i Insurance companies

ii Investment and Finance companies

iii Leasing companies

iv Merchant banking companies

v House holding Finance companies

vi Stock exchanges

32

i Local Banks

II Foreign Banks

An Overview of Bangladeshrsquos Banking EnvironmentThe Banking Industry in Bangladesh is one characterized by strict regulations and

monitoring from the central governing body the Bangladesh Bank The chief concern

is that currently there are far too many banks for the market to sustain As a result the

market will only accommodate only those banks that can transpires the most

competitive and profitable ones in the future Currently the major financial institutions

under the banking system include

1 Bangladesh Bank

2 Commercial Banks

3 Islamic banks

4 Leasing Companies

5 Finance companies

Of these there are four nationalized commercial banks (NCB) 9 specialized banks

11 foreign banks and 30 domestic private banks 4 Islamic banks currently operating

in Bangladesh

Generally the commercial banks and finance companies provide a myriad of banking

productsservices to cater to the needs of their customers However the Bangladeshi

banking industry is characterized by the tight banking rules and regulations set by the

Bangladesh Bank All banks and financial institutions are highly governed and

controlled under the Banking Companies Act-1993

The range of banking products and financial services is also limited in scope all local

banks must maintain a 4 Cash Reserve Requirement (CRR) which is non-interest

bearing and a 16 Secondary Liquidity Requirement (SLR) With the liberalization

of markets competition among the banking products and financial services seems to

be growing more intense each day In addition the banking products offered in

Bangladesh are fairly homogeneous in nature due to the tight regulations imposed by

the central bank Competing through differentiation is increasingly difficult and other

banks quickly duplicate any innovative banking service

BANK AND BANKING SYSTEM OF BANGLADESH

32

Bangladesh inherited from the British via banking during Pakistani period the todays

banking structure It presently consists of several categories or classes of banks

excluding bon-bank financial institutions like investment and finance companies

leasing companies merchant banking companies housing development finance

companies and stock exchanges etc categorization or classification of banks is a very

difficult task since no single basis is good enough to classify them appropriately

Despite that and attempt may be made to classify them o the basis of

a Functions and

b Ownership and

c Origin

BANKING SECTOR AND ITS CONTRIBUTION TO THE

NATIONAL ECONOMYThe Economic structure of Bangladesh is agricultural based Most of the industries of

our country are depend on agriculture For savings and formation of capital is

normally difficult on view of Bangladesh Moreover now days there are various

financial institution (government private and foreign) have been set-up in the

country Side by side government has also set-up various specialized banks and

financial institutions

These banks and financial institutions contribute in different way on our economic

development Especially bank business plays an important role on development of

economic situation of our country Some of important contribution criteria are listed

below

1 Creation of medium of exchange

2 Collection of savings and formation of capital

3 Supply of capital

4 Development of home trade

5 Help of foreign trade etc

PROBLEMS AND PROSPECT OF BANKING SECTOR

IN BANGLADESHBanks in Bangladesh in the present form are more than half a century old During

this period they have undergone many changes both qualitatively and qualitatively

32

Numbers of banks and their branches have increases significantly Services provided

by them have also multiplied It is by now a mix of both Government banks and banks

in the private sector Despite these changes can it be said that they have played an

expected role in economic development The answer will tend to be negative The

question is why the banks could not initiate the process of development The reasons

may by summarize as under the heading of problems of banking sector in Bangladesh

These are

Problem of banking sector in Bangladesh1 The operations of the banks were and are still limited to city and commercial areas

only Though they have spread to rural areas yet they are engaged in transferring

funds from rural or less developed areas to urban areas instead of investing in the

areas of their location

2 Commercial banks mostly financed the trade and commerce amp did not pay adequate

attention to small medium and large industries not to spread of agriculture which still

contributes largely to GDP

3 Lending operations of banks were and are still based on security including

collateral This security oriented lending deprived the creditworthy borrowers who

could not offer collateral but had potentialities

4 When banks were nationalized after liberation in 1972 they went to rural areas and

expended their business both vertically and horizontally But in doing so they lost

control over their operations resulting in increasing number of losing branches and

loan default The result has been disastrous for the banking sector in the sense that

they are not in a position now to contribute significantly economic growth by

mobilizing more resources for meeting growing credit needs Instead of expansion

they are now found engaged in housekeeping

5 Economic structure of Bangladesh is agricultural based For this reason

industrialization is not spread all over the country As result banking operation is not

extend if banks have a great desire to expand their business

6 Bureaucratic process of our country is also barrier for expanding banking business

7 Government policies amp practice and legal issues are not favorable for banking

business

32

8 Infrastructure facilities and security systems of our country is also another problem

of expanding banking business

Prospect of banking sector in Bangladesh1 Although Bangladesh is agricultural country but day by day its economic

activities would be increased

2 Garments Industries is an important economic sector of our country So it is

another sector where banks can invest their money

3 Banks can establish new industry on their own capital because Bangladesh has low

price raw materials and low cost manpower

4 Banks can provide credit in small sectors ie micro credit scheme (cottage industry

handicraft fishing etc) and make new entrepreneur For example Grameen Bankrsquos

banking system

5 Mobilization of funds and investment in the desired sectorsproductive sectors As a

result people would be aware of banking sectors and transact with banks

Competitor AnalysisHSBC BankHSBC started operations in 1996 The bank primarily focuses on urban areas and has

branches in most areas of the capital city of Dhaka it also has branches in the cities of

Chittagong and Sylhet The bank also has a good number of ATM booths in the cities

present it also has booths in most five star hotels

HSBC Bangladesh is rated lsquoAAArsquo in the Long-term and ST-1 rating in the Short-

term which are the highest level of ratings for any bank or financial institution in

Bangladesh

HSBC Bangladesh offers a comprehensive range of financial services such as

commercial banking consumer banking payments and cash management trade

services treasury and custody and clearing The bank also offers offshore banking in

the Export Processing Zones this is only limited to investors in the EPZs A special

service called NRB Services is also available for nonresident Bangladeshis this

service allows consumers to maintain accounts in US Dollars Pound Sterling and

Euros People using this service can freely remit money from Bangladesh to any part

of the world and can access their money from any HSBC booth around the world

32

HSBC Bangladesh has a help center which operates on daily basics It is one of the

very few banks in the country to offer day night banking

HSBCs global Islamic banking system called Amanah is available in Bangladesh

There is a special branch dedicated just for this service

Services Provided By HSBC Bank

Retail

bull Home Loan

bull Personal Loan

bull NRB Services

bull HSBC Select

bull Power Vantage

Commercial

bull Export Services

bull Import Services

bull Electronic DC Advising

bull Cash Management

Amanah

bull Amanah Retail

bull Amanah Commercial

HSBCs operations in Bangladesh

bull Retail Banking and Wealth Management

bull Commercial banking

bull Corporate and institutional banking

bull Trade amp Supply Chains

bull Payments and cash management

bull Custody and clearing

bull Investment banking and markets

bull Treasury and capital markets

bull Amanah

(SWOT Analysis)

Strengths

The strengths of HSBC rival companies include the ability to provide the needs and

demands of different customers all over the world Through the use of information

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

OVERVIEW OF FINANCIAL STRUCTURE OF

BANGLADESH

Financial structure primarily depends on the level of economic and social

development of a particular country It involves through a historical process along

with the level of development different kinds of financial institutions grow and

develop to meet different kinds of needs of economic and social development Hence

financial structure or system varies from one country to another As for Bangladesh

financial structure is at the formative stage Its classification is beset with problems

because rigid classification often becomes unrealistic However for academic

proposes financial institutions in Bangladesh may broadly be divided into two

groups

a Banking institutions and

b Non-bank financial institutions

A chart showing the above classification is given below

Banking institution Non-banking financial

institutionA Functional

i Central Bank

ii Commercial Banks

iii Industrial Banks

iv Agricultural Banks

v Specialized Banks

vi Banks Run On Islamic Principles

vii Cooperative Banks

B Ownership

i Government Or Nationalized Banks

ii Private Banks

iii Joint Venture Banks

C Origin

i Insurance companies

ii Investment and Finance companies

iii Leasing companies

iv Merchant banking companies

v House holding Finance companies

vi Stock exchanges

32

i Local Banks

II Foreign Banks

An Overview of Bangladeshrsquos Banking EnvironmentThe Banking Industry in Bangladesh is one characterized by strict regulations and

monitoring from the central governing body the Bangladesh Bank The chief concern

is that currently there are far too many banks for the market to sustain As a result the

market will only accommodate only those banks that can transpires the most

competitive and profitable ones in the future Currently the major financial institutions

under the banking system include

1 Bangladesh Bank

2 Commercial Banks

3 Islamic banks

4 Leasing Companies

5 Finance companies

Of these there are four nationalized commercial banks (NCB) 9 specialized banks

11 foreign banks and 30 domestic private banks 4 Islamic banks currently operating

in Bangladesh

Generally the commercial banks and finance companies provide a myriad of banking

productsservices to cater to the needs of their customers However the Bangladeshi

banking industry is characterized by the tight banking rules and regulations set by the

Bangladesh Bank All banks and financial institutions are highly governed and

controlled under the Banking Companies Act-1993

The range of banking products and financial services is also limited in scope all local

banks must maintain a 4 Cash Reserve Requirement (CRR) which is non-interest

bearing and a 16 Secondary Liquidity Requirement (SLR) With the liberalization

of markets competition among the banking products and financial services seems to

be growing more intense each day In addition the banking products offered in

Bangladesh are fairly homogeneous in nature due to the tight regulations imposed by

the central bank Competing through differentiation is increasingly difficult and other

banks quickly duplicate any innovative banking service

BANK AND BANKING SYSTEM OF BANGLADESH

32

Bangladesh inherited from the British via banking during Pakistani period the todays

banking structure It presently consists of several categories or classes of banks

excluding bon-bank financial institutions like investment and finance companies

leasing companies merchant banking companies housing development finance

companies and stock exchanges etc categorization or classification of banks is a very

difficult task since no single basis is good enough to classify them appropriately

Despite that and attempt may be made to classify them o the basis of

a Functions and

b Ownership and

c Origin

BANKING SECTOR AND ITS CONTRIBUTION TO THE

NATIONAL ECONOMYThe Economic structure of Bangladesh is agricultural based Most of the industries of

our country are depend on agriculture For savings and formation of capital is

normally difficult on view of Bangladesh Moreover now days there are various

financial institution (government private and foreign) have been set-up in the

country Side by side government has also set-up various specialized banks and

financial institutions

These banks and financial institutions contribute in different way on our economic

development Especially bank business plays an important role on development of

economic situation of our country Some of important contribution criteria are listed

below

1 Creation of medium of exchange

2 Collection of savings and formation of capital

3 Supply of capital

4 Development of home trade

5 Help of foreign trade etc

PROBLEMS AND PROSPECT OF BANKING SECTOR

IN BANGLADESHBanks in Bangladesh in the present form are more than half a century old During

this period they have undergone many changes both qualitatively and qualitatively

32

Numbers of banks and their branches have increases significantly Services provided

by them have also multiplied It is by now a mix of both Government banks and banks

in the private sector Despite these changes can it be said that they have played an

expected role in economic development The answer will tend to be negative The

question is why the banks could not initiate the process of development The reasons

may by summarize as under the heading of problems of banking sector in Bangladesh

These are

Problem of banking sector in Bangladesh1 The operations of the banks were and are still limited to city and commercial areas

only Though they have spread to rural areas yet they are engaged in transferring

funds from rural or less developed areas to urban areas instead of investing in the

areas of their location

2 Commercial banks mostly financed the trade and commerce amp did not pay adequate

attention to small medium and large industries not to spread of agriculture which still

contributes largely to GDP

3 Lending operations of banks were and are still based on security including

collateral This security oriented lending deprived the creditworthy borrowers who

could not offer collateral but had potentialities

4 When banks were nationalized after liberation in 1972 they went to rural areas and

expended their business both vertically and horizontally But in doing so they lost

control over their operations resulting in increasing number of losing branches and

loan default The result has been disastrous for the banking sector in the sense that

they are not in a position now to contribute significantly economic growth by

mobilizing more resources for meeting growing credit needs Instead of expansion

they are now found engaged in housekeeping

5 Economic structure of Bangladesh is agricultural based For this reason

industrialization is not spread all over the country As result banking operation is not

extend if banks have a great desire to expand their business

6 Bureaucratic process of our country is also barrier for expanding banking business

7 Government policies amp practice and legal issues are not favorable for banking

business

32

8 Infrastructure facilities and security systems of our country is also another problem

of expanding banking business

Prospect of banking sector in Bangladesh1 Although Bangladesh is agricultural country but day by day its economic

activities would be increased

2 Garments Industries is an important economic sector of our country So it is

another sector where banks can invest their money

3 Banks can establish new industry on their own capital because Bangladesh has low

price raw materials and low cost manpower

4 Banks can provide credit in small sectors ie micro credit scheme (cottage industry

handicraft fishing etc) and make new entrepreneur For example Grameen Bankrsquos

banking system

5 Mobilization of funds and investment in the desired sectorsproductive sectors As a

result people would be aware of banking sectors and transact with banks

Competitor AnalysisHSBC BankHSBC started operations in 1996 The bank primarily focuses on urban areas and has

branches in most areas of the capital city of Dhaka it also has branches in the cities of

Chittagong and Sylhet The bank also has a good number of ATM booths in the cities

present it also has booths in most five star hotels

HSBC Bangladesh is rated lsquoAAArsquo in the Long-term and ST-1 rating in the Short-

term which are the highest level of ratings for any bank or financial institution in

Bangladesh

HSBC Bangladesh offers a comprehensive range of financial services such as

commercial banking consumer banking payments and cash management trade

services treasury and custody and clearing The bank also offers offshore banking in

the Export Processing Zones this is only limited to investors in the EPZs A special

service called NRB Services is also available for nonresident Bangladeshis this

service allows consumers to maintain accounts in US Dollars Pound Sterling and

Euros People using this service can freely remit money from Bangladesh to any part

of the world and can access their money from any HSBC booth around the world

32

HSBC Bangladesh has a help center which operates on daily basics It is one of the

very few banks in the country to offer day night banking

HSBCs global Islamic banking system called Amanah is available in Bangladesh

There is a special branch dedicated just for this service

Services Provided By HSBC Bank

Retail

bull Home Loan

bull Personal Loan

bull NRB Services

bull HSBC Select

bull Power Vantage

Commercial

bull Export Services

bull Import Services

bull Electronic DC Advising

bull Cash Management

Amanah

bull Amanah Retail

bull Amanah Commercial

HSBCs operations in Bangladesh

bull Retail Banking and Wealth Management

bull Commercial banking

bull Corporate and institutional banking

bull Trade amp Supply Chains

bull Payments and cash management

bull Custody and clearing

bull Investment banking and markets

bull Treasury and capital markets

bull Amanah

(SWOT Analysis)

Strengths

The strengths of HSBC rival companies include the ability to provide the needs and

demands of different customers all over the world Through the use of information

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

i Local Banks

II Foreign Banks

An Overview of Bangladeshrsquos Banking EnvironmentThe Banking Industry in Bangladesh is one characterized by strict regulations and

monitoring from the central governing body the Bangladesh Bank The chief concern

is that currently there are far too many banks for the market to sustain As a result the

market will only accommodate only those banks that can transpires the most

competitive and profitable ones in the future Currently the major financial institutions

under the banking system include

1 Bangladesh Bank

2 Commercial Banks

3 Islamic banks

4 Leasing Companies

5 Finance companies

Of these there are four nationalized commercial banks (NCB) 9 specialized banks

11 foreign banks and 30 domestic private banks 4 Islamic banks currently operating

in Bangladesh

Generally the commercial banks and finance companies provide a myriad of banking

productsservices to cater to the needs of their customers However the Bangladeshi

banking industry is characterized by the tight banking rules and regulations set by the

Bangladesh Bank All banks and financial institutions are highly governed and

controlled under the Banking Companies Act-1993

The range of banking products and financial services is also limited in scope all local

banks must maintain a 4 Cash Reserve Requirement (CRR) which is non-interest

bearing and a 16 Secondary Liquidity Requirement (SLR) With the liberalization

of markets competition among the banking products and financial services seems to

be growing more intense each day In addition the banking products offered in

Bangladesh are fairly homogeneous in nature due to the tight regulations imposed by

the central bank Competing through differentiation is increasingly difficult and other

banks quickly duplicate any innovative banking service

BANK AND BANKING SYSTEM OF BANGLADESH

32

Bangladesh inherited from the British via banking during Pakistani period the todays

banking structure It presently consists of several categories or classes of banks

excluding bon-bank financial institutions like investment and finance companies

leasing companies merchant banking companies housing development finance

companies and stock exchanges etc categorization or classification of banks is a very

difficult task since no single basis is good enough to classify them appropriately

Despite that and attempt may be made to classify them o the basis of

a Functions and

b Ownership and

c Origin

BANKING SECTOR AND ITS CONTRIBUTION TO THE

NATIONAL ECONOMYThe Economic structure of Bangladesh is agricultural based Most of the industries of

our country are depend on agriculture For savings and formation of capital is

normally difficult on view of Bangladesh Moreover now days there are various

financial institution (government private and foreign) have been set-up in the

country Side by side government has also set-up various specialized banks and

financial institutions

These banks and financial institutions contribute in different way on our economic

development Especially bank business plays an important role on development of

economic situation of our country Some of important contribution criteria are listed

below

1 Creation of medium of exchange

2 Collection of savings and formation of capital

3 Supply of capital

4 Development of home trade

5 Help of foreign trade etc

PROBLEMS AND PROSPECT OF BANKING SECTOR

IN BANGLADESHBanks in Bangladesh in the present form are more than half a century old During

this period they have undergone many changes both qualitatively and qualitatively

32

Numbers of banks and their branches have increases significantly Services provided

by them have also multiplied It is by now a mix of both Government banks and banks

in the private sector Despite these changes can it be said that they have played an

expected role in economic development The answer will tend to be negative The

question is why the banks could not initiate the process of development The reasons

may by summarize as under the heading of problems of banking sector in Bangladesh

These are

Problem of banking sector in Bangladesh1 The operations of the banks were and are still limited to city and commercial areas

only Though they have spread to rural areas yet they are engaged in transferring

funds from rural or less developed areas to urban areas instead of investing in the

areas of their location

2 Commercial banks mostly financed the trade and commerce amp did not pay adequate

attention to small medium and large industries not to spread of agriculture which still

contributes largely to GDP

3 Lending operations of banks were and are still based on security including

collateral This security oriented lending deprived the creditworthy borrowers who

could not offer collateral but had potentialities

4 When banks were nationalized after liberation in 1972 they went to rural areas and

expended their business both vertically and horizontally But in doing so they lost

control over their operations resulting in increasing number of losing branches and

loan default The result has been disastrous for the banking sector in the sense that

they are not in a position now to contribute significantly economic growth by

mobilizing more resources for meeting growing credit needs Instead of expansion

they are now found engaged in housekeeping

5 Economic structure of Bangladesh is agricultural based For this reason

industrialization is not spread all over the country As result banking operation is not

extend if banks have a great desire to expand their business

6 Bureaucratic process of our country is also barrier for expanding banking business

7 Government policies amp practice and legal issues are not favorable for banking

business

32

8 Infrastructure facilities and security systems of our country is also another problem

of expanding banking business

Prospect of banking sector in Bangladesh1 Although Bangladesh is agricultural country but day by day its economic

activities would be increased

2 Garments Industries is an important economic sector of our country So it is

another sector where banks can invest their money

3 Banks can establish new industry on their own capital because Bangladesh has low

price raw materials and low cost manpower

4 Banks can provide credit in small sectors ie micro credit scheme (cottage industry

handicraft fishing etc) and make new entrepreneur For example Grameen Bankrsquos

banking system

5 Mobilization of funds and investment in the desired sectorsproductive sectors As a

result people would be aware of banking sectors and transact with banks

Competitor AnalysisHSBC BankHSBC started operations in 1996 The bank primarily focuses on urban areas and has

branches in most areas of the capital city of Dhaka it also has branches in the cities of

Chittagong and Sylhet The bank also has a good number of ATM booths in the cities

present it also has booths in most five star hotels

HSBC Bangladesh is rated lsquoAAArsquo in the Long-term and ST-1 rating in the Short-

term which are the highest level of ratings for any bank or financial institution in

Bangladesh

HSBC Bangladesh offers a comprehensive range of financial services such as

commercial banking consumer banking payments and cash management trade

services treasury and custody and clearing The bank also offers offshore banking in

the Export Processing Zones this is only limited to investors in the EPZs A special

service called NRB Services is also available for nonresident Bangladeshis this

service allows consumers to maintain accounts in US Dollars Pound Sterling and

Euros People using this service can freely remit money from Bangladesh to any part

of the world and can access their money from any HSBC booth around the world

32

HSBC Bangladesh has a help center which operates on daily basics It is one of the

very few banks in the country to offer day night banking

HSBCs global Islamic banking system called Amanah is available in Bangladesh

There is a special branch dedicated just for this service

Services Provided By HSBC Bank

Retail

bull Home Loan

bull Personal Loan

bull NRB Services

bull HSBC Select

bull Power Vantage

Commercial

bull Export Services

bull Import Services

bull Electronic DC Advising

bull Cash Management

Amanah

bull Amanah Retail

bull Amanah Commercial

HSBCs operations in Bangladesh

bull Retail Banking and Wealth Management

bull Commercial banking

bull Corporate and institutional banking

bull Trade amp Supply Chains

bull Payments and cash management

bull Custody and clearing

bull Investment banking and markets

bull Treasury and capital markets

bull Amanah

(SWOT Analysis)

Strengths

The strengths of HSBC rival companies include the ability to provide the needs and

demands of different customers all over the world Through the use of information

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

Bangladesh inherited from the British via banking during Pakistani period the todays

banking structure It presently consists of several categories or classes of banks

excluding bon-bank financial institutions like investment and finance companies

leasing companies merchant banking companies housing development finance

companies and stock exchanges etc categorization or classification of banks is a very

difficult task since no single basis is good enough to classify them appropriately

Despite that and attempt may be made to classify them o the basis of

a Functions and

b Ownership and

c Origin

BANKING SECTOR AND ITS CONTRIBUTION TO THE

NATIONAL ECONOMYThe Economic structure of Bangladesh is agricultural based Most of the industries of

our country are depend on agriculture For savings and formation of capital is

normally difficult on view of Bangladesh Moreover now days there are various

financial institution (government private and foreign) have been set-up in the

country Side by side government has also set-up various specialized banks and

financial institutions

These banks and financial institutions contribute in different way on our economic

development Especially bank business plays an important role on development of

economic situation of our country Some of important contribution criteria are listed

below

1 Creation of medium of exchange

2 Collection of savings and formation of capital

3 Supply of capital

4 Development of home trade

5 Help of foreign trade etc

PROBLEMS AND PROSPECT OF BANKING SECTOR

IN BANGLADESHBanks in Bangladesh in the present form are more than half a century old During

this period they have undergone many changes both qualitatively and qualitatively

32

Numbers of banks and their branches have increases significantly Services provided

by them have also multiplied It is by now a mix of both Government banks and banks

in the private sector Despite these changes can it be said that they have played an

expected role in economic development The answer will tend to be negative The

question is why the banks could not initiate the process of development The reasons

may by summarize as under the heading of problems of banking sector in Bangladesh

These are

Problem of banking sector in Bangladesh1 The operations of the banks were and are still limited to city and commercial areas

only Though they have spread to rural areas yet they are engaged in transferring

funds from rural or less developed areas to urban areas instead of investing in the

areas of their location

2 Commercial banks mostly financed the trade and commerce amp did not pay adequate

attention to small medium and large industries not to spread of agriculture which still

contributes largely to GDP

3 Lending operations of banks were and are still based on security including

collateral This security oriented lending deprived the creditworthy borrowers who

could not offer collateral but had potentialities

4 When banks were nationalized after liberation in 1972 they went to rural areas and

expended their business both vertically and horizontally But in doing so they lost

control over their operations resulting in increasing number of losing branches and

loan default The result has been disastrous for the banking sector in the sense that

they are not in a position now to contribute significantly economic growth by

mobilizing more resources for meeting growing credit needs Instead of expansion

they are now found engaged in housekeeping

5 Economic structure of Bangladesh is agricultural based For this reason

industrialization is not spread all over the country As result banking operation is not

extend if banks have a great desire to expand their business

6 Bureaucratic process of our country is also barrier for expanding banking business

7 Government policies amp practice and legal issues are not favorable for banking

business

32

8 Infrastructure facilities and security systems of our country is also another problem

of expanding banking business

Prospect of banking sector in Bangladesh1 Although Bangladesh is agricultural country but day by day its economic

activities would be increased

2 Garments Industries is an important economic sector of our country So it is

another sector where banks can invest their money

3 Banks can establish new industry on their own capital because Bangladesh has low

price raw materials and low cost manpower

4 Banks can provide credit in small sectors ie micro credit scheme (cottage industry

handicraft fishing etc) and make new entrepreneur For example Grameen Bankrsquos

banking system

5 Mobilization of funds and investment in the desired sectorsproductive sectors As a

result people would be aware of banking sectors and transact with banks

Competitor AnalysisHSBC BankHSBC started operations in 1996 The bank primarily focuses on urban areas and has

branches in most areas of the capital city of Dhaka it also has branches in the cities of

Chittagong and Sylhet The bank also has a good number of ATM booths in the cities

present it also has booths in most five star hotels

HSBC Bangladesh is rated lsquoAAArsquo in the Long-term and ST-1 rating in the Short-

term which are the highest level of ratings for any bank or financial institution in

Bangladesh

HSBC Bangladesh offers a comprehensive range of financial services such as

commercial banking consumer banking payments and cash management trade

services treasury and custody and clearing The bank also offers offshore banking in

the Export Processing Zones this is only limited to investors in the EPZs A special

service called NRB Services is also available for nonresident Bangladeshis this

service allows consumers to maintain accounts in US Dollars Pound Sterling and

Euros People using this service can freely remit money from Bangladesh to any part

of the world and can access their money from any HSBC booth around the world

32

HSBC Bangladesh has a help center which operates on daily basics It is one of the

very few banks in the country to offer day night banking

HSBCs global Islamic banking system called Amanah is available in Bangladesh

There is a special branch dedicated just for this service

Services Provided By HSBC Bank

Retail

bull Home Loan

bull Personal Loan

bull NRB Services

bull HSBC Select

bull Power Vantage

Commercial

bull Export Services

bull Import Services

bull Electronic DC Advising

bull Cash Management

Amanah

bull Amanah Retail

bull Amanah Commercial

HSBCs operations in Bangladesh

bull Retail Banking and Wealth Management

bull Commercial banking

bull Corporate and institutional banking

bull Trade amp Supply Chains

bull Payments and cash management

bull Custody and clearing

bull Investment banking and markets

bull Treasury and capital markets

bull Amanah

(SWOT Analysis)

Strengths

The strengths of HSBC rival companies include the ability to provide the needs and

demands of different customers all over the world Through the use of information

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

Numbers of banks and their branches have increases significantly Services provided

by them have also multiplied It is by now a mix of both Government banks and banks

in the private sector Despite these changes can it be said that they have played an

expected role in economic development The answer will tend to be negative The

question is why the banks could not initiate the process of development The reasons

may by summarize as under the heading of problems of banking sector in Bangladesh

These are

Problem of banking sector in Bangladesh1 The operations of the banks were and are still limited to city and commercial areas

only Though they have spread to rural areas yet they are engaged in transferring

funds from rural or less developed areas to urban areas instead of investing in the

areas of their location

2 Commercial banks mostly financed the trade and commerce amp did not pay adequate

attention to small medium and large industries not to spread of agriculture which still

contributes largely to GDP

3 Lending operations of banks were and are still based on security including

collateral This security oriented lending deprived the creditworthy borrowers who

could not offer collateral but had potentialities

4 When banks were nationalized after liberation in 1972 they went to rural areas and

expended their business both vertically and horizontally But in doing so they lost

control over their operations resulting in increasing number of losing branches and

loan default The result has been disastrous for the banking sector in the sense that

they are not in a position now to contribute significantly economic growth by

mobilizing more resources for meeting growing credit needs Instead of expansion

they are now found engaged in housekeeping

5 Economic structure of Bangladesh is agricultural based For this reason

industrialization is not spread all over the country As result banking operation is not

extend if banks have a great desire to expand their business

6 Bureaucratic process of our country is also barrier for expanding banking business

7 Government policies amp practice and legal issues are not favorable for banking

business

32

8 Infrastructure facilities and security systems of our country is also another problem

of expanding banking business

Prospect of banking sector in Bangladesh1 Although Bangladesh is agricultural country but day by day its economic

activities would be increased

2 Garments Industries is an important economic sector of our country So it is

another sector where banks can invest their money

3 Banks can establish new industry on their own capital because Bangladesh has low

price raw materials and low cost manpower

4 Banks can provide credit in small sectors ie micro credit scheme (cottage industry

handicraft fishing etc) and make new entrepreneur For example Grameen Bankrsquos

banking system

5 Mobilization of funds and investment in the desired sectorsproductive sectors As a

result people would be aware of banking sectors and transact with banks

Competitor AnalysisHSBC BankHSBC started operations in 1996 The bank primarily focuses on urban areas and has

branches in most areas of the capital city of Dhaka it also has branches in the cities of

Chittagong and Sylhet The bank also has a good number of ATM booths in the cities

present it also has booths in most five star hotels

HSBC Bangladesh is rated lsquoAAArsquo in the Long-term and ST-1 rating in the Short-

term which are the highest level of ratings for any bank or financial institution in

Bangladesh

HSBC Bangladesh offers a comprehensive range of financial services such as

commercial banking consumer banking payments and cash management trade

services treasury and custody and clearing The bank also offers offshore banking in

the Export Processing Zones this is only limited to investors in the EPZs A special

service called NRB Services is also available for nonresident Bangladeshis this

service allows consumers to maintain accounts in US Dollars Pound Sterling and

Euros People using this service can freely remit money from Bangladesh to any part

of the world and can access their money from any HSBC booth around the world

32

HSBC Bangladesh has a help center which operates on daily basics It is one of the

very few banks in the country to offer day night banking

HSBCs global Islamic banking system called Amanah is available in Bangladesh

There is a special branch dedicated just for this service

Services Provided By HSBC Bank

Retail

bull Home Loan

bull Personal Loan

bull NRB Services

bull HSBC Select

bull Power Vantage

Commercial

bull Export Services

bull Import Services

bull Electronic DC Advising

bull Cash Management

Amanah

bull Amanah Retail

bull Amanah Commercial

HSBCs operations in Bangladesh

bull Retail Banking and Wealth Management

bull Commercial banking

bull Corporate and institutional banking

bull Trade amp Supply Chains

bull Payments and cash management

bull Custody and clearing

bull Investment banking and markets

bull Treasury and capital markets

bull Amanah

(SWOT Analysis)

Strengths

The strengths of HSBC rival companies include the ability to provide the needs and

demands of different customers all over the world Through the use of information

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

8 Infrastructure facilities and security systems of our country is also another problem

of expanding banking business

Prospect of banking sector in Bangladesh1 Although Bangladesh is agricultural country but day by day its economic

activities would be increased

2 Garments Industries is an important economic sector of our country So it is

another sector where banks can invest their money

3 Banks can establish new industry on their own capital because Bangladesh has low

price raw materials and low cost manpower

4 Banks can provide credit in small sectors ie micro credit scheme (cottage industry

handicraft fishing etc) and make new entrepreneur For example Grameen Bankrsquos

banking system

5 Mobilization of funds and investment in the desired sectorsproductive sectors As a

result people would be aware of banking sectors and transact with banks

Competitor AnalysisHSBC BankHSBC started operations in 1996 The bank primarily focuses on urban areas and has

branches in most areas of the capital city of Dhaka it also has branches in the cities of

Chittagong and Sylhet The bank also has a good number of ATM booths in the cities

present it also has booths in most five star hotels

HSBC Bangladesh is rated lsquoAAArsquo in the Long-term and ST-1 rating in the Short-

term which are the highest level of ratings for any bank or financial institution in

Bangladesh

HSBC Bangladesh offers a comprehensive range of financial services such as

commercial banking consumer banking payments and cash management trade

services treasury and custody and clearing The bank also offers offshore banking in

the Export Processing Zones this is only limited to investors in the EPZs A special

service called NRB Services is also available for nonresident Bangladeshis this

service allows consumers to maintain accounts in US Dollars Pound Sterling and

Euros People using this service can freely remit money from Bangladesh to any part

of the world and can access their money from any HSBC booth around the world

32

HSBC Bangladesh has a help center which operates on daily basics It is one of the

very few banks in the country to offer day night banking

HSBCs global Islamic banking system called Amanah is available in Bangladesh

There is a special branch dedicated just for this service

Services Provided By HSBC Bank

Retail

bull Home Loan

bull Personal Loan

bull NRB Services

bull HSBC Select

bull Power Vantage

Commercial

bull Export Services

bull Import Services

bull Electronic DC Advising

bull Cash Management

Amanah

bull Amanah Retail

bull Amanah Commercial

HSBCs operations in Bangladesh

bull Retail Banking and Wealth Management

bull Commercial banking

bull Corporate and institutional banking

bull Trade amp Supply Chains

bull Payments and cash management

bull Custody and clearing

bull Investment banking and markets

bull Treasury and capital markets

bull Amanah

(SWOT Analysis)

Strengths

The strengths of HSBC rival companies include the ability to provide the needs and

demands of different customers all over the world Through the use of information

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

HSBC Bangladesh has a help center which operates on daily basics It is one of the

very few banks in the country to offer day night banking

HSBCs global Islamic banking system called Amanah is available in Bangladesh

There is a special branch dedicated just for this service

Services Provided By HSBC Bank

Retail

bull Home Loan

bull Personal Loan

bull NRB Services

bull HSBC Select

bull Power Vantage

Commercial

bull Export Services

bull Import Services

bull Electronic DC Advising

bull Cash Management

Amanah

bull Amanah Retail

bull Amanah Commercial

HSBCs operations in Bangladesh

bull Retail Banking and Wealth Management

bull Commercial banking

bull Corporate and institutional banking

bull Trade amp Supply Chains

bull Payments and cash management

bull Custody and clearing

bull Investment banking and markets

bull Treasury and capital markets

bull Amanah

(SWOT Analysis)

Strengths

The strengths of HSBC rival companies include the ability to provide the needs and

demands of different customers all over the world Through the use of information

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

technology competitors of HSBC may outgrow the company by using all its

resources to develop new products and services that will be appealing for the

customers Moreover the alliances of larger organization may also be considered as

one of the strengths of HSBCrsquos competitors The competitors of HSBC may also have

strength in terms of having powerful brand image as well as strong market leadership

Weaknesses

One of the weaknesses of the rival companies of HSBC is its lack of resources to

sustain their competitive advantage In addition rival companies of HSBC may also

lack the ability to reach different customers because of distance barrier Poor

management systems may also be considered as one of the weaknesses of competitors

of HSBC The rival companies of HSBC may also have weaknesses in terms of

having weak marketing approaches and brand image Some rival companies like

those small enterprises may have weaknesses in gaining customer loyalty

Opportunities

The opportunities of the rival companies of HSBC may include the following

bullMajor productive and favorable market conditions

bullAlteration in line with regulatory or competitive market environment

bullChanges and advancement of technological aspects and enhances buyersupplier

relationship

Threats

Rival companies of HSBC are also affected by different market threats These threats

may include the following

bullMajor adverse and unfavorable conditions in an industryrsquos market settings

representing obstacles to the companyrsquos desire competition position and advantage

bullThe threats of new entrants or new industries which will compete effectively in the

market

bullThe slow growth of the market in which the industry belongs

bullRapid technological changes and the existence of new revised policies and

government regulations

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

Dutch-Bangla Bank Limited

Dutch-Bangla Bank Limited (DBBL) is Bangladeshs most innovative and

technologically advanced bank DBBL stands to give the most innovative and

affordable banking products to Bangladesh Amongst banks DBBL is the largest

donor in to social causes in Bangladesh It stands as one of the largest private donors

involved in improving the country DBBL is proud to be associated with helping

Bangladesh as well as being a leader in the countrys banking sector

Dutch-Bangla Bank started operation is Bangladeshs first joint venture bank From

the onset the focus of the bank has been financing high-growth manufacturing

industries in Bangladesh The rationale being that the manufacturing sector exports

Bangladeshi products worldwide Thereby financing and concentrating on this sector

allows Bangladesh to achieve the desired growth DBBLs other focus is Corporate

Social Responsibility (CSR) Even though CSR is now a cliche DBBL is the pioneer

in this sector and termed the contribution simply as social responsiblity Due to its

investment in this sector DBBL has become one of the largest donors and the largest

bank donor in Bangladesh The bank has won numerous international awards because

of its unique approach as a socially conscious bank

DBBL was the first bank in Bangladesh to be fully automated The Electronic-

Banking Division was established in 2002 to undertake rapid automation and bring

modern banking services into this field Full automation was completed in 2003 and

hereby introduced plastic money to the Bangladeshi masses DBBL also operates the

nations largest ATM fleet and in the process drastically cut consumer costs and fees

by 80 Moreover DBBL choosing the low profitability route for this sector has

surprised many critics DBBL had pursued the mass automation in Banking as a CSR

activity and never intended profitability from this sector As a result it now provides

unrivaled banking technology offerings to all its customers Because of this mindset

most local banks have joined DBBLs banking infrastructure instead of pursuing their

own

Even with a history of hefty technological investments and even larger donations

consumer and investor confidence has never waned Dutch-Bangla Bank stock set the

record for the highest share price in the Dhaka Stock Exchange in 2008

Services

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

SME ( Small and Medium Enterprises ) Banking

Retail Banking

Corporate Banking

NRB Banking

DBBL has installed over 800 ATMs nationwide

The account holder of DBBL cannot have the facility of zero balance in

account

The ATM card of DBBL is not supported by all the ATM booths of different

banks

The online money transfer of DBBL is fast but charges high

Corporate banking services

bull Project finance

bull Working Capital finance

bull Syndications amp Structured finance

bull Trade finance

bull Equity finance

bull Social and Environmental Infrastructure finance

bull Custom electronic-banking projects

Lc trading

DBBL has some operations in this area

Import FinanceDBBL extends finance to the importers in the form of

1 Opening of Import LC

2 Credit against Trust Receipt for retirement of import bills

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

3 Short term amp medium term loans for installation of imported machineries amp

production thereof

4 Payment against document

Export Finance

1 Pre-Shipment Finance

Pre-Shipment finance in the form of

I) Opening of Back-to-Back LC

II) Export Cash Credit

2 Post-Shipment Finance

Post-Shipment finance in the form of

I) ForeignLocal Documentary Bills Purchase

II) Export Credit Guarantee

III) Finance against cash incentive

Foreign Remittance

DBBL provides premium quality service for repatriation and collection of remittance

with the help of its first class correspondents and trained personnel By introducing

on-line banking service and becoming a SWIFT Alliance Access Member which

enable its branches to send and receive payment instruction directly that helps provide

premium services Remittance services provided by DBBL are

Inward Remittance Draft TT

Outward Remittance FDD TT TC and Cash (FC)

Treasury

DBBL is well equipped for treasury operation through subscribing Reuterss terminal

and operating in SWIFT network It is also well equipped with competent human

resources for efficient dealing

Their treasury quote competitive exchange rate for major currencies

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

1Spot SalePurchase

2 Forward SalePurchase

3 Money market Inter-bank amp Corporate

4 SWAPS

5 Forex - Commercial amp Non-Commercial

Account Services

DBBL provides all the accounts services as prescribed by the guidelines of Central

Bank (Bangladesh Bank) They offer competitive interest rate and provide premium

quality services for the accounts Account services are

1 Foreign Currency Account

2 Non-Resident Foreign Currency Deposit Account (NFCD)

3 Resident Foreign Currency Deposit Account (RFCD)

4 Convertible and Non-Convertible Taka Account

5 Convertible and Non-Convertible Taka Account

6 Non-Resident Blocked Taka Account

SWOT Analysis

Strengths

1048729 Largest banking service provider in the commercial bank and operate near about

1000 corporate client

1048729 Qualified hard working amp dedicated human resources

1048729 Gets advantage for ATM card

Weaknesses

1048729 Low deposit rate and minimum balances are too high

1048729 Non functioning ATM machines delay for providing cards

1048729 Poor coordination amp communication between Head offices and branches

Opportunities

1048729 If reducing its current fees amp charges and positioning attractively so DBBL can

attract more corporate client

1048729 By offering more attractive interest rates and lowering the minimum balances

eligible for interest the bank can attract a lot of the old customers

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

Threats

1048729 At present Trust Bank EBL and BRAC Corp are posing significant threats to

DBBL regarding retail and business banking respectively

1048729 Furthermore the new comers in private banking sector are also coming up with

very competitive products

Brac Bank

BRAC Bank is a fully operational Commercial Bank Since inception in July

2001BRAC Bank being the youngest bank took a step to break away from usual

tradition and tapped into the true suburb entrepreneurial initiativesBRAC Bank has

100 Branches 60 SME Service Centers 3 SMEKrishi Branches more than 300

ATMs and 424 SME Unit offices across the country It has disbursed over BDT

10000 cores of SME loan and has over 500000 individual customers who access

online banking facilities Its services cuts across all strata of clientele are it corporate

retail or SME

BRAC Bank Limited provides various commercial banking services in Bangladesh

and internationally Its corporate banking products and services consist of overdrafts

term loans lease finance products loans against trust receipt work order finance and

project finance products and medium enterprise loans bank guarantees syndicated

debt facilities trade finance products including letters of credit and guarantee

finance products to emerging businesses and bill purchase services The companyrsquos

SME products comprise various deposit products such as current accounts and loan

products including anonno rin apurbo rin pathshala rin aroggo rin digoon rin

prothoma rin durjoy trade plus business equity loan proshar rin bizness loan and

suppliers finance Its Probashi banking products and services include current

accounts savings accounts and fixed deposits and bonds It also offers cash

management services and custodial services

Services Provided By BRAC Bank

bull SME Banking

bull Corporate amp Institutional Banking

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

bull Retail Banking

bull Banking Services for Non-Resident Bangladeshi (NRB)

bull BRAC Bank has grown to 56 branches 30 SME Service Centers 427 SME

unit offices and 112 ATM sites across the country

bull The ATM card of BRAC Bank is supported by all the ATM booths of

different banks

bull The online money transfer of BRAC bank charges less

Retail Banking Products

BRAC Bank has a variety of retail banking products for consumers including Loans

Deposit Schemes Accounts Service Cards loan products such as salary quick auto

home and secured loansoverdraft Other Services BRAC bank has recently started

e-commerce banking through their e-commerce gateway BRAC Bank provides VISA

local and international credit and debit cards to their consumers

ATM Network

BRAC Bank has one of the largest ATM networks of its own in Bangladesh with

more than 300 both In addition to this BRAC Bank is the lead arranger of OMNIBUS

shared ATM network

Main Capital Plus Exchange Corporation Capacity Building Support Areas

bull Small business lending

bull Risk management

bull Internal audit operations

bull Cash management

bull Leadership Training

Key Accomplishments in Partnership with Exchange

bull Strengthened small business lending expertise to support the Banks growing

front-line loan staff and developed strong underwriting guidelines for maintaining

portfolio quality in a period of accelerated growth

bull Local regional and international trainings for its top managers and staff

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

Highlight Ford Impact Project

BRAC Bank Bangladesh is currently participating in a study funded by the Ford

Foundation and managed by Capital Plus Exchange Corporation focused on the

impact of small business lending on household poverty

BRAC Bank quick overview

bull Fastest growing bank in the country for the last two years

bull Leader in SME financing through 350 offices

bull Biggest suit of personal banking amp SME products

bull Large ATMs (Automated Teller Machine) amp POS (Point of Sales) network

Industry Average

Valuation BRAC

PriceEarnings 77x

PriceSales 14x

PriceBook 15x

PriceCash Flow 75x

TEVSales NM

Dhaka bank

Bangladesh economy has been experiencing a rapid growth since the 90s Industrial

and agricultural development international trade inflow of expatriate Bangladeshi

workers remittance local and foreign investments in construction communication

power food processing and service enterprises ushered in an era of economic

activities Urbanization and lifestyle changes concurrent with the economic

development created a demand for banking products and services to support the new

initiatives as well as to channelize consumer investments in a profitable manner A

group of highly acclaimed businessmen of the country grouped together to responded

to this need and established Dhaka Bank Limited in the year 1995

The Bank was incorporated as a public limited company under the Companies Act

1994 The Bank started its commercial operation on July 05 1995 with an authorized

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

capital of Tk 1000 million and paid up capital of Tk 100 million The paid up capital

of the Bank stood at Tk 2659597763 as on March 31 2010 The total equity (capital

and reserves) of the Bank as on March 31 2010 stood at Tk 6036368754

The Bank has 62 Branches 3 SME Service Centers 6 CMS Units 2 offshore Banking

Unit across the country and a wide network of correspondents all over the world The

Bank has plans to open more Branches in the current fiscal year to expand the

network

The Bank offers the full range of banking and investment services for personal and

corporate customers backed by the statendashofndashthe-art technology and a team of highly

motivated Professionals

As an integral part of our commitment to Excellence in Banking Dhaka Bank now

offers the full range of real-time online banking services through its all Branches

ATMs and Internet Banking Channels

Dhaka Bank Ltd is the preferred choice in banking for friendly and personalized

services cutting edge technology tailored solutions for business needs global reach

in trade and commerce and high yield on investments

Industry Average

Valuation DKBK

PriceEarnings 82x

PriceSales 29x

PriceBook 20x

PriceCash Flow 82x

TEVSales NM

City Bank

City Bank is one of the oldest private Commercial Banks operating in Bangladesh It

is a top bank among the oldest five Commercial Banks in the country which started

their operations in 1983 The Bank started its journey on 27th March 1983 through

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

opening its first branch at B B Avenue Branch in the capital Dhaka city It was the

visionary entrepreneurship of around 13 local businessmen who braved the immense

uncertainties and risks with courage and zeal that made the establishment amp forward

march of the bank possible Those sponsor directors commenced the journey with

only Taka 34 core worth of Capital which now is a respectable Taka 33077 core as

capital amp reserve

City Bank is among the very few local banks which do not follow the traditional

decentralized geographically managed branch based business or profit model

Instead the bank manages its business and operation vertically from the head office

through 4 distinct business divisions namely

1048729 Corporate amp Investment Banking

1048729 Retail Banking (including Cards)

1048729 SME Banking amp

1048729 Treasury amp Market Risks

Under a real-time online banking platform these 4 business divisions are supported at

the back by a robust service delivery or operations setup and also a smart IT

Backbone Such centralized business segment based business amp operating model

ensure specialized treatment and services to the banks different customer segments

The bank currently has 87 online branches and 10 SME service centers spread across

the length amp breadth of the country that include a full fledged Islamic Banking

branch Besides these traditional delivery points the bank is also very active in the

alternative delivery area It currently has 46 ATMs of its own and ATM sharing

arrangement with a partner bank that has more than 550 ATMs in place SMS

Banking Interest Banking and so on It already started its Customer Call Center

operation The bank has a plan to end the current year with 100 own ATMs

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card

The bank is a principal member of VISA international and it issues both Local

Currency (Taka) amp Foreign Currency (US Dollar) card limits in a single plastic City

Bank has launched American Express Credit Card and American Express Gold Credit

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

card in November 2009 City Bank is the local caretaker of the brand and is

responsible for all operations supporting the issuing of the new credit cards including

billing and accounting customer service credit management and charge

authorizations as well as marketing the cards in Bangladesh Both cards are

international cards and accepted by the millions of merchants operating on the

American Express global merchant network in over 200 countries and territories

including Bangladesh City Bank is one of the largest corporate banks in the country

with a current business model that heavily encourages and supports the growth of the

bank in Retail and SME Banking The bank is very much on its way to opening many

independent SME centers across the country within a short time The bank is also

very active in the workers foreign remittance business It has strong tie-ups with

major exchange companies in the Middle East Europe Far East amp USA from where

thousands of individual remittances come to the country every month for

disbursements through the banks large network of 97 online branches and SME

service centers

Overview of PRMG Bank LTDPRMG Bank Ltd is a second generation bank As we are going to start our operations

from January 2012 we will develop a structure for our bank and prepare a well

managed financial system Our authorized capital will be 10000 million and will try to

reach to larger portions in the market

Our mission and visionVisionTo stand out as a pioneer banking institution in Bangladesh and contribute

significantly to the national economy

Mission

High quality financial services with the help of the latest technology

Fast and accurate customer service

Balanced growth strategy

High standard business ethics

Steady return on shareholderrsquos equity

Innovation banking at a competitive price

Attract and retain quality human resource

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

Firm commitment to the society and the growth of national economy

CORE VALUES OF THE BANK

bullIntegrity

bullRespect

bullFairness

bullHarmony

bullTeam spirit

bullCourtesy

bullCommitment

bullService Excellence

CLIENT COMITMENT OF THE BANK

bullDispatch of work with high degree of professionalism and use of most

suitable banking technology

bullFounding life-long relationship based on mutual trust and respect

bullResponse to customer needs with quickness and accuracy

bullSharing their values and beliefs

bullMutual growth

bullFirst-rated solutions of the banking problems and issues

bullCompetitive pricing of products and services

bullSafety and security of their money in trust with Bank

NATURE OF BUSINESS

As a commercial bank we will do all traditional banking business including

the wide range of savings and credit scheme products retail banking and ancillary

services with the support of modern technology and professional excellence We will

launch a number of financial products and services since its inception The types

of deposits loans amp advances and international business areas under

DEPOSIT SCHEME

Besides Fixed Deposits Savings Bank Deposits and Current Account Deposits our

Bank will introduce the following customer friendly deposit schemes

A) Pension Savings Scheme (PSS)

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

B) Education Savings Scheme (ESS)

C) Monthly Savings Scheme (MSS)

D) Savers Benefit Deposit Scheme (SBDS)

E) Fixed Deposits (1 2 3 6 amp 12 months and 2 3 years)

F) Double Benefit Scheme (DBS)

LOAN SCHEME

The loan portfolio of the Bank is well diversified and covers funding to a wide

spectrum

of business and industries including readymade garments textile edible oil ship

scrapping steel amp engineering chemical pharmaceuticals cement construction

health-care real-estate and loans under consumerrsquos credit schemes allowed to the

middle-class people of the country for acquiring various household items

A) Agricultural Scheme

B) Commercial Lending

C) Working Capital

D) House Building Loan

E) Consumer Credit Scheme

F) Finance to NBFIs

G) SME Finance

H) LargeMedium Scale Industry

I) Loan against Export amp Import

INTERNATIONAL BUSINESS

The international business of the bank includes the following

-Import Business

-Export Business

-Foreign Remittances

OTHER PRODUTSERVICES

The other product services offered by the bank are as under

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

-ATM Operation

- Real Time On

-line any Branch Banking Service

- Dual Currency Visa Credit Card

- Islamic Banking Services

- Merchant Banking Service

CORE OBJECTIVE

The banks overall objective is to have a higher profitability than that of the weighted

average of other banks As such the main focus of the Bank is on highly

profitable business with convincing growth potential Vision for the future is the

characteristic that differentiates our Bank from other competitors

MANAGEMENT STRUCTURE

We have planned our management structure with clearly defined responsibilities

delegation of authority and proper accountability

Resultantly there is transparency in decision-

making and management activities The bank has

appropriate organizational structure manned with qualified professionals for proper pl

anning executing controlling and monitoring functions

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Senior Asstt Vice President

Asstt Vice President

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

Senior Principal Officer

Management Trainee Principal Officer

Management Trainee executive Officer

Senior officer Probationary Officer

Officer

Junior officer

Trainee assistant officer Assistant officer

Computer trainee Computer operator

Cashier trainee Cashier

SPECIAL FEATURE OF THE BANK

a) In our bank we will be engage in conventional commercial banking

b) It is the pioneer to introducing and launching different customer friendly

deposit scheme to tap saving of the people for channeling the same to

the productive sector of the economy

c) The bank is committed to continuous research and development so as to keep

phase with modern banking

d) The operation of the bank is computerized to ensure prompt and efficient

service to the customers

e) The bank has introduced camera surveillance system to strengthen the security

service inside the bank premises

f) The bank introduced customer relation management to assess the need of the

customers and resolves any problem on the spot

Possible SWOT analysis of our bankSWOT analysis is a strategic planning tool to evaluate he Strengths Weaknesses

Opportunities and Threats involved in a project or in a business venture It involves

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

specifying the objective of the project or business venture and identifying the internal

and external factors that are favorable and unfavorable to achieve the objectives The

aim of the SWOT analysis is to identify the key internal and external factors that are

important to achieve the objectives

Strengths Well-built investment arrangement

Aim for having goodwill in the banking sector

Client loyalty is expected to be high

Improved working situation

Training and development facilities

Good interior decorations with central air-condition

Minimum waiting time

Good personal relationship with customers

We will appoint well-trained employees

We will provide online banking facility to our customers All the branches

will be computerized

Good corporate image in the banking sector

Providing loan in corporate sector

Lower amount of bed debt

Weaknesses Worker number is inadequate

More up to date banking facilities such as account checking by mobile Credit

card is unavailable

The workforces of the bank may not be receiving appropriate validation

regarding different type of facilities

Centralized management makes decision-making process more difficult and

time overridden

There will be no 24 hours banking facilities

Binding in rules and regulation

Lack of communication between management

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

Opportunities Our branch will be situated in most commercial area so it has a chance to

attract more businessmen

It has the chance to capture students segment of the market by giving them

customized service for both saving and credit scheme

The population of Bangladesh is continuously increasing at a rate of 73 per

annumThe countryrsquos growing population is gradually and increasingly learnin

g to adaptation of consumer finance

Threats Current law and order situation is not positive for the investment part

The percentage of credit defaulter is elevated

Pessimistic representation to the govt and to Bangladesh Bank

Some Banks offering more attractable rate on deposits than ours

Some foreign Banks are introducing many new expensive and technological

services for customers

Number of potential competitors both foreign and domestic private banks are

increasing day by day At present HSBC Prime Bank Dutch-Bangla BankE

XIM Bank BRAC Bank Mercantile Bank Social investment Islamic Bank

are also coming up with very competitive force

Estimations amp findings

Forecasted balance sheet and income statement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

To prepare the balance sheet and income statement we have taken look at similar

competitorrsquos annual report eg National Bank Ltd like the competitor some of the

assets are liquid and some of them are fixed to manage the companyrsquos liquidity and

solvency which are very important for a bank Again in liability sectors some are

current and fixed liabilities some are interest bearing and non interest bearing

liabilities All the other instruments for balance sheet and income statement are

managed in the same way

The data of year 2012 for balance sheet and income statement are presumed and then

forecasted for the next two years We have assumed that the company is going to have

15 growth in total asset As loans and leases are bankrsquos assets and main business

we are going to forecast all the current and fixed assets liabilities equities in balance

sheet and interest income interest expense non interest income etc of income

statement by taking their percentage of total assets For example current asset is

553 of total asset 112676984923 in 2012 so the predicted current assets will be

553 of the forecasted total asset of 2013 and 2014 In case of income statement the

interest income 1118856453 is 99 of the total asset so the forecasted net income

for 2013 and 2014 will be the same percentage of the respective yearrsquos total asset

WACC

To calculate the cost of capital we have used the method of WACC The equation for

the calculation is

WACC= weight of liabilitycost of liability+ weight of equitycost of equity

= (Total debttotal debt and equity) (total interest expensetotal interest bearing

liabilities) + (Total shareholderrsquos equitytotal debt and equity)ROE

The cost of capital 0090466012 is quite low and manageable for the bank The

weight of the liabilities is almost 90 so the company is highly leveraged but it is

also low of cost as the interest expense is low

NPV

The free cash flow is also projected for 2012-2014 Using the estimated free cash we

have calculated the Net Present value of the bank The discount rate for this

calculation is the WACC of the company

NPV=PV of FCF1+PV of FCF2+ PV of FCF3

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement

32

The NPV of the bank is 16547711914 which is positive As we know that a project

has potential to be successful when its NPV is positive we should go for opening up

this bank

IRR

The internal rate of return is calculated by using trial and error method NPV is

calculated for different rates and IRR is the rate for which NPV is found zero The

IRR of this bank is 5979

The IRR of the bank is positive and quite higher than the WACC So the probability

of getting a profitable return from the investment is high The plan of opening up the

bank should be granted

Recommendation

The following important activities need to be performed by the bank to become more

efficient and effective in near future

Our bank should establish newupdated financial products to attract potential

depositors

Customerrsquos credit scheme should ameliorate by various modern

banking systems

Current portfolio should be exaggerated Not to give weight only in working

capital financing

We should create other type of deposit to attract more customers

The loan officer must determine that borrower have responsible attitude

toward using borrowed funds is truthful in answering the bankrsquos question and

will make every effort to repay what is owed

The loan officer must be reviewed all types of loan on a periodic basis

• May 3rd 2012
• Declaration
• This report is prepared by us for Raisul Islam (Rsm) to fulfill the requirement of Fin 340 course in spring 2012 semester This report is thoroughly for academic in purpose It was never submitted before in any course or institution
• Acknowledgement