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A Report On

Financial performance and analysis of Brace Bank

Submitted To:

Ms. Reshma Nowreen

Lecturer in Finance

Submitted By:

SL NO

.

Name ID

1. Farzana Zerin 1412. Rebeka Sultana 1483. Md.Sakib Ahmed 1544. Mahfuza Akter 1555. Mohammad Shibly Rahman 163

Bangladesh University of Business & Technology (BUBT)

Date of submission-

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Letter of Transmittal

Date

To

Ms. Reshma Nowreen

Lecturer in Finance

Subject: Approval of Report

Dear Sir,

With due respect we would like to inform you that it’s a great pleasure for us to submit our report “Financial performance and analysis of BRAC Bank” as integral requirement of our BBA program. Throughout the completion of this report we have earned in depth, knowledge about the bank. We feel this report writing experience will help us to prepare more quality one in future.Therefore, I firmly believe that our report will meet your approval. I would genuinely aspire any corrections and guideline as you feel necessary. Your kind advice will lead me further to the best.

Sincerely yours,

On behalf of

All group members of

Group Orions

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Acknowledgement

At the very beginning we are very pleased to successfully complete our Report

writing “Financial performance and analysis of BRAC Bank”. We would like to

express our gratitude to our honorable Ms. Reshma Nowreen, Lecturer in Finance

Studies without whose proper supervision the report would have remain

incomplete.

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Table of Contents

Contents Page

Executive summary 6

Introduction 7

Background 7-8

Objectives 8

Methodology 8-9

Limitation 9

Overview of BRAC Bank 10-12

Theoretical Aspect 13-17

Trend Analysis

Status of loan classification

Ratio analysis

18-20

21-22

22-26

Finding analysis 27

Conclusion 27

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Executive summary

The information received from the secondary data. We visit the Branch of the

BRAC Bank. Then we find out the services availability to the customer. Then we

find out the financial performance and analysis of that bank. At the same time we

are faced some problem such as there are some information lacking. Some web-

pages of that bank are not displayed etc. BRAC Bank Limited is a scheduled

commercial bank in Bangladesh. BRAC Bank is providing various services to its

customers and trying to improve every time. The service providers of BRAC bank

are the people who are related to the development of bank and customer.

.

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Chapter: 1

1.1 Introduction

BBL is a full service scheduled commercial bank. It has both local and

international institutional shareholder. The bank is primarily driven with a

view of creating opportunities and pursuing. Market niches not traditionally

meet by conventional banks. BRAC Bank has been motivated to provide “best-in-

the-class” services to its diverse assortment of customers spread across the

country under an on-line banking dais. Today, BRAC Bank is one of the fastest

growing banks in the country. In order to support the planned growth of its

distribution, network and its various business segments. The bank wants to

build a profitable and socially responsible financial institution. The bank

maintains a high level of standards in everything for our customers, our

shareholders, our Acquaintances and our communities upon, which the future

affluence of our company rests.

1.2 Background

BBL is a scheduled commercial bank in Bangladesh. It established in Bangladesh

under the Banking companies Act, 1991 and incorporated as private limited

company on 20 May 1999 under the companies Act, 1994. The primary objective

of the bank is to provide all kinds of banking business. BRAC Bank Limited is a

fully operational commercial bank that was founded in July 2001 by BRAC

NGO, one of the largest development finance institutions in the world. The

bank’s objectives include providing comprehensive commercial banking

services, building a profitable and modern, full-service financial institution, and

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pursuing profitable market niches in the Small and Medium Enterprise (SME)

business sector not traditionally met by conventional banks.

1.3 Objectives

The main purpose for making is to known the financial performance of BRAC

Bank Ltd. The specifics objective maybe show as under-

To know the historical background of BBL

To know the trend analysis of BBL

To know the loan classification of BBL

To know the ratio analysis of BBL

To acquire knowledge about the overall banking system

1.4 Methodology

In order to meet the needs of fulfilling the objectives of the report secondary data

are required. The information for the organization part of the report was collected

from secondary sources.

There are two types of sources

Primary Data Sources.

Secondary Data Sources.

In this report we don’t used any kind of primary data source.

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Secondary data are collected through

Manuals & Annual Report of BRAC Bank Limited.

Official web site.

Banking Journals.

Research Paper.

1.5 Limitation

There might be some information that might be inaccurate, since the time invested

in the work is not sufficient enough to completely know about the company.

Another limitation was getting the information and interpreting it, on the basis of

our understanding and then implementing it. The main constraint of the study was

insufficiency of information that was highly required for the study.

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Chapter: 2

2.1 Overview of BRAC Bank

BRAC Bank Limited (BBL) is a fully operational commercial bank that

was founded in July 2001 by BRAC NGO, one of the largest development

finance institutions in the world. The bank’s objectives include providing

comprehensive commercial banking services, building a profitable and modern,

full-service financial institution, and pursuing profitable market niches in the

Small and Medium Enterprise (SME) business sector not traditionally met by

conventional banks. The bank’s main portfolio products include loans for

small and medium sized entrepreneurs; personal loans, credit cards and multiple

deposit accounts for retail customers; and specialized retail products tailored to

religious restrictions. The bank also provides corporate deposit and loan products

as well as non-resident Bangladeshi remittance services. BRAC’s distribution

network of 151 branches including 81 branches, 48 SME Krishi Branches,

22 SME service center, 429 SME unit offices and 280 ATMs across

Bangladesh and now reach more than 10,00,000 retail customers. The Bank is

constantly coming up with new products. Recently BBL has introduced Visa Silver

and Visa Gold both Local and International credit cards; and further more the Bank

is in the process of introducing VISA Debit card. In the years ahead BRAC Bank

expects to introduce many more services and products as well as add a wider

network of SME unit offices, Retail Branches and ATMs across the country. The

Banks operate under a “Double Bottom Line” agenda where profit and social

responsibility to hand in hand as it strives towards a poverty free, enlightened

Bangladesh

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Vision for the Future

Building profitable and socially responsible financial institution focused on market

and business with growth potential thereby assisting BRAC and stakeholders to

build a just enlightened healthy democratic and poverty free Bangladesh.

Corporate Mission

Sustained growth in Small & Medium Enterprise sector

Continuous low-cost deposit Growth with controlled growth in retail assets.

Corporate Assets to be funded through self-liability mobilization. Growth in

Assets through syndications and investment in faster growing sectors.

Continuous endeavor to increase non-funded income

Keep our debt charges at 2% to maintain a steady profitable growth

Achieve efficient synergies between the bank’s branches, SME unit offices

and BRAC

field offices for delivery of remittance and Bank’s other products and

services

Manage various lines of business in a full controlled environment with no

compromise on service quality

Keep a divers, far flung team fully controlled environment with no

compromise on service quality

Keep a diverse, far flung team fully motivated and driven towards

materializing the bank’s vision into reality.

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Organ gram

The Board of Directors is the top management and policy-making body of BRAC

Bank Limited. Presently the Boars consist of a chairman and four directors. It is to

be noted that the managing Director, is also a member of the Board. Directors are

appointed from amongst those who have had experience and shown capacity in

the field of finance and banking, trade, commerce, industry agriculture. The Chief

Operations officer executes all the activities under the direction of the board. The

officers and the other line and staff personnel are appointed by Bank’s own

Recruitment Committee.

Managing Director

Deputy Managing

EVP & Chief operation

VP& Head of SME

A VP & Head of credit

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Chapter: 3

Theoretical Aspect

Trend analysis

Deposit:

In deposit terminology, the terms Bank Deposit refers to an amount of money in

cash or check form or sent via a wire transfer that is placed into a bank account.

The target bank account for the Bank Deposit can be any kind of account that

accepts deposits.

Bank Deposit Example:

For example, a Bank Deposit is generally made when opening an account or in the

course of routine business or personal transactions that involve placing funds with

the bank for future use.

Growth rate of deposit:

Growth rate of deposit is calculated by=

(Current year-previous year)/previous year *100

Loans & Advances:

Loan- The act of giving money, property or other material goods to another party

in exchange for future repayment of the principal amount along with interest or

other finance charges. A loan may be for a specific, one-time amount or can be

available as open-ended credit up to a specified ceiling amount.

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Advance- Sums paid or received before the fulfillment of an obligation, such as

supply of goods or provision of services.

Growth rate of loan:

Growth rate of loan is calculated by =

(Current year-previous year)/previous year

Investment trends:

An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

Growth rate of investment:

Growth rate of investment is calculated by=

(Current year-previous year)/previous year

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Status of loan classification

Classified loan:

Any bank loan that is in danger of default. Classified loans have unpaid interest and principal outstanding, and it is unclear whether the bank will be able to recoup the loan proceeds from the borrower. Banks usually categorize such loans as adversely classified assets on their books.

Substandard loan:

Bank loan or other interest-earning asset that is protected inadequately by current net worth and paying capacity of the borrower, or the collateral pledged. Loans classified as substandard are characterized by the distinct possibility that the lender will sustain some loss if the deficiencies are not corrected. Some loss of interest is anticipated, or may have already occurred, but loss of principal is considered unlikely.

Doubtful Loan:

Loan in which full repayment is considered uncertain. Some losses are expected. A loan classified as doubtful has all the characteristics of a substandard loan well-defined credit weaknesses, with the added characteristic that credit weaknesses make full collection or liquidation in full highly questionable and improbable. Fifty percent of loans classified as doubtful are deducted from adjusted bank capital in computing regulatory capital adequacy.

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Bad/Loss:

A classified loan which period is 1 year and seems no chance to recover the money from borrower can be traced as Bad/Loss loan.

Ratio Analysis

Current Ratio:

A liquidity ratio that measures a company's ability to pay short-term obligations.

The Current Ratio formula is:

Debt ratio:

A ratio that indicates what proportion of debt a company has relative to its assets.

The measure gives an idea to the leverage of the company along with the potential

risks the company faces in terms of its debt-load.

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Credit to Deposit Ratio:

The amount of a bank's loans divided by the amount of its deposits at any given

time. The higher the ratio, the more the bank is relying on borrowed funds, which

are generally more costly than most types of deposits. Forming part of the

Liquidity ratios of a bank, this ratio is often used by policy makers to determine the

lending practices of financial institutions. The higher the Loan-to-deposit ratio, the

more the bank is relying on borrowed funds.

Formula = Net Loans / Total Deposits

Cost Income Ratio:

The cost-to-income ratio is a key financial measure, particularly important in

valuing banks. It shows a company’s costs in relation to its income. To get the

ratio, divide the operating costs (administrative and fixed costs, such as salaries

and property expenses, but not bad debts that have been written off) by operating

income. The ratio gives investors a clear view of how efficiently the firm is being

run – the lower it is, the more profitable the bank will be. Changes in the ratio can

also highlight potential problems: if the ratio rises from one period to the next, it

means that costs are rising at a higher rate than income, which could suggest that

the company has taken its eye off the ball in the drive to attract more business.

Cost Income ratio = Operating Cost/Operating Income

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Chapter: 4

4.1 Trend Analysis

Year 2008 2009 2010 2011 2012Deposit 58007 75220 88158 103726 134646Growth rate of deposit

30% 17% 18% 30%

Interpretation:

Here the analysis of data five years shows that the total amount of deposit are

increasing yearly which is a good for the bank and the growth rate of deposit are

fluctuating yearly. In recent year 2012s this rate is 30%.As the higher growth rate is

better for the bank for more investment, so the bank should try to maintain high

growth rate for deposit.

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2008 2009 2010 2011 2012

58007

7522088158

103726134646

DepositYear Deposit

Year 2009, 30%

Year 2010, 17%

Year 2011, 18%

Year 2012, 30%

Growth rateGrowth rate of deposit

Loans and Advances

Year 2008 2009 2010 2011 2012

Loans & Advances 52677 64151 82461 90882 103624

Growth rate of Loans & Advances

22% 29% 10% 14%

Interpretation:

Here the analysis of data five years shows that the total amount of loans and advances

are increasing yearly which is a good for the bank but on the other hand growth rate of

loans and advances fluctuating yearly. So the bank should try to increase the growth

rate for profitability.

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2008 2009 2010 2011 2012

5267764151

8246190882

103624

Loan and Advances

Year Loans & Advances

Year 2009, 22%

Year 2010, 29%

Year 2011, 10%

Year 2012, 14%

Growth rate of loan & advances

Growth rate of Loans & Advances

Investment

Year 2008 2009 2010 2011 2012

Investment 8245 10375 12856 1419 25373Growth rate of Investment

26% 24% -89% 105%

Interpretation:

The analysis shows that investment of bank increase yearly from 2008 to 2010 and

decreases in 2011but in 2012 the amount of investment goes up which is better for

bank to earn more profit but the growth rate is fluctuating so the bank should try to

invest more in safe sector after maintaining the required liquidity for earnings.

4.2 Status of loan classification

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2008 2009 2010 2011 2012

8245 10375 12856 1419

25373

Investment

Year Investment

Year 2009, 26%

Year 2010, 24%

Year 2011, -89%

Year2012, 105%

Growth rate InvestmentGrowth rate of Investment

Classified Loan

Year 2009 2010 2011Substandard Loan 1504126278 1142795194 1584001808

% 39% 29% 41%Doubtful 990855828 1430876989 1288798013

% 26% 37% 33%Bad/Loss 1382674637 2355885993 2366742729

% 36% 61% 61%

Total Classified Loan 3877656743 4929558176 5239542550

Graph:

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29%

37%

61%

2010Substandard loan DoubtfulBad & loss

41%

33%

61%

2011Substandard loan DoubtfulBad and loss

Interpretation:

Here the analysis of loan classification of 2010and 2011 show that, the percentage

of bad/loss loan on total classified loans is higher than the substandard and

doubtful loan, which is not good for the bank. So the bank should try to reduce the

amount of bad/loss loan and also the amount of total classified loans.

Chapter: 5

Ratio Analysis

Current Ratio:

Year 2008 2009 2010 2011 2012

Current assets

21076570130 56253999506 59190423909 43441909590 64713854091

Current liabilities

32038481403 48134555867 40886797840 56533704881 71235869906

Current Ratio

0.657851721 1.168682218 1.447665922 0.768424954 0.908444779

Graph:

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Interpretation:

In this analysis we can show that the current ratios of the bank are fluctuating

yearly and the past two years this ratio shows that the bank has less current asset to

meet up its liabilities which is not a good sign for the bank.

Debt Ratio:

Year 2008 2009 2010 2011 2012

Total Liabilitie

s

72441893391

95127222246

119150087964

133201048438

173676792029

Total Assets

67004367741

86976267833

109738202407

123598443600

163522243477

Debt Ratio

108% 109% 109% 108% 106%

Graph:

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Year 2008, 0.657851721

Year 2009, 1.168682218

Year 2010, 1.447665922

Year 2011, 0.768424954

Year 2012, 0.908444779

Current Ratio

Interpretation:

In this problem analysis we see that the percentage of ratio has increased from 2008

to 2009 and 2010 but decreased from 2010 to 2011 and 2012 in the bank because

their asset was increased at a higher rate than from the last year. Here the bank

maintains approximately same level of debt ratio from past five years. This is a good

sign for the bank.

Cost income ratio:

Year 2008 2009 2010 2011 2012

Operating expense

2862277587 3546573197 4571309242 574960576 5164822269

Operating income

6036183837 7264162137 9539934262 1089480177 1013473342

Cost income ratio

47% 49% 48% 53% 51%

Graph:

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Year 2008, 108%

Year 2009, 109%

Year 2010, 109%

Year 2011, 108%

Year 2012, 106%

Debt RatioDebt Ratio

Interpretation:

The analysis shows that the cost of ratio fluctuating yearly. It is one of the main key

performance indicators of a bank's efficiency: the lower the ratio the more efficient the

bank. Here the ratio is higher in recent year, so it is not a good sign for bank business.

Credit Deposit Ratio:

Year 2008 2009 2010 2011 2012

Loans 52676716740 64150835159 84302789317 103624438 9082217467

Deposits 58006887010 75219615155 88157908331 1346464485 1037255292

Credit Deposit Ratio

91% 85% 96% 77% 88%

Graph:

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Year 2008, 47%

Year 2009, 49%

Year 2010, 48%

Year 2011, 53%

Year 2012, 51%

Cost income ratioCost income ratio

Interpretation:

The credit deposit ratio state that the higher the ratio the better but too much higher

is not good because it can create liquidity risk. Here the ratio is fluctuating yearly

but the bank should maintain moderate cost to deposit ratio.

Chapter 626

Year 2008, 91%

Year 2009, 85%

Year 2010, 96%

Year 2011, 77%

Year 2012, 88%

Credit Deposit RatioCredit Deposit Ratio

6.1 Finding and analysis:

We find the deposit growth of 2009-12. The rate of deposit was decreasing in 2010-11 but increasing in 2012.

The loan rate was decreasing in the year of 2010 to 2012.

Investment growth was decreasing over 2010-2011 but highly increased in 2012.

Classified loan situation or percentage is increasing year to year.

We found the Current ratio, Debt ratio, Cost income ratio and Credit to deposit ratio.

Found the financial position of BRAC Bank at a glance over 2009-2012.

6.2 Conclusion:

Overall the financial position of BRAC Bank is quite well over the previous year.

But somehow in some specific area it’s doing not so good. It’s may be either the

operational or technical fault of bank management and finance department of the

bank. The BRAC Bank can overcome these situations quickly because as we all

know it’s one of the leading banks of our country.

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