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Daffodil International

University

A Report on the Fund ManagementandPerformance Evaluation of

BRAC Bank Limited.

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Course Code: FIN- 435.

Course Title: Bank Fund Management.

AssignmentOn:

The Fund Management andPerformance Evaluation ofBRAC Bank Limited

PREPARED FOR:

Sabrina Akhter

Lecturer

Department of CommerceFaculty of Business & Economics

Daffodil International University

PREPARED BY:

Batch: 17th

BBA

Date of Submission:March 31, 2010

March 31, 2010

Sabrina Akhter

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Course Instructor of Bank Fund Management

Department of Commerce.

Faculty of Business and Economics

Daffodil International University

Subject: Regarding the submission of this report on the Fund Management and

Performance Evaluation of BRAC Bank Limited.

Dear Madam,

Its gives us immense pleasure in presently here with the report entitled the Fund

Management and Performance Evaluation of BRAC Bank Limited. which was

assign to us as a student of FIN-435 course. In preparing this assignment we had the

unique opportunity to expose ourselves.

We tried our best to follow your instruction, schedule, format, and suggestion in every

step of our report writing.

Please grant my earnest apology for any issue of the report, let me be informed.

Sincerely Yours,

------------------------

(On behalf of the group)

ACKNOWLDGEMENT

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First of all we would like to thank to our respectable teacher Sabrina Akhter to give us

the opportunity to do this assignment under her guidance. She is so much an inspiration

and guidance to us. We are short of words in expression our gratitude.

Then we would like to thank to officials of BRAC Bank limited for their excellent

support to produce the data and relevant information. We want to convey our special

thank to Mr. Zahirul Islam, company secretary of BRAC Bank who apart from his very

busy office work, has spared time to discuss the ins and outs of the assignment and guide

us by giving suggestions. We worked there under his direct supervision.

We would like to thank for entire honorable person whose are cooperating with me,

without whose we can not touch our destination.

EXECUTIVE SUMMERY

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The topic of this report was The Fund Management and Performance Evaluation of

BRAC Bank Limited.. This report is partial requirement of BBA program, faculty of

business & Economics of Daffodil International University. To prepare this report as an

apprentice we have taken necessary assistance from Sabrina Akhter during report writing.

The report is conducted with the purpose of introduction the financial operation and

providing the chance to analyze and make assignment accordingly.

TABLE OF CONTENTS

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Chapters Name Page No.

Acknowledgement

Executive summary

Table of contents

Introduction

Motivation of the Report

Objective of the report

Methodology

Limitation of the report

Background of the Report

Operation of the Bank

Business Performance

Recommendation

Conclusion

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INTRODUCTION

Motivation of the Report:

We are the students of BBAprogram of Daffodil International University. As we are

studying the Bank Fund Management in this semester, we have to gather huge amount of

knowledge about the Bank fund operation. To acquire practical knowledge about the

banking operation our course instructor has motivated us to do this type of assignment.

Thats why we have motivated to prepare this report.

Objective of the Report:

A study in banking operation of AB Bank Limited to find out its activities and

performance in terms of anticipated customers requirements and provide them with the

service, which meet their market, quality and service need.

To give a brief about the history and information of this bank.

To inform about the bank mission and vision market performance of BRAC Bank

Limited.

Setting a general idea about operation performance of BRAC Bank Limited.

To explain about the sources and uses of BRAC Bank fund.

Methodology:

The study is based on secondary data methodology of this final report is given below:

Data regarding the organization profile collected in the following ways:

From the organizations Annual report.

Online information.

By interviewing the organizations officials.

Observational method will also be used in this study.

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Limitation of the study:

Any assignment paper needs high degree of involvement regarding collection of

information, creation of database, literature review and analysis of data. In this study, we

have tried our level best to collect the related information within the time constraint.

Blackguard of BRAC Bank Limited:

BRAC Bank is a scheduled commercial bank established under the Banking companies

Act, 1991 and incorporated as a public company limited by shares on 20 May, 1991

under the companies Act, 1994 in Bangladesh. The primary objective of the Bank is to

carry on all kinds of banking business. The bank could not start its operating till 03 June,

2001 since the activity of the bank was suspended by the High Court of Bangladesh.

Subsequently, the judgment of the High court was set aside and dismissed by Bank has

started operations from 04 July, 2001.

Vision Statement:

Building a profitable and socially responsible financial institution on Market and

Business with growth potential, thereby assisting BRAC and stakeholders to build a just

enlightened, healthy, democratic and poverty free Bangladesh.

Mission Statement:

Sustained growth in Small & Medium Enterprise sector

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

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

Assets through syndications and investment in faster growing sectors.

Continuous endeavor to increase non-funded income

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

Achieve efficient synergies between the Banks branches, SME unit offices and

BRAC field offices for delivery of remittance and Banks other products and

services

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CORE VALUES:

Value the fact that one is member of the BRAC family.

Creating an honest, open and enabling ENVIRONMENT.

Have a strong customer focus and build relationships based on integrity, superior

service and mutual benefit.

Strive for profit & sound growth.

Work as a team to serve the best interest of our owners

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Source of BRAC Bank funds:

Year 2009 2008 2007 2006 2005

Borrowings 2450000000 2280000000 2240000000 1332974167 1473391667

Deposit and

Other A/C

75219615155 58006887010 37368407774 23001921689 13409010390

OtherLiabilities

8760734892 6717480730 3702158970 3559726180 1210675172

Shareholders Equity

8150954413 5437525651 3072028674 2117193037 782931910

Total Funds 94581304460 72441893391 46382595418 30011815073 16876009139

Contributions of each Component in percentage:

Year 2009 2008 2007 2006 2005

Borrowings 2.59 3.15 4.83 4.44 8.73Deposit and

Other A/C

79.53 80.07 80.57 76.64 79.46

Other

Liabilities

9.26 9.27 7.98 11.86 7.17

Shareholders

Equity

8.62 7.51 6.62 7.05 4.64

Portion of each fund sources 2009

3%

79%

9%

9%

Borrrowi

Deposit a

Other A/C

Other

Liabilities

Sharehol

s Equity

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80.07

9.277.51 3.15

Borrowing

Deposits andother account

Other lialilities

Shareholers equit

Portion each fund sources 2007

4.83

80.57

7.986.62

Borrowings

Deposits another accou

Other

liabilities

Shareholder

equity

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76.6

11.9

7.05 4.44

Borrowing

Deposit and ot

account

Other liabilitie

Shareholderequity

Portion of each fund source 200

79.46

7.17 8.734.64Borrowing

Deposit and

other accoun

Other liabiliti

Shareholderequity

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Uses of Bank Funds:

Contributions of each Component in percentage:

Year 2009 2008 2007 2006 2005

Cash 6619009730 4315888000 3114571471 2172387439 1011470878

Balance withthe Bank 5593933873 3194971113 3064562581 2335200830 1162526288

Investment 10972204419 8245373273 4996856717 3768012071 2163814600

Loan &

advance

64150835159 5267671674

0

3246112018

0

1955716538

0

11791312522

Fixed Asset 1637898063 1472024279 942929286 389375132 156335491

Other Asset 4307431216 2536919986 1702573183 1189674221 1510529360

Money at call

and on shortnotice

1300000000 100000000 100000000 600000000 80000000

Total Fund 88987378587 6934692227

8

4331805083

7

2767661424

3

16713462851

Year 2009 2008 2007 2006 2005

Cash 7.43 6.22 7.19 7.84 6.05

Balance with the

Bank

6.28 4.60 7.07 8.43 6.95

Investment12.33 11.89 11.53 13.61 12.94

Loan & advance 72.08 75.96 74.93 70.66 70.54

Fixed Asset 1.84 2.12 2.17 1.40 0.93

Other Asset 4.84 3.65 3.93 4.29 9.03

Money at call and

on short notice

1.46 0.14 0.23 2.16 0.47

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Portion of fund uses 2009

7.436.28

12.33

72.08

1.84 4.84 1.46

Cash

Balance with

theBankInvestment

Loan & Advance

Fixed Asset

Other Asset

Money at call and

on short notice

Portion of fund Uses 2008

6.22 4.6

75.96

2.17 3.930.14

11.89

Cash

Balance with the Bank

Investment

Loan & Advance

Fixed Asset

Other Asset

Money at call and on shor

notice

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Portion of fund Uses 2007

7.197.07

11.53

74.93

2.17 3.930.23

Cash

Balance wit

the Bank

Investment

Loan &

advance

Portion of fund Uses 20067.84

8.43

13.61

70.66

1.4 4.29

2.16 Cash

Balance with the

Bank

Investment

Loan & Advance

Fixed Asset

Other Asset

Money at call and

short noticeSlice 8

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6.05

6.95

12.94

70.54

0.93

9.03 0.47 Cash

Balance withthe Bank

Investment

Loan &Advanace

I

nvestment Sector of BRAC BankLike other bank The BRAC Banks interest to investment is the use of money for the

purpose of making more money to gain income or increase capital or both. As we know

there is always lies default risk in loan making. To avoid this, the bank goes through the

investment because debt instruments can be converted into cash with little risk of loss of

principal value. The BRAC bank authority ahs analyzed that the investment in debentures

is less affected by local economic condition rather than national economic condition in

the money market and capital market. Incomes on debentures are tax free.

The BRAC banks investment items are T-bill/bond, share, and debenture. The Chief

Investment officer of the investment committee has designed the investment area mainly

invest in government sector.

The total invests in government securities (5&2 years Treasury bill) are

3,240,000,000/- and it was 3,822,669,100/- in Government bond in2005.

As we know, credit risk is the barrier in maximizing shareholders wealth. So, banks make

investment by part of their Lon able funds to earn profit and maximize the shareholders

wealth without any risk. This is the reason to invest a large amount in T-bill thus it can be

converted in cash at any time when required.

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Deposit Mix:Year 2009 2008 2007 2006 2005

Current Deposit and

other A/C

24549608278 7652002774 5543600799 3060293660 328852

Bills payable 453829731 424445762 409015536 11744828 122593

Savings bankdeposits

13043725795 4627686658 3985564159 2936582930 186376

Fixed Deposit 36731258306 43399790445 27307976283 16742577461 805155

Other Deposit 441193045 1902951371 122250997 148722810 825661

Deposit Mix in 2009

17

Current Depositand other

A/C, 24549608278

Bills

payable, 453829731

Savings bank

deposits, 13043725

795

Fixed

Deposit, 36731258

306

Other

Deposit, 44119304

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Deposit Mix in 2008

Deposit Mix in 2007

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Deposit Mix in 2006

Deposit Mix in 2005

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Performance Evaluation:

Return of Equity:

Year 2009 2008 2007 2006 2005

Income After Tax 1373364872 973450830 618335637 334261127 192680101

Total Equity Capital 8150954413 5437525651 3072028674 2117193037 782931910

ROE 16.85% 17.90% 20.13% 15.79% 24.61%

Return on Equity

16.85 17.920.13

15.79

24.

0

5

10

15

20

25

30

2009 2008 2007 2006 2005

Year

Percentage

Return on Equity: Return on Equity is a measure of the rate of return flowing to the

banks shareholders. It approximates the net benefit that the shareholders have received

from investing their capital in the bank (i.e. placing their funds at risk in the hope of

earning a suitable profit).

Here the Bank earns tk. 16.85, tk 17.90, tk. 20.13, tk. 15.79 and tk. 24.61 by using total

capital of tk. 100 for the year 2009, 2008, 2007, 2006 and 2005 respectively.

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Return on Asset:

Year 2009 2008 2007 2006 2005

Net IncomeAfter Tax

1373364872 973450830 618335637 334261127 192680101

Total Asset 9458130446

0

7244189339

1

4638259541

8

3001181507

3

16876009139

ROA 1.45% 1.34% 1.33% 1.11% 1.14%

Return on Asset

1.451.34 1.33

1.11 1.1

0

0.5

1

1.5

2

2009 2008 2007 2006 2005

Year

Percentage

Return on Assets: Return on Assets is an indicator of managerial efficiency, it indicates

how capable the converting the institutions Assets into earnings.

Here the Bank earns tk. 1.45, tk 1.34, tk. 1.33, tk. 1.11 and tk. 1.14 by using total assets

of tk. 100 for the year 2009, 2008, 2007, 2006 and 2005 respectively.

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Net Interest Margin:

Year 2009 2008 2007 2006 2005

Net Interest

Income

3129115435 3156009869 2062110340 1157615437 607331119


0

7244189339

1

4638259541

8

3001181507

3

16876009139

NIM 3.31% 4.36% 4.45% 3.86% 3.60%

3.31

4.36 4.453.86 3.6

0

1

2

3

45

Percentag

e

2009 2008 2007 2006 2005

Year

Net Interest Margin

Net Interest Margin: The net interest margin measures how large a spread between

interest revenue and interest cost. Management has been able to achieve by close controlover the banks earning assets and the pursuit of the cheapest sources of funding. This is a

measure of efficiency as well as profitability indicating how well management and staff

have been able to keep the growth of revenue ahead of rising cost.

Here the Banks net interest income tk. 3.31, tk 4.36, tk. 4.45, tk. 3.86 and tk. 3.60 by

using total assets of tk. 100 for the year 2009, 2008, 2007, 2006 and 2005 respectively.

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Net Non Interest Margin:

Year 2009 2008 2007 2006 2005

Non NetInterests

Revenue

4275511368 2880173968 1481039542 919810085 565986540

Non Net Interest

Expense

3603569530 2862277587 1597657356 1027018495 592999647


72441893391

46382595418

30011815073

16876009139

NNIM 0.71% 0.025% -0.25% -0.36% -0.16%

0.71

0.025

-0.25-0.36

-0.16

-0.4

-0.2

0

0.2

0.4

0.6

0.8

Percentage

2009 2008 2007 2006 2005

year

Non Net Interest Margin

NNI

Net Non Interest margin ratio: Non interest margin measures the amount of non

interest revenue stemming from deposit service charges and other service fees the bankhas seen able to collect (called fee income) relative to the amount of non interest cost

incurred including wages, Salaries repair maintenance cost and loan loss expensesforemost bank, the non interest margin is negative that means generally non-interest costare more than fee income.

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From the above picture it can be stated that the Banks net non interest income tk. 0.71, tk

0.025, tk. -0.25, tk. -0.36 and tk. -0.16 by using total assets of tk. 100 for the year 2009,2008, 2007, 2006 and 2005 respectively.

Earnings per Share:

Year 2009 2008 2007 2006 2005

Net Income After

Tax

1373364872 973450830 618335637 334261127 192680101

No. of Share 22521700 15840000 120000000 11373300 5000000

EPS Tk.60.98 Tk. 61.46 Tk. 42.30 Tk. 29.39 Tk. 38.54

60.98 61.46

42.3

29.3938.54

010

20304050

6070

Percentag

e

2009 2008 2007 2006 2005

Year

Earnings Per Share

E

Earnings per share: Earnings per share indicate how much a share on stock of a bankcan earn income from investment.

]

That means here one stock of this bank can earn tk 60.98, tk.61.46, tk. 42.30, tk. 29.39and tk. 38.54 for the year 2009, 2008, 2007, 2006 and 2005

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Degree of Asset Utilization:

4.02 4.38 4.193.5 3.44

0

1

2

3

45

Percentage

2009 2008 2007 2006 2005

year

Degree of Assets Utilization

Asset Utilization: The banks degree of Asset Utilization reflects portfolio management

policies, specially the mixed and yields on the banks assets Equity Multiplier

From the above picture it can be stated that the Banks total operating income tk.4.02, tk

4.38, tk. 4.19, tk. 3.50 and tk. 3.440.16 by using total assets of tk. 100 for the year 2009,2008, 2007, 2006 and 2005 respectively.

Year 2009 2008 2007 2006 2005

Total Operating

Revenue

3801057273 3173906250 1945492529 1050407027 580318012


0

7244189339

1

4638259541

8

3001181507

3

16876009139

Asset Utilization 4.02% 4.38% 4.19% 3.50% 3.44%

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The Banks Equity Multiplier:

Bank equity Multiplier: Equity multiplier reflects leverage on financing policies thatmeans the sources chosen to fund the bank (debt/equity)

The multiplier is a direct measure of the banks degree of financial leverage.

How many dollar of assets must be supported by each dollar of equity capital and howmuch of the banks recourses, therefore must rest on debt. Because equity must absorb

losses on the banks assets the larger the multiplier the more exposed to failure risk the

bank is.

From the above picture it can be stated that the Banks total assets is 11.6 times, 13.32times, 15.10 times, 14.18 times and 21.55 times higher than total equity capital for the

year 2009, 2008, 2007, 2006 and 2005 respectively. The financial leverage for the bankdeclines gradually.

Year 2009 2008 2007 2006 2005


72441893391

46382595418

30011815073

16876009139

Total Equity

Capital

8150954413 5437525651 3072028674 2117193037 782931910

EquityMultiplier

11.60 13.32 15.10 14.18 21.55

26

11.613.32

15.1 14.18

21.55

0

5

10

15

20

25

2009 2008 2007 2006 2005

Year

Equity Multiplier

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Recommendation

The overall scene says that The BRAC bank has the strong efficient management in loan

management. Although there a chance to default loan and some non performing loan the

bank always prefer to utilize their deposit fund in the loan sector than in investment

sector. The Prime bank always takes necessary steps by analyzing the credit approaches

thus the bank does not need to face the loan default problem. But the efficiency also

affected by economic condition of the country beside the political situation. The BRAC

Bank is always promising satisfied its customer.

Conclusion

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Todays business is very competitive and complex. To survive in the related sector the

organization need competitive people and has to take some effective policy. Every

country must given a plan for important role in economic activities Bangladesh is no

exception of that. Commercial Banks financial development and economic development

are closely related. Thats why the private commercial banks are playing significant role

in this regard.

From the analysis of the BRAC Bank, we got understand about the performance. Also

well performance of BRAC Bank.

The Bank should have to up a new standard in financing in the industrial, Trade and

foreign exchange business. Its various deposit and credit products should have also

attracted the clients- both corporate and individuals who feel comfort in doing business

with the Bank. The bank should take initiative effort to accelerate the non interest income

performance for avoiding negative non net interest income.

Documents

bank fund 435