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Commercial Banking In
Bangladesh and Prime Bank
Presenters:
Name ID
Kamruzzaman Ahmed 1020063030
Farjana Yesmin Munni 1010232030
Tania Alam 1020833030
Tasnia Sanajan 1110510030
Ahnaf Tahmid 1010000030
Commercial Bank:
Commercial bank is a financial institution.
Collect deposits by offering many types of accounts.
Gives interest on the deposits
Provide loans and other financial facilities.
Charge interest on loans and our services.
The main duty of commercial bank is taking deposits on interest and
providing loans on interest
Commercial Bank (cont…) :
Commercial banks in
Bangladesh:
State-owned commercial
Banks (4 Banks)
Specialized commercial
Banks (4 Banks)
Conventional private
commercial Banks (31
Banks)
Islami-Shariahbased
commercial Banks (8 Banks)
Foreign commercial
Banks (9 Banks)
Functions of Commercial
Bank:
Receiving depositsReceiving deposits Providing loansProviding loans
Functions of Commercial
Bank (Cont..) :
Deposits
Current Account
Saving Account
Fixed Account
Functions of Commercial
Bank (Cont..) :Current account:
o Freedom of withdrawal.
o No interest.
o Minimum amount of 1000tk.
Saving account:
oA limit of withdrawal in a week.
o Lower rate of interest.
o Mostly used by middle class group.
Functions of Commercial
Bank (Cont..) :
Fixed account:
oWithdrawal after a fixed time.
o Highest rate of interest rate.
o Interest rate differs due to different period.
Loan
• Short-term Loans
• Medium-term Loans
• Long-term Loans
Term basis
• Secured loan
• Unsecured loan
• Demand
• Subsidize
• Concessional
Type basis
Functions of Commercial
Bank (Cont..) :
Functions of Commercial
Bank (Cont..) :
Short-term Loans: Loan that is given for less than five years.
Medium-term Loans: Loan that is given for 6 to 10years.
Long-term Loans: Loan that is given for more than 10years.
Functions of Commercial
Bank (Cont..) :i. Secured loans:
a. Collateral
b. Mortgage loan
ii. Unsecured loans:
a. Personal loans
b. Bank overdrafts
c. Business Loan
d. SME Loan
iii. Demand loans
iv. Subsidies
v. Concessional
Functions of Commercial
Bank (Cont..) :Secured Loans
Mortgage loanCollateral Loans
Necessity of Commercial Bank:
Security
Exchange currency
Easy transactionHelp
globalization
Intermediary between lender and borrower
Prime Bank Ltd
Prime Bank Ltd
Background:
•Prime Bank Ltd is a fully licensed conventional private owned commercial bank.
•Created and started its journey on 17th April,1995.
•Well reputed and experience personalities in the field of trade and commerce
were the sponsor of the organization
•They have always tried to understand the customers need and serve them
according to their needs.
•They have hired highly professional and dedicated team with long experience for
serving the customers more effectively
Prime Bank Ltd
Vision:
To be the best Private Commercial Bank in Bangladesh in terms of
efficiency, capital adequacy, asset quality, sound management and profitability
having strong liquidity.
Mission:
To build Prime Bank Limited into an efficient, market-driven, customer
focused institution with good corporate governance structure.
Continuous improvement of
our business policies, procedure and efficiency through integration of technology
at all levels.
Leaders of Prime Bank Ltd
Leaders of Prime Bank Ltd
Leaders of Prime Bank Ltd
Awards and Achievements of
Prime Bank Ltd:
The BIZZ 2012 Inspirational Company Award
International Star for Leadership in Quality (ISLQ) Award 2010
Business Initiative Directions (B.I.D.) Paris, France
ICMAB Best Corporate Performance Award 2008 First Position
FNS Award-2005 Best Performing Local Bank
ICAB National Awards-2003 For Best Published Accounts and Reports Second Prize Financial Sector (Banking)
Functions of Prime Bank Ltd:
Prime Bank Ltd has divided its total functions under five categories.
Retail Banking
Corporate Banking
Islamic Banking
SME/Agri Banking
NRB Banking
Functions of Prime Bank Ltd
1. Retail Banking:Customers are Prime Bank Ltd’s 1st priority. Prime Bank Ltd try to provide the
broad range of variety and improve services for customers for maximizing
customer’s benefit.Under this category they cover:
Deposits
Loans
Cards
Internet Banking
Locker Services
Phone Banking
Utility pay services
Functions of Prime Bank Ltd
2. Corporate Banking:
Prime Bank Ltd designed and offered corporate banking service for the corporate
sector of Bangladesh. This offering includes four services:
General credit unit
Export Finance unit
Lease Finance unit
Structured Finance unit
Functions of Prime Bank Ltd
3. Islamic Financing:
Islamic Banking is operated based on Shari’ah principles. Prime bank was the 1st
commercial bank offering both conventional and Islamic banking together. Only
five branches of Prime Bank Ltd provide Islamic banking operations to serve the
increasing demand of customers for Islamic products and services. Under this
process they offer:
Hasanah Deposit Products
Hasanah Investment Products
Hasanah Foreign Trade
Functions of Prime Bank Ltd
4. SME/Agri Banking:This service is offered by Prime Bank Ltd for both SME and agriculture sector
of Bangladesh. 17 branches of Prime Bank Ltd provide this services to the
customers. And this programs offer:
Collateral Free Loan
Capital Loan
Working Capital Loan
Seasonal Loan
Double Loan
Functions of Prime Bank Ltd
5. NRB Banking:
Remittance is one of the most effective equipment of our economy. Prime
Bank Ltd has provided this offerings for NRB (Non-Resident Bangladeshi).
This offer includes:
Foreign Remittance Services
Account Facilities for NRBs
Wire Transfer Facilities
Exchange House
Deposits offered by
Prime Bank Ltd (Cont..):
•Short term deposit:
Short term deposit option in running account.
Amounts being paid into drawn out of the account continuously.
These accounts are also called demand deposit.
Generally opened by individual person.
Interest bearing deposit.
•Fixed Deposit receipts scheme:
Customer can devote a fixer amount of money.
Duration can be one month, three months, six months or twelve
months.
Accordingly the interest rate is 9.5%, 9.5% or 10%
Deposits offered by
Prime Bank Ltd (Cont..):•Current Account:
Freedom of deposits and withdrawal
Check book facilities
Locker facilities
Collecting foreign remittance in both cheque and draft
No interest
•Saving Account:
Utility payment service
Negotiable account withdrawal
5% interest rate
Deposits offered by
Prime Bank Ltd (Cont..):
•Double benefit deposit scheme:
Issued for 6 years 6 months term.
After 6 years 6 months, terminal value will stand at Tk. 2 lacs from
the initial fixed deposit of Tk. 1 lac.
Interest rate is 11.6%
•House Building Deposit Scheme:
The scheme is offered for 5,7 or10 years.
Minimum equity building amount shall be 10lacs and maximum
amount shall be 20 lacs.
Deposits offered by
Prime Bank Ltd (Cont..):Mudaraba Double Benefit deposit scheme (MDBDS):
Follow Mudaraba concept
Profit bearing account
Offers returns on deposit for fixed period of time
Estimated duration is 5years, 5month.
Mudaraba Contributory Savings Scheme (MCSS):
Minimum installment is 500tk
Maximum installment is 24000tk
Offers two options of getting return.
i. Total amount after maturity
ii. As pension 5years after maturity (based on the deposit)
Deposits offered by
Prime Bank Ltd:
Money Benefit Deposit Scheme
Contributory Saving scheme
Lakhopati Deposit Scheme
Education Savings scheme
Shukonna
Monthly Benefit Deposit Scheme
Al-Wadeeah Current Account
Mudaraba Hajj Saving Scheme (MHSS)
Loans offered by
Prime Bank LtdSwapnapuran loan:
Fund for fulfilling customer’s dream.
At least 25 years professional experience
Two years loan limit is maximum 30 Lac.
Security will be mortgage and original title deed.
Car loan:
Purchase brand new car
professional experience
2 years minimum monthly income will be BDT 200000.
Hypothecation over the car.
Loans offered by
Prime Bank Ltd (Cont..) :CNG Conversion Loan:
Help to convert our personal vehicle to CNG criteria.
To be eligible for this loan is at least 21 years.
Loan limit will be maximum 1 Lac.
Security will be personal guarantee of the borrowers.
Household’s durable loan:
To buy furniture, home appliance and household durables.
Criteria to eligible for this loan are at least 21 years.
Minimum monthly income should be BDT 10000 and self employed
25000 loan limit will be maximum 5 Lac.
Security personal guarantee of the borrowers.
Marriage loan:
For fulfilling cherished priorities and expenditures of weeding.
Criteria to be eligible for this loan are at least 25 years.
Loan limit will be maximum 3 lac.
Security will be personal guarantee of the borrowers.
Education loan:
For student who wants to fulfill their dreams of higher studies.
Student should be at least 25 years.
Loan limit will be 5 lac.
Security will be personal guarantee of the borrowers.
Loans offered by
Prime Bank Ltd (Cont..) :
Loans offered by
Prime Bank Ltd (Cont...) :
Any purposes loan
Loan against Salary
Doctor’s loan
Travel loans
Hospitalization Loan
Abash Home Loan
Carnival loan
Hasanah Auto Investment (Burak)
Hasanah Household Durable Investment (Asbab)
Hasanah Medical Investment (Shifa)
Process of collecting
repayment:
1. Fulfill legal procedures so that they can take any legal steps if needed.
2. Bank sent reminder letter
3. Talk to the borrower over phone
4. Bank goes for group visiting
5. Strictly handle this sector
6. Bank inform the person who has given the grantee
7. After all this process if they fail then they go to court and do legal
procedures.
Performance evolution of
Prime Bank Ltd
Financial institutions like banks have very different ways of reporting financial
information. Investors have different fundamental factors to consider while
evaluating a bank’s performance. Ratios that are used to evaluate the prime banks
position are:
CAMELS rating
Loan Growth
Deposit Growth
Loan/Deposit Ratio
Efficiency ratio
Capital Ratio
ROE/ROA
Credit Quality
Two different domestic bank’s financial highlights were taken to compare the
situation prime bank is in. They are:
i. Premier Bank
ii. AB bank
Performance evolution of
Prime Bank Ltd (Cont..):
Performance evolution of
Prime Bank Ltd (Cont..)CAMELS rating:
C= Capital Adequacy. As adequate bank capital is thought to
reduce a bank’s risks.
A= Asset Quality. How deposited funds are allocated. Can
determine level of Credit risk.
M= Management Capability. Administrative skills and ability to
cope with changing environment.
E= Earning
L= Liquidity. Regulators prefer that banks not consistently rely
on sources like federal funds market to obtain funds
and S= Sensitivity. To market risk, especially interest rate risk.
Performance evolution of
Prime Bank Ltd (Cont..)
•Camels rating have 1 through 5 rating for each of these components and a
composite rating where the rating of 1 indicates strong performance or best rating,
2 reflects satisfactory performance, 3 represents performance that is flawed to some
degree, 4 refers to marginal performance and is significantly below average and 5
is considered as unsatisfactory or worst rating.
Performance evolution of
Prime Bank Ltd (Cont..)
•These are rated by regulatory bodies such as Bangladesh Bank
•Ratings are not published to prevent possible bank run
•Based on the performance of Dec 2012, as suggested in articles of ‘Dhaka Mirror’
and ‘weekly industry’ Prime Bank is on B-Class which is the list of satisfactory
banks. No banks were labeled as A-Class.
Performance evolution of
Prime Bank Ltd (Cont..)
Performance evolution of
Prime Bank Ltd (Cont..)
• Loan Growth: Assets are what generate sales and the biggest asset for most
of the banks is Loans. For many banks, loan growth is as important as
revenue growth to most industrial companies.
Loans and
Advances
Prime Bank Premier Bank AB Bank
2008 75156 23637 56709
2009 89252 30319.53 70880
2010 116057 33664.59 88002
2011 138848 46400.57 94638
2012 160890 49774 106066
Performance evolution of
Prime Bank Ltd (Cont..)
Loan Growth:
0
5
10
15
20
25
30
35
40
2008-09 2009-10 2010-11 2011-12
Loan Growth
Prime Bank
Premier Bank
AB Bank
Performance evolution of
Prime Bank Ltd (Cont..)
• Deposit Growth: Deposit growth states how much lending a bank can do.
Deposits Prime Bank Premier Bank AB Bank
2008 88021 27114.47 68560
2009 106956 32059.62 83087
2010 124574 37381.96 95702
2011 159816 54691.47 116152
2012 182053 60692.97 140026
Performance evolution of
Prime Bank Ltd (Cont..)
Performance evolution of
Prime Bank Ltd (Cont..)
• Loan/Deposit ratio:
– The loan/deposit ratio helps assess a bank's liquidity, and by extension,
the aggressiveness of the bank's management.
– If the loan/deposit ratio is too high, the bank could be vulnerable to any
sudden adverse changes in its deposit base. Conversely, if the
loan/deposit ratio is too low, the bank is holding on to unproductive
capital and earning less than it should.
Performance evolution of
Prime Bank Ltd (Cont..)
Loan/Deposit
Ratio
Prime Bank Premier Bank AB Bank
2008 85 87.2 82.71
2009 83 94.6 85.31
2010 93 90.06 91.95
2011 87 84.8 81.4
2012 88 82.0 75.75
Performance evolution of
Prime Bank Ltd (Cont..)
Performance evolution of
Prime Bank Ltd (Cont..)
Loan/Deposit Growth:
Performance evolution of
Prime Bank Ltd (Cont..)Efficiency Ratio:
A Bank’s efficiency ratio is equivalent to a company’s operating margin. A
bank efficiency ratio is a measure of a bank's overhead as a percentage
of its revenue.
Efficiency Ratio Prime Bank Premier Bank AB Bank
2008 33.42 31.12 30.14
2009 35.47 29.8 29.83
2010 36.94 34.42 32.01
2011 35.75 36.64 44.31
2012 36.62 35.44 48.27
• Efficiency Ratio:
Performance evolution of
Prime Bank Ltd (Cont..)
Performance evolution of
Prime Bank Ltd (Cont..)
Capital Ratio:
• Banks holding more capital can more easily absorb potential losses and are
more likely to survive.
• Regulators use the Tier 1 capital ratio, A comparison between a banking
firm's core equity capital and total risk-weighted assets, to grade a firm's
capital adequacy. A firm must have a Tier 1 capital ratio of 6% or greater to
be classified as well-capitalized.
Capital Ratio Prime Bank Premier Bank AB Bank
2008 10.88 12.66 12.84
2009 14.71 12.71 11.09
2010 11.69 15.14 9.91
2011 12.46 10.01 11.37
2012 12.64 10.55 11.73
Performance evolution of
Prime Bank Ltd (Cont..)
0
2
4
6
8
10
12
14
16
2008 2009 2010 2011 2012
Prime Bank
Premier Bank
AB Bank
Performance evolution of
Prime Bank Ltd (Cont..)
ROE/ROA:
• Return on equity reveals how much profit a company earned in comparison
to the total amount of shareholder equity
• Return on assets indicates how profitable a company's assets are in
generating revenues.
Performance evolution of
Prime Bank Ltd (Cont..)
Performance evolution of
Prime Bank Ltd (Cont..)Return on Equity (ROE):
ROE Prime Bank Premier Bank AB Bank
2008 20.58 3.19 40.96
2009 30.19 20.88 39.84
2010 21.65 23.47 30.77
2011 20.19 28.23 9.25
2012 13.53 7.66 9.31
Performance evolution of
Prime Bank Ltd (Cont..)Return on Equity (ROE):
Performance evolution of
Prime Bank Ltd (Cont..)
Return on Asset (ROA):
Credit Quality:
If a bank's credit quality is in decline because of non-performing loans
and assets and/or charge-offs increases, the bank's earnings and capital
may be at risk.
Performance evolution of
Prime Bank Ltd (Cont..)
Credit rating agency (data on Prime Bank)
• Ratings of the debtor’s ability to pay back the debt by making timely
interest payments and of the likelihood of default.
• CRISL rated prime bank as high quality.
Performance evolution of
Prime Bank Ltd (Cont..)
Performance evolution of
Prime Bank Ltd (Cont..)
Name of the Organization Prime Bank Limited
Long Term AA
Short Term ST-2
Validity Long 29th June 2014
Validity Short 29th December 2014
Published Date 15th July 2013
Sector Banking
Rating Year 2013
•No theories are perfect like ratios i.e. they cannot predict the future accurately at
all times
•Ratios shown for Prime Bank are more or less in the range of standard numbers.