Bank’s profitability and managerial expenses

8/2/2019 Banks profitability and managerial expenses

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1.1 The origin of the report:This term paper is prepared for Quazi Sagota Samina, Senior Lecturer, Department of Business

Administration of East West University. This term paper is prepared as a partial requirement of

FIN-380 (Management of Commercial Banks) course for the semester of spring 2012.

1.2. Objective of the study

Here we have only looked at the Banks profitability and managerial expenses. So the

specific objectives are-

To give detailed information about some particular Banks.

Banks profitability and managerial expenses.

To focus on the major financial items and their impacts on the organization.

To know briefly about their rules and regulation. And

Their performance in our country.

1.3. Scope of the study

As we are focusing on four particular giant Banking institutions in our country i.e. Exim Bank,

EBL, FSIB, and IBBL, the scope of the study is huge. Among these giants few are focusing on

the transparent operation, so that they let the general people to know about them from a very

close point of view. Here we discuss about the basic idea of these banks along with that we will

discuss about the performance of these four giant Banking Institutions and then we will analyze

few item as well as about some extra-ordinary features of these four giants.

1.4. Methodology

The report is based on information collected from secondary source of data, by using web sites

and annual report of these four giants published. Along with that we consulted with our Hon

able course instructor. The data collected from the some other sources too. These ares-

Dhaka Stock Exchange library.

Financial Journals.


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Annual Report-

Exim Banks 2005-2010

EBLs 2005-2010

FSIBs 2005-2010

IBBLs 2005-2010

1.5. Limitations of the study

The major limitations encountered are:

Lack of experience has acted as constraints in the way of meticulous exploration on

the topic.

Time wasnt enough to complete such a complicated topic.

Relevant papers and documents were not available sufficiently. In many cases up to

date information is not available.


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EXIM Bank LimitedThis Bank starts functioning from 3rd August, 1999 with its name as Bengal Export

Import Bank Limited. On 16th November 1999, it was renamed as Export Import Bank of

Bangladesh Limited with Mr. Alamgir Kabir as the Founder Advisor and Mr. Mohammad

Lakiotullah as the Founder Managing Director respectively. Under the leadership of Mr.

Lakiotullah, the Bank has migrated all of its conventional banking operation into Shariah Based

Islami Banking in the year July 2004. In the year 2006, Mr. Kazi Masihur Rahman became the

Managing Director of the bank when Mr. Lakiotullah left the bank after completion of his

successful 7 years as MD. Mr. Kazi served in the bank for next five years. Under his leadership,

the bank has been placed on a state of the art centralized IT platform with two modern data

centers where world renowned core banking software TEMENOS T24 is running along with

some alternate delivery channels like ATMs and SMS banking. In 25th August, 2011, Mr. Md.

Fariduddin Ahmed has joined in the bank as Managing Director.

OUR VISION

The gist of our vision is Together Towards Tomorrow. Export Import Bank of Bangladesh

Limited believes in togetherness with its customers, in its march on the road to growth and

progress with services. To achieve the desired goal, there will be pursuit of excellence at all

stages with a climate of continuous improvement, because, in EXIM Bank, we believe, the line

of excellence is never ending. Its personalized quality services to the customers with the trends

of constant improvement will be cornerstone to achieve our operational success.

OUR MISSION

To be the most caring and customer friendly and customer oriented bank.

To create a technology based most efficient banking environment for its customers.

To ensure sustainable growth and establish full value to the honorable stakeholders and

To ensure ethics and transparency at all levels.

Finally, above all, to add effective contribution to the national economy.


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FIVE YEARS AT A GLANCE

(BDT in millions)

Sl. Particulars 2005 2006 2007 2008 2009

01. Authorized Capital 100.00 350.00 350.00 350.00 1000.00

02. Paid-up Capital 87.90 171.38 214.22 267.78 337.40

03. Reserve Fund 57.00 81.09 113.46 153.26 209.30

04. Deposits 2831.90 3503.20 4154.66 5758.70 7383.55

05. Investment (General) 2604.63 3264.13 4019.52 5363.77 6860.99

06. Investment ( Shares on Bonds) 163.30 223.33 245.77 289.40 216.94

07. Foreign Exchange Business 7294.00 9617.51 11790.01 15643.46 16260.46

a) Import Business 4143.20 4959.67 6139.94 7854.05 8391.15

b) Export Business 3128.50 4623.46 5579.04 7646.56 7624.08

c) Remittance 22.30 34.38 71.03 142.85 245.23

08. Operating Profit 117.58 137.87 190.82 251.84 318.18

09. Investment as a % of total Deposit 91.97% 93.18% 96.75% 93.14% 92.92%

10. No. of Foreign Correspondent 222 246 246 278 333

11. Number of Employees 934 1020 1104 1312 1440

12. Number of Branches 28 30 35 42 52

13. Return on Assets before tax 3.49% 3.94% 4.39% 4.45% 4.14%


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Eastern Bank LimitedEBL knows its target customers and as such offers new products and services to cater to

their contemporary taste and need. In the past couple of years the Bank came up with several

exciting products and service propositions: Some of them are a first of its kind in Bangladesh.

Priority Banking, Travel related products, life insurance covered DPS, Platinum Credit Card,

SME Debit Card to name a few. EBL is one of the first banks in Bangladesh to launch Mobile-

based remittance service marking a new era of banking services among the unbanked population

of the country. In EBL's journey to excellence, a great achievement has been added. Centralized

Trade Services of EBL have achieved Quality Management Systems Certificate as per ISO

9001:2008 standard awarded by Bureau VERITAS Certification under accreditation from the

UK Accreditation Services (UKAS). Later, the whole centralized (Corporate, Consumer, SME

and Treasury) operations of the bank have achieved Quality Management Systems Certificate as

per ISO 9001:2008 standard. EBL is the first Bangladeshi Bank to achieve the recognitions for

Its commitment to quality delivery.

MISSION We will deliver service excellence to all our customers, both internal and external.

We will ensure to maximize shareholders' value.

We will constantly challenge our systems, procedures and training to maintain a cohesive

and professional team in order to achieve service excellence.

We will create an enabling environment and embrace a team based culture where people

will excel.

VISION

To become the most valuable brand in the financial services in Bangladesh

creating long-lasting value for our stakeholders and above all for the community

we operate in by transforming the way we do business and by delivering

sustainable growth.


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GROUP CORPORATE STRUCTURE OF EBL

COMPANY MILESTONES

DATE Milestones

8 August 1992 Date of incorporation.

16 August 1992 Date of commencement of banking operations.

20 March 1993 Listed with Dhaka Stock Exchange Ltd.

12 November 1998 First dividend declared for income

17 July 2003 First online banking operations across all the branches.

19 May 2004 Commencement of operation of Offshore Banking Unit, Bangladesh.

11 September 2004 Listed with Chittagong Stock Exchange Ltd.


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FIVE YEARS AT A GLANCE OF EBL


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ACHIEVEMENTS OF EBL


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First Security Islamic Bank Limited

OUR VISION

To be the unique modern Islami Bank in Bangladesh and to make significant contribution to the

national economy and enhance customers trust and wealth, quality investment, employees

value and rapid growth in shareholders equity.

OUR MISSION

To be the most caring and customer friendly and service oriented bank.

To create a technology based most efficient banking environment for its customers. To ensure ethics and transparency in all levels.

To ensure sustainable growth and establish full value of the honorable shareholders and

Above all, to add effective contribution to the national economy.

OUR STRATEGIES

To strive our customers best satisfaction & win their confidence.

To manage & operate the bank in the most effective manner.

To identify customers needs & monitor their perception towards meeting those

requirements.

To review & updated policies, procedures & practices to enhance the ability to extend

better customer services.

To train & develop all employees & provide them adequate resources so that the

customers needs reasonably addressed.

To promote organizational efficiency by communicating company plans policies &

procedures openly to the employees in a timely fashion.

To ensure a congenial working environment.

To diversify portfolio in both retail & wholesale markets.


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CSR PROGRAMME OF THE FSIB LIMITED

FSIBL donated Tk 50, 00,000/- for Liberation War Museum

FSIBL donated Tk 30, 00,000/- to Prime Ministers Relief & Welfare Fund

Assistance for family members of the martyred Army Officers killed in BDR carnage

Assistance for Cyclone Aila Victim

To mitigate the sufferings of Aila victims, First Security Islami Bank Limited has donated Tk

10,00,000/- only to Prime Ministers Relief Fund. Mr. AAM Zakaria, Managing Director, First

Security Islami Bank Limited handed over a cheque amounting tk 10,00,000/- to Prime Minister

Sheikh Hasina.


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FINANCIAL PERFORMANCE OF FSIB BANK IN YEAR 2006-2007


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IBBL at a GlanceIslami Bank Bangladesh Limited is a Joint Venture Public Limited Company engaged in

commercial banking business based on Islamic Shari'ah with 58.03% foreign shareholding

having largest branch network (236 Branches & 30 SME/Krishi Branches i.e. total 266

Branches) among the private sector Banks in Bangladesh. It was established on the 13th March

1983 as the first Islamic Bank in the South East Asia. Islami Bank Bangladesh Limited is a Joint

Venture Public Limited Company engaged in commercial banking business based on Islamic

Shari'ah with 57.36% foreign shareholding having largest branch network (196 branches & 10

SME Service Centres) among the private sector Banks in Bangladesh. It was established on the

13 March 1983 as first Islamic Bank in the South East Asia. It is listed with Dhaka StockExchange Ltd. and Chittagong Stock Exchange Ltd. Authorized Capital of the Bank is Tk.10,000

million and Paid-up Capital is Tk.4,752 million having 33,686 shareholders.

MISSION

To establish Islamic Banking through the introduction of a welfare oriented banking system and

also ensure equity and justice in the field of all economic activities, achieve balanced growth and

equitable development in through diversified investment operations particularly in the prioritysectors and less developed areas of the country. To encourage socio-economic upliftment and

financial services to the loss-income community particularly in the rural areas.

VISION

Our vision is to always strive to achieve superior financial performance, be considered a leading

Islamic Bank by reputation and performance.

Our goal is to establish and maintain the modern banking techniques, to ensure soundness

and development of the financial system based on Islamic principles and to become the

strong and efficient organization with highly motivated professional, working for the benefit

of people, based upon accountability, transparency and integrity in order to ensure stability of

financial systems.


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CORE VALUES

Trust in Almighty Allah

Strict observance of Islamic Shariah

Highest standard of Honesty, Integrity & Morale

Welfare Banking

Equity and Justice

Personalized Service

Adoption of Changed Technology

Proper Delegation, Transparency & Accountability.

MILESTONES OF THE IBBL

Date Milestones

13 March, 1983 Establishment of the Bank.

30 March, 1983 Opening of their First Branch.

12 August, 1983 Formal Opening of their company.

1985 Went for the IPO.

1985 Listed in the Dhaka Stock Exchange.

1996 Listed in the Chittagong Stock Exchange.

1996 Issuance of 1st

Right Share.

2000 Issuance of 2nd Right Share.

2003 Issuance of 3rd

Right Share.

26 November, 1991 Issuance of 4th Right Share.

12 June, 1997 Opening of their 50th

Branch.

29 December, 2004 Opening of their 150th Branch.


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FIVE YEARS AT A GLANCE


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FIRST SECURITY ISLAMI BANK LIMITED

INFORMATIONS

PERCENTAGE CHANGE IN INFORMATION

Year Net Income

After Tax

Total Asset

Total

Operating

Expense

Salary And

Allowances

Managing

Director

Salary

2005 (157020387) 18408060625 188525911 103350430 4838000

2006 (117224177) 20448667971 219330994 114460635 5440000

2007 30630728 26941780871 286000759 142977355 6880000

2008 104282064 31239393418 383179206 186903693 8310000

2009 326837749 47978552952 576795959 254153482 10027500

2010 548600731 63619797799 881607207 418301777 9916130

Year ROA

% Change

Over The

Year

Salary

expense as

a % of

Operating

Expense

% Change

of Salary

Expense

Over The

Year

MDs

Salary as

a % of

Operating

Expense

% Change

of MDs

Salary

Expense

Over The

Year

2005 0.008530 - 54.82% - 2.57% -

2006 0.00573 48.87 52.19% (5.04%) 2.48% (3.63%)

2007 0.001137 603.96 49.99% (4.40%) 2.41% (2.90%)

2008 0.00338 66.36 48.78% (2.48%) 2.17% (11.06%)

2009 0.006812 50.38 44.06% (10.71%) 1.74% (24.71%)

2010 0.008623 21 47.45% 7.14% 1.12% (55.36%)


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EASTERN BANK LIMITED

INFORMATIONS


Year ROA

% Change

Over The

Year

Salary

expense as

a % of

Operating

Expense

% Change

of Salary

Expense

Over The

Year

MDs

Salary as

a % of

Operating

Expense

% Change

of MDs

Salary

Expense

Over The

Year

2005 0.019945 - 41.04% - 1.74% -

2006 0.014267 39.80 44.26% 7.28% 1.50% (16%)

2007 0.010425 36.85 43.25% (2.34%) 1.10% (36.36%)

2008 0.014611 28.65 45.51% 4.97% .75% (46.67%)

2009 0.020818 29.82 52.76% 13.74% .64% (17.19%)

2010 0.030479 31.70 55.07% 4.19% .60% (6.67%)

Year Net Income

After Tax

Total Asset

Total

Operating

Expense

Salary And

Allowances

Managing

Director

Salary

2005 546496236 27399954469 535794923 219876465 9304224

2006 513197846 35970642294 753174899 333362759 11275944

2007 419142202 40203682476 951622488 411556905 10481265

2008 797774068 54598268072 1318463870 600073608 9940258

2009 1454541675 69870738519 1649402237 870246424 10574284

2010 2514201697 82488576181 2109399625 1161751421 12615162


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EXIM BANK LIMITED

INFORMATIONS


Year Net Income

After Tax

Total Asset

Total

Operating

Expense

Salary And

Allowances

Managing

Director

Salary

2005 555335174 33716699328 435806139 231722416 3150000

2006 650292342 41793540962 635283277 330992966 3919032

2007 820698355 52804042985 838293388 442004999 4221052

2008 1096627046 68446464000 1030942700 544058922 5329800

2009 1682990615 86203931939 1273070086 648943840 7569300

2010 3458015132 113047466849 1841506068 1014492899 9885700

Year ROA

% Change

Over The

Year

Salary

expense as

a % of

Operating

Expense

% Change

of Salary

Expense

Over The

Year

MDs

Salary as

a % of

Operating

Expense

% Change

of MDs

Salary

Expense

Over The

Year

2005 0.016471 - 53.17% - .72% -

2006 0.015560 5.85 52.10% (2.05%) .62% (16.13%)

2007 0.015542 12 52.73% 1.19% .50% (24%)

2008 0.016022 3.00 52.77% .08% .52% 3.85%

2009 0.019423 17.51 50.97% (3.53%) .59% 11.86%

2010 0.030590 36.51 55.09% 7.48% .54% (9.26%)


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ISLAMI BANK LIMITED

INFORMATIONS


Year ROA % Change

Over The

Year

Salary

expense as

a % of

Operating

Expense

% Change

of Salary

Expense

Over The

Year

MDs

Salary as

a % of

Operating

Expense

% Change

ofMDs

Salary

Expense

Over The

Year

2005 0.09162 - 63.73% - .36% -

2006 0.00932 833.05 68.36% 6.77% .30% (20%)

2007 0.00746 24.93 65.07% (5.06%) .27% (11.11%)

2008 0.01159 35.63 68.87% 5.52% .21% (28.57%)

2009 0.01223 5.23 69.27% .58% .18% (16.67%)

2010 0.01350 9.41 70.40% 1.61% .16% (12.5%)

Year Net Income

After Tax

Total Asset

Total

Operating

Expense

Salary And

Allowances

Managing

Director

Salary

2005 1125821683 12288034822 1833192601 1168135352 6576314

2006 1400591591 150252820801 2703669981 1848280506 8109777

2007 1427362414 191362349717 3126575311 2034596246 8372181

2008 2674796768 230879135344 4115805498 2834358181 8669347

2009 3403551874 278302839706 4545974409 3149068585 8028938

2010 4463471909 330586118276 6087318956 4285461029 9648845


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Correlations

1.000 -.430 -.419 -.369

. .470 .483 .541

5 5 5 5

-.430 1.000 .996** .866

.470 . .000 .058

5 5 5 5

-.419 .996** 1.000 .829

.483 .000 . .082

5 5 5 5

-.369 .866 .829 1.000

.541 .058 .082 .

5 5 5 5

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Return on asset(ROA)

Total operating expense

Salary and allow nce

Managing directors sa lary

Return on

asset(ROA)

Total

operating

expense

Salary and

allow nce

Managing

directors

salary

Correlation is s ignifica nt at the 0.01 level (2-tailed).**.

FIRST SECURITY ISLAMI BANK LIMITED

Correlations

INTERPRETATION:

Correlation Between ROA & Total Operating Expense:Correlation between ROA and total operating expense is -.430. So it is weak negatively

correlated. It means if ROA increase the total operating expense will be decreased. And if ROA

decreases the total operating expense will increase.

Correlation Between ROA & Salary and allowance:

Correlation between ROA and & Salary and allowance is -.419.So it is weak negatively

correlated. It means if ROA increase Salary and allowance will be decreased. And if ROA

decreases Salary and allowance will increased.

Correlation Between ROA & Managing Director Salary:

Correlation between ROA and & Managing Director Salary is -.369.So it is weak negatively

correlated. It means if ROA increase Managing Director Salary will be decreased. And if ROA

decreases Managing Director Salary will increase.


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Correlations

1.000 -.714 -.654 .192

. .176 .231 .757

5 5 5 5

-.714 1.000 .995** .524

.176 . .000 .365

5 5 5 5

-.654 .995** 1.000 .585

.231 .000 . .300

5 5 5 5

.192 .524 .585 1.000

.757 .365 .300 .

5 5 5 5

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N




Managing directors salary

Return on

asset(ROA)

Total

operating

expense

Salary and

allow nce

Managing

directors

salary

Correlation is significant at the 0.01 level (2-tailed).**.

EASTERN BANK LIMITED

CORRELATIONS

INTERPRETATION:

Correlation Between ROA & Total Operating Expense:

Correlation between ROA and total operating expense is -.714. So it is strong negatively




Correlation between ROA and & Salary and allowance is -.654.So it is strong negatively


decreases Salary and allowance will increase.



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Correlations

1.000 .900* .908* .897*

. .037 .033 .039

5 5 5 5

.900* 1.000 .998** .984**

.037 . .000 .002

5 5 5 5

.908* .998** 1.000 .974**

.033 .000 . .005

5 5 5 5

.897* .984** .974** 1.000

.039 .002 .005 .

5 5 5 5

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N





Return on

asset(ROA)

Total

operating

expense

Salary and

allow nce

Managing

directors

salary

Correlation is significant at the 0.05 level (2-tailed).*.

Correlation is s ignificant at the 0.01 level (2-tailed).**.

Correlation between ROA and & Managing Director Salary is .192.So it is weak positively

correlated. It means if ROA increase Managing Director Salary will be increased . And if ROA

increases Managing Director Salary will increase.

EXIM BANK LIMITED

CORRELATIONS

INTERPRETATION:


Correlation between ROA and & Total Operating Expense is .900.So it is strong positively

correlated. It means if ROA increase Total Operating Expense will be increased. And if ROA

decreases Total Operating Expense will decrease.


Correlation between ROA and & Salary and allowance is .908.So it is strong positively

correlated. It means if ROA increase Salary and allowance will be increased. And if ROA

decreases Salary and allowance will decrease.



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Correlations

1.000 -.610 -.578 -.391

. .274 .308 .515

5 5 5 5

-.610 1.000 .999** .788

.274 . .000 .114

5 5 5 5

-.578 .999** 1.000 .784

.308 .000 . .117

5 5 5 5

-.391 .788 .784 1.000

.515 .114 .117 .

5 5 5 5

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N

Pearson Correlation

Sig. (2-tailed)

N





Return on

asset(ROA)

Total

operating

expense

Salary and

allow nce

Managing

directors

salary

Correlation is s ignificant at the 0.01 level (2-tailed).**.

Correlation between ROA and & Managing Director Salary is .897.So it is strong positively

correlated. It means if ROA increase Managing Director Salary will be increased. And if ROA

decreases Managing Director Salary will decrease.

ISLAMI BANK LIMITED

CORRELATIONS

INTERPRETATION:


Correlation between ROA and total operating expense is -.610. So it is strong negatively




Correlation between ROA and & Salary and allowance is -.578.So it is strong negatively


decreases Salary and allowance will increase.



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Correlation between ROA and & Managing Director Salary is -.391.So it is weak negatively

correlated. It means if ROA increase Managing Director Salary will be decreased. And if ROA

decreases Managing Director Salary will increase.

CONCLUSIONBanking system plays a very important role in the economic life of the nation. The health of the

economy is closely related to the soundness of its banking system. In a developing country like

Bangladesh the banking system as a whole play a vital role in the progress of economic

development. A bank as a matter of fact is just like a heart in the economic structure and the

Capital provided by it is like blood in it. As long as blood is in circulation the organs will remain

sound and healthy. If the blood is not supplied to any organ then that part would become useless.

So if the finance is not provided to agriculture sector or industrial sector, it will be destroyed.

Loan facility provided by banks works as an incentive to the producer to increase the production.

Banking is now an essential part of our economic system. Modern trade and commerce would

almost be impossible without the availability of suitable banking services. First of all, banking

promotes savings. All manner of people, from the ordinary laborers and workers to the rich land

owners and businessmen, can keep their money safely in banks and saving centers. Secondly,

banking promotes investments. Banks easily invest the money they get in industry, agriculture

and trade. They either invest it directly or advance loans to other investors. Thirdly, it is most

through banks that foreign trade is carried on. Whether we export or import, it is through banks

that money is transferred from one country to another. For example, bills of exchange and letters

of credit are the regular ways banks use to transfer money. A number of recent studies, however,

indicate that the banking sector plays a more important role than it was believed earlier (World

Bank, 1996; Almeyda).So far we have discussed about 4 commercial bank of our country. They

are EXIM bank, First Security Islamic Bank, Eastern Bank Ltd and Islamic Bank Bangladesh

Ltd. We have discussed about the correlation of different variables and some financial

interpretation about these banks. In a developing country like Bangladesh the banking system as

a whole play a vital role in the progress of economic development. In this paper we have tried to

analyze the development and growth of Selected Private Commercial Banks of Bangladesh. It is

observed that all the selected private commercial banks are able to achieve a stable growth of


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branches, employees, deposits, loans and advances, net income, earnings per share during the

period of 2005-2010.

Referenceswww.Islamic bank-bd.com

Bangladesh Bank Publications

Annual Report of NCC Bank Ltd. 2008

www.bangladesh-bank.com

www.google.com

www.seribd.com

www.roc.gov.bd

Newspaper: Financial Express

Annual Report of Eastern Bank Ltd. 2006





Annual Report of Islamic Bank Ltd. 2006Annual Report of Islamic Bank Ltd. 2007

Annual Report of Islamic Bank Ltd. 2008



Annual Report of First Security Islamic Bank Ltd. 2006





Annual Report of EXIM Bank Ltd. 2006






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Bank’s profitability and managerial expenses

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