CHAPTER-1INTRODUCTION

Introduction

The recruitment and selection processes of an organization are two of its most

important financial activities. The basic purpose of recruiting is to ensure a sufficient

pool of applicants from which the most qualified individuals may be selected.

Effective recruiting is important because sufficient number of qualified applicants is

needed to ensure that selection can be successfully accomplished.

Origin of the Report

This report is a requirement of the internship program which is an important part of the

BBA (ion’s) degree requirement. As the supervisor has advised me to develop a

thorough understanding of the recruitment and selection processes of SOCIAL

ISLAMI BANK LTD. (SIBL), this report will be prepared on those aspects of the

Financial Statement Analysis of SIBL.

Objectives of the Study

The objectives of this study will be:

To evaluate the current recruitment and selection policy and process of

SOCIAL ISLAMI BANK LTD..

To find out the weaknesses of the current policy.

To suggest improvements to the policy.

Theoretical analysis of recruitment and selection

Analysis current recruitment and selection of SOCIAL ISLAMI BANK LTD.

Recommendations regarding the recruitment and selection of SOCIAL

ISLAMI BANK LTD.

Methodology

In the preparation of this report, data has been collected from both primary and

secondary sources. In-depth interviews of some of the employees of the Finance

Division of SOCIAL ISLAMI BANK LTD.have been conducted to gather necessary

information. Also, the Financial Analysis Statement of SIBL has been consulted in

preparing this report. Moreover, text books, the internet, the annual report of SOCIAL

ISLAMI BANK LTD.etc. have been used to collect information.

Scope

The scope of this study is only the recruitment and selection policy and processes of

SOCIAL ISLAMI BANK LTD..

Limitation

The major limitation of this report is that some confidential information was not

available for the purposes of this report.

CHAPTER-2

CONCEPTUAL ISSUE

2.1 Background of SOCIAL ISLAMI BANK LTD. (SIBL)

The Bank was incorporated in the year 1959 under the name and style of The Eastern

Mercantile Bank Limited under Companies Act 1913. After liberation of the country in

1971, the Bank was nationalized as per policy of the Government of the People’s

Republic of Bangladesh under the Bangladesh Bank (Nationalization) Order 1972 (PO

No 26 of 1972) and was renamed as National Bank. Subsequently, the Bank was

denationalized in the year 1983 and was again incorporated in Bangladesh under the

name and style of SOCIAL ISLAMI BANK LTD. in that year. Since then SOCIAL

ISLAMI BANK LTD. has been rendering all sorts of Commercial Banking services as

the largest bank in private sector through its 386 number of branches network all over

the country.

The principal activities of the Bank are to provide all kinds of commercial banking

services within the stipulations laid down by Bank Companies Act 1991 and directives

as received from Bangladesh Bank from time to time through its 386 branches all over

Bangladesh. The Bank is listed in the Dhaka and Chittagong stock exchanges as a

publicly quoted company for its general class of shares. The Bank also carries out

Brokerage Business under the license issued by the Securities and Exchange

Commission (SEC), Bangladesh.

Board of Directors

Mr. Md. Anisul HoqueChairman

Alhaj Sk. Mohammad RabbanAli Vice Chairman

Mr. Md. Sayedur RahmanVice Chairman

Major (Retd.) Dr. Md. RezaulHaque

Director

Alhaj Sultan MohmoodChowdhury

Director

Mr. Abdul Awal PatwaryDirector

Alhaj Sultan MohmoodChowdhuryDirector

Alhaj NasiruddinDirector

Mr. Mohammad AzamRepresentative of Namreen

Enterprise Limited

Mr. Mohammad FazlayMorshedDirector

Mr. Abdul JabbarMollahIndependent Director

Mr. Md. Shafiqur RahmanManaging Director (CC)

2.2 Vision, Mission & Objectives

2.2.1 Vision

To hold the position of best private commercial Bank in Bangladesh with adherence to

meticulous compliance of rules and regulations and strong commitment to Corporate

Social Responsibility.

2.2.2 Mission

To become most remarkable and admirable private commercial bank in the country.

To get recognition as a dynamic, innovative and customer service oriented bank. To

keep momentum of continuous & steady growth with maximum transparency and to

diversify products and resources. To expedite continuous of date of information and

technology with all modern facilities to copy with demand and challenges of the time.

2.2.3 Objective

Major objectives of the bank include the following:

Growth

Value Addition

Quality Standard

2.3 Core Operations

Banks act as payment agents by conducting checking or current accounts for

customers, paying cheques drawn by customers on the bank, and collecting cheques

deposited to customer& current accounts. Banks also enable customer payments via

other payment methods such as telegraphic & mail transfers, POS, and ATM etc..

Banks borrow money by accepting funds deposited on current accounts, by accepting

term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend

money by making advances to customers on current accounts, by making installment

loans, and by investing in marketable debt securities and other forms of money

lending.

Banks provide almost all payment services, and a bank account is considered

indispensable by most businesses, individuals and governments. Non-banks that

provide payment services such as remittance companies are not normally considered

an adequate substitute for having a bank account.

Banks borrow most funds from households and non-financial businesses, and lend

most funds to households and non-financial businesses, but non-bank lenders provide a

significant and in many cases adequate substitute for bank loans, and money market

funds, cash management trusts and other non-bank financial institutions in many cases

provide an adequate substitute to banks for lending savings to.

Like other commercial banks SIBL also provides all the services mentioned above.

Major activities of the bank include the following:

Accepting money on term deposit and lending money by way of overdraft,

installment loan or otherwise.

Providing documentary and standby letters of credit (trade finance), guarantees,

performance bonds, securities underwriting commitments and other forms of

off- balance sheet exposures

Issue of banknotes (promissory notes issued by a banker and payable to bearer

on demand)

Issuing bank drafts and bank cheques and processing of payments by way of

telegraphic/mail transfer, POS, internet banking or other means.

Currency exchange and safekeeping of documents and other items in safe

deposit boxes.

CHAPTER-3CONCEPTUAL ISSUE

3.1 Deposit Collection and Mobilization

Being the largest private commercial bank of the country the bank accepts a variety of

deposits through its 386 branches located all over the country. The bank also provides

all sorts of deposit mobilization activities to its customers. Total deposit of the bank as

on 31 December 2012 stood at taka 8846.33 crore with highest exposure in Savings

account of 34.66 %.

14.50%

2.93%

34.66%

22.34%

12.95%7.72%

4.91%0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Currentdeposit

Bills payable SavingsBank deposit

Fixed deposit Short termsdeposit

Pensionschemes

Others

Credit Operations

For the last couple of years banks operations in connection with loans and advances

has increased significantly which is contributing a lot to sustainable growth of the

bank. The bank provides all sorts of advances to almost all sector of the economy

within the stipulation laid down in Banking Company Act. 1991.

Besides regular credit operations the bank has started brokerage business since January

2009, consequently got stock dealing license and started Stock dealing operation from

March 2012.

Personal Loan

For the purchase of household appliances, computers, marriage, medical treatment and

education for self or dependents etc.

For the purchase of household appliances, furnishings, for household

refurbishment, marriage, medical treatment, education.

Maximum BDT 500K but not less than BDT 75K per loan.

Ill. Consumer Loan to be disbursed through the savings account to be opened

with SOCIAL ISLAMI BANK LTD.

Repayment in 12, 24, 36, 48 monthly installments. Prepayments are allowed

anytime at his/her convenience.

Auto Loan

For the purchase of a passenger car (unregistered reconditioned or brand new) to be

used for personal transport purposes by the obligor. The vehicle will be registered in

the bank’s name and the obligor will be issued a authority letter by the bank to use it

for his personal purpose.

Vacation Loan

For taking an overseas vacation, purchase of tickets, purchase of TC’s etc.

Purchase of Air ticket(s) in the name of the obligor and family and purchase of

FX for hotel and other expenses as allowed by the BBFX Manual.

IL Maximum amount BDT 500K but not less than BDT 75K.

Repayment in 24, 36 and 48 monthly installments. Prepayments allowed

anytime at his/her convenience.

FX to be purchased from our bank branches.

Ticket bookings are required to be done from any of our enlisted Travel

Agents.

Consumer Loan to be disbursed through the savings account to be opened with

SOCIAL ISLAMI BANK LTD..

Safety Locker Services

Clients can use the locker facility of SOCIAL ISLAMI BANK LTD. Limited and thus

have the option of covering their valuables against any unfortunate incident. SIBL

offers security to its locker service as afforded to the Bank’s own property at a very

competitive price.

Utility Bills Services

SOCIAL ISLAMI BANK LTD. Limited offers a multi-mode utility bill payment

facility for its customers. Whether it is cellular phone bill, telephone bill, electricity

bill or water bill, SIBLoffers various modes and convenient ways to make bill payment

easy for its clients. Clients can use SIBLATM cards to pay bills at their convenience or

visit SIBL branches to make payment for bills. Currently, Grameen Phone and City

Cell mobile phone bills are accepted at all SIBL branches. More utility providers will

soon be added to this service for the client’s convenience.

Lease Financing

Although there are separate financial institutions in the lease financing market, banks

are entering in this business day by day. SOCIAL ISLAMI BANK LTD. offers Lease

Financing for acquiring of capital machinery, equipment and other items. The rental

payable under lease financing is treated as revenue expenditure and thus is deductible

for tax purposes.

Finance & Advisory Services

Given the needs of its large and varied base of corporate clients SOCIAL ISLAMI

BANK LTD. will be positioning itself to provide investment banking advisory

services. These could cover a whole spectrum of activities such as Guidance on means

of raising finance from the local Stock markets, Mergers and Acquisitions, Valuations,

Reconstructions of Distressed companies and other expert knowledge based advice. By

this means SOCIAL ISLAMI BANK LTD. hopes to play the role of strategic

counselor to blue-chip Bangladesh companies and then move from the level of advice

to possible implementation of solutions to complex financing problems that may arise

from time to time. This would be an extra service that would complement the normal

financing activities that SOCIAL ISLAMI BANK LTD. already offers to corporate

business houses.

CHAPTER-4FINDING OF THE REPORT

Annual Report

Annual Report of SOCIAL ISLAMI BANK LTD. Limited is a very useful report for

analysis of its financial Statement analysis. This report explained about financial

strength, customer service, risk management, corporate social responsibility, and good

governance. Directors’ Report section explained the global economy and Bangladesh

economy. This report tried to accumulate all the relevant data and topics regarding

financial performance. This report would be very helpful and handy for potential

investors and policy makers.

This report also explained different accounting policies. But the report lacks about the

in- depth analysis of financial position. In addition to that, it does not discuss about the

industry performance. Moreover, the report does not tell me about the trend of

financial performance. In addition to that, emphasis is given on that information that

creates positive impression about the company and presents the information in their

own way.

2.5.1 Key Financial as on 31 December, 2012

Income statements & Balance sheets

PROFIT AND LOSS ACCOUNT

(Combined for Main and offshore banking unit)for the ear ended 31 December 2012

CASH FLOW STATEMENT

(Combined for Main and Offshore banking)For the year ended 31 December 2012

Last 5 years financial highlights

Financial Statement Analysis of SOCIAL ISLAMI BANK LTD.

The purpose of this chapter is to discover financial Statement analysis of SOCIAL

ISLAMI BANK LTD. Limited so that management and the public can identify the

most critical problems inside the Bank and develop ways to deal with those problems.

Banks today are under great pressure — to meet the objectives of their shareholders,

employees, depositors and borrowing customers, while somehow keeping government

regulators satisfied that the bank’s policies, loans, and investments are sound. I have

separated 10 significant ratios into three broad categories after analyzing some

important findings from Income statement and balance sheet of last five years of the

bank.

The ratios are as follow:

A. Profitability Ratios

1. Return on Assets (ROA)

2. Return of Equity (ROE)

3. Net Interest Margin (NIM)

4. Price/Earnings Ratio (P/E Ratio)

5. Earnings Per Share (EPS)

6. Book Value Per Share

7. Loan deposit Ratio

8. Payout Ratio

9. Dividend Yield Ratio

B. Liquidity Ratio

1. Current ratio

2. Inventory turnover ratio

3. Gross Profit ratio

4. Net Loan to Total Assets

C. Debt Utilization Ratio

1. Debt to Total Assets

2. 2. Times Interest Earned Ratio (TIE)

Apart from the above mentioned ratio analysis, I have conducted the followinganalysis:

1. Cash Flow Statement Analysis;

2. Stockholders’ Equity Statement Analysis;

Income Statement & Balance Sheet

Total Income

Total income of SIBL has been on increase for last five years except in 2008. The

following figure shows the total income of SIBL in past five years. The trend is quite

clear. Total income increases significantly from 2008 to 2012.

Profit Trend

The nominal value of profit is increasing each year. From Tk.628 million in the year

2008, the figure has now grown to Tk. 1193 million in the year 2012. But the growth

in last 5 years in profit is not very high. The rate as the figure indicates has settled for a

stable position.

010002000300040005000600070008000

2008 2009 2010 2011 2012

Total Income (in million)

Taka

Income Expenditure Comparison

The percent of expense to the income has remained steady over the years. It was

lowest in 2008 and then it increases 3% each year in 2008 and 2012.

Deposit and advance comparison

The advance and deposit ratio has been increased over the years. From 75.7% in 2008,

it reached almost 82% in 2012. So the bank is getting more aggressive as it is getting

older.

Ratios

Liquidity ratio measures the SOCIAL ISLAMI BANK LTD.’s short-mn ability to pay

its maturing obligations. Two most important liquidity ratios, current ratio and net loan

to total assets, are discussed in this section.

Current Ratio: The current ratio is the ratio of total current asset to total current

liabilities of the bank. This ratio is also helpful in evaluating working capital position

because working capital is the excess of current assets over current liabilities. The

figure, depicted on the next page, shows the current ratio of the bank over the past five

years:

The above figure shows that the current ratio of the bank was increasing from the year

2008 till 2012. After 2012, current ratio started to decline and the year 2012 saw the

lowest current ratio for the bank. So it can be said that the liquidity position of the

bank is relatively weak.

Net Loan to Total Assets: Another way of measuring liquidity for financial institution

is to measure the net loan to total assets. It will help to measure amount the bank

disburse in the form of loans and advances from the assets. The ratios of net loan to

total assets are represented by the following figure.

2008

59%

2009

62%

2010

59%

2011

71%

2012

71%

2005

2006

2007

2008

2009

2010

2011

2012

2013

As the above figure suggests the Net loan to total assets ratio has increased notably in

last two years. Again it can be observed that the liquidity position of the bank is

relatively weak.

Cash Flow Statement Analysis

In the previous chapter, I have analyzed the ratio that is mostly related to income

statement and balance sheet. In this section, I will discuss cash flow statement that is

the single most important element of survival. Creditors examine the cash flow

statement carefully because they are concerned about being paid.

A good starting point of the analysis of the cash flow statement is to find net cash

provided by operating activities. In case of SIBL, net cash flow from operating

activities show an increasing trend except in the year 2012 when it dramatically went

down to negative figure. The following figure shows the trend of net cash flow from

operating profits over the past five years:

Stockholder’s Equity Statement AnalysisSeveral ratios use stockholders’ equity related amounts to evaluate a company’s

profitability and long-term solvency. The following three ratios are discussed and

illustrated in this regard:

Rate of Return on Common Stock Equity: A widely used ratio that measures

profitability from the common stockholders view point is rate of return on common

stock equity. This ratio shows how many dollar of net income were earned for each

dollar invested by the owners of the bank. The following figure shows the trend of rate

of return on common stock equity of the bank over the past five year:

The figure represented above shows that the trend is not very much fluctuating. It has

been stable over past five years. In 2012, the return was 22.74% compared to the

previous year’s 20.89%.

Capital Adequacy Ratio: Capital adequacy focuses on the total position of bank’s

capital and protects the depositors from the potential shocks of losses that the bank

might incur. Banks in Bangladesh have to maintain a minimum Capital Adequacy

Ratio (CAR) of not less than 9.00 percent of risk-weighted assets. The figure,

represented on the next page, shows the capital adequacy ratio of the bank over the last

five years:

2008

9%

2009

11%

2010

11%

2011

11%

2012

9%

2005

2006

2007

2008

2009

2010

2011

2012

2013

The above figure shows that SOCIAL ISLAMI BANK LTD. is not well capitalized by

local standards with a total CAR of 9.43% in 2012. There was a sharp decline in the

rate from the year 2011 when CAR was 11 .00%. The bank is not in a position to

absorb major financial risks (like credit risk, market risk, foreign exchange risk,

interest rate risk etc.).

Debt Equity Ratio=fundrsShareholde

debtstermLong

Year 2001 2012Debt equity ratio 9.31% 6.05%

Debt equity ratio is on lower trend. So there is still scope for arranging long-term loans

for further expansion of the business provided profitable activities can be carried on.

3. Though Cash & Balance with other bank is increased by 27% & 47% respectively,

borrowing from bank, financial institution also increased by 195%. That means banks

liquidity was not sufficient to meet the obligations.

Capital Adequacy Ratio:

It is a measure of a bank’s capital. This ratio is used to protect depositors and promote

the stability and efficiency of financial systems around the world. Capital adequacy

ratio is the ratio which determines the bank’s capacity to meet the time liabilities and

other risks such as credit risk, operational risk, etc. it is also known as ‘Capital to Risk

Weighted Assets Ratio (CRAR).”

Capital adequacy Ratio= 10021

assetweightedRisk

capitalTiercapitalTier

TIER 1 CAPITAL - 1. Equity Capital.

2. Disclosed Reserves.

TIER 2 CAPITALS - 1. Undisclosed Reserves.

2. General Loss reserves.

3. Subordinate Term Debts.

Year Total Capital Risk Weighted Asset Car2008 3237.87 32055.71 10.10%2009 4711.47 35940.79 13.11%2010 6519.14 48562.76 13.42%2011 9124.62 105986.2 8.61%2012 19190.79 156148.6 12.29%

2008

10.10%

2009

13.11%

2010

13.42%

2011

8.61%

2012

12.29%

2005

2006

2007

2008

2009

2010

2011

2012

2013

CarYear

Here, we view Capital Adequacy ratio of SIBL was in a good position in 2012

comparing with 2011. That means SIBL has good capacity to meet the time liabilities

and other risks.

Loan deposit Ratio:

For banks, it is how much they have coming in (deposits) vs. how much they have

going out (loans). The more money the bank has loaned out generates more interest

income provided the loans are to secure borrowers. Deposits are obligations (debts) the

bank has to the depositors. So, a healthy bank has lots of secure loans generating lots

of income (interest) to cover depositor’s accounts.

Loan deposit ratio= 100Deposit

Loan

Year Loan & advance Deposit Advancedeposit ratio

2008 32709.68 40350.87 81.06%2009 36475.74 47961.22 76.05%2010 50665.07 60187.89 84.18%2011 65129.29 76834.13 84.77%2012 92003.56 102471.83 89.78%

Dividend Yield Ratio

This ratio is important for those investors who are interested in the dividend income.

As the shareholder purchases the shares in the open market, his yield (rate of return)

is not equal to the dividend declared by the company.

Dividend yield ratio= 100Pr

iceMarket

shareequityperDividend

Year Dividend perequity share

Market Price Dividend yieldratio

2008 5 76.05 6.57%2009 5.5 149.4 3.68%2010 5.2 101.43 5.13%2011 5.5 64.63 8.51%2012 9.5 191.6 4.96%

2008

6.57%

2009

3.68%

2010

5.13%

2011

8.51%

2012

4.96%

2005

2006

2007

2008

2009

2010

2011

2012

2013

Dividend yield ratioYear

Here we view a fluctuation in the dividend yield ratio. It was 6.57%, 3.68%, 5.13%,

8.51% and 4.%% lathe year of 2008,2009,2010,2011 and 2012.

Payout Ratio: It is important to some investors that the payout be sufficiently high to

provide a good yield on the stock of SOCIAL ISLAMI BANK LTD. Limited. The

figure of the next page shows the trend of the payout ratio of the bank over the past

five years:

Pay out ratio

28.57% 28.30%

16.39%

45.45%

22.22%

0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%40.00%45.00%50.00%

2007 2008 2009 2010 2011 2012 2013

Pay out ratio

The above figure shows that payout ratio declined in 2010 to 22.22% from 45.45% in

2009 while in 2008 it was as low as 16.39%. A payout ratio of 22.22% means that the

bank paid out 22.22% of the EPS in the form of dividend.

So SOCIAL ISLAMI BANK LTD. is retaining and reinvesting 77.78% of the earnings

for future growth.

Non interest cost to total Interest income

CHAPTER-5RECOMMENDATION & CONCLUSION

Recommendations

I have some points to focus which will help the bank to improve the efficiency as well

as the quality of work. The points are as follows:

As SIBL is a service providing organization, it should introduce new and

dynamic services to serve the people and capture the target market.

Management should set proper planning for its operations of each and every

work for the whole bank as well as all branches of SIBL.

It must avoid the duplication of work through better communication.

It also tries to avoid duplication in any case through accuracy and efficiency.

Top management must ensure the proper implication of IT.

Still the bank is not fully computerized. Manual registers are used in some

cases. So immediately management should take proper step.

SIBL pays very less interest than other banks. So, if they found higher interest

rate offering by other private banks of Bangladesh then they will lose

customers.

However, the income of the business is still heavily dependent upon its share

on the retail market. The retail sector is very price sensitive.

Conclusion

I have to try my best to reach a firm and concrete a conclusion very confident way. I

believe that my realization will be in harmony with most of the banking thinkers. Now

a day banking sector is more competitive. To achieve a proper reward about

performance, it is essential to satisfy its customer by providing them different valuable

and dynamic services. Because a satisfied customer will talk to others about the

services those he/she is very justifiable enjoying and a satisfied customers statement is

more effective than a thousand of commercial advertisement. People depend on the

people — is the mode of human civilization. Therefore, the importance to satisfy

customer is increasing day by day in the private commercial sector especially in the

private banks. As all the activities those are required to provide valuable services to its

customers to make them satisfy, are related with the fund management system, SIBL is

so much careful about its fund management system. SIBL always gives its highest

attention in monitoring and managing the bank fund, which is consists of fund, capital,

reserve, deposit, loan and advance. At present SIBL is successful in effectively and

efficiently managing these vital issues. In spite of that, in order to keep its success

continue and reach at the pinnacle of success it, its managers, board of directors and

employee must have the comprehensive and clear idea about the reserve, fund, loan,

capital, deposit and liquidity regarding the smooth control of bank and continue its

vital operation toward country’s economic development.