comparative analysis between the international finance investment (ific) and commerce bank limited...

Comparative Analysis between The International Finance Investment (IFIC) and Commerce Bank Limited and Al-Arafah Islami Bank Limited (AIBL)

STAMFORD UNIVERSITY BANGLADESH

An Assignment on

Financial Accounting (FIN 131)

Submitted to:

Farjana Yeshmin

Assistant Professor

Department of Business Administration

Stamford University Bangladesh

Submitted by:

Sultan Mahmud

ID No. BBA04815014

Dipu Miah

ID No. BBA04815058

Batch/ Sec: BBA 057-D

Submission Date: December 06, 2015

2

Farjana Yeshmin

Course Teacher

Financial Accounting (FIN 131)

Department of Business Administration

Stamford University Bangladesh

Dear Sir,

It gives us pleasure to submit the assignment on “Comparative Analysis between The

International Finance Investment and Commerce Bank Limited and Al-Arafah Islami Bank

Limited”. It was a fantastic opportunity for us to prepare the assignment under your guidance,

which really was a great experience for us.

We have worked hard and tried our best to prepare the assignment. But due to some

limitations we failed to collect more accurate data. We will be very pleased to provide further

information if necessary.

Sincerely,

Sultan Mahmud

On behalf of the group

3

Table of Contents

Chapter One: Introduction.....................................................................................................6

Bank...................................................................................................................................6

Objective............................................................................................................................6

Functions of Bank..............................................................................................................7

Classification of Bank........................................................................................................7

Chapter Two: Financial Statement........................................................................................9

Objective of Financial Statement.......................................................................................9

Chapter Three: Overview of the International Finance Investment and Commerce Bank Limited and Al-Arafah Islami Bank Limited......................................................................10

The International Finance Investment and Commerce Bank Limited.................................10

Mission.............................................................................................................................10

Vision...............................................................................................................................11

Strategic Objectives.........................................................................................................11

Corporate Profile..............................................................................................................12

Al-Arafah Islami Bank Limited...........................................................................................14

Mission.............................................................................................................................14

Vision...............................................................................................................................15

Objectives.........................................................................................................................15

Corporate Profile..............................................................................................................15

Chapter Four: Financial Statement.....................................................................................17

Financial Statements of International Finance Investment and Commerce Bank Limited (IFIC):..................................................................................................................................17

International Finance Investment and Commerce Bank Limited....................................17

Balance Sheet...................................................................................................................17

as at 31 December 2014...................................................................................................17


Profit and Loss Account...................................................................................................19

for the year ended 31 December 2014.............................................................................19


Cash Flow Statement........................................................................................................21

4


Financial Statements of Al-Arafah Islami Bank Limited:...................................................23

Al-Arafah Islami Bank Limited.......................................................................................23

Balance Sheet...................................................................................................................23



Profit and Loss Account...................................................................................................25



Cash Flow Statement........................................................................................................26


Chapter Five: Comparison between AIBL and IFIC.........................................................27

Total Capital.....................................................................................................................27

Total Assets......................................................................................................................28

Total Deposits..................................................................................................................29

Return on Investment (ROI).............................................................................................30

Return on Equity (ROE)...................................................................................................31

Return on Assets (ROA)..................................................................................................32

Earnings per Share...........................................................................................................33

Price Earning Ratio..........................................................................................................34

Conclusion...........................................................................................................................36

Reference.............................................................................................................................37

5

Chapter One: Introduction

BankA bank is a financial intermediary that creates credit by lending money to a borrower, thereby

creating a corresponding deposit on the bank’s balance sheet. (1)

Objective Objective from the view point of Bank owners

I. Earning profit

II. Rendering Services

III. Investment of fund

IV. Earning good will

V. Raising efficiency

Objective from the view point of the government

I. Issuance of Note and currency notes

II. Formation of capital

III. Investment of capital and industrialization

IV. Control of money market

V. Creation of employment

VI. Counseling in financial matters

Objective from the view point of Bank customers

I. Safe custodian of public money

II. Custodian of public money

III. Representative or trustee

IV. Providing credit facility

6

Functions of Bank In modern time, the functions of a modem commercial bank are manifold. The functions of a

bank may broadly be divided into two parts. The functions of banks are briefly highlighted in

following Diagram or Chart.

Classification of Bank Classification on the Basis of Function

a. Central Bank

b. Commercial Bank

c. Industrial Bank

d. Agricultural Bank

e. Exchange Bank

f. Saving Bank

7

g. Investment Bank

h. Mortgage Bank

i. Micro-Finance Bank

Classification on the Basis of Ownership

a. Public Sector Bank

b. Private Sector Bank

c. Co-operative Bank

Classification on the Basis of Domicile

a. Domestic Bank

b. Foreign Bank

Classification on the Basis of Status

a. Schedule Bank

b. Non-schedule Bank (3)

8

Chapter Two: Financial Statement

Financial statements are records that outline the financial activities of a business, an

individual or any other entity. Financial statements are meant to present the financial

information of the entity in question as clearly and concisely as possible for both the entity

and for readers. Financial statements for businesses usually include: income statements,

balance sheet, statements of retained earnings and cash flows, as well as other possible

statements. (4)

Objective of Financial StatementThe objectives of financial statement are following

To determine the ability of a business to generate cash, and the sources and uses of

that cash.

To determine whether a business has the capability to pay back its debts.

To track financial results on a trend line to spot any looming profitability issues.

To derive financial ratios from the statements that can indicate the condition of the

business.

To investigate the details of certain business transactions, as outlined in the

disclosures that accompany the statements. (5)

9

Chapter Three: Overview of the International Finance Investment and Commerce Bank Limited

and Al-Arafah Islami Bank Limited

The International Finance Investment and Commerce Bank LimitedInternational Finance Investment and Commerce Bank Limited (IFIC Bank) is banking

company incorporated in the Peopleï¿½s Republic of Bangladesh with limited liability. It was

set up at the instance of the Government in 1976 as a joint venture between the Government

of Bangladesh and sponsors in the private sector with the objective of working as a finance

company within the country and setting up joint venture banks/financial institutions aboard.

In 1983 when the Government allowed banks in the private sector, IFIC was converted into a

full fledged commercial bank. The Government of the Peopleï¿½s Republic of Bangladesh

now holds 32.75% of the share capital of the Bank. Directors and Sponsors having vast

experience in the field of trade and commerce own 11.31% of the share capital and the rest is

held by the general public.

MissionThe mission of IFIC Bank is to provide service to their clients with the help of a skilled and

dedicated workforce whose creative talents, innovative actions and competitive edge make

their position unique in giving quality service to all institutions and individuals that they care

for.

They are committed to the welfare and economic prosperity of the people and the

community, for they derive from them their inspiration and drive for onward progress to

prosperity.

They want to be the leader among banks in Bangladesh and make their indelible mark as an

active partner in regional banking operating beyond the national boundary.

10

In an intensely competitive and complex financial and business environment, they

particularly focus on growth and profitability of all concerned.

VisionAt IFIC, they want to be the preferred financial service provider through innovative,

sustainable and inclusive growth and deliver the best in class value to all stakeholders.

Strategic Objectives1. To strive for sound business growth by ensuring customer satisfaction through quality

and timely services

2. To manage and operate the Bank in the most efficient manner to ensure achievement

of goals

3. To maintain adequate capital flow to support further growth

4. To ensure effective and efficient risk management for sustainable business growth

5. To diversify loan portfolio through structured finance and expansion of Corporate,

SME, Agri and Retail businesses

6. To mount state-of-the-art technologies and adopt innovative ideas for financial

inclusion

7. To groom human resources for serving customers efficiently

8. To increase brand visibility by creating positive image of the Bank

9. To be a trend-setter in serving the society and remain responsive to the environment

10. To ensure sound corporate governance practices

11. To facilitate mobility in banking by up-gradation of internet and Mobile Banking

12. To add value for all stakeholders.

11

Corporate Profile

Name of the Company AuditorsInternational Finance Investment and Commerce

Bank Limited (IFIC)

Howladar Yunus & Co.

Chartered Accountants

Legal Form Legal AdviserIFIC Bank Limited was incorporated in

Bangladesh and registered with the Registrar of

Joint Stock Companies & Firms as a public

company limited by shares

Ahsanul Karim

Company Registration Number Tax ConsultantsC-4967, Dated October 08, 1976 Adil & Associates

Authorized Capital Credit Rating Agency

BDT 20,000.00 million

Credit Rating Agency of Bangladesh (CRAB)

Limited

Paid up Capital ChairmanBDT 4,377.50 million Salman F Rahman

Listing Status Managing Director & CEOListed with Dhaka Stock Exchange Ltd. (DSE)

and Chittagong Stock Exchange Ltd. (CSE) in

1986 and 1997 respectively

M. Shah Alam Sarwar

Market Category Chief Financial Officer (CFO)‘A’ Category S. M. Abdul Hamid

12

Tax Payer Identification Number (TIN) Company Secretary135055865054, LTU, Dhaka A. K. M. Mozharul Hoque

VAT Registration Number No. of the Employees19071035167 2,527

Registered Office No. of BranchesBDBL Bhaban (8th – 10th & 16th - 19th floor)

8, Rajuk Avenue, Dhaka-1000

Tel: 9563020-29, Fax: 9562015

Swift: IFIC BD DH

E-mail: [email protected]

Web: www.ificbankbd.com

120

Subsidiary Companies No. of ShareholdersIFIC Securities Limited

IFIC Money Transfer (UK) Limited 44,444

Off-shore Banking Unit (OBU) Investor RelationsIFIC Bank Limited - OBU

Federation Branch, FBCCI Building

60, Motijheel C/A, Dhaka

BDBL Bhaban (10th floor)

8, Rajuk Avenue, Dhaka-1000

Hotline: 9563020

13

Al-Arafah Islami Bank LimitedWith the objective of achieving success here & hereafter by pursuing the way directed by

Allah and the path shown by His Rasul (SM), Al Arafah Islami Bank Ltd was established

(registered) as a private limited company on 18 June 1995. The inaugural ceremony took

place on 27 September 1995. The authorized capital of the Bank is Tk.15000.00 million and

the paid up capital is Tk. 8343.24 million as on 31.12.2013. Renowned Islamic Scholars and

pious businessmen of the country are the sponsors of the Bank. 100% of paid up capital is

being owned by indigenous shareholders.

The equity of the bank stood at Tk. 14478.06 million as on 31 December 2013, the manpower

was 2387 and the number of shareholders was 58466. It has achieved a continuous profit and

declared a good dividend over the years. High quality customer service through the

integration of modern technology and new products is the tool of the bank to achieve success.

The bank has a diverse array of carefully tailored products and services to satisfy customer

needs.

The Bank is committed to contribute significantly to the national economy. It has made a

positive contribution towards the socio economic development of the country with 127

branches of which 23 is AD throughout the country.

Missiono Achieving the satisfaction of Almighty Allah both here & hereafter.

o Proliferation of Shariah Based Banking Practices.

o Quality financial services adopting the latest technology.

o Fast and efficient customer service.

o Maintaining high standard of business ethics.

o Balanced growth.

o Steady & competitive return on shareholders' equity.

o Innovative banking at a competitive price.

o Attract and retain quality human resources.

o Extending competitive compensation packages to the employees.

o Firm commitment to the growth of national economy.

14

o Involving more in Micro and SME financing.

Visiono To be a pioneer in Islami Banking in Bangladesh and contribute significantly to the

growth of the national economy

Objectiveso Al-Arafah Islami Bank Limited is a customer focused modern Islamic Banking sound

and steady growth in both mobilizing deposit and making quality Investment to keep

their position as a leading Islami bank in Bangladesh.

o To deliver financial services with the touch of their heart to retail, small and medium

scale enterprises, as well as corporate clients through our branches across the country.

o Their business initiatives are designed to match the changing trade & industrial needs

of the clients.

Corporate Profile

Name of the Company ChairmanAl-Arafah Islami Bank Limited Badiur Rahman

Date of Registration Managing Director18 June 1995 Md. Habibur Rahman

Opening Ceremony Company Secretary27 September, 1995 Md. Mofazzal Hossain

Authorized Capital Equity15,000.00 Million 18,159.52 Million

Paid-up Capital Number of Branches9,469.58 Million 119

Local Partnership of Capital Deposit100% 166,851.17 Million

Registered Office InvestmentPeoples Insurance Building

15

36, Dilkusha Commercial Area

(6th - 9th & 19th Floor), Dhaka-1000

Tel: PABX : 9567885, 9567819

9569353, 9568007

9560198, 7123255-7

Fax : 880-2-9569351

SWIFT : ALARBDDH

E-mail : [email protected]

Web : www.al-arafahbank.com

146,740.36 Million

Auditors Number of EmployeesKHAN WAHAB SHAFIQUE RAHMAN &

CO.


SYFUL SHAMSUL ALAM & CO.


2,649

Credit Rating Agency Number of ShareholdersCredit Rating Agency of Bangladesh

(CRAB) Limited52,007

16

Chapter Four: Financial Statement

Financial Statements of International Finance Investment and Commerce Bank Limited (IFIC):

International Finance Investment and Commerce Bank Limited

Balance Sheet

as at 31 December 2014Amount in Taka (Thousand)

Particulars 2014 2013 2012

PROPERTY AND ASSETSCash 10,398,813 9,686,767 9,582,853

Cash in hand (including foreign currencies) 1,829,379 2,019,892 1,793,359

Balance with Bangladesh Bank and its agent bank(s) (including foreign currencies)

8,569,433 7,666,874 7,789,494

Balance with other banks and financial institutions12,042,832 10,028,347 5,151,800

In Bangladesh 11,214,966 8,755,055 3,497,911Outside Bangladesh 827,866 1,273,291 1,653,889

Money at call and on short notice 1,450,000 - 950,000

Investments 22,845,255 21,170,763 15,670,685

Government securities 17,217,294 5,893,691 11,311,623Other investments 5,627,961 5,277,071 4,359,061

Loans and advances 102,282,149 84,110,385 77,159,761

Loans, cash credits, overdrafts etc. 94,532,881 77,989,360 70,259,542Bills purchased and discounted 7,749,268 6,121,024 6,900,219

Fixed assets including premises, furniture and fixtures 2,929,319 2,382,855 2,342,321Other assets 4,016,791 4,310,035 3,871,326Non-banking assets 373,474 373,474 -Total assets 156,338,637 132,062,628 114,728,749

17

LIABILITIES AND CAPITAL

Liabilities

Borrowing from other banks, financial Institutions and agents 5,621,445 3,492,857 874,456

Deposit and other accounts 129,745,805 110,463,796 92,432,755Current deposit and other accounts 15,464,779 13,356,063 11,540,229Bills payable 1,874,975 1,573,829 1,492,411Savings bank deposit 18,366,462 13,890,792 11,468,553Fixed deposit 94,039,587 81,643,111 65,317,764

Other liabilities 10,343,270 9,008,123 13,668,135Total liabilities 145,710,521 122,964,777 106,975,347

Capital / Shareholders’ equityPaid up capital 4,377,499 3,806,521 3,460,473Statutory reserve 3,909,507 3,374,079 2,832,536General reserve 55,771 55,771 55,771Revaluation reserve against securities 1,575 16,043 17,084Revaluation reserve against fixed assets 115,314 115,314 115,314Reserve against non banking assets - - -Foreign currency translation gain/(loss) - - -Surplus in profit and loss account 2,168,447 1,730,120 1,272,220Attributable to equity holders 10,628,115 9,097,850 7,753,401Non controlling interest - - -Total shareholders’ equity 10,628,115 9,097,850 7,753,401Total liabilities and shareholders’ equity 156,338,637 132,062,628 114,728,749

18


Profit and Loss Account

for the year ended 31 December 2014

Amount in Taka (Thousand)


Interest income 11,858,390 11,111,313 10,442,619Interest paid on deposits, borrowings, etc. 8,466,644 8,499,298 7,636,960Net Interest income 3,391,745 2,612,015 2,805,659

Investment income 2,377,463 2,168,408 1,813,933Commission, exchange and brokerage 1,328,028 1,235,487 1,150,676Other operating income 528,973 507,884 408,233

4,234,464 3,911,779 3,372,843Total operating income 7,626,210 6,523,794 6,178,503

Salaries and allowances 2,447,559 1,887,630 1,769,162Rent, taxes, insurance, electricity, etc. 669,310 581,678 483,346Legal expenses 6,430 5,042 3,734Postage, stamp, telecommunication, etc. 94,177 90,061 72,441Stationery, printing, advertisement, etc 174,941 100,583 102,027Managing Director’s salary 13,660 13,660 7,952Directors’ fees 1,175 900 1,285Auditors’ fee 1,275 700 700Charges on loan loss - 35,777 -Depreciation and repair of bank’s assets 397,901 300,657 269,127Other expenses 646,956, 559,232 358,342Total operating expenses 4,453,386 3,575,923 3,068,120Profit/(Loss) before provision 3,172,823 2,947,871 3,110,382Provision for loans, investments and other assetsSpecific provision 405,683 (145,290) 1,611,799General provision 260,000 49,392 (33,000)Provision for off-Shore Banking unit 4,000 9,600 (6,500)Provision for off-balance sheet exposure 50,000 63,220 1,500Provision for diminution in value of investments (250,000) 235,566 193,710Other provisions 26,000 27,672 (47,210)Total Provision 495,683 240,160 1,720,299Profit/(Loss) before taxes 2,677,140 2,707,711 1,390,082Provision for taxationCurrent tax 1,290,000 1,090,000 963,216Deferred tax expense/(income) (157,592) 272,221 (678,279)

1,132,407 1,362,221 284,936Net profit after taxation 1,544,733 1,345,490 1,105,146

1,159,142 926,173 445,090

19

Retained earnings brought forward from previous year

2,703,875 2,271,663 1,550,237AppropriationsStatutory reserve 535,428 541,542 278,016General reserve - - -

535,428 541,542 278,016Retained Surplus 2,168,447 1,730,120 1,272,220Earnings per share (EPS) 3.53 3.07 2.90

20


Cash Flow Statement

for the year ended 31 December 2014Amount in Taka (Thousand)


A. Cash flows from operating activitiesInterest received 14,253,383 12,867,164 10,442,619Interest payments (8,687,897) (8,450,326) (7,636,960)Dividend received 105,718 82,493 53,213Fees and commission received 1,328,028 1,235,487 1,150,684Recoveries of loans and advances previously written-off 194,316 648,876 175,200Cash payments to employees (2,481,219) (1,871,290) (1,619,388)Cash payments to suppliers (237,324) (155,073)Income taxes paid (1,194,602) (1,027,512) (808,310)Receipts from other operating activities 587,439 560,885 2,168,944Payments for other operating activities (1,516,126) (1,326,887) (1,088,471)Operating cash flows before changing in operating assets and liabilities 2,351,714 2,563,816 2,837,532Increase/(decrease) in operating assets and liabilitiesStatutory deposits - - -Loans and advances to other banks - - -Loans and advances to customers (17,521,662) (8,215,063) (12,518,589)Other assets 269,122 (433,866) 310,761Deposits from other banks (225,339) (279,194) 1,522Deposits from customers 19,507,347 15,414,260 19,026,670Trading liabilitiesOther liabilities 68,947 (133,107) 308,493

2,098,415 6,353,027 7,128,859Net cash flows from operating activities 4,450,130 8,916,843 9,966,391

B. Cash flows from investing activities

Net proceeds/(payments) from sale/(purchase) of Government securities (1,255,048) (4,216,501) 18,000Net proceeds/(payments) from sale/(purchase) of securities (285,614) (1,130,775) (261,731)Purchase of property, plant & equipment (Annexure-D) (833,303) (220,369) (310,872)Proceeds from sale of property, plant & equipment 3,253 4,912 1,437Payment against lease obligation (7,263) (5,140) -

Net cash used in investing activities (2,377,976) (5,567,874) (553,165)C. Cash flows from financing activities

Borrowing from other banks, financial institution and agents 2,128,587 640,162 -Receipts from issue of sub-ordinated bond - - -Dividend paid (cash) - - -

Net cash flow from financing activities 2,128,587 640,162 (245,558)D. Net increase/(decrease) in cash (A+B+C) 4,200,742 3,989,132 9,167,667

21

E. Effects of exchange rate changes on cash and cash equivalents (24,714) (42,255) -

F. Opening cash and cash equivalents 19,721,469 15,690,081 17,805,611G. Closing cash and cash equivalents (D+E+F) 23,897,497 19,721,469 26,973,278

Closing cash and cash equivalentsCash in hand 1,829,379 2,019,892 1,793,359Balance with Bangladesh Bank and its agents bank 8,569,433 7,666,874 7,789,494Balance with other banks and financial institutions 12,042,832 10,028,347 5,151,800Money at call and on short notice 1,450,000 - 950,000Govt. Securities - - 11,283,196Prize bonds 5,851 6,355 5,427

23,897,497 19,721,469 26,973,278

22

Financial Statements of Al-Arafah Islami Bank Limited:

Al-Arafah Islami Bank Limited

Balance Sheet



Cash in handCash in hand (including foreign currencies) 1,301,483 1,532,281 1,082,941Balance With Bangladesh Bank and its Agents Banks (including foreign currencies) 19,372,830 16,046,314 11,601,779

20,674,314 17,578,595 12,684,720Balance with other Banks and Financial InstitutionsIn Bangladesh 2,512,574 3,136,874 1,055,592Outside Bangladesh 1,703,815 1,561,507 1,257,383

4,216,389 4,698,381 2,312,975Placement with Banks & Other Financial institutions 9,750,000 5,400,000 11,300,000Investment in Share & SecuritiesGovernment 7,000,000 5,480,000 4,200,000Others 842,092 1,047,885 997,514

7,842,092 6,527,885 5,197,514InvestmentsGeneral Investments etc. 138,198,168 113,084,774 90,736,824Bills purchased and discounted 3,103,911 8,214,210 10,830,210

141,302,079 121,298,985 101,567,035Fixed assets less Accumuladated Depreciation 2,641,594 2,489,986 2,361,213Other Assets 20,122,243 12,941,766 10,911,353Non-Banking Assets - - -Total Assets 206,548,713 170,935,600 146,334,812

LIABILITIES AND CAPITALLiabilitiesPlacement from Banks & Other Financial institutions 8,900,000 3,400,000 5,100,000Deposits and other AccountsMudaraba Savings Deposits 17,501,279 12,267,376 9,998,519Mudaraba Term Deposits 99,362,221 90,765,477 77,314,883Other Mudaraba Deposits 33,500,490 24,152,503 18,208,830Al-Wadia Current Accounts and Others Accounts etc. 15,304,022 13,566,062 12,898,844Bills Payable 1,396,165 953,220 959,167

167,064,179 141,704,640 119,380,245Other Liabilities 13,911,521 11,288,222 9,379,937

23

Deferred tax Liabilities/ (Assets) 74,890 64,678 48,885

Total Liabilities 189,950,591 156,457,541 133,909,068Capital/Share Holders EquityPaid up Capital 9,469,585 8,343,246 7,130,980Statutory Reserve 4,643,316 3,849,648 3,102,076Other Reserve 977,548 977,548 977,548Retained Earnings 1,507,672 1,307,616 1,215,138Total Share holders’ equity 16,598,122 14,478,059 12,425,743Total Liability and Share holders equity 206,548,713 170,935,600 146,334,812

24


Profit and Loss Account


Particulars 2014 2013 2012Investment Income 19,019,524 16,988,630 14,119,185Profit paid on deposits & Borrowing (12,660,720) (12,052,492) (9,575,649)Net Investment Income 6,358,804 4,936,138 4,543,535Income from Investment in Shares /Securities 665,289 607,225 772,218Commission, Exchange and Brokerage 1,601,306 983,843 1,012,084Other Operating Income 188,358 236,014 195,115

2,454,954 1,827,083 1,979,419Total operating income 8,813,758 6,763,222 6,522,954Salaries and allowances & contribution to P.F 2,003,166 1,603,625 1,357,953Directors fees & expenses 10,268 9,054 6,715Shariah Supervisory Committee's fees & expenses 271 204 260Rent, taxes, insurance and lighting etc. 354,694 283,960 221,169Postage, telegram, telephone and stamp etc. 68,041 74,916 71,875Legal charges 4,222 2,607 2,242Auditors' fee 1,909 1,127 646Salary & Allowances to the Managing Director 11,570 11,030 10,660Depreciation and repairs to the bank's properties 241,185 216,883 169,293Stationery, printing and advertisement etc. 82,899 65,062 55,482Other expenses 336,899 279,881 222,752Total operating expenses 3,115,128 2,548,353 2,119,050Profit/(Loss) before Tax & provision 5,698,630 4,214,868 4,403,903Provision against Investments & Contingent Liabilities 1,727,328 374,282 668,204Provision for diminution in value of invevtment - 101,500 89,474Other Provision 2,959 1,230 -Total provision 1,730,287 477,012 757,679Profit/(Loss) before Tax 3,968,342 3,737,856 3,646,224Current tax 1,838,066 1,669,747 1,709,802Deferred tax 10,212 15,793 16,892Provision for Taxation 1,848,279 1,685,540 1,726,694Net Profit/(Loss) after tax 2,120,063 2,052,315 1,919,529AppropriationStatutory Reserve 793,668 747,571 729,244General Reserve - - -

793,668 747,571 729,244Retained Earnings 1,326,394 1,304,744 1,190,284Earnings per Ordinary share (EPS) 2.24 2.17 2.30

25


Cash Flow Statement

for the year ended 31 December 2014

Amount in Taka (Thousand)

Particulars 2014 2013 2012Cash flows from operating activitiesInvestment income receipt in Cash 19,272,806 13,659,057 13,620,158Profit paid on deposits (11,018,733) (10,820,548) (7,547,823)Dividend received 388,990 366,734 10,076Fees & Commission received in cash 1,601,306 983,843 952,084Recoveries from write off investments 23,017 2,631 14,154Cash payments to employees (2,014,736) (1,613,721) (1,344,936)Cash payments to suppliers (82,899) (42,969) (36,730)Received from other operating activities (item-wise) 188,358 476,505 772,218Paid for other operating activities (item-wise) (815,718) (704,027) (569,252)Advance income tax paid (1,750,544) (1,180,364) (1,691,678)Operating profit before changes in operating assets and liabilities 5,791,845 1,127,141 4,178,271Changing in Operating assets & liabilitiesIncrease/Decrease of trading securities 205,793 (50,370) (368,595)Increase/Decrease of investment and advances to other banks (4,350,000) 5,900,000 (1,500,000)Increase/Decrease of Investment and advances to customers (other than Banks) (21,645,081) (17,279,888) (27,264,653)Increase/Decrease of other assets (item-wise) (5,429,932) (618,713) (1,836,883)Increase/Decrease of Deposits from other banks 5,500,000 (1,700,000) 200,000Increase/Decrease of Deposits from customers (other than Banks) 25,359,538 22,346,666 35,244,375Increase/Decrease of Other liabilities account of customers - - -Increase/Decrease of Trading liabilities (item-wise) (1,146,828) (724,268) 466,764Cash receipt from operating activities (1,506,510) 7,873,426 4,941,007A. Net Cash from operating activities 4,285,334 9,000,567 9,119,278Cash flows from investing activities:Proceeds from sale of securities - - -Payments for purchases of securities - - -Purchase of property, plant and equipment (151,607) (426,286) (663,713Sales proceeds of Fixed assets - - -Purchase-sale of subsidiary - (15,000) (825,000)B. Net cash flows from investing activities (151,607) (441,286) (1,488,713)Cash flows from financing activitiesIncrease in Exchange Equalization Account - - -Increase in Share Capital - - -Dividend paid - - -C. Net cash flows from financing activities - - -D. Net increase in cash and cash equivalent (A+B+C) 4,133,727 8,559,281 7,630,564E. Effects of exchange rate changes on cash and cash-equivalents - - -

26

F. Net increase in cash and cash equivalent (D+E) 4,133,727 8,559,281 7,630,564G. Cash & Cash Equivalents at the beginning of the year 27,756,976 19,197,695 11,567,130H. Cash & Cash Equivalents at the end of the year 31,890,704 27,756,976 19,197,695

Chapter Five: Comparison between AIBL and IFIC

International Finance Investment and Commerce Bank Limited and Al-Arafah Islami Bank

Limited, both are financially sound banks in Bangladesh. They will be financially compared

on the basis of following points:

Total Capital

Total Assets

Total Deposits

Return on Investment (ROI)

Return on Equity (ROE)

Return on Assets (ROA)

Earnings per share

Price Earning ratio (Times)

Total CapitalTotal capital usually refers to the sum of long-term debt and total shareholder equity; both of

these items can be found on the company's balance sheet. (6)

Amount in Taka

Name of The Banks 2014 2013 2012

Al-Arafah Islami Bank

Limited

17,352,630,670 15,012,259,604 13,179,777,862

International Finance

Investment and Commerce

Bank Limited

11,308,447,906 9,630,845,996 7,923,695,690

27

2014 2013 20120

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

14,000,000,000

16,000,000,000

18,000,000,000

20,000,000,000

AIBLIFIC

In case of total capital, Al-Arafah Islami Bank Limited is in better position in the last three

years.

Total AssetsTotal assets are the sum of all current and noncurrent assets that a company owns. (7)

Amount in Taka



Limited

206,548,713,972 170,935,600,596 146,334,812,318



Bank Limited

156,338,637,021 132,062,628,567 114,728,749,779

28

2014 2013 20120

50,000,000,000

100,000,000,000

150,000,000,000

200,000,000,000

250,000,000,000

AIBLIFIC

Al-Arafah Islami Bank Limited has more total asset than International Finance Investment

and Commerce Bank Limited in the past three years which makes it more financially sound

bank.

Total DepositsTotal deposit is the money placed into a banking institution for safekeeping. Bank deposits

are made to deposit accounts at a banking institution, such as savings accounts, checking

accounts and money market accounts. (8)

Amount in Taka



Limited

167,064,179,104 141,704,640,624 119,380,245,882



Bank Limited

129,745,805,362 110,463,796,836 92,432,755,891

29

2014 2013 20120

20,000,000,000

40,000,000,000

60,000,000,000

80,000,000,000

100,000,000,000

120,000,000,000

140,000,000,000

160,000,000,000

180,000,000,000

AIBLIFIC

Al-Arafah Islami Bank Limited holds more deposits rather than International Finance

Investment and Commerce Bank Limited which helps it to be financially stronger.

Return on Investment (ROI)Return on investment (ROI) is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. ROI measures the amount of return on an investment relative to the investment’s cost. (9)



Limited

13.70% 13.01% 12.51%



Bank Limited

7.22% 7.16% 11.58%

30

20142013

2012

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

AIBLIFIC

Al-Arafah Islami Bank Limited is in better position with higher ROI than International

Finance Investment and Commerce Bank Limited

Return on Equity (ROE)Return on Equity is the amount of net income returned as a percentage of shareholders equity.

Return on equity measures a corporation's profitability by revealing how much profit a

company generates with the money shareholders have invested. (10)



Limited

12.80% 14.15% 13.85%



Bank Limited

15.67% 15.98% 15.43%

31

2012 2013 20140.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

AIBLIFIC

International Finance Investment and Commerce Bank Limited is doing good in case of

Return on Equity (ROE).

Return on Assets (ROA)Return on Assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. (11)



Limited

1.03% 1.20% 1.31%



Bank Limited

1.07% 1.09% 1.07%

32

2014 2013 20120.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

AIBLIFIC

Al-Arafah Islami Bank Limited had quite good ROA in 2013 and 2012. But it declines over

time. In 2014, it has ROA of 1.03%. On the hand, International Finance Investment and

Commerce Bank Limited was holding better ROA than Al-Arafah Islami Bank Limited in

2014. It indicates that IFIC Bank improves and retains their ROA over time. It makes them

better company.

Earnings per ShareEarnings per share is the portion of a company's profit allocated to each outstanding share of common stock. It serves as an indicator of a company's profitability. (12)

Amount in Taka



Limited

2.20 2.46 2.38



Bank Limited

3.53 3.07 2.90

33

2012 2013 20140

0.5

1

1.5

2

2.5

3

3.5

4

AIBLIFIC

In account of EPS, International Finance Investment and Commerce Bank Limited is in better

position than Al-Arafah Islami Bank Limited.

Price Earning Ratio The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative to its per-share earnings. (13)

Amount in Taka



Limited

6.77% 7.76% 10.21%



Bank Limited

7.40% 11.16% 12.47%

34

20122013

2014

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

AIBL

IFIC

AIBLIFIC

Same as EPS, International Finance Investment and Commerce Bank Limited holds greater

P/E ratio than Al-Arafah Islami Bank Limited which indicated better profitability.

35

ConclusionBanking sector of Bangladesh consists of several nationalized and private banks. They are

doing their activities and highly contribute to the national economy. Among them Al-Arafah

Islami Bank Limited and International Finance Investment and Commerce Bank Limited also

make significant contribution to the economy. They are performing their activities, as a result

not only the bank but also the economy is benefited. The banks are performing general

banking, Loan-advance, foreign exchange activities etc, as a result they are mobilizing the

money and do well for the economy. Although they have some limitations in their services,

they are doing tremendous job for the economy. If they can reduce their limitation and

introduce new ideas, they can do better in the banking sector of Bangladesh. Comparing these

two banks is not a easy task. They have their own system and Al-Arafah Islami Bank Limited

follows Islami Banking. Al-Arafah Islami Bank Limited is in way better position in case of

Total capital, total assets, total deposits, Return on Investment (ROI), and Return on Assets

(ROA). But when it comes with Return on Equity (ROE), Earning per Share (EPS), and P/E

ratio, International Finance Investment and Commerce Bank Limited is holding much better

than Al-Arafah Islami Bank Limited which proves of having better portability.

36

Reference 1. https://en.wikipedia.org/wiki/Bank

2. http://kalyan-city.blogspot.com/2011/04/functions-of-banks-important-banking.html

3. www.business-science-articles.com/articles/business/102-banking-and-its-

classifications

4. http://www.investopedia.com/terms/f/financial-statements.asp

5. http://www.accountingtools.com/definition-financial-statemen

6. http://money.stackexchange.com/questions/21506/calculating-the-total-capital-of-a-

company

7. http://study.com/academy/lesson/total-assets-definition-lesson-quiz.html

8. http://www.investopedia.com/terms/b/bank-deposits.asp

9. http://www.investopedia.com/terms/r/returnoninvestment.asp

10. http://www.investopedia.com/terms/r/returnonequity.asp

11. http://www.investopedia.com/terms/r/returnonassets.asp

12. http://www.investopedia.com/terms/e/eps.asp

13. http://www.investopedia.com/terms/p/price-earningsratio.asp

14. Annual Report 2014, The International Finance Investment and Commerce Bank

Limited

15. Annual Report 2013, The International Finance Investment and Commerce Bank

Limited

16. Annual Report 2014, Al-Arafah Islami Bank Limited

17. Annual Report 2013, Al-Arafah Islami Bank Limited

37