Download - Commercial Bank and Prime Bank

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


Bank (Cont..) :

Deposits

Current Account

Saving Account

Fixed Account


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.


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


Bank (Cont..) :


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.


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


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

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


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


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


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


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


•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.


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.


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




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.


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.



•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.



• 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



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



• 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

• 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.



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





Loan/Deposit Growth:


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:





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



0

2

4

6

8

10

12

14

16

2008 2009 2010 2011 2012

Prime Bank

Premier Bank

AB Bank



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.




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


Prime Bank Ltd (Cont..)Return on Equity (ROE):



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.



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.





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.

Download - Commercial Bank and Prime Bank

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