Performance of Ocbc Bank

banks performance over the last 10 years in terms of profitability, asset

growth and product innovation.
The profitability of OCBC Bank over last 10 year was stable increased. In
year 2002, OCBC Bank had S$667million of net profit. The next year, the
net profit had rose 43% to S$954million. In year 2004, net profit was
S$1162million and year 2005 was S$ 1298million. In year 2006, net profit
had rose 54% to S$2002million. In year 2007, the net profit just increased
3% to S$2071million. However, the net profit of OCBC Bank in year 2008
decreased 16% to S$1749million. In year 2009, net profit increased again
to S$1962millioin. Year 2010, net profit was S$2245million and it increased
by 14% compared to previous year. In year 2011, net profit of OCBC Bank
increased by 3% and reached its highest point which is S$2312million. The
ratio of return on assets of OCBC Bank is slightly higher than the average
ratio in the industry. However, the ratio of return on equity is slightly lower
than the average ratio. By referring the records over the past 10 years, we
can say that OCBC Banks performance is quite well in term of the
profitability.
The asset growth of OCBC Bank is keep increasing over the past 10 years.
In year 2002, the total asset of OCBC Bank was S$84,051million. In year
2003 the total asset increased to S$84,497million. Next year, total asset
had increased to S$121,935million. In the subsequent year, the total asset
of OCBC Bank increased again to S$134,710million. For year 2006, the
total asset increased to S$151,220million. In year 2007, OCBC Bank had
increased their total asset to S$174,607million. Even net profit of year 2008
decreased compare to last year, the total asset of OCBC Bank still
increased and reached S$181,385million. In the year 2009, total asset
reached S$194,300million. In year 2010, total asset had increased to
S$229,283million. For year 2011, total asset of OCBC Bank had reached a
highest point which is S$277,758million.
Next, we compare the products and services of OCBC Bank provided
recently to the past ten years, OCBC Bank is now more likely focus on
quick and easy. By looking on the services it provide, we can have cards
services, ATM services, premier services, property services, loan services,
investment services and even insurance services. By looking on the cards
services, OCBC Bank provides their customers to get their debit cards or
credit cards less than 1 minute. When a customer transfers their debts from
other banks to OCBC Bank, they enjoy a lower interest rate for 6 months.
Sometimes, OCBC Bank will also provide seminars about investment to the
public with free admission. Nevertheless, OCBC Bank even provides
scholarship for students and public with some prerequisites. Internships are
also provided by the OCBC Bank to all the fresh graduates, postgraduates
and undergraduates. OCBC Bank is not only focus on their services
provided to maximize their profit but also focus on their internal operations.


Performance of Exim Bank (2005-2009)
Introduction
Bank introductions
EXIM Bank (Export Import Bank of Bangladesh Limited) was incorporated
on June2, 1999 as a private sector banking company under the companys
act 1994 and started its operations on August3, 1999. The bank has
authorized capital of BDT 3.5 billion and a paid up capital of BDT 2.68. The
bank is listed in both DSE and CSE.
Company Details
Business Operations -Sariah based Islami banking service
Chairpersons-Md. Nazrul Islam Majumdar
Directors-Md. Faiz Ullah, Nasima Akhter, A.K.M Nurul Fazal, Zubayer
Kabir, Md. Habibullah, Md. Abdul Mannan.
Company Secretary-NA
Registered Office -Plot No. SE (F): 9, Road No. 142, Gulshan Avenue,
Dhaka-1212.
Website-www.eximbankbd.com
Auditor -Hoda Vasi Chowdhury & Co
Highlights of Performance
The bank has migrated all of its conventional banking operations into
Sariah based Islami banking since July, 2004. The bank is providing
services through 52 branches all over the country with a total manpower of
over 1400. The bank has correspondent relationships with 26 foreign
banks. Investment of the bank other than loans and advances were limited
to government treasury bills, prize bonds and shares and debentures, and
total investment during 2008 amounted to BDT 2.9 billion and made a profit
after tax of BDT 1.1 billion. ROA and EPS of the bank stood 1.83% and
BDT 40.95 respectively. The bank has a total asset of BDT 77.7 billion at
June 30, 20096. Operating income stood at BDT 1.67 billion for the period
June 30, 2009.
EXIM Bank Foundation and CSR Activities
At least 2% of their annual profit of every year is put aside for the
foundation to conduct Corporate Social Responsibilities (CSR) activities is
also part of their performance. The mainstream CSR activities that are
carried out through this foundation are:
Healthcare service.
Scholarship program for brilliant poor student.
Education Promotion Scheme(Interest free loan).
Helping people affected by natural calamities.
Helping people in slum areas.
Donation to educational institutions to setup computer lab.
Beautification of Dhaka City.
Healthcare service
.
A 5 storied building having 10,000 sft floor space at 840 Kazi Para, Rokeya
Sarani, Mirpur, Dhaka-1216 has been hired to set up Exim Bank Hospital.
The decoration of this hospital is going on in full swing
Scholarship program for brilliant poor student
This is a stipend package for poor and meritorious students that take care
of the beneficiaries throughout their student life. EXIM Bank Scholarship
Program, launched in 2006 with 61 poor and meritorious students selected
from different reputed educational institutions of Dhaka City.
Education Promotion Scheme (Interest free loan)
Under Education Promotion Scheme, quard or interest-free loan is provided
for poor and meritorious students to help them bear monthly educational
expenditure including academic expenses, food, accommodation, etc
Helping people affected by natural calamities
Another vital area we are dealing with as part of our CSR activities is
helping people survive natural calamities. Under this welfare program,
EXIM Bank provides relief in cash and kind for flood, fire or cyclone victims
and cold-stricken people.
Helping people in slum areas
Besides natural calamities, fire breaks out sometimes in slum areas that
guts the shanties and renders the affected people totally helpless. In that
situation, we help the victims fight against the hard days and return to
normal life.
Donation to educational institutions to setup computer lab
We have donated to Dhaka University and Chittagong University to set up
two computer labs that help the students of those universities acquire ICT
knowledge. This will certainly help the students to be ready to take the
challenges of this information society.
Beautification of Dhaka City
In response to the call of the Dhaka City Corporation, EXIM Bank has been
sharing a good portion of the mammoth task of beautifying the capital since
2005. To make the capital a modern city enriched with adequate urban
amenities, EXIM Bank always joins hands with the government.
Total Deposits
A deposit account is a current account, savings account, or other type of
bank account, at a banking institution that allows money to be deposited
and withdrawn by the account holder. These transactions are recorded on
the bank's books, and the resulting balance is recorded as a liability for the
bank, and represent the amount owed by the bank to the customer. Some
banks charge a fee for this service, while others may pay the customer
interest on the funds deposited.
For EXIM Bank the following deposits are available. They offer Al Wadiah
Current, Mudaraba Savings, Mudarba Term, Bills Payable and others. We
have analyzed the data of deposit for last five years from 2005-2009.
Table 1: Deposits of EXIM Bank
|Year |Al Wadiah Current (mn) |Mudaraba Savings (mn) |Mudaraba Term
(mn) |
|2005 |3,710.81 |1,698.02 |84.36% |
|2006 |3,463.31 |-247.50 |-6.67% |
|2007 |4,778.63 |1,315.32 |37.98% |
|2008 |6,672.70 |1,894.07 |39.64% |
|2009 |8,733.45 |2,060.75 |30.88% |
The graph shows a positive uptrend for the bank when it is Current
deposits for the last five years. For the year of 2007-09 we have observed
the more or less same slop in the graph.
Graph 3: Trends of Current Deposits
[pic]
When we have analyzed Savings scheme for Exim Bnak for the last five
years we have observed the more or less same variation for 2005-07 and
there is a decline in 2008 and in 2009 we have observed there is almost
double growth of Savings deposit for the Bank. In 2008 the savings deposit
was 2,440.82 million Taka whereas in 2009 the amount stands at 4,444.33
million which was about 82.08% higher than the previouys year.
Table 3: Mudaraba (Savings Scheme)
|Year |Mudaraba Savings (mn) |Growth (mn) |Growth (%) |
|2005 |1,338.53 |178.86 |15.42% |
|2006 |1,684.53 |346.00 |25.85% |
|2007 |2,209.67 |525.14 |31.17% |
|2008 |2,440.82 |231.15 |10.46% |
|2009 |4,444.33 |2,003.51 |82.08% |
In 2009 there is straight slope for the bank. In 2009 we have observed that
deposit rate of Bangladesh rises to 9.65% from 9.18%. So banks clients
were more prone to deposit their money in banks.
Graph 4: Trend of Savings Deposits
[pic]
The deposit interest rate of Bangladesh for the last five years is listed
below:
Graph 5: Deposit Interesr Rate
[pic]
The Mudaraba Term deposit reflects some volatile attitude in its nature. In
2005 the amount was 22,933.25 million. In 2006 and 2007 the growth rate
declined from the previous year. In 2009 we have observed there was a
negative growth for the bank. Here we can say 2009 was the revolution
year for capital market. Huge amount of cash flow started to come in capital
market. So do for the banks also. So bank clients are prone to invest their
money in capital market rather than to put in banks.
Table 4:Mudaraba Term Deposit
|Year |Mudaraba Term (mn) |Growth (mn) |Growth (%) |
|2005 |22,933.25 |7,216.78 |45.92% |
|2006 |29,479.57 |6,546.32 |28.55% |
|2007 |33,682.92 |4,203.35 |14.26% |
|2008 |47,333.80 |13,650.88 |40.53% |
|2009 |44,559.50 |-2,774.30 |-5.86% |
The below table shows the ratio of each deposit scheme to total deposit.
We have observed a stable ratio for the bank in case of Term Deposit.
From 2005-2008 the ration stood above 80% for each year.
Table 5: Ratio of Total Deposit
|Year |Mudaraba Term (mn) |Total Deposit (mn) |Ratio of Total Deposit |
|2005 |22,933.25 |28319.22 |80.98% |
|2006 |29,479.57 |35032.03 |84.15% |
|2007 |33,682.92 |41546.58 |81.07% |
|2008 |47,333.80 |57587.00 |82.20% |
|2009 |44,559.50 |73835.46 |60.35% |
In 2009 it dropped to 60% from 82.20% because of uptrend of capital
market. Though we have observed that the total deposit growth rate was
positively uptrend for the year of 2009. it was a positive output for the bank
profitability,
Graph 6: Ratio of Term to Total Deposit
[pic]
Ratio of Savings to Total Deposit is listed in the table below. We have
observed here an uptrend attitude for the Bank. In 2008 there was a
decline of ration to 4.24% from 5.32% in 2007.
Table 6: Ratio of Savings to Total Deposit
|Year |Mudaraba Savings (mn) |Total Deposit (mn) |Ratio of Savings to
Total Deposit |
|2005 |1,338.53 |28319.22 |4.73% |
|2006 |1,684.53 |35032.03 |4.81% |
|2007 |2,209.67 |41546.58 |5.32% |
|2008 |2,440.82 |57587.00 |4.24% |
|2009 |4,444.33 |73835.46 |6.02% |
But in 2009 the ration covers the decline in 2008 well and the ratio reaches
to 6.02% from 4.24% of 2008.
Graph 7: Ratio of Savings to Total Deposit
Transactional accounts are meant neither for the purpose of earning
interest nor for the purpose of savings, but for convenience of the business
or personal client; hence do they tend not to bear interest. Instead, a
customer can deposit or withdraw any amount of money any number of
times, subject to availability of funds.
If we go for analysis for Exim Bank we will see an stable ratio of current
deposit to its total deposit for each year. The average ration was above
11.5% for each year. In 2005 the ration was 13.10 % and then in 2006 the
ratio drops to 9.89%.
Table 7: Ratio of Current to Total Deposit
|Year |Al Wadiah Current (mn) |Total Deposit (mn) |Ratio of Current to Total
Deposit |
|2005 |3,710.81 |28319.22 |13.10% |
|2006 |3,463.31 |35032.03 |9.89% |
|2007 |4,778.63 |41546.58 |11.50% |
|2008 |6,672.70 |57587.00 |11.59% |
|2009 |8,733.45 |73835.46 |11.83% |
But from 2007 onwards the ratio we have observed was stable and it was
above 11.5% which reflects well balanced combination of current deposit
compared to Total Deposit.
Graph 8: Ratio of Current to Total Deposit
[pic]
Earning Per Share
Earning per share: Earnings per share (EPS) is the amount of earnings per
each outstanding share of a company's stock. Earning per share of Exim
bank for previous 9 years is given below:
Table 1: EPS, NAV & Net profit after Tax.
|Year |EPS |Net asset value per share |Net profit after tax(million) |
|2005 |63.19 |217.61 |555.34 |
|2006 |43.48 |181.57 |650.29 |
|2007 |43.45 |213.70 |930.84 |
|2008 |2.10 |18.63 |1096.63 |
|2009 |4.99 |19.91 |1682.99 |
Calculation of earing per share: The EPS formula does not include
preferred dividends for categories outside of continued operations and net
income. Earnings per share for continuing operations and net income are
more complicated in that any preferred dividends are removed from net
income before calculating EPS. This is because preferred stock rights have
precedence over common stock. If preferred dividends total $100,000, then
that is money not available to distribute to each share of common stock.
The formula to calculate EPS is given below :
[pic]
Exim bank entered into the stock market of Bangladesh in 2001 by issuing
IPO. In 2005, we can see that, net asset value per share was 217.61, net
profit was 555.34 million taka and EPS was 63.19.we can understand Exim
bank started the journey in stock market with profit. in 2006 net asset value
per share 181.57 which was 36.04 lower than previous year. In this case
EPS was 43.48 and net profit was 650.29 million taka. So here we can
observe that the financial value of Exim bank went up. So the EPS and net
profit increased. In 2007 EPS was 43.45 and net asset value per share was
32.13 more than the previous year which is 213.70. In the year 2007 value
oh Exim bank increased indicated by increased net asset value per share
and EPS. So, net profit was increased to 930.84 million Tk. Similarly we
can see in every year EPS is increasing or decreasing slightly upto year
2007. Upto 2007 net profit also increasing. In 2008 and 2009 EPS
decreased a huge amount its because total number of share increased and
net asset value per share decreased. As per un-audited financial statement
of 2nd quarter (half yearly provision) Exim banks profit after tax stood
tk.834.54 million with EPS of 2.47 considering the face value of taka 10.00
per share.
The bank charged the denotations of share from 100.00 to 10.00 with effect
from June 6, 2010. It may be noted that , at the end of first quarter the
banks registered profit after tax 42.24 million either EPS of 1.25
considering the face value of taka 100.00 per share. This remarkable
growth in EPS has been achieved due to increase in profit and deduction of
provision. As approved in the 11th annual general meeting of the company
held on 12th July, one right share will be issued for every two shares per
subject to approval of the securities and exchange commission
Return on Earnings
Stock Dividend
A dividend paid as additional shares of stock rather than as cash. If
dividends paid are in the form of cash, those dividends are taxable. When a
company issues a stock dividend, rather than cash, there usually are not
tax consequences until the shares are sold.
Table 1: Stock Dividend
|Year |% Stock dividend |
|2005 |30% |
|2006 |25% |
|2007 |25% |
|2008 |26% |
|2009 |35% |
Analysis:
1. Risk is the vital issue that the Financial Institutions need to address
properly to ensure sustainable growth in the financial market. Addressing of
risk and prudent management to optimize the same can ensure sustainable
growth in the industry. Now it has become obvious for the Financial
Institutions to implement the advices as prescribed in the Basel Accord
which will act as a guide to develop a risk adjusted asset and liability
portfolio and capital structure.
So Bangladesh Bank issued an order regarding Basel II Accord and it
would be implemented in the financial institutions from January 2012. For
this reason, EXIM Bank of Bangladesh Ltd. offered stock dividends to their
investors to meet the capital adequacy.
Graph 1: Paid up Capital & Stock Dividend
[pic]
Graph 2: General Investment
[pic]
2. From this graph we can see that, EXIM Bank of Bangladesh Ltd.
Invested almost 92%, 93%, 96%, 93% and 90% of total deposit as loan
respectively years 2005, 2006, 2007, 2008, & 2009. Since EXIM Bank of
Bangladesh is an Islamic bank which refers to a system of banking or
banking activity that is consistent with the principles of Islamic law (Sharia)
and its practical application through the development of Islamic economics.
Sharia prohibits the payment or acceptance of interest fees for loans of
money (Riba, usury), for specific terms, as well as investing in businesses
that provide goods or services considered contrary to its principles
(Haraam, forbidden).
In order to meet the demand of investment the bank needs more funds and
so it provides stock dividends to its investors instead of borrowing money
and stock dividends reduce the cost of funds.
Cash Dividend
A cash payment to all qualifying shareholders in proportion to their
holdings, usually shown in per share held. Cash dividend is made to
shareholders of corporate stock. The dividends are distributed from current
earnings or accumulated profits. When a corporation earns a profit or
surplus, that money can be put to two uses: it can either be re-invested in
the business (called retained earnings), or it can be paid to the
shareholders as a dividend. Many corporations retain a portion of their
earnings and pay the remainder as a dividend. The last five year data of
cash dividend of EXIM bank is presented below
Table 1: Cash Dividend
|Year |% of Cash dividend |
|2005 |30% B, 1R:2 |
|2006 |25% B |
|2007 |7.00, 25% B |
|2008 |26% B |
|2009 |35% B |
Graph 1: Cash Dividend
[pic]
The EXIM bank here believes in best re-invested into the company:
research and development, capital investment, expansion, etc. If we look at
the trend of the cash dividend of the year 2005 to 2009 that we will see that
the only 7% is given in year 2007 as a cash dividend, rest of the year EXIM
bank reinvested for the future company expansion. On our analysis, EXIM
bank is focusing on company expansion rather focusing on the dividend
policy. The number of shares of EXIM bank is increased for stock split and
for giving stock dividend, but in our Bangladeshi culture investors like the
dividend policy. EXIM bank has played a silent contribution in giving cash
dividend. The only reason of not giving cash dividend to the shareholders is
to expand the business. The EXIM bank gives more stock dividend for the
company expansions.
Sources
1. Bangladeshs Top 500-2009, 1st edition.
2. www.dsebd.org
3. www.eximbankbd.com
4. www.investopedia.com
5. www.bangladesh-bank.org/
6. Annual Report of EXIM Bank of Bangladesh (2005-2009).
7.