Daffodil International

University

A Report on the Fund Management

and Performance Evaluation of
BRAC Bank Limited.

1
 Course Code: FIN- 435.
Course Title: Bank Fund Management.

Assignment
On:
“The Fund Management and Performance Evaluation of
BRAC Bank Limited”

PREPARED FOR:

Sabrina Akhter
Lecturer
Department of Commerce
Faculty of Business & Economics
Daffodil International University

PREPARED BY:

Batch: 17th
BBA

Date of Submission: March 31, 2010

March 31, 2010

Sabrina Akhter

2
Course Instructor of Bank Fund Management
Department of Commerce.
Faculty of Business and Economics
Daffodil International University

Subject: Regarding the submission of this report on “the Fund Management and
Performance Evaluation of BRAC Bank Limited.”

Dear Madam,
Its gives us immense pleasure in presently here with the report entitled “the Fund
Management and Performance Evaluation of BRAC Bank Limited.” which was
assign to us as a student of FIN-435 course. In preparing this assignment we had the
unique opportunity to expose ourselves.

We tried our best to follow your instruction, schedule, format, and suggestion in every
step of our report writing.
Please grant my earnest apology for any issue of the report, let me be informed.

Sincerely Yours,

------------------------

(On behalf of the group)

ACKNOWLDGEMENT

3
First of all we would like to thank to our respectable teacher Sabrina Akhter to give us
the opportunity to do this assignment under her guidance. She is so much an inspiration
and guidance to us. We are short of words in expression our gratitude.

Then we would like to thank to officials of BRAC Bank limited for their excellent
support to produce the data and relevant information. We want to convey our special
thank to Mr. Zahirul Islam, company secretary of BRAC Bank who apart from his very
busy office work, has spared time to discuss the ins and outs of the assignment and guide
us by giving suggestions. We worked there under his direct supervision.

We would like to thank for entire honorable person whose are cooperating with me,
without whose we can not touch our destination.

EXECUTIVE SUMMERY

4
The topic of this report was “The Fund Management and Performance Evaluation of
BRAC Bank Limited.”. This report is partial requirement of BBA program, faculty of
business & Economics of Daffodil International University. To prepare this report as an
apprentice we have taken necessary assistance from Sabrina Akhter during report writing.

The report is conducted with the purpose of introduction the financial operation and
providing the chance to analyze and make assignment accordingly.

TABLE OF CONTENTS

5
 Chapters Name Page No.

Acknowledgement
Executive summary
Table of contents
Introduction
Motivation of the Report
Objective of the report
Methodology
Limitation of the report
Background of the Report
Operation of the Bank
Business Performance
Recommendation
Conclusion

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 INTRODUCTION

Motivation of the Report:

We are the students of BBA program of Daffodil International University. As we are

studying the Bank Fund Management in this semester, we have to gather huge amount of
knowledge about the Bank fund operation. To acquire practical knowledge about the
banking operation our course instructor has motivated us to do this type of assignment.
That’s why we have motivated to prepare this report.

Objective of the Report:

A study in banking operation of AB Bank Limited to find out its activities and
performance in terms of anticipated customer’s requirements and provide them with the
service, which meet their market, quality and service need.

• To give a brief about the history and information of this bank.

• To inform about the bank mission and vision market performance of BRAC Bank
Limited.
• Setting a general idea about operation performance of BRAC Bank Limited.
• To explain about the sources and uses of BRAC Bank fund.

Methodology:

The study is based on secondary data methodology of this final report is given below:
Data regarding the organization profile collected in the following ways:

• From the organization’s Annual report.

• Online information.
• By interviewing the organization’s officials.
• Observational method will also be used in this study.

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Limitation of the study:

Any assignment paper needs high degree of involvement regarding collection of

information, creation of database, literature review and analysis of data. In this study, we
have tried our level best to collect the related information within the time constraint.

Blackguard of BRAC Bank Limited:

BRAC Bank is a scheduled commercial bank established under the Banking companies
Act, 1991 and incorporated as a public company limited by shares on 20 May, 1991
under the companies Act, 1994 in Bangladesh. The primary objective of the Bank is to
carry on all kinds of banking business. The bank could not start its operating till 03 June,
2001 since the activity of the bank was suspended by the High Court of Bangladesh.
Subsequently, the judgment of the High court was set aside and dismissed by Bank has
started operations from 04 July, 2001.

Vision Statement:
“Building a profitable and socially responsible financial institution on Market and
Business with growth potential, thereby assisting BRAC and stakeholders to build a “just
enlightened, healthy, democratic and poverty free Bangladesh”.

Mission Statement:
• Sustained growth in “Small & Medium Enterprise” sector
• Continuous low-cost deposit growth with controlled growth in retail assets.
• Corporate Assets to be funded through self-liability mobilization. Growth in
Assets through syndications and investment in faster growing sectors.
• Continuous endeavor to increase non-funded income
• Keep our debt charges at 2% to maintain a steady profitable growth
• Achieve efficient synergies between the Bank’s branches, SME unit offices and
BRAC field offices for delivery of remittance and Bank’s other products and
services

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CORE VALUES:

• Value the fact that one is member of the BRAC family.

• Creating an honest, open and enabling ENVIRONMENT.
• Have a strong customer focus and build relationships based on integrity, superior
service and mutual benefit.
• Strive for profit & sound growth.
Work as a team to serve the best interest of our owners

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Source of BRAC Bank funds:

Year 2009 2008 2007 2006 2005

Borrowings 2450000000 2280000000 2240000000 1332974167 1473391667
Deposit and 75219615155 58006887010 37368407774 23001921689 13409010390
Other A/C
Other 8760734892 6717480730 3702158970 3559726180 1210675172
Liabilities
Shareholder 8150954413 5437525651 3072028674 2117193037 782931910
s’ Equity
Total Funds 94581304460 72441893391 46382595418 30011815073 16876009139

Contributions of each Component in percentage:

Year 2009 2008 2007 2006 2005

Borrowings 2.59 3.15 4.83 4.44 8.73
Deposit and 79.53 80.07 80.57 76.64 79.46
Other A/C
Other 9.26 9.27 7.98 11.86 7.17
Liabilities
Shareholders’ 8.62 7.51 6.62 7.05 4.64
Equity

Portion of each fund sources 2009

9% 3%
9% Borrrowings

Deposit and
Other A/C
Other
Liabilities
Shareholder
79% s’ Equity

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Portion of each fund sources 2008

Borrowing

7.51 3.15
9.27
Deposits and
other account

Other lialilities

Shareholers equity
80.07

Portion each fund sources 2007

Borrowings
6.62 4.83
7.98
Deposits and
other account

Other
liabilities

80.57 Shareholders
equity

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Portion of each fund sources 2006
Borrowing

7.05 4.44 Deposit and other

account
11.9

Other liabilities

Shareholder
equity

76.6

Portion of each fund source 2005

4.64 8.73 Borrowing

7.17

Deposit and
other account
Other liabilities

Shareholder
equity
79.46

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Uses of Bank Funds:
Year 2009 2008 2007 2006 2005
Cash 6619009730 4315888000 3114571471 2172387439 1011470878
Balance with 5593933873 3194971113 3064562581 2335200830 1162526288
the Bank
Investment 10972204419 8245373273 4996856717 3768012071 2163814600
Loan & 64150835159 5267671674 3246112018 1955716538 11791312522
advance 0 0 0
Fixed Asset 1637898063 1472024279 942929286 389375132 156335491
Other Asset 4307431216 2536919986 1702573183 1189674221 1510529360
Money at call 1300000000 100000000 100000000 600000000 80000000
and on short
notice
Total Fund 88987378587 6934692227 4331805083 2767661424 16713462851
8 7 3

Contributions of each Component in percentage:

Year 2009 2008 2007 2006 2005

Cash 7.43 6.22 7.19 7.84 6.05

Balance with the 6.28 4.60 7.07 8.43 6.95

Bank
Investment 12.33 11.89 11.53 13.61 12.94

Loan & advance 72.08 75.96 74.93 70.66 70.54

Fixed Asset 1.84 2.12 2.17 1.40 0.93

Other Asset 4.84 3.65 3.93 4.29 9.03

Money at call and 1.46 0.14 0.23 2.16 0.47

on short notice

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 Portion of fund uses 2009
Cash

Balance with
1.84 4.84 1.46 7.43
6.28 theBank
Investment
12.33
Loan & Advance

Fixed Asset

Other Asset

72.08 Money at call and

on short notice
Slice 8

Portion of fund Uses 2008 Cash

Balance with the Bank

2.17 3.930.14 6.22 Investment

4.6
11.89
Loan & Advance

Fixed Asset

Other Asset
75.96
Money at call and on short
notice

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Portion of fund Uses 2007 Cash

2.17 3.930.23 7.19 Balance with

7.07
11.53 the Bank

Investment

Loan &
74.93
advance

Fixed Asset

Other Asset

Portion of fund
2.16 Uses 2006 Money
Cash at call
1.4 4.29 7.84
8.43
and on short
Balance with the
notice
Bank
13.61 Investment

Loan & Advance

Fixed Asset

70.66
Other Asset

Money at call and on

short notice
Slice 8

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 9.03 0.476.05 Cash
0.93 6.95

12.94 Balance with

the Bank

Investment

Loan &
70.54 Advanace I
nvestment Sector of BRAC Bank
Fixed Asset
Like other bank The BRAC Bank’s interest to investment is the use of money for the
purpose of making more money to gain income or increase capital or both. As we know
there is always lies default risk in loan making. To avoid this, the bank goes through the
Other Asset
investment because debt instruments can be converted into cash with little risk of loss of
principal value. The BRAC bank authority ahs analyzed that the investment in debentures
is less affected by local economic condition rather than national economic condition in
Money at call
the money market and capital market. Incomes on debentures are tax free.
The BRAC bank’s investment items are T-bill/bond, share, and on short
and debenture. The Chief

notice
Investment officer of the investment committee has designed the investment area mainly
invest in government sector. Slice 8
 The total invests in government securities (5&2 years Treasury bill) are
3,240,000,000/- and it was 3,822,669,100/- in Government bond in2005.
Slice 9
As we know, credit risk is the barrier in maximizing shareholders wealth. So, banks make
investment by part of their Lon able funds to earn profit and maximize the shareholders
wealth without any risk. This is the reason to invest a large amount in T-bill thus it can be
converted in cash at any time when required. Slice 10

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Deposit Mix:
Year 2009 2008 2007 2006 2005
Current Deposit and 24549608278 7652002774 5543600799 3060293660 3288528993
other A/C
Bills payable 453829731 424445762 409015536 11744828 122593253
Savings bank 13043725795 4627686658 3985564159 2936582930 1863763753
deposits
Fixed Deposit 36731258306 43399790445 27307976283 16742577461 8051558273
Other Deposit 441193045 1902951371 122250997 148722810 82566118

Deposit Mix in 2009

Other
Deposit, 44119304
5

Current Deposit
and other
A/C, 24549608278
Fixed
Deposit, 36731258
306

Savings bank
deposits, 13043725
795

Bills
payable, 45382973
1

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Deposit Mix in 2008

Deposit Mix in 2007

18
Deposit Mix in 2006

Deposit Mix in 2005

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Performance Evaluation:
Return of Equity:

Year 2009 2008 2007 2006 2005

Income After Tax 1373364872 973450830 618335637 334261127 192680101
Total Equity Capital 8150954413 5437525651 3072028674 2117193037 782931910
ROE 16.85% 17.90% 20.13% 15.79% 24.61%

Return on Equity
30
25 24.61
Percentage

20 20.13
16.85 17.9
15 15.79
10
5
0
2009 2008 2007 2006 2005
Year

Return on Equity: Return on Equity is a measure of the rate of return flowing to the
bank’s shareholders. It approximates the net benefit that the shareholders have received
from investing their capital in the bank (i.e. placing their funds at risk in the hope of
earning a suitable profit).

Here the Bank earns tk. 16.85, tk 17.90, tk. 20.13, tk. 15.79 and tk. 24.61 by using total
capital of tk. 100 for the year 2009, 2008, 2007, 2006 and 2005 respectively.

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Return on Asset:
Year 2009 2008 2007 2006 2005
Net Income 1373364872 973450830 618335637 334261127 192680101
After Tax
Total Asset 9458130446 7244189339 4638259541 3001181507 16876009139
0 1 8 3
ROA 1.45% 1.34% 1.33% 1.11% 1.14%

Return on Asset
2

1.5
Percentage

1.45 1.34 1.33

1.11 1.14
1

0.5

0
2009 2008 2007 2006 2005
Year

Return on Assets: Return on Assets is an indicator of managerial efficiency, it indicates

how capable the converting the institutions Assets into earnings.

Here the Bank earns tk. 1.45, tk 1.34, tk. 1.33, tk. 1.11 and tk. 1.14 by using total assets
of tk. 100 for the year 2009, 2008, 2007, 2006 and 2005 respectively.

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Net Interest Margin:

Year 2009 2008 2007 2006 2005

Net Interest 3129115435 3156009869 2062110340 1157615437 607331119
Income
Total Asset 9458130446 7244189339 4638259541 3001181507 16876009139
0 1 8 3
NIM 3.31% 4.36% 4.45% 3.86% 3.60%

Net Interest Margin

5
4.36 4.45
4 3.86 3.6
3.31
Percentag 3
e 2
NI
1 M
0
2009 2008 2007 2006 2005
Year

Net Interest Margin: The net interest margin measures how large a spread between
interest revenue and interest cost. Management has been able to achieve by close control
over the banks earning assets and the pursuit of the cheapest sources of funding. This is a
measure of efficiency as well as profitability indicating how well management and staff
have been able to keep the growth of revenue ahead of rising cost.

Here the Bank’s net interest income tk. 3.31, tk 4.36, tk. 4.45, tk. 3.86 and tk. 3.60 by
using total assets of tk. 100 for the year 2009, 2008, 2007, 2006 and 2005 respectively.

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Net Non Interest Margin:

Year 2009 2008 2007 2006 2005

Non Net 4275511368 2880173968 1481039542 919810085 565986540
Interests
Revenue
Non Net Interest 3603569530 2862277587 1597657356 1027018495 592999647
Expense
Total Asset 9458130446 7244189339 4638259541 3001181507 16876009139
0 1 8 3
NNIM 0.71% 0.025% -0.25% -0.36% -0.16%

Non Net Interest Margin

0.8 0.71
0.6
0.4
Percentage 0.2
0 0.025
-0.16 NNIM
-0.2 -0.25
-0.4 -0.36
2009 2008 2007 2006 2005
year

Net Non Interest margin ratio: Non interest margin measures the amount of non
interest revenue stemming from deposit service charges and other service fees the bank
has seen able to collect (called fee income) relative to the amount of non interest cost
incurred including wages, Salaries repair maintenance cost and loan loss expenses
foremost bank, the non interest margin is negative that means generally non-interest cost
are more than fee income.

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From the above picture it can be stated that the Bank’s net non interest income tk. 0.71, tk
0.025, tk. -0.25, tk. -0.36 and tk. -0.16 by using total assets of tk. 100 for the year 2009,
2008, 2007, 2006 and 2005 respectively.

Earnings per Share:

Year 2009 2008 2007 2006 2005

Net Income After 1373364872 973450830 618335637 334261127 192680101
Tax
No. of Share 22521700 15840000 120000000 11373300 5000000
EPS Tk.60.98 Tk. 61.46 Tk. 42.30 Tk. 29.39 Tk. 38.54

Earnings Per Share

70
60 60.98 61.46
50
Percentag 40 42.3 38.54
e 30 29.39
20 EPS
10
0
2009 2008 2007 2006 2005
Year

Earnings per share: Earnings per share indicate how much a share on stock of a bank
can earn income from investment.
]
That means here one stock of this bank can earn tk 60.98, tk.61.46, tk. 42.30, tk. 29.39
and tk. 38.54 for the year 2009, 2008, 2007, 2006 and 2005

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Degree of Asset Utilization:

Year 2009 2008 2007 2006 2005

Total Operating 3801057273 3173906250 1945492529 1050407027 580318012
Revenue
Total Asset 9458130446 7244189339 4638259541 3001181507 16876009139
0 1 8 3
Asset Utilization 4.02% 4.38% 4.19% 3.50% 3.44%

Degree of Assets Utilization

5 4.38
4.02 4.19
4 3.5 3.44
3
Percentage
2
1
0
2009 2008 2007 2006 2005
year

Asset Utilization: The bank’s degree of Asset Utilization reflects portfolio management
policies, specially the mixed and yields on the bank’s assets Equity Multiplier

From the above picture it can be stated that the Bank’s total operating income tk.4.02, tk
4.38, tk. 4.19, tk. 3.50 and tk. 3.440.16 by using total assets of tk. 100 for the year 2009,
2008, 2007, 2006 and 2005 respectively.

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The Bank’s Equity Multiplier:

Year 2009 2008 2007 2006 2005

Total Asset 9458130446 7244189339 4638259541 3001181507 16876009139
0 1 8 3
Total Equity 8150954413 5437525651 3072028674 2117193037 782931910
Capital
Equity 11.60 13.32 15.10 14.18 21.55
Multiplier

Equity Multiplier

25
21.55
20
15 15.1 14.18
13.32
11.6
10
EM
5
0
2009 2008 2007 2006 2005
Year

Bank equity Multiplier: Equity multiplier reflects leverage on financing policies that
means the sources chosen to fund the bank (debt/equity)
The multiplier is a direct measure of the banks degree of financial leverage.
How many dollar of assets must be supported by each dollar of equity capital and how
much of the banks recourses, therefore must rest on debt. Because equity must absorb
losses on the banks assets the larger the multiplier the more exposed to failure risk the
bank is.

From the above picture it can be stated that the Bank’s total assets is 11.6 times, 13.32
times, 15.10 times, 14.18 times and 21.55 times higher than total equity capital for the
year 2009, 2008, 2007, 2006 and 2005 respectively. The financial leverage for the bank
declines gradually.

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 Recommendation

The overall scene says that The BRAC bank has the strong efficient management in loan
management. Although there a chance to default loan and some non performing loan the
bank always prefer to utilize their deposit fund in the loan sector than in investment
sector. The Prime bank always takes necessary steps by analyzing the credit approaches
thus the bank does not need to face the loan default problem. But the efficiency also
affected by economic condition of the country beside the political situation. The BRAC
Bank is always promising satisfied its customer.

Conclusion
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Today’s business is very competitive and complex. To survive in the related sector the
organization need competitive people and has to take some effective policy. Every
country must given a plan for important role in economic activities Bangladesh is no
exception of that. Commercial Bank’s financial development and economic development
are closely related. That’s why the private commercial banks are playing significant role
in this regard.
From the analysis of the BRAC Bank, we got understand about the performance. Also
well performance of BRAC Bank.

The Bank should have to up a new standard in financing in the industrial, Trade and
foreign exchange business. Its various deposit and credit products should have also
attracted the clients- both corporate and individuals who feel comfort in doing business
with the Bank. The bank should take initiative effort to accelerate the non interest income
performance for avoiding negative non net interest income.

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