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South East University

Term paper on Financial


Institution Analysis of IDLC
Finance

Southeast University
Term paper on Financial Institution Analysis

South East University

[Year]

Course Code: FIN-2122

Submitted by :

Course Title:
Financial
Management
Term paper on Financial Institution Analysis

Rajib Alam
2011010000195
Batch No: 27th
Section : F

South East University

Term paper on Financial Institution Analysis

Southeast University

Abstract

This paper examines the issues or topics which are presently subject to Financial Institution
analysis of IDLC financial institutions. The paper demonstrates that there has been diversity in
the Topics or issues which non finance believes to be important. A financial institution of the
most critical issues or topics is provided which should be helpful to those engaged in doing
analysis for financial institutions. IDLC Finance Limited one of renowned non banking financial
institution in Bangladesh. It started its operation at 1985 and it is the pioneer financial institution
in Bangladesh. IDLC Finance Limited has different kinds of products and services. IDLC is
financing in different sectors through their products and services. IDLC Finance Limited is a
mother company. I have done my term paper in IDLC finance. And my topic was the

Financial Institution analysis of IDLC Finance. In Bangladesh investment bank mainly


perform four kinds of activities. They are issue management, underwriting, portfolio
management and corporate advising. IDLC Finance Limited is performing all of these four
activities. IDLC Finance Limited is providing different capital market related services to the
corporation and institution seeking for the funds and individuals seeking opportunities to
invest their fund in different securities. The companies wide array products and services
range from retail products ,such as home loans, car loans, corporate and SME products
including lease and term loans, structured finance services are ranging from syndication to
capital restructuring and a complete suite of merchant banking and capital market service.
IDLC Finance Limited is Financial institution its activities in such a way, that why number of
client of it increasing day by day. It is a very good sign for a capital market. IDLC
Finance Limited is a providing good return to its parent company as well as the
country economy through its activities. The current term paper aimed at critically examining the
Analyzed of a private financial institution. The main objective of this term paper was to analyze the
financial institution analysis of IDLC finance ltd. along with how efficiently are providing services to
its customer. From Financial Analysis it has been seen that the performance of IDLC finance ltd is
really satisfy.

Term paper on Financial Institution Analysis

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Acknowledgement

Its a matter of great contentment to be able to complete this term paper in due time. My
endeavor will be considered successful if the term paper is of any help to you. At the very
outset I would like to express my heartiest gratitude to Almighty Allah for giving me the
capacity to complete this task. Then I would like to place my humble gratitude to my
respected faculty Lecturer: S. M. Mujahidul Islam SEU Business School, Southeast
University for his valuable time commitment, guidance, patience and stimulation made
along with the course of action. I have put my best effort to make this report to serve its
purpose; that is, to come across the Financial Institution analysis of IDLC Finance
Limited. I would like to avail the opportunity of expressing my deep gratitude and regards
to my parents for their continuous support. I am indebted to all of my classmates to
support and .providing me with his experience and practical knowledge in this regard.
Along with this I want to thank one other people who is Md. Harun ur Rashid. He is my
brother. Without the help of these people this term paper probably wouldnt be completed
in due time.

Term paper on Financial Institutions Analysis of IDLC

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1.1Analysis of Financial Institutions:


Analyzing a financial institution is very different from analyzing a corporate entity. When a
financial institution has liquidity problems, the end can be fast and furious. This two day
class will cover the qualitative and quantitative analysis of financial institutions. Exercises
and case studies are included.

1.2 Introduction:
One of the renowned names in Bangladesh financial market is financial institution Some
financial institutions serve as pass through or agency institutions, where the risks and returns
to clients depend primarily on the investment results of the institutions. Such institutions
include mutual funds, hedge funds, REITs and defined contribution plans such as 401k plans.
Other financial institutions serve as guarantors, or principal institutions, where the institutions
offer a fixed return to clients and the institutions retain the actual risks and returns of their
investments. This group includes commercial banks, Non- financial institution, insurance
companies, sovereign funds and defined benefit pension plans. Leasing Company (IDLC)
Limited. It started operation in the year 1985 as the pioneer leasing company as to facilitate
lease- financing and capital investment in industrial sector, with the view of Become the
best performing and most innovative solutions provider in the country. For introducing new
multitude of diverse financial products and services in 2007 the company changed its name to
IDLC Finance Ltd. Over the last two decades IDLC has contributed relentlessly in the
countrys transition into a developing country and has emerged as Bangladeshs leading multi
product financial institution. The company now offers financial and technological solutions to
both institutional and individual clients to cater for their unique requirement.

1.3 Origin of the report:


This term paper is a course requirement of FIN-2122: Financial Management. Our
honorable course instructor assigned us the topic and the report was conducted on Financial
Institution and IDLC finance Ltd. I am very glad to have his suggestion and guidelines in
this regard. The report mainly focused on the Financial Institution and leasing companys
functions, source of fund, investment and rules and regulation regarding leasing company.
But as Financial Institution analysis is one of the highest concerns of todays financial
institutions, we also focus on the Financial Institution Analysis of the firm.

1.4 Statement of the problem:


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This study arises from the need to know the financial institution analysis in the firm more
effectively. The rapid growth of securities, financing company and Investments Company are
really thinks about the financial institution. Now a days it is known that the financial
institution analysis the organizational performance very well. In financial institution analysis
there is lots of important thing. We can also be able to know that how these things are helping
or be the independent variable of the knowledge sharing.
Accordingly, organization from different sectors, across industries and through different time
periods should use these financial institution analysis tools. Nevertheless researcher has yet to
examine in depth the probable influence of financial institution analysis of a firm in different
conditions. However, the reason why individual employees decide whether to actively
participate in financial institution analysis activities are currently not well understood.
Therefore, this research aims to contribute to the general understanding of the barriers
determining the success of financial institution analysis in organizations in general and to the
organization under study in particular. Knowledge is one of the few assets that grows also
usually exponentially when shared financial institution analysis is believed to be one of the
most important processes for financial analysis . Davenport and Prusak (2000) and Chua
(2003), however, indicate that financial institution is analysis in organizations whether the
process is deliberately managed or not. Junnarkar (1997) also supports this. View of readily
established analysis communities within the organizational framework, even before
management makes any kind of effort towards establishing them. Companies are seeking to
implement special KM projects, which aim to establish an environment within organizations
that will support the effective analysis creation, transfer and use (Davenport et al., 1998). All
analysis management initiatives try to foster the sharing of knowledge, ideas, and
experiences, in whatever form, among individuals or groups, as Cabrera and Cabrera (2002)
point out. Nevertheless, it is accepted that willing to share participants is the key factor for
a successful implementation of any KM process (Koulopoulos and Frappaolo, 1999).

1.5 Objective of the study:


1.5.1 Broad Objective:
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1.5.2 Specific Objective:

2.1 Clarifying the Concepts:


A financial institution is an institution that provides financial services for its clients or
members. Probably the most important financial service provided by financial institutions is
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acting as financial intermediaries. Most financial institutions are regulated by the


government. Broadly speaking, there are three major types of financial institutions:
1 Depositary Institutions : Deposit-taking institutions that accept and manage deposits and
make loans, including banks, building societies, credit unions, trust companies, and mortgage
loan companies
2 Contractual Institutions: Insurance companies and pension funds; and
3 Investment Institutes: Investment Banks, underwriters, brokerage firms

Function: Financial institutions provide service as intermediaries of financial markets. They


are responsible for transferring funds from investors to companies in need of those funds.
Financial institutions facilitate the flow of money through the economy.
Standing settlement instructions: Standing Settlement Instructions (SSIs) are the agreements
between two financial institutions which fix the receiving agents of each counterparty in
ordinary trades of some type. These agreements allow traders to make faster trades since time
used to settle the receiving agents are conserved. Limiting the trader to an SSI also lowers the
likelihood of a fraud.
Regulation See also: Financial institutions in most countries operate in a heavily regulated
environment as they are critical parts of countries' economies. Regulation structures differ in
each country, but typically involve prudential regulation as well as consumer protection and
market stability. Some countries have one consolidated agency that regulates all financial
institutions while others have separate agencies for different types of institutions such as
banks, insurance companies and brokers.
See also:
Ban Consumer Credit Act 1974 (UK law), Credit union, Financial economics Fractionalreserve banking, Full-reserve banking International financial institutions, Non-bank financial
institution, Savings and loan association.

2.2Available Research:
2.2.1 Financial Institutions Research Project:
Financial intermediaries play a crucial role in channeling capital from investors to companies.
We define financial intermediaries broadly, including not only commercial banks, but also
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investment banks and providers of private equity and venture capital. Thus our research
program focuses not only on traditional banking questions, such as the regulation of
commercial banks and the monetary transmission channels between the banking sector and
the real economy, but also on the role and efficiency of investment banks and private equity
funds in helping companies raise capital.

2.2.2 Expert Insight into Bank and Insurance Financial Strength:


As the scrutiny of banks has increased in the aftermath of the credit crisis, the ability to
accurately assess the strength of banks and their security has become more important than
ever. Moody's Investors Service Bank Research is designed to provide financial market
participants with fundamental analysis and expert insight into bank credit risk.

2.2.3 Bryce W. Rowe, CFA ,Senior Research Analyst, Community Banks:


Bryce Rowe is Bairds senior analyst covering Community Banks / Business Development
Companies. Prior to joining Baird in 2006, Bryce held equity analyst positions at several
regional brokerage firms with the most recent being Legg Mason. In 2011, Bryce was
selected for The Wall Street Journals Best on the Street Analyst Survey for Commercial
Banks and Savings & Loans, ranking No. 4, and his second recognition by The Wall Street
Journal. He received a BA in Economics from the University of Virginia. Bryce Rowe is
Bairds senior analyst covering Community Banks / Business Development Companies. Prior
to joining Baird in 2006, Bryce held equity analyst positions at several regional brokerage
firms with the most recent being Legg Mason. In 2003, Bryce was selected for The Wall
Street Journals Best on the Street Analyst Survey for Commercial Banks and Savings &
Loans. He received a BA in Economics from the University of Virginia.

2.2.4 David A. George, CFA, Senior Research Analyst, US Banks:


David George is Bairds senior analyst covering U.S. Banks. Prior to joining Baird in 2007,
he was a senior analyst at A.G. Edwards & Sons, covering large- and mid-cap regional banks
as well as the trust and processing banks. In 2004, he was named a Top 50 Analyst by
Bloomberg Magazine, finishing first in stock selection in the Regional Bank category. He
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also has seven years of experience in the banking industry, as he held senior commercial
lending positions with both Fifth Third Bancorp and Huntington Bancshares. David received
a BA in Sociology from the College of Wooster (Ohio).

Factors

Rank

Location Convenience

Other Convenience Facto (such as parking, hours and the like)

Advertising

Bank Atmosphere

3.1What is Data?
Data is a collection of facts, such as values or measurements. It can be numbers, words,
measurements, observations or even just descriptions of things.

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3.1.1 Data can be qualitative or quantitative:


A) Qualitative data is descriptive information (it
describes something)
B) Quantitative data is numerical information
(numbers).
Quantitative data can also be Discrete or
Continuous: Discrete data can only take certain
values (like whole numbers) Continuous data can take any value (within a range)
Put simply: Discrete data is counted, Continuous data is measured
Example: What do we know about Arrow the Dog?

Collecting: Data can be collected in many ways. The simplest way is direct observation.
Example: you want to find how many cars pass by a certain point on a road in a 10-minute
interval.So: simply stand at that point on the road, and count the cars that pass by in that
interval.
Census or Sample: A Census is when you collect data for every member of the group (the
whole "population").A Sample is when you collect data just for selected members of the
group. Example: there are 120 people in your local football club. You can ask everyone (all
120) what their age is. That is a census. Or you could just choose the people that are there this
afternoon. That is a sample. A census is accurate, but hard to do. A sample is not as accurate,
but may be good enough, and is a lot easier.
Data or Datum: The singular form is "datum", so we would say "that datum is very high"
"Data" is the plural so we can say "the data are available", but it is also a collection of facts,
so "the data is available" is fine too.

3.2 Data source And information:


Two types of data Primary data and secondary data:

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What does each and every research project need to get results? Data or information to
help answer questions understand a specific issue or support a hypothesis.
At the Institute for Work & Health, researchers conduct many projects each year. Some
projects involve going into workplaces and asking workers questions. Researchers who do
this have specific work-health questions in mind that theyd like answered.
The answers or data used from the responses are called primary data.
Other Institute projects involve using data that has already been gathered by someone else,
such as survey information from the Canadian Census. Researchers then examine this
information in a different way to find a response to their question. This data are called
secondary data.

3.3 I collected the secondary data:

4.1 Company History and Background:


IDLC financial Bangladeshs pioneering leasing company was established in Dhaka in 1980.
IDLC was formed through the collaboration of International Finance corporation (IFC), the
private sector wing of the world Bank.

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German Investment and Development company (DEG) one of largest European development
finance institutions and a member of KfW Bankengruppe Kookmin bank, one of the largest
banks in South Korea Korea Development financing Corporation, one of the largest leasing
companies in South Korea of the 1980s The Aga Khan fund for Economic Development, a
leading international development agency The City Bank Limited, one of the oldest private
Commercial Bank in Bangladesh IPDC of Bangladesh Limited, the first private sector
financial institution in Bangladesh and Sadharan Bima corporation, the only state ownerd
general insurance corporation in Bangladesh
Today IDLC finance is the leading multi product Non Banking Finacial Institution in
Bangladesh with 27 Branches and over 800 staff IDLC offers a wide range of loans .deposit
and capital market products and service to the Corparate, Consumer and SME client
segments. IDLC operates in the Capital market through its wholly owned subsidiaries IDLC
investment Limited and IDLC securities Limited
The IDLC group has always been a standard bearer for the financial sector in terms of
corporate governance and statutory compliance. The group is also highly regarded for its
professional pool of resource and progressive work environment. In 2010, the IDLC group
committed to sustainable business by becoming a member of the Bangladesh CSR Centre, the
United Nations Global Compact (UNGC), and finally, the United Nation Environment
Programmed Finance Initiative (UNEP FI)
IDLC received a long term rating of AA1 and short term rating of ST-1, as of June 30,2011

4.1.2 IDLCs Vision, Mission and Strategic Objectives

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4.1.3 Our Corporate Philosophy:


Discharge our functions with proper accountability for actions and results and bind
ourselves to the highest ethical standards

4.1.4 Goal:

4.1.5 Strategic Objectives

Grow and develop our talent pool;


Fully leverage new core banking platform;
Optimize distribution points;
Grow and diversify funding sources;
Grow sales and service capabilities in Consumer Division;
Aggressively grow SME portfolio;
Focus on top-tier clients in Corporate;
Consolidate capital market operations and enhance capabilities;
Embrace internationally accepted corporate governance and sustainable
business practices.

4.1.6 Core Values

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4.1.7 Sector wise exposure December 31, 2012:

4.1.8 SEGMENT, PRODUCT AND SERVICE:


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IDLC offers products under four major business segments Consumer, Corporate,
Small and Medium Enterprise and Capital Markets.
Consumer Finance
Deposit Schemes
Cumulative term Deposit
Monthly/ Quarterly/Annual Earner Deposit
Double/ Triple Money Deposit
Short-term Deposit
Home Loan
Car Loan
Personal Loan
Corporate:
Corporate Finance

Structured Finance Solutions:

Term Loan
Fund-raising :\Loan\Leas\private placement of Equity
Lease Finance
Preference Share\Bond\Foreign-currency Loan
Working Capital Finance
Refinancing of special Funds
Project Finance
Refinancing and Special Funds
Corporate Advisory Services
1) Project/infrastructure Finance
2) Advisory service
3) Structured Solution
4) Securitization of Assets

Small and Medium Enterprise


A} Small enterprise Finance

B.1) Medium Enterprise Finance

/ SME Loan

/Term Loan

/Abashan Loan

/Lease Finance

/Seasonal Loan

/Working Capital Finance


/Project Finance

Capital Markets
Portfolio Management

/Specialized Product
B.2) Supplier Finance

/Discretion portfolio Management{MAXCAP}

B.3) Women Entrepreneur Loan

/Margin Lending (Cop Invest)

B.4)Commercial Vehicle Loan

Investment Banking (IPO,RPO Bond Issuance, Rights, Rights shares ,offering, Corporate Advisory ect)
Research
Brokerage Services

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4.1.9 KEY FINANCIAL OF IDLC GROUP:

4.1.10 AWARDS AND ACHIEVEMENTS:


SAFA (South Asian Federation of Accounts) Beast Presented Account Awards
SAFA Beast Presented Accounts Award 2005,2006,2007,2009 and 2010

ICAB (The Institute of Cost and Management Accountants of Bangladesh) Awards


A} ICMAB Beast Corporate Award 2010
B} ICMAB Beast Corporate Performance Award 2008
C} ICMAB National Beast Corporate Award 2007
COMMWARD Excellence in Communication 2009 and Superbrands recognition in 2009

4.2 Definition of 'Ratio Analysis:

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A tool used by individuals to conduct a quantitative analysis of information in a company's


financial statements. Ratios are calculated from current year numbers and are then compared
to previous years, other companies, the industry, or even the economy to judge the
performance of the company. Ratio analysis is predominately used by proponents of
fundamental analysis.

4.2.1Types of Ratio and Categories of Financial Ratios:


Liquidity Measurement Ratios

4) Operating Performance Ratios

a)Current Ratio

) Fixed Asset Turnover

b) Quick Ratio

b) Sales/Revenue Per Employee

c) Cash Ratio

c) Operating Cycle

d) Cash Conversion Cycle

5) Cash Flow Indicator Ratios


a) Operating Cash Flow/Sales Ratio

2) Profitability Indicator Ratios


b) Free Cash Flow/Operating Cash Ratio
a) Profit Margin Analysis
c) Cash Flow Coverage Ratio
b) Effective Tax Rate
d) Dividend Payout Ratio
c) Return On Assets
d) Return On Equity

6) Investment Valuation Ratios

e) Return On Capital Employed

a) Per Share Data


b) Price/Book Value Ratio

3) Debt Ratios
c) Price/Cash Flow Ratio
a) Overview of Debt
d) Price/Earnings Ratio
b) Debt Ratio
e) Price/Earnings To Growth Ratio
c) Debt-Equity Ratio
f) Price/Sales Ratio
d) Capitalization Ratio
g) Dividend Yield
e) Interest Coverage Ratio
h) Enterprise Value Multiple
f) Cash Flow To Debt Ratio

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Financial Performance

2007

2008

2009

2010

2011

Growth %

4.2.2 Key Operating and Financial Highlights Group:

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Lease and Term loans disbursed

2,977

3,412

3,750

4,345

8,517

96.03%

Housing finance disbursement

1,255

1,612

1,839

2,121

2,586

21.90%

Short term finance portfolio

213

336

317

468

821

75.61%

Lease Finance

4,571

4,734

4,383

4,107

4,547

10.72%

Real estate finance assets

3,065

3,915

4,789

5,605

6,979

24.52%

Total assets

15,056

17,342

22,681

26,930

31,165

15.72%

Long term liabilities

11,103

12,115

18,792

21,745

25,299

16.34%

Term deposit balance

8,257

8,249

9,780

12,373

16,828

36.01%

Net current assets

1,401

1,559

3,645

4,172

3,676

-11.88%

Operational income

883

1,179

1,913

3,047

2,160

-29.11%

Operational expenses

272

352

490

966

913

-5.43%

Financial expenses

1,246

1,553

1,687

1,822

2,364

29.76%

Profit before tax

475

708

1,273

1,956

1,217

-37.81%

Net profit after tax

303

406

822

1,327

500

-62.30%

Average effective tax rate

36.08

42.57

35.46

32.16

58.88

83.08%

Debt equity ratio (Times)

9.54

8.32

8.48

6.30

6.83

8.44%

Financial expenses coverage ratio (Times)

1.38

1.46

1.75

2.07

1.51

-26.96%

Current ratio (Times)

1.20:1

1.21:1

1.04:1

1.39:1

1.31:1

-0.08%

Return on total assets (%)

2.37

2.50

4.11

5.35

1.72

-3.63%

Nonperforming loan ratio (%)

5.96

3.97

3.43

2.84

2.32

-0.52%

Return on shareholders equity (%)

27.59

28.43

41.05

43.64

13.04

-30.60%

Earnings per share* (BDT)

3.06

4.10

8.30

13.41

5.05

-62.30%

Dividend per share

4.00

3.50

11.00

10.00

2.50

-75.00%

Price earnings ratio (Times)

49.63

55.76

44.60

34.67

27.41

-20.96%

Dividend yield (%)

2.63

1.53

2.97

2.15

1.81

-0.34%

Dividend payout ratio (%)

26.40

21.55

40.14

45.21

49.47

4.26%

Operational Performance

Financial Ratio

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Equity Statistics

Number of shares (No.)

2,000,000

2,500,000

3,000,000

6,000,000

99,000,000

1550.00%

Year end market price per share (BDT)

1,519.00

2,289.00

3,703.00

4,648.00

138.50

-97.02%

Net asset value per share (BDT)

12.60

16.28

24.17

37.27

40.21

7.87%

Market capitalization

3,038

5,723

11,109

27,888

13,712

-50.83%

Market value addition

139.30

212.62

346.13

427.53

98.29

-77.01%

Shareholders' equity

1,247

1,611

2,393

3,690

3,980

7.87%

4.2.3 Non performing lone Ratio:


NPL is the nonperforming loans ratio. Analysts use this ratio to compare lenders. If a lender
has a high NPL ratio, the lender will have difficulties with cash flows. This is because many
of the loans the company holds have a high probability of not being paid back. If a lender
does not receive a return of his principal on the loan, he will lose money. The higher the
NPL, the more likely this happens.

Formula:

Divide by the total loan amount to calculate the NPL ratio. In the example, $10,000 divided
by $100,000 equals 0.1. Multiply the decimal by 100 to get 10 percent.

Non performing lone Ratio of IDLC Finance (2010) = 2.84%

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Non performing lone Ratio of IDLC Finance (2011) = 2.32%

4.2.4 Debt to equity ratio :


The debt-equity ratio is another leverage ratio that compares a company's total liabilities to its
total shareholders' equity. This is a measurement of how much suppliers, lenders, creditors
and obligors have committed to the company versus what the shareholders have committed.

Formula:

Debt to equity ratio of IDLC Finance (2010) = 6.30 Times


Debt to equity ratio of IDLC Finance (2011) = 6.83 Times

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4.2.5 Earnings per share:


EPS represents the number of dollars earned during the period on behalf of each outstanding
share of common stock. Earnings per share is calculated as follows:

Formula :
Earnings per share

Earnings available for common stockholders


Number of shares of common stock outs tan ding

EPS of IDLC Finance BDT (2010) = 13.41


EPS of IDLC Finance BDT (2011) = 5.05

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4.2.6 Dividend per share


Dividends Per Share (EPS) - Dividends per share represents the cash (or property) paid on
each share of outstanding common stock. Dividends per share do not represent the amount of
profit earned per share of stock (EPS). When calculating dividends per share all you need to
do is divide dividends paid by the number of common shares outstanding. The formula for is:

Dividend per share of IDLC Finance (2010) = 10.00


Dividend per share of IDLC Finance (2011) = 2.50

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4.2.7 Price Earnings Ratio:


The price earnings ratio (P/E) is the best known of the investment valuation indicators. The
P/E ratio has its imperfections, but it is nevertheless the most widely reported and used
valuation by investment professionals and the investing public. The financial reporting of
both companies and investment research services use a basic earnings per share (EPS) figure
divided into the current stock price to calculate the P/E multiple (i.e. how many times a stock
is trading (its price) per each dollar of EPS).
Formula:

Price Earnings ratio of IDLC Finance (2010) = 34.67 Times


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Price Earnings ratio of IDLC Finance (2011) = 27.41 Times

4.2.8 Return on total Assets:


Return on Total Assets (ROA): Return on total assets (ROA) Measures the overall
effectiveness of management in generating profits with its available assets; also called the
return on investment (ROI). The return on total assets is calculated as follows

Formula:
Re turn on total assets

Earnings available for common stockholders


Total assets

Return on total Assets of IDLC Finance (2010) = 5.35 %

Return on total Assets of IDLC Finance (2011) = 1.72 %

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4.2.9 Return on shareholders equity:


Measures the rate of return the shareholders receive on their investment in your business. Net
Income for the Year is after taxes and interest because the shareholders are only entitled to
the balance.
Formula:

Return on shareholders equity of IDLC Finance (2010) = 43.64%


Return on shareholders equity of IDLC Finance (2011) = 13.04 %

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4.2.10 Current Ratio


The current ratio is a popular financial ratio used to test a company's liquidity (also referred
to as its current or working capital position) by deriving the proportion of current assets
available to cover current liabilities.

Formula:

Current Ratio Analysis of IDLC Finance (2010) = 1.39:1 times


Current Ratio Analysis of IDLC Finance (2011) = 1.31:1 times

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5.1 Summary of major findings:


5.1.1 Non performing lone Ratio:
Here we can see that non performing loan ratios are decreasing each year. And in 2011 it is
3.07 % which is a good sign for IDLC Finance ltd. The ratio of nonperforming loan has been
further reduced from 4.5% in 2009 and 3.62 % in 2010 to 3.07% in 2011, mainly through
strengthening of the credit and collections teams and relevant process. IDLC has continued
with its prudential policy of building adequate provision for doubtful accounts and future
losses.

5.1.2 Debt to equity ratio:


IDLC finance limited is a strong equity based company. Emerging Credit Rating Agency of
Bangladesh rated IDLC in long term rating at AAA and sort term rating as ST -1. Institution
rating in this category characterized with excellent position. As in December 31, 2011 total equity of
IDLC finance stands at BDT 3690 million and 2010 it was BDT 2393 million. This means the
company has a strong equity against its debt. And the graph also shows that the ratio of debt to equity
ratio is decreasing in each year. And that is a good sign for the company to meet its obligation. The
companys equity had increased by 54% over the previous year.

5.1.3 Earnings per share:


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The company believes that superior service, diversification of client segment and business strong risk
management, performance focus, ensuring sustaining financial performance and those results an
increasing rate of earning per share. This graph shows every year this rate is increasing. Consorted
earning per share grew by 61% to BDT 221.8 compared to previous year.

5.1.4 Dividend per share:


IDLC finance has been paying dividend consistently to its shareholders over the years. But they pay
dividend randomly according to their business policy.This graph highlights their dividend payment
per share. Moreover the company has paid 110% in 2010 and 100 % in 2011.

5.1.5 Price earnings ratio:


Price earnings ratios are 21.01 that indicate a good sign for the company. We know that lower price
earnings ratio means earring per share is more than the market value of the company. In 2011 IDLC
Finance has decreased by 6.02% against 2010.

5.1.6 Return on total assets:


The return on asset ratio of IDLC finance ltd also improved in 2011 over other four years. That we
can see on this graph and the annual report of 2011. The ROA increased means the net income also
increased and in 2011 their return on asset is 5.35 with a growth of 1.24%.

5.1.7 Shareholders equity:


This graph shows that shareholders equity in 2011 is BDT 3690 million with a growth of 54 percent
against BDT 2393 in the 2010. This table also shows the share holders equity was in a steady growth
2007 to 2008. And the growth rate 2008 to 2009 was reduced against 2007 to 2008. But from 2009 it
is again with positive growth.

5.1.8 Current Ratio:


The current ratio of IDLC finance in 2011 is 1.39:1 with a growth of .35 times. IDLC has a optimum
current ratio over the last few years. It means the company has the ability to face its short term
liabilities successfully with their short term asset.

5.2 Recommendations:
5.2.1 SOME OF THE RECOMMENDATIONS THAT I WOULD LIKE TO
PROPOSE ARE:
COMPETITIONS AND PRODUCT DIVERSIFICATION
Investment banks in Bangladesh are operating in a highly competitive environment. The
competition for them is even more challenging as they have to compete with banks. Given
the changes in the business environment, the need for product diversification is very
important. The remaining part concentrates mainly on term financing and housing finance.
Investment banks should venture into diversified use of their funds such as investment
banking, venture capital financing, factoring, etc. for a healthy growth of the capital
market.

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5.2.2 ENHANCING CAPITAL MARKET ACTIVITIES:


Investment banks around the world carry out a significant role in the development of the
capital market. Strong institutional support is necessary for a vibrant capital market which
is the core of economic development in any market based economic system. Active
participation of investment banks is essential to accelerate the capital market activities
which can expedite the economic growth of the country. The success of investment banking
operations is largely linked to the development of the security market.

5.2.3 RECOMMENDATIONS TO OFFER EVEN BETTER SERVICES


In addition to portfolio management, which is the core services offered by the investment
banks in our country, there are other valuable services that they can offer to attract a larger
customer and to reduce the risk of losing out customers to the competitors.
If we consider the level of grasp of the knowledge of our population, then it become quite
apparent that why instigating programs to educate our clients can give our investment
banks competitive edge over others, if not prove out to be a major differentiating factor.
Not only can that, educating the clients also open up new dimensions to do business with
the clients by creating demands in them. Though merger and acquisition yet not proved to be
so affordable and also profitable move in our countrys perspective, but ignoring this sector
will not be wise enough if our
investment banks are aiming at long term customer hold. So, the quicker investment banks
address this issue, the better it may prove out for them.

5.2.4 Operating income:


Above table shows in Each year their operating income growth increased rapidly. In 2011
operating revenue grew 58% to reach BDT 3027 million against the year 2011.Though the
amount of BDT million increase in 2011 but the growth shows that there is negative growth
in percentage in 2010 to2011, here the growth is 58% but the previous year growth is 62%
which indicated that the operating expenses also increased. So the company should try to
reduce their operating cost expenses.

5.2.5 Total asset:


IDLC consolidated asset at 2011 year end stood at BDT 26.9 billion a 19 % growth over
2010. An aggressive deposit program was initiated in the second half of 2011 and by year
end. So from the above table I can say they has a optimum level of asset.That means they
have the ability to meet its long term as well as short term obligations with adequate asset.

5.2.6 Profit:
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In 2011 IDLC Financed Limited posted an operating profit of BDT 1956 million as against
BDT 1273 million in 2010 with a spectacular growth of 53.65 percent over thepreceding
year. After having made necessary provisions for loans and advances, accordance with the
instruction of Bangladesh bank net income before tax (NIBT) stood at BDT 1327million in
the year under review against TK 822 million in the preceding year registering a growth of
61.47 percent.

5.2.7 Shareholders equity


This above table shows that shareholders equity in 2011 is BDT 3690 million with a
growth of 54 percent against BDT 2393 in the 2010. This table also shows the share
holders equity was in a steady growth 2007 to 2008. And the growth rate 2008 to 2009
was reduced against 2007 to 2008. But from 2009 it is again with positive growth.

5.2.8 Major Risks at IDLC: Major risks that IDLC identifies detrimental to its return and
market reputation is as follows:

5.2.8 .1Credit Risk: Credit risk is the possibility that a borrower or country party will fail to
meet agreed obligations. Thus managing credit risk for efficient management of a financial
institution (FI) has become the most crucial task. Given the fast changing, dynamic global
economy and the increasing pressure of globalization, liberalization , and consolidation it is
essential that FIs have robust credit risk management policies and producers those are
sensitive and responsive to these changes. At IDLC, credit risk may arise in the following
forms:

Default risk ,Exposure risk, Recovery risk, Country party risk, Related party risk,
Legal risk, Political risk

5.2.8 .2 Market Risk:


Market risk refers to the risk of fluctuation in a variety of markets such as interest rates,
prices of securities where the values of assets and liabilities can change and there exists the
risk of incurring losses.

5.2.8 .3 Liquidity Risk


Liquidity risk arises when a company is unable to meet the short term obligation to its lenders
and stakeholders. This arises from the adverse mismatch of maturities of assets and liabilities.

5.2.8 .4 Operational Risk


Operational risk is the potential loss arising from a break down in companys system and
producers, internal control, compliance requirements or corporate governance practices that
results in human error, fraud, failure, damage of reputations, delay to perform or compromise
of the companys interests by employees.

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5.3 Concluding:

The importance of sustaining and improving Financial institution and performance are
increasing day by day particularly in an environment which is characterized by rapidly
flourishing technology and its growing application to banking and non banking financial
institution tremendous competition, product development, shift in marketing strategy,
deregulation & globalization on the one hand, and escalation in the number of bank failures
accompanied by mergers and mega mergers on the contrary. In order to keep abreast with the
prevailing market scenario it is necessary to develop a comprehensive financial institution
evaluation system.

Institutions Evaluation System means a mechanism for improving the likelihood of the
organization successfully implementing its strategy. It is a process to have the goal of

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strategy implementation. In this process senior management selects a series of measures that
best represent the organizations strategy.

The current report aimed at critically examining the Institution Analysis of a private financial
institution. The main objective of this report was to Institution of financial analysis of IDLC
finance ltd. along with how efficiently are providing services to its customer. From Financial
Analysis it has been seen that the financial institution of IDLC finance ltd is really
satisfactory.

6.1 BIBLIOGRAPHY
1. Annual Report from 2011 and 2010.
2. Web Site of IDLC-Retrieve from www.idlc.com
3. Financial institution - Wikipedia, the free encyclopedia
4. Brochures of IDLC Finance Limited.
5. www.investopedia.com/terms/f/financialinstitution.asp
6. Financial Institutions of Bangladesh - Travel One BD
7. Banks in Bangladesh: List of Financial Institutes in Bangladesh
8. Non-bank financial institution - Wikipedia, the free encyclopedia
9. http://www.assignmentpoint.com/tag/internship-report
10. The_IDLC_Group_Corporate_Profile .pdf
11. Non-Bank Financial Institutions - World Bank

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12. Financial and Private Sector Development - Non-Bank ... - World Bank
13. Analysis of Financial Institutions - Financial Training Course
14. Credit Analysis of Financial Institutions, Second Edition - Waylon
15. www.kesdee.com/pdf/financialanalysis.pdf
16. ro.uow.edu.au/cgi/viewcontent.cgi?article=1030&context.
17. Financial institution Financial Statement Analysis
18.Fundamentals of Bank Financial Statement Analysis
19.Bank Financial Statement Analysis & Ratio Analysis
20.ro.uow.edu.au/cgi/viewcontent.cgi?article=1029&context...
21.Credit Analysis of Financial Institutions, Second Edition Waymond

6.2APPENDIX
6.2.1 List of Abbreviations
CDBL Central Depository of Bangladesh
CSD Customer Support Desk
CSE Chittagong Stock Exchange
DGEN DSE General Index
DSE Dhaka Stock Exchange Limited
FI Financial Institution
ICB Investment Corporation of Bangladesh
IPO Initial Public Offering
NBFI Non-Banking Financial Institution
OTC Over the Counter Market
PIPE Private Investment in Public Equities
RPO Repeat Public Offering
SEC Securities and Exchange Commission

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