You are on page 1of 55

Growing together

Financial Analysis of TDR of LankaBangla Finance Limited

Prepared for
Department of Business Administration Northern University Bangladesh

Supervised by Farhana Rob Shampa


Senior Lecturer in Finance Department of Business Administration Northern University Bangladesh

Prepared by Syeda Bashira Khatun


ID NO: BBA 080260787 Major in Finance Department of Business Administration

Northern University Bangladesh


Date of submission: 08th July, 2012

Financial Analysis of TDR of LBFL

Growing together

FINANCIAL ANALYSIS OF TDR OF LANKABANGLA FINANCE LIMITED

Growing together

Financial Analysis of TDR of LBFL

Growing together

FINANCIAL ANALYSIS of TDR of


LankaBangla Finance Limited

Growing together

Date of submission: 08th July, 2012

Financial Analysis of TDR of LBFL

Growing together

FINANCIAL ANALYSIS of TDR of LankaBangla Finance Limited

Prepared by

Syeda Bashira Khatun


ID NO: BBA 080260787 Major in Finance Department of Business Administration

Northern University Bangladesh

Date of submission: 08th July, 2012

Financial Analysis of TDR of LBFL

Growing together

Financial Analysis of TDR of LankaBangla Finance Limited


Prepared for
Department of Business Administration Northern University Bangladesh

Supervised by Farhana Rob Shampa


Senior Lecturer in Finance Department of Business Administration Northern University Bangladesh

Prepared by Syeda Bashira Khatun


ID NO: BBA 080260787 Major in Finance Department of Business Administration

Northern University Bangladesh


Date of submission: 08th July, 2012

Financial Analysis of TDR of LBFL

Growing together

LETTER OF TRANSMITTAL
July 08th, 2012 To Farhana Rob Shampa, Senior Lecturer in Finance Department of Business Administration Northern University Bangladesh Subject: Submission of Internship Report on Financial Analysis of TDR of LankaBangla Finance Limited. Dear Madam, I am the student of BBA program of NUB. I am happy and delighting to submit here with a copy of internship report for your kind evaluation and appreciation. I would honor if you go through my report and find worthwhile as I really put in a lot effort while preparing it. My internship period was from 13.02.2012 to 12.05.2012. It is a privilege and great for me to submit my internship report on titled Financial Analysis of TDR (Term Deposit Receipt) of LankaBangla Finance Limited that has been prepared as an original part of my degree requirement. I have tried my best to follow the instructions of my supervisor in preparing this report. But there may be some mistakes due to various limitations. For this reason, I would like your kind consideration in this regard. I hope you will find this report up to your expectation. I would be grateful to receive your suggestions and comments regarding this. Sincerely Yours, ----------------Syeda Bashira Khatun ID NO: BBA 080260787 Major in Finance Department of Business Administration Northern University Bangladesh

Financial Analysis of TDR of LBFL

Growing together

STUDENT DECLARATION

I am Syeda Bashira Khatun, hereby declare that the presented internship report entitled Financial Analysis of TDR of LankaBangla Finance Limited is uniquely prepared by me and the report has not been submitted to, any other university or institution, for any degree or award or any other purpose.

Signature

..

Syeda Bashira Khatun

ID NO: BBA 080260787 Major in Finance Bachelor of Business Administration Northern University Bangladesh

Financial Analysis of TDR of LBFL

Growing together

Certificate of Acceptance

This is to certify that the Internship Report on Financial Analysis of TDR of LankaBangla Finance Limited is submitted in partial fulfillment of the requirement for the degree of Bachelor of Business Administration (BBA), Northern University Bangladesh, Which is accepted in form and quality.

Farhana Rob Shampa


Supervisor Senior Lecturer in Finance Department of Business Administration Northern University Bangladesh Department of Business Administration Northern University Bangladesh Internship Committee

Financial Analysis of TDR of LBFL

Growing together

ACKNOWLEDGEMENT

First of all, I express my deep gratitude to Almighty Allah who create and nature us in this transitory. I also express my sincere express gratitude and wholehearted respect to my internship supervisor Mrs. Farhana Rob Shampa, Senior Lecturer, Department of Business Administration, Northern University Bangladesh for her Cooperation and guidelines assistance to complete this report. I also express my warm gratitude and cordial thanks to the management and some officials of LankaBangla Finance Limited who have given me the opportunity to work with them and help a lot by providing the information and enabling me to prepare this report. I have received their generous help and support. So special thank to Mr. Quamrul Islam CFO (Senior Vice President and Chief Financial Officer), Mr. Nazimuddin Ahmed (Senior Manager-Treasury), Mr. Amit Kumar Roy (Assistant Manager), Mr. Farhad Ahmed Chowdhury (Manager- HRD), Mrs. Sharmin Sultana (Principal officer), Mr. Chowdhury Shifuddin Mahmud (Principal officer), Mr. Galib Mohammed Hasan (officer). I would like to take the opportunity to express my wholehearted gratitude to my fellow friends, near and dear ones who offered encouragement, information, inspiration and assistance the course of constructing this report. However, the responsibility of errors and omissions in this report, if any lies in my account.

Financial Analysis of TDR of LBFL

Growing together

TABLE OF CONTENTS
SL NO PARTICULARS LETER OF TRANSMITTAL .......................................................... ACKNOWLEDGEMENT ................................................................ EXECUTIVE SUMMARY .................................................................. CHAPTER ONE: INTRODUCTION Introduction ...................................................................................... Problem Statement ........................................................................... Objectives of the Report ................................................................... Methodology of the Study ................................................................ 1.4.1 Sources of data .................................................................. Limitation of the Study ..................................................................... Scope of the Study ............................................................................ CHAPTER TWO: LBFL AT A GLANCE Background of LBFL ....................................................................... Vision of LBFL ................................................................................ Mission of LBFL .............................................................................. Objectives of LBFL .......................................................................... Features of LBFL ............................................................................. The Structure of LBFL ..................................................................... Divisions of LBFL ....................................................................... CHAPTER THREE: INTERNSHIP POSITION DUTIES & LEARNING POINT First day at work ........................................................................... Job Rotation .................................................................................. Nature of the job............................................................................ 3.3.1. Term Deposit Opening Section ...................................... 3.3.2. Encash Section ............................................................... Learning point .............................................................................. CHAPTER FOUR: TDR POLICY OF LBFL Introduction of TDR Policy of LBFL ........................................... Policy Guidelines ......................................................................... 4.2.1 Deposit Principles ............................................................ Organizational Structures & Responsibilities .............................. 4.3.1 Organizational Structure .................................................. PAGE NO 6 9 12 14 14 14-15 15 15 15-16 16 18 19 19 19-20 20-21 21-22 23

1.00 1.1 1.2 1.3 1.4 1.5 1.6 2.00 2.1 2.2 2.3 2.4 2.5 2.6 2.7 3.00 3.1 3.2 3.3

3.4 4.00 4.1 4.2 4.3

25 20 25-26 25-26 26 27 29 29-30 30 30-32


31

10

Financial Analysis of TDR of LBFL

Growing together

4.3.2 Key Responsibilities ........................................................ 4.4 Procedural Guidelines .................................................................. 4.5 Approval Process .......................................................................... 5.00 CHAPTER FIVE: TDR PRACTICES OF LBFL 5.1 Extent & Restrictions ................................................................... 5.2 TDR Department & its Function .................................................. 5.3 Processing of TDR Proposals ....................................................... 6.00 CHAPTER SIX: FINANCIAL ANALYSIS & FINDINGS 6.1 Deposit Schemes Categories ........................................................ 6.2 LBFLs Structure of Finance ........................................................ 6.3 Earnest Money Financing Scheme ............................................... 6.4 Ratio of Financial Analysis on Graph .................................................. 6.5 Findings ........................................................................................ CHAPTER SEVEN: CONCLUSION & 7.00 RECOMMENDATIONS 7.1 Conclusion .................................................................................... 7.2 Recommendations ........................................................................ LIST OF TABLES Table 1: Term deposit opening procedure .............................................. Table 2: Function of Encashment ........................................................... Table 3: Cumulative Term Deposit Amount ........................................... Table 4: Periodic Return Term Deposit Rate & Amount ........................ Table 5: Money Builders Term Deposit Amount .................................... Table 6: Consolidated Financial Highlights ........................................... LIST OF FIGURES Figure 2.1: Management Hierarchy ....................................................... Figure 4.1: Organizational Structure of LBFL ..................................... Figure 4.2: Flow Chart of Approval Process ........................................

32 32 33 35 35-36 36 38-40 40-42 43 43-50 51

53 54 26 26 38 39 39-40 41-42 22 31 33

11

Financial Analysis of TDR of LBFL

Growing together

EXECUTIVE SUMMARY
The internship report is prepared of BBA program of NUB. This report will give a clear idea about the TDR and financial analysis of LBFL. Especially on the Financial Analysis of TDR of LankaBangla Finance Limited. LankaBangla Finance Limited (LBFL) is established in 1997 with a view to establishing a new way of deposit as a leading non-banking financial institution in Bangladesh. It is located to the Safura Tower (Level 11) - 20 Kemal Ataturk Avenue, Banani Corporate Branch. LankaBangla Finance Limited (LBFL) is a leading operating enterprise in Bangladesh in the field of deposit keeping. Technical support provided by Sampath Bank Limited, Sri Lanka has been working as a catalyst to emerge LBFL as most innovative financial solution provider strictly in compliance with the rules & regulations of Bangladesh Bank. First chapter: is the introduction chapter; here I mentioned problem statement, objectives of the report, methodology of the study, sources of data, limitation of the study, scope of the study. Second chapter: I present overall briefing about the organization. Here I also background of LBFL, vision, mission, objectives, features, structure of the LBFL and divisions of LBFL. Third Chapter: Here I discussed my internship duty, job description that I have to perform and the learning point during the performances. Forth chapter: In the chapter four I mentioned introduction of TDR policy of LBFL, policy guidelines, deposit principles, organizational structures & responsibilities, procedural guidelines and approval process of TDR. Fifth chapter: TDR practices of LBFL are mentioned here. Sixth chapter: I discussed financial analysis and findings of the report, through evaluation of the ratio of the financial analysis and put it into graph. Lastly, we have described some suggestions that should be taken by LBFL to overcome their weaknesses.

12

Financial Analysis of TDR of LBFL

Growing together

Growing together

13

Financial Analysis of TDR of LBFL

Growing together

INTRODUCTION
1.1 Introduction:
This report has been done as per the requirement for successful completion of the Internship program. Exposure to the business world and acquiring practical work experience was the primary objective of this report. I was attached with LankaBangla Finance Limited; at located in Safura Tower (Level 11) - 20 Kemal Ataturk Avenue, Banani Corporate Branch. The report focuses on treasury division as I was attached with that division during the period of my internship program. The topic of this report was decided upon after approval by my internship supervisor.

1.2 Problem Statement:


The objective of my study work is to learn about the TDR deposit categories and deciding the characteristics and features of their products and financial analysis of the product of LBFL. I have tried my level best to find out characteristics and features of their products.

The company has different categories of product; which features are attractive to the clients. But it was not well designed process how to reach to the clients. I tried my supreme to find the financial effect through ratio analysis of the products that maintaining in LBFL.

1.3 Objectives of the Report:


The present study has been designed to achieve the following objectives: The first objective is to know about the LBFL TDR Policy as a private non-banking organization. Secondly how LBFL operates its TDR division being controlled with rules and regulations of Bangladesh Bank.

14

Financial Analysis of TDR of LBFL

Growing together Another basic objective of the report are to see whether the process of TDR practice operation in LankaBangla Finance Limited is complying with the guideline issued by Bangladesh Bank and how LankaBangla Finance Limited is handling the deposits and interests. To find out barriers or bottlenecks in collecting the overall TDR and maintaining process. To recommend on those problems.

1.4 Methodology of the Study:


The study was based on primary and secondary data. In order to prepare practical training report various source and method of data collection was used.

1.4.1 Sources of data:


In this report only secondary data have been used. For both the Organizational part and Project part, quantitative information from the Annual reports of LBFL and qualitative information from other literature regarding the division and their functions, operations were used. So, only the secondary data were utilized. While I was conducted the study I collected various types of secondary data. Data has been collected through different sources, by talking with the responsible officers, organizations annual report, and from different circular published by Bangladesh Bank for non-banking organization and their own circular.

1.5 Limitation of the Study:


The following limitations are apparent in this report: There was little or no scope to contact with the direct clients of the TDR for the internee students. So I could not realize well all the procedures of collecting TDR. Only those TDRs which are highest practiced by the organization have been focused in this report.

15

Financial Analysis of TDR of LBFL

Growing together For organizational part, almost no financial information for the previous years was available; in some cases only un-audited information could be collected. TDR (or FDR) policy is the Internal Confidential matter to every bank or non-banking organization. So only most important parts and provisions of policy related to selected schemes loans and advances were focused.

1.6 Scope of the Study:


Non-banking sector is a robust and sensitive area. A non- banking organization has different products; Different services and different customers. Different departments of a bank perform different activities. However, scope of the study is limited within specific area of an organization that is LankaBangla Finance Limited.

Again it was prepared on the basis of data and information gathered from Safura Tower (Level 11) - 20 Kemal Ataturk Avenue, Banani Corporate Branch. So this study says only about the activities of the LankaBangla Finance Limited Safura Tower (Level 11) - 20 Kemal Ataturk Avenue, Banani Corporate Branch in the light of LBFL as a whole. This study covers only various parts and provisions of LBFL TDR policy and practice as a sample of non-banking organizations in Bangladesh.

16

Financial Analysis of TDR of LBFL

Growing together

Growing together

17

Financial Analysis of TDR of LBFL

Growing together

2.1 Background of LBFL:


LankaBangla Finance Limited (LBFL) a joint venture financial institution established with multinational collaboration is in operation since 1997 having license from Bangladesh Bank under Financial Institutions Act, 1993. With institutional shareholding structure, educated & motivated human resources, friendly working environment & dynamic corporate culture has enabled LBFL to be a diversified financial services providing institution of the country. Technical support provided by Sampath Bank Limited, Sri Lanka has been working as a catalyst to emerge LBFL as most innovative financial solution provider strictly in compliance with the rules & regulations of Bangladesh Bank.

LBSL (Formerly known as Vanik Bangladesh Securities Ltd) started its stock broking business in 1997 trading on the Chittagong Stock Exchange (CSE) Ltd, while commencing trading on the Dhaka Stock Exchange (DSE) in 1998. The company was renamed LankaBangla Securities with effect from 27 April 2005 following a restructuring of the company.

Under the right of an enlightened board of directors, and the policy by the resourceful management, the company has emerged as one of the leading financial institutions in the country. Having strong presence and recognition in almost all financial product and service lines in the industry, LankaBangla is the lone financial institution which operates MasterCard & VISA card and provides third party card processing services to different banks.

LankaBangla Finance Limited (LBFL) is a private non-banking organization with Head Office at Safura Tower (Level 11) - 20 Kemal Ataturk Avenue, Banani, Dhaka - 1213, Bangladesh. With the assets of 22,380.00 million BDT, the non-banking organization has diversified activities in deposits; invest in business and credit cards. LankaBangla Finance is playing an important role in providing lease in all market segments of customers, individuals, Small & Medium Enterprises, Commercial Houses, Large Corporate organizations. The total amount of lease has been provided 16,659.83 million BDT till its main investing projects are automobiles, etc. the policy has gained popularity among consumers.

18

Financial Analysis of TDR of LBFL

Growing together

2.2 Vision Growing Together.


To be the nation's most sought after facilitator in creating, nurturing and maximizing value to the stakeholders, the society, and the environment.

2.3 Mission
To lead by example through a committed team of nurtured resources fostering ownership that motivates thriving towards excellence in knowledge, systems, processes and procedures, thereby empowering the organization on at every level to deliver the highest quality of product, customer care, and stakeholder value keeping environmental safety a priority.

2.4 Objectives of LBFL:


a. Strategic Objectives: Enrichment & expansion of financial offerings by introducing new product and service lines through proper diversification and customization of existing products & services for ensuring maximum market coverage to meet & exceed stakeholders needs & expectations; Continuous improvement in operational processes through technological advancement, employee capacity building through human resources development programs, thereby ensuring effective and efficient utilization of resources to maximize the value of the company; Strengthening building blocks to consolidate the product & service framework and maintaining strict compliance to good governance norms and regulations to ensure long term sustainability of the company; Building synergy among resources and activities to ensure maximum outputs from resource inputs;

19

Financial Analysis of TDR of LBFL

Growing together Contribute to the society to share the achievements of the company with the nation putting priority to ecological balance of the environment in our way of doing business, thereby ensuring long term economic potential for us as well as our society.

b. Financial Objectives: To be the most preferred financial services provider; To maximize the value of being our customer, shareholder or employee; To build and retain a team of highly skilled human resources through talent hunting, nurturing, training, developing and motivating through rewarding to deliver the highest level of customer service; To build state-of-the-art technological framework for ensuring faster, accurate, timely and risk calculated operations capable of coping with ever increasing financial and operational complexities; To develop and maintain an organizational culture committed towards ownership thriving for continuous innovation and improvement in our way of doing business to meet and exceed stakeholders ever growing expectations;

2.5 Features of LBFL:


Safe & Secured; High Return; Flexible/Diversified Deposit Scheme tailored to your needs; Minimum deposit amount of Tk. 100,000; Minimum duration---Six Months for individual & institution as directed by Bangladesh Bank ; Interest payment periodically (Monthly/Quarterly/Half-Yearly/Annually) as per client choice; No incidental costs; Premature encashment allowed after completion of minimum duration;

20

Financial Analysis of TDR of LBFL

Growing together Specialized customer service; Depositor can nominate nominee(s) to withdraw the deposited amount in absence of depositor; Legal guardian can open deposit in the name of minor; Any Individual/Firm/Corporate Houses are eligible to participate in the Deposit Scheme of LankaBangla.

2.6 The Structure of LBFL:


The organization structure and corporate of LankaBangla Finance Limited (LBFL) strongly reflect its determination to establish, uphold and gain a stronger as an organization which is customer-oriented and transparent in its management.

Board of Directors: The Board of LankaBangla Finance Limited consists of 10 (ten) members, elected from the sponsors of the non-banking organization. Board Committees: The Board of Directors who also decides on the composition of each committee determines the responsibilities of each committee. Executive Committee: The committee has 8 (eight) members. Audit Committee: All internal audit facts are executives by the audit committee. The committee has 4 (four) members. Management Committees: Under management committee there are 11 (eleven) members and also there are 8 (eight) committees. These are: I. II. III. IV. V. VI. VII. VIII. Human Resource Committee: There are 4 (four) members. Internal Control and Compliance Committee: There are 10 (ten) members. Management Credit Committee: There are 5 (five) members. Anti Money Laundering Compliance Committee: There are 5 (five) members. Asset Liability Management Committee: There are 8 (eight) members. IT Development Committee: There are 3 (three) members. Credit Card Operations Committee: There are 7 (seven) members. BASEL II Implementation Committee: There are 7 (seven) members.

21

Financial Analysis of TDR of LBFL

Growing together

Chairman Director Independent Director Managing Director & Chief Executive Officer Senior Vice President & Chief Financial Officer Senior Vice President & Head of Credit Administration Senior Vice President & Head of Retail Finance Senior Vice President & Head of Internal Control & Compliance Vice President & Company Secretary Vice President & Head of Cards Vice President & Head of Corporate Finance Vice President & Head of Credit Risk Management Assistant Vice Presidents Branch Managers Senior Managers

Assistant Managers
HRD Managers Principal Officers Officers Assistant Officers Trainee Assistant Officers

Figure 2.1: Management Hierarchy SOURCE: LBFL Website & Annual Report 2011
22

Financial Analysis of TDR of LBFL

Growing together

2.7 Divisions of LBFL:


All policy formulations and subsequent execution are done in the Head Office. It comprises of 10 (ten) major divisions namely Treasury Division, Credit & Investment Division, Accounts Division, Human Resources Division, Marketing Division, Credit Administration Division, Information Technology Division, Research and Development Division, Audit and Compliance Division, Training and Development Division. Besides these main divisions, there are 7(seven) branches including Dhaka, Chittagong and Sylhet branches to look after the non-banking operations. The structures and sanctions of each of the divisions of LBFL are described below: Treasury Division Credit & Investment Division Accounts Division Human Resources Division Marketing Division Credit Administration Division Information Technology Division Research and Development Division Audit and Compliance Division Training and Development Division

23

Financial Analysis of TDR of LBFL

Growing together

Growing together

24

Financial Analysis of TDR of LBFL

Growing together

3.1 First day at work:


I joined in 20 Kemal Ataturk Avenue, Banani Corporate Branch on 13th February 2012. On the day I met with VP & Company Secretary & Head of HR, Mr. Mostafa Kamal to report my joining as an internee. He warmly received and introduced me to Mr. Farhad Ahmed Chowdhury to introduce with Mr. Quamrul Islam who monitored my total internship program. From that day I was placed in Treasury Sector and used the full day for understanding the job duties of this section.

3.2 Job Rotation:


The report has been prepared on the basis of experience gathered during the period of internship from 13th February 2012 to 12th May 2012. Within this period I worked in Treasury Department. Total working duration I learn different facts of this department.

3.3 Nature of the job:


As a part of internship program, I was required to learn various types of Treasury related activities which are assigned by the different officers of this department. In this period, I am working with all officers of this department but basically in a major portion of time I spend in Term deposit sector of Treasury department. Because excess load was always created in this sector. I am also done many tasks like encashment term deposit, renewal of term deposit, database analysis for bank ultimus software, etc. this has definitely enriched my practical experience. My different types of works are described below:

3.3.1. Term Deposit Opening Section:


Term deposit opening was one of my task, where my jobs was giving the information regarding new term deposit opening, help the client to fill up the deposit opening form, and input the information into the account opening software. Under this section, LBFL opens different types of term deposit on the request of clients.

25

Financial Analysis of TDR of LBFL

Growing together Table-1: Term deposit opening procedure: The term deposit should be properly introduced by Any one of the following: Step 1 A client can open TDR under a respectable person of the locality well known to the PMO of the branch concerned. Receiving filled up application in LBFLs prescribed form mentioning what type of term deposit is desired to be opened. The form filled up by the applicant himself/herself. One of passport sixe photographs from individual are taken; in case of firms Step 3 photographs of all partners or selective authorities are taken. Applicant must select a nominee and should give nominees one copy photo with his own signature to prove that it is attached. But in case of joint applicants nominee is not essential. Step 4 Step 5 Step 6 Step 7 Authorized officer accepts the application. The committed amount is deposited - only cheque is accepted. The checklist is verified by the respective officer. The term deposit is opened and term deposit certificate is given.

Step 2

3.3.2. Encash Section:


LBFL, as a non-banking organization, accept surplus money from the people as deposit for a certain period and give the interest in a specific rate. The client not able to withdraw the money in this running period but if he/she wants then withdraw interest. And after fulfill the time period the client can encash the deposit. This is the section that directly deals with clients; the reputation of the organization depends much on it. The function of encash section described below: Table-2: Function of Encashment: Interest payment Cash Payment The client who is interest to withdraw interest that is paid by cheque; and others interest is added with their deposit by renewal. The client who withdraw deposit their money is returned by cheque.

26

Financial Analysis of TDR of LBFL

Growing together

3.4Learning point:
There are many things that I learned in the LankaBangla Finance Limited in 20 Kemal Ataturk Avenue, Banani Corporate Branch. These are given below: How to open their several deposit in their organization. What are the requirements for opening their deposit How to provide information to their clients How clients can get deposit confirmation as TDR Certificate How clients get their interest confirmation How collect the deposit amount How operate money builders account How different officers do their work How Repo are collect from Bangladesh Bank How Call Money are collect from different bank How to submit report to internal and external audit committee How to sell Repo by online transaction How to bargaining for select Repo and Call Money rate How to prepare a report for submitting the Bangladesh Bank in month ending Finally I learned to prepare an internship report.

27

Financial Analysis of TDR of LBFL

Growing together

Growing together

28

Financial Analysis of TDR of LBFL

Growing together

4.1 Introduction of TDR Policy of LBFL:


LankaBangla Finance Limited is committed to provide high quality services to its constituents through different financial products and profitable utilization of fund and contribute to the growth of GDP by financial profitable sectors, helping industrialization, creating employment opportunities for the educated youth.

With a view to achieving the aforesaid objectives of the organization, TDR operation is of paramount importance as the greatest share revenue of the total revenue of the organization is generated from it. The success of a non-banking organization, therefore, depends on how efficiently and judiciously it makes build of its capital. In other words, careful and efficient management of its TDR collection is very essential for the success of the organization.

In formulating a TDR judgment and making quality is TDR decision, the marketing officer must be equipped with all information needed to evaluate a TDR clients character, management competence, capacity, ability to provide amount, external conditions and extra requirements which may affect in maintain a TDR.

The TDR making Policy has been divided into the following categories: i. Policy Guidelines; ii. LankaBangla Deposit Scheme Form; iii. KYC Form; iv. Checklist.

4.2 Policy Guidelines:


The TDR making Policy guidelines of the organization describes details fundamental TDR risk management policies, outlines general principles that are designed to govern the implementation of more detailed lending procedures and deposit risk analysis system.

29

Financial Analysis of TDR of LBFL

Growing together

4.2.1 Deposit Principles:


For sound capital the following points should be kept in view: Judicious selection of customers

I. Purpose II. Safety III. Sources of fund IV. passport size photograph of applicant(s) V. passport size photograph of nominee(s) attested by the applicant VI. Photocopy of National ID/Voter ID/Passport/Driving License VII. Other papers if required in futures VIII. Deposit can be used as collateral with LankaBangla or other Banks/Financial Institutions IX. Each account would have unique number X. Bangladesh Bank guidelines XI. Taxes & levies as imposed by Government would be applicable XII. reserves the right to change or amend the terms & conditions of TDR XIII. account can be opened by Cheque/ Pay Order/Draft XIV. Legal guardian can open deposit in the name of minor XV. Premature encashment allowed after completion of minimum duration XVI. Minimum deposit amount of Tk. 100,000 XVII. Flexible/Diversified Deposit Scheme tailored to your needs These guidelines will be updated annually.

4.3 Organizational Structures & Responsibilities:


The appropriate organizational structure must be in place to support the adoption of policies described policy guidelines. The key feature is the segregation of the Marketing / Relationship Management function from approval / Risk management/ Administration Functions.

30

Financial Analysis of TDR of LBFL

Growing together

4.3.1 Organizational Structure:


The following chart represents the management structure:
Board of Directors Executive Committee

Board Secretariat Audit Committee Managing Director

Internal Audit

Credit Risk Management

Credit & Investment Division

Merchant Banking

Credit Card

Mortgage Loan Division

Finance & Treasury Accounts

Information Technology

HR & Admin

Management Committee

Credit Risk Management Committee

Merchant Banking Committee

Assets & Liability Management Committee

HR Committee

IT Development Committee ICC Committee

Figure 4.1: Organizational Structure of LBFL SOURCE: Adapted from LBFL Annual Report 2008

31

Financial Analysis of TDR of LBFL

Growing together

4.3.2 Key Responsibilities:


There are various responsibilities that done by various concerned. The key responsibilities that have been vested upon them as follows: Head of Deposit Risk Management Head of Deposit Head of Deposit Division ( Treasury)

4.4 Procedural Guidelines:


Approval Process Delegation of power Sanctioning Authority Encashment Legal Action Write Off Of TDRs/Deposits

32

Financial Analysis of TDR of LBFL

Growing together

4.5Approval Process of TDR:

TDR Marketing Team (Officers and PMO)

Board OF Directors concern in special cases

Head of Branch (Approval/Decline) As Per Delegation CFO and MD (approval/decline)

KYC Approval of the specific branch officer Beyond Capacity Recommended To

Treasury Departments Manager Approval

Special Recommendation of Clients

Principal officers approval

Interest Rate

Respective officers Approval

Figure 4.2: Flow Chart of Approval Process Source: Adapted at the time of working with the Department

33

Financial Analysis of TDR of LBFL

Growing together

Growing together

34

Financial Analysis of TDR of LBFL

Growing together

5. TDR PRACTICES OF LBFL


5.1 Extent & Restrictions:
It is applied to all the branches of LankaBabgla Finance Limited in Bangladesh. Extension of TDR facilities are subject to deposit policy of the non-banking organization. As non-banking organization respect and maintain some rules, regulations and policies of Bangladesh Bank in a word government given all policies.

5.2 Treasury Department & its Function:


The TDR department is assisted by the Finance Department, which is mainly concerned with the post-approval functions of Finance Division. The aspects that are critically tracked and monitored by Finance Division are TDR expiry Past Record or previous client Document deficiency Deposit date Interest rate Special requirements by client if any Deduct exise duty Deduct income tax Treasury Division is involved in basically two broad functions:

Deposit Monitoring:
The important aspects of this part are: The sources of fund The occupation of the client Deposit amount Time period of the deposit

35

Financial Analysis of TDR of LBFL

Growing together Interest rate of the deposit Creates opportunity to maximize your returns.

5.3 Processing of TDR Proposals:


TDR account can be opened by Cheque/ Pay Order/Draft. Safe & Secured High Return Flexible/Diversified Deposit Scheme tailored to your needs Minimum deposit amount of Tk. 100,000 Minimum duration---Six Months for individual & institution as directed by Bangladesh Bank Interest payment periodically (Monthly/Quarterly/Half-Yearly/Annually) as per client choice No incidental costs Premature encashment allowed after completion of minimum duration Depositor can nominate nominee(s) to withdraw the deposited amount in absence of depositor Any Individual/Firm/Corporate Houses are eligible to participate in the Deposit Scheme of LankaBangla

The following papers/documents are to be submitted by the Branch-in-charge along with the deposit proposals: Application form and KYC form duly filled in. One passport size photograph of applicant(s), nominee(s) attested by the applicant. Photocopy of National ID/Voter ID/Passport/Driving License. Other papers if required in future

36

Financial Analysis of TDR of LBFL

Growing together

Growing together

37

Financial Analysis of TDR of LBFL

Growing together

FINANCIAL ANALYSIS & FINDINGS


6.1Deposit Schemes Categories
LankaBangla offers various Deposit Schemes with attractive rate of return. Under this there are 4(four) types of Term Deposits:

i. LB Cumulative Term Deposit Under this scheme customers Deposit will turn into a desirable amount through accumulation of interest. The minimum tenure of the scheme is at least 2 years. If their deposit amount is Tk.100,000 the receivables on maturity will be:

Table -3: Cumulative Term Deposit Amount: 2 Years Tk.123,766 3 Years Tk. 138,620 4 Years Tk.154,561 5 Years Tk.172,335

Amount with Interest


200000 150000 100000 50000 0 2 Years 3 Years 4 Years 5 Years Amount with Interest

Graph 5.1: Cumulative Term Deposit Amount with interest Significant: Here we can figure out that this term deposit is providing certain amount after a fixed time period. Not in case of premature.

38

Financial Analysis of TDR of LBFL

Growing together ii. LB Periodic Return Term Deposit Under this scheme customer can draw the interest periodically (Monthly/Quarterly/Halfyearly/Annually) keeping the original deposited amount intact. Table -4: Periodic Return Term Deposit Rate & Amount: Tenure 1 Year Rate 2 Years Rate 3 Years Rate Monthly 1,229 14.75% 1,188 14.25% 1,188 14.25% Quarterly 3,725 14.90% 3,600 14.40% 3,600 14.40% Half-Yearly 7,475 14.95% 7,225 14.45% 7,225 14.45% Annually 15,000 15.00% 14,500 14.50% 14,500 14.50%

iii. LB Double Money Term Deposit Deposit amount placed at a time will turn double on completion of 6 years 3 months.

iv. Money Builders Term Deposit (Like DPS of Commercial Banks): Under this scheme the depositor will open an account. On expiry the depositor will receive the deposited amount along with the interest accrued there on. Table -5: Money Builders Term Deposit Amount: Installment per month Return after 3 years 1,000 44,000 Return after 5 years 83,000 Return after 10 years 230,000

39

Financial Analysis of TDR of LBFL

Growing together

2,000 3,000 5,000 10,000 25,000

88,000 132,000 220,000 440,000 1,100,000

166,000 249,000 415,000 830,000 2,075,000

460,000 690,000 1,150,000 2,300,000 5,750,000

30,000 25,000 20,000 15,000 10,000 5,000 0

7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0

Installment Return after 3 years Return after 5 years Return after 10 years

Graph 5.2: Money Builders Term Deposit Amount Significant: Here we can figure out the money builders monthly deposit amount are different. And base on that their gaining money amount is also different.

6.2LBFLs Structure of Finance:


LankaBangla Finance Limited (LBFL) has indeed, completed another successful year of its journey towards its goal by way of stretching maximum and achieving its best. Figures of

40

Financial Analysis of TDR of LBFL

Growing together December-end-2010 speak for themselves the steady growth in its fundamental indicators over the past few years. Table below shows the comparatives figures: Table -6: Consolidated Financial Highlights: All figures in BDT million except (%)
2007 2008 2009 2010 2011 Growth (%)

Financial Performance Total Assets Total Liabilities Business Disbursement Current Assets Current Liabilities Non Current Assets Long Term Liabilities Term Deposits Total Investment Portfolio Operational Performance Operating Revenue Operating Expenses Financial Expenses Net Profit Before Tax Net Profit After Tax Turnover of Share Trading by LBSL Financial Ratios 946.96 648.57 418.76 298.39 210.47 1,542.18 1,069.97 707.16 472.21 377.64 2,427.07 1,362.38 936.61 908.07 744.08 4,176.11 1,513.72 1,016.08 2,331.10 1,700.15 560,366.03 3,410.33 2,023.40 1,396.57 1,304.04 791.1 229,161.62 -18.34% 33.67% 37.45% -44.06% -53.47% -59.11% 5,782.38 5,185.03 3,024.22 3,977.61 3,477.92 1,804.77 1,707.12 1,818.52 4,717.46 8,108.87 7,186.40 3,258.97 5,554.92 4,793.27 2,553.95 2,393.12 2,627.30 6,869.63 13,435.00 11,335.07 4,689.28 8,839.66 7,394.94 4,595.93 3,940.13 4,432.90 10,699.17 19,322.24 14,532.20 4,275.50 8,985.65 7,869.65 10,336.59 6,662.55 4,560.00 15,064.57 22,380.00 16,659.83 4,443.70 9,345.29 8,945.25 13,034.71 7,714.58 5,309.62 18,703.35 15.83% 14.64% 3.93% 4.00% 13.67% 26.10% 15.79% 16.44% 24.15%

65,972.48 127,605.37 242,210.58

41

Financial Analysis of TDR of LBFL

Growing together Current Ratio Debt Equity Ratio Financial Expense Coverage Ratio Return on Equity (%) Return on Assets (%) Equity Parameters Authorized Capital Paid-up Capital Shareholders' Equity No. of Share Outstanding Net Asset Value (NAV) Per Share Earnings Per Share (EPS) Market Price Per Share (Closing) Price Earnings Ratio (Times) Dividend Payment (Ccash & B- bonus) Dividend Payout Ratio (%) Dividend Coverage (Times) Dividend Yield (%) 1,000.00 350 597.34 35 1,000.00 385 922.48 38.5 1,000.00 442.75 2,100.53 44.28 1,000.00 531.3 4,790.04 53.13 3,000.00 823.52 5,720.17 82.35 200.00% 55.00% 19.42% 55.00% 1.14 8.68 1.5 41.23% 4.89% 1.16 7.79 1.53 40.94% 4.66% 1.2 5.4 1.79 35.42% 5.54% 1.14 3.03 2.67 35.49% 8.80% 1.04 2.91 1.57 13.83% 3.53% -8.50% -4.00% -41.40% -61.04% -59.83%

17.07

23.96

47.44

90.18

69.46

-22.98%

5.47

9.81

14

32

9.61

-69.98%

100.1

196.6

313.8

497.9

170.2

-65.82%

18.3 10% B 15% C 76.50%

20.04 15% B 15% C 69.45%

22.41 20% B 15% C 44.15%

15.56 55% B 72.49%

17.72 30% B

13.87%

52.94% -26.97%

1.19 2.50%

1.44 1.53%

2.27 1.12%

1.38 1.10%

1.89 1.76%

36.93% 59.57%

42

Financial Analysis of TDR of LBFL

Growing together

6.3Earnest Money Financing Scheme:


Lankabangla Finance Ltd. reported unaudited consolidated earnings results for the second quarter and six months ended June 30, 2011. For the quarter, the group reported net interest income of BDT 96.5 million against BDT 180.1 million a year ago. Total operating income for the period was BDT 474.5 million against BDT 886.5 million a year ago. Net operating income for the quarter was BDT 371.6 million against BDT 787.3 million a year ago. Profit before tax and reserve was BDT 363.2 million against BDT 667.9 million a year ago. Net profit attributable to shareholders of the company was BDT 258.4 million against BDT 457.3 million a year ago. Earnings per share were BDT 3.14 against BDT 5.55 a year ago. For the six months period, the group reported net interest income of BDT 220.6 million against BDT 268.8 million a year ago. Total operating income for the period was BDT 1,010 million against BDT 1,443.5 million a year ago. Net operating income for the period was BDT 802.4 million against BDT 1,248.8 million a year ago. Profit before tax and reserve was BDT 739.5 million against BDT 1,105.5 million a year ago. Net profit attributable to shareholders of the company was BDT 511.5 million against BDT 897.4 million a year ago. Earnings per share were BDT 6.21 against BDT 10.08 a year ago. Net cash from operating activities was BDT 1,578.5 million against net cash used in operating activities of BDT 903.7 million a year ago. Purchase of property, plant and equipment was BDT 15.1 million against BDT 31.9 million a year ago.

6.4 Ratio of Financial Analysis on Graph:


Current Ratio 2007
1.14

2008
1.16

2009
1.2

2010
1.14

2011
1.04

43

Financial Analysis of TDR of LBFL

Growing together

1.2 1.15 1.1 1.05 1


2007 2008 2009 2010 2011

0.95
Current Ratio

Graph 6.1: Current ratio point on graph Significant: This organization current ratio is in a fluctuating position. But now its low than previous five years. That indicates that the companys current liabilities facing power is lessen.

2007 Debt Equity Ratio 8.68

2008 7.79

2009 5.4

2010 3.03

2011 2.91

10 8 6 4 2 0 Debt Equity Ratio


2007 2008 2009 2010 2011

Graph 6.2: Debt Equity Ratio on graph

44

Financial Analysis of TDR of LBFL

Growing together Significant: Here we can find that the debt equity ratio is decreasing day after day. This indicates that the organizations dependency on debt is decreasing. This is indicating that the company is going to a good position.

Financial Expense Coverage Ratio

2007 1.5

2008 1.53

2009 1.79

2010 2.67

2011 1.57

3
2.5 2 1.5 1 0.5 0 Financial Expense Coverage Ratio
2007 2008 2009 2010 2011

Graph 6.3: Financial Expense Coverage Ratio on graph Significant: Here the financial expense ratio is high and in a fluctuating mode, which shows that the organization is good in maintaining the financial expense in a good way.

Return on Equity (%)

2007 41.23%

2008 40.94%

2009 35.42%

2010 35.49%

2011 13.83%

45

Financial Analysis of TDR of LBFL

Growing together

2007

50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Return on Equity (%)

2008 2011 2010 2009 2008 2007 2009 2010 2011

Graph 6.4: Return on Equity (%) on graph Significant: Here we can see that the return on equity is in instable. But the organization should maintain these high. Otherwise, the investor and also the clients will be de-motivated.

Return on Assets (%)

2007 4.89%

2008 4.66%

2009 5.54%

2010 8.80%

2011 3.53%

9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Return on Assets (%)
2007 2008 2009 2010 2011

46

Financial Analysis of TDR of LBFL

Growing together Graph 6.5: Return on Assets (%) on graph Significant: Here we find that the return on asset is very low than the previous year. This is a risk for the organization. The organization should emphasis on the progress, to avoid the decrease.

No. of Share Outstanding

2007 35

2008 38.5

2009 44.28

2010 53.13

2011 82.35

100 80 60 40
2007 2008 2009 2010 2011

20
0 No. of Share Outstanding

Graph 6.6: No. of Share Outstanding on graph Significant: Here in graph we clearly see that the number of share is increasing day after day.

Net Asset Value (NAV) Per Share

2007 17.07

2008 23.96

2009 47.44

2010 90.18

2011 69.46

47

Financial Analysis of TDR of LBFL

Growing together

100 80 60 40 20 0 Net Asset Value (NAV) Per Share


2007 2008 2009 2010 2011

Graph 6.7: Net Asset Value (NAV) Per Share on graph

Significant: Here we can figure out that the (NAV) is increasing day by day. Those motivate the investors to invest more in the organization.

Earnings Per Share (EPS)

2007 5.47

2008 9.81

2009 14

2010 32

2011 9.61

48

Financial Analysis of TDR of LBFL

Growing together

40 30 20
2011 2010 2009 2008 2007

2007 2008 2009 2010 2011

10 0
Earnings Per Share (EPS)

Graph 6.8: Earnings Per Share (EPS) Per Share on graph Significant: Here we can find out that earnings per share are suddenly fall this year. This may influence the investor and clients badly. So the organization have to pay more attention on it. Price Earnings Ratio (Times) 2007 18.3 2008 20.04 2009 22.41 2010 15.56 2011 17.72

25 20 15 10 5 0 Price Earnings Ratio (Times)


2007 2007 2011 2010 2009 2008 2008 2009 2010 2011

Graph 6.9: Price Earnings Ratio (Times) on graph

49

Financial Analysis of TDR of LBFL

Growing together Significant: Price earnings ratio is in a moving situation. Here we can see that this year it is good but not as the pervious few years. So that should give more effort to improve that.

Dividend Payout Ratio (%)

2007 76.50%

2008 69.45%

2009 44.15%

2010 72.49%

2011 52.94%

90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Dividend Payout Ratio (%)
2007 2008 2009 2010 2011

Graph 6.10: Dividend Payout Ratio (%) on graph Significant: Here we can find that the divided pay percentage is lessen; which indicates that the organization give importance on the retain earnings. Which also motivate the investors, because it increases their ownership.

50

Financial Analysis of TDR of LBFL

Growing together

6.5 Findings:
During internship period in LankaBangla Finance Limited, Safura Tower (Level 11) - 20 Kemal Ataturk Avenue, Banani Corporate Branch the following problems or shortage are observed. Lack of sufficient executives especially in treasury department that hampers the deposit sanctioning process in time. LBFL takes relatively more times in providing the certificates to the clients. It seriously discourages the persons who are interested to keep deposit here. mode of honors check, checking of different legal documents etc. Head office takes so longer time in processing and approval of certificates of the deposits. LBFL does not provide certificates to all deposits like double money term deposit, money builders term deposit. So the client loss their faith and not interested to keep deposits. LBFL does not give premature withdrawal like bank; or if allowed premature withdrawal then charges some extra charges, which discourage the clients to keep money here. LBFL only like to invest in business sectors; they do not eager to invest in private sectors. Which minimize the opportunity of their profit maximizing. LBFL does not provide any extra benefits to the existing client for keeping deposit here again. Thats discouraging them to keep relationship with the organization.

51

Financial Analysis of TDR of LBFL

Growing together

Growing together

52

Financial Analysis of TDR of LBFL

Growing together

7.1 Conclusion:
In Bangladesh commercial Banks have spread their command in financial system, but we have to recognize the fact that non-Bank Financial Institutions are also significant for smooth economy. Company like LBFL is providing some additional and dynamic financial services which helped them to become well known. In one hand they are providing support for those financial sectors that was not served by commercial bank. As an efficient company LBFL helps in minimizing risk which in turn helps the economy as a whole. As LBFL becoming stronger and efficient day by day it can be hoped that if they get necessary support from government it will be able to play a more historic role in the economic development of Bangladesh.

I also find that LankaBangla specialize in providing you with instant cash through the purchase of accounts receivable or debts outstanding which is a financing technique known as Factoring. Factoring moves your cash flow forward creating immediate cash to improve your financial position and increase your purchasing power.

As the Non-banking financial institution it is searching for new area of business and collect information about the potential sector as well as to prepare strategy for getting competitive advantage. Lastly, I can said that the Non-banking financial institution have huge opportunity to increase business and profit in the Bangladeshi economic. Its plan should be innovative to do these jobs.

53

Financial Analysis of TDR of LBFL

Growing together

7.2Recommendations:
LBFL should provide the certificate of the all type of deposits. Deposit process and giving certificates should be faster. The invest sector should be the moderate and more. The deposit policies should be revised to moderate and made easy for the clients. LBFL also should concentrate on the promotion activities; that all levels of client know about their services. The interest rate should be more attractive than their competitors.

54

Financial Analysis of TDR of LBFL

Growing together

References:
Annual Report of LankaBangla Finance Limited (2008 & 2011) LankaBangla Finance Ltd. Web sites: http://www.lankabangla.com/ LBFL database Deposit manual of LankaBangla Finance Limited Directors organogram: www.lbsbd.com/AboutUs/BoardofDirectors.aspx Different Types of Form of LBFL http://www.lankabangla.com/financial_highlight.php _visit on the 22-04--2012 http://www.lankabangla.com/corporate_management.php_visited on the 20-06-2012 http://www.lankabangla.com/term_finance.php_visited on the 24-05-2012 http://www.lankabangla.com/factoring.php_viisted on the 18-05-2012

___*****___
55

Financial Analysis of TDR of LBFL