Chapter: 7

(Empirical Analysis & Findings)

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 7.1 Credit Distribution

From previous 5 year annual report I have analyzed some important data which is related to credit
activities of JBL. The analyzed information is shown below by creating different chart graphs etc.:

 Year wise Deposit

Taka in BDT.
Million
Year Total Deposit
2010 60674.56
2011 70508.05
2012 79623.13
2013 97485.61
2014 114,635.13
Table 22: Year wise Deposit (Source: Annual report of JBL 2014)

Graph 10: Year wise Deposit

Year wise deposits of JBL are increasing year by year. In 2010 the total deposit was TK. 60674.56
million. It was increased to TK. 114,635.13 million in 2014. From the graph it is seen that growth rate

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from year 2013 to 2014 is 23% which indicates positive perception toward JBL from clients point of
view.

 Year wise Loans & Advances

Taka in BDT. Million

Year Total loan and Advances

2010 49,734.80
2011 56,611.79
2012 54,887.03
2013 67,669.38
2014 77,899.79
Table 23: Year wise loan & Advances (Source: Annual report of JBL 2014)

Graph 11: Year wise loan & Advances

Here we see that total loans & advances of JBL are increasing 2008 – 2011. This is because of their
attractive and flexible loan packages. But in 2012 their total loans and advances is decreased by

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3.14% compare to 2011. the main reason of decreasing loans and advances, the competitive bank
come up with a new loan policy which is more attractive than our loan policy.

7.2 Sector Wise Credit Distribution

Graph 12: Sector Wise Credit Distribution

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From the figure it can easily be said that JBL provides more loan in Trade service sector. In 2014 it
provided total loan and advances to several sector. But in agriculture sector they discourage to sanction
loan because they think this sector is risky, in 2014 JBL provide loan in agriculture sector only 5%.

7.3 Geographical Location Wise Loan & Advance

Graph 13: Geographical location wise and & advances

In above chart we see that JBL provide huge amount of loans and advances in Dhaka division. They
provide 69.44% loans and advices in Dhaka division. JBL also provide their loans and advances
16.67% in Chittagong division and and the others division they provide fewer percentage of loans and

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advances, as 9.75% in Rajshahi division. 1.69% in Sylhet division, 1.53% in Khulna division, 0.67% in
Rangpur division, and 0.25% in Barisal division.

7.4 Classification Status of Loan

Classification Status % Total Loan Outstanding ( In Million)

Standard 93.45% 7,279.63
Special mention Account 0.87% 68.13
Sub-standard 0.50% 38.76
Doubtful 0.43% 33.19
Bad/Loss 4.75% 370.27
Total 100.00% 7,789.98
Table 24: Classification status of Loan (Source: Annual report of JBL 2014)

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 Graph 14: Classification Status f loan

7.5 Interest Earn on Lending

Year Total Interest on Lending

2014 10269.61

2013 9697.92

2012 9626.68

2011 8473.44

2010 5207.52

Table 25: Interest earn on Lending (Source: Annual report of JBL 2014)

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 Graph 15: Interest on Lending

7.6 Ratio Analysis

Non-performing Loan ratio

A sum of borrowed money upon which the debtor has not made his or her schedule payments for at list
90 days. A nonperforming loan is either in default or close to being in default. Once a loan is
nonperforming, the odds that it will be repaid in full are considered to be substantially lower. If the
debtor starts making payments again on a nonperforming loan, it becomes a reperforming loan, even if
the debtor has not caught up on all the missed payments.

Nonperforming loan
Nonperforming Ratio = ×100
Total loan

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 Year Non-performing Loan Total Loan NPL Ratio
2010 905.52 49734.80 1.82%
2011 5133.76 56611.79 2.86%
2012 5337.87 54887.03 9.73%
2013 5133.76 67669.38 7.59%
2014 4422.15 77899.79 5.68%
Table 26: Non Performance Loan Ratio

Graph 16: Non Performance Loan Ratio

Loan to Deposit ratio

A Commonly used statistic for assessing a bank’s liquidity by dividing the banks total loans by its total
deposit. This number, also known as the LTD ratio, is expressed as a percentage. If the ratio is too
high, it means that banks might not have enough liquidity to cover any unforeseen fund requirement; if
the ratio is too low, banks may not be earning as much as they could be.

Total Loan
LDT Ratio =
Total Deposit

Year Total Loan (Taka in Million) Total deposit (Taka. In Million) LDT Ratio
2014 77,899.79 114,635.13 67.95%

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2013 67,669.38 97,485.61 69.41%
2012 54,887.03 79,623.13 68.93%
2011 56,611.79 70,508.05 80.29%
2010 49,734.80 60,673.56 81.97%
Table 27: Loan to Deposit Ratio

2014 2013 2012 2011 2010

Graph 17: Loan to Deposit Ratio

7.7 Provision for Loan

Provision for Unclassified Loans

Year Provision for Unclassified Loan
2010 718.17
2011 804.897
2012 814.67
2013 937.67
2014 1,097.74
Table 28: Provision for Unclassified Loan (Source: Annual report of JBL 2014)

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 2010 2011 2012 2013 2014

Graph 18: Unclassified loan

The Percentage of Un-classified loans decrease in 2014 due to recovery, regularized and written off of
bad loans following Bangladesh Bank guidelines. Required provision has been kept against all non-
performing loans and advances as per directive of Bangladesh Bank law.

Provision for Classified Loans

Year Provision for Classified Loan

2010 453.76
2011 627.30
2012 1,698.25
2013 2,256.68
2014 1,796.86
Table 29: Provision for Classified Loan (Source: Annual report of JBL 2014)

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 2010 2011 2012 2013 2014

Graph 19: Classified loan

The Percentage of Classified loans decrease in 2014 due to recovery, regularized and written off of bad
loans following Bangladesh Bank guidelines. Required provision has been kept against all non-
performing loans and advances as per directive of Bangladesh Bank law.

7.8 Trend Analysis

Current year amount – Base year amount

Percent change = ×100
Base year amount

2014 2013 2012 2011 2010

Net earn on interest on lending 10269.61 9697.92 9626.68 8473.44 5207.52
Provision for Loans 1121.43 684.02 1126.38 347.39 341.4
Loans 77899.79 67669.38 54887.03 56611.09 49430.50
Loan to deposit Ratio 67.95% 69.41% 68.93% 80.29% 81.47%
Non-performing loan ratio 5.68% 7.59% 9.73% 2.86% 1.82%
Debt Equity ratio 9.43 9.41 10.46 10.33 10.56

Table 30: Trend Analysis

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In 2014 JBL provide more loan so JBL earn more interest than previous year and provisions for loan
also high than other year. Loan to deposit ratio is low than other year that means JBL maintain more
liquidity than other year. Their debt equity ratio also lowers by year by year. That means JBL
minimizing its finance by debt than other year.

So I can say that JBL year by year performing good credit management.

2014 2013
Classified Loan 5.68% 7.59%
Unclassified Loan 94.32% 92.41%
Substandard Loan .50% .35%
Doubtful Loan .43% 2.32%
Bad/Loss Loan 4.75% 4.91%

7.9 Asset Quality Standards

Loan Provision
Loan provision to Non performing loan ratio = ×100
Nonperforming loan

Year Loan Provision Non-performing loan Ratio

2011 278.58 5133.76 5.42%
2012 987.15 5337.87 18.49%
2013 1684.02 4422.15 15.46%
2014 1221.43 5133.76 23.79%
Table 31: Loan provision to nonperforming loan ratio

Loan Provisions
Loan provision to loan ratio = ×100
Total loan

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 Year Loan Provision Total loan Ratio
2011 278.58 56611.79 .49%
2012 987.15 51887.03 1.90%
2013 684.02 67669.38 1.01%
2014 1221.43 77899.79 1.57%
Table 32: Loan provision to loan ratio

Loan Provisions
Total provision to Asset ratio = ×100
Total Asset
Year Total provision Total Asset Ratio
2011 3473.93 870506.51 .39%
2012 1126.37 109678.50 1.02%
2013 3878.37 115162.95 3.36%
2014 4116.03 139494.58 2.95%
Table 33: To provision to asset ratio

Overall analyses I can say that JBL is now do better credit management than before. That’s why in
Long term JBL rated by A1 (Strong Capacity and high quality) and in short term graded by ST-2

7.10 Hypothesis Testing

Summarization of variables

Year ROE ROA NPL/TL

2010 21.0 1.8 7.3
2011 19.45 1.69 2.85
2012 13.35 1.06 9.72
2013 13.20 1.06 5.68
2014 13.68 1.01 7.59
Table 34: Summarizations of variables

Significance level = 5%

ROE vs. Percentage of NPL

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 Graph 20: ROE vs. Percentage of NPL

Diagram shows a slight negative correlation between ROE and NPL. Since non-performing loans is an
indicator to poor credit risk management. If JBL can reduce the percentage of Non-performing loan it
will earn more profit. We therefore expect better credit risk management is related to lower non-
performing loans.

7.11 SWOT Analysis

SWOT analysis refers to analysis of strengths, weaknesses, opportunities and threats of an

organization. This facilitates the organization to make its future performance improved in comparison
to its competitors. An organization can also study its current position through SWOT analysis. For all
of these, SWOT analysis is considered as an important tool for making changes in the strategic
management of an organization. Through direct observation and discussion with the JBL officials I
am able to point out some major strength and weaknesses as well as some threats and opportunities
regarding the various issues of the Bank such as –

 Organizational identity
 Service level
 Operational efficiency

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  Technology
 Employee efficiency etc. along with many other issues.

Strengths Weaknesses

 Top management  Dependent on fixed deposits

 Corporate culture
 Various Products and Services
 Strong employee bonding
 Efficient Performance
 Strong financial position
 Moderate risk management system
 Absence of strong marketing activities
 Not enough innovative products

Opportunities Threats

 Country wide network  Similar products are offered by others

 Introducing more branches  Default Loans
 Introducing special corporate scheme  Industrial Downturn
 Real time online banking  Increased competition in the market
 Creation of brand image

 Strengths

 Top Management

The Jamuna Bank Limited is operated by a very efficient management group. The top management
officials have all worked in reputed banks and their years of banking experience, skill, and expertise
will continue to contribute towards further expansion of the bank. So, the top management of the bank
is the major strength for JBL.

 Corporate Culture

JBL has an interactive corporate culture. The working environment of JBL is very friendly, interactive
and informal. And, there are no hidden barriers or boundaries while communicate between the superior
and the employees. This corporate culture works as a great motivation factor among the employees of

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the bank.

 Various Products and Services

JBL offers various types of products and services to their clients. So those, Customers can choose the
right products that will fulfill their needs.

 Strong employee bonding and belongings

JBL employees are one of the major assets of the company. The employees of JBL have a strong sense
of commitment towards organization and also feel proud and a sense of belonging towards JBL. The
strong organizational culture of JBL is the main reason behind its strength

 Efficient Performance
It has been seen from customers’ opinion that JBL provides hassle-free customer services to its client
comparing to other financial institutions of Bangladesh. Personalized approach to the needs of
customers is its motto.

 Strong Financial Position

It has been seen that the net profit has been gradually rising over the years. Furthermore, JBL is not just
sitting on its previous year’s success, but also taking initiatives to improve. One of the employees has
said.

 Weakness
 Dependent on fixed deposits
Jamuna Bank heavily dependents on fixed deposit. The bank have to pay large amount of interest for
the just because of highly depend on fixed deposit.

 Moderate risk management system

JBL risk management system is not that much secured. They need to develop their risk grading system.

 Absence of strong marketing activities

JBL currently don't have any strong marketing activities through mass media e.g. Television. TV ads
play vital role in awareness building. JBL has no such TV ad campaign. Although they do a lot of CSR
activities compared to other banks.

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  Not enough innovative products
In order to be more competitive in the market, JBL should come up with more new attractive and
innovative products.

 Opportunities
 Country wide network

The ultimate goal of JBL is to expand its operations to whole Bangladesh. Nurturing this type of vision
& mission & to act as required, will not only increase JBL's profitability but also will secure its
existence in the log run.

 Introducing more branches

There are many important places in Bangladesh, where customers are eagerly waiting for doing
banking transactions. But no existence of banks is in those places. Although JBL already has 97
branches to provide services to its customers, it must also open more branches in those places where
people needs banking facilities.

 Introducing special corporate scheme

JBL can introduce special corporate schemes for the corporate customers or officers who have an
income level higher from the service holders. At the same time, they can introduce schemes or loans
for various service holders. And the schemes should be separate according to the professions, such as
engineers, lawyers, doctors etc.

 Real time online banking

Today online banking is the best way to earn profit for the bank. So JBL have to earn more profit by
developing online banking system.

 Creation of brand image

As we know that brand creates value. So JBL need to develop their brand image by developing their
products and services.

 Threats

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  Similar products are offered by other banks
Now-a-days different foreign and private banks are also offering similar type of products with an
almost similar profit margin. So, if all competitors fight with the same weapon, the natural result is
declining profit.

 Default Loans
The problem of non-performing loans or default loans is very minimum or insignificant. However, this
problem may rise in the future thus; JBL has to remain vigilant about this problem so that proactive
strategies are taken to minimize this problem.

 Industrial Downturn
Bangladesh is economically and political unstable country. Flood, draught, cyclone, and newly added
terrorism have become an identity of our country. Along with inflation, unemployment also creates
industry wide recession. These caused downward pressure on the capital demand for investment.

 Increased competition in the market

In banking sector day by day competition are increased and lots of new bank are coming into the
competition. So it is big threat for JBL.

7.12 Findings

The study has been made to find out the credit operating system, their credit policies and procedures of
loan supervision and recovery, especially their classified loans of Jamuna Bank Ltd. And after
discussing their credit system, procedure of loan recovery and analyze their performance of loan and
advance department including the classified loans,

The findings of the study are as following:-

 Jamuna Bank, Chistia Market branch, is able to achieve excellent rating from their clients in
two important criteria of branch location & comfortable interior decoration.

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  Branch managers are made fully liable for the selection of the new borrower in the bank. It
prohibits the way to improper selection of the new borrower by the branch manager.

 Jamuna Bank Ltd. provides working capital facilities like Cash Credit, in against of stock of
manufacturing goods. And continuously supervise to ensure that appropriate stocks are there to
support the financing.

 The employees are very good in nature, highly educated and helpful, if subordinate makes a
mistake, higher authority motivates politely rather than blaming.

 The employees of credit departments that are so crucial matter are highly experienced and can
handle smartly the clients.

 Important factors such as- good reputation in the market, personal & corporate relationship etc.

 ATM service is week.

 The branch manager, officer and executive who have achieved target in all respect may be
rewarded.

 Advertising and promotional activities are not very effective for informing customers about
new and (financial) attractive service. So, advertising campaign should be stronger for quick
improvement of the bank.

From the study it has been found that the pricing policy of JBL is not much satisfactory. For this reason
they should hire marketing specialists who will help them to develop effective service strategy,
different critical decision and prepare various plans.

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