02 Full Report - 79

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EXIM Bank Ltd

Together Towards Tomorrow
1.01 INTRODUCTION
The prosperity of a country depends upon its economic activities and banking sector plays a vital role here. So banking as a profession has achieved huge popularity all over the world. The same concern immensely appeals me as well. By the grace of Almighty Allah I have been assigned to prepare an internship paper on Performance Evaluation of Export Import Bank Bangladesh Ltd - a very promising third generation bank of Bangladesh. I went through various functions and activities of the bank with an analytical point of view during the last few months and witnessed the dynamicity of their style. This inspired and helped me a lot to furnish my internship report with a great deal of enthusiasm.
I believe that I have tried all the way to follow the previous studies retaining my originality in writing the report. Any analytical criticism and creative suggestion on this concern will receive my heartiest welcome.
1.02 ORIGIN OF THE REPORT

Each professional degree needs practical knowledge of the respective field of discipline to be fruitful. Our BBA program also has an internship program, relating to the exchange of theoretical knowledge into the real life practical situation. The report entitled Performance Evaluation of Export Import Bank of Bangladesh Limited originated from the partial fulfillment of the internship program. The main purpose of the preparation of the report is due to the partial fulfillment of the internship program period of the BBA Program conducted by the school of Management and Business Administration, Shahjalal University of Science and Technology, Sylhet, Bangladesh.
Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd
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EXIM Bank Ltd
During the internship program, I was under the supervision and guidance of Fazle Elahi Mohammed Faisal, Lecturer, Department of Business Administration, Shahjalal University of Science and Technology, Sylhet, Bangladesh.
1.03 OBJECTIVES
The General objective of the study is to provide an overview of learning of the intern during the internship program and fulfill the internship requirement. Beside the general objective, the report can be categorized into main objective and specific objectives. The objectives behind this report are mentioned below: (i) Main Objective: The main objective of this study is to prepare an internship paper (which is a partial requirement of the under graduation program) on the specified topic working within an organization implementing the knowledge that have been gathered over the past few years at Shahjalal University of Science and Technology, Sylhet, Bangladesh. (ii) Specific Objectives: The specific objectives of this report are as follows: To analyze the performance of Export Import Bank of Bangladesh Limited (EXIM Bank).
1.04 METHODOLOGY
This report is a descriptive one, which was administered by collecting primary and secondary data. Descriptive Research has an important objective: gives description of something marketing characteristics of function (Malhotra, 2001) and also the description of phenomenon or
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EXIM Bank Ltd
characteristic associated with an object population (who, what, when, where and how of a topic, Copper, 2001). The report tried to evaluate the performance of Export Import Bank of Bangladesh Limited. Before going in to the deep study, conceptual structure visualized under which the whole study was conducted. 1.4.1 Sources of Data This study covered two types of data, which are: Primary data Secondary data (i) Primary Data Primary data collected through interview with the clients of EXIM Bank Sylhet Branch, constructed specially for this report. (ii) Secondary Data Going through different documents and papers developed by the Bank personnel and by others are the sources of secondary data. 1.4.2 Collection Procedure of Data Managers and officers of EXIM from different divisions were the main sources of secondary data. Interview with the clients of EXIM Bank helped me a lot to understand their attitude towards EXIM Bank.
1.4.3 Analysis of Data
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EXIM Bank Ltd
Collected data are analyzed to draw the conclusion. All the data have shown in tabular form.
1.05 LIMITATIONS OF THE REPORT

The study is not free from some practical limitations. Following limitations have faced during the study and the time of working & data collection: As I worked in branch office I didnt get all the necessary data I required. This was the main problem that I faced in preparing the report. Some desired information could not be collected due to confidentiality of bank. Work load during the internship program at the bank was also a barrier to prepare this report. Due to lack of practical experience, some errors might be occurred during the study. Therefore maximum efforts have given to avoid mistakes.
1.06 TIME LINE FOR THE RESEARCH

July 2005-September 2005 (in Bangladesh)
2.01: ESTABLISHMENT OF EXIM BANK

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EXIM Bank Ltd
Export Import Bank of Bangladesh Limited is a third-generation private commercial bank in the country with commendable operating performance. The bank was established in 1999 under the leadership of Late Mr. Shahjahan Kabir, the founder chairman. He had a long experience as a good banker. A group of highly qualified and successful entrepreneurs joined their hands with the founder chairman to materialize his dream. In deed, all of them proved themselves in their respective business as most successful star with their endeavor, intelligence, hard working and talent entrepreneurship. Among them, Mr. Nazrul Islam Mazumder became the honorable chairman after the demise of the honorable founder chairman. This bank starts functioning from 3rd August 1999 with Mr. Alamgir Kabir, FCA as the advisor and Mr. Mohammad Lakiotullah as the Managing Director. Both of them have long experience in the financial sector of our country. By their pragmatic decision and management directives in the operational activities, this bank has earned a secured and distinctive position in the banking industry in terms of performance, growth, and excellent management. The Bank conducts all types of commercial banking operations. The core business of the Bank comprises of trade finance, term finance, working capital finance and corporate finance. The Bank is also providing personal credit; services related to local and foreign remittance and several products related services. The scheme of the Bank, which is designed to help the fixed income group in raising standard of living is competitively priced and has been widely appreciated by the customers. The bank has achieved success in all sectors and ended up with the highest ever-operating profit, which is 46% higher than that of preceding year.
2.02: CORPORATE MISSION OF EXIM BANK

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EXIM Bank Ltd
To provide high quality financial services in export and import trade. To provide excellent quality customer service. To maintain Corporate and business ethics. To become a trusted repository of customers' money and their financial advisor. To make our stock superior and rewarding to the customers/share holders. To display team spirit and professionalism. To have a Sound Capital Base.
2.03: CORPORATE CULTURE OF EXIM BANK

This bank is one of the most disciplined Banks with a distinctive corporate culture. The bank believes in shared meaning, shared understanding and shared sense making. Their people can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to us. The people in the Bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture the bank belongs has not been imposed; it has rather been achieved through their corporate conduct.
2.04 SPECIAL FEATURES OF EXIM BANK

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EXIM Bank Ltd
Though EXIM Bank is engaged in conventional commercial banking, it also considers inherent desire of the religious Muslims; and has launched Islamic banking system and inaugurates two Islamic Banking Branches in the year 2002 and one Branch in 2003. The Islamic Banking Branches perform their activities under the guidance and supervision of a body called Shariah Council.
It is the pioneer in introducing and launching different customers friendly deposit schemes to tap the savings of the people for channeling the same to the productive sectors of the economy.
For uplifting the standard of living of the limited income group of the population the Bank has introduced Monthly Saving Scheme to encourage the common and fixed income group of people.
The bank is committed to continuous research and development so as to keep pace with modern Banking.
The operations of the Bank are computerized oriented to ensure prompt and efficient services to the customers.
The bank has introduced customer relations management system to assess the need of various customers and resolve any problem on the spot.
The bank has also decided to go for Online Banking facility for the customers in near future.
2.05: SPONSORS / DIRECTORS OF EXIM BANK
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EXIM Bank Ltd
EXIM Bank is sponsored by a group of businessmen from various business sectors of the country. The maximum directors are involved in RMG business and they are also renowned among the business community of the country. EXIM Banks present Chairman Mr. Nazrul Islam Mazumdr has long experience in garments business. He is also the Chairman of NASA group of companies.
Late Shahjahan Kabir Founder Chairman
Md. Nazrul Islam Mazumder Chairman
Alamgir Kabir, FCA Former Advisor
Mohammed Lakiotullah Managing Director
Director
Sponsors
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EXIM Bank Ltd
Mr.Md. Nazrul Islam Swapan Mr. Mohammad Abdullah Mr.Md. Altaf Hossain Mr.Md. Faiz Ullah Mr.Md. Mazakat Harun Mr.Md. Fahim Zaman Pathan Mrs. Nasima Akhter Engr.Mr.Md. Aminur Rahman Khan Mr. A.K.M. Nurul Fazal Bulbul Mr.Md. Zubayer Kabir Mrs. Rizwana K. Riza Mr.Md. Habibullah Mr.Md. Nur Hussain Mr. Anjan Kumar Saha Mr.Md. Abdul Mannan
Mrs. Hasina Akhter Mrs. Rabeya Khatoon Mrs. Mahmuda Begum Mrs. Nasreen Islam Mrs. Asma Begum Mrs. Sabira Sultana Mrs. Mamtaj Begum Mr.Md. Shaiful Alam Mrs. Hamida Rahman Mr.Md. Meer Joynal Abedin Mr.Md. Nurul Amin Mrs. Nahida Akter Mr. Muhammed Shahidullah Mr.Md. Abdullah Al-Mamun Mrs. Rubina Shahid Al-Haj Mr. Md. Nurul Amin Mr.Md. Abdullah Al-Zahir Sawpan
2.06: BRANCHES OF EXIM BANK
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EXIM Bank Ltd
The Bank operates through its Head Office at Dhaka and its 25 branches. The branches are located in the following regions. Branch Name Motijheel Branch Panthapath Branch Agrabad Branch Khatungonj Branch Gazipur Branch Imamgonj Branch Gulshan Branch Sonaimuri Branch Sylhet Branch Nawabpur Branch Narayangonj Branch Shimrail Branch Islami Banking Branch Eskaton Branch Islami Banking Branch Laksham Branch Mirpur Branch Jubilee Road Branch Elephant Road Branch Mawna Bogra Jessore Malibag Ashulia Ashugonj Location Dhaka Dhaka Chittagong Chittagong Gazipur Dhaka Branch Noakhali Sylhet Dhaka Narayangonj Dhaka Mothijheel, Dhaka Dhaka Uttara, Dhaka Comolla Dhaka Chittagong Dhaka Dhaka Bogra Jessore Dhaka Dhaka Ashugonj
The Bank also carries out international business through a Global Network of Foreign Correspondent Banks.
2.07: USE OF PROCEEDS

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EXIM Bank Ltd
The public issue is the compliance of statutory requirement of the bank. The proceed will strengthen the capital base of the bank and augment business expansion. The proceeds of the present issue of 31,38,750 ordinary share at Tk.130.00 each (including a premium of Tk. 30.00 per share) amounting to Tk. 408,037,500.00 would be utilized in the normal lending and investment business of the bank.
IPO EXPENSES: Detailed of estimated Public Issue expenses are shown below: Particulars Amount (in Tk) 650.000.00 10.000.00 1,020,094.00 1,224,113.00 816,075.00 1,020,094.00 1,804,781.00 100,000.00 400,000.00
Manager to the issue fee Securities & Exchange Commission fees Underwriting Commission (0.50% of Tk. 204.019 million) Fees of Securities & Exchange Commission (0.30% of Tk. 408.037 million) Brokerage Commission (assumed 20% of IPO, i.e., 1% of Tk. 81.60 million) Banker to the Issue (0.25% of Tk. 408.037 million) Listing fee to DSE or CSE (0.25% on Tk. 721.912 (313.875+408.037 million) Printing of Prospectus (Estimated or at actual)
140,000.00
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EXIM Bank Ltd
Advertisement in one daily newspaper (full prospectus) (cost or at actual) Advertisement of abridged version of prospectus and notices etc. (Estimated or at actual) Arrangement of lottery CDBL related expenses Post Issue Expenses (Estimated or at actual) Total
60,000.00 204,525.00 650.000.00
8,099,682.00
Table 1: Initial Public Offering expense of EXIM Bank Source: EXIM Bank Prospectus
2.08: DESCRIPTION OF BUSINESS

(1) EXIM Bank at a Glance 2001 Authorized Capital Paid up Capital Reserve Fund Deposits Investment (Loan, advances) Investment Foreign Exchange Business (import) Foreign Exchange Business (export) 744.22 1008.83 1512.46 2241.85 48.23% 100.00 25.31 11.96 726.37 531.15 2002 100.00 25.31 22.95 994.52 795.46 2003 100.00 31.39 55.78 1524.30 1228.91 2004 100.00 62.78 93.84 1909.57 1768.22 Growth 0% 100% 68.23% 25.28% 43.89%
82.91 851.97
141.90 1315.25
237.70 1926.01
154.29 2678.17
- 35.09 39.05%
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EXIM Bank Ltd
Remittance Operating Profit Fixed Assets Investment as % of Total Deposit Number of Foreign Correspondents Number of Employees Number of Branches Cost of Fund Cost of Fund with E.C. Return on Assets
40.28 28.38 9.43 70.65%
27.76 40.40 11.10 79.89%
23.50 60.64 12.77 80.62
11.38 88.56 15.08 92.60
- 51.57% 46.09% 18.09% 14.86%
175
178
185
196
5.95%
356 10 9.25% 11.71% 3.18%
500 16 9.29% 11.70% 3.37%
627 19 9.26% 11.30% 3.39%
774 24 8.40% 10.36% 3.08%
23.44% 26.32% - 9.29% - 8.32% - 9.14%
Table 02: EXIM Bank at a glance Source: EXIM Bank Prospectus From the above table we see that the trend of paid up capital is upward. This upward trend indicates that investors are buying more and more shares at high price. Investment is also showing an upward trend. This indicates that borrowers of EXIM Bank are taking more loans and the bank is also extending its range of loans. Foreign exchange business handled by the bank is also showing an upward trend. As the export and import business handled by EXIM Bank is increasing, so it is contributing in the national economy through international business. The growth of operating profit is fairly attractive. From the above table it is very much clear that operating profit of EXIM is increasing at a decent rate in every successive year.
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EXIM Bank Ltd
This indicates that the operating efficiency of the bank is increasing at a rapid pace and the bank is able to reduce its operating cost. The number of branches of EXIM is also increasing. This increasing number of bank branch indicates that EXIMs geographical coverage is increasing and the bank is expanding its operation. It indicates that asset efficiency of the bank is increasing and assets are utilized in efficient way. (2) Business Operations: (i) Main Products of Services: Contribution to Revenues:
Revenue income from the main products/services during the past years as follows:
Description Interest income Income from investment Commission, Exchange & Brokerage Gain on sail of investment in shares Other operating income
2003 1,396,081,422 121,535,735 379,929,474 9,669,915 54,696,256 1,961,912,802
2002 932,241,186 68,974,876 272,673,777 7,615,723 35,049,507 1,316,555,069
2001 621,331,381 54,282,759 211,864,118 28,761,610 24,626,157 940,866,325
Table 03: Sources of income of EXIM Bank Source: EXIM Bank Prospectus (iii) Special Products and Services:
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EXIM Bank Ltd
Export Import Bank of Bangladesh Limited launched several financial products and services since its inception. Among the are Monthly Savings Scheme, Super Savings Scheme, Education Savings Scheme, Multiplus Savings Scheme, Smart Saver Scheme. All of these have received wide acceptance among the people. Monthly Savings Scheme: The prime objective of this scheme is to encourage people to build up a habit of saving. In this scheme, one can save a fixed amount of money every month and receive substantial lump sum of money after five, eight, ten or twelve years. Super Savings Scheme: Under this scheme, customer has to deposit a fixed amount of money for five years and in return, he will receive the benefits on monthly basis. Benefits start right from the first month of opening an account under the scheme and will continue up to five years when the depositor will get refund of his deposit. This scheme is a sure investment for a steady return. Multiples Savings Scheme: Savings help to build up capital and capital is the prime source of business investment in a country. Investments take the country towards industrialization, which eventually creates wealth. This is why savings are treated as the very foundation of development. To create more awareness and motivate people to save EXIM Bank offers Multiples Savings Scheme. Any individual, company, educational institution, government organization, NGO, trust, society tee
SWIFT Service:
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EXIM Bank Ltd
The SWIFT Service help in sending and receiving the messages and instructions related to NOSTRO Account operations and L/C related matters. The bank has brought 6 branches under SWIFT network. Competitive Conditions in the Business The bank sector comprises of monolith public sector consisting of four major commercial banks, and three DFI and a large number private commercial banks including about a dozen foreign owned private banks. They severally compete for savings/deposits and are in search of sound investment/lending targets. Despite stiff competition, the private sector banks are earning significantly increasing profit, especially those having strongly professionally managed operations.
2.09: DESCRIPTION OF PROPERTY

1. The banks business is principally operates through its Head Office at Dhaka and its branch offices on different locations on rented premises. However, the bank owns the following operating assets at written down value as given value. As at Dec 31, 2003 18,874,116 45,624,221 59,963,843 3,148,271 114,036 Table 04: Description of property As at Dec 31, 2002 17,709,390 35,406,740 53,406,740 3,991,645 173,955 As at Dec 31, 2001 13,305,532 29,436,417 45,021,751 6,333,986 194,527
1. Furniture and Fixtures 2. Office Equipment 3. Interior Decoration 4. Vehicles 5. Books
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Source: EXIM Bank Prospectus 2. The bank itself owns the entire fixed assets. 3. There is no mortgage or lien on the property. 4. There is no leasehold property by the bank except premises of the Head Office and Branches on lease/rental basis.
2.10: RISK FACTORS AND MANAGEMENT PERCEPTION REGARDING RISKS

Export Import Bank of Bangladesh Limited is a third generation private commercial bank in the country with commendable operating performance. Directed by the mission to provide prompt and efficient services to clients, EXIM Bank has successfully celebrated its sixth year of operation. It provides a wide range of commercial services. The Bank has achieved success among its peer group within a short span of time with its professional and dedicated team of management having long experience, commendable knowledge and expertise in convention with modern banking. With all its resources, the management of the bank firmly believes that the bank would be able to encounter problems that may arise both at micro and macro economic levels. However, the prospective risk factors and the plan of the management to reduce such risks are given below: 01. Liquidity risk usually arises if the customers lose confidence in the financial institute/bank or if they find a more attractive investment opportunity. The liquidity risk also arises if liabilities
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EXIM Bank Ltd
are not matched with the advances made or exposure is concentrated in a particular sector. EXIM Bank might face such risk like other banks. # The management of the bank is maintaining an efficient portfolio in order to have a healthy growth and retain customer satisfaction. In order to avoid asset liability mismatch the management of the bank is constantly monitoring the banks business portfolio. The bank has a Well-diversified and balanced advance portfolio consisting of agriculture, industrial, garments, import construction, trade & commerce, export, transport, consumer, and other sectors. The liquidity risk is minimized to maximum extent. 02. Interest rate risk arises due to interest rate fluctuation in the financial market. Change of interest rate in the international market situation is also likely to affect the bank interest rate in Bangladesh. Interest rate is free floating and different banks offer different interest rates. If any bank takes deposits at high interest rate then the risk becomes greater. Government of Bangladesh has also emphasized to reduce the spread of interest rate, which will effectively reduce the earnings of the banks. EXIM Bank might also be a subject to such risk. # The management of the Bank is prudently monitoring the market situation to keep the deposit interest rate at minimum and also trying to invest at a reasonable rate to increase the profitability of the Bank. Also efficient management of portfolio would reduce the amount of classified loans to a minimum level, which at the end will sustain the earnings of the Bank. 03. The present instability and slump in the world economy may affect the overall economy of the country and the banking system as well.
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EXIM Bank Ltd
# EXIM Bank is engaged in modern banking. It is expected that EXIM Bank by its efficient Asset and Liability management will be able to maintain its trend of growth and thus overcome the threat. 04. As per requirement of the Bangladesh Bank, BRPD Circular no-10, dated March 30, 2003, all Commercial Banks working in Bangladesh are required to maintain Paid-up Capital and reserves at least Tk. 100.00 crore by March 10, 2005 provided at least 50% of the required adequacy will have to be met by March 10, 2004. If the requirement of the Capital adequacy as mentioned above cannot be met by the Bank within the stipulated time, Bank will not be eligible to pay dividend to the shareholders. # The management of the Bank is planning to meet the required capital adequacy within the stipulated time frame. For any reason, if the situation does not permit to meet the requirement, the bank has option to declare stock dividend instead of cash dividend. 05. Deteriorating asset quality originating from inadequate/inappropriate risk appraisal by the banks, slack monitoring of outstanding debts by them, inadequate/inappropriate documentation secured by the banks and other form of management deficiencies. # EXIM Bank has been able to maintain a very low classified portfolio over the last six years of operations. Its present classified portfolio stands very low of the total loan portfolio in the year 2003. This demonstrates the Banks professional management ability. 06. Increased provisioning requirement arising out of creeping classified debts resulting in less than anticipated distributable profits and eventual lower dividend payout. This could be a local issue for a relatively new bank. Bangladesh Banks present stipulation in classification of loans and consequent provisioning requirement after four years of operation of any bank is evident.
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EXIM Bank Ltd
# While the management of the bank recognizes this risks, it has so far demonstrated its ability to maintain a very low classified portfolio and thus very low provisioning requirement, which has always been adequately addressed. Moreover, the bank has declared 25% cash dividend and 12.50% stock dividend in 2001. In 2002, the Bank has declared 8% cash dividend and 24% stock dividend. 07. Every bank carries some contingent liabilities in their books, as it is generic to the nature of their business. Should any significant portion of such contingent liability become actual? Liability at any point of time due to client default, the profitability of a bank maybe affected negatively? # EXIM Bank carries contingent liability in its books as a natural course of business and the quality of contingent liability carried by the bank at any point of time is not significantly high compared to the size of its balance sheet in general and reserves in particular. 08. Unfair and hostile competition in the banking industry leading to price-cutting and entrance of other financial institution in the traditional banking and quasi-banking services, including formal banking, i.e. money changers, money lenders and brokers, unauthorized syndication, underwriters etc. # Recognizing these risks, EXIM Bank has, since its inception, focused on diversified client base with an innovative and differentiated product base. This strategy has been rewarding for EXIM, and it plans to remain innovative in future also by way of creating new markets for its products. 09. Should one or more banks in the country fail to perform or become bankrupt at any point of time, a general lack of confidence in the market may affect EXIMs business negatively.
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# This risk is absolutely external to the Bank and could affect any financial institution operating in the country. EXIM does not have any specific antidote to this risk, except its reputation and image. The Bank carries out all of its activities in such a way as will help create a lasting confidence among the public. 10. Deep and frequent exchange rate fluctuation negatively impacting on import and/or export business of the clients. # Foreign exchange risks originating from transactions have always been professionally managed. 11. A banks ability to operate profitability is directly related to the monetary and fiscal policy of the country at any given point of time. Imposition of restrictive monetary and/or fiscal policy by the government at any time may affect a banks profitability negatively. # Neither EXIM Bank nor any other commercial bank can effectively combat this risk. However, EXIM Bank having small and targeting niche markets is likely to be less affected by restrictive monetary and/or fiscal policy. 12. Inability to cope with competitiveness faced from other banks due to lack of up-to-date technology, innovativeness in product development and skilled human resources. # Although EXIM Bank is yet to be fully automated the Bank has adequate technology to meet its present requirement and it proceeding aggressively to enhance its technology level. Many products are introduced in the market in recent days and more innovative and diversified products are in the offering. The products are well received by the market, which is evident from the growth pattern of those products. The bank is recruiting fresh university graduates on regular basis and arranging training for them both from its own and other training institutions. Side by
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EXIM Bank Ltd
side the Bank is hiring experienced and skilled human resource in an effort to balancing out the need of the Bank in various fields of its operation. The bank has also introduced various welfare schemes for its employees with a view to retain its trained and experienced human resources on longer term basis and to create a sense of belongingness. The bank Management believes that lower employee turnout ratio will improve productivity of the banking future. 13. Investors should keep in mind that equity security entails un-quantified risk and reward possibility, including leading towards total erosion of investment in extreme cases. # The risk is inherent to all equity securities and is not specific to the security of EXIM Bank. 14. The Bank has made adequate provision on loans and advances as per Bangladesh Banks circular. But in future, any increase in loan loss provisioning might have adverse impact on probability as well as net worth. # The Management has been following a Loan and Advance Policy, which will be continued in future. Therefore, it is expected that the loan loss provisioning in future will be within tolerable limit having little material impact on future profitability as well as net worth. 15. The bank has been rated by the CRISL on September 08, 2003 under Credit Rating Rules, 1996 of the Securities and Exchange Commission. CRISL assigns BBB rating to Export Import Bank of Bangladesh Limited in the long term and ST-3 rating in the short term on the basis of the banks good fundamentals, superior asset quality, maintaining required capital adequacy, moderate profitability, moderate liquidity and limited market share. Financial institutions rated in this category fall under the CRISL category of investment grade and are adjusted to offer moderate degree of safety for timely repayment of financial obligations. This level of indicates
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EXIM Bank Ltd
that the bank has yet to overcome weakness in some areas of operation but has the capability to overcome the abovementioned limitations with persistent efforts. # Risk factors are more variable inn period of economic stress than those rated in the higher categories. The short-term rating indicates good certainty of timely payment. Liquidity factors are sound in the short run. Although ongoing funding need may enlarge total financial requirements, EXIMs recent move to issue shares to raise Tk. 408.04 million from the capital market is good to mitigate on going finance need. EXIM is a third generation private bank in the country and performing above average as compared to the peer banks. As on June 30, 2003 EXIMs loans and advances stood at Tk. 9.48 million total deposit of Tk. 10.92 billion. With 0.23% infection in its loan portfolio, EXIM earned Tk. 109.43 million during the same period. 16. Bangladesh Bank granted approval to EXIM Bank to operate as Islamic Bank. As there are other Islamic Banks operating in the country, the EXIM Bank may face competition for its conversion into Islamic banking after five years of operation. # As EXIM Bank is performing well in traditional general banking and there is a good demand for Islamic Banking, the management of the Bank is also expecting god result in Islami banking operation. 17. As per audited accounts of December 31, 2003, the Bank has capital inadequacy (7.25%) in terms of Risk weighted Assets (RWA) whereas standard requirement is 9%. # on completion of IPO the bank will meet its capital adequacy. 18. The bank did not distribute any dividend for the year ended on December 31, 2003.
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# The sponsoring shareholders are entitled to avail dividend out of the retained profit and balance shown in premium account as per audited financial of December 31, 2003. The dividend will be distributed in due course with the approval of Bangladesh Bank. 19. CRISL assigned BBB rating on September 08, 2003 to Export Import Bank of Bangladesh Limited in the long term and ST- 3 rating in the short term. As per international practice long term remains valid for one year and short term remains valid for six months. Hence the shortterm rating is no longer valid. # The management is in the opinion that the performance 9of the bank is getting much better than that period of CRISL rating dated September 08, 2003.
3.01 ANALYSIS OF PROFIT AND LOSS ACCOUNT

Profit and Loss Account Export Import Bank of Bangladesh Limited For the year 31st December 2004 Notes 2004
2003
2002
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EXIM Bank Ltd
Investment income Profit paid on deposits, borrowings etc Net Investment Income Income from investment in -shares/securities Commission, exchange and -brokerage Gain on sale of investment in shares Other operating income Total Operating Income
20
Taka Taka 1,820,283,897 1,396,081,422
Taka 932,241,186
21
1,145,511,622 1,121,309,068 = 394,772,275 = 274,772,354
728,365,599 = 203,875,587
22
78,639,501
121,535,735
68,974,876
23
597,695,893
379,929,474
272,673,777
24
73,643,453 74,325,865
9,669,915 54,696,256
7,615,723 35,049,507 = 588,189,470 95,627,987 29,607,526 168,084
Salaries and allowance Rent, taxes, insurance, lighting etc Legal expenses Postage, stamp, telegram and telephone Audit fees Stationery, printing, advertisements etc Managing Directors remuneration Managing Directors fees Directors fees Depreciation on and repairs to banks property Other expenses
25 26 27
=1,219,076,987 = 840,603,734 183,089,157 134,004,574 50,456,074 41,076,938 1,090,982 522,184
28
20,740,411 181,750
14,677,332 156,750
13,694,330 150,000
29 18,993,547 2,400,000 317,500 3,130,000 26,127,561 13,299,014 2,184,000 292,500 2,613,672 19,733,147 11,138,022 2,006,710 260,000 2,462,500 16,053,632
30 31
32
76,742,592
49,381,699
30,223,666
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EXIM Bank Ltd
Total Operating Expense
= 383,269,574 = 277,941,810
= 201,392,457
Profit before Provisions Provisions for investment For diminution in value of investment in share Total Provisions Profit before Tax Provision for tax Profit after Tax Retained earnings brought forward Transfer from share premium 40% cash dividend for 2003 10% dividend distribution tax Transfer to dividend equalization account Adjustment for (under)/over provision for -tax made in earlier years Profit Available for Appropriation
33
835,807,413 190,169,211 -
562,661,924 84,154,418 -
386,797,013 29,080,970 19,693,258
= 190,169,211 = 84,154,418 = 645,638,202 = 478,507,506 263,840,039 223,715,350 = 381,798,163 = 254,792,156 123,621,836 82,575,000 (125,550,000) (12,555,000) (62,775,000) 2,131,181 -
= 48,774,228 = 338,022,785 136,600,000 = 201,422,785 17,226,625 -
5,316,836
(37,600,000) (35,468,819)
1,088,672 16,137,953
= 387,114,999 = 219,323,337
= 217,560,738
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EXIM Bank Ltd
Appropriations: Statutory reserve Proposed cash dividend Proposed issue of bonus shares (@ 10 -shares per 25 shares held ) Share premium on bonus share
13 129,127,640 95,701,501 67,604,557 20,250,000
251,100,000 = 380,227,640
= 95701,501
60,750,000 66,825,000 = 215,429,557
Retained Earnings Carried Forward 6,887,359 60.82 123,621,836 81.18 2,131,181 79.14
Earnings Per Ordinary Share
Table 5: Profit & Loss Account of EXIM Bank Source: EXIM Bank Prospectus From the above table we see that in the year 2002 net investment income were 203,875,587 Tk. In the year 2003 it increased to 274,772,354 Tk and in 2004 it further increased to 394,772,275 Tk. Here we see that investment income has increased at every year. It indicates that the bank is earning more profit from investment at every subsequent year. From the above table it is evident that total operating income of the bank is also increasing. In the year 2002 total operating income of the bank were 588,189,470 Tk. In 2003 it increased to 840,603,734 Tk and in 2004 it further increased to 1,219,076,987 Tk. Thus we see that total operating income of the bank has increased more than 100% in the last three years
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EXIM Bank Ltd
Earning per share (EPS) of a bank is an important indicator of profitability. From the above table we see that EPS of EXIM has decreased significantly in the year 2004 by about 20 Tk per share, which is a dangerous signal for the bank.
3.02 ANALYSIS OF BALANCE SHEET

Export Import Bank of Bangladesh Limited Balance Sheet at 31st December 2004 Notes 2004 2003 Taka Property and Assets Cash: In hand (including foreign currencies) With Bangladesh Bank and Sonali Bank (including foreign currencies) 1,019,146,505 563,793,875 440,885,038 3 190,152,334 129,871,767 163,672,719 Taka
2002 Taka
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EXIM Bank Ltd
= 1,209,298,839 Balance with other banks and financial institutions: In Bangladesh Outside Bangladesh 4 748,839,964 461,948,589 = 1,210,781,553 -
= 693,665,642
= 604,557,757
805,135,395 319,241,380 = 1,124,376,775 605,000,000
524,993,436 25,997,751 =550,991,187 360,000,000
Money at call and short notice Investment (shares and bonds): Government Securities others
5 6
1,500,689,600 42,295,814 =1,542,985,414
2,200,360,200 176,713,581 =2,377,073,781
1,230,641,100 188,360,191 =1,419,001,291
Loans and advances: General Investment Bills discounted and purchased
7 18,005,716,816 1,326,719,256 11,324,591,109 964,529,067 7,481,509,504 473,052,532 =7,954,562,036
=19,332,436,072 =12,289,120,176
Fixed assets Other assets
8 9
150,822,688 909,426,885
127,724,487 671,696,525
110,983,041 374,607,103
Non-banking assets Total assets Liabilities and Capital Liabilities Borrowing from other banks, financial institutions and agents Deposits and other accounts: Current deposits and other
24,355,751,451
17,888,657,386
11,374,702,415
10
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EXIM Bank Ltd
accounts Bills payable Savings bank deposits Bearer certificates of deposits Term deposits Call deposits Foreign currency deposits
2,012,789,637 138,047,759 1,159,670,831 15,716,470,619 51,196,943
1,258,920,268 101,050,630 998,239,535 12,027,460,890 820,000,000 37,297,082
888,422,787 60,615,707 613,662,425 221,054,432 7,005,226,249 1,135,000,000 21,244,932 =9,945,226,532
=19,078,175,789 =15,242,968,405
Other liabilities Total liabilities Capital/shareholders Equity Paid up capital Proposed issue of bonus shares Share premium Dividend equalization account Statutory reserve Retained earnings Total shareholders equity Total liabilities and shareholders equity Off Balance Sheet Items
11
3,877,570,922 22,955,746,711 627,750,000 251,100,000 94,162,500 62,775,000 357,329,881 6,887,359 1,400,004,740
1,897,414,904 17,140,383,309 313,875,000 82,575,000 228,202,241 123,621,836 748,274,077
878,143,962 10,823,370,494 253,125,000 60,750,000 82,575,000 132,500,740 2,131,181 551,331,921
12 13 14 15 16 17
24,355,751,451
17,888,657,386
11,374,702,415
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EXIM Bank Ltd
Contingent liabilities: Acceptance and endorsementsLetters of guarantee Irrevocable letters of credit Bills for collection Other contingent liabilities Total contingent liabilities 18 859,399,747 5,009,355,187 451,115,577 2,679,607,500 8,999,478,011 521,386,572 2,383,041,275 536,126,303 4,457,007,820 7,897,561,970 208,788,385 2,249,814,615 220,107,612 1,931,507,631 4,610,218,243
Other commitments
Total off balance sheet items
8,999,478,011
7,897,561,970
4,610,218,243
Table 6: Balance sheet of EXIM Bank Source: EXIM Bank Prospectus In the above table we see that total asset of EXIM has increased over the last three years. Increase of total asset means additional investment by the bank. Both current and fixed assets have increased significantly. Increase of current assets such as cash indicates more liquidity of the bank. Increase of fixed assets indicates investment in long term for future operation. Besides assets, total liability of the bank has also increased significantly. Increase of liability reduces the banks solvency both in short and long term. From the above table we also see that total shareholders equity of EXIM has increased very rapidly. Increase of shareholders equity means there are more owners as well as more stake of the shareholders in the operational and financial activities of the bank.
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EXIM Bank Ltd
3.03 FINANCIAL RATIO ANALYSIS

Analysis of Balance Sheet Ratios 01. Liquidity Ratios Liquidity ratios are used to measure a firms ability to meet short term obligations. They compare obligations to short term resources available to meet these obligations. From these ratios, much insight can be obtained into present cash solvency of the firm and the firms ability to remain solvent in the event of adversity. Now we should analyze various liquidity ratios of EXIM Bank:a) Current Ratio One of the most general and frequently used of these liquidity ratios is current ratio:Current Asset Current Liability Current ratio for EXIM Bank for year end 2003 was: 2,42,30,42,417 1,35,99,70,898 = 1.78 Current ratio for EXIM Bank for year end 2004 was: 2,42,00,80,392 2,15,08,37,396 =1.13 The current ratio of a firm measures its short term salary that is its ability to meet short term obligations. As a measure of current financial liquidity it indicates Taka of current assets
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EXIM Bank Ltd
available for each Taka + current liability. In the year 2003, Tk. 1.78 of current asset was available to meet Tk.1.00 of current liability. In 2004, Tk. 1.12 of current assets was available to meet Tk. 1.00 of current liability. In both the year current ratio is more than 1 which means that the Bank is able to meet its current obligation, but as it is less than 2 or not much larger than 1, so the margin of safety to the short term creditor is not much larger. 2. LEVERAGE RATIO: (a) Debt to Equity Ratio: To assess the extant to which the firm is using borrowed money, we may use several different debt ratios. The debt to equity ratio is computed by simply dividing the debt of the firm by its shareholders equity. Total debt Shareholders Equity For EXIM Bank, 2004 year-end ratio was: 22955746711 1400004740 = 16.39 At the year-end 2003, this ratio was: 17140383309 748274077 = 22.90 D/E ratio is the ratio amount invested by investor to the amount invested by the company. The ratio measures the capital structure of the Bank. The long term solvency would judge the
34
EXIM Bank Ltd
soundness of a firm on the basis of the long term financial strength measured in terms of its ability to pay the interest regularly as well as repay the installment of the principle on due dates or in one lump sum at the time of maturity. The long term solvency of a firm can be examined by using leverage ratios. In the year 2003, the creditors of EXIM Bank provided Tk. 22.90 for each Tk. 1.00 being provided by shareholders and in the year 2004, creditors provide Tk. 16.39 for each Tk. 1.00 being provided by shareholders of the Bank. The leverage ratio of EXIM Bank is very high and it is a danger signal for the creditors because the owners are putting up relatively less money of their own. If the project of the Bank fails financially, the creditors will lose heavily. Moreover, with a small financial stake in the firm, the owners may behave irresponsibly and indulge in speculative activity. The greater the D/E ratio, the greater is the risk to the creditors. A high D/E ratio has equally serious implication from the firms point of view also. A high proportion of debt in the capital structure would lead the inflexibility in the operations of the firm as creditors would exercise pressure and interfere in management. (b) Debt to Asset Ratio The debt to asset ratio is defined by dividing a firms total debt by its total assets: Total Debt Total Assets For EXIM Bank this ratio for 2003 was 17140383309 17888657386 = 0.95
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EXIM Bank Ltd
This ratio for 2004 was 22955746711 24355751451 = 0.94 The above ratio measures the share of total asset financed by outside funds. We see that in 2003, 95% of banks assets are financed with debt of various types and the remaining 5% of the financing came from shareholders equity. In 2004, 94% of assets are financed by debt and only 6% came from shareholders equity. The banks debt to equity ratio is very high. Because of this high ratio the bank is in high financial risk. As the percentage of financing provided by shareholders equity is very small so the cushion of protection to the banks creditors is very low. 3. Coverage Ratio (a)Profit coverage ratio: Coverage ratios are designed to relate the financial charges of a firm to its ability to service, or cover, them. Bond rating services, such as Moodys Investors Service and Standard & Poors, make extensive use of these ratios. One of the most traditional of the coverage ratios is the interest coverage ratio, or times interested earned. Earning Before Tax Profit Paid on Deposits, Borrowings Profit coverage ratio of EXIM Bank in 2003 was: 1599816574 1121309068 = 1.42 Profit coverage ratio of EXIM Bank in 2004 was:
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EXIM Bank Ltd
2071149824 1425511622 = 1.45 This ratio serves as one measure of firms ability to meet its profit payment and thus avoid bankruptcy. The profit coverage ratio of EXIM Bank is very low. This low ratio is a danger signal that the bank is using excessive debt and greater the likelihood that the bank could not cover its profit payment without difficulty. EXIM Banks to cover annual profit payment 1.45 times in 2004 and 1.42 times in 2003 appears to provide a very low margin of safety. (b)Dividend Coverage Ratio This ratio measures the ability of a firm to pay dividend on shares which carry a stated rate of returns. Earning After Tax (EAT) Cash Dividend This ratio for EXIM Bank in 2004 was 381798163 125550000 = 3.04 This ratio is high and it reveals safety margin available to the shareholders.
4. PROFITABILITY RATIO (a) Return on Investment (ROI) This ratio is measured in terms of the relationship between net profits and assets. ROI is: Net Profit After Taxes
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EXIM Bank Ltd
Average Total Assets ROI for EXIM in 2003 was 242792156 17888657386 = 1.35% For the 2004 ROI was 381798163 24355751451 = 1.56% X 100
X 100
X 100
Here we see that although ROI of 2004 has slightly increased from previous year but it is still very low.
(b) Return on Capital Employed (ROCE) ROCE = Net Profit After Taxes Average Total Capital Employed ROCE for EXIM Bank for the year 2003 was: 254792156 7841685077 = 3.24% (c) Return on Equity (ROE) This profitability ratio carries the relationship of return to the sources of funds yet another step further. X 100 X 100
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EXIM Bank Ltd
ROE = Net Profit After Taxes Shareholders Equity ROE for EXIM Bank in 2004 was 381798163 1400004740 = 27.27% ROE for 2003 was 254792156 748274077 = 34.05% This ratio tells us the earning power on shareholders book value investment. The ROE of EXIM Bank is high and it reflects the banks acceptance of strong investment opportunity and effective expense management. (d) Earning Per Share (EPS) It measures the profit available to the equity shareholders on a per share basis that is the amount they can get on every share held. X 100
EPS = Net Profit Available to Equity holders Number of Ordinary Shares Outstanding
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EXIM Bank Ltd
EPS for EXIM Bank for the year 2003 was Tk. 81.18 per share and for the year 2004 the EPS was Tk. 60.82 per share. (e) Dividend per Share (DPS) This ratio reveals the dividends paid to shareholders on a per share basis. DPS = Dividend Paid to Ordinary Shareholders Number of ordinary shares outstanding DPS for the year 2003 was 12550000 3138750 = 3.99 (f) Price Earning (P/E) Ratio P/E Ratio = Market Price of Share EPS P/E ratio of EXIM Bank for the year 2003 was 407.53 81.18 = 5.02 The P/E ratio reflects the price currently being paid by the market for each taka of currently reported EPS. In other words the P/E ratio measures investors expectations and the market appraisal of the performance of the bank.
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EXIM Bank Ltd
3.04 TREND ANALYSIS

01. Liquidity Ratio (i) Current Ratio: The current ratio that asset liability ratio is upward sloping. Current Ratio 2004 Current Ratio 2003 1.13 1.78 = 0.634 From the above calculation we can see that current ratio of 2004 is .634 times higher than that of 2003. 02. Debt to Equity Ratio In 2004 debt is lower than 2003. It reflects that the bank accumulated to reduce its debt. D/E Ratio 2004 D/E Ratio 2003 16.39 12.90 = 0.72 (Approx) So, the debt-equity ratio in 2004 is 0.72 times lower than that of 2003. iii. Debt to Asset ratio: The debt to asset ratio is almost same in FY 2003 and 2004
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EXIM Bank Ltd
0.94 0.95 Debt to asset ratio is 0.99 times lower in 2004 than that 2003. iv. Coverage Ratio: The ratio is upward. 1.45 (2004) 1.42 (2005) =1.02 Coverage ratio shows the positiveness in the growth of the task. The coverage ratio is 1.02 times higher in 2003 than 2003. Dividend coverage ratio is 3.04 in FY 2004.
3.05 FINANCIAL CONDITION

Profit and Operating Results The Bank has earned an operating profit of taka 562.66 million during 2003 after all provisions including the 1% General Provision on unclassified Loans and Advances. Provision for Income Tax for the year amounted to taka 223.71 million resulting in a net profit, after tax, of 254.79 million. The growth in net profit over the previous year is 26.5%. Deposit A strong deposit base is necessary for the success of a bank. During the year 2003 the Bank mobilized a substantial amount of deposits from mid-level income group people under Deposits Savings Scheme.
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EXIM Bank Ltd
After critical handling the bank mobilized total deposit of taka 15242.97 million as at December 31, 2002. Advance The Banks Loans and Advances portfolio also indicates an impressive growth. Total Loans and Advances amounted to Tk 12289.12 million in 2003 as against Tk 7,954.56 million in 2002 and the growth rate is 54.49%. This is due to increased commercial and trade financing, term lending and working capital support. The classified loan position is almost nil. This was achieved by rendering due attention and monitoring high-risk advances. As a result, classified advance is amounted to Tk 298.03 MILLION IN 2003. The Bank is trying to operate its credit activities with the target of achieving Zero classified loans. The sectors financed include Manufacturing, Trading, Construction, Transport, Agriculture, Fishing & Forestry, Edible Oil, Pharmaceuticals, Information Technology, and Customer Credit amongst others. Foreign Exchange Business International trade constitutes the main stream of business activities of EXIM Bank. It offers a full range of trade finance and services namely Issue, Advice and Confirmation of documentary credit; arranging forward exchange coverage; Pre-shipment and post-shipment finance; Negotiation and Purchase of Export Bills; Discounting bill of exchange; collection of bills, inward and outward remittance etc.
Import Business The total Import Business handled by the Bank during 2003 was Tk 19,260.01 million compared to Tk 13,152.50 million in the previous year showing an increased rate of 46.44%. Export Business
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EXIM Bank Ltd
The total export business handled by the Bank during 2003 was Tk 15,124.60 million compared to Tk 10,088.30 million in the previous year showing an increased rate of 49.92%. Foreign Correspondents EXIM Bank has correspondents banking relationships with over 78 Banks spread across 68 countries to facilitate cross border trade and payment related services. So far, the Banks total correspondents are 180. The bank has maintained an excellent relationship with leading international banks and has successfully established credit lines with major banks to support global foreign trade business. Investment The total investment of the bank stood at Tk. 23, 77.073million as on 31st December, 2003 as against 1419 million in the previous year showing an increase of 67.52%. The notable investments represent developments in the treasury bills, shares, prize bonds and others. Capital and Reserve Fund The authorized capital of the bank is Tk. 1,000.00 million. Total shareholders equity at the end of December, 2003 stood at Tk 748.27 million. The paid up capital represents the face value of 3138750 ordinary shares of Tk 100/= each fully paid by the sponsor share holders. The capital adequacy ratio was 7.25% as on 31st December 2003.
Dividend EXIM Bank is continuously updating itself with a view to be competitive and to remain the leader of the banking industry. It has distributed a substantial amount of dividends in the preceding years and also strengthens the platform of the bank. The percentages of distributions of dividends are as follows.
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EXIM Bank Ltd
Year
Cash Dividend (%) 14% 25% 8%
Stock Dividend (Bonus Share) 12.50% 24%
2000 2001 2002
Table 7: Dividend payment of EXIM Bank Source: EXIM Bank Prospectus EXIM Bank distributes both cash and stock dividend to its shareholders. From the above table we see that in 2001 cash dividend was higher (25%) than the stock dividend (12.5%). But in 2002 stock dividend is higher than cash dividend by 16%. Maturity Grouping of Investment 2003 360,200 50,000,000 2,150,000,000 176,713,581 2,377,073,781 Table 8: Maturity Grouping of Investment Source: EXIM Bank Prospectus From the above table we can understand that EXIM is emphasizing more on long term investment rather than short term investment. The duration of majority of the bank investment is 1 to 5 years. CAPITAL ADEQUACY RATIO 2002 641,100 1,230,000,000 188,360,191 1,419,001,291
On demand More than 3 Months but less than 1 year More than 1 year but less than 5 years More than 5 years Total
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EXIM Bank Ltd
In accordance with the Instruction of Bangladesh Bank, the bank adopted BIS (Basle Committee on Banking Supervision) risk adjusted capital standards to measure capital adequacy. Banks in Bangladesh are required to maintain the ratio of 9% at the minimum against risk weighted assets. (Tk. in Million) CORE CAPITAL (TIER-1) A Paid up Capital Proposed Issued as Bonus Share B C D E F G H Share Premium Account Statutory Reserve (SR) Proposed Cash Dividend Other Reserve (OR) Retained Earnings Minority Interest in Subsidiaries Non-cumulative Irredeemable Preference Shares Total Core Capital 123.62 31. 12. 2003 313.87 82.58 228.20 31. 12. 2002 253.12 60.75 82.57 132.50 20.25 2.13 -
748.27
551.33
Table 9: Capital Adequacy Ratio Source: EXIM Bank Prospectus The banks capital adequacy ratio stood at 7.25% at the end December 31, 2003. The bank reinvested heavily in the year 2003 which is 121 million Tk. higher than the previous year. More reinvestment means more capability of the bank for earning profit in the future. LOANS AND ADVANCES
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EXIM Bank Ltd
Classification of Loan & Advances Amount in 000 Sl. No. Type of Loan 31.12.2003 % of Total Loan & Advance 97.57% 2.21% 0.05% 0.17% 100% 31.12.2002 % of Total Loan & Advance 99.90% 0.10%
A. B.
Total
Unclassified Classified I) Substandard ii) Doubtful iii) Bad & Loss Loans and Advances
11,991,089 271,057 5,757 21,217 12,289,120
7,946,933 7,629
7,954,562
100%
Table 10: Loans and Advances Source: EXIM Bank Prospectus An important feature of EXIMs loan is that its classified loan is only 0.10% which is very negotiable. The Bank has no doubtful as bad/losses. It indicates that the Bank is efficient in loan recovery. Provision for Classified Loans & Advance: 31st December 2003 Base for Rate Amount Provision 11,929,131 164,946 12,051 31st December 2003 Base for Rate Amount
A. B. C. D.
Classified Substandard Doubtful Bad & Loss Total
1% 20% 50% 100%
Provision 119,291 7,910,720 32,989 5,350 12,051 164,331
1% 20% 50% 100%
79,107 1,070
80,177
Table 11: Provision for Classified Loans & Advance
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EXIM Bank Ltd
Source: EXIM Bank Prospectus Although the bank has no doubtful or bad debt, it is maintaining a good amount of provision for bad debt. Position of Provision (Amount in 000) SL. A. B. Particulars Provision Required Provision Made 31.12.2003 164,331 164,331 Table 12: Position of Provision Source: EXIM Bank Prospectus From the above table we see that EXIMs required provisions equals the actual provisions made by the bank. It indicates that the bank adopts sound strategy regarding provisions. SOURCES OF CASH (i) Internal Sources 31.12.2002 80,177 80,177
Paid up Capital Proposed Issue of Bonus Shares Share Premium Statutory Reserve Proposed Cash Dividend Retained Earnings
31-12-2003 313,875,000 82,575,000 228,202,241 123,621,836
31-12-2002 253,125,000 60,750,000 82,575,000 132,500,740 20,250,000 2,131,181
31-12-2001 225,000,000 28,125,000 15,750,000 64,896,183 56,250,000 17,226,625
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EXIM Bank Ltd
Total
748,274,077
551,331,921
407,147,808
Table 13: Internal Sources of Cash Source: EXIM Bank Prospectus From the above table we see that the dominant internal sources of cash are paid-up capital, statutory reserve and retained earnings. It reflects internal efficiency of the bank. (ii) External Sources
Deposits Borrowing Total Grand Total
31-12-2003 15,242,968,405 15,242,968,405 15,991,242,482
31-12-2002 9,945,226,532 9,945,226,532 10,496,558,453
31-12-2001 7,255,016,263 7,255,016,263 7,662,264,071
Table 14: External Sources of Cash Source: EXIM Bank Prospectus External source of cash includes deposits and borrowings. it is to be mentioned that the only external source of EXIM is deposits from clients.
3.06 COMAPARATIVE CASH FLOW STATEMENT:
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EXIM Bank Ltd
Comparative cash flow statement of the bank is as follows:
2004 Tk. A. Cash flows from operating activities Interest Receipts 1,836,674,087 Interest Payment Dividend Receipts Fees and Commission Receipts Recovery on loans previously written off Cash payment to employees Cash payment to suppliers Income taxes paid Receipts from other operating activities Payment for other operating activities Operating profits before changes in operating assets 594,862,172 2,002,721 597,995,,893
2003 Tk.
2002 Tk.
2001 Tk.
1,505,117,977 12,499,180 379,929,474
983,639,141 17,576,921 272,673,777
660,802,253 (521,318,709) 14,811,887 211,864,118
1,341,909,520 (1,121,309,068) (728,365,599)
168,596,566 19,168,031 301,252,013 147,969,318
136,188,574 399,052 212,463,399 54,696,256
97,634,697 872,804 153,924,085 36,198,958
68,940,971 1,648,569 75,615,581 24,626,157
158,853,717
124,374,642
89,290,153
65,973,289
358,306,256
240,001,459
178,607,596
and liabilities (A) Changes in operating assets and liabilities (Increase)/decrease in operating assets: Statutory Deposit Trading security-shares Fund advanced to other banks Fund advanced to customers 134,417,767 5,414,860,530
11,646,610 -
109,886,192 -
77,113,999 2,961,012,548
4,334,558,140 2,823,014,633
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EXIM Bank Ltd
Other assets Deposits from other banks Deposits from customers Liabilities on account of customers Trading Liabilities Other Liabilities Net cash from operating activities
47,062,947 1,721,396,615 5,556,603,999 -
85,025,075
86,628,320
229,055,465 670,009,000 2,700,330,015 -
Increase/(decrease) in Operating Liabilities: 1,412,198,000 1,234,390,000 3,885,543,873 3,924,600,269 -
455,408,539 347,901,721
673,801,174 1,921,912,698
318,617,293 402,556,516
121,401,834 861,277,363
B. Cash flows from investing activities
Receipts from sale of securities Payment for purchase of securities Purchase of fixed assets Sale proceeds of fixed assets Gain on sale of investment in shares Net cash from investing activities
1,622,082,514
780,000,000
970,000,000
50,000,000
1,500,000,000
1,750,000,000 1,450,000,000
480,000,000
47,892,244 1,146,326 -
35,232,540 1,112,500 9,669,915
35,207,043 2,897,157 7,615,723
55,452,675 28,761,610
994,450,125
504,694,163
456,691,065
C. Cash flows from financing activities Issue of ordinary shares Share premium Dividend paid in cash 313,875,000 94,162,500 138,105,000 20,250,000 56,250,000 31,500,000
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EXIM Bank Ltd
Net cash from financing activities
269,932,500
20,250,000
56,250,000
31,500,000
D. Net increase in cash and cash equivalent (A+B+C)
2,632,625
907,212,573
158,387,647
373,086,298
E. Cash and cash equivalent 2,423,402,617 at the begging of the year
1,516,190,044 1,674,577,691
1,301,491,393
F. Cash and cash equivalent at the end of the year (D+E) Cash and cash equivalent Cash Balance with other banks & financial institutions Money at call and short notice Prize bonds
2,420,769,992
2,423,402,617 1,516,190,044
1,674,577,691
1,209,298,839 1,210,781,553
693,665,642 1,124,376,775
604,557,757 550,991,187
406,105,565 772,889,426
689,600 2,420,769,992
605,000,000 360,200
360,000,000 641,100
495,000,000 582,700 1,674,577,691
2,423,402,617 1,516,190,044
Table 15: Comparative Cash Flow Statement Source: EXIM Bank Prospectus If cash inflow is larger than cash outflow it indicates that the bank is operating efficiently. Operating activities include all these activities which are undertaken by the bank to perform successful operation. In the above table we see that net cash from operating activity increase in one year and decrease in the subsequent year.
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EXIM Bank Ltd
Increase of net cash from investing activity indicates that the bank is undertaking more investment activities. EXIM Banks net cash from investing activity is increasing at every year.
In the last the bank has rapid progress in financial performance. In 2001 net cash from financing activity was 31,500,000 Tk and in 2004 it increased to Tk 269,932,500.
3.07 MARKETING ASPECTS

The bank renders selected types of commercial banking services within the stipulation laid down by the Bank Companies Act, 1991 and directives as received from Bangladesh Bank from time to time which include among other the followings: Deposit Schemes Armed with two Islamic banking branches, the bank offers both conventional and Islamic saving schemes. Besides conventional deposits e.g. Fixed Deposits, Saving Bank Deposit and Current Account Deposits etc, the bank has introduced several schemes e.g. Multiplus Savings (Thirteen Years deposit-More than Triple), Monthly Income Scheme, Super Savings (Eight Years deposit-More than Double), Education Saving Scheme, Smart Saver (A high return investment scheme), and Monthly Savings Scheme. Loans and Advances Portfolio In recent years a varied type of loans are swelling rapidly. In line with this trend of product diversification, EXIM offers different conventional credit/investment schemes and the Islamic Banking products added a new momentum for the bank to increase opportunities for investment. So far, EXIMs loan and advances portfolio includes Project Finance in the form of Term Loan, Real Estate Finance, Secured Overdraft against FDR, different security certificates,
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EXIM Bank Ltd
working capital in the form of Cash Credit Hypothecation/Pledge, Import Trade Finance in the form of PAD/LIM/TR etc, Export finance in the form of Foreign Documentary Bill Purchased/Packing Credit/Local Foreign Bill Purchased, Higher Purchase & Lease Finance, Consumer Credit Schemes, Small Loan in the form of general loan, Murabaha, Murabaha post import, Murabaha T.R., Bai Muazzal both for local trade and export, Izara, Bai Salam. EXIM Bank has been introducing new products in the market to increase its market base.
3.08 MARKET FOR SECURITIES BEING OFFERED

Dhaka Stock Exchange Limited (DSE) 9/F, Motijheel C/A, Dhaka- 1000. Or Chittagong Stock Exchange Limited (CSE) CSE Building, 1080 S.K. Mujib Road, Agrabad C/A, Chittagong. 3.09 FINANCIL STRUCTURE 1. Financial Structure
a. Issued and fully Paid up Capital as on 31st December 2003 (Sponsor Holding)
313,875,000
b. Initial Public Offering (IPO) ( including a premium of Tk. 30.00 per share)
408,037,500
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EXIM Bank Ltd
Total Capital Structure after IPO Table 17: Financial Structure Source: EXIM Bank Prospectus
721,912,500
As required in the Public Issue 1998 all the sponsors shares as detailed in the section Ownership of the Companys Securities will be subjects to a Lock-in provision for a period of 3 (three) years, as follows: The shares, which are subscribed by the sponsors as described in the prospectus, shall be subject to a Lock-in Period as under: 1. Three years in case of companies intended/intending to go for Initial Public Offering (IPO) from the Date of its approval thereof by the Commission or from the start of its commercial operation, whichever is later. 2. A Jumbo Share Certificate (One for each existing Sponsors/Directors/existing Shareholder) is to be issued covering his respective total holdings. Their share holing may be converted into market lots only after the expiry of the lock-in-period of three years. 3. Jumbo share certificates of the sponsors/directors shall be in the custody of a scheduled bank (other than their own Bank). The name, branch of the bank should be intimated to the commission. No splitting of share shall be made without prior intimation to the commission. Availability of Securities (i) Details of IPO
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EXIM Bank Ltd
IPO will be of 3,138,750 shares @ Tk 130.00 each (including a premium of Tk. 30.00 per share) in the following manner:
Number
Par Value
Premium
Total Amount Tk 408,037,500 40,803,750
01. 02.
Total IPO 10% of IPO reserved for Non-Resident Bangladeshis
3,138,750 313,875
100 100
30 30
03.
90% of IPO are offered to the general public
2,824,875
100
30
367,233,750
Table 18: Details of IPO Source: EXIM Bank Prospectus
3.10 ASSET QUALITY

Total asset of EXIM stood at Tk. 13.6 billion on June 30, 2003 of which 5.35% is financed by shareholders fund and 82.22% is financed by the depositors. Overall asset quality of EXIM is good though not the best in the peer group. EXIM has steeped into the fifth year of operation with only 0.23% gross NPL ratio although 0% for the same ratio in the peer group is
56
EXIM Bank Ltd
available. However, EXIM is maintaining a better asset quality considering the peer average for gross NPL ratio (2002: 0.42%). During FY 2002, EXIMs total asset increased by 20% compared to that of EFY 2001. This growth rate was 42% for the year 2001. As at EFY 2002 EXIMs total loans and advances increased by 55% as against the industry and peer growth rate 17% and 44% respectively for the year 2002. The banks total loan portfolio further increased by 19% as at 1H 2003. These high growth rates in peer average for the earlier years are in fact inflated because of small base effect. However, EXIM attained faster growth considering the ongoing economic scenario of this country. 3rd generation banks are often criticized for their fast banking practice and EXIM seems to be keeping pace with the peers in this respect where the bank is supposed to be more cautious in selecting borrowers to maintain the quality of its assets. (i) Non Performing Loans (NPL) As on 30th June 2003, non performing loans of EXIM stood at Tk. 21.80 million against its total loans and advances of Tk. 9.48 billion which is only 0.23%. During EFY 2002 the same ratio was 0.10%. This seems to be commendable when compared to the industry average of 31.37% of the total banking sector and 17.38% of the PCBs as on June 2002. Peer Group Gross NPL ratio for EFY 2002 was 0.42%. During EFY 2002 infection started in its loan portfolio. But comparing to peer group average, the bank is in a better position. As the above portfolio of EXIM has been developing for more than 3.5 years, small gross NPL ratio (0.23%) cannot sufficiently speak all about the quality of assets of the bank. Decomposition of NPL (Million Tk) 1H 2003 Dec, 2002
2004
Dec, 2001
Dec, 2000
57
EXIM Bank Ltd
Substandard Doubtful Bad/Loss
13.01 3.34 5.45
7.63 0 0
0 0 0
0 0 0
Table 19: Non Performing Loans (NPL) Source: EXIM Bank Prospectus Movements in the non performing loans (NPL) demonstrate slow but active infection in the banks financial health for the last two years. Although such infection is insignificant considering the size of its loan portfolio, unless the bank maintains proper monitoring of the existing portfolio and remains conscious about its future exposure it may cause a real trouble in future. (ii) Rescheduled Loan & Rescheduled Policy The bank seems to follow liberal rescheduling policy to keep the NPL ratio minimum. During the last one year EXIMs top 20 rescheduled loans amount a total of Tk. 682.28 million which is 7.20% of the banks outstanding loans and advances as on June 30, 2003. out of this rescheduled amount, Tk. 419.02 million is uncovered. This has been done by changing the mode, conversion of non-funded loan to force term loans and enhancement of repayment period. Major portion of these loans come from a few RMG manufacturers whose Back-to-Back LC and pre-shipment finance liability forcedly converted to uncovered term loan. (iii) Loan Loss Reserve and Policy EXIM keeps provisions for its loans and advances as prescribed by the central bank. The bank, with its existing provisioning policy, keeps reserve for only what is required. Since it is not keeping any access reserves in good times, it may fall in trouble in bad times if it has to maintain a significant portion of fund as reserve for nonperforming loans and advances in future.
58
EXIM Bank Ltd
(iv) Sectoral Exposure of Loans EXIMs funded exposure was highest in trade finance followed by working capital finance with 45.91% and 17% respectively as on EFY 2002. Of its total exposure EXIM is more concentrated in export finance for garments products followed by import trade financing. The banks exposure to export trade finance for garments products was Tk. 4.54 billion forming 32.23% of its total exposure (Tk. 14.09 billion) as on June 30, 2002. For EFY 2001 and 2002 this exposure was 30.83% and 31.40% respectively reflecting a rising trend of concentration. Such a high exposure to a single sector reveals the level of concentration risk for the bank where the local garments industry is struggling to survive in the international market. In case of term financing only, as on the end of 1H 2003, highest exposure goes again to the garments industry (40.61%) followed by transport industry (12.10%). Leasing companies received 10.11% of the banks total term financing. Import trade finance constitutes 24.03% of the banks total exposure (both funded and non-funded) which is 26.73% and 24.02% during EFY 2002 and 2001 respectively.
(v) Large Loan Exposure and Directors Loan EXIMs top 10 and top 20 term loans amounted Tk. 711.50 million and Tk. 1,140,.20 million respectively as on June 30, 2003 which are 7.51% and 12.03% respectively of its total funded exposure. At present directors loan is nil as per the document submitted by EXIM. (vi) Risk-Weighted Assets (RWA) Risk-Weighted Assets (RWA) is calculated as per the Bangladesh Bank Circular, which requires 100% weight to be assigned to all loans and advances to the private sector. The RWA
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EXIM Bank Ltd
amounted to Tk. 8181.38 million (as on June 2003) including off balance sheet exposure and this amount is in increasing trend keeping pace with the growth of its loans and advances. (vii) Off Balance Sheet Exposure As on June 2003, total contingent liabilities accounts for 29.78% of total footing (assets with contra), and 42% of total assets, 46% of the banks contingent are made up of irrevocable commitments to extended credits. Letter of Guarantee contributed 6% of EXIMs total offbalance sheet assets. In terms of risk weighting, Off-Balance Sheet (OBS) assets reportedly formed 2.98% of the banks total risk-weighted assets as at December 2001. as whole, EXIMs OBS exposure appears satisfactory. (viii)Investment in Securities In order to maintain the Statutory Liquidity Requirement (which is 20% of total deposit liability excluding for inter-bank deposits), EXIM has to maintain a good number of interest bearing bills and government securities in its investment portfolio. EXIM keeps mainly treasury bills (88% of total investment in securities) of different maturity schedule considering the flexibility and return. As on EFY 2002, investment quoted securities amounted to Tk. 188.36 million, which is 11.05% of the banks total investment. Market value of these quoted securities was 168.67 as on the same date reflecting 10.46% loss and the diminution value stood at 19.69 million.
3.11 FUNDING & LIQUIDITY

Considering Better deposit base, higher L - D ratio, and relatively tight liquid asset ratio, and high cost of fund; overall liquidity position deemed to be moderate for EXIM. Customer deposit,
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EXIM Bank Ltd
the base deposit for a bank, has been increasing over the years. More than 90% L-D ratio signifies the Banks aggressive attitude in offering loans and advances. In FY 2002, EXIMs total customer deposit increased to Tk 8.30 billion (FY 2001: Tk. 5.50 billion). The Banks major funding source is customer deposits, which comprises of a significant 83.50% of total deposits and borrowings in FY 2002. In 2002, the Banks deposit composition showed 70% of Time Deposits and 30% of Demand Deposits which were 75% and 25% respectively during the preceding year. As on June 2003, customer deposit increased to 10.33 billion which is 87.04% of the Banks total deposits and borrowings. Increasing trend in customer deposit reflects a good funding base for EXIM.
3.12 ASSET LIABILITY MANAGEMENT

There is no set Asset Liability Management Committee (ALMCO) of EXIM Bank and no other particular committee is assigned with the duty to do such job. In absence of such committee, the asset-liability position is currently managed by an officer in consultation with DMD-1 and MD of the bank. The asset liability maturity of EXIM as on June 30, 2003 shows that the assets and liabilities of the bank are somehow matched except for the 8 days 3 Months time span. The asset liability
61
EXIM Bank Ltd
maturity structure shows that EXIM is mainly dependent on short term liabilities represent to 63.64% of the banks total liabilities. However, in the 8 days 3 months time span, the bank has assts worth Tk. 1,066.35 million against the liabilities of Tk. 2,740.19 million which means there is a deficit of 61.08% in the asset. This seems to be the main reason for its dependency in the call money market to tap the temporary asset liability mismatch.
3.13 MARKET SHARE OF EXIM BANK

The banking industry of Bangladesh had deposit of Tk 996.47 billion and loan and advances of Tk 802.40 billion as on December 2002, shared among 49 banks including 5 NCBs, 4 specialized banks, 10 foreign banks, 25 private commercial banks and 5 Islamic banks. Out of the above EXIMs share of deposit is taka 9.95 billion which is 1% of total market deposits and share of loans and advances is Tk 7.96 billion which is 0.99% of all total market loans and advances. Being a Third Generation Bank in the private sector with an age of less than 6 years, it showed commendable growth of deposits of 35% in EFY 2002, much higher than the growth trends in the industry.
Market Share of EXIM Bank EXIM Bank 2002 Mil Tk. 9,945 2001 Mil Tk. 7,390 Industry 2002 Mil Tk. 996,474 2001 Mil Tk. 886,481 Growth EXIM % 35 Industry % 12
Deposits
% 1
% 0.83
62
EXIM Bank Ltd
Loans
and
7,955
0.99
5,132
0.71
802,396
727,491
55
10
Advances
Table 20: Market Share of EXIM Bank Source: 1. Scheduled Bank Statistics, Bangladesh Bank, October-December 2001 2. Economic Trend, May 2003.
3.14 COMPARATIVE PROFIT POSTIONS OF PRIVATE BANKS IN BANGLADESH

Comparative Profit Position of Private Banks in Bangladesh in the last three years is shown below. This will help to have a clear picture of the profit positions of the private banks working in Bangladesh.
Comparative Profit Position of Private Banks (crore taka) Sl 01 02 03 04 05 06 Bank Name Uttara Bank Pubali Bank Basic Bank Islami Bank National Bank IFIC Bank 2002 135.58 125 50.08 157.26 92.6 45 2003 114.05 93 65 218.28 100 68 2004 124 75 72 293 112 78 Growth 9% -19% 11% 34% 12% 15%
63
EXIM Bank Ltd
07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Arab-Bangladesh Bank UCBL Bank City Bank Prime Bank Southeast Bank Dhaka Bank Dutch-Bangla Bank Al Arafa Bank Social Investment Bank Eastern Bank NCC Bank Mercantile Bank EXIM Bank Standard Bank Bank Asia Premier Bank ONE Bank Mutual Trust Bank First Security Bank Trust Bank Shahjalal Bank Jamuna Bank
54 46 55 81.02 52.03 62.82 45 17.15 42.00
60 72 69.09 110 71.03 63 48 31.37 51.20
72 90 95 137 88 85 68 37 42.00
20% 25% 38% 25% 24% 35% 42% 18% -18%
59.45 48.05 40.40 12.10 22.00 19.68 22.02 18 13 11 9.71 3.00
64 61.10 60.64 30 43.00 40.15 26.5 38 24 9 19.35 14
72 87.00 88.56 49 66.00 93 49 52 39 28 12 32
13% 42% 46% 63% 53% 132% 85% 37% 63% 211% -38% 129
64
EXIM Bank Ltd
29
Brac Bank
3.00
3.24
21
548%
Table 21: Comparative Profit Position of Private Banks in Bangladesh Source: EXIM Bank Prospectus
The above table shows the comparative profit positions of different banks in Bangladesh. In the year 2002, net profit of EXIM Bank was 40.4 crore Tk. and it increased to 60.64 crore Tk in 2003 and 88.56 crore Tk in 2004. The growth rate of EXIM is 46% which is better than many other private banks. The banks which have higher growth rate than EXIM Bank are Standard Bank (63%), Bank Asia (53%), Premier Bank (132%), One Bank (85%), First Security Bank (63%), Trust Bank (211%), Jamuna Bank (129%) and BRAC Bank (548%). Although some private banks show very high profit rate, these are vulnerable because of instability and inherent risk. The profitability of EXIM Bank does not fluctuate too much.
3.15 ROAE, ROAA & NIM OF EXIM BANK

EXIMs operating performance found to be satisfactory among the competing banks of the third generation and also performing above average comparing with the whole banking sectors. The banks profitability parameters show a mixed picture except pre-tax return on average equity (ROAE), which indicates a steady growth since its inception till EFY 2002. As on December 2002, EXIMs pre-tax return on average assets (ROAA) decreased to 3.48% from 3.96% in EFY 2001 due to faster growth rate of assets than that of profit. Net Interest Margin (NIM) increased to 2.67% during EFY 2002 which was 2.06% in the preceding year (EFY 2002: 2.52%). During
65
EXIM Bank Ltd
the end of 1H 2003 annualized NIM, ROAA and ROAE declined and stood at 2.08%, 3.19% and 61.69% respectively. Key Performance Indicators EXIM Bank 1H2003 NIM (%) ROAA (%) ROAE 2.08* 3.19* 61.69* 2002 2.67 3.48 66.72 2001 2.06 3.96 64.39 2000 2.52 2.72 30.58
*Annualized un-audited figure. Table 22: Key Performance Indicators Source: EXIM Bank Prospectus EXIMs operating income increased by 40% while its operating expenses increased by 38% in 2002 comparing that of the preceding year. During this period, it enjoyed a pretax and pre-provision profit of Tk. 386.80 million, which rose by 41% from Tk. 273.85 million of the preceding year. As on EFY 2002 net profit increased by 27.44%, which further increased at an annualized growth rate of 8.6% during the end of 1H 2003.
3.16 INCOME OF EXIM BANK
Breakdown of Total Income By Activities 1H 2003 % of Total 30.26 14.36 2002 % of Total 34.66 11.73 2001 % of Total 23.84 12.94 2000 % of Total 31.37 9.32
Components of Income Net Interest Income Investment Income
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EXIM Bank Ltd
Fee Income Other Income
48.94 6.45
46.36 7.25
50.50 12.73
45.32 13.99
Table 23: Breakdown of Total Income by Activities Source: EXIM Bank Prospectus
EXIMs net interest margin (NIM) increased to 2.67% during EFY 2002 which was 2.06% during EFY 2001. The banks NIM is average with its peers. EXIMs investment income increased by 27.07% from Tk. 54.28 million in 2001to Tk. 68.97 million in the following year. In 2002, the banks fee income increased by 28.70% to Tk. 272.67 million. Free income grabs larger portion in the total income pie of the bank followed by its net interest income. It is worth noting that as on June 2003 EXIMs share of fee income is the highest in the peer group representing 48.94% of total operating income as a result of its concentration on exports import financing. As the banks major income stems from non interest based commission, exchange and brokerage of export and import business, interest rate fluctuation shall have a lesser discomposing effect on the profitability of EXIM compared to the other banks of the generation. However; any slump in countrys international trade might cause an adverse impact on its profit earning ability.
3.17 OPERATING PERFORMANCE
Key Cost Ratios EXIM Bank 1H 2003 2002 2001
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EXIM Bank Ltd
Efficiency Ratio Personnel Expenses to Average Assets (%) Operating Expenses to Average Assets (%) Yield per 100 Tk. Staff Cost (Tk.) * Annualized figure
34.59 0.91 1.84 380.3
34.24 0.99 2.08 404.48
34.73 1.12 2.36 397.23
Table 24: Key Cost Ratios Source: EXIM Bank Prospectus EXIMs cost efficiency is more or less similar to its peer average. In terms of costs, operating expenses increased by 38.23% in 2002 to Tk. 201.39 million (in 2001: Tk. 145.69 million). Personnel expenses have increased by 38.71% in 2001 to Tk. 95.63 (in 2001: Tk. 68.94 million). Other non-interest expenses have also increased by 37.80%, to Tk. 105.76 million from Tk. 76.75 million during the preceding period. But positively, cost-to-income ratio decreased to 34.24% (EFY 2001: 34.73), mainly because of the higher growth of income compared to that of the cost. During 1H 2003 this ratio slightly increased to 34.59%. EXIM Bank has paid 25% cash dividend and 12.5% bonus shares for FY 2001 and for FY 2002 it has declared 8% cash dividend and 24% bonus share as against its earnings of Tk. 79.14 per share of Tk. 100 each. It is worth mentioning here that Bangladesh Bank (BB) has instructed the scheduled banks of the country to raise their capital (including reverses) up to Tk. 1,000.00 million which caused these banks to retain a major portion of their profit.
3.18 COMPARISON WITH PEER GROUP
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EXIM Bank Ltd
Dividend and Earnings Per Share of the Peer Group Cash Dividend Stock Dividend 2002 EXIM Bank Mercantile Bank Mutual Trust Bank The Trust Bank Bank Asia 8% 35% 20% Nil 20% 2001 25% 30% 18% Nil N/A 2002 24% 5% Nil 14% 8% 2001 12.5% 10% Nil Nil N/A 2002 79.14 82.24 19.26 199.45 48.51
EPS 2001 62.44 77.65 24.51 103.86 29.33
Table 25: Dividend and Earnings per Share of the Peer Group Source: EXIM Bank Prospectus The above table shows comparison of EXIM with its peer group. In 2001 Mercantile Banks cash dividend and EPS was 30% and 77.6 Tk respectively and in 2001 Bank Asias cash dividend and EPS was N/A and 29.33 Tk respectively. In the same year EXIMs cash dividend and EPS was 25% and 62.44 Tk respectively. In 2002 the EPS of EXIM was 79.14 Tk which was higher than that of Mutual Trust Bank and Bank Asia. This is a positive sign of EXIM.
3.19 YEAR WISE NET PROFIT EXIM BANK

Year wise net profit of EXIM Bank is shown in the following figure: 2001 66.08 52.13 13.95 2002 98.58 72.72 25.86 2003 151.32 111.75 39.57 2004 % of Growth 189.54 25.26% 142.43 47.11 27.45% 19.05%
Profit Income Less: Profit Expenses Net Profit Income Add: Exchange,
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EXIM Bank Ltd
Commission & Others = Less Administrative Expenses Net Position
28 41.95
33.41 59.27
45.68 85.25
75.17 122.28
64.56% 43.44%
13.57 28.38
18.87 40.40
29.61 60.64
33.72 88.56
37.02% 46.04%
Table 26: Year wise Net Profit of EXIM Bank Source: EXIM Bank Prospectus Increase of net profit income indicates that the bank is able to distribute more dividends to its shareholders as well as able to meet its outstanding liabilities. It further indicates that the bank is able to reinvest its earning for more generation of future profit.
4.01 FINDINGS
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EXIM Bank Ltd
Export Import Bank of Bangladesh Limited is a third generation private commercial bank in the country with commendable operating performance. Directed by the mission to provide prompt and efficient services to clients, EXIM Bank has successfully celebrated its sixth year of operation. It provides a wide range of commercial services. The Bank has achieved success among its peer group within a short span of time with its professional and dedicated team of management having long experience, commendable knowledge and expertise in convention with modern banking. The management of the bank is maintaining an efficient portfolio in order to have a healthy growth and retain customer satisfaction. In order to avoid asset liability mismatch the management of the bank is constantly monitoring the banks business portfolio. The bank has a Well-diversified and balanced advance portfolio consisting of agriculture, industrial, garments, import construction, trade & commerce, export, transport, consumer, and other sectors. The liquidity risk is minimized to maximum extent. The management of the Bank is prudently monitoring the market situation to keep the deposit interest rate at minimum and also trying to invest at a reasonable rate to increase the profitability of the Bank. Also efficient management of portfolio would reduce the amount of classified loans to a minimum level, which at the end will sustain the earnings of the Bank. EXIM Bank is engaged in modern banking. It is expected that EXIM Bank by its efficient asset and liability management will be able to maintain its trend of growth and thus overcome the threat.
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EXIM Bank Ltd
EXIM Bank has been able to maintain a very low classified portfolio over the last six years of operations. Its present classified portfolio stands very low of the total loan portfolio in the year 2003. This demonstrates the Banks professional management ability. Recognizing the risks of unfair and hostile competition in the banking industry EXIM Bank has, since its inception, focused on diversified client base with an innovative and differentiated product base. This strategy has been rewarding for EXIM, and it plans to remain innovative in future also by way of creating new markets for its products. Foreign exchange risks originating from transactions have always been professionally managed in EXIM Bank.
EXIM Bank having small and targeting niche markets is likely to be less affected by restrictive monetary and/or fiscal policy. Although EXIM Bank is yet to be fully automated the Bank has adequate technology to meet its present requirement and it proceeding aggressively to enhance its technology level. Many products are introduced in the market in recent days and more innovative and diversified products are in the offering. The products are well received by the market, which is evident from the growth pattern of those products. The bank is recruiting fresh university graduates on regular basis and arranging training for them both from its own and other training institutions. Side by side the Bank is hiring experienced and skilled human resource in an effort to balancing out the need of the Bank in various fields of its operation. The bank has also introduced various welfare schemes for its employees with a
72
EXIM Bank Ltd
view to retain its trained and experienced human resources on longer term basis and to create a sense of belongingness. The bank Management believes that lower employee turnout ratio will improve productivity of the banking future. The Management has been following a Loan and Advance Policy, which will be continued in future. Therefore, it is expected that the loan loss provisioning in future will be within tolerable limit having little material impact on future profitability as well as net worth. As EXIM Bank is performing well in traditional general banking and there is a good demand for Islamic Banking, the management of the Bank is also expecting god result in Islamic banking operation.
4.02: SWOT ANALYSIS
Strengths Strong non-interest earning base Wide branch network among the third generation banks Low infection in loan exposure Wide product line
Weakness High cost of fund Highly exposed to volatile garment business
73
EXIM Bank Ltd
Excessive dependency on term deposits Inadequate delegation of power Inadequate IT infrastructure
Opportunities Credit card business Scope of market penetration through diversified products and wide banking network Regulatory environment favoring private sector development
Threats Increased competition in the market for public deposits Market pressure for lowering the interest rate Deteriorated export, import and guarantee business due to indecent competition as well as economic slump.
Apart from the customer deposit, EXIM relies on inter-bank borrowings and bank deposits for funding of its assets. This account for about 16.50% of the banks total interest bearing funds in FY 2002. However, its portion in the total funding as on 30 th June of 2003 stood at 12.96% reflecting the banks decreasing dependency on other banks for funding and liquidity needs. The banks liquid asset ratio was 29.51% during EFY 2002 (EFY 2001: 34%) against peer average of 39.48% (EFY 2001: 44% approx). during the end of 1H 2003 this ratio further declined to 28.52% reflecting deteriorating liquidity position of the bank. It can be noted here
74
EXIM Bank Ltd
that the average liquidity position of the 3rd generation banks also declined during recent years and EXIM is not an exception. But it is in a poorer liquidity position compared to its peers. Cost of funding of EXIM during EFY 2003 was 9.75. the industry average for the same during EFY 2003 remained slightly below 7%. Compared to the overall industry EXIMs sources of funds are costly. The banks net loans to customer deposit ratio hovered around 93.54% for the last two and a half year. This ratio stood at 91.62% during the end of 1H 2003. This reveals relatively tight liquidity position of the bank. Comparing with its peer group n FY 2002, EXIM Bank showed the high dependency on fixed deposits for funds with about 80% concentration. Its saving deposit collection shows a rising trend whereas current deposits remain steady over the years. The bank seems to be heavily dependent on term deposit and volatile call money market in order to meet its funding need. Of the banks total deposits (including call) 42.22% will mature within 3 months, 12.39% will mature within 6 months, 11.67% will mature within 1 year, and the remaining 33.72% is more than one year. Though the total amount coming from top 50 deposits increased to Tk. 2.54 billion at the end of 1H 2003 (EFY 2002: Tk. 2.51 billion) its contribution to total deposits found to be decreasing over the recent years. During EFY 2002, top 50 deposits comprised 28.52% of the banks total deposit which as 47.83% during the preceding year. At the end of 1H 2003 it further decreased to 23.28%. Comparing to the figure of EFY 2002, deposits amounting to Tk. 100 million and above increased to Tk 1.22 billion from 1.05 billion. Deposits having balance more than Tk. 10 million and less than Tk. 100 million totals Tk. 1.32 billion which was Tk. 2.51 billion in the preceding year.
75
EXIM Bank Ltd
It may be noted that money market remained volatile during the recent past. Adoption of floating exchange rate in the country followed by strict monetary control by the Bangladesh Bank caused the tight situation in the money market. During end of the second quarter of this year this condition was acute. However, after successful implementation of floating exchange rate, local money market has been liberalized to a great extent and the availability of fund has increased. EXIM Banks position in respect of this inter-bank money market was of net borrower at the end of 1 H 2003, with borrowing Tk. 891.50 million against placement of Tk. 325.20 million. Since the beginning of 2 H 2002 to the end of 1 H 2003 EXIMs average borrowing per month was Tk. 962.58 million @ 8.49%against average lending per month was Tk. 254.41 million @ 9.15%. However, dependency on the money market declined during the second quarter of this year.
5.01 RECOMMENDATIONS
EXIM Bank is a third generation private commercial bank in the country with commendable operating performance. Some recommendations regarding banks betterment are described below. The recommendations given below are not decisions; rather they are only suggestions to improve the performance in order to fulfill the customer satisfaction so that clients give more
76
EXIM Bank Ltd
preference to EXIM Bank. The recommendations are made on the basis of survey findings and analysis and these are: 1. Increasing branch number to increasing wide geographical coverage throughout the country. 2. Introducing online banking for providing advanced technological facilities to customers. 3. ATM booth is necessary for giving prompt service to clients. 4. Taking initiative to increase foreign remittance. Special consideration to Sylhet zone can be profitable for the bank. 5. Implementing adequate IT infrastructure to provide international service standard to customers. 6. Adding some promotional offers to large balance bearing clients. 7. Emphasis on corporate social responsibility is also necessary. Sponsorship in different social programs can flourish bank image. 8. EXIM should go aggressive advertising and promotional activities to get a broad geographic coverage. 9. To gain success in the programs like "Poverty Alleviation and "Self Reliant" especially in rural areas, this bank should provides investment facilities on the basis of individual. 10. To fulfill the vision of "mass banking" this Bank should grants investment portfolio to new entrepreneurs /new businessmen new companies etc.
5.02 CONCLUSION
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EXIM Bank Ltd
EXIM Bank is a private sector bank having a small market share of the industry. Although it is a third generation bank facing government deposit restrictions, it has all the potentials to penetrate in the market. If the weakness are addressed appropriately and opportunities are explored keeping in view the threats behind with a stable and adroit management having regard to appropriate corporate governance and modern automation technology, it is expected that EXIM advance up in the ladder of success in the coming years.

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EXIM Bank Ltd

1.02 ORIGIN OF THE REPORT

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

1.4.3 Analysis of Data

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

1.05 LIMITATIONS OF THE REPORT

1.06 TIME LINE FOR THE RESEARCH

2.01: ESTABLISHMENT OF EXIM BANK

2.02: CORPORATE MISSION OF EXIM BANK

2.03: CORPORATE CULTURE OF EXIM BANK

2.04 SPECIAL FEATURES OF EXIM BANK

2.05: SPONSORS / DIRECTORS OF EXIM BANK

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

Late Shahjahan Kabir Founder Chairman

Md. Nazrul Islam Mazumder Chairman

Alamgir Kabir, FCA Former Advisor

Mohammed Lakiotullah Managing Director

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

2.06: BRANCHES OF EXIM BANK

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

2.07: USE OF PROCEEDS

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

60,000.00 204,525.00 650.000.00

2.08: DESCRIPTION OF BUSINESS

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

40.28 28.38 9.43 70.65%

27.76 40.40 11.10 79.89%

23.50 60.64 12.77 80.62

11.38 88.56 15.08 92.60

- 51.57% 46.09% 18.09% 14.86%

356 10 9.25% 11.71% 3.18%

500 16 9.29% 11.70% 3.37%

627 19 9.26% 11.30% 3.39%

774 24 8.40% 10.36% 3.08%

23.44% 26.32% - 9.29% - 8.32% - 9.14%

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

2003 1,396,081,422 121,535,735 379,929,474 9,669,915 54,696,256 1,961,912,802

2002 932,241,186 68,974,876 272,673,777 7,615,723 35,049,507 1,316,555,069

2001 621,331,381 54,282,759 211,864,118 28,761,610 24,626,157 940,866,325

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

2.09: DESCRIPTION OF PROPERTY

1. Furniture and Fixtures 2. Office Equipment 3. Interior Decoration 4. Vehicles 5. Books

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

2.10: RISK FACTORS AND MANAGEMENT PERCEPTION REGARDING RISKS

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

3.01 ANALYSIS OF PROFIT AND LOSS ACCOUNT

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

Taka Taka 1,820,283,897 1,396,081,422

1,145,511,622 1,121,309,068 = 394,772,275 = 274,772,354

7,615,723 35,049,507 = 588,189,470 95,627,987 29,607,526 168,084

=1,219,076,987 = 840,603,734 183,089,157 134,004,574 50,456,074 41,076,938 1,090,982 522,184

Internship Paper on Performance Evaluation of Export Import Bank Bangladesh Ltd

Total Operating Expense

386,797,013 29,080,970 19,693,258