Operating and Financial Performance of Commercial Banks an Empirical Study on Eastern Bank Ltd
Eastern Bank Ltd.
CHAPTER ONE
INTRODUCTION
1.1 INTRODUCTION
Generally by the word “Bank” we can easily understand that the financial institution deals with money. But there are different types of banks like; Central Banks, Commercial Banks, Savings Banks, Investment Banks, Industrial Banks, Cooperative Banks etc. But when use the term “Bank” without any prefix, or qualification it refers to the ‘commercial banks’. Commercial banks are the primary contributor to the economy of a country. So we can say commercial banks are a profit making institution that holds the deposit of the individuals & business in checking various accounts like current, savings account and than uses these funds to make loans. For these, people and government are very much dependent on these banks as the financial intermediary. As banks are profit-earning concern; they collect deposit at the lowest possible cost and provide loans and advances at higher possible cost. The differences between two are the profit for the bank.
Banking sector is expanding its hand in different events every day. At the same time the banking process is becoming faster, easier and the banking arena becoming wider. As the demand for better service increases day by day, they are coming with different innovative ideas and products. In order to survive in the competitive field of the banking sector, all banking organization are looking for better service opportunities to provide their fellow clients. As a result, it has become essential for every person to have some idea on the bank and banking procedure.
Thesis program is very essential for every student, especially for the students of business administration, which helps them to know real life situation. For this reason a student makes the thesis paper at the last stage of the MBA degree, to launch a career with some practical experience. To fulfill that requirement I have selected the study topic “Performance Analysis of Commercial Bank-An Empirical Study on Eastern Bank Limited”.
1.2 BACKGROUND OF THE STUDY
Banking sector is spending its hand in different financial event every day. At the same time the banking process is becoming faster, easier and the banking arena is becoming wider. As the demand for better service increase day by day, they are coming with different innovative ideas & product. In order to survive in the competitive field of the banking sector, all banking organization are looking for better service opportunities to provide their fellow clients. As a result, it has become essential for every person to have some idea on the bank and banking procedure.
1.3 OBJECTIVE OF THE STUDY
A. General Objective:
The general objective of the report is to require MBA thesis fulfill the academic program and to know about the management system of Eastern Bank Ltd As a private commercial bank as well as its formation & it’s functional, operational & financial aspects.
B. Project objectives:
· To have a clear idea of day to day functioning and service offered by a commercial bank.
· Evaluate the performance of Eastern Bank Ltd.
· To have a close vision as well as analyze the performance of the specific branch and the bank as a whole.
· To make a bridge between the theories and practices on banking operations.
· To know about the international trade financing activities.
· To find out the internal and external lacking in the daily operation and to overcome that shortcomings for more progress of Eastern Bank Limited.
1.4 SCOPE OF THE STUDY
Exploratory research method is used in writing this report. This type of research is meaningful in any situation in which the researcher does not have enough understanding to proceed with the research project. This research is characterized by flexibility and versatility with respect, to the methods, because formal research method, because formal research protocol and procedures are not employed. It is rarely involves structured questionnaire, large sample and probability sampling plans. Rather researchers are alert to new ideas and insights as the proceed. Once a new idea or insight is discovered, they may shift their exploration in that direction. Observation method is used to complete this qualitative research.
1.5 METHODOLOGY OF THE STUDY
The following methodology has been followed to come to a successful conclusion. To successfully finish the project certain methodology has been followed. These are:
Sources of Information & Data
In order to make the Report more meaningful and presentable, two sources of data and information have been used widely.
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Both primary and secondary data sources were used to generate the report
The “Primary Sources” are as follows –
· Informal conversation with the course teacher and bankers.
· Observing various organizational procedures.
· Relevant file study as provided by the officers concerned.
· Unpublished information through interviews
The “Secondary Sources” of data and information are –
· Published article and manuals
· Periodicals published by Bangladesh Bank.
· Various books, articles, compilations etc. regarding general banking functions, foreign exchange operations and credit policies.
· From newspapers and internet
· Annual reports of Banks.
Analytical Review
A critical analysis of the data has been made through the bar and line graph over the last few years. This will enable me to visualize the trend of the variable of interest over time. Indicators of bank performance (Import, Export, Loan, Deposit etc.) have also been computed thorough ratio analysis.
1.6 LIMITATION OF THE STUDY
In all respect some limitation and weakness remain within which I failed to escape by any means. These are follows:
Limitation of time It was one of the main constraints that hindered to cover all aspects of the study.
Lack of Secondary The annual report was the main secondary Information source of information that was not enough to complete the report and private the reader a clear idea about the bank.
Confidentiality of data Confidentiality of data was another important barrier that was faced during the conduct of this study. Every organization has their own secrecy that is not revealed to others. While collecting data on EBL’s strategic plan, the personnel did not disclose enough information for the sake of confidentiality of the organization.
Chapter Two
Overview of Eastern Bank Limited
2.1 Background of Eastern Bank Limited
The emergence of Eastern Bank Limited in the private sector is an important event in the banking industry of Bangladesh. Eastern Bank Limited started its business as a public limited company on August 8, 1992 with the primary objectives to carry on all kinds of banking business in and outside of Bangladesh and also with a view to safeguard the interest of the depositors of erstwhile BCCI (Bank of Credit and Commerce International (Overseas)) under the Reconstruction Scheme, 1992, framed by Bangladesh Bank.
In 1991, when BCCI had collapsed internationally, the operation of this bank had been closed Bangladesh. After a long discussion with the BCCI employees and taking into consideration the depositors’ interest, Bangladesh Bank then gave permission to form a bank named Eastern Bank Limited which would take over all the assets, cash and liabilities of erstwhile BCCI in Bangladesh, with effect from 16th August 1992. So, it can be said that EBL is a successor of BCCI.
EBL started its business as a scheduled bank with only four branches, which included Principal Branch, Dhaka; Motijheel Branch, Dhaka; Agrabad Branch, Chittagong and Khulna Branch. EBL started its business with a motto to grow as a leader in the banking arena of Bangladesh through better counseling and efficient service to clients. EBL resumed its operational activities initially with an authorized capital of Tk. 1000 million, divided into 10 million shares of Tk. 100 each and paid up capital of Tk. 310 million. The initial shareholders were the NCBs, various govt. agencies, and some of the depositors who had agreed to accept shares in the new bank in lieu of their deposits. The first Board of Directors of EBL constituted under govt. supervision consisted of 7 directors from various business and professions. Eastern bank Limited was under govt. control until the end of 2000 and therefore, there were lots of deficiencies in the Bank’s management. In 2001, the board of directors brought in new professional management from various foreign banks who have been trying to modernize the bank ever since.
Eastern Bank Limited started the year 2004 with Paid-up Capital stood at Tk. 828 million but the authorized capital remained unchanged at Tk. 1000 million. The general public held 83.42% of its shares while institutional investors held the rest 16.58%. At present, EBL is one of the fastest growing commercial banks in the country & the largest capital based bank in Bangladesh. It has 25 branches scattered all over the major cities of the country in major business areas.
2.2 Overview of the Banking Sector in Bangladesh
Whoever, being an individual firm, company or corporation generally deals in the business of money and credit is called bank. In our country, any institution, which accepts, for the purpose of lending or investment deposits of money from public, repayable on demand or otherwise, and with transferable by checks draft order and otherwise can be termed as a bank. The purpose of banking is to ensure transfer of money from surplus unit to deficit units. Bank in all countries work as the depository of money. The owners look for safety and amount of interest for their deposits with Banks. Entrepreneurs try to obtain money from the banks as working capital and for long-term investment. These entrepreneurs welcome effective and forward-looking advice for investment. Banking sector thus owe a great to the deposit holders on the hand and the entrepreneurs on the other. They are expected to play the role of friend, philosopher, and guide for the deposit holders and the entrepreneurs.
Since liberation, Bangladesh passed through fragile phases of development in the banking sector. The nationalization of banks in the post liberation period was intended to safe the institutions and the interest of the depositors. Those handling the banking sector have borne the burden of putting banks on reliable footings. Despite all that was done, some elements of irregularities appeared. With the assertion of the role of the Central bank, The Bangladesh bank started adopting measures for putting banking institutions on right track. Yet the performance of public sector management of banks left some negative effects in the money market in particular and the economy in general. The agility among the borrowers manipulates the banking sector as a whole. In effect, a default culture appeared on the scene.
The opening of PRIVATE and FOREIGN participants to the banking sector was intended to obtain desirable results from banking. The authorization of private banks was designed to create competition among the banks and competition in the from of efficiency with and the productivity in enterprises funded by banks. Unfortunately, for the people, at large banking sector is yet to obtain the credit for efficiency, credibility, and growth.
Banking sector has a vital role to play in the economic activities and development of any country. This sector is much more important in a developing country like Bangladesh. The whole scenario of the economy of a country can be ascertained by examining the condition of the banking sector. In Bangladesh, the banking sector dominates the financial sector and macroeconomic management largely depends on the performance of the banking sector. Banking grew primarily in the public sector with main emphasis on restructuring of the financial system and development needs of the war-torn economy with gradual liberalization in subsequent years. It was increasingly felt that banks should be allowed in the private sector for giving a fillip to development process on the basis of private initiative. In the 80’s for the first time a number of banks in the private sector were allowed. Subsequently in the mid 90’s some more banks in private sector also commenced operations. Finally, in 1999, 3rd generation of private sector banks was given permission to operate. As a result while up to 80’s public sector banks dominated financial sector, banks in the private sector were given increased responsibility with the passage of time.
At present there are 51 scheduled banks operating all over the country. Out of these, 9 are state-owned (including five specialized banks), 29 are private commercial banks and the rest 13 are foreign commercial banks.
Domestic banks can be divided into four main groups: Nationalized Commercial Banks (NCBs); Private banks established in the early 1980s; and private banks established in 1999:
Nationalized Commercial Banks (NCBs)
In general terms; NCBs are large, operationally inefficient and technically insolvent. They are used as vehicles of government directed lending. These banks enjoy an enormous and stable customer deposit base, which provides a cheap source of funding. In addition, most large government related business is routed through these banks;
Private commercial banks
Private commercial banks are divided into three groups according to their commencement of business. They are familiar in the name of 1st generation, 2nd generation and 3rd generation banks.
1st Generation Banks (Established 1982-1988)
Private Banks set up to service the sectors not being addressed by the larger NCBs. Not subject to state directed lending but have generally suffered from related lending to directors and their extended families. 1st generation banks includes National Bank Limited, The City Bank Limited, United Commercial bank Limited, AB Bank Limited, IFIC Bank Limited, Islami Bank Bangladesh Limited and Al-Baraka Bank Bangladesh Limited.
2nd Generation Banks (Established 1992-1996)
In that time seven new licenses were granted. These are the better-managed banks with strong capital base and good asset quality and under a much-improved regulatory regime. All the banks lustered in this group have successfully raised capital from secondary market and all the shares are now traded in the stock exchange at premium.
Eastern Bank Limited, National Credit & Commerce Bank Limited, Southeast Bank Limited , Dhaka Bank Limited, Al Arafah Islami Bank Limited, Social Investment Bank Limited and Dutch-Bangla Bank Limited.
3rd Generation Banks (Established 1999 to present)
Ten Twelve banks have been granted licenses over the year 1999 to present. While some bankers complain that the country is over-banked, the more commonly held view, including that of the World Bank, is that there is adequate scope for these banks to survive given currently untapped gaps in the market, fat in existing interest margins (currently circa 5%), and efficiency/ service level disparities. It is estimated that up to 70% of the Bangladeshi economy remains un-banked. While this appears to imply that the newer banks may move downstream in terms of asset quality but in reality the last two sets of new banks are successfully competing with NCBs and Foreign banks on the top end market segment. Mercantile Bank Limited, Standard Bank Limited, One Bank Limited, EXIM Bank Limited, Premier Bank Limited, Mutual Trust Bank Limited, First Security Bank Limited, Bank Asia Limited, the Trust Bank Limited, Jamuna Bank, and BRAC Bank, and Shahjalal Islami Bank Limited.
2.3 Business Philosophy of Eastern Bank Ltd
The philosophy of EBL is to develop the Bank into an ideal and unique banks. The sponsor perception is that EBL should be quite different from other product and managed commercial banks operating in Bangladesh. EBL to grow as a industry lieder rather than a follower. The leadership will be in the area of service as being made to add new dimension so that clients can get “Additional” in the services to commensurate with the needs and requirements of the country’s growth and developing economy.
Nevertheless, EBL is a commercial bank in the private sector. It is therefore next world seek lair return on owner’s equity as its one of the main goal. This purpose sought to be achieved by rendering maximum possible satisfaction to its clients quick and efficient services. Therefore, quality service to the clients is another goal of the EBL.
2.4 Vision, Mission and Objectives of EBL
Vision
To become the bank of choice by transforming the way we do business and developing a truly unique financial institution that delivers superior growth and financial performance and are the most recognizable brand in the financial services in Bangladesh.
Mission
- We will deliver service excellence to all our customers, both internal and external.
- We will constantly challenge our systems, procedures and training to maintain a cohesive and professional team in order to achieve service excellence.
- We will create an enabling environment and embrace a team based culture where people will excel. We will ensure to maximize shareholder’s value.
Objectives
- To maintain a satisfactory deposit mix.
- To grow its credit extension service to the commercials as well as industry.
- To increase its diversifications of loan portfolio and geographical coverage.
- To curb present operating expenses further so as to increase earnings.
- To reduce burden of non performing assets.
2.5 Corporate Governance at EBL
Governance in Financial Institutions is considered to be the agent of effective and profitable business operation. The Corporate governance establishes trust among the interested parties, provides information for the stakeholders, establishes professionalism, builds capacity to operate business efficiently and create a congenial working environment, which is inevitable to face the challenges of the present competitive business environment. Corporate governance in EBL may be delineated as follows:
2.5.1 Board of Directors
The Board of Directors has to ensure that the management headed by Chief Executive Officer (CEO) fully discharge their day to day administrative responsibilities prescribed by BB and the Board itself and necessarily refrain themselves from micro management of the management affairs. Eastern Bank Ltd. recognizes the importance of good corporate governance as a major factor in enhancing the efficiency of the organization. The Bank therefore seeks to encourage the conduct of its business to be in line with the principles of good corporate governance, which form a basis for sustainable growth. They include an independent, active and engaged Board of Directors which has the skill to properly evaluate and oversee the business process, business and financial performance, internal control and compliance structure and direct management on strategic and policy issues.
2.5.2 Executive Committee
In compliance with the BRPD circular no. 16 dated July 24, 2003, the Board of Directors of Easter Bank Limited has reconstituted its Executive Committee (EC) in its 352 Board Meeting and was duly confirmed by the Board in the following Board Meeting held on September 19, 2006. Three Executive Committee meetings were held during 2006. This committee is comprised of 4 non executive Directors and Managing Director of the Bank
2.5.3 Audit Committee
To assist the Board of Directors with regard to the audit of financial reports, management reports by external auditors, internal controls and internal audits, and to select and work in co-ordination with the Bank’s external auditors. Compliance with the BRPD circular no. 12 dated 23 December 2002, an Audit Committee was first constituted by the Board of Directors of Eastern Bank Limited in its 253 meeting held on 7 January, 2003 and thereafter last reconstituted in 352 Board Meeting held on 29 August 2006.
2.5.4 The Management Committee
Like any other business organization, the top management makes all the major decisions in EBL. The board of directors being at the highest level of organizational structure plays an important role in policy formulation. The board of directors is not directly concerned with the day-to-day operation of bank. They have delegated this duty to the management committee. The board mainly establishes the objectives and policies of the bank. There are three (3) committee of the board for different purposes:
1. Executive committee comprising of 7 members of the board;
2. Committee of the board for Administrative matter,
3. Committee to examine Bad Loan Cases.
The Chief Executive Officer (CEO), who is assisted by 3 Executive Vice Presidents (EVPs), looks after the day-to-day affairs of the Bank. Human Resource Department, MDs Secretariat and Audit and Compliance Department are under direct control of the CEO. The three EVPs are in charge of Operations, Credit and Corporate Banking respectively. They control the affairs of these departments through the managers who are in charge of various departments under these divisions.
2.6 Functional Division/Department OF EBL
All policy formulations and subsequent executions are done in the Head Office. It comprises of nine major divisions namely Corporate Banking Division, Credit Division, Consumer Banking Division, Trade Services Division, International Division, Finance and Accounts Division, Human Resources Division, Information Technology Division, and Audit and Compliance Division. Besides these main divisions, there is also an Administration Division, which looks after the Bank’s day–to-day operation.
2.7 Business Network of EBL
EBL operates through a network of 22 branches around the country. 10 of those branches are located in Dhaka, 5 in Chittagong and 3 in Sylhet & rest in other 4 commercially important cities (Khulna, Bogra, Rajshahi & Jessore).
2.8 Core Business Units of EBL
· Consumer Banking
· Corporate Banking
· SME banking
· Treasury
2.8.1 Consumer Banking
EBL Consumer Banking deals with the day-to-day financial wants of the consumer clients. Consumer banking products are designed keeping in mind the financial necessities and affordability of the clients. The new IT platform of EBL has enabled its Consumer Banking to offer world class and comprehensive range of financial products and services. These have been fashioned in a manner to fulfill the clients’ banking needs with dedicated Relationship Managers who are reaching out to the customers to make sure that the job is done in a systematic manner within the client’s time frame. And with Internet banking service, customers can now access the accounts and services at the click of mouse.
2.8.2 Corporate Banking
Corporate Banking is an integrated specialized area of the Bank, which addresses the diverse financial needs of Corporate Customers.
2.8.3 SME Banking
SME Banking is an integrated specialized area of the Bank which addresses the diverse financial needs of small and medium business houses.
2.8.4 Treasury
Treasury unit is a Core banking unit with its leading-edge technology and steadily growing volume of activity in the markets, EBL’s treasury unit and currency dealing desks have consolidated its position as a well-known and well established counterpart in the newly transformed Free Floating rate, dealing daily with a wide circle of both bank and non-bank customers all over Bangladesh. Our everyday business evolves around participation in Money Market & Foreign Exchange Market in a substantial volume.
Chapter Three
PERFORMANCE AT DIFFERENT AREAS
3.1 Introduction
The main goals and objectives of EBL are to manage our business profitability to satisfy our shareholders and customers. Profit is a product of prudence, judgment, accuracy, compositeness and business volume. EBL have your assets and liability committee, management committee, credit committee and other committee who continuous monitors the indicators for healthy growth of banking business. EBL are aware about natural consequences of globalization liberalization, privatization, and reforms, foreign in vestment, economic policy and infrastructure development. The national agenda have created new challengers for the banks operating in Bangladesh.
3.2 DEPOSIT Products
Eastern Bank Limited accepts deposits by the following types of accounts, and pays interest, except Current Account. The relationship between banker and customer is debtor-creditor relationship of conventional banks. The depositor is a partner in business with Eastern Bank Limited.
3.2.1 EBL savings Account:
EBL Savings Account is suitably designed to meet the savings requirement of the consumer customers willing to save from their hard earned income. It pays interest at competitive rate matching the needs of the customers. Savings Account is very easy to open and can be operated from any EBL branch giving the customers the demographic flexibility. Minimum balance requirement for a savings account is Tk. 15,000.00.
3.2.2 Current Account:
EBL Current Account is a non-interest bearing account suitable for both corporate and consumer clients. It allows unlimited cash withdrawal facility for customers from any of the 22 EBL branches across the country. There is a minimum balance requirement of Tk. 1.000.00 for maintaining a current account.
3.2.3 EBL Fixed Deposit:
EBL Fixed Deposits having flexible tenure ranging from one month to three years allow the customers to get more out of their long term investment. Keeping in mind the income requirement of the customers EBL offers high interest rates. It is very simple to open a fixed deposit account from any EBL branch.
3.2.4 HPA (High Performance Account):
If customers keep a minimum balance of Tk.20, 000.00 under this account, then EBL offer very competitive rates that are tiered into two slabs for deposits up to Tk. 10 lacs and above Tk. 10 lacs. The interest on his/her account is calculated on a daily basis and added to his/her deposit half yearly. If the deposit goes below the Tk. 20,000 limit on any day then he/she loses interest for that day.
3.2.4 EBL Interesting Account
Get your saving accounting monthly instead of waiting for 6 long months. It is truly “interesting”- a complete solution for earning interest every month out of a transactional account. Earn it – just effortlessly.
3.2.5 EBL Monthly income Plan (MIP):
EBL Monthly Income Plan is an income plan which helps customer to earn a monthly fixed amount on their fixed deposits kept with EBL for a period of 3 years.
All we need to do is keep TK 50,000/- or multiples of it for a period of 3 years. Customer will earn TK. 356/-(After deduction of Tax) per month on every deposit of TK. 50,000/-, or TK.525/-(After deduction of Tax) per month on every deposit of TK. 100,000/- for a period of 3 years. A customer can open any number of MIP of TK 50,000/- or multiples of TK 50,000. Customer can earn money on their fixed deposits. Monthly fixed interests will be automatically credited to customer’s linked CD/SB/HP account on due date.
3.2.6 EBL Monthly Deposit Plan
EBL Monthly Deposit Plan is a savings plan, which helps to turn customer’s small monthly savings into a large amount over a period of 5 years. It is a convenient savings mode, which helps customer’s money to grow. To open a Monthly Deposit Plan all the customer need to do is choose any of the six monthly deposit amount options. A customer may choose more than one Monthly Deposit Plan of different denomination.
3.2.7 EBL Savings Insurance Account (SIA)
EBL SIA works in a very simple way. All you have to do is to keep a minimum balance for at least one year according to the class of deposit you choose. You can withdraw from this account – at any time – any amount that is above the required minimum balance under your chosen deposit class. EBL SIA not only pays you interest at the prevailing market rates; it also provides valuable insurance coverage for free corresponding to your deposit amount. This is how SIA differs from other usual savings account
3.3 LOANS Products
Banking business consists of borrowing and lending. One of the primary functions of commercial banks is the sanctioning of credit to borrowers without as equate finance. There can be no growth of maintenance of a stable output. Banks act as financial intermediates between surplus and deficit economic units. Thus a banker is a dealer in money and credit. Banks accept deposit from large number of customers and then lend a major portion of accumulated money to those who wish to borrow. In this process banks secure reasonable return for the savers, make funds available to the borrowers at a cost and earn a profit after covering the cost of funds. Banks besides their traditional role of intermediation between savers and providing an effective payment mechanism have been allowed to diversify into much new area of better paying business activities.
3.3.1 EBL Fast Cash
EBL Fast Cash is a revolving credit facility. Fast Cash allows the customer to draw up to a predetermined amount of credit from their Current Account. Customers will only be charged interest for the amount they draw. The minimum limit for EBL Fast Cash is Tk. 50,000.00
3.3.2 EBL Executive Loan
EBL Executive Loan is any purpose EMI (equated monthly installment) based credit facility for salaried executives. No Cash Security No Down payments No Price Quotation/ Invoice required
3.3.3 EBL fast Loan
Fast loan is a short-term loan facility from EBL. This loan is fully secured against cash security (EBL FDR, Govt. Sanchaya Patra, ICB Unit certificates etc.). EBL Fast Loan has convenient repayment period ranging from 12/24/36 EMI’s. EBL Fast Loan is priced at competitive rates and loan is sanctioned within 24 hours of application
3.3.4 Auto Loan
EBL Auto Loan is here to help you purchase your dream car. It’s easy and flexible repayment schedule erase your worries about the burden of a loan. Our Auto loan Scheme will allow you to avail credit up to 75% of the car value. You need to be a Bangladeshi national between the age of 25-55, workings in a reputed multinational/ local firm or involved in a reputed business. The maximum repayment period for EBL Auto Loan is 4 years. You can choose 12, 24, 36 or 48 equated monthly installments (EMI) to repay the loan.
3.3.5 Jibandhara Loan
EBL Jibandhara Loan is an any purpose Lifestyle loan. Purpose might be considered as- House renovation, Interior Decoration, Marriages in the family, Advance rental payments, Hospitalization or other emergency medical needs, Trips abroad, Purchase of miscellaneous household appliances etc. individuals like: Salaried executives & Doctors, architects, engineers, Chartered Accountant, Consultant and IT professionals can apply for this loan.
3.3.6 Utshab Loan
EBL Utshab Loan, an unsecured festival loan. Customer’s expenses volume during the EID goes up due to different shopping purpose, purchase of household appliance, travel with family abroad and so on. EBL Utshab Loan will be a timely consumer loan for meeting customers’ shopping or other expense for EID. Presently, EBL Executive loan, and Jibandhara Loan offer at 16% p.a. But the EBL Utshab Loan offered at 15% only.
3.3.7 Debit Line
EBL Debit Line – is a unique offering that combines the smoothness of a debit card with the stunning benefits of a credit facility. It’s a fully unsecured overdraft facility that customers can enjoy through their EBL Visa Electron Debit Card. Eastern Bank is the first Bank in Bangladesh to introduce this service. This facility can be availed by salaried executives with minimum one year of experience as well as self-employed professionals with minimum one year of practice. The minimum monthly income of salaried executives should be Bangladesh Taka 15,000 a month, and for self employed professionals Bangladesh Taka 20,000 a month.
3.4 Consumer Banking Services at EBL
Consumer Banking at EBL is to serve individual customer throughout every stage of their life stage. Consumer banking is considered to the front officers of the bank, which interfaces with the customers. These activities are being carried out through the 22 branches. Previously these branches used to conduct all kind of business activities, including processing credit issue, conducting trade service, consumer service etc. But after the restructuring process, all these branches are now mainly focusing only on delivering service to individual and corporate customers and are therefore termed as “Sales & Services Centers”.
3.4.1 Student file
EBL allows students who are going abroad to study to open an account in order to transfer funds to wherever they are going. We take the step to take the permission (if necessary) from Bangladesh Bank on behalf of the customers. For this we need all the documents of the student’s previous completed education and his/her (s) acceptance letter from which ever University he/she is going
3.4.2 Tuition Fees Collection
Þ Scholastica ( Pvt) Ltd
Þ Scholastica Transport Service Ltd
Þ South Breeze
Þ Mirpur Bangla School
Þ Aga Khan Education Service System
Þ Shahid Smrity School
3.4.3 Visa Electron online debit card
EBL Introduces the Visa Electron online debit card:With EBL Visa Electron you can now draw cash from the Q-cash ATM network, 24 hours a day through out the year. No need to carry excess cash in your wallet. Your card is electronically linked to your EBL account. EBL Visa Electron is also accepted at Visa merchants with Electronic P.O.S Visa Symbol, where you can pay for merchandise and services. Acceptance – Hassle free acceptance at network of Q-Cash ATMs currently 10 and to be expanded up to 50 by July 2004 and approximately 1000 POS deployed in major cities. Photo card – Displays your photo & signature on front of your card for enhanced security.
3.4.4 Real time online banking
EBL is the pioneer Bank in laying foundation to the world class banking software in Bangladesh. No other private Banks in Bangladesh could implement foreign banking software with success in the past. Flex cube is the Internet banking solution that delivers the Corporate, Consumer and Investment Banking products to bank’s customers over the Net. Our Internet Banking module is a secure, robust and extensible web banking solution. Conceived specifically to exploit the potential of the web, our new banking platform delivers a modular solution addressing Consumer, Corporate and Investment Banking. Customers will be able to transfer funds, inquire balance, request for cheque book, pay utility bills on-line etc.
3.4.5 Internet Banking
EBL made a milestone in the banking arena by introducing the internet banking for the first time in Bangladesh. Internet banking application addresses the needs of small, individual and corporate account holders of the bank. This application provides a comprehensive range of banking services that enable the customer to meet most of their banking requirements over the Net. Transactions that can be executed through net are Account Operations and Inquiries, Fund Transfers and Payments, Utility Bill Payment, Deposits, Loans, Inquiries and other services.
3.4.6 Utility Services Bill Collection
Þ WASA ( only Dhaka)
Þ DESA ( Rajshahi, Bogra, Dhaka-Mirpur Branch)
Þ PDB ( Chittagong, Rajshahi Jessore)
Þ AKTEL
3.4.7 Internet Service Provider Bill
1. Proshikanet
2. Bdcom Online Ltd\
3. ConnectBd Ltd
4. Access Telecom (BD) Ltd
5. In-touch Communication Ltd
6. Dhaka Broad Band Network (DBN)
7. Spark System Ltd
8. Agni Systems Ltd
9. Touch Tone Bd Ltd
3.4.8 Locker services
EBL offers three different types of lockers – small, medium and large. They can be used for the safe keeping of personal belongings (jewelry, documents etc.). However nothing illegal can be kept in the locker. The locker holder has to have an account with EBL to get this service. The yearly rate of the lockers range from the smallest one is being TK 1000, the medium one being Tk 1500 and the Large one being TK 2500. This service is available at the following branches of EBL.
3.4.9 EBL 5 to 9
This is a service that gives the customer the option to deposit money in the bank beyond banking hours. All the customer has to do is become a member of the EBL 5 to 9 services by providing a nominal yearly fee. The customer being a member will be given a bag and a lock. He/she can put in money in the bag lock it and deposit the same in the EBL 5 to 9 safe deposit box kept in the branch any time during 24 hours time. The bag upon deposit in the 5 to 9 deposit box will directly go to the bank’s secured vault. His/her deposit will be credited to the respective account the following day and the deposit bag will be returned to the customer for further deposits in the future.
3.5 Future Product Development Plan and promotion program
We are planned to introduce and implemented the following new products for our consumer banking from 2005:
ð Children Deposit Plan (only for kids)
ð Evening banking for selected branches
ð Introducing Partially Secured Loan or EBL Money Maker Loan
ð EBL Jiban Dhara (Lifestyle Loan; already launched)
ð Islamic Banking
ð EBL Freedom Loan (loan for women’s executives and other solvent women)
ð EBL Homemaker Loan (loan for housewives)
ð EBL Travel Loan
ð Special deposit for private university students, and housewives
ð SMS banking through mobile phone
ð Credit Card (Visa and / or Amex)
ð 15 ATMs – solely EBL’s ATMs, not under any consortium arrangement
ð Mall branding (week long visibility driven show at super market / mega mall floors)
ð Launch of Non Resident Business (foreign remittance business with the goal
3.5.1 Promotion is the vital marketing mix element that helps to occupy a place in the customers’ mind. We are thinking of launching the followings to give our brand equity a jolt:
3.5.2 Campaign for Private University Students:
As we are aware that 52 private varsities are there in Bangladesh, the students of which go abroad regularly for higher studies. We want to launch “Student File” program for these students, which will give us good opportunity of fee and FX earnings. We want to offer them also savings account, debit card and Internet banking though normal channels plus kiosks.
3.5.3 Kids Day:
We plan to celebrate kid’s day on a certain Friday, both in Dhaka and in Chittagong. Kids of English medium schools along with their guardians will be invited in the program. Drawing or game contest will take place. Top performers will be awarded with bank’s logo pasted school bags.
3.5.4 Mobile Loan Hut:
Mobile sales booth or loan hut will be set up at Bashaudnara City, the largest mega mall in Dhaka.
3.6 Main Elements of Business Strategy
3.6.1 Designing product wise consumer budget and action plan
All branches or sales & Service centers are provided product wise and month wise budget and action plan of different customer’s events. These are monitored and tracked regularly.
3.6.2 Introducing Contemporary product and Kiosk or booth
Introducing contemporary product line for different target group like executives, housewives, students of private varsities which EBL is going to do soon will assure robust sales volume. Kiosk or mini booth (total 5 in 2005) will be set up in busy Dhaka areas and that will introduce a new model of banking in Bangladesh.
3.6.3 Designing Hunting Team/ Direct Sales Team
EBL already has 150 commissions pay based direct sales agents in its team whose only responsibility is sales. At EBL we have also formed “hunter team” in each branch the members of which have clear focus on branch-based sales, while there are separate teams for services.
3.6.4 Training and Motivation for Direct Sales Team
Embrace Direct Sales and support Direct Sales. Know they hold the key to your growth
3.6.5 Two Customers Events per Month in the Branch Level
Currently we are ensuring minimum two customer’s events are conducted inside/outside branch per month going by the net relationship value (NRV) of the customers. We believe in the strength of micro marketing, which is a totally new concept in the banking industry of Bangladesh. So far already 60+ events have been held at EBL branches where some 25 customers attended at each event.
3.6.6 Aggressive Advertisement campaign & aggressive promotion all over the year
EBL has launched aggressive media campaign and street based visibility campaign this year. We are already on air every evening with a premier TV channel in Bangladesh; and have already launched a road based campaign for promoting our technology-based products.
3.6.7 One BRM per week
Currently we are holding one Business Review Meeting per week in consumer banking. This is a very helpful tool for fostering nicer and more effective communication and for tracking progress of business and projects. BRM also helping us to monitor actual time-to-market for our different products and services.
The Bank believes in the development of professionalism as well as personal commitments of the employees. To keep the salary package comparable with the industry, there was upward revision of the package in different grades. The Bank arranges annual picnic, where the employees participate along with their family members and a feeling of oneness is generated.
CHEPTER FOUR
OPERATING AND FINANCIAL PERFORMANCE
4.1 Introduction
Eastern Bank Limited (EBL) is a second generation commercial bank with 28 online branches across major cities in Bangladesh and 690 full time employees on year end 2008. Eastern Bank Limited has made a staggering 37.72 percent growth in Operating Profit in 2008 to BDT 1,870.40 million largely backed by a quantum growth (96 percent) of Net Interest Income (NII). Further analysis of Operating Profit 2007 reveals that EBL has been able to arrest the falling trend of Net Interest Income (NII) successfully in 2007 by managing balance sheet properly. This improvement once again reinforces the fact that EBL is clearly on the right track of solidifying its growth potential despite having lower fees income than expected. An usual growth of investment income (By 10.38 percent over 2006) to the tune of BDT 506.85 million and a comfortable growth of other operating income (By 26.59 percent over 2006) to the tune of BDT 365.92 million have outweighed the apparent shrinkage (negative growth) of Brokerage and Commission Income (By 8.13 percent in 2007) and incidental increase of operating expenses.
4.2 Deposits
Taka in million
| YEAR | AMOUNT |
| 2004 | 15649 |
| 2005 | 19396 |
| 2006 | 26734 |
| 2007 | 30095 |
| 2008 | 41573 |
At the end of 2007 total deposits stood at Tk. 30095 million, a 15.57% increase compared to Tk. 26734 million from the preceding year. This was undoubtedly a remarkable progress considering volatile price situation for acquiring deposits.
4.3 Collections under Major Deposit Schemes
Now we can focus on the deposit collection under major deposit products at 2008 of the bank so that we can understand mode of deposit mobilization they use mostly. Here we can also take a look on the schemes that are popular to the customers.
| Types of deposit | % of total deposit |
| Fixed Deposit | 66 |
| Saving Deposit | 20 |
| Current and Others Deposit | 12 |
| Bills payable | 2 |
From the table we can have a picture of deposit portfolio of Eastern Bank Ltd. Fixed deposit is about 66% means, the bank is able to collect maximum deposit relatively at long term. Saving deposit is 20% means bank collect lower amount at relatively interest deposit
From the pie chart we can see about 66% of total deposit are fixed deposit and about 20% are saving deposit.
4.4 Loans and Advances
Taka in million
| YEAR | AMOUNT |
| 2004 | 14973 |
| 2005 | 17758 |
| 2006 | 26008 |
| 2007 | 30962 |
| 2008 | 39652 |
Loans and advances of the bank grew strongly by 19.04 percent to 30962 million in 2007. Loans and advance increased by 19.04 percent indicating strong growth in operational performance. Eastern bank grew loans and advance by 19.04 percent and loans and advances of industry grew by 16 percent.
4.5 Sector wise Loans & Advances
The special feature of the credit policy of EBL is to invest on the basis of current and future growth of particular sectors. Earning profit is not the only motive and objective of the bank’s credit policy rather emphasis is given in attaining social good and in creating employment opportunities.
In order to diversify loan portfolio, every bank engaged itself in investment operations through special schemes introduced during the years. The following table shows the different sector wise loan and advance made by the banks.
| Portfolio Diversification | |
| Sector | Percent |
| Commerce and Trading | 7.96 |
| Commodity Import | 2.88 |
| Edible Oil Refinery | 3.74 |
| Individuals | 12.10 |
| Pharmaceuticals Industries | 2.92 |
| Readymade Garment | 12.70 |
| Ship Breaking Industries | 4.50 |
| Steel Products | 7.53 |
| Telecommunication | 4.97 |
| Textile Mills | 12.10 |
| Others | 28.61 |
From the above table we see that two are particularly two modes that are not followed by SIBL. Especially the mudaraba and musaraka modes are very risky. Other modes are common to all of them.
4.6 Geographic Locations Wise Loans & Advances
Taka in million
| Geographic Location | AMOUNT |
| Dhaka Division | 25118 |
| Chittagong Division | 4834 |
| Sylhet Division | 267 |
| Rajshahi Division | 367 |
| Khulna Division | 307 |
Most of the branches of Eastern Bank Ltd situated in Dhaka city, therefore most of the loans are disbursed in Dhaka division which is about 80% of total loan.
4.7 Foreign Exchange Business
Taka in million
| YEAR | IMPORT | EXPORT |
| 2004 | 24414 | 8303 |
| 2005 | 29692 | 13239 |
| 2006 | 39347 | 24289 |
| 2007 | 45298 | 26673 |
| 2008 | 62203 | 35555 |
The Bank’s performance in the area was satisfactory. Total import and export business transected were Tk. 45298 million and 26673 million respectively during 2007. The growth rate of the import business was 15 percent and the main items of import were industrial machineries, raw materials, commodities and other consumer products. The growth rate of export business was 9.8 percent and the items of export were RMG, Shrimp, and Jute etc.
4.8 Operating Profit
Taka in million
| YEAR | AMOUNT |
| 2004 | 892 |
| 2005 | 1056 |
| 2006 | 1358 |
| 2007 | 1870 |
| 2008 | 2385 |
The Bank’s operating profit increased during the year by Tk-512 million and stood at Tk-1870 million as at 31 December 2007.
4.9 Net Profit (before tax)
Taka in million
| YEAR | AMOUNT |
| 2004 | 851 |
| 2005 | 967 |
| 2006 | 1134 |
| 2007 | 1286 |
| 2008 | 1931 |
The Bank’s net profit increased during the year by Tk-512 million and stood at Tk-1870 million as at 31 December 2007.
4.10 Income – Expenses – Profit:
Taka in million
| YEAR | INCOME | EXPENSES | PROFIT |
| 2004 | 2241 | 1349 | 892 |
| 2005 | 2957 | 1901 | 1056 |
| 2006 | 4272 | 2913 | 1358 |
| 2007 | 5325 | 3454 | 1870 |
| 2008 | 6256 | 3870 | 2386 |
4.11 Total Assets
Taka in million
| YEAR | AMOUNT |
| 2004 | 23048 |
| 2005 | 27400 |
| 2006 | 35971 |
| 2007 | 42579 |
| 2008 | 54598 |
The Bank’s performance in the area was satisfactory. The Bank’s Total assets increased during the year by 18 percent and stood at Tk-42579 million as at 31 December 2007
4.12 Market value per share
| YEAR | AMOUNT IN TAKA |
| 2004 | 780 |
| 2005 | 1222.75 |
| 2006 |