Private commercial banks brought a revolution in Banking sector or Bangladesh. They provide quire different services than Nationalized Commercial Banks. Commercial banks in Bangladesh got quick responses from depositors and borrowers. Among those banks The City Bank Limited created a different image to the public through its innovative products and services. But this bank could not avoid default culture. Financial performance of the bank hindered again and due to huge classified loans and advances.
To create demand of loans and advances the bank must reduce lending rate. It could not do only for classified loans and advances. Idle money of the bank could not be utilized properly. As a result the growth rate of profitability of the bank has not been declined, volatile world Economy, Political instability, new competitors etc. are also reason for declining performance of The City Bank Limited.
The City Bank Ltd, functioning as a conventional bank in the country since 1983, has been able to consolidate its position in the sector. The Bank has been able to establish a solid presence with the customers and general public, through its improved services, value addition in the economy and increasing shareholders value.
This report is divided into five Chapters. The first Chapter starts with introduction, Second Chapter Organizational Part and General Banking of CBL, Third Chapter Logistic & Support Division, Fourth Chapter Performance Analysis, Fifth Chapter Recommendation and conclusion.
Objectives of the report:
The main objectives of the study are to evaluate the performance of the City Bank Limited during the last three years. The other objectives are stated below:
- To overview the City Bank Ltd.
- To describe the functions of logistic and support divisions.
- To analysis Profitability ratio, Bank efficiency ratio, Asset quality indicators ratio and Liquidity ratio of City Bank Ltd.
- To suggest some recommendation to improve the performance.
Methodology of the study:
Collection of facts are generally treated as Data. There are two types of data
• Primary data
• Secondary data
(a) Primary Data:
● Face to face conversation with the respective officers and staffs of the
● Study of the relevant files as instructed by the officers concerned.
● Informal conversation with the bankers.
(b) Secondary Data:
- Annual reports of the City Bank Limited
- Periodicals published by Bangladesh Bank
- Various books, articles, compilations etc.
- Bank’s website : www.thecitybanklimited.com.bd
Limitations of the study:
There are some limitations in every analysis. I have also faced problems at the time analyzing the performance of the bank. The of my research work are as follows:
- Anything which will adversely affect the image of the bank could not be disclosed.
- The annual report of the bank is not a well report. Some terms are not happened in future.
- The time frame work did not permit me and to make my work done in a very scientific manner and also it is very difficult for researcher to make a comprehensive qualitative survey with in a very short period of time.
- Research faced enormous problem while constructing data’s because these are not well organized.
Organizational Part OF CBL
Evolution of the Banking Sector:
After the independence on December 16, 1971, the Provisional Government of Bangladesh promulgated a law called Bangladesh Bank (Temporary) Order 1971 by which the State Bank of Pakistan was declared as Bangladesh Bank and the offices, branches and assets of the said state bank were declared as offices, branches and assets of Bangladesh Bank. The Government also merged existing 12 banks inherited from the Pakistan regime and constituted 6 new nationalized banks: Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Pubali Bank and Uttara Bank. During the 1970s, the banking activities were directed at massive credit disbursement to help increase industrialization and productivity in the war-ravaged country as per the Government’s economic priority. But little attention was placed to identify problem loans and making provisions for them, although there was a significant amount of hidden default loans.
Since the beginning of 1980s, a rapid deregulation and privatization was initiated in the banking sector in order to increase efficiency, productivity and competition. Two out of six commercial banks (Uttara Bank and Pubali Bank) were denationalized and a number of private commercial banks were allowed to operate. But the efficiency and credit discipline did not increased, rather loan default situation further worsened.
Recognizing the need to reform the financial sector, the Government formed a commission named National Commission of Money, Banking and Credit to undertake a major study of the financial sector in late 1984. Commission made its recommendation for financial sector reform in 1986. The loan default problem was recognized as the most serious issue that needed to be addressed. The World Bank also started a long-term project named Financial Sector Reform Project (FSRP) in 1990 with a view to conduct an in-depth study on the financial sector of Bangladesh and to suggest necessary reform measures.
As per the FSRP recommendations, the Government launched a number of measures including new rules and regulations for screening, monitoring and recovery of loans and also created new laws and amended the old ones to ensures the lenders resource. The FSRP reform measures also had their own inconsistencies. For instance, there existed a mismatch between the loan screening and monitoring standard and loan classification standard. As a result of such inconsistency, proportion of classified loan appeared to be magnified.
After the expiry of FSRP in 1996, the Government formed Banking Reform Committee (BRC) with the objective of continuing further reform in the banking sector. Almost simultaneously, another World Bank Project named Commercial Banking Restructuring Project (CBRP) started working since 1997. BRC opined that the supervisory and regulatory of Bangladesh Bank has been one of the main reasons for the accumulated banking problems and BRC’s recommendation thus put highest importance on strengthening the supervisory and regulatory capacity of Bangladesh Bank for amelioration of the default loan situation. As per the recommendations made by the BRC and CBRP, reform and restructuring initiatives have been undertaken by the Government to improve the banking sector condition. Till today newer policies and regulations are being instituted and older ones are being replaced or amended in this regard.
Historical perspective of Commercial Banking:
At the time of liberation there were around thirteen domestic scheduled banks and a few foreign banks operating in the region of Bangladesh. Two of the smaller commercial banks, namely, Eastern Banking Corporation and Eastern Mercantile bank had their head offices in the East Pakistan. The major banks only had their regional offices in Dhaka. The management excepts the two East Pakistani Banks were, however, almost solely in the hands of Non-Bangalis. All these banks except National Bank of Pakistan were in the private sector. The government owned even National Bank of Pakistan only to the extent of 25 percent. However the management of National bank of Pakistan was almost totally free from interference by the government. Interestingly, the then central bank namely, The State Bank of Pakistan was owned by the general public to the extent of 49 percent.
Banks in Bangladesh:
At present there are 49 banks with over 6000 branches operating in Bangladesh (Bangladesh Bank, 2007). The banking sector in Bangladesh comprises five types of banks as shown below:
- Nationalized Commercial Banks (NCBs)
- Development Finance Institutions (DFI)
- Non-Islamic Private Commercial Banks (PCBs)
- Islamic PCBs
- Foreign Commercial Banks (FCBs)
Historical Background of The City Bank Limited:
City Bank is one of the oldest private Commercial Banks operating in Bangladesh. It is a top bank among the oldest five Commercial Banks in the country which started their operations in 1983. The Bank started its journey on 27th March 1983 through opening its first branch at B. B. Avenue Branch in the capital, Dhaka city. It was the visionary entrepreneurship of around 13 local businessmen who braved the immense uncertainties and risks with courage and zeal that made the establishment & forward march of the bank possible. Those sponsor directors commenced the journey with only Taka 3.4 corer worth of Capital, which now is a respectable Taka 330.77 corer as capital & reserve.
The bank currently has 83 online branches spread across the length & breadth of the country that include a full fledged Islami Banking branch. Besides these traditional delivery points, the bank is also very active in the alternative delivery area. It currently has 25 ATMs of its own; and ATM sharing arrangement with a partner bank that has 225 ATMs in place; SMS Banking; Interest Banking and so on. Soon its CustomerCallCenter is going to start operation. The bank has a plan to end the current year with 50 own ATMs.
City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card. The bank is a principal member of VISA international and it issues both Local Currency (Taka) & Foreign Currency (US Dollar) card limits in a single plastic. VISA Debit Card is another popular product which the bank is pushing hard in order to ease out the queues at the branch created by its astounding base of some 400,000 retail customers. The launch of VISA Prepaid Card for the travel sector is currently underway.
City Bank prides itself in offering a very personalized and friendly customer service. It has in place a customized service excellence model called GAP (Graceful-Appropriate-Pleasing) that focuses on ensuring happy customers through setting benchmarks for the bank’s employees’ attitude, behavior, readiness level, accuracy and timelines of service quality.
City Bank is one of the largest corporate banks in the country with a current business model that heavily encourages and supports the growth of the bank in Retail and SME Banking. The bank is very much on its way to opening many independent SME centers across the country within a short time. The bank is also very active in the workers’ foreign remittance business. It has strong tie-ups with major exchange companies in the Middle East, Europe, Far East & USA, from where thousands of individual remittances come to the country every month for disbursements through the bank’s large network of 83 online branches.
The current senior management leaders of the bank consist of mostly people form the multinational banks with superior management skills and knowledge in their respective “specialized” areas. The bank this year, is celebrating its 25th year of journey with the clear ambition of becoming the no.1 private commercial bank in the country in 3 years time. The newly launched logo and the pay-off line of the bank are just one initial step towards reaching that point.
The City Bank Limited was one of the 12 Banks of Bangladesh among the 500 Bank in Asia for its asset, deposit & profit as evaluated by “Asia Week” in the year 2000. Other than that, The City Bank Limited received the “Top Ten Company” award from the prime minister of the People’s Republic of Bangladesh.
Mission, Visions and Objective of CBL:
Corporate Mission of CBL
- To contribute to the socioeconomic development of the country
- To attain the highest level of customer satisfaction through extension of services by dedicated and motivated team of professional
- To maintain continuous growth of market share ensuring Quality
- To maximize bank’s profits by ensuring its steady growth
- To maintain the high moral and ethical standards
- To ensure participative management system and empowerment of Human Resources
- To nurture an enabling environment where innovativeness and performance is rewarded.
Corporate Vision of CBL
- To be the leading bank in the country with best practices and highest social commitment.
Objective of CBL
Despite extreme competition among banks operating in Bangladesh, both local and international The City Bank Limited made a remarkable progress practically in every sphere of its functions. The active of the CBL are very implicit and vast comparing to that of other banks in the country today. The theme of the bank is “For Relationship Banking”. The prime objectives of the CBL are to create a strong capital base, to earn good profit and pay satisfactory dividend to honorable shareholders with proper social commitments. To achieve the objectives the management is continuously working for the improvement of bank’s assets quality by identifying potential depositors and good borrowers. Because it believes “The line of excellence never ends”. The strategic plans and business will be its strength in this very competitive environment.
Organogram and reporting lines of CBL:
The Bank will be moving from current geography to Business Matrix. With this end in view the Board of Directors has approved an interim-structured Organogram and reporting Lines for introduction in the bank.
Banking and its Definition:
The word “Banking” has been defined to mean the accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise, withdraw able by cheque, draft, order or otherwise. The term “Banker” includes any person acting as a one who has an account with a banker or for whom a banker habitually undertakes to act as such. So account is a contract between a Bank and customer. On the basis of accounts the banker customer relationships build up.
The term banking has also been defined as:
USA: Act of Congress defines Banking “As the Business of dealing in Credit “Japan: Act of 1927 in Japan defines bank as “Institutions, which carry on operations of given as well as receiving credit”
From the above definitions we find three major functions of a Bank-
- Taking Deposit
- Extending Loans & Advances
- Foreign Exchange Business
Deposits are often called the lifeblood of commercial banks. No commercial banks can be thought of without deposits. In fact modern commercial banking starts with deposits from the public followed by lending or financing trade, commerce and trade. Deposits are treated as:
- Deposits as the major source of fund
- Deposit as basis of lending
- Deposit as source of income
- Deposit and credit creation
Under the umbrella of Foreign exchange business there are three main functions as follows:
- Export Business
- Import Business
- Foreign remittance
So in simple words, Banking means taking deposit, extending loan and advances and doing foreign exchange business in order to attain profit & contribute to GDP.
Form the above discussion we can say that Bank as a financial intermediaries collects deposit form surplus areas and provides loans and advances to deficit areas (where needed) and also engaged itself in foreign exchange business, the sum-up of all these activities is known as Banking.
The City Bank Limited is the first private sector Bank in Bangladesh. The Bank established in March 27,1983 with an authorized capital of Tk. 1.75 Billion under the entrepreneurship of twelve prominent & leading businessman of the country. Today The City Bank serves it’s customers at home & abroad with 83 branches spread over the country & about three hundred oversea correspondences covering all the major cities and business center of the world.
Types of Bank A/C:
Classification as per nature of account:
Current Deposit (CD) A/C
Savings Banks Deposit A/C
Short Term Deposit A/C
Fixed Deposit A/C
Non Resident Foreign Currency Deposit A/C (NFCD A/C)
Resident Foreign Currency Deposit A/C (RFCD A/C)
Non Resident Taka A/C (NRTA A/C)
Convertible Taka A/C
Current Deposit A/C: Current Deposit is a term deposit. Its main features are as follows:
Withdrawal not restricted
Continuous Transaction Allowed
The more the Bank will achieve current deposit, the more the net income the bank will achieve as bank do not need to pay interest on current deposit.
Savings Banks Deposit A/C: Savings Bank Deposit A/C is a Quasi A/C. Its main features are as follows:
Continuous transaction allowed
Withdrawal limited in the sense that-
(a) Not more than two withdrawals in a week
(b) Not more than 25% withdrawal of the balance by a single cheque.
Short Term Deposit A/C: Short Term Deposit A/C is a term deposit A/C. The main features of this account are as follows:
Withdrawal not restricted
Continuous transaction allowed
Fixed Deposit A/C: Fixed Deposit a/C is also a term deposit A/C.Its main features are as follows:
Continuous Transaction not allowed
Requirements of foreign currency A/C
Copy of passport
Valid work permit
One notable thing is that, Foreign Currency A/C’s nominee can operate A/C unlike other Bank A/C.In that case Banks need to preserve nominee’s photo and specimen signature.
Non Resident Foreign Currency A/C:
Its main features are as follows:
Non resident people
It is like a term deposit
Minimum for three months
Interest is charged at the rate of LIBOR (London Inter Bank Offer Rate)
Resident Foreign Currency A/C: Its main features are as follows;
Resident who once in foreign country
Within one month after returning
Can Bring 5000US $ without declaration.
Can open A/C only in AD Branch
Non Resident Taka A/C: It is almost a saving A/C operating from another country.
Documents required for opening an A/C:
Individual / Joint A/C:
Account opening form as applicable duly filled in
Specimen signature card
Two copies of photographs dully attested by introducer
Nominee form and photographs of the nominee
Mandate or authority form
KYC (Know Your Customer) form
National ID card Photocopy.
New product of CBL:
a) City Deposit Products:
b) City Loan Products:
c) City Card Products:
City Debit Card
City Credit Card
d) City NRB Product
Customer Service: A customer care:
In a service industry like Banking, Providing ‘CUSTOMER DELIGHT’ through prompt and accurate service is of paramount importance. A satisfied customer will always come back to the bank and will act as good will ambassador of the bank.
In this age of globalization and market economy, Banks are increasingly turning towards modern technology that in fact, changed the interaction bank and customers.
Now, technology and services are two prime tools to attract customers. As banks deal with customers for their business, services to them are absolutely required. That means, without customer delight or customer service, bank cannot develop its business.
Rules to Bankers
Customer is ALWAYS RIGHT
We get our salary because we have CUSTOMERS
Customer is the king and bank must satisfy him
Every complaint is an opportunity ( It is called service recovery).
Customer Touch Point:
Customers come To Branch for:
We must delight our customers
Know Your Customer (KYC)
Know Your Product (KYP)
Some Rules to Remember:
Always be courteous & Polite
Never Interrupt a customer when he/she is angry
When answering a telephone, greet and give your identity
When transferring a call, let the customer know whom your are transferring it to
Never say I do not know
Always thank the customer for his patronage
One Stop Service:
If some one is unhappy about how they are treated, they will tell 11 (eleven) other people. This is how we can lose business. When some one has received excellent customer service, they will generally tell 3 or 4 other people, this is how we can grow our business. Therefore to achieve higher customer service, One Stop Service has been introduced in CBL.
One Stop Service is basically a customer-oriented service aimed at providing prompt & accurate services form one point without moving from one point to another. In this process, the customer deposits or gets payment of his cheque form one point standing in a queue and need not to move to different point for getting the process end.
Current Functions of CBL:
a) Description of Services Offered by CBL: The Services offered by CBL are discussed below:
1. Service of CBL
The CBL concentrates the following categories of banking services:
Loans and Advances
International Trade and Foreign Exchange
Online Banking Services
Debit Card and Duel Currency Credit Card Facilities
2. Retail Banking
One of the most remarkable success stories of last 50 years Banking Industry globally has been the conceptualization and innovative execution of banking with individual customers, their friends and families. The industry has termed it as Retail Banking or Personal Banking or Consumer Banking. The City Bank limited recently started its journey in Retail Banking. More than 700 staffs have been trained so far on the vital concepts of service excellence and sales. In the product side ATM fleet has been launched, Debit card has been issued, SMS Banking has been offered, 3 new deposit product have come up and our communications in media has been increased, manifold in the endeavor to build a Retail Banking brand namely “City Retail Happiness Counts”. Retail Banking includes:
3. SME Banking:
Considering the potential growth and demand situation the City Bank Limited has extended credit facilities to small and medium enterprises through SME Banking in the year 2006 and 2007. A separate division has established in the Head Office with collaboration of all branches to process and handle loans under SME for attaining a respectable market share and successful operation of the scheme. The Bank has organized several training program for development of adequate human resources.
Following services are provided by SME Banking
In the year 2007, major initiatives have been taken to re-launch SME Banking. Organization and processes are being restructured with focus to enhance business. SME asset size in 2007 went up to BDT 2,000 million and the number of borrowers in SME was 3,000.The bank ha s also taken measures to provide complete banking solution to SME by devising both cash and non-cash based product appropriate and fit to support the requirements of the concerned business. Small enterprise will have a better opportunity to avail PPG based funded product. The needs of medium sized enterprises are also being fulfilled through multiple products offering in the conventional manner. The City Bank SME recently launched “City Nokshi”. “City Nokshi” is a 10 percent rate per annum as per the guidelines of Bangladesh Bank and is available only for the women entrepreneur of the country.
4. Corporate and Investment Banking:
As part of its commitment to provide global quality service. The City Bank Ltd, one of the largest local Banks, has launched its Corporate & Investment Banking Division recently. This shift , from branch banking model to business driven matrix, is the first step of the banks plan to revitalize its way of doing business in 2008. The C&I Division will comprise of a number of relationship teams centered in Dhaka and Chittagong to provide who will act as one stop contact point for the customers of the bank. This model has been successfully globally to provide better service and create increased customer satisfaction. The relationship teams have been staffed mainly through internal quality resources. The C& I relationship teams have already taken over the existing large accounts and servicing the customers to their satisfaction. Total new booking in last few months is more than BDT 3,000 million. The C&I Division will also have product teams i.e. structured finance, Islamic finance, Leasing, Cash management who will meet the specialized product needs of the corporate customers. The time ahead is going to be very challenging for C&I. The major challenges shall be to increase the quality of the portfolio keeping in mind the business targets for the year 2009 and also ensure quality services in this transaction phases with timely formation and support from other departments i.e. centralized credit administration, operations.
Following services are provide by Corporate Banking:
Working Capital Finance
5. Duel Currency Credit Card:
Today’s customer wants services and information to be provided at all times and places. This has become possible by ATMs and POS terminals and helped banks in achieving “Anytime, Anywhere Banking”. Therefore there is a need for an automated system that will connect the branches through online to provide better services to the customers. The most modern technology based bank product for making hassle free financial transactions and drawing of cash money all over the world is given by Credit Card. The City Bank Ltd is the first among domestic banks to introduce a unique dual currency CITY CARD under the logo of VISA International in Bangladesh. After obtaining principle membership of VISA on 19th February, 2003 the bank is pleasing its commitment to be leader as card issuer in the arena. Tremendous responses are there from the market for this plastic money. Up to March, 2008 the number of CITYCARD is 10,215.
6. Computerization and Online Service:
With computerization the bank had gone another step ahead towards providing pragmatic, safe and prompt banking services. All 84 branches including Islamic Banking Branch are brought under computerized net. Bank has implemented online real time banking through an agreement with Info sys Technologies Limited for supply of world reputed banking software “FINACLE”. Within March, 2008 real time banking facilities have been introduced in 37 branches of CBL. Under this system, client will be able to do the following type of transactions:
Easy to withdraw or deposit from any online branch
Fund transfer with one click, no need TT/DD
Customer can easily tell which payments have cleared.
7. Islamic Banking:
The City Bank Limited started its Islamic Banking operation by opening its first Islamic Banking Branch at 9/H, Motijheel, Dhaka. Islamic Banking Branch has just completed 4 year of its operation. In the year 2007 the branch has closed various deals under Islamic Finance operation. In 2007, branch’s investment portfolio reached was TK. 648 million with overall client base of about 3,500 customers. Operating profit of the branch posted TK. 50 million in 2007 compared to TK. 40 million in 2006. Islamic Branch is also rendering sales and service to a good number of broker houses including DSE’s central trade account in the capital market. The salient features of Islamic Banking are as follows:
To conduct all its activities as per Islamic Shariah
To conduct its monetary matters free of interest
To establish banker-customer relationship on the basis of partnership
To follow Islamic principle in all its investment port-folio
To develop living standard of the poor incoming group
To render excellent services to the clients cordially
To conduct welfare related activities to the people.
8. SWIFT Banking (Since 2000):
The City Bank Ltd. is one of the first few Bangladeshi Bank who has become member of SWIFT (Society for Worldwide Inter-Bank Financial Telecommunication) in 1983. SWIFT is members owned co-operative, which provides a fast and accurate communication network for financial transactions such as letters of Credit, Fund transfer etc. By becoming a member of SWIFT, the bank has opened up possibilities for uninterrupted connectivity with over 5,700 user institution in 150 countries around the world.
9. SMS Banking:
City SMS gives you 24-hour access to the key financial information of our customersCity Bank Account. It is the simplest way of finding out customers account’s daily / month – end balance. With City SMS , a customer neither have to wait for his or her statement to arrive through mail nor have to make a phone call at branches to inquire about his or her balances and last few transactions. Once a customer becomes a member of SMS banking, he or she will enjoy 24-hour access it the key financial information.
Through City SMS Banking you will be able to access his or her account information like balance; transaction and a range of other financial information by typing a presently following functionality are available through City SMS Banking
Sources: Bank’s website – http:/click.thecitybank.com/sms.htm
10. Corporate Governance:
The bank recognizes the importance of Corporate Governance and is committed to maintain highest standard. A team of experienced professionals maintains the following committees to run the Bank efficiently:
Administration and Disciplinary Action Authority
Technical and Audit Authority
Procurement and purchase Committee
Asset and liability Committee
11. Training Program:
The City Bank Limited has launched a huge training program for its staff as part of its restructuring plan. So far, 774 staffs have received training on Customer Service and face to Face Sales; 65 staff received training on departmental operating Instructions and 268 staff received training on Orientation to Credit. Apart from these regular training are going on with BBIM, BIM, and CRISL etc. City Bank Management gives top priority to its peoples leasing and development issues. That’s why the current training project of City Bank is given a name “Learning & Development making the winning moves”.
b) Functional Division of CBL: The Bank accomplishes its functions through different functional divisions/departments along with their major functions are listed below:
1. Financial Division:
Financial Planning , budget preparation and monitoring
Payment of salary
Controlling inter-branch transaction
Disbursement of bills
Preparation / Review of returns and statement
Preparation of financial reports and annual reports
Maintenance of Provident Fund, Gratuity, Superannuation Fund
2. Credit and risk management:
Processing and approving credit proposals of the branches
Documentation, CIB (Credit Information Bureau) report etc
Arranging different credit facilities
Providing related statements to the Bangladesh Bank and other department
3. Human Resource Division (HRD
Training and development
Compensation, employee benefit, leave and service rules program and purgation
Placement and performance appraisal of employees
Preparing related reports
Reporting to the Executive Committee/Board on related matters
Promotional camping and press release
4. Information Technology (IT) department
Network management and expansion
Member banks reconciliation
Date entry and processing
Procurement of hardware and maintenance
5. Branch control & Inspection Division
Controlling different function of the branches and search for expansion
Conducting internal audit and inspection both regularly and suddenly
Ensuring compliance with Bangladesh Bank(BB), monitoring BB’s inspection and external audit reports
6. Retail Division
ATM card, Credit and system operation and maintenance
Credit Card Operation (Proposed)
Customer and vendor relationship
7. City Bank Treasury and Market Risk Division:
City Bank Limited has a dedicated Treasury team who is capable of providing all treasury Solutions. Through business partners CBL is providing a wide range of Treasury products. In CBL Treasury, there are various teams who are specialized in their own area to ensure the best possible solution to our customer obligation.
ATM and Market Research
Strategy of CBL:
CBL believes in the practice of Market-Oriented Strategic Planning , developing and maintaining a viable fit between the organization’s objectives, skills and resources, The aim of such approach is to shape and reshape the bank’s businesses and service so that they yield target profit and growth. The strategic planning of CBL consists of two organizational levels, which are:
a) Location Based Strategy
b) Business Level Strategy
a) Location Based Strategy:
Since the growth and profit of banking business largely depends upon the location of branches where large connection of other businessman and industries are involved, CBL Main Strength is its location based strategy. The 83 branches of CBL are divided into five different regions, which are:
Dhaka Division, comprises 37 branches
Chittagong Division , comprising 15 branches
Comilla Division , comprising 5 branches
Sylhet Division , comprising 9 branches
Bogra Division , comprising 10 branches
Khulna Division , comprising 7 branches
The concentration of business and lifestyles of the people are not the same in these five areas. So, the strategies of the five areas differ from one another, but they are designed with distinctive local touch. Head office constantly monitors the progresses of all the five areas. At present, The bank is not interested in launching more branches. Currently CBL is focusing in strengthening the existing branches.
Business Level Strategy:
The business strategy of the Bank is to strengthen its retail business, following a conservative leading approach. But the Bank’s major portion of the profit generates from its Retail banking and SME banking.
(i) Retail Banking Strategy
(ii) SME Banking Strategy
Retail Banking Strategy:
The City Bank Ltd. recently has started its journey in Retail Banking. More than 700 staffs have been trained so far on the vital concepts of service excellence and sales. In the product side ATM fleet has been launched , Debit card and credit ha s been issued, SMS Banking has been offered, 3 new deposit products have been introduced, manifold in the endeavor to build a Retail Banking brand namely “City Retail Happiness Counts”.
SME Banking Strategy:
Considering the potential growth and demand situation The City Bank Limited extended credit facilities to small and medium enterprises through SME Banking in the year 2006 and 2007. A separate division has been established in the Head Office with collaboration of all branches to process and handle loans under SME for attaining a respectable market share and successful operation of the scheme. The bank organized several training program for the development of adequate human resources.
Logistic & Support Division[L&SD]
To bring uniformity and transparency in the purchase and procurement process, the management of The City Bank Limited recommended establishing a sound purchase policy considering best quality of products and services and better prices. The Logistic and Support Division is mainly responsible for all types of purchases and procurements of the bank. Before purchasing a more valuable product, LSD needs to invite bids, quotes or RFP’s from reputable supplier or vendors. In addition LSD also prepares and maintains Tender Documents, Tender Schedules and Tender Invitations.
The process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements .
Logistic and Support Division is also a part of Finance Division, as all purchases and procurements of the Bank are done by LSD, it tries to purchase in lower price, but dose not negotiate with the products.
Function of LSD:
Logistic and Support Division function are as below:
Supply and maintenance.
Maintenance of Fixed Asset
Parts of LSD:
Logistic and Support Division are divided in 6 units and every unit work separately there own responsibility. These are:
Supervision Support Unit
Central Dispatch Unit
Purchase and procurement policy:
Purchase Policy is a rule and regulation which is followed by the Bank before making any purchase. There are Various types of purchase policies which are followed by the Purchasing Unit.
These purchasing policies and guidelines have been prepare in order to ensure that The City Bank Ltd. obtains quality products and services, according to Bank’s needs and within the budget. This Policies and Guidelines shall be applicable for both domestic and international procurements.
For the purpose of efficient procurement and procurement process, the main division responsible for procurement of all major services and goods in Logistic and Support Division. IT Division is responsible for procuring IT related products such as software , hardware and others. Marketing and Branding is responsible for purchasing advertising or promotional related materials and services.
These Guidelines is subject to review from time to time for further improvement. Further/improvements are usually made in the from of addendums.
Types of policy:
Policies can divided into three categories –
a) Renovation & Decoration Policy:
1. For preparing lay-out reputed Designer / Decorator are usually invite for preparing lay-out plan and supervision of the work.
2. For large projects, Tender is generally called.
3. For making any major purchases, notes are placed before the purchase committee and management for approval purposes and as per their decisions, work orders are being issued.
4. Apart from price, the committee considers supplier’s previous experience and reputation.
5. At the time of final payment, in some cases 5% are retained from the total work order amount as security money for 3-12 months.
6. The work order also contains scope of work , completion time and penalty charges.
b) Vehicle Purchase Policy:
1. Vehicle are allotted for the branches for the branches for operation purposes within defined criteria and management discretion.
2. Vehicle are purchased for a new employee or promoted employee as per service rule.
3. Straight line basis are followed for depreciation and 25% are being charged on purchases value. Book value reaches at Tk. 1/- after 4 (four) years. Decision for selling vehicles are taken when expenditure for repairs go up.
4. Authorities take decision on the type and numbers of vehicles to be purchased after taking into account the need, allotment criteria, and availability as well as brand, model, year of manufacture, capacity, CC etc.
5. Spare parts availabilities, maintenances, cost of repairing, re-sale value and cost of fuel consumption are also being considered.
6. Quotations are collected from reputed traders to negotiate for a better price or terms & condition while asking for the decision from Board Members or Management Committees Based on comparative quotations and prices.
c) General Policy:
1. All purchases for the Bank are usually initiated and conducted by the Logistics and Support Division (LSD).
2. No purchase are made, paid, or reimbursed, unless written prior approval is obtained in the prescribed format.
3. A unit or Division who requires goods or services raise a requisition for purchase, in the prescribed formats. The requisition is then forwarded to Authorized Division.
4. Any purchase requisition in over than Tk. 1,500,000 is routed through a Purchase Committee (PC) and Board for their recommendations and approvals.
5. For making any purchase, two forms – Purchase Requisition (PR) and Purchase Order (PO) from are being used.
6. Minor purchases with a total value up to Tk. 3,000 per transaction can be made by the Consuming Unit or Division itself, but their maximum limit for purchases Tk.20,000 per month.
7. Quotation are being received and Tenders are being called as per Requirements.
8. The Purchase Unit considers Unit considers and confirms the following items when conducts purchases:
Payment terms and methods
Delivery terms and methods
General Tender Details:
The tender or bid documents include the following things:
a) Purchasing Division as addressee.
b) Tender opening date, closing date, time and place of submission
c) Bid Bond:
The bid bond amount shall very depending on circumstances from minimum 7% to 14% of the total value of work.
Bid Bonds are being submitted in the from of pay order / demand draft/ bank guarantee.
The Bid Bond / Earnest Money of all other unsuccessful bidders are refunded / returned within 15 working days.
d) Acceptance or rejection of an offer depends on various reasons.
e) Performance Security & Guarantee.
A performance Security / Guarantee is usually received.
Performance Security / Guarantee also received in the from of pay order / Demand Draft / Bank Guarantee.
Performance security / Guarantee are not being released until end of warranty period.
f) Awarding Contract-
Formal purchase order / contract are being issued to the successful bidder
In the Work Order – terms, conditions, technical specifications, price, payment terms, delivery schedules and warranties are being mentioned.
Steps in Tender Operations:
Weakness of LSD:
This department is evolving under new management. New ideas and new processes are being implemented under the new orgarnogram .
A new purchase policy has been implemented. Some rectification has been made in course of time. Due to this, the function some times gets complicated as the policy is frequently changed.
LSD was earlier slow and sluggish. The new management has made it dynamic. But it has the legacy of getting respect back from its customers.
LSD is constantly incorporating new departments, jobs and activities of the bank. For example recently many brand related activities were handed over to LSD.But has not received new manpower. So the jobs are over burdening the department.
How to overcome the weakness:
The department needs to finalize the Organogram, which will ensure the specific employee of this department are clear about their own roles. At the same time working process, working methods needs to finalized.
The department should finalize the policies and ensure that those are implemented property.
The continuous hard work and proper service delivery in time can ensure that the department gets the respect back from the customers.
After finalization of the organ gram, new persons has to be employed where there are deficiencies in manpower.
A. Bank Profitability Ratios:
1) Return On Asset
During the period 2005-2007 average figures of ROA is 1.02%City Bank. It means that the City Bank can make taka 1.02 per 100 taka employed. The standard deviation calculated for City Bank is 0.64%. The range was 1.17% for City Bank. The table shows that in the initial period the ROA of City Bank was very optimistic but in the later period, ROA of City Bank is 0.71% which is unexpected. Time trends suggest that the bank needs to increase their utilization of assets to pile up the ratio.
2) Return on Equity
During the period 2005-2007 the average figures of ROE is 18.48%City Bank. The table shows that in the initial period the ROE of City Bank was very optimistic but in the later period, ROE of City Bank is 12.71% which is unexpected. The standard deviation is 11.79% and the range is 21.35%. The City bank is experiencing deteriorating positions in ROE.
3) Profit Margin
During the period 2005-2007 the average figures of Profit Margin is 16.02% for City Bank. The standard deviation is 8.61% and the range is 16.58%. A low profit margin indicates a low margin of safety that a decline in revenue will erase profits and result in a net loss. Time trends suggest that the bank needs to increase their revenue to pile up the ratio.
4) Return on Deposit
During the period 2005-2007 the average figures of Return on Deposit is 1.19% for City Bank. The standard deviation is 0.75% and the range is 1.37%. The average indicate that bank can generate profit 1.19 Taka per 100 Taka using deposit. The bank needs to increase their utilization of deposit for getting a good amount of return.
5) Return on Share Holders Capital
During the period 2005-2007 the average figures of Return on Shareholder Capital is 42.09% for City Bank. The standard deviation is 28.81% and the range is 52.90%. The average indicates that the return on shareholder capital is 42.09 Taka per 100 Taka. The inter firm comparison of this ratio determines whether the investments in the firm are attractive or not as the investors would like to invest only where the return is higher.
6) Net Operating Margin
During the period 2005-2007 the average figures of Net Operating Margin is 72.66% for City Bank. The standard deviation is 12.55% and the range is 24.76%. The average indicates that 72.66% of a company’s revenue is left over, before taxes and other indirect costs (such as rent, bonus, interest, etc.), after paying for variable costs of production as wages, raw materials, etc. A good operating margin is needed for a company to be able to pay for its fixed costs, such as interest on debt.
Bank Efficiency Ratio:
1) Interest Income To Expense (IEE)
During the period 2005-2007 the average figures of IEE is 4.36% for City Bank. The standard deviation is 1.03% and the range is 2.06%. The average indicates that the bank can make net interest income 4.36 Taka per 100 Taka lending. The bank needs to decrease their interest expense or increase interest income to pile up the ratio.
2) Operating Expense to Asset (OEA)
During the period 2005-2007 the average figures of OEA is 2.77% for City Bank. The standard deviation is 0.03% and the range is 0.06%. The average indicates that the City Bank can spent for operating purpose taka 2.77 per 100 taka employed. The bank stays in better position because of their less operating expense.
3) Operating Income to Asset (OIA)
During the period 2005-2007 the average figures of OIA is 2.79% for City Bank. The standard deviation is 0.77% and the range is 1.53%. The average indicates that the City Bank can earn operating income taka 2.79 per 100 taka employed. The bank needs to increase operating income by decreasing their interest expense or increasing interest income to pile up the ratio.
4) Operating Expense to Revenue (OER)
During the period 2005-2007 the average figures of OER is 45.19% for City Bank. The standard deviation is 5.36% and the range is 10.37%. The average indicates that the Bank spent for operating purpose Taka 0.45 for every Taka they earned in operating revenue. The bank needs to decrease operating expense or increase operating income to pile up the ratio.
5) Asset Turnover (ATO)
During the period 2005-2007 average figures of ATO is 13.53%City Bank. It means that the City Bank can earn interest income taka 13.53 per 100 taka employed. The standard deviation calculated for City Bank is 1.25%. The range was 2.41% for City Bank. The table shows that in the initial period the ATO of City Bank was much unexpected but in the later period, ATO of City Bank is 14.53% which is optimistic. Time trends suggest that the bank needs to increase their utilization of assets to pile up the ratio.
6) Net Interest Margin (NIM)
The average of net interest margin is 2.79% for City Bank with the standard deviation and range are 0.77% and 1.53% respectively. The average indicates that the bank can make net interest income 2.79 Taka per 100 Taka employed. The bank needs to increase interest income or decreasing interest expense to pile up the ratio.
Asset Quality Indicators:
1) Provision to Earning Assets
The average of provision to Earning Assets is 1.56% for City Bank with the standard deviation and rang are 1.37% and 2.57% respectively. The ratio indicates that an expense set aside as an allowance for bad loans such as customer defaults, or terms of a loan have to be renegotiated
2) Loan Ratio:
During the period 2005-2007 the average of loan ratio is 63.56% for City Bank with the standard deviation and rang are 3.21% and 5.57% respectively. The average ratios show that the utilization of total assets has been done extremely well by the City Bank.
3) Loans to Deposits
During the period 2005-2007 the average of loan to deposit ratio is 74.23% for City Bank with the standard deviation and rang are 3.06% and 5.59% respectively. The average indicates that the bank can provide loan 74.23 Taka per 100 Taka of their deposit which shows the more the bank is relying on borrowed funds, which are generally more costly than most types of deposits.
1) Cash to Assets
During the period 2005-2007 the average of cash to asset ratio is 7.28% for City Bank with the standard deviation and rang are 0.47% and 0.93% respectively. The average indicates that the bank has ability to cover its current debt, but ratios that is too high might indicate that a company is not allocating enough resources to grow its business.
2) Cash to Deposits
During the period 2005-2007 the average of cash to deposit ratio is 8.50% for City Bank with the standard deviation and rang are 0.58% and 1.15% respectively. The average indicates that the bank has available cash 0.085 Taka per Taka of their deposit. That means the city bank invests maximum amount of their deposit.
3) Deposits to Assets
During the period 2005-2007 the average of deposit to asset ratio is 85.61% for City Bank with the standard deviation and rang are 0.91% and 1.80% respectively. The average indicates that the bank has deposit 85.61 Taka per 100 Taka of their asset which shows that customer is highly satisfied & feel secured to save their money to the city bank.
4) Equity Multiplier
During the period 2005-2007 the average figures of equity multiplier is 1816.70%City Bank. The standard deviation is 32.99% and the range is 63.49%. The average indicates that the bank’s total assets 1816.70 Taka per 100 Taka of their shareholders’ equity which shows that higher financial leverage, which means the bank is relying more on debt to finance its assets.
5) Equity to Deposits
6) Total Liabilities to Equity
During the period 2005-2007 the average figures of liabilities to equity is 1816.70%City Bank. The standard deviation is 32.99% and the range is 63.49%. The average indicates that the bank’s total liabilities/debt 1816.70 Taka per 100 Taka of their shareholders’ equity. The debt-equity ratio is another leverage ratio that compares a bank’s total liabilities to its total shareholders’ equity. This is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed.
7) Total Liabilities to Shareholder Capital
During the period 2005-2007 the average figures of liabilities to Shareholder capital is 4054.38%City Bank. The standard deviation is 226.20% and the range is 452.29%. The average indicates that the bank’s total liabilities/debt 4054.38 Taka per 100 Taka of their shareholders capital.
8) Retained Earnings to Total Assets
During the period 2005-2007 the average figures of retained earnings to total asset is 0.09%City Bank. The standard deviation is 0.02% and the range is 0.03%. The ratio indicates that growth has been financed through profits, not increased debt. But the average indicates that the bank’s retained earnings is 0.09 Taka per 100 Taka of their total asset which shows that growth may not be sustainable as it is financed from increasing debt, instead of reinvesting profits.
Recommendations and Conclusion
The specific and board recommendations of the study are as follows:
Policy may be revised from time to time
The bank needs to decrease their interest expense or increase interest income.
Time trends suggest that the bank needs to increase their utilization of assets.
Customized software may be implemented
The bank has to increase their advertisement and also increase their social activity.
Employee may need advance training
The background of the client must be searched properly. Because it is very difficult to authenticate the philosophy of the client.
Avoid force loan as minimum as it can
Right people should in right place, so that the job has been done properly.
The City Bank Limited has established goodwill through innovative products and services. It has many problems but is followed very sincerely the rules, regulations and advice of Bangladesh Bank. Bangladesh Bank closely monitors this bank. The City Bank is experiencing deteriorating positions in ROE. The average of return on shareholders capital indicates that the return on shareholders capital is 42.09 Taka per 100 Taka. The inter firm comparison of this ratio determines whether the investments in the firm are attractive or not as the investors would like to invest only where the return is higher. Financial position of the bank slightly improved in the year 2005. The ratio indicates that growth has been financed through profits, not increased debt. But the average indicates that the bank’s retained earnings is 0.09 Taka per 100 Taka of their total asset which shows that growth may not be sustainable as it is financed from increasing debt, instead of reinvesting profits.
In recent years The City Bank Limited is performing very well and this bank is focusing more on on-line banking, SME banking, export- import business etc.
1. Direct Discussion with the employees of The City Bank Ltd. Head Office
2. Bank’s Annual Report-2007
3. Bank’s website- www.citybank.com.bd
4. Book – Bank Management- a fund emphasis
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