Efficiency & Evaluation of IFIC Bank Ltd.
To survive competitively in the market any business whether it is production or service oriented should make their product and services more diversified. Responding to the market demand IFIC Bank has a complete array of Commercial Corporate and Personal banking service covering all segments of society. Now Commercial Banks are emphasizing on consumer loan due to minimize the risk of default. That is why the report is prepared on Operational Efficiency of Credit Management of IFIC Bank.
This report has been conducted to find out the possibility of establishing the position of IFIC Bank in terms of products. In this report the total credit portfolio of IFIC Bank has been shown that indicated a positive growth trend in the credit amount disbursed. Again in terms of interest income, credit is also accounting an increasing trend. One of the crucial parts of the report is that, IFIC Bank Retail Unit has been compared with other bank’s Credit, in some aspects to understand the current position in the market. From the comparison with banks, some problems and prospects are found in IFIC Bank Credit.
IFIC is offering diversified product portfolio and lowest rates and charges which are their strength to proceed further in the business. Again, IFIC Bank has a few problems regarding target clients segments and promotional activities that should be rectified. The credit disbursement procedure is also described in this report. There are many opportunities for IFIC Bank to develop and enter in credit market with a massive amount of investment as this is one of the ways for risk diversification. In recent banking business modern countries are focusing more and more on credit to shuffle their past ideas about investing in corporate credit. Though there is a tough competition in this sector, but to achieve a leading position IFIC bank should consider more its credit business on loan.
|Operating Result||2009||2010||2011||% growth|
|Profit Before provision||101.11||202.87||177.58||-12.47%|
|Cost of fund||6.35%||6.58%||6.12%||-6.99%|
|Cost of income ratio||76.60%||72.15%||67.81%||-6.02%|
Financial Performance of 2010 & 2011
The bank mobilized a total deposit of Tk . 73,042.23 million as of December 31,2011 as against Tk. 54,660.41 million as of December 31,2010 indicating an increase of 34% over the previous year. The competitive interest rates , deposit mobilization effort and customers confidence on the bank contributed to the significant growth in deposit during the year.
Loans & Advances
The total Loans & Advances of the bank stood at Tk . 65,428.35 million as of December 31,2011 as against Tk. 48,826.26 million as of December 31,2011 ,marking an increase of 34% over the previous year.
The loans & advances portfolio of the bank mainly consists of trade financing , Projects Loans for new Projects and BMRE projects , Working capital SME and Lease Financing . Besides the bank is financing individual borrowers under Consumers Financing Scheme . the Bank is gradually increasing its involvement in Agriculture Sector as per direction of the Bangladesh Bank.
IFIC Bank generated profit of Tk. 2,877.90 million in 2011 before provisions as against Tk. 3,844.08 million in 2010 showing a negative growth of about 25% Mentionable here that in 2010 there was extraordinary income of Tk. 1,090 million from recovery of written –of loans.
The interested by 45.65% which was Tk. 6,798.01 million in 2011 and Tk. 4,667.28 million in 2010 due to increase in loans and advances . During the year both income from investment and commission , exchange gain & broken increased as compared to the previous year . the income from capital stood at Tk. 129.07 million during 2011 against Tk. 227.66 million in 2010
The total expenses of the bank for 2011 stood at Tk. 7,572.66 million Tk . 5,103.45 million in 2010. The interest paid to the depositors and borrowings represented Tk. 4,654.63 million which was 61.47% of the total expenses. The total operating expenses of the bank was Tk. 2,918/.03 million in 2011 in comparison to that of tk. 2,528.92 million in 2010
Capital & Reserve
The authorized capital of IFIC Bank was Tk. 5,350.00 million and the paid – up capital stood at Tk. 2,768.38 million as on December 31,2011. A break – up of the capital & reserve inclusive os statutory reserve for the fulfillment of provision under Bank Company Act , 1991 is fulfilled below
|Nature of Capital & Reserve||Taka in million|
|ü Paid – up capital||2,768.38|
|ü Statutory Reserve||2,554.52|
|ü Other Reserve||171.75|
|ü Retained Surplus||1,190.52|
|Total capital & reserve||6,685.17|
Source : Annual Report of IFIC Bank Ltd .2011
Problems Regarding Credit Management
Proper Credit Management is the most important function of any bank. But for some reasons the credit management system faces some problems, which hamper the proper functioning of the systems. Some reasons behind dysfunctional credit management are:
Undue Pressure on the part of different concerns for sanctioning of credit in favor of some project which is not viable makes it hard for the credit management system to functioning properly. Recently this type of pressure has been reduced by some rules imposed by the Bangladesh Bank.
Because of the past poor record of loan recovery by the banking sector as a whole developed this impression among the people that bank loans do not need to be repaid. And thus some even try to provide inadequate security against advances with the motive to default.
Delays in Loan Sanction
Lengthy process of loan sanction or delay in loan sanction is a common problem of credit management. Because of the lengthy approval process of the advances the delay happens.
Higher Rate of Interest for Credit
Higher rate of interest is a factor in credit management. Some times the rate is so high that the return from the investment is not adequate enough to repay the loan. And hence default occurs.
Lack of Supervision and Monitoring
Lack of management policy, LAN, lack of updated software, no rewards for recovery of CL, lack of new package, inadequate manpower, heavy works load on each officer or executive or carelessness of responsible officers are the reasons for lack of supervision and monitoring.
Changes in Policies
Due to changes in the export, import, foreign exchange policy as well as monetary and fiscal policy long-term financing suffer a lot. In many cases project loan lost their viability, Bank does not offer interest subsidy for such affected project.
Irregularity in Providing Loan
Usually Banks are responsible to provide loan to those who are eligible for the loan. But in reality, small investors do not get the loan easily.
For a successful credit appraisal data regarding the market and industry as well as the projects to be funded is required. But there is no available database regarding the market and various industrial sectors in Bangladesh.
SWOT Analysis of IFIC Bank Ltd.
The overall evaluation of bank’s strength, weakness, opportunity and threat is called SWOT.
S = Strength
SWOT is internal and external factor of the bank. Internal factors are controllable and external factor are not controllable. Internal factors are management related that is controllable by the bank. The impact of SWOT may negative or positive on the bank. Favorable impact of SWOT can create organizational progress and unfavorable SWOT creates lot of organizational problem.
The attribute with which customers were highly satisfied but gave less importance was tagged as the strength areas of the bank. Some attributes that give IFIC Bank Ltd. a better standing in the competition. These are:
Large number of customers
Location of the branches
Professionalism of the employees
Rates on savings
Some weaknesses of the bank were pointed out in the survey, which had low satisfaction scores and were somewhat less important to customers. But in order to improve overall satisfaction these attributes should be considered.
Slow decision making due to large hierarchy
Solution searching tendency of employees
Location of the ATM’s
Willingness to help
Opportunities are the ones that hold bright prospects for IFIC Bank Ltd. identifying that where it should build its strength. These opportunities are
Reliability of the statement
Fees and service charges
Location of the branch
Threats are ones that represent danger for the bank in its future growth and are responsible for the downgrading of customer satisfaction. Some of the threats are:
Location of the ATM’s
Technology of bank
phone banking service
neatness of employees
Friendliness of employees
Ratio analysis of IFIC Bank comparing with Prime Bank Ltd.
Total Debt Ratio: (Total Assets – Total Equity) / Total Assets
Total debt ratio of IFIC Bank and Prime Bank is reasonable. The less leverage both company are using and the stronger their equity position.
Debt Equity Ratio: Total Debt / Total Equity
Debt Equity ratio of IFIC Bank and Prime Bank are decrease from 2009 to 2010.
Total Assets Turnover: Sales (Total operating income) / Total Assets
Total Assets Turnover Ratio is used to measure the firm’s ability to utilize its assets to generate sales. It is an indication to the firm’s operation efficiency. A lower ratio means inefficient utilization of assets.
In 2010 total assets turnover ratio is higher than 2009. That indicate IFIC Bank and Prime Bank operate their assets to generate sales with efficiency.
Profit Margin: Net Income (Profit after taxation) / Sales (Total operating income)
Indicates what portion of sales contributes to the income of a company. Profit margin ratio of IFIC Bank is good than Prime Bank.
Return on Assets: Net Income (Profit after taxation) / Total Assets
Indicates what return a company is generating on the firm’s investments/assets. Return on assets ratio show – IFIC Bank and Prime Bank both are generate increasing return on the firms total assets.
Return on Equity: Net Income (Profit after taxation) / Total Equity
Table 5: ratio analysis of IFIC bank comparing with prime bank ltd.
This ratio indicates how profitable a company is by comparing its net income to its average shareholders’ equity. The return on equity ratio measures how much the shareholders earned for their investment in the company. The higher the ratio percentage, the more efficient management is in utilizing its equity base and the better return is to investors. IFIC Bank is more efficient management is in utilizing its equity base and the better return is to investors. But return on equity of Prime bank is not good.
From the learning and experience point of view the report says that it was really enjoy full internship period in IFIC Bank Ltd. From the very first day, the reporter was confident that this 3 (three) months internship program will definitely help the reporter to realize his further carrier in the job market. It is limited only to the study. For the criticality of the data series pattern, it is hard to get a clear picture of the Credit policy of IFIC Bank ltd. Though hard, it is tried to describe with some of the most available tools used to forecast time series data. As we know that in Bangladesh there is trend of floating foreign exchange rate, that’s why banks like IFIC Bank Ltd worked very hard to come up with the foreign exchange market.
Another most important thing is that, every bank has a vision to strive for excellence. IFIC Bank Ltd from the very beginning showed its determination to do well through providing good customer services. As the day will progress people will seek better service from the better bank. In the category of better bank IFIC Bank Ltd has proven to be great name.
1) Books, Publications and Journals of IFIC Bank Limited
2) Valuable discussion of supervisors during the period of internship.
3) Prospectus Of IFIC Bank Limited published in July 2010.
4) Annual Report of IFIC Bank (2010, 2011).
5) Bangladesh Economic Review 2009, Economic Advisor’s wing, Finance Division Ministry of Finance.
6) Discussion with CRO of credit division
7) Website: www.ificbankbd..com
8) Website: www.primebank.com.bd