Credit Management Activities of City Bank Limited

Credit Management Activities of City Bank Limited

The City Bank Ltd is a private bank in Bangladesh that came in banking sector with big promise. It is one of the promising commercial banks, operating nationwide wide 87 branches. It started its journey as a private commercial bank in 1983 with a mission to provide service to its clients and make its position unique in giving quality service to all institutions and individuals that they care for.

The main purpose of the report is to provide a basic idea that I gathered from my internship period. Basically I focused on credit management of the bank. City Bank Ltd provide both funded and non-funded loan. It has full of product lines for Consumer Credit Scheme (CCS), Small Enterprise (SME) and for Large & Medium (LM) organizations.

The product program guidelines are also so structured. All the products are not equally operative. The most operating loan’s guidelines are discussed in the report.

The demand for industrial loan is increasing. In data analyzing part it is shown that the CCS loan demand and interest income is increasing for all banks except City Bank Ltd. the bank management should give concentration to improve this situation as the market is so competitive. They can introduce more diversified Credit or loan to increase demand.

Bangladesh Bank has identified some sectors, in which to invest more and discourage some sectors to invest.Some credit performance related ratios such as net Interest Ratio, Risk Ratio, Loan Ratio, and Interest Expense Ratio are calculated. To get internal and external view of the bank SWOT analysis is done. This analysis gives a view of the banks strengths, weakness, opportunity and threats; which helps to give some suggestions that the bank could follow.

In the last part there is some findings of the banks, recommendations and draw a conclusions about the bank performance.

Introduction

The prosperity of a country depends upon its economic activities. Like any other sphere of modern socio- economic activities, to banking is a powerful medium of to ringing about socio- economic changes of a developing country. Agriculture, commerce, & industry provide the bulk of a country’s wealth, without adequate banking facility these there cannot flourish. For a rapid economic growth, a fully developed banking system can provide the necessary boost. The whole economy of a country is linked up with banking system. The function of the bank are now wide & diverse of all the function of a modern bank, lending is by far the most important. All that a banker always deals in credits know it. He is a credit receiver (the deposits) and a credit giver (the loans & advances) banker mobilizes the small & scattered savings of the community and makes them available for investment in productive purposes.

Commercial banks are profit-making institutions for which they have to ensure better asset quality. The strength of a bank is primarily judged by the soundness of its advances, thus the advances must permit the changing of a reasonable time and without undue difficulty. Successful lending depends upon sound judgment and accurate knowledge of the character and credit worthiness of the borrower.

Credit comes from a Latin word “credo” which means, “I trust” i.e. moneylenders trust the borrowers to pay them back. In terms of bank, bank trusts its borrower that they will repay the loan as per terms & conditions.

Accordingly, before allowing credit bank should have confidence in the borrower’s ability and willingness to repay the loan. Because all lending involves some degree of risk and it is necessary for any bank to keep the risk to a minimum. Thus, the banker before making an advance must consider its safety liquidity & profitability, for which proper & good selection of borrower is necessary.

Objectives of the study:

The objectives of this report are:-

•   To provide an overview of the existing loan product and services offered by City Bank’s credit division.

• To know about the requirement, procedure to get a loan, repayment system and customer attitude towards it.
• To evaluate the credit performance of the bank.

• To identify strength and weakness as well as different Ratios analysis of City bank Ltd.
• To offer pragmatic suggestions for the improvement of their credit performance.

Scope of the study

This study covers the details of The City Bank’s practices about credit management activities emphasizing the approval and monitoring process. This report consists of my observations in the credit departments of Principal Branch of the City Bank Limited. The study mainly emphasizes the sequential activities involved in credit approval process, analytical techniques used by The City Bank for credit analysis as an essential part of the credit activities. The study also focuses on the loan monitoring techniques adopted by The City Bank Limited both in pre-sanction and post- sanction period of a credit. The study compares between the various sections of credits. Finally, the study incorporates an evaluation of the different aspects of the credit activities and monitoring techniques and makes some recommendations about it.

Methodology of the study:

The report is prepared on the basis of secondary sources of information. They are as follows-

Secondary Source:

• Annual report of The City Bank Ltd.
• File balance sheet and various documents
• Different textbooks & materials
• Website of The City Bank Limited
• Reports submitted by several internship students

Organization of the report

The organization of the report is based on five chapters. In the first chapter I introduced about the topic of the report, its scope, preparation methodology, limitations of the report, a glance of City bank Ltd. And its product generally offered to the customers.

The second chapter described about the term credit, credit risk management division, products of credit division, credit policies and practices, documentation of loan, securities, loan handling, credit processing steps etc.

In third chapter I have included the credit performance of CBL, and its ratio analysis. In the fourth chapter there is SWOT analysis and comparison with other banks.

In the last chapter there are findings of the report, recommendations and conclusions.

Limitations of study:

From the intention to make the report realistic and properly accepted this report has been conducted. However, many problems appeared in the way of conducting the study. All the given information is not fully complete. Some of the information is company secret and important and only provided to some persons to know about it.

However, I try my best to settle and pass up the Report before the due date and hoping it was satisfied. The study considers following limitations:

•  Lack of in-depth knowledge and analytical ability for writing such report.
•  Another limitation of this study is bank’s policy of not disclosing some data and information for obvious reason, which could be very  much useful.
•  In case of the secondary data collection, there were very few secondary information was available. There were few supporting books,    report, journals et
•   Lack of experience to analyze data.
•  Time limitation is also a big factor, which hinders the data collection process. Due to time limitation many aspects could not by discussed in the present study.
•  Poor conception of the discussed group was another severe problem that created a lot of confusion regarding verification of the conceptual data. In some cases more than one person were interviewed to clarify each concept.

Company Overview- 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 crore worth of Capital, which now is a respectable Taka 330.77 crore as capital & reserve.

City Bank is among the very few local banks which do not follow the traditional, decentralized, geographically managed, branch based business or profit model. Instead the bank manages its business and operation vertically from the head office through 4 distinct business divisions namely

1. Corporate & Investment Banking;
2. Retail Banking (including Cards);
3. SME Banking; &
4. Treasury & Market Risks.

Under a real-time online banking platform, these 4 business divisions are supported at the back by a robust service delivery or operations setup and also a smart IT Backbone. Such centralized business segment based business & operating model ensure specialized treatment and services to the bank’s different customer segments.

The bank currently has 88 online branches and 10 SME service centers and 1 SME Agro center 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 77 ATMs of its own; and ATM sharing arrangement with a partner bank that has more than 550 ATMs in place; SMS Banking; Interest Banking and so on. It already started its Customer Call Center operation. The bank has a plan to end the current year with 100 own ATMs.

THE CITY BANK AT A GLANCE

(Gulshan Avenue) Gulshan-2 Dhaka-1212, Bangladesh

What does the term Credit mean?

Lending is fundamental precept of banking every there that advances are made to customer in reliance on his promise to repay, rather than the security held by banker, Security is required by bankers as a protection against unquoted default in repayment by the customer. Thus, the object of both eternal on internal control is to ensure the employment of bank fund in a profitable manner without under risk of loose to the capital.

“Loan contains some degree of risk, sound principles of credit must be employed in approving loans on order to keep the risk to minimum. The principles of sound lending may therefore be summarized on safety, purpose, security, liquidity, diversity, adequate return, credit control and tribally to serve national interest the main objective of lending policy is to increase import, export, trade and at the same time to promote industrial growth by providing industrial landing.”

Bank credit plays a dominant role in economic development of a country. Long run and sound credit policy of a country is the precondition for its economic development, and existence of sound credit policy is inevitably linked with timely recovery of loans.

Credit Risk Management division:

In 2009, Credit Risk Management division (CRMD) has taken lot of initiatives to protect the interest of the Bank from the credit risk perspective. Credit risk at CBL governed by Credit Policy Manual (CPM) which was amended according to the business needs as well as risk management is concerned.

Vision: 2010

• Maintain a high standard credit quality, control & compliance in place
• Bring down NPL ratio further
• Basel II guidelines implementation in terms of content & sprit
• Promote continuous on the job local and overseas training.

Products of Credit Division:

There are many types of loan in City Bank, which takes customer to fulfill their needs. Such as-

a) Retail loan = Most types of loan processing from here. These Are:

• City Express
• City Solution
• City Drive
• City Credit Card
• City Scholar
• City Double Loan

b) Corporate loan = Big company/organization are including here.

c) SME loan = Small/Medium entrepreneur are including here.

Credit policies & practices:

Loan AmountLocal Classic/Silver CardBDT 10,000 – BDT 49,000Local Gold CardBDT 50,000 – BDT 500,000Dual Classic / Silver CardBDT 10,000 – BDT 49,999+US$

100 – US$ 1,999Dual Gold Card

BDT 50,000 – BDT 500,000 +

US$ 1,000 – US$ 3,000

Table- Credit policies & practices for City Express:-

Table-Credit policies & practices for City Solution:

Table-Credit policies & practices for City Drive:-

Identification and Documentation of loan:

1) City Solution –

• Passport or Voter identity or driver license or Employee Id or Nationality or Ward Commissioner’s Certificate with photo attachment
• Photograph and business card
• Bank Statement for last 6 months
• Any document showing TIN
• Letter of Introduction (LOI) for salaried executives or salary slip, if it covers the major information of LOI
• Trade license/MOA for businesspersons
• Copy of house ownership and rent agreement for landlord and landlady

2) City Drive

• Passport or Voter identity or driver license or Employee Id or Nationality or Ward Commissioner’s Certificate with photo attachment
• Recent color photograph and business card
• Copy of TIN related certificate
• Letter of Introduction (in case of salaried executives) as per our format or Pay Slip, if it covers the major information of LOI
• Trade license/MOA for businesspersons
• Bank Statement for last 6 months
• Rent or Lease Agreement of house / property (if applicable)

3) City Express

• Firstly he must open any FDR in this bank and FDR document treated as City Express document. Such as-
• Passport or Voter identity or driver license or Employee Id or Nationality or Ward Commissioner’s Certificate with photo attachment
• Trade license/MOA for businesspersons
• Recent color photograph and business card
• Any document showing TIN
• 1 copy photo of nominee

4) City Credit Card-

Table-Identification and Documentation of loan for City Credit Card

Bank statement, TIN & passport copy/photo IDSalary certificate /LOI /pay-slip/bank statement not required where the Customer’s salary account is maintained by bank.

5) City Scholar-

City scholar is a unique education loan offered to fund higher studies not only in Bangladesh but also abroad. It offers up to 95% of you fixed deposit value as student loan or up to tk.10 lac on purely collateral-free basis.

• One valid Passport copy of applicant and student (for study abroad)/ Driving License/ Voter ID

• Copy of College / University admission paper and proof of formal acceptance by student along with other documents (for abroad)

• 2 copies of photograph of the applicant and 1 copy photograph of the guarantor (if availing unsecured loan portion)

• Business card (if any), Copy of Tin related documents (TIN certificate in not mandatory)
• Letter of Introduction (in case of salaried executives) as per City Bank’s format or salary slip if that covers the major information of LOI
• Bank Statement for last 3 months for salaried persons and 6 months for professionals/businessmen for unsecured loans

6) City Double Loan-

City Double is a unique loan facility where your fixed deposit in City Bank or in any other financial institution will now allow you to avail two loans at the same time from us – one as overdraft (up to 95% of FD value) and other as an EMI loan (up to Tk. 10 Lacs).

Minimum Income

• City Bank fixed deposits

• City Bank’s deposit scheme of minimum 2 years maturity attained

• Wage Earner Development Bond/FDR of other eligible banks and financial institutions

• Passport/National Identity/Driver’s License/Ward Commissioner’s Certificate with photo attached

• 2 copies photograph of the applicant and 1 copy photograph of the guarantor (if availing unsecured loan portion)

• Business card (if any)

• Bank statement for last 6 months
• Any document showing TIN
• Trade license/Memorandum of Association/ Partnership deed for  businessmen
• Letter of Introduction (LOI) for salaried executives or pay slip if that covers major information of LOI

Securities/Guarantee:

1) City Solution: – One personal guarantee will required availing City Solution

   Eligibility of guarantor:

• Any salaried executive deemed acceptable to CBL or
• Professionals (Doctors, Chartered Accountants, and Engineers etc) deemed acceptable to CBL or
• Reputed Businessman deemed acceptable to CBL
• A guarantor can provide personal guarantee not exiting maximum exposure of the product ceiling
• CBL staff cannot give guarantee against City Solution

Required guarantor’s Documents:

• Any document showing TIN
• Photograph and business card

2) City Drive:– One personal guarantee is required from any of the following individuals

Eligibility of guarantor:

• Spouse or blood relative (parents, siblings)
• Any salaried executive deemed acceptable to CBL or
• Professionals (Doctors, Chartered Accountants, and Engineers etc) or
• Reputed Businessman acceptable to CBL
• A guarantor can provide personal guarantee not exceeding maximum exposure of the product ceiling and creditability.
• CBL staff cannot give guarantee against any retail loan

Required guarantor’s Documents:

• Any document showing TIN. In case of spouse and blood relative, TIN will not required
• Photograph

3) City Express:-Customer FDR which deposited in this bank, is treated as his/her Securities/Guarantee. In addition, he/she can takes as loan 90% of FDR amount.

4) City Credit Card:-No guarantor is required, only a reference is required.

Credit information:

City Solution

• Features:
• Loan amount ranting from Tk.50, 000 to Tk. 10, 00,000
• Loan tenor 12 to 60 months
• No guarantor required for the loan amount up to Tk. 3 lac*
• No hidden charges
• Competitive interest rate
• Processing fee 1.5%

Eligibility:

• Age: 22 to 60 years
• Experience: Salaried executive total 1 year including 6 months with current employer, Businessperson 2 year and professional 1 year
• Minimum monthly income: Salaried executive Tk.15, 000, Self employed Tk. 25,000 and businessperson Tk. 30,000

City Drive

Features:

• Loan amount ranging from Tk. 3, 00,000 to Tk. 20, 00,000
• Car financing up to 90% of reconditioned or new vehicle price
• Lower interest rate & up to 100% financing for loan against cash security
• Loan tenor 12 to 60 months
• No hidden charges
• Loan processing fee 1% of loan amount

Eligibility:

•  Age: 22 to 60 years
• Experience: 1 year for Business person, and also 1 year for Salaried executive including 6 months with current employer
• Monthly income: Minimum Tk. 30,000

CBL Credit Card

Features: Some of the Important features of it given below:

• Interest Free Days: Minimum 15 & Maximum 45 Days
• CBL Dual Currency ‘CITYCARD’ is accepted all over the world
• Balance Transfer

• Flexi-Pay/Installment Payment
•  Lower Annual/Renewal Fee
•  International Mobile Roaming
• Supplementary Card
• Internet Transaction
• Immediate Cash Advance
•  Auto Debit Facility
•  Convenient Payment Option
•  E–Statement
• Global Emergency Assistance Service
•  Self-set Limit
•  Limited Lost Card Liability

Eligibility:

• Age: Primary Card-18 to 60 years
• Supplementary-18 to 60 years
•  Target market:

• Salaried Executive
• Self-employed

Minimum monthly income:

• For Silver/Classic CITYCARD: BDT 12,000
• For Gold CITYCARD: BDT 30,000

Citizenship: The applied cardholder must be a Bangladeshi or a non- Bangladeshi holding a valid work permit with prior approval from Bangladesh Bank.

City express

Features:

•  Loan amount ranging up to 90%-95% of FDR
• Lower interest rate only 3%
•  No guarantor required for the loan amount
• No hidden charges
•  Competitive interest rate

Eligibility:

 Everyone can take this loan, which have any FDR in this Bank

City Scholar

Features:

• Secured overdraft facility –value can be up to 95% of the security deposit.
• Unsecured facility – loan amount up to Tk. 10 Lac
•  Secured Equal Monthly Installments Facility – loan amount up to 95% of the security deposit
• Quick processing time
• Interest rate lower than other competitive products
• Student file service facility

Eligibility:

• This education loan is designed to meet any type of educational financial need of a student. Any creditworthy individual can avail this loan facility for his/her offspring or for himself/herself.

City Double Loan

Features:

• Fully secured loan in the for up to 95% of FD value
•  Unsecured loan for up to Tk. 10 Lac payable in Equal Monthly Installments (tenor ranging from 12 to 60 months).
• Zero processing fee for the overdraft facility
• Interest rate lower than other competitive products

Eligibility:

Any credit worthy individuals like: salaried executives, professionals like doctors, architects, engineers, chartered accountants, consultants, IT professionals and businesspersons etc. can apply for this loan.

Loan handling:

 Loan Disbursement Procedure– After the sanction of the loan, the loan is disbursed as follows:

• At first branch provides a sanction advice including all terms & conditions asking their opinion.
• When the party agreed, send a reply.
• As per the terms & conditions, the party submits all documents.
• After collecting the documents, bank submits it to the lawyer for the purpose of registration.
• After getting his/her permission, the bank then register the document.
• At this stage the bank, require a permission mentioning that all necessary activities are completed.
• After getting the permission, the party opens an account in the name of loan.

 Credit processing steps:

Fig:- Credit Activities Followed by the City Bank Ltd.

Credit principles/Principles of Lending:

Banks are profit-oriented organization for which a bank invests its funds in many ways to earn income. At the same time bank runs the risk of default in repayment. As such, the banks are required to follow certain basic principles of lending. These principles are-

Know Your Customer: Know your Customer (KYC) is the most important guiding principle of The City Bank Ltd. for extending credit facilities to its prospective borrowers. Complying with this principle helps the bank to avoid money laundering crime and adverse selection of borrowers.

Safety: Safety depends first upon

• The security and its value offered by the borrower and
• The repaying capacity and willingness of the borrower to repay the loan with interest.

Liquidity: It refers to ability of an asset to be converted into cash without loss and within a short time to meet depositor’s demand for cash.

Profitability: The City Bank Ltd. must employ its fund in such a way that they will bring adequate return for the bank, which should be more than cost of the funds.       

Purpose: The purpose for which The City Banks will provide loan should be productive so that the money not only safe but also provides a definite source of repayment.

Spread: It refers to the diversification of advance. So far, The City Bank Ltd. could maintain considerable margin on its disbursed loan but recently Bangladesh Bank has imposed restriction on lending rate and to comply with Bangladesh Bank policy guidelines, The City Bank Ltd. lowered its lending rate.

Credit Supervision and Monitoring techniques in The City Bank Ltd:

Lending always involves risks as discussed before. The primary and the most important risk associated with a loan is default risk or the borrower to repay the loan with interest. To protect loan assets from being nonperforming The City Bank Ltd. both in the pre-sanction and in the post-sanction stage or for ongoing credit does assets effective supervision and monitoring. In simple words, supervision and monitoring of a loan denotes continuous checking and assessing the borrower, his business, and his willingness to repay the loan based on some predetermined manners. Purpose of Credit Monitoring in The City Bank Ltd. – are pointed out below-

•  To prevent loan classification
• To return flow of fund
•  To ensure compliance of terms and conditions
•  To obtain feedback from the borrowers
•  To take timely corrective action regarding a particular loan

Credit Administration as a Tool for Credit Monitoring

•  To ensure that all security documentation complies with the terms of  approval and is enforceable.
•  To control loan disbursement only after all terms and conditions of approval have been met, and all security documentation is in place.
• To maintain control over all security documentation.
• To monitor borrower’s compliance with covenants and agreed terms and conditions, and general monitoring of account conduct/performance.

To minimize credit losses, monitoring procedures and systems should be in place that provides an early indication of the deteriorating financial health of a borrower.

• Past due principal or interest payments, past due trade bills, account excesses, and breach of loan covenants.
• Loan terms and conditions are monitored, financial statements are received on a regular basis, and any covenant breaches or exceptions need timely actions.
• Timely corrective action is taken to address findings of any internal, external or regulator inspection/audit.
• An Early Alert Account is one that has risks or potential; weaknesses of a material nature requiring monitoring, supervision, or close attention by the management.
• Moreover, regular contact with customers will enhance the likelihood of developing strategies mutually acceptable to both the customer and the bank.
• Determine Account Action Plan Recovery Strategy.
• Ensure adequate and timely loan loss provisions are made based on actual and expected losses.
• Regular review of worse accounts.

Risk Grading as a tool of Credit Monitoring

The system should define the risk profile of borrower’s to ensure that account management, structure and pricing are commensurate with the risk involved. Risk grading is key measurement of a Bank’s asset quality, and as such, it is essential that grading is a robust process. All facilities should be assigned a risk grade. It is recognized that the banks may have more or less risk grades; however, monitoring standards and account management must be appropriate given the assigned Risk Grade.

Table: – Risk Rating Grading Definition:

Fill payment of principal and interest is unlikely and the possibility of loss is extremely high. However, due to specifically identifiable pending factors, such as litigation, liquidation procedures or capital injection, the asset is not yet classified as loss. Loan loss provisions must be raised against the estimated unrealizable amount of all facilities.viii)Loss (Non performing) 8Assets under this category are long outstanding assets with no progress in obtaining repayment or in the late stages of wind up liquidation. The prospect of recovery is poor and legal options have been pursued. The proceeds expected from the liquidation or realization of security may be awaited. The continuance of the loan as a bankable asset is not warranted, and the anticipated loss should have been provided for.

Credit Performance of The City Bank Limited:

Table: The Growth rate of CBL Loans and Advances since last 5 years:

Loans and Advance of the bank as on December 31, 2009 stood at BDT 43,486 million compared to BDT 34,4201 million of previous years reflecting a staggering growth of 26%. This growth was the result of the strong drives undertaken by the bank’s C&I and SME divisions with strong focus on good names, strong credit risk and good security structure.

Table: Non-Performing Loan (NPL) of CBL over last 5 years

Table: Last two years sector wise allocation of total loans and advances is depicted below:

We can see that, here in 2009 Large and Medium Industries, Small and Cottage Industries, Transportation and Communication Industries sector are allotted more amounts from 2008. On the other hand, Agricultural Industries, Commerce and Trade Industries, Insurance, Real Estate and Service Industries sector are fewer amounts fixed. In the year 2009 highest amount have been  allocated to the Large and Medium Industries.

Table: Yield on Loans and Advances for last five years

The table shows that, the yield on loans and advances in 2009 is 13.07% compared to 13.50% in 2008 which shows a decreasing trend. But from 2004 to 2008 there is an increasing tendency in loans and advances.

Price Earnings Ratio:

Table: The picture of last 5 years Price Earnings Ratio

PER= (Market) Price per share/Earning per share

By analyzing price earning ratio we see the bank’s stock valuation and the income the bank is actually generating from each shares. The higher the price earning ratio becomes, the better the condition of the company. We see that in 2008 the P/E ratio was 17.82 which decrease in 2009 become 14.00; which mean that in 2009 the company didn’t generate income compared to 2008. But from 2005 to 2008 there is a increasing trend in P/E ratio which shows the better financial condition of the bank.

Profitability Ratio:

These ratios help us to evaluate the firm’s profits with respect to operating income, assets, or equity. Ratios are —-

Net Profit Margin

It measures the percentage total operating income, that remains after all the costs and expenses have been paid. It is calculated as follows —

Net Profit Margin = Net Profit after Tax/Total operating Income*100

Table: -The picture of last 2 years NPM

The net profit margin indicates that how much the bank keeps in earnings against its sales. The higher the profit margin indicates a more profitable company that has better control over its costs compared to its competitors. The net profit margin is 18.74% in 2009 in compared to 2008 which was 11.78%. The increasing profit margin shows the better condition of the bank.

Return on Assets (ROA)

It measures the overall effectiveness of management in generating profit with its available assets. It is calculated as follows —-

Table:-The picture of last 5 years Return on Assets (ROA)

ROA = Profit after tax \ Average assets * 100

The higher return on asset shows that the company is well run and has a healthy ROA. Here from 2006 to 2009 the ROA is gradually increasing which shows that the bank is running well.

Return on Equity (ROE)

It measures the return earned by the funds invested by the common stockholders. It is calculated as follows——-

ROE = Net Profit after Tax/Shareholder’s Equity*100

Table:-The picture of last 5 years Return on Equity (ROE)

The return on equity is an important ratio to decide whether to invest in a company or not. It measures the return on the money the investors have put into the company. Here the ROE in 2009 is 16.24 compared to 2008 11.23%; which shows a good return of the investors money.

Capital Ratio:

This type of ratio analyze a particular Bank’s capital structure and help us to determine the level of assets financed by the Bank’s creditors and the level of assets financed by the firm’s shareholder’s funds. The common types of ratios are as follows:

Debt Ratios:

This ratio analyzes a firm’s debt position, which indicates the amount of other people money being used in the firm to generate profits by measuring the portion of total asset financed by the firm’s creditor. This ratio is calculated as follows —

Debt Ratio = Total Liabilities or Debt/Total Asset*100

Table:-The picture of last 3 years DR

The debt ratio measures that how much a bank is dependent on others capital. Lower the percentage, the less leverage a company is using and the stronger its equity position. In general, the higher the ratio, the more risk that company is considered to have taken on. In 2009 the debt ratio is 92.33% which shows a risky situation of the bank.

Equity Capital Ratio:

The ratio shows the position of the Bank’s owners’ equity by measuring the portion of total assets financed by the share holders’ invested funds and it is calculated as follows:

Equity Capital Ratio = Total Shareholders’ Equity/Total Asset*100

Table:-The picture of last 5 years Equity Capital Ratio (ECR)

Operating Efficiency Ratio

The ratio measures a particular Bank’s operating efficiency, which is the Bank’s ability to serve its customers in the most effective way by using least amount of resources (such as time, cost etc.). The following ratios are widely used to measure a particular Bank’s operating efficiency:

Operating Cost to Income Ratio:

 It measures a particular Bank’s operating efficiency by measuring the percent of the total operating income that the Bank spends to operate its daily activities. It is calculated as follows:

“Operating Cost to Income Ratio = Total Operating Cost/Total Operating Income*100

Table:-The picture of last 5 years

SWOT Analysis of The City Bank Limited

Every organization is composed of some internal strengths and weaknesses and has some external opportunities and threats in its whole life cycle. The following will briefly introduce the customers to The City Bank’s internal strengths and weaknesses and external opportunities and threats as I have explored that are:

• “S”- Strengths
• “W”-Weaknesses
• “O”-Opportunities
• “T”-Threats

Strengths

•       Stable source of fund
•       Strong Liquidity Position
•       Wide Network of branches
•       Experienced Top management
•       Diversified Product line
•       Satisfactory IT infrastructure and online banking

Weaknesses

•   Asset infection rate is still high
•   Relatively high  overhead expense
•  Problem in Delivery

Opportunities

•   Regulatory environment favoring
• Private sector development
• Credit card business
•  SME and Agro based industry loan

Threats

•       Deposits as well as quality assert
•       Market pressure for lowering the interest rate
•       Shrinkage in export, import and guarantee
•       Business due to economic slump and war
•       Frequent currency devaluation

Market analysis and opportunity for city solution

Major Key players of any purpose unsecured loans are SCB, HSBC, BRAC Bank and Eastern Bank. They are offering personal loan facility under the following criteria:

Table: –Market Situation for City Solution:-

Market analysis and opportunity for city Drive

Major Key players of Auto loan are SCB, HSBC, BRAC Bank and Eastern Bank. They are offering the loan facility under the following criteria:

Table: – Industry comparison for City Drive

FINDINGS

The City Bank Limited has been performing very well. The CBL is running with steady growth in almost every sphere. They are reducing non-performing loan. They are committed to be a leading Bank in Bangladesh. No doubt, this is the sign of good management. However, the appraisal and proposal system of The City Bank is said to the best one in this kind certain factors are overlooked.

In appraisal system, the competitive position analysis is not focused while doing the appraisal system

• Lengthy lending process
• Lack of documentation
• Lack of monitoring of credits
• Shortage of efficient manpower
• The product appraisal is done on the customer base not any comparison is done with other product.
• The supplier’s influence is overlooked.
• Due to the unavailability the credit demand assessment is not properly done.

RECOMMENDATION

Recommendation regarding improvement of Credit management of CBL

• Maintain a high standard credit quality, control & compliance in place.
• Bring down NPL ratio further.
• Basel II guidelines implementation in terms of content & sprit.
• Promote continuous on the job local and overseas training.
• The bank should recalculate its lending rate on a periodic basis to cope up with changing lending scenario.
• Care should also be taken so that good borrowers are not discarded due to strict adherence to the lending policy.
• At the branch level, credit department must be adequately capable of collecting the correct and relevant information and analyzing the financial statements quickly and precisely.
• Credit officer must be skilled enough to understand the manipulated and distorted financial statements.
• Credit committees at all levels must work in co-ordination with each other for quick approval of loans and to reduce the loan processing cost.
• To expedite the lending process, board credit committee meeting should be held twice a month instead of once a month.
• To faster the lending process, The City Bank Limited should facilitate online loan application submission and personal credit processing.
• In case of mortgage, care must be taken to accept collateral on second charge.
• In case of assignment, the bank must ensure that the assignment debtor has given undertaking.
• Monitoring of a loan should be conducted at regular interval.
• Loan monitoring is a continuous task and requires expert work force. Therefore, it is suggested that The City Bank Ltd should set up a separate loan-monitoring cell, which will be responsible for monitoring its total loan portfolio with special care to the problem loan.
• There is still much more scope, left to make the credit recovery techniques effective to reduce on classified loan specifically NPL

CONCLUSION

Modern Commercial Banking is challenging business. It was revealed from the above presentation that in 2005 Bank has achieved remarkable success in various financial activities as well as in bank’s business. During the year under report, Bank has earned commendable operating profit and attained capital adequacy. Substantial amount has been recovered from classified loan because of appropriate action in this regard.

For significant performance, the bank has earned National and International recognition. The City Bank Limited was one of the 12 Bangladeshi Banks among the 500 Banks in Asia for its assets, deposit and profit as evaluated by “Asia weak” in the year 2000. Besides that bank received “Top Ten Company Award” from the Prime Minister of the Peoples Republic of Bangladesh in the year 1992-93 which was declared by Securities and Exchange Commission.

And recently, City bank wins The Asian Banker “Strongest Bank in Bangladesh – 2010” Award. Also City Bank MD & CEO K Mahmood Sattar wins The Asian Banker “Leadership Achievement Award 2010”.

From the above findings and discussion, we can see that, The City Bank now in good position compared to previous some year. However, the bank can be more improved in its position, if it gives more concentration in its credit-monitoring sector. The way of this, I already discussed. Such as-Loan monitoring is a continuous task and requires expert work force. Therefore, it is suggested that The City Bank Ltd should set up a separate loan-monitoring cell, which will be responsible for monitoring its total loan portfolio with special care to the problem loan. Moreover, at the branch level, credit department must be adequately capable of collecting the correct and relevant information and analyzing the financial statements quickly and precisely. To faster the lending process, The City Bank Limited should facilitate online loan application submission and personal credit processing. The bank should give importance in general welfare of the economy more than many other financial institutions. The bank should redesign all sorts of banking procedures to be more user-friendly, attractive and impressive.