Performance Evaluation of United Commercial Bank Limited

Executive Summary

Through this Internship report an attempt has been made to assess the performance of United Commercial Bank Limited. Basically this report has been developed from the basis of secondary data. The sources of information are annual report of the bank, internet, newspaper, magazine etc. My experience also helps me to establish this report.

Banking is a system of intermediation. Modern commercials banks since their early days had been doing two main functions. These are Acceptance of deposits from the public and lending money to the people.

In addition, they also involved themselves in investment. Apart from the principal function, they also have to render various services to the people. The ever-changing demands of the society, business and industry have led the banks to undertake such services for enhancing their utility to the society at large. Based on nature of these services, they may be classified as under (a) agency services: collection and payment of cheques, payment on behalf of customs, purchase and sale of stocks, acting as trustees, acting as agency (b) General services: opening letter of credit, safe custody, dealing in foreign exchange, providing Investment reports, underwriting of loans, providing remittance facilities, complete service in foreign trade.

One important challenge that the banking sector is facing is the introduction of information technology in the banking system in an aggressive manner. This is required to improve management efficiency, reduce operational cost, improve customer services, and increase transparency.

Hence, the banking sector would play a vital role in the development of the country and efficient and sound banking management would led the country to reach at the highest peak of success.

United commercial Bank strives hard to optimize profit through conduction of transparent business operations within the legal and social framework with malice to none and justice for all.

To achieve the maximum benefit from the investment both funded and non funded the major issue is select the sound ones. In this regard project appraisal as well as evaluation should be considered most. Before financing in any project the quantities and qualitative judgment is essential. The financial strength, management structure, business size, business line, nature of business, competitor etc. should be identified. After financing strong monitoring is also required. As a member of the banking family we are bound to follow the rules and regulation of the government. So we are conscious enough to conduct our operation abiding by direction of Bangladesh Bank. For this reason we have to serve different information in the credit information bureau of Bangladesh Bank.

Background of UCBL

Sponsored by some dynamic and reputed entrepreneurs and eminent industrialists of the country and also participated by the Government, UCB started its operation in mid 1983 and has since been able to establish one of the largest network of 100 branches among the first generation banks in the private sector. United commercial Bank has started their operation in Bangladesh as a local bank in 1983. They have added 99 branches with 21 Authorized Dealer (AD) branches with their name. They have total online banking facilities along with no charge in the local transactions. They have 10 (Ten). Automated Teller Machine (ATM) Booth in Chittagong,  Sylhet and Dhaka Division. But they also have the contract with Dutch Bangla Bank Limited to use their booths in all over Bangladesh by the UCBL customers. With its firm commitment to the economic development of the country, the Bank has already made a distinct mark in the realm of Private Sector Banking through personalised service, innovative practices, dynamic approach and efficient Management. The Bank, aiming to play a leading role in the economic activities of the country, is firmly engaged in the development of trade, commerce and industry thorough a creative credit policy.

Company Mission and Vision:

Company Mission: United Commercial Bank limited Always try to meet the demand the customer and to solve most of their expectations. Their main theme is to think from the bottom line of the customers mind to provide their comfort. Company Vision: United Commercial Bank Limited wants to be the market leader in the local banks in Bangladesh. Their target is to be the highest profitable bank in local banking sector.

Corporate Culture:

United Commercial Bank Limited is practicing the corporate culture from last 10 (Ten) years. Now UCBL has its practical implementation in the each and every branch. They believe in shared meaning, shared understanding and shared sense making. Their people can see and understand events, activities, objects and situation in a distinctive ways. They mould their manners and etiquette character individually to suit the purpose of the bank and the needs of the customers whose are of paramount importance to the bank. The corporate culture they belong has not been imposed. It has rather been achieved through their corporate conduct.

Product and services

Products and services of UCBL:

Though The United Commercial Bank has passed the successful 27 years, they have added lots of products and services to satisfy and to meet the demand of the customer. The list of some popular products and services are given below:

• UCB Multimillionaire
• UCB Money Maximizer
• Western Union Money Transfer
• SMS Banking Service
• Online Service
• Credit Card
• One Stop Service
• Time Deposit Scheme
• Inward & Outward Remittances
• Import Finance
• Export Finance
• Industrial Finance
• Locker Service

Source: www.ucbl.com

Table-3: Amount of Maturity 1 crore

Source: www.ucbl.com

UCB Money Maximizer

UCB money maximizer is a time deposit product. After maturity you can get double of your deposit

Minimum deposit: taka 2,500

Maximum deposit : any amount, multiple of taka 50,000, maximum 25,00,000

Maturity time: 8 Years

Interest rate: 9.10 %

More than one scheme: You can get more than one UCB Money Maximizer  Scheme at a time

Credit facility:  You can get OD or EMI loan facilities up to 90 % of your deposit after 2 years of your scheme

Minimum loan limit is taka 50,000

4 %interest rate is for OD & 3% interest rate is for EM

UCB Earning Plus

UCB money maximize is a time deposit product. After one or three month you can get return on your fixed deposit

Minimum deposit: taka 5,000

Maximum deposit: any amount, multiple of taka 50,000.

Maturity time & interest rate:

3 years – 9%

5 years – 9%

If your age is more than 55 years you can enjoy extra 0.10 % interest under senior account facility

More than one scheme: You can get more than one UCB EARNING PLUS Scheme at a time

Credit facility:  You can get OD or EMI loan facilities up to 90 % of your deposit after 2 years of your scheme

Minimum loan limit is taka 50,000

4 %interest rate is for OD & 3% interest rate is for EMI

Table-1: AMOUNT OF INTEREST ON GENERAL ACCOUNT:

 Source: www.ucbl.com

Table-2: AMOUNT OF INTEREST ON SENIOR ACCOUNT

Source: www.ucbl.com

UCB DPS Plus :

Minimum instalment: taka 500

Maximum instalment: multiple of taka 1,000, maximum taka 25,000.

Interest rate: 9 %

Maturity: 5 & 10 Years.

More than one scheme: You can get more than one UCB DPS PLUS Scheme at a time.

Credit facility:  You can get OD or EMI loan facilities up to 90 % of your deposit after 2 years of your scheme

Minimum loan limit is taka 50,000

4 %interest rate is for OD &

3% interest rate is for EMI

Table-1: Amount of after maturity

Source: www.ucbl.com

SMS Banking Service

Terms & Conditions:

• The Application form must be filled up & sent directly to United Commercial Bank and not by facsimile. The Bank may require three working days after receiving the Application Form for activation of the service.
• The account holder is solely responsible to stop misuse of SMS Banking Services and also to maintain the confidentiality of his/her financial information by ensuring safe holding of the mobile phone/connection assigned to SMS Banking Service provided by United Commercial Bank. If the Mobile Phone/ Connection is lost,
• stolen or sold to another individual, the account holder shall immediately notify the Bank and cancel the SMS Banking Service. The account holder hereby agrees that United Commercial Bank shall not be responsible for any disruption in SMS Banking Service due to any mechanical failure on the part of United Commercial Bank/Mobile Phone Service Provider.
• Registration form should be submitted to the branch, where the account is maintained.
• SMS Banking Service shall remain effective until otherwise advised in writing by the account holder.
• The Bank may revise and/or change any of the Terms & Conditions at any time with notice to you but does not require any consent.
• By providing SMS Banking Service United Commercial Bank may collect service charge from the linked account. United Commercial Bank may revise and/or change the service charge at any point of time.

The nature of the loan products in the UCBL:

In the bank I have found lots of loan product for the customer. Some popular and mostly

Demanded products details are given below:

 Cash Credit (Hypothecation):

It is favourite and elastic product because the limits fluctuate according to the needs of the

Business. In a manufacturing company, whose stocks of raw materials and manufactured goods constantly fluctuate, it is difficult for the bank to control such changes; so the necessity arise for allowing hypothecation facilities to them in terms of stocking goods under the effective control of bank.

• Over Draft or OD:

The overdraft is a kind of advance always allowed on a current account operated upon by Cheques. The customer may be sanctioned a certain limit upon which he can overdue his current account within a stipulated period. Here, withdraws or deposits can be made any number of items at the convenience of the borrower, provided the total amount overdrawn does not, at any time, exceed the agreed limit. Interest is calculated and charged only on the actual debit balances on daily product basis. Thus, the borrower in this case can save interest by reducing the debit balance.

• Term Loan:

Term Loan has its validity for one year. And the customer can take the loan in the term basis. And after the complication of the time or the duration of the loan he can renew the loan. From sales proceeds of their business or from own other source of the customer. Credit turn over in a quarter must be at least equal to the limit. Full and final adjustment to be made within the validity.

• Letter of Credit or L/C:

L/C is the revolving loan. It is contracted by the Bank and the buyer or the seller in the formal Basis. It is negotiated by the preformed invoice and the IRC. I have experienced to take care of doing proposals for both the foreign and local L/C.

The process of the Loan In general:

It is very important for a bank to proper utilize its cash flow that the financial institution takes from its clients in the form of deposits. The bank takes the money in the form of long term-deposits, short term deposits, double benefit deposit and other scheme. Since bank has no investment of its own the profitability of the bank depends on loan sanction. Now a day’s Bank industries become very competitive. Every bank offers flexible loan rate for the loan takers. Generally the loan UCBL offers to its clients is divided into two categories: Retail Loan and Business loan

General Banking:

I got the opportunity to observe various principles and procedures followed in banks for financial operation and control. I was able to grasp an elementary knowledge on quite a few aspects of its operation.

Issuing of Cheque Book:

My first work in the bank was to issue the Cheque book of the account holder. For issuing Cheque book, at first I took the requisition page to the customer, which remains is in the old Cheque book and for the first time account holder there is another type of cheque requisition slip. Then I verified the requisition page from the officer. Finally I put the Cheque serial number according to the kind of A/C (SB, CD, FDR and STD). During the delivery of Cheque book, I took the signature of the A/C holder in the register book. I had to make sure that each of the pages of Cheque book was checked by the authorized officer.

Opening Account:

In opening an account, my first job was to make the application form clear to the client. What type of documents and the signature the client have to put. There has a different type of account to open. Such as saving, current, short term deposit or STD, Fixed deposit or FDR etc. My job was to confirm the additional documents with the form like KYC or Know your Customer and to Cheque the signature. At last I put all details of the account holders’ information through software named PC bank2000.

Clearing department:

Meaning of clearing: The word clearing has been derived from the word “clear” and is defined as:

“A system by which banks exchange cheques and other negotiable instruments drawn on each other within a specific area and thereby secure payment for their clients through the Clearing House at specified time in an efficient way.”

EXPLANATION:- By clearing means sometimes the account holder of United Commercial Bank Limited present a cheques, which is not drawn on by United Commercial Bank but by the person, who has the account in United Commercial Bank. In this case bank accepts these cheques in clearing department and later on collects the amount from bank on which cheques is drawn through Clearing house. This function is called clearing.

Instrument to be presented

• Cheques
• Demand Drafts
• Pay Orders

Types of clearing: There are four types of clearing:-

1. Inward Clearing

2. Outward Clearing

3. Intercity Clearing

4. Same Day Clearing

Clearing activities:

According to the article 37(2) of Bangladesh Bank Order 1972, the banks, which are the member of the clearinghouse, are earned as Scheduled Banks. The scheduled banks clear the Cheque drawn upon one another through clearinghouse. This is an arrangement by the central bank where every day the representative of the member banks gathers to clear the Cheque. Banks for credit of the proceeds to the customer’s account accept Cheque and other similar instruments. The bank receives many such instruments during the day from account holders. Many of these instruments are drawn payable at other banks. If they were to be presented at the drawer banks to collect the proceeds it would be necessary to employ many messengers for the purpose. Similarly there would be many Cheque draft on this the messengers or other banks would present bank and then at the counter. The whole process of collection and payment would involve considerable labour, delay, risk and expenditure. All the labour, risk, delay and expenditure are substantially reduced by the representative of all the banks meeting at a specific time, for exchanging the instruments and arriving at the net position regarding receipt or payment. The place where the banks meet and settle their dues is called the Clearinghouse. The clearinghouse sits for two times a working day. All day to day clearings are posted through a software to the banks network and later it’ll deals by principle office of UCBL.

Posting Cheques through the NIKASH software: After posting of all the cheques and different types refund warrant and dividend warrant we send those branch wise information or data to principal office branch of UCBL and they do the rest of the activities of the clearing.

REASON FOR DISHONORED CHEAQUE

Following are the general reasons to dishonour cheque in the process of clearing by the bank of clearing:

• Refer to drawer.
• Not arranged for.
• Insufficient balance.
• Effects not cleared may be presented again.
• “Received for Clearing” seal is stamped on the deposit slip for the particular
• “Payee’s A/C Credited” endorsement required endorsement seals are given on the back of the cheque
• Entries are given in the Outward Clearing Register Book
• “Clearing” seal is given on the cheque along with date on which the cheque is going to clearing house
• Entries are given in the computer
• Get the printout of the entries by bank wise and endorsement must be signed
• Give the cheque to the officials of the respective bank in the Clearing house Exceed arrangements.
• Full cover not received.
• Payment stopped by drawer.
• Payee’s endorsement irregular/ illegible/ required
• Payee’s endorsement irregular, require banks confirmation.
• Drawer’s signature differs/ required.
• Alterations in date/ figures words require drawer’s full signature.
• Cheque is post dated/ out of date mutilated.
• Amount in words and figure differs.
• Crossed cheque must be presented through a bank.
• Clearing stamp required/ requires cancellation.
• Addition to Bank’s discharge should be authenticated.
• Cheque crossed “Account payee only” (18) Collecting discharge irregular/ required.

Making previous day’s voucher:

Maintaining all vouchers is essential for the bank. These are checked by the Audits which come through Bangladesh Bank. Everyday many transactions are done in kawran bazaar Branch. After finishing all transactions after that day binding all vouchers chronologically with the print paper and then making a voucher file and put the date on cover page. And put it in the voucher register.

Methodology of the Study:

For establishing this report I used the secondary data collection method from

• www.ucbl.com
• Annual report of UCBL
• Audit report of Bangladesh bank
• Monthly branch performance report (primarily­)
• And other sources.

Related studies

The studies of efficiency using frontier approaches on banking did not start until Sherman and Gold (1985) initiated their own. They applied the frontier approach to the banking industry by focusing on the operating efficiency of the branches of a saving bank. Since then, numerous studies have been conducted using frontier approaches to measure banking efficiency. There have been extensive studies on bank efficiency done in the US and European countries and most of them focused on conventional banking (Berger and Humphrey, 1997; Goddard et al., 2001).

           Despite the considerable development of the Islamic banking sector, there have been very limited studies done focusing on the efficiency of Islamic banks. Several studies that have been devoted to assess the performance of Islamic banks have generally examined the relationship between profitability and banking characteristics. DEA have been used extensively to measure banking efficiency. Some of those studies that measure efficiency of Islamic banks using DEA Application are conducted by Yudistira (2004), Ascarya and Yumanita (2006, 2007a, and 2007b), Sufian (2006) and Zamil and Rahman (2007). Yudistira measured the efficiency of 18 Islamic banks from various countries during 1997 – 2000 using intermediation approach. Ascarya and Yumanita (2006) measured the efficiency of Islamic banks in Indonesia during 2002 – 2004 using intermediation and production approaches, since Islami banking not only can be viewed as intermediary institution, but can also be viewed as production entity. Sufian measured the efficiency of Islamic window in Malaysia during 2001–2004 using intermediation approach with the same reason as that of Yudistira. Mochtar et al. (2007) measured the efficiency of 22 Islamic banks (20 windows and 2 full-fledged) and 20 conventional banks in Malaysia during 1997-200. Meanwhile, Zamil and Rahman (2007) measured the efficiency of Islamic banks and conventional banks in Malaysia during 2001-2004 using intermediation approach.

           A similar approach of efficiency study was conducted by Ascarya, Yumanita (2006) and Yaumidin (2007). They used the DEA method to measure the efficiency of Islamic banks. Ascarya and Yumanita (2006) focused their study on investigating the comparative efficiency between Islamic banks in Malaysia and Indonesia. The input variables used are total deposits, labour, and fixed assets, while the output variables used are total loans and income. Their interesting findings was profitable banks tend to be efficient banks. They also found that the majority of Malaysian Islamic banks have been experiencing diseconomies of scale in 2005, especially small and foreign owned banks. Besides that, they concluded that Indonesian Islamic banking has recorded high overall efficiency of 85%, mainly due to the improvement in scale efficiency from impressive growth in the period of observation.

           Viverita et. al. (2007) and Kamaruddin et. al., (2008) also applied DEA to assess the cost and profit efficiencies of Malaysian Islamic banks and conventional banks for the period 1998 to 2004. The results generally suggest that an Islamic bank wasted around 30.5 percent of its inputs relative to the best-practice bank. The results also show that there existed about 30-37 percent inefficiencies in the operations of Islamic banks over the period of study. Mohamad et. al., (2008) examined the cost and profit efficiency of conventional versus Islamic banks using the Stochastic Frontier Approach. The results suggest that there are no significant differences between the overall efficiency results of the conventional and Islamic banks.

           Other studies of banking efficiency using DEA are done by Jemric and Vujcic (2002) and Hadad et al. (2003) and Jemric and Vujcic measured efficiency of banks in Croatia during 1995- 2000 using intermediation and production approach, since banking is not just functioned as intermediary, but also as a producer of loans and investments. Meanwhile, Hadad et al. measured efficiency of banks in Indonesia during 1995 – 2003 using asset approach to see the impact of merger and acquisition. The few previous studies of the efficiency of Bangladeshi Banks have been narrow in their focus. Dilruba, (2005) estimated relative economic and price efficiency of different banks in Bangladesh.

           This study attempted to avoid the problems inherent in simple measures by constructing a variety of approaches that can be used to measure the extent of different efficiencies. The study avoided the parametric approach although the main attraction is that they allow hypothesis testing and the construction of confidence intervals. However, the drawbacks are the need to assume a functional form for the frontier technology and for the distribution of the technical inefficiency term.

           Therefore, the study used the programming approach which is nonparametric and there is no need to make such assumptions, i.e., the nonparametric approach is less prone to these types of specification error. But the major weakness of the programming approach is that it is deterministic, and can not decompose the unknown effects or unknown errors. The deterministic approach assumes that the error term, and any farm level deviations are attributed to inefficiency. This investigation estimates technical, allocative and scale efficiencies, using different approaches, which covers a completely new study area to any previous study.

Literature Review

According to Obaidullah (2005), efficiency of the financial institutions can be defined as ability to mobilize the savings from the savings-surplus units and allocate these funds among savings-deficit units in the economy. Moreover, Kumbhakar and Lovell, (2003) stated that efficiency can be measured with respect to maximization of output, minimization of cost or maximization of profits. By referring to these definitions, a greater efficiency can be looked as an indicator that individual banks can adapt better to a different operating environment through higher ability to combine and utilize inputs. It could also imply that the banks with higher efficiency have higher shareholder value, higher volume of funds intermediated and more economic growth if funds are channeled into more productive investments.

Since the 1990s, the efficiency of financial institutions has become an important part of banking literature (Berger and Humphrey, 1997). There are quite significant numbers of research conducted in this area in developed and developing countries. One of the important results of the banking efficiency studies is examined indicators of success, which can be used for improving performance of individual banks, and the banking industry as a whole. When the banking industries hold proper efficiency, the economic systems, therefore, can be driven in a stable control. Thereby, it can avoid the reoccurrence of financial crisis such as happened in Asia during 1996-1998, which many economists believe started with the short term liquidity problem created by the financial markets.

Efficiency Measurement Using Parametric Approach

SFA and DFA have been used for some studies to measure the X-efficiency of commercial bank or other financial institutions such as studies that were conducted by Semih and Philippatos (2001), Hadad et al. (2003), Hassan (2003 and 2006), Bader (2008). The first three studies measure the efficiency of conventional banks, while the last four studies measure the efficiency of Islamic banks. Allen and Rai (1995) measured operational efficiency in banking internationally during 1988-1992 using SFA and DFA. Yildirim and Philippatos (2005) measured the efficiency of banks in Europe during 1993-2000 using SFA to evaluate impact of transition economies to banks efficiency, while Hadad et al. (2003) used SFA and DFA methods to measure the efficiency of banks in Indonesia during 1995-2003. Meanwhile, Hasan (2003) measured the efficiency of Islamic banks in Pakistan, Iran, and Sudan during 1994-2001 using SFA (cost and profit efficiencies), and DEA (cost, allocative, technical, pure technical, and scale efficiencies), while Hassan (2006) measured the efficiency of Islamic banking industry in the world during 1995-2001 using SFA (cost and profit efficiencies) and DEA (cost, allocative, technical, pure technical, and scale efficiencies).

Efficiency Measurement Using Non-parametric Approach

DEA have been used extensively to measure banking efficiency. Some of those studies that measure efficiency of Islamic banks using DEA Application are conducted by Yudistira (2004), Ascarya and Yumanita (2006, 2007a, and 2007b), Sufian (2006) and Zamil and Rahman (2007). Yudistira measured the efficiency of 18 Islamic banks from various countries during 1997 – 2000 using intermediation approach. Ascarya and Yumanita (2006) measured the efficiency of Islamic banks in Indonesia during 2002 – 2004 using intermediation and production approaches, since Islami banking not only can be viewed as intermediary institution, but can also be viewed as production entity. Sufian measured the efficiency of Islamic window in Malaysia during 2001–2004 using intermediation approach with the same reason as that of Yudistira. Mochtar et al. (2007) measured the efficiency of 22 Islamic banks (20 windows and 2 full-fledged) and 20 conventional banks in Malaysia during 1997-200. Meanwhile, Zamil and Rahman (2007) measured the efficiency of Islamic banks and conventional banks in Malaysia during 2001-2004 using intermediation approach.

A similar approach of efficiency study was conducted by Ascarya, Yumanita (2006) and Yaumidin (2007). They used the DEA method to measure the efficiency of Islamic banks. Ascarya and Yumanita (2006) focused their study on investigating the comparative efficiency between Islamic banks in Malaysia and Indonesia. The input variables used are total deposits, labor, and fixed assets, while the output variables used are total loans and income. Their interesting findings was profitable banks tend to be efficient banks. They also found that the majority of Malaysian Islamic banks have been experiencing diseconomies of scale in 2005, especially small and foreign owned banks. Besides that, they concluded that Indonesian Islamic banking has recorded high overall efficiency of 85%, mainly due to the improvement in scale efficiency from impressive growth in the period of observation.

Viverita et. al. (2007) and Kamaruddin et. al., (2008) also applied DEA to assess the cost and profit efficiencies of Malaysian Islamic banks and conventional banks for the period 1998 to 2004. The results generally suggest that an Islamic bank wasted around 30.5 percent of its inputs relative to the best-practice bank. The results also show that there existed about 30-37 percent inefficiencies in the operations of Islamic banks over the period of study. Mohamad et. al., (2008) examined the cost and profit efficiency of conventional versus Islamic banks using the Stochastic Frontier Approach. The results suggest that there are no significant differences between the overall efficiency results of the conventional and Islamic banks.

Other studies of banking efficiency using DEA are done by Jemric and Vujcic (2002) and Hadad et al. (2003) and Jemric and Vujcic measured efficiency of banks in Croatia during 1995- 2000 using intermediation and production approach, since banking is not just functioned as intermediary, but also as a producer of loans and investments. Meanwhile, Hadad et al. measured efficiency of banks in Indonesia during 1995 – 2003 using asset approach to see the impact of merger and acquisition. The few previous studies of the efficiency of Bangladeshi Banks have been narrow in their focus. Dilruba, (2005) estimated relative economic and price efficiency of different banks in Bangladesh. This investigation estimates both technical and a locative efficiencies using different approaches for each farm in the sample, using different approaches, which covers a completely new study area to any previous study.

This study attempted to avoid the problems inherent in simple measures by constructing a variety of approaches that can be used to measure the extent of different efficiencies. Of the approaches, econometric approaches are parametric, and the main attraction is that they allow hypothesis testing and the construction of confidence intervals. However, the drawbacks are the need to assume a functional form for the frontier technology and for the distribution of the technical inefficiency term. Amongst the parametric approaches some are stochastic, and so attempt to distinguish the effects of uncontrollable error, such as adverse weather conditions, supply shocks and measurement error from farm-specific sources of inefficiency, while a no stochastic approach lumps noise and inefficiency together and calls the combination inefficiency.

The programming approach is nonparametric and there is no need to make such assumptions, i.e., the nonparametric approach is less prone to these types of specification error. But the major weakness of the programming approach is that it is deterministic, and can not decompose the unknown effects or unknown errors. The deterministic approach assumes that the error term, and any farm level deviations are attributed to inefficiency.

These features imply that each of these methods has advantages and disadvantages and there is no obviously superior approach. It is not expected that alternative methods of measuring efficiency will yield identical estimates. Therefore, the choice between these approaches depends upon the objective of the research, the type of bank and the data available. One of the main objectives of this study is to compare efficiency measures from different approaches to assess if there are significant differences in the estimates of efficiency. The purpose of the comparison is to examine whether ordinal ranking of farms in terms of efficiency remains the same across various measures.

Operation of UCBL- (2002-2008):

• UCBL maintain the same amount of authorized capital from 2002 to 2008 which is 1,000 million taka.
•   UCBL maintain the same amount of paid up capital from 2002 to 2008 which is 299 million taka.
• UCBL increase their reserved fund year by year from 2002-2008. in 2002 the reserved fund was 440 million but in after 2008 that was 1,889 million taka.
• UCBL increase their deposit year by year from 2002-2008. in 2002 deposit  was 16,417 million but in after 2008 that was 54,485 million taka.
• UCBL also increase their advance or loan because deposit has been increased.
• UCBL decrease their investment significantly from 2002 to 2005, but from 2006 to 2008 they are increased their investment.
• So overall gross income of UCBL increase year by year from 2002 to 2008.
• Gross expenditure also increases from 2003 to 2008.
• In 2002 net profit of UCBL was 155 million, but after 2002 they are increases their deposits, investment, and amount of advance or loan so from 2003 to 2008 their net profit was more than 2002
• UCBL also increase their import &export operation from 2002 to 2008

   Source: Annual Report

Performance analysis of UCBL (2004-2008 )

Bank perform in 2008

The bank

At the end of the year, 2008, total asset of the bank stood at tk. 64,795 million against tk. 50,181 million in the previous year. Total liquid assets including investment stood at tk. 16,325 million during the year against tk.10, 379 million in the previous year total liquid asset was 29.96% of the total deposits as at the close of the year. Net return of equity during the year 200 was 17.44% as against 25.98% in the previous year.

Capital & reserve

During the year under report authorised capital of the bank remained unchanged at taka 1000 million and the paid up capital stood tk. 299 million. the reserved fund of the bank increased by 18.33% to taka 1,889 million as against tk. 1,596 million in the previous year.

The capital fund of the bank stood at Tk. 4,780 million in 2008 against tk. 3,696 million of 2007 recording an increase of tk. 1,084 million (29.32%).Core capital (Tier-1) increased by tk.765 million and  stood at the tk. 3,902 million while supplementary capital (Tier-11) increased by tk. 319 million as stood at tk. 878 million. Total capital fund is equivalent to 10.34% of risk weighted asset.

Deposit

The deposit of the bank registered an increase of 28.82% in the year under review. At the close of 2008, total deposit stood at tk. 54,485 million against tk. 42,296 million in the previous year. The product mix comprised tk. 8,821 million as demand and tk. 45,673 million as time deposit. The ratio between demand and time liability was 20% & 80% respectively Out of the total deposits, tk. 48,627 million was mobilized from the private sector while the balance tk. 5,858 million from the private sector.

Credit

In 2008 UCBL credited 12,896 million taka in industrial sector, 1,850 million taka in real estate sector, 331 million taka transport and communication sector, 15,760 million taka in whole sale /retail sector, 9,877 million taka in import sector, 1,189 million taka in export sector, and 1,189 million taka credited in other sector.

The bank continued its participation in deferent credit program for financing new industrial projects working capital, trade finance international trade etc. consequently total credit rose to tk.44,446 million in 2008 from tk. 37,566 million of 2007. The credit deposit ratio stood at 81.57%.

Table  1: Sector wise credit during the year was as follows

                        Source: annual report 2008

Investment

At the close of 2008, total investment of the bank stood at tk. 7,201 million against tk. 5,518 million in 2007. Income of tk 35 million has been earned from different companies during the year under report.

Treasury operation

The function of treasury constitutes money market operation, foreign exchange dealings, asset liability management and other fixed income product. Maintenance of cash reserve requirement (CRR) and statutory liquidity requirements (SLR) is one of the major function of treasury. Treasury department of the bank has been actively participating in local money market as well as foreign currency market in a prudent way and has been a lender of the market during the year 2008 for utilization of surplus fund. The banks investment in Treasury bill and other securities was tk. 7,201 million during the year, the treasury operation has grown substantially and has contributed 15.49%to the total income of the bank.

Foreign trade

During the year 2008, the bank opened 15,219 letters of credit for import amounting to tk. 60,009 million compared to 14,470 letters of credit amounting to tk. 60,329 million in 2007. The volume of export bill handled by the bank in 2008 was tk. 36,500million compared to tk. 27,230 million in 2007.

Operating result

The bank earned a total operating income of tk. 7,850 million during the year against tk. 6,052million in the previous year. The total operating expenditure was tk. 5,400 million in 2008 against tk. 4,034 million in 2007. After making provision of tk. 987 million against loan & advances, the pre-tax profit for the year stood at tk. 765 million which is proposed to be appropriated as under:

Table 1:

Soursec: audit report of bangladesh bank

Bank perform in 2007

The bank

At the end of the year, 2007, total asset of the bank stood at tk. 50,181 million against tk. 38,548 million in the previous year. Total liquid assets including investment stood at tk. 10,379 million during the year against tk. 11,023 million in the previous year total liquid asset was 24.54% of the total deposits as at the close of the year. Net return of equity during the year 2006 was 26% as against 25% in the previous year.

Capital & reserve

During the year under report authorised capital of the bank remained unchanged at taka 1000million and the paid up capital stood tk. 299 million. The reserved fund of the bank increased by 26% to taka 1,596 million as against tk. 1,262 million in the previous year.

The capital fund of the bank stood at Tk. 3,696 million in 2007 against tk. 2,620 million of 2006 recording an increase of tk. 1,076 million (41.06%).Core capital (Tier-1) increased by tk. 815 million and  stood at the tk. 3,137 million while supplementary capital (Tier-11) increased by tk. 261 million as stood at tk. 559 million. Total capital fund is equivalent to 9.28% of risk weighted asset.

Deposit

The deposit of the bank registered an increase of 28% in the year under review. At the close of 2007, total deposit stood at tk. 42,296 million against tk. 33,016 million in the previous year. The deposit mix comprised tk. 8,510 million as demand and tk. 33,786 million as time deposit. The ratio between demand and time liability was 20:80. Out of the total deposits, tk. 36,828 million was mobilized from the private sector while the balance tk. 5,468 million from the private sector.

Credit

In 2008 UCBL credited 8,911 million taka in industrial sector, 1,334 million taka in real estate sector, 222 million taka transport and communication sector, 14,041 million taka in whole sale /retail sector, 9,946 million taka in import sector, 2,276 million taka in export sector, and 836 million taka credited in other sector.

The bank continued its participation in deferent credit program for financing new industrial projects working capital, trade finance international trade etc. consequently total credit rose to tk.37,566 million in 2007 from tk. 26,110 million of 2006. The credit deposit ratio stood at 0.89:1.

Table 1 : . Sector wise credit during the year was as follows:

                        Source: annual report 2007

Investment

At the close of 2007, total investment of the bank stood at tk. 5,518 million against tk. 6,101 million in 2006. Income of tk 10 million has been earned from different companies during the year under report.

Treasury operation

The function of treasury constitutes money market operation, foreign exchange dealings, asset liability management and other fixed income product. Maintenance of cash reserve requirement (CRR) and statutory liquidity requirements (SLR) is one of the major function of treasury. Treasury department of the bank has been actively participating in local money market as well as foreign currency market in a prudent way and has been a lender of the market during the year 2007 for utilization of surplus fund. The banks investment in Treasury bill and other securities was tk. 5,518 million during the year, the treasury operation has grown substantially and has contribued 16.22%to the total income of the bank.

Foreign trade

During the year 2007, the bank opened 20,627 letters of credit for import amounting to tk. 60,329 million compared to 15,219 letters of credit amounting to tk. 39,853 million in 2006. The volume of export bill handled by the bank in 2007 was tk. 27,230 million compared to tk. 20,804 million in 2006.

Operating result

The bank earned a total operating income of tk. 6,052 million during the year against tk. 4,118 million in the previous year. The total operating expenditure was tk. 4,034 million in 2007 against tk. 2,798 million in 2006. After making provision of tk. 350 million against loan & advances, the pre-tax profit for the year stood at tk. 1,668 million which is proposed to be appropriated as under in Table 1

Table 1:

Soursec: audit report of bangladesh bank

Bank perform in 2006

The bank

At the end of the year, 2006, total asset of the bank stood at tk. 38,548 million against tk. 2,178 million in the previous year. Total liquid assets including investment stood at tk. 11,023 million during the year against tk. 7,372 million in the previous year total liquid asset was 33.39% of the total deposits as at the close of the year. Net return of equity during the year 2006 was 25% as against 24% in the previous year.

Capital & reserve

During the year under report authorised capital of the bank remained unchanged at taka 1000million and the paid up capital stood tk. 230 million. The reserved fund of the bank increased by 21% to taka 1,262 million as against tk. 1,045 million in the previous year.

The capital fund of the bank stood at Tk. 2,620 million in 2006 against tk. 1,943 million of 2005 recording an increase of tk. 677 million (34.84%).Core capital (Tier-1) increased by tk.587 million and  stood at the tk. 2,322 million while supplementary capital (Tier-11) increased by tk. 90 million as stood at tk. 298 million. Total capital fund is equivalent to 9.70% of risk weighted asset.

Deposit

The deposit of the bank registered an increase of 34% in the year under review. At the close of 2006, total deposit stood at tk. 33,016 million against tk. 24,559 million in the previous year. The product mix comprised tk. 6,223 million as demand and tk. 26,793 million as time deposit. The ratio between demand and time liability was 23:77. Out of the total deposits, tk. 29,897 million was mobilized from the private sector while the balance tk. 3, 119 million from the private sector.

Credit

In 2008 UCBL credited 5,733 million taka in industrial sector, 981 million taka in real estate sector, 196 million taka transport and communication sector, 10,021 million taka in whole sale /retail sector, 6,198 million taka in import sector, 1,553 million taka in export sector, and 1,428 million taka credited in other sector.

The bank continued its participation in deferent credit program for financing new industrial projects working capital, trade finance international trade etc. consequently total credit rose to tk.26, 110 million in 2006 from tk. 20,211 million of 2005. The credit deposit ratio stood at 0.79:1.

Table 1: sector  wise credit during the year was as follows

                        Source: annual report 2006

Investment

At the close of 2006, total investment of the bank stood at tk. 6,101 million against tk. 2,877 million in 2005. Income of tk 8 million has been earned from different companies during the year under report.

Treasury operation

The functions of treasury constitute money market operation, foreign exchange dealings, asset liability management and other fixed income product. Maintenance of cash reserve requirement (CRR) and statutory liquidity requirements (SLR) is one of the major function of treasury. Treasury department of the bank has been actively participating in local money market as well as foreign currency market in a prudent way and has been a lender of the market during the year 2006for utilization of surplus fund. The banks investment in Treasury bill and other securities was tk. 6,101 million during the year; the treasury operation has grown substantially and has contributed 14.53%to the total income of the bank.

Foreign trade

During the year 2006, the bank opened 15,219 letters of credit for import amounting to tk. 3,985 million compared to 14,470 letters of credit amounting to tk. 29,408 million in 2005. The volume of export bill handled by the bank in 2006was tk. 20,804 million compared to tk. 14,785 million in 2005.

Operating result

The bank earned a total operating income of tk. 4,118 million during the year against tk. 3188million in the previous year. The total operating expenditure was tk. 2,798 million in 2006 against tk. 2,036 million in 2005. After making provision of tk. 261 million against loan & advances, the pre-tax profit for the year stood at tk. 1,060 million which is proposed to be appropriated as under in Table 1

Table 1:

Source: audit report of Bangladesh bank

Bank perform in 2005

The bank

At the end of the year, 2005, total asset of the bank stood at tk. 28,813 million against tk. 25,059 million in the previous year. Total liquid assets including investment stood at tk. 7,372 million during the year against tk. 8,828 million in the previous year total liquid asset was 30% of the total deposits as at the close of the year. Net return of equity during the year 2005 was 24% as against 14% in the previous year.

Capital & reserve

During the year under report authorised capital of the bank remained unchanged at taka 1000 million and the paid up capital stood tk. 230 million. the reserved fund of the bank increased by 33% to taka 1,045 million as against tk. 783 million in the previous year.

The capital fund of the bank stood at Tk. 1,943 million in 2005 against tk. 1,389 million of 2004 recording an increase of tk. 554 million (39.88%).Core capital (Tier-1) increased by tk. 492 million and  stood at the tk. 1,735 million while supplementary capital (Tier-11) increased by tk. 62 million as stood at tk. 208 million. Total capital fund is equivalent to 9.72% of risk weighted asset.

Deposit

The deposit of the bank registered an increase of 17% in the year under review. At the close of 2005, total deposit stood at tk. 24,559 million against tk. 20,970 million in the previous year. The product mix comprised tk. 5,772 million as demand and tk. 18,787 million as time deposit. The ratio between demand and time liability was 24:76. Out of the total deposits, tk. 21,557 million was mobilized from the private sector while the balance tk. 3,002 million from the private sector.

Credit

In 2008 UCBL credited 442 million taka in agriculture and fishery sector 2,656 million taka in industrial sector, 672 million taka in real estate sector, 76 million taka transport and communication sector, 5,710 million taka in whole sale /retail sector, 5,860 million taka in import sector, 832 million taka in export sector, and 3,963 million taka credited in other sector.

The bank continued its participation in different credit program for financing new industrial projects working capital, trade finance international trade etc. consequently total credit rose to tk.20, 211 million in 2005 from tk. 15,385 million of 2004. The credit deposit ratio stood at 0.82:1.

Table 1: Sector wise credit during the year was as follows

                        Source: annual report 2006

Investment

At the close of 2005, total investment of the bank stood at tk. 2,877 million against tk. 3,020 million in 2004. Income of tk 8 million has been earned from different companies during the year under report.

Treasury operation

The function of treasury constitutes money market operation, foreign exchange dealings, asset liability management and other fixed income product. Maintenance of cash reserve requirement (CRR) and statutory liquidity requirements (SLR) is one of the major function of treasury. Treasury department of the bank has been actively participating in local money market as well as foreign currency market in a prudent way and has been a lender of the market during the year 2005 for utilization of surplus fund. The banks investment in Treasury bill and other securities was tk. 2,877 million during the year, an amount of tk. 1670 million was placed at call and short notices of end 2005. The treasury operation has grown substantially and has contributed 18.22%to the total income of the bank.

Foreign trade

Million compared to 12,339 letters of credit amounting to tk. 24,386 million in 2005. The volume of export bill handled by the bank in 2005 was tk. 14,785 million compared to tk. 10,470 million in 2004.

Operating result

The bank earned a total operating income of tk. 3,188 million during the year against tk. 2,554 million in the previous year. The total operating expenditure was tk. 2,036 million in 2005 against tk. 1,696 million in 2004. After making provision of tk. 300 million against loan & advances, the pre-tax profit for the year stood at tk. 852 million which is proposed to be appropriated as under in Table

Source: audit report of Bangladesh bank

Bank perform in 2004

The bank

At the end of the year, 2004, total asset of the bank stood at tk. 25,059 million against tk. 22,797 million in the previous year. Total liquid assets including investment stood at tk. 8,828 million during the year against tk. 7,434 million in the previous year total liquid asset was 42% of the total deposits as at the close of the year. Net return of equity during the year 2005 was 14% as against 21% in the previous year.

Capital & reserve

During the year under report authorised capital of the bank remained unchanged at taka 1000 million and the paid up capital stood tk. 230 million. the reserved fund of the bank increased by 19% to taka 783 million as against tk. 658 million in the previous year.

Deposit

The deposit of the bank registered an increased of 20% in the year under review. At the close of 2004, total deposit stood at tk. 20,970 million against tk. 17,413 million in the previous year. The deposit mix comprised tk. 5,057 million as demand and tk. 15,913 million as time deposit. The ratio between demand and time liability was 24:76. Out of the total  deposits, tk. 18,654 million was mobilized from the private sector while the balance tk. 2,316 million from the private sector.

Credit

In 2008 UCBL credited 333 million taka in agriculture and fishery sector 2,553million taka in industrial sector, 456 million taka in real estate sector, 80 million taka transport and communication sector, 4,712 million taka in whole sale /retail sector, 4,572 million taka in import sector, 759 million taka in export sector, and 3,565 million taka credited in other sector.

The bank continued its participation in different credit program for financing new industrial projects working capital, trade finance international trade etc. consequently total credit rose to tk.15,385 million in 2004 from tk. 14,396 million of 2003. The credit deposit ratio stood at 0.73:1

Table 1: Sector wise credits during the year were as follows:

                        Source: annual report 2006

Investment

At the close of 2004, total investment of the bank stood at tk. 3,020 million against tk. 3,022 million in 2003. Income of tk 41 million has been earned from different companies during the year under report.

Foreign trade

During the year 2004, the bank opened 12,339 letters of credit for import amounting to tk. 24,386 million compared to 12,781 letters of credit amounting to tk. 18,488 million in 2003. The volume of export bill handled by the bank in 2004 was tk. 10,470 million compared to tk. 7,492 million in 2003.

Operating result

The bank earned a total operating income of tk. 2,554 million during the year against tk. 2,197 million in the previous year. The total operating expenditure was tk. 1,697 million in 2004 against tk. 1,493 million in 2003. After making provision of tk. 231 million against loan & advances, the pre-tax profit for the year stood at tk. 626 million which is proposed to be appropriated as under in table 1

Table 1:

Source: audit report of Bangladesh bank

FINDINGS AND RECOMENDATION OF STUDY

In 2004 and 2005 paid up capital were remain same but in 2005 Total capital was increased. Finally in 2005 capital was surplus. In 2005 total asset and total deposit has been increased compare to 2004. Total loan and advance also increased in 2005 than 2004, because of increased deposit. that’s why credit deposit ratio has been increased by 73.36% to 82.29%. In 2005 there is less percentage of classified loans against total loans and advance than 2004 that is good position for the bank. For this reason total operating profit has been increased a lot against 2004. The provision kept against classified loans has been increased in 2005 compare to 2004 and then provision will surplus in 2005. Percentage of cost of fund remains same. Interest and non interest earning asset has been increased. In 2005 Return on investment and return on asset has been decreased than 2004, because of lees investment and more asset in hand. Earning per share has been increased more in 2005 from 2004 and price earning ratio has been decreased in 2005 form 2004.

Table 1: overall activities of 2004 &2005

Source: annual report

(2005 to 2006)

In 2005 and 2006 paid up capital were remain same but in 2006 Total capital was increased. Finally in 2006 capital was surplus. In 2006 total asset and total deposit has been increased compare to 2005. Total loan and advance also increased in 2006 than 2005, because of increased deposit. that’s why credit deposit ratio has been increased by 82.29% to 79.08%. In 2006 there is less percentage of classified loans against total loans and advance than 2005 that is good position for the bank. For this reason total operating profit has been increased a lot against 2005. The provision kept against classified loans has been increased in 2006 compare to 2005 and then provision will surplus in 2006. Percentage of cost of fund remains same. Interest and non interest earning asset has been increased. In 2006 Return on investment has been decreased because of less investment and return on asset has been increased than 2005, because of less assets in hand. Earning per share has been increased more in 2006 from 2005 and price earning ratio has been decreased in 2006 form 2005.  

Table 2: overall activities of 2005 &2006

           Source: annual report

(2006 to 2007)

In 2006 and 2007 paid up capital has been increased but in 2007 Total capital was increased. Finally in 2007 capital was deficit. In 2007 total asset and total deposit has been increased compare to 2006. Total loan and advance also increased in 2007 than 2006, because of increased deposit. that’s why credit deposit ratio has been increased by 79.08% to 88.82%. In 2007 there is less percentage of classified loans against total loans and advance than 2006 that is good position for the bank. For this reason total operating profit has been increased a lot against 2006. The provision kept against classified loans has been increased in 2007 compare to 2006 and then provision will surplus in 2007. Percentage of cost of fund remains same. Interest and non interest earning asset has been increased. In 2007 Return on investment and return on asset has been increased than 2006, because of more investment and less asset in hand. Earning per share has been increased more in 2007 from 2006 and price earning ratio has been increased in 2007 form 2006

Table 3: overall activities of 2006 &2007

Source: annual report

                                                       (2007 To 2008)

In 2007 and 2008 paid up capital were remain same but in 2008 Total capital was increased. Finally in 2008 capital was surplus. In 2008 total asset and total deposit has been increased compare to 2007. Total loan and advance also increased in 2008 than 2007, because of increased deposit. that’s why credit deposit ratio has been decreased by 88.82% to 81.57%. In 2008 there is less percentage of classified loans against total loans and advance than 2007 that is good position for the bank. For this reason total operating profit has been increased a lot against 2007. The provision kept against classified loans has been increased in 2008 compare to 2007 and then provision will surplus in 2008. Percentage of cost of fund was increased in 2008. Interest and non interest earning asset has been increased. In 2008 Return on investment has been increased from2007 due to more investment, and return on asset has been decreased than 2007, because of more asset in hand. Earning per share has been decreased in 2008 from 2007 and price earning ratio has been decreased in 2008 form 2007.

Table 4: overall activities of 2007 & 2008

Source: annual report