CHAPTER-1 INTRODUCTION Introduction The recruitment and selection processes of an organization are two of its most important financial activities. activities. The basic basic purpose of recruiting is to ensure a sufficient sufficient pool of applicants applicants from which the most qualified qualified individuals individuals may be selected. selected. Effective recruiting is important because sufficient number of qualified applicants is needed to ensure that selection can be successfully accomplished.
Origin of the Report This report is a requirement of the internship i nternship program which is an important part of the BBA (ion’s) degree requirement. As the supervisor has advised me to develop a thorough thorough understa understanding nding of the recruitme recruitment nt and selection selection proces processes ses of SOCIAL ISLAMI BANK LTD. LTD. (SIBL), this report will be prepared on those those aspects aspects of the Financial Statement Analysis of SIBL.
Objectives of the Study The objectives of this study will be:
To evaluate the current recruitment and selection policy and process of SOCIAL ISLAMI BANK LTD..
To find out the t he weaknesses of the current policy.
To suggest improvements to the policy.
Theoretical analysis of recruitment and selection
Analysis current current recruitment and selection selection of SOCIAL ISLAMI BANK LTD. LTD.
Recommen Recommendatio dations ns regarding regarding the recruitme recruitment nt and select selection ion of SOCIAL SOCIAL ISLAMI BANK LTD.
Methodologyy Methodolog In the preparation of this report, data has been collected from both primary and secondary sources. In-depth interviews of some of the employees of the Finance Division Division of SOCIAL SOCIAL ISLAMI ISLAMI BANK LTD.have LTD.have been been conducte conducted d to gather necess necessary ary informatio information. n. Also, Also, the Financial Financial Analys Analysis is Statement Statement of SIBL has been been consulted consulted in preparing this report. report. Moreover, text books, books, the internet, the annual annual report of SOCIAL ISLAMI BANK LTD.etc. LTD.etc. have been used to collect information. information.
Scope The scope of this study is only the recruitment and selection policy and processes of SOCIAL ISLAMI BANK LTD..
Limitation The major limitation of this report is that some confidential information was not available for the purposes of this report.
Methodologyy Methodolog In the preparation of this report, data has been collected from both primary and secondary sources. In-depth interviews of some of the employees of the Finance Division Division of SOCIAL SOCIAL ISLAMI ISLAMI BANK LTD.have LTD.have been been conducte conducted d to gather necess necessary ary informatio information. n. Also, Also, the Financial Financial Analys Analysis is Statement Statement of SIBL has been been consulted consulted in preparing this report. report. Moreover, text books, books, the internet, the annual annual report of SOCIAL ISLAMI BANK LTD.etc. LTD.etc. have been used to collect information. information.
Scope The scope of this study is only the recruitment and selection policy and processes of SOCIAL ISLAMI BANK LTD..
Limitation The major limitation of this report is that some confidential information was not available for the purposes of this report.
CHAPTER-2 CONCEPTUAL ISSUE 2.1 Background Background of SOCIAL ISLAMI BANK BANK LTD. (SIBL) The Bank was incorporated in the year 1959 under the name and style of The Eastern Mercantile Bank Bank Limited under Companies Companies Act 1913. After After liberation of the country in 1971, the Bank was nationalized as per policy of the Government of the People’s Republic of Bangladesh under the Bangladesh Bank (Nationalization) Order 1972 (P O No 26 of 1972) 1972) and and was rename renamed d as National National Bank. Bank. Subsequen Subsequently, tly, the Bank Bank was was denationalized in the year 1983 and was again incorporated in Bangladesh under the name and style of SOCIAL ISLAMI ISLAMI BANK BANK LTD. LTD. in that that year. year. Since then SOCIAL ISLAMI BANK LTD. has been rendering all all sorts of Commercial Banking Banking services services as the largest bank in private sector through its 386 386 number of branches network network all over the country. The principal activities of the Bank are to provide all kinds of commercial banking services within the stipulations laid down by Bank Companies Act 1991 and directives as received from Bangladesh Bank from time to time through its 386 branches all over Bangladesh. The Bank is listed in the Dhaka and Chittagong stock exchanges as a publicly quoted company for its general class of shares. The Bank also carries out Brokerage Business under the license issued by the Securities and Exchange Commission (SEC), Bangladesh.
Board of Directors Mr. Md. Anisul Hoque Chairman
Alhaj Sk. Mohammad Rabban Ali Vice Chairman
Mr. Md. Sayedur Rahman Vice Chairman
Major (Retd.) Dr. Md. Rezaul Haque
Alhaj Sultan MohmoodChowdhury
Alhaj Sultan MohmoodChowdhury
Alhaj Nasiruddin
Director
Director
Mr. Mohammad Azam Representative of Namreen Enterprise Limited
Mr. Abdul JabbarMollah Independent Director
Mr. Md. Shafiqur Rahman Managing Director (CC)
Mr. Mohammad FazlayMorshed
Director
Director
Mr. Abdul Awal Patwary Director
2.2 Vision, Mission & Objectives 2.2.1 Vision To hold the position of best private commercial Bank in Bangladesh with adherence to meticulous compliance of rules and regulations and strong commitment to Corporate Social Responsibility.
2.2.2 Mission To become most remarkable and admirable private commercial bank in the country. To get recognition as a dynamic, innovative and customer service oriented bank. To keep momentum of continuous & steady growth with maximum transparency and to diversify products and resources. To expedite continuous of date of information and technology with all modern facilities to copy with demand and challenges of the time.
2.2.3 Objective Major objectives of the bank include the following:
Growth
Value Addition
Quality Standard
2.3 Core Operations Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customer& current accounts. Banks also enable customer payments via other payment methods such as telegraphic & mail transfers, POS, and ATM etc.. Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending.
Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account. Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to.
Like other commercial banks SIBL also provides all the services mentioned above. Major activities of the bank include the following:
Accepting money on term deposit and lending money by way of overdraft, installment loan or otherwise.
Providing documentary and standby letters of credit (trade fin ance), guarantees, performance bonds, securities underwriting commitments and other forms of off- balance sheet exposures
Issue of banknotes (promissory notes issued by a banker and payable to bearer on demand)
Issuing bank drafts and bank cheques and processing of payments by way of telegraphic/mail transfer, POS, internet banking or other means.
Currency exchange and safekeeping of documents and other items in safe deposit boxes.
CHAPTER-3 CONCEPTUAL ISSUE 3.1 Deposit Collection and Mobilization Being the largest private commercial bank of the country the bank accepts a variety of deposits through its 386 branches located all over the country. The bank also provides all sorts of deposit mobilization activities to its customers. Total deposit of the bank as on 31 December 2012 stood at taka 8846.33 crore with highest exposure in Savings account of 34.66 %. 35.00% 30.00% 25.00% 20.00%
34.66%
15.00% 22.34% 10.00%
14.50%
12.95%
5.00%
7.72% 2.93%
0.00%
Current deposit
Bills payable
Savings Fixed deposit Short terms Bank deposit deposit
Pension schemes
4.91% Others
Credit Operations For the last couple of years banks operations in connection with loans and advances has increased significantly which is contributing a lot to sustainable growth of the bank. The bank provides all sorts of advances to almost all sector of the economy within the stipulation laid down in Banking Company Act. 1991. Besides regular credit operations the bank has started brokerage business since January 2009, consequently got stock dealing license and started Stock dealing operation from March 2012.
Personal Loan For the purchase of household appliances, computers, marriage, medical treatment and education for self or dependents etc.
For the purchase of household appliances, furnishings, for household refurbishment, marriage, medical treatment, education.
Maximum BDT 500K but not less than BDT 75K per loan.
Ill. Consumer Loan to be disbursed through the savings account to be opened with SOCIAL ISLAMI BANK LTD.
Repayment in 12, 24, 36, 48 monthly installments. Prepayments are allowed anytime at his/her convenience.
Auto Loan For the purchase of a passenger car (unregistered reconditioned or brand new) to be used for personal transport purposes by the obligor. The vehicle will be registered in the bank’s name and the obligor will be issued a authority letter by the bank to use it for his personal purpose.
Vacation Loan For taking an overseas vacation, purchase of tickets, purchase of TC’s etc.
Purchase of Air ticket(s) in the name of the obligor and family and purchase of FX for hotel and other expenses as allowed by the BBFX Manual.
IL Maximum amount BDT 500K but not less than BDT 75K.
Repayment in 24, 36 and 48 monthly installments. Prepayments allowed anytime at his/her convenience.
FX to be purchased from our bank branches.
Ticket bookings are required to be done from any of our enlisted Travel Agents.
Consumer Loan to be disbursed through the savings account to be opened with SOCIAL ISLAMI BANK LTD..
Safety Locker Services Clients can use the locker facility of SOCIAL ISLAMI BANK LTD. Limited and thus have the option of covering their valuables against any unfortunate incident. SIBL offers security to its locker service as afforded to the Bank’s own property at a very competitive price.
Utility Bills Services SOCIAL ISLAMI BANK LTD. Limited offers a multi-mode utility bill payment facility for its customers. Whether it is cellular phone bill, telephone bill, electricity bill or water bill, SIBLoffers various modes and convenient ways to make bill payment easy for its clients. Clients can use SIBLATM cards to pay bills at their convenience or visit SIBL branches to make payment for bills. Currently, Grameen Phone and City Cell mobile phone bills are accepted at all SIBL branches. More utility providers will soon be added to this service for the client’s convenience.
Lease Financing Although there are separate financial institutions in the lease financing market, banks are entering in this business day by day. SOCIAL ISLAMI BANK LTD. offers Lease Financing for acquiring of capital machinery, equipment and other items. The rental payable under lease financing is treated as revenue expenditure and thus is deductible for tax purposes.
Finance & Advisory Services Given the needs of its large and varied base of corporate clients SOCIAL ISLAMI BANK LTD. will be positioning itself to provide investment banking advisory services. These could cover a whole spectrum of activities such as Guidance on means of raising finance from the local Stock markets, Mergers and Acquisitions, Valuations, Reconstructions of Distressed companies and other expert knowledge based advice. By this means SOCIAL ISLAMI BANK LTD. hopes to play the role of strategic counselor to blue-chip Bangladesh companies and then move from the level of advice to possible implementation of solutions to complex financing problems that may arise from time to time. This would be an extra service that would complement the normal financing activities that SOCIAL ISLAMI BANK LTD. already offers to corporate business houses.
CHAPTER-4 FINDING OF THE REPORT Annual Report Annual Report of SOCIAL ISLAMI BANK LTD. Limited is a very useful report for analysis of its financial Statement analysis. This report explained about financial strength, customer service, risk management, corporate social responsibility, and good governance. Directors’ Report section explained the global economy and Bangladesh economy. This report tried to accumulate all the relevant data and topics regarding financial performance. This report would be very helpful and handy for potential investors and policy makers. This report also explained different accounting policies. But the report lacks about the in- depth analysis of financial position. In addition to that, it does not discuss about the industry performance. Moreover, the report does not tell me about the trend of financial performance. In addition to that, emphasis is given on that information that creates positive impression about the company and presents the information in their own way.
2.5.1 Key Financial as on 31 December, 2012
Income statements & Balance sheets
PROFIT AND LOSS ACCOUNT (Combined for Main and offshore banking unit) for the ear ended 31 December 2012
CASH FLOW STATEMENT (Combined for Main and Offshore banking) For the year ended 31 December 2012
Last 5 years financial highlights
Financial Statement Analysis of SOCIAL ISLAMI BANK LTD. The purpose of this chapter is to discover financial Statement analysis of SOCIAL ISLAMI BANK LTD. Limited so that management and the public can identify the most critical problems inside the Bank and develop ways to deal with those problems. Banks today are under great pressure — to meet the objectives of their shareholders, employees, depositors and borrowing customers, while somehow keeping government regulators satisfied that the bank’s policies, loans, and investments are sound. I have separated 10 significant ratios into three broad categories after analyzing some important findings from Income statement and balance sheet of last five years of the bank. The ratios are as follow: A. Profitability Ratios
1. Return on Assets (ROA) 2. Return of Equity (ROE) 3. Net Interest Margin (NIM) 4. Price/Earnings Ratio (P/E Ratio) 5. Earnings Per Share (EPS) 6. Book Value Per Share 7. Loan deposit Ratio 8. Payout Ratio 9. Dividend Yield Ratio B. Liquidity Ratio
1. Current ratio 2. Inventory turnover ratio 3. Gross Profit ratio 4. Net Loan to Total Assets C. Debt Utilization Ratio
1. Debt to Total Assets 2. 2. Times Interest Earned Ratio (TIE) Apart from the above mentioned ratio analysis, I have conducted the following analysis: 1. Cash Flow Statement Analysis;
2. Stockholders’ Equity Statement Analysis;
Income Statement & Balance Sheet Total Income Total income of SIBL has been on increase for last five years except in 2008. The following figure shows the total income of SIBL in past five years. The trend is quite clear. Total income increases significantly from 2008 to 2012.
Total Income (in million)
8000
a k a T
7000 6000 5000 4000 3000 2000 1000 0 2008
2009
2010
2011
2012
Profit Trend The nominal value of profit is increasing each year. From Tk.628 million in the year 2008, the figure has now grown to Tk. 1193 million in the year 2012. But the growth in last 5 years in profit is not very high. The rate as the figure indicates has settled for a stable position.
Income Expenditure Comparison The percent of expense to the income has remained steady over the years. It was lowest in 2008 and then it increases 3% each year in 2008 and 2012.
Deposit and advance comparison The advance and deposit ratio has been increased over the years. From 75.7% in 2008, it reached almost 82% in 2012. So the bank is getting more aggressive as it is getting older.
Ratios Liquidity ratio measures the SOCIAL ISLAMI BANK LTD.’s short-mn ability to pay its maturing obligations. Two most important liquidity ratios, current ratio and net loan to total assets, are discussed in this section.
Current Ratio: The current ratio is the ratio of total current asset to total current liabilities of the bank. This ratio is also helpful in evaluating working capital position because working capital is the excess of current assets over current liabilities. The figure, depicted on the next page, shows the current ratio of the bank over the past five years:
The above figure shows that the current ratio of the bank was increasing from the year 2008 till 2012. After 2012, current ratio started to decline and the year 2012 saw the lowest current ratio for the bank. So it can be said that the liquidity position of the bank is relatively weak. Net Loan to Total Assets: Another way of measuring liquidity for financial institution is to measure the net loan to total assets. It will help to measure amount the bank disburse in the form of loans and advances from the assets. The ratios of net loan to total assets are represented by the following figure.
2013
71%
2012
71%
2011
59%
2010 2009
62% 59%
2011
2008 2007
2012
2010 2009 2008
2006 2005
As the above figure suggests the Net loan to total assets ratio has increased notably in last two years. Again it can be observed that the liquidity position of the bank is relatively weak.
Cash Flow Statement Analysis In the previous chapter, I have analyzed the ratio that is mostly related to income statement and balance sheet. In this section, I will discuss cash flow statement that is the single most important element of survival. Creditors examine the cash flow statement carefully because they are concerned about being paid. A good starting point of the analysis of the cash flow statement is to find net cash provided by operating activities. In case of SIBL, net cash flow from operating activities show an increasing trend except in the year 2012 when it dramatically went down to negative figure. The following figure shows the trend of net cash flow from operating profits over the past five years:
Stockhol der ’ s Equity Statement Analysis Several ratios use stockholders’ equity related amounts to evaluate a company’s profitability and long-term solvency. The following three ratios are discussed and illustrated in this regard: Rate of Return on Common Stock Equity: A widely used ratio that measures profitability from the common stockholders view point is rate of return on common stock equity. This ratio shows how many dollar of net income were earned for each dollar invested by the owners of the bank. The following figure shows the trend of rate of return on common stock equity of the bank over the past five year:
The figure represented above shows that the trend is not very much fluctuating. It has been stable over past five years. In 2012, the return was 22.74% compared to the previous year’s 20.89%. Capital Adequacy Ratio: Capital adequacy focuses on the total position of ba nk’s capital and protects the depositors from the potential shocks of losses that the bank might incur. Banks in Bangladesh have to maintain a minimum Capital Adequacy Ratio (CAR) of not less than 9.00 percent of risk-weighted assets. The figure,
represented on the next page, shows the capital adequacy ratio of the bank over the last five years:
2013 9%
2012 11%
2011 11%
2010 11%
2009 2008 2007
9%
2011
2012
2010 2009 2008
2006 2005
The above figure shows that SOCIAL ISLAMI BANK LTD. is not well capitalized by local standards with a total CAR of 9.43% in 2012. There was a sharp decline in the rate from the year 2011 when CAR was 11 .00%. The bank is not in a position to absorb major financial risks (like credit risk, market risk, foreign exchange risk, interest rate risk etc.). Debt Equity Ratio=
Long term debts Shareholders fund
Year Debt equity ratio
2001 9.31%
2012 6.05%
Debt equity ratio is on lower trend. So there is still scope for arranging long-term loans for further expansion of the business provided profitable activities can be carried on. 3. Though Cash & Balance with other bank is increased by 27% & 47% respectively, borrowing from bank, financial institution also increased by 195%. That means banks liquidity was not sufficient to meet the obligations.
Capital Adequacy Ratio: It is a measure of a bank’s capital. This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. Capital adequacy ratio is the ratio which determines the bank’s capacity to meet the time liabilities and
other risks such as credit risk, operational risk, etc. it is also known as ‘Capital to Risk Weighted Assets Ratio (CRAR).” Capital adequacy Ratio=
TIER 1 CAPITAL -
Tier 1 capital Tier 2 capital Risk weighted asset
100
1. Equity Capital. 2. Disclosed Reserves.
TIER 2 CAPITALS - 1. Undisclosed Reserves. 2. General Loss reserves. 3. Subordinate Term Debts.
Year 2008 2009 2010 2011 2012
Total Capital 3237.87 4711.47 6519.14 9124.62 19190.79
Risk Weighted Asset 32055.71 35940.79 48562.76 105986.2 156148.6
Car 10.10% 13.11% 13.42% 8.61% 12.29%
2013 12.29%
2012 8.61%
2011 13.42%
2010 2009 2008 2007
Car
13.11% 2012
10.10%
Year
2011 2010 2009
2008
2006 2005
Here, we view Capital Adequacy ratio of SIBL was in a good position in 2012 comparing with 2011. That means SIBL has good capacity to meet the time liabilities and other risks.
Loan deposit Ratio: For banks, it is how much they have coming in (deposits) vs. how much they have going out (loans). The more money the bank has loaned out generates more interest income provided the loans are to secure borrowers. Deposits are obligations (debts) the bank has to the depositors. So, a healthy bank has lots of secure loans generating lots of income (interest) to cover depositor’s accounts. Loan deposit ratio=
Loan
Deposit
100
Year
Loan & advance
Deposit
2008 2009 2010 2011 2012
32709.68 36475.74 50665.07 65129.29 92003.56
40350.87 47961.22 60187.89 76834.13 102471.83
Advance deposit ratio 81.06% 76.05% 84.18% 84.77% 89.78%
Dividend Yield Ratio This ratio is important for those investors who are interested in the dividend income. As the shareholder purchases the shares in the open market, his yield (rate of return) is not equal to the dividend declared by the company. Dividend yield ratio= Year
2008 2009 2010 2011 2012
Dividend per equity share Market Pr ice
Dividend per equity share 5 5.5 5.2 5.5 9.5
100
Market Price
76.05 149.4 101.43 64.63 191.6
Dividend yield ratio 6.57% 3.68% 5.13% 8.51% 4.96%
2013 4.96%
2012 8.51%
2011 5.13%
2010
Dividend yield ratio
3.68%
2009 2008
Year
2012
6.57%
2011 2010 2009
2007
2008
2006 2005
Here we view a fluctuation in the dividend yield ratio. It was 6.57%, 3.68%, 5.13%, 8.51% and 4.%% lathe year of 2008,2009,2010,2011 and 2012. Payout Ratio: It is important to some investors that the payout be sufficiently high to provide a good yield on the stock of SOCIAL ISLAMI BANK LTD. Limited. The figure of the next page shows the trend of the payout ratio of the bank over the past five years:
Pay out ratio 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2007
45.45%
28.57%
28.30% 22.22%
Pay out ratio
16.39%
2008
2009
2010
2011
2012
2013
The above figure shows that payout ratio declined in 2010 to 22.22% from 45.45% in 2009 while in 2008 it was as low as 16.39%. A payout ratio of 22.22% means that the bank paid out 22.22% of the EPS in the form of dividend. So SOCIAL ISLAMI BANK LTD. is retaining and reinvesting 77.78% of the earnings for future growth.
Non interest cost to total Interest income
CHAPTER-5 RECOMMENDATION & CONCLUSION Recommendations I have some points to focus which will help the bank to improve the efficiency as well as the quality of work. The points are as follows:
As SIBL is a service providing organization, it should introduce new and dynamic services to serve the people and capture the target market.
Management should set proper planning for its operations of each and every work for the whole bank as well as all branches of SIBL.
It must avoid the duplication of work through better communication.
It also tries to avoid duplication in any case through accuracy and efficiency.
Top management must ensure the proper implication of IT.
Still the bank is not fully computerized. Manual registers are used in some cases. So immediately management should take proper step.
SIBL pays very less interest than other banks. So, if they found higher interest rate offering by other private banks of Bangladesh then they will lose customers.
However, the income of the business is still heavily dependent upon its share on the retail market. The retail sector is very price sensitive.
