Executive Summary: Liquidity management is a concept that is receiving serious attention all over the world

especially with the current financial situations and the state of the world economy. Some of the striking
corporate goals include the need to maximize profit, maintain high level of liquidity in order to guarantee
safety, attain the highest level of owners net worth coupled with the attainment of other corporate objectives.
Liquidity plays a significant role in the successful functioning of a bank as they are highly exposed to the credit
and liquidity risks. Effective liquidity risk management helps to ensure a bank's ability to meet cash flow
obligations, which are uncertain as they are affected by external events. On the other hand dilemma exists in
liquidity management to achieve desired trade-off between liquidity and profitability. This study will seek to
investigate the liquidity management scenario and its effects on the profitability by performing an analysis on
IFIC Bank Ltd. In addition to the overview of this bank and theoretical concept a trend analysis of the liquidity
ratios will be given in order to analyze the overall liquidity management scenario of IFIC Bank Ltd. Moreover,
this report will also try to find the relationship between liquidity and profitability. To investigate this
relationship this research will consider two profitability measures i.e. return on assets (ROA), return on equity
(ROE) and it will be performed through regression analysis. Lastly a conclusion and recommendation regarding
the liquidity management scenario of IFIC Bank Ltd. will be given based on the analysis.

Table of Content:
Executive Summary

1.0. Introduction
1.1. Origin of the Report
1.2. Research Question, Objectives and Scopes of
the Report
1.3. Literature Review
1.4. Research Methodology
1.5. Limitations
1.6. Report Preview

2.0. Organizational Preview

3.0. Internship job description
4.0. Theoretical part
4.1. Basic definitions of liquidity
4.2. What is liquidity management
4.3. Liquid Assets of a bank
4.4. Liquidity gap
4.5. Ways to managing liquidity mismatches
4.6. Liquidity Risk

5.0.Liquidity
Management-Requirements
of
Central Bank
5.1. Asset Liability Management Policy of Central
Bank
5.2. Action Points
5.3. Key Management Indicators
5.4. Maturity Profile Mismatch
6.0. Liquidity Management of IFIC Bank Ltd.
6.1.Trend analysis of Current Assets and
Current Liabilities
6.2. IFICs liquidity Risk Management Framework
6.3. Liquidity Statement of IFIC Bank Ltd.
6.4. CRR and SLR of IFIC
6.5. Estimating IFICs liquidity needs
6.6. Trend Analysis
6.6.1. Liquidity Ratio Analysis
6.6.2. Profitability Ratio Analysis
6.7. IFICs approaches for handling liquidity crisis
7.0. Hypothesis testing of the relationship between
liquidity and profitability
8.0. Conclusions and Recommendations
9.0. Appended Part
9.1. References
9.2. Appendices
9.3. Bibliography
10.0. Table of Table
11.0. Table of Chart

Introduction: This report will be prepared as an academic requirement for the BBA Internship Program under
the supervision of Debashish Shaha, Lecturer and Coordinator of my Internship, Department of Finance &
Banking, Jahangirnagar University. As a participant of this program, the author is placed at IFIC Bank Ltd. Head

office, Motijheel for a period of three months starting from November 15- February 15. On basis of the
experience gathered from different department of IFIC bank, I am highly interested to work on the liquidity
management scenario of this bank and my research title will be Liquidity Management of IFIC Bank Ltd and
its impact on profitability.

Objective: The major objective of this report is analyze the liquidity management of the IFIC Bank Ltd. To
fulfill this objective I will concentrate on the following issues:
Analyzing the liquidity position of IFIC Bank Ltd. by using some statistical measures.
Central bank requirements for the commercial banks on liquidity management.
Estimating liquidity need of the IFIC Bank Ltd.
Finding out the internal system & liquidity management process of IFIC Bank Ltd.
Drawing a relationship between liquidity and profitability in terms of analyzing the overall position of
IFIC Bank Ltd.
Pointing out the major findings of the report & provide some valuable recommendations
based on them.

Research Methodology:
Research Design: This internship report will be mainly a descriptive research. The main focus of this report will
be to analyze the Liquidity Management Scenario of IFIC Bank Ltd. and establishing a relationship between
liquidity management and profitability of this bank.
Sources & Collection of Data: In this research data will be collected from both primary and secondary sources.
The content and the collection procedure of those data from both sources is given bellow:
Primary Sources: Data will be collected from the employees of Treasury department of the IFIC Bank Ltd
by group discussion, survey, and my observation of the process of managing the liquid assets of the bank.
Secondary Data: Annual reports of these bank from the year 2007 to 2014, Asset Liability Management
Guideline 2004 of IFIC Bank Ltd. and data from different published sources i.e. research papers, literatures
on liquidity management will be used in this report.

Literature Review: Liquidity is the ability of a company to meet its short term obligations. It is the ability of
the company to convert its assets into cash. Inability to meet the short term liabilities may affect the companys
operations and in many cases it may affect its reputation too. Lack of cash or liquid assets on hand may force
a company to miss the incentives given by the suppliers of credit, services, and goods. Loss of such incentives
may result in higher cost of goods which in turn affect the profitability of the business. So there is always a
need for the company to maintain certain degree of liquidity.
A number of researches have examined the impact of liquidity management on the profitability in commercial
banks. Adebayo et al. (2011) examined liquidity management and commercial banks profitability in Nigeria.
Findings of this study indicate that there is significant relationship between liquidity and profitability. Arif
(2012) tested liquidity risk factors and assessed their impact on (22) of Pakistani banks during the period (20042009). Findings of the study indicate that there is a significant impact of liquidity risk factors on the banks
profitability, where an increase in deposits lead to increasing in the banks profitability in terms of reducing
dependence on the central bank in meeting the customers obligations, and profitability is negatively affected
by the allocation of non-performing loans and liquidity gap.
Al-Tamimi and Obeidat (2013) identified the most important variables which affect the Capital Adequacy of
Commercial Banks of Jordan in Amman Stock Exchange for the period from 2000 2008. The study shows that
there is a statistically significant positive correlation between the degree of capital adequacy in commercial
banks and the factors of liquidity risk, and the return on assets.

Based on the above literatures, it can be said that several studies have been done on different aspects of
liquidity management and profitability analysis through ratio, but not any comprehensive study on that issue
has yet been conducted on the banking sector of Bangladesh. Hence, the present study will aim to analyze the
Liquidity management of IFIC Bank Ltd. and reveal a relationship between liquidity and profitability.

Data Analysis: For qualitative and quantitative analysis of data along with trend analysis of financial
statement components, ratio analysis, and regression analysis will be used in this report. For measuring the
annual liquidity position of the bank and drawing a relationship between the liquidity and profitability the
following ratios will be used:
Current Ratio
Working Capital Ratio
Quick Ratio
Cash Position Indicator Ratio
Liquid Asset Ratio
Capacity Ratio
Total Deposit Ratio
Core Deposit Ratio
Loan-to-Deposit Ratio

Reserve Ratio
Debt to Equity Ratio
Volatile liabilities Dependency Ratio
Interest Coverage Ratio
Liquid Asset/ Total Liabilities Ratio
Purchased Funds Ratio
Net Non-Core Funding Dependence Ratio
Return on Assets (ROA)
Return on Equity (ROE)

After the ratio analysis another statistical analysis will be made to draw a relationship between the liquidity
position and profitability of IFIC Bank Ltd. To reveal this relationship the following regression model will used:
Yit = i+ Xit + eit
Where,
Yit is profitability measure ( ROE and ROA)
i refers to time-invariant firm-specific effects
Xit are the independent variables(Different Liquidity Ratios)
coefficients
eit is a random disturbance.
Based on the above general model the effect of liquidity position on the banks profitability will be evaluated
using the hypothesis outlined below.
H01: ROAit= it+ Lit+ eit..(1)
H02: ROEit= it+ Lit+ eit.(3)

Conclusion: IFIC Bank Ltd. is one of leading private commercial banks of the country. To mobilize funds from
surplus units and deploy funds to deficit units, the bank is playing a great role in the economic development of
the country. So, in this report I will try to analyze the overall liquidity management condition of this bank and
to give some recommendation regarding the supervision of the mismatches of liquidity so that it can perform
its banking activities more effectively and efficiently.

Bibliography:

Annual report 2007-2014 IFIC Bank ltd. Official website: www.ificbank.com.bd/annual_report.php

Asset Liability Management (ALM) Policy Guideline June 2004, IFIC Bank Ltd.
Peter Rose, Sylvia, Bank Management & Financial Services, 9th Edition, Chapter 7, 11, 13
Altman, E. I. 1968. Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy.
The Journal of Finance, Vol.23 No.4
Masulis, R.M, 1998. The Debt/equity Choice, Ballinger, Cambridge, Mass.
Miguel, A. and Peinado, C. 2004. Optimal Capital Structure, Endogenous Bankruptcy, and the Term
Structure of Credit Spreads. Journal of Finance, Vol. 51, No. 3, PP: 987-1019.