Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
INTRODUCTION
Internship is an agreement between an university and an organization that provides an
opportunity for a student to work in an organization for a temporary period of time, so
that he/she can get a real life experience about the corporate life. This internship report is
based on the Prospect Of Merchant Banks In Bangladesh and the report was
prepared from the prospect of a newest investment in recent times, BRAC EPL
Investments Ltd. While working on the main topic of the project additional research
was also done about the organization. The growth analysis and the SWOT analysis was
also prepared. Based on the work experience in BRAC EPL Investments Ltd. it was easy
to comment that it was the fastest growing investment bank in Bangladesh and the details
will be discussed later on the report, and it also represents the prospects of Merchant
Banks in Bangladesh.
In order to strengthen the capital market of Bangladesh the newest initiative of the
government and the regulatory bodies has been to promote merchant banking. The capital
market of Bangladesh has yet to find a solid ground and the investor confidence in the
market is not significantly high, especially after the stock market crash in 1996.
Observing the poor performance of the market over the years the government has taken
initiatives to reform the market. One of such step is to allow banks and financial
institutions offering other financial and banking services to open up their merchant
banking wing.
Since merchant banking is a quite new concept in financial system in Bangladesh and
significantly differs with traditional banking, there is lot of scopes to explore and develop
the industry. At the same time for financing larger investments, investors need to know
the functions and usefulness of merchant banking. General investors also can be
benefited investing through merchant banking service like portfolio management.
Although merchant banks are not providing all range of service that they can do, but day
by day they are enlarging their service area in the capital market of Bangladesh
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Vision
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Mission
To assist in bringing high quality service to our customers and to participate in the growth
and expansion of our national economy. To set high standards of integrity and bring total
satisfaction to our clients, shareholders and employees. To become the most sought after
Investment Bank in the country and to reach all prospective clients throughout
Bangladesh.
Core Values
Our Strength emanates from our owner - BRAC. This means, we will hold the following
values and will be guided by BRAC as we do our work.
Value the fact that one is a member of the BRAC family
Creating an honest, open and enabling environment
Have a strong customer focus and build relationships based on integraty,
superior service and mutual benefit
Strive for profit & sound growth
Work as team to serve the best interest of our owners
Relentless in pursuit of business innovation and improvement
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Background
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Portfolio
Management
Issue Management
IPO Mgt.
Rights/Debt
Underwriting
Non-Discretionary
Cap Invest
Discretionary A/C
Scope of Services:
1. Capital Markets: The Capital Markets group at BRAC EPL is responsible for
providing equities research and conducting wealth management business.
Equity Research: Thorough. Actionable. Conviction.
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2. Portfolio Management: BRAC EPL has a team of highly dedicated and competent
professionals who provide high quality service and manage Clients portfolios.
BRAC EPL places the interests of the Client before its own and it has espoused elevated
standards of professional conduct to safeguard the interest of its Clients. BRAC EPL
brings a depth and breadth of knowledge of the Bangladesh capital market that is
unmatched by any other merchant bank. BRAC EPL has largely invested in technological
infrastructure for efficient order processing and administering the investments of the
Clients. BRAC EPL is also continually striving to enhance its IT facilities to benefit the
Clients. We offer portfolio management through the following accounts:
a) Cap Edge Non-Discretionary Portfolio Account: Cap Edge is a dynamic
investment account that provides investors with the entire range of nondiscretionary portfolio management services including:
b) MCE Managed Cap Edge: To be introduced shortly.
3. Investment Banking:
The Investment Banking team at BRAC EPL consists of professionals with expertise in
the equity and debt capital markets, providing issue management, structured finance and
corporate advisory services to clients. We offer services in the following arena:
Issue Management and Underwriting of Public Offering
We provide issue management and underwriting services forInitial Public Offering (IPO)
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Preference shares
Loan syndication
Corporate bonds
Redeemable bonds
Asset-backed securitization
Private equity
In the recent years, alternative investment asset classes such as private equity
have become increasingly important pools of capital in the global financial
system. BRAC EPL believes that Bangladeshi companies and entrepreneurs are
now willing to take the next step and accept private equity as a means of
financing.
With
economic
fundamentals
improving,
improved
political
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EPL
acts
as
an
intermediary
for
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I)
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Department Overview
In
the
first three months of operation the total Asset under management crossed over
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As the Asset Under Management increased and so did the Daily Transaction volume it all
eventually lead to the increase of Daily Income. The graph below shows how the profit
increased from a few thousand per day to over 5-10 lacs per day.
The treasury department helped out the Portfolio Management team more then any other
departments. All the loans that were disbursed to the clients of the PMD, the loan was
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Details
Apr 2010
May 2010
Total funded
2,300,000,000
Facilities
Total funds
disbursed
Total
60,000,000
Total available
facility
200,000,000
260,000,000
2,100,000,000
As we can see from the figures above, that even after our rapid growth, BRAC EPL has
still enough funds to last for few more years and to support the clients with loan facilities
over the period of time. Even after the remaining funds, the Treasury Departments is
already on the move to collect additional funds to keep the company safe if at any time it
requires additional loan for its clients.
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Human Resources
The Human Resource Department has adequately prepared to support the business in due
time. They were efficient enough to hire the right amount of people at the right time. The
table below shows the current situation of BRAC EPL Investments Ltd.
Department wise
Existing
Budgeted HeadcountDifference
Headcount
(2010)
CEOs Office
Portfolio Management
15
26
11
Capital Market
Investment Banking
Finance
Compliance
Admin/Corporate Affairs 2
Human Resources
IT
Total
37
53
16
The business is running smoothly with the current amount of employees working, and if
any further assistance is required the budgeted head count is prepared to hire additional
support at any time. The figure below shows the distribution of work fore and the
distribution of male employees from female employees.
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Current Products
Currently BRACEPL has only one product which is CAP Edge a Non discretionary
portfolio account. It has been found that it is a tremendous product. Any Bangladeshi
can open that account by depositing only taka one lac. Other market leader like IDLC and
other merchant bank is charging more than Five lac. So compared to the competitors
product it is a tremendous product to attract general investors. Our dedicated team is also
working for the future product like discretionary portfolio account. But the main thing is
that all the general people think that this CAP Edge is a product of BRAC Bank for the
loan purposes due to the lack of marketing. So it is confirm that this can really bring a
revolutionary change in Bangladeshi investment culture if we take some corrective
decisions very quickly than our prime competitors.
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Market operation
BRACEPL head office is located in Motijheel and now they have opened branches in
Gulshan and another branch in Motijheel DSE ANNEX to cope up with the increasing
demand of the clients in the Motijheel area. More branches within Dhaka will be
operation very shortly. Future branches are most likely to be open in Uttara, Dhanmondi
and Mirpur area.
It is sure that to win the whole market with our product we have to establish new
branches in some other parts of the Bangladesh. If we can do that then we will get the
first mover advantages. Though we are operating in Motijheel and Gulshan, but we are
getting some supports from the Noakhali and Comilla office regarding account opening.
But this whole operation is very tiny comparing to the market. So we need to enhance our
operation as early as possible by opening some new branches in the prime & remote
location. As BRAC EPL is a subsidy of BRAC Bank, the one of the main goal is to reach
all prospective clients in Bangladesh. The Chittagong branch is almost at its final stage
and will be operation very shortly, other branches like Bogura, Khulna and Sylhet are to
be opened within the next year.
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Lack of dispersion branchesBefore we were operating only a single office which is situated in the motijheel
area of Dhaka city. Though it is the hub of the share market it Dhaka city, we have
faced many customers who demanded that there we have offices in areas such as
Gulshan, Dhanmondi, Uttara and Mirpur. Branches could help improve the
customer mix and also to raise the awareness of our brand and products. The
primary target should be the gulshan location, which is scheduled to be opened
this month. It will help to bring in the super rich investors and raise our product
awareness among the upper middle class and upper class section of the population.
A portion of this problem was solved due to the opening of the Gulshan and
Motojheel DES ANNEX branch, but more branches will be required shortly as the
company expands.
Lack of Internal CommunicationAnother issue we are facing is our internal lack of communication among
departments and offices. A particular issue is the securities list that is prepared by
the research team. There are occasions when we receive 3 updates of the list in a a
particular day. This becomes a problem for the investors. For e.g- One client took
a securities list in the morning and purchased a particular share that was
mentioned to be marginable in the list. But the same share was mentioned non
marginable in the latter part of the day. However, there was no way for the client
to know that and the individual had already purchased the share perceiving it to be
marginable. The investor faced tremendous problem regarding this issue and
finally our Head of Portfolio had to resolve the issue personally.
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Lack of support from our brokerageWe expect our brokerage to help us with our marketing and sales. Since most
people come for the BO Account and because our brokerage has been in operation
longer, they verbally try to communicate our message and raise awareness of our
product to their existing and new investors. So far we have had modest support
from them but we expect it to increase.
Lack of skilled personnel in Noakhali and Comilla officeLack of skill of employees in these branches causes a lot of communication
problem. Most of them have very little computer knowledge and does not have
proper corporate etiquette. There were incidents, where we had to fax 30 portfolios
just because they cannot operate their email or use MS office. They also are callas
about the compliance issues and are regularly sending incompleted forms. If this
continues, the list of incompleted accounts might get out of control and may
become a big problem for our compliance department.
Lack of Dedicated BrokersMost clients complain about the fact that we have only one dedicated broker. So
our management should think about this and try to come up with a solution for our
client satisfaction.
Lack of MarketingSince we are a service oriented entity, our main focus should revolve around
marketing. Raising product awareness is a key element in this industry. We should
breach the shackles of the traditional belief of merchant bank marketing and set a
milestone which other banks would follow. Instead of using the pull strategy
(Bringing the customers to us), we should use the push strategy (Taking the
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Recommended Solution
After analyzing all the factors, we have come to the conclusion that marketing
should be our first priority. Sales team should be appointed immediately which
will be directly under the supervision of CSD (Customer Service Department).
We could initially start with 5 sales executives who will be appointed to the head
office and the two other branches that are about to open shortly. Each office will
have 1 or 2 executives depending on the volume of customers and importance of
location.
These executives will be hired as contractual employee with a fixed salary and
commission based on performance and sales. A tentative salary structure for such
executives could be BDT 8000/= per month in addition to the commission on sales
which will be up to the managements discretion.
We should also think about going for BTL (Below the line) ads to increase
awareness about the product in a cost effective way. We could insert leaflets in the
newspaper instead of giving printed news paper ads. By this we could cover many
major portions of the city in a very cost effective way. Our target is to bring all the
small investors into the capital market and the BTL ads are a very cost effective
way to achieve it. This will help when we start our branches in Chittagong and the
other division, we could then go for ATL (Above the line) Ads choosing the media
that will assure highest exposure.
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Financial Highlights
BRAC EPL has started its operation for a very short amount of time, but even after that
its growth sky rocketed at a very impressive speed. No one in the market expected this
kind of growth from a new organization and the PMD team met their annual budget by
the end of the first quarter. The whole team worked cohesively to reach their goal. The
table below shows the success of the BRAC EPL Investments in the first few months of
its operation.
Details
Interest
income
Interest
expense
Jan 2010
Feb 2010
Mar 2010
Apr 2010
YTD
Budgeted
Taka
Taka
Taka
Taka
Taka
Taka
113,899
1,635,510
3,578,939
5,328,348
11,872,849
125,000
125,000
113,899
1,635,510
3,453,939
5,203,348
11,872,849
1,291,471
8,517,998
9,296,344
19,105,813
45,827,874
252,035
2,458,967
4,019,353
6,730,355
13,568,890
1,039,436
6,059,031
5,276,991
12,375,458
32,258,984
33,973
2,469,342
2,395,024
15,198,339
9,007,690
Net interest
income
Fee and
commission
income
Fee and
commission
expense
Net fee and
commission income
Net income
from other
financial
instruments
carried at
fair value
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7,670,205
Other
operating
4,675,128
2,181,117
21,460,500
income
35,986,950
1,333,333
Total
operating
4,675,128
3,668,425
31,624,383
28,796,159
68,764,095
54,472,856
3,081,571
3,901,296
4,398,531
5,841,485
17,222,883
50,538,636
352,376
798,150
806,123
2,156,649
2,033,981
3,281,571
4,253,672
5,196,681
6,647,608
19,379,532
52,572,617
1,393,557
(585,247)
26,427,702
22,148,551
49,384,563
1,900,239
income
Operating
expenses
Depreciatio
n and
200,000
amortization
Total
operating
expenses
Profit
before
income tax
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Objectives
The report purports to focus on two aspects:
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Methodology
The paper has been written on the basis of information
collected from primary and secondary sources. The primary information has been
collected from the Institutional and as well as some general clients of the bank.
The secondary information has been collected from the banks records, corporate
newsletter, branches manuals, different websites and various publications in the bank.
Some opinions and ideas have been incorporated in the paper through interactive sessions
and interviews with the top management and mid level executives of the organization.
Limitation
During my orientation I am able to learn a lot of things but still it was not enough. There
are some limitations that I cant ignore. The main limitations were:
First of all the duration of my orientation was not enough to cover all aspects of
non-banking operations.
Data unavailability was the constraint. Official documents on the detail activities
of the department were not available as the the organization was newly formed
As the company is newly formed, many of the information were not propel filed
and it was hard to access them.
Guiding Principals
BRAC EPL Investments Ltd. is a multi-product financial institution offering an array of
diverse financial services and solutions to institutional and individual clients to meet their
diverse and unique requirements. Following are the guiding principles that shape the
organizational practice of BRAC EPL.
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PESTLE Analysis
Political, Environmental, Social, Technological, Legal, and Economical analysis are very
important before measuring any organizations performance. To evaluate the position of
BRAC EPL in the industry, it is essential to know where and in what situation this
institution is performing its operations. Following factors are discussed to show their
effect on BRAC EPL and on this industry of Bangladesh as a whole.
Political Factors: Political environment was always unstable and it always affects every
aspect of life of this developing country. Due to political turmoil since October 2006 the
share market behaves inconsistently. During this period, DSE general index reached into
record maximum point and also fallen to record minimum point. 26th November, 2007
DSE GEN reached 3071 point increasing 127 in a single day while 3 rd December it fallen
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For example in 25th November, 2007 SEC imposed rule declaring ban on margin loan in
all merchant banks.
Environmental Factors: Environmental factors are those that affect the industry due to
environmental, ecological or ethical changes. Since share trading is not highly related to
environmental factors, the merchant banking industry is also not influenced by those
factors. However, some large companies of this industry checks whether its clients is
complying with the Environmental Conservation Act 1995 and Environmental
Conservation Rule 1997 properly in the investment projects.
Industry Life Cycle
Merchant banking is a very new concept in Bangladesh capital market arena. This
industry is growing rapidly basically because of the profit margin from the portfolio
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The merchant banking industry just covered its embryonic stage. Now it is in growth
stage. Although the number of rivalry increased a lot, but there is huge potential into this
industry.
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IDLC
IDLC Finance Ltd commenced its journey, in 1985, as the first leasing company of the
country with multinational collaboration and the lead sponsorship of the International
Finance Corporation (IFC) of The World Bank Group. Technical assistance was provided
by Korea Development Leasing Corporation (KDLC), the largest leasing company of the
Republic of South Korea.
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institutions helps the company to constantly develop through sharing of experience and
professional approach at the highest policy making level.
IDLC, as a multi-product financial institution, offers a diverse array of financial services
and solutions to institutional and individual clients to meet their diverse and unique
requirements. The product offerings include Lease Finance, Term Finance, Real Estate
Finance, Short Term Finance, Corporate Finance, Merchant Banking, Term Deposit
Schemes, Debentures and Corporate Advisory Services.
IDLC's vision is to be Bangladeshs best multi-product financial institution. In achieving
this vision and goal, we realize the importance of taking due care of all of
our constituents, particularly the share-holders, customers and workforce. The corporate
philosophy is to perform with proper accountability and achieve highest ethical standards
in all our activities.
IDLCs unique institutional shareholding structure, compromising mostly of financial
institutions, helps the company to constantly develop through sharing of experience and
professional approach at the highest policy making level. The company has authorized
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Frequency
4
12
11
3
30
7.5
7.5
Percentage
13.3333333
40
36.6666667
10
100
BO Account
Margin Loan Account
Both
Mean
Median
Frequency
4
9
17
30
10
9
Percentage
13.3333333
30
56.6666667
100
The table and the graph above shows that more than 50% of the respondents hold both a
BO account and a Margin Loan account, when I personally asked the respondents the
reason for this, they said its simple, they want to get the margin loan facility so that they
can trade double the volume, and on they also hold an BO account, so that they can apply
for IPO, a facility that is not available in the margin loan account. Half of the respondents
who were only using the margin loan facility were new, they had not that much exposure
with the share market. But they tool up the loan as it gave them a chance to double their
investments.
That gave me the opportunity to ask the next question, do the respondents think that the
margin loan facility is very risky.
3. Do you think Margin Load is risky?
Frequency Percentage
a) Very risky
7 23.3333333
b) Little risky
21
70
c) Safe
2 6.66666667
d) Very Safe
0
0
30
100
Mean
7.5
Median
4.5
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The table and the graph above tell us about the clients perceptions about the margin loan
facility. Question number 4 was to get the reason behind answer number 3, where I asked
the respondent the reason behind margin loans riskiness. We can see that none of the
respondent are answered that margin loan is very safe, as there is a loan involved they all
thought that there are some risk involved in the margin loan facility. Only 6% of the
respondents thought that it was somewhat safe, but the as these 6% of the respondents
had more then 5 years experience in the share market and they sort of know all the tricks
behind the market, that was the reason they thought that margin loan facility is was safe.
The other 93% of the respondents thought that margin loan was risky even as they were
using it. They said that there are constant interest charges and management fees, and even
if they are in a loss they had to pay them. Therefore it put them into some pressure to
always pay up the charges in the quarter end.
As I asked the next question, I was amused to see that fully that 100% respondents
choose one answer. When I asked them that will it be easier to use the margin loan if they
have more information about the market? And as I said before all the respondents said
yes. It made me curious and I rally wanted to find the reason why every one said yes.
When I asked other people in the trading floor about this question, I was surprised every
single one them said yes. Then I took this issue to one of Traders, he said, any
respondents will say yes if you provide more market information to them. No one wants
to make a loss, so more as they get more information they will be more into it. The graph
below shows how much the respondents wants to get more information.
5. Do you think it would be easier to use Margin
Loan Facility if you have more information about
the market?
Frequency
Percentage
a) No
0
0
b) Yes
30
100
30
100
Mean
15
Median
15
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The next question that also would have been one sided
except if there were no respondents that had previously
used margin loan facility. The question asked if the loan interest, management fees and
the buy and sell brokerage commission that the clients were paying is high? The
respondent answers from the point of view of BRAC EPL Investments Ltd. The graph
below shows their answers.
6. Do you think that interest, fees and brokerage
commission is too expensive?
Frequency
a
b
c
Percentage
Yes
16
53.3333333
No
20
8
30
10
8
26.6666667
100
Average
Mean
Median
More then 50% of the clients said that the charges are too high, but as I looked further
into the topic, I found out that the clients perceive the charges to be high. The remainder
40% who said that the charges are not high and it average, they also went to different
merchant banks for queries and some contains margin loan accounts in other banks as
well, therefore after market survey they perceive that the charges in BRAC EPL
Investments are not that high compared to its competitors.
The last question was little confidential for the respondents, not all the clients wanted
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Case Studies
1. Relocation from Gulshan Office to Motijheel Head Office.
I had tremendous opportunity to be with an organization from its very start. At the
very beginning there were just three interns working for BRAC EPL Investments
Limited. We were assigned under three department heads. As mentioned before
BRAC EPL Brokerage office was located in Gulshan, but there was not sufficient
space to accommodate all of the Investment team. So, before the new Motijheel office
was ready, all of the Investments was temporary working on the Gulshan Branch. The
Investment Team was located there for four months, and I was first assigned to the
work on the Gulshan Branch. And the day finally came when Head Office was ready
and the Whole Investment team was getting to move. At first the Portfolio
Management Team was assigned to move and as I was an intern of the PMD
(Portfolio Management Team) was I lucky to make the first move as well. Therefore
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BRAC EPL has a plan to open as many branches in Dhaka as possible. The main
purpose of opening branches all around Dhaka is to increase the client base and to
accommodate the increasing amount of clients. The opening of two other branches
was a huge success. Within 1 month Gulshan Branch opened 100+ clients and their
asset under management was over 8 corers. Another branch was opened in Motijheel
in the DSE Annex building so that BRAC EPL can accommodate the huge client base
in Motijheel area. And this approach really pleased the clients as now they have
enough space to sit comfortably and trade. Even as the head office was just around
the block the DSE Annex branch showed huge success. Within three weeks they were
also able to open 50+ accounts. Opening branches had a huge financial impact on
BRAC EPL Investments. It not only increased the Asset Under Management Value,
but it also increased the trade volume and the total trade amount.
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