Chapter-01

Introduction

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1.1Introduction of the study
Banks play the most important role in the economy. Banks collect money from the
individuals and lend them to others. Now banks offer the widest range of financial
services and perform lots of financial functions. Thus banks have proven that they are
the key factor for the business and economy as well.
Jamuna Bank Limited is one of the largest private banking institutions in Bangladesh,
dynamic in actions, honest in dealings, just in judgment, fair in approaches and
devoted to high quality service to customers and thereby contribute to the growth of
GDP of the country throughout stimulating trade and commerce, boosting up export,
poverty alleviation, raising living standard of limited income group and overall
sustainable socio-economic development in the country.
To achieve the aforesaid objectives of the Bank, different banking activities must play
an active role to provide the financial assistance to the customer who also helps them
by providing them with management assistance when needed. Jamuna Bank Limited
has played this role with the experiences in the banking sector where the others are
not merely performed.
The internship report compromises a brief study on the Overall Credit Performance of
Jamuna Bank Limited during three months internship. The report is distributed in
many parts according to nature and requirement of organization and according to the
instructions of supervisor of report.

1.2 Objectives of the Study:

The objective of the study is to gather practice of all knowledge regarding business
sector and operations. Theory classes of B.B.A provide us theories regarding business
sector and practical orientation gives us the chance of view those systems and their
operation. More precisely we can identify those objectives:
 To gather the practical experience base on the theoretical knowledge.
 To habituated with the corporate environment and culture.
 To serve the faction of overall banker customer relationship.
 To evaluate the financial performance of Jamuna Bank Limited.
 To look at the types of credit offered by Jamuna Bank Limited and its overall
credit management.

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  To critically evaluate the avenues of credit policies and guidelines followed by
Jamuna Bank Limited.
 To know the Credit Risk Management of Jamuna Bank Limited.
 To evaluate the Credit Performance of Jamuna Bank Limited.

1.3 Methodology:
I have designed this report as an expletory research paper. I have discussed the
general banking system of Jamuna Bank Limited and critically analyze the credit
performance with the standard one as per theoretical framework. For this purpose I
use my personal observation during my internship program. Through conversation
with the different level officers of the bank, I also gather knowledge about the credit
system. For theoretical framework, I go through a number of credit related books,
financial management books, business communication book, foreign exchange
manuals, Bangladesh Bank Guidelines.
Sources of the Information:
For smooth and accurate study everyone has to follow some rules and regulations.
The study inputs were collected from two sources:

Primary Sources:
 Practical desk work.
 Face to face communication with officers.
 Face to face conversation with the client.
 Facing some practical situation related with the day to day banking activities.

Secondary Sources:
 Annual Report of Jamuna Bank Limited.
 Brochures.
 Websites.
 Different publications of Jamuna Bank Limited.
 Theoretical books relating banking sectors.
 Bangladesh Bank Report.

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1.4 Scope of the Study:
As I was an intern, my scope was limited and restricted for some purpose. I had
maintained some official formality for the collection of data of my report. This study
will give a clear idea about the credit performance of Jamuna Bank Limited as well as
the different products and services of Jamuna Bank Limited. At last the credit position
of the bank in the banking industry based on its last couple of year’s performance.
First of all we have to know the customer. If the applicant is new to us then we let the
client open bank account and continue transaction for a certain time and upon good
reflection of transaction we will proceed with the loan proposal. Having an account or
opening an account is must to proceed for any loan request from any customer.
Whatever we want to facilitate the customer depends on our knowledge on the client.
And an account helps up to enrich our knowledge on our client. And if the transaction
in the customer account reflects healthy and sound views then we proceed with the
loan application to the next step as follows.

1.5 Limitations of the study:

Any research work needs high degree of involvement regarding of information,
creation of data base, literature review and analysis of data. While doing so, many
limitations arise even though we always put our best effort to avoid them. In
conducting the present study, the following limitations have been faced.
 The personnel of the organization did not want to disclose the classified
information to the outsiders.
 Due to lack of experience, there is a chance of having some mistake in the
report though best effort has been applied to avoid any kind of mistake.
 I have faced major limitation in the limitation in the financial projection as my
estimation was rather than information base than of actual one.
 Time was not sufficient to make an in depth study on such issue.

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 Chapter-02
Overview of the Organization

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2.1 Introduction:
Jamuna Bank Limited provides commercial banking services in Bangladesh. The
bank primarily engages banking, trade finance, project finance, retail banking, small
enterprise finance, consumer finance and syndication. Its range of service offerings
include cash management services, payment and clearings, safe deposit locker
services, employee benefits, collection services, assets management, services and
SWIFT for foreign trades. Jamuna Bank has an investment of 16314.93 million taka
in its business.

2.2 Location:
The registeredoffice and corporate Head office at ChiniShilpaBhaban, 3 Dilkusha,
C/A, Dhaka-1000. Its branches are situated at all the major cities of the country except
09 which are situated at rural area. The number of bank branches stood at 83 on April
2018. The bank has a plan to open more branches over the next several years at
different important commercial places of the country.

2.3 History of Jamuna Bank Limited:

Jamuna Bank Limited is a banking company registered under the Companies Act,
1994 with its head office at ChiniShilpaBhaban (2nd, 3rd and 8th floor),3, Dilkusha,
C/A, Dhaka-1000 Bangladesh. The bank started its operation from 3rd June 2001.
Jamuna Bank Limited is a highly capitalized new generation bank started its operation
with an Authorized capital of tk.1600.00 million as of December 2001, Paid up capital
of tk.1072.50.00 million as of December 2006, Authorized capital increased and
stood at tk10000.00 million as of December 2018 and Paid up capital is tk.3648.40
million.

Jamuna Bank Limited is one of the leading private commercial banks in Bangladesh
that has achieved tremendous popularity and creditability among the people for its
products and services.

It is a public limited company and its shares are traded in Dhaka and Chittagong stock
exchange the bank undertakes all types of banking transaction to support the
development of trade and commerce in the country. Jamuna Bank Limited’s services

6
are also available of the entrepreneurs to set up new ventures and BMM industrial
units.
To provide clientele services in respect of international trade it has established wide,
corresponded banking relationship with local and foreign banks covering major trade
and financial interest home and abroad.
The bank gives special emphasis on export, import, trade finance, SME finance, retail
credit and finance to women entrepreneurs.
Being a third generation bank of Bangladesh its focuses on,
 Remaining with time.
 Managing change.
 Developing human capital.
 Creating true customer’s value.

2.4 Corporate Vision, Mission, Motto and Slogan:

2.4.1 Vision of Jamuna Bank Limited:
To became a leading banking institution and plays private role in the development of
the country-
 To stands out as a pioneer banking institutions in Bangladesh.
 To contribute significant to the national economy.

2.4.2 Mission Statement of Jamuna Bank Limited:

The bank is committed to satisfying diverse needs of its customers through an array of
products at a competitive price by using appropriate technology and providing timely
services, so that a sustainable growth, reasonable returns and contribution to the
development of the country can be ensured with a motivated and professional work
force.
Jamuna Bank Limited aims to become one of the leading banks in Bangladesh by
prudence, flair, quality of operations in their banking sector. The bank has some
missions to achieve the organizational goals. Some of them are as follows:
 Fast and accurate customer services and innovative banking at a competitive
price.
 High quality financial services with the help of latest technologies.
 Deep commitment to the society and the growth of national economy.

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  Attract and retain quality human resources, high standard business ethics.
 Balanced growth strategy, steady return on shareholders’ equity.
2.4.3 Corporate Motto:
The bank will be a confluence of the following three interests:
 Of the bank: Profit Maximization and Sustained Growth.
 Of the Customer: Maximum Benefit and Satisfactions.
 Of the society: Maximization of Welfare.
2.4.4 Slogan of Jamuna Bank Limited:
Your partner for growth.

2.5 Ownership Structures:

Leading industrialists of the country having vast experience in the field of trade and
commerce own 52.84% of the share capital and the rest is held by the general public.
Jamuna Bank Limited’s broad currently consists of 18 Directors. Authorized capital is
tk.10000.00 million and paid up capital is tk. 3648.40.00 millions as of 31 st December
2018.

2.6 Management Structure:

Management Team:
Jamuna Bank Limited is managed by highly professional people. The present
Managing Director of the bank is a forward-looking senior banker having decades of
experience and multi discipline knowledge to his credit both at home and abroad. He
is support by an educated and skilled professional team with diversified experience in
finance and banking. Jamuna Bank Limited has already achieved tremendous progress
within a short period of time of its operation. The lists of management structures are
given bellow:

Name of the bank Jamuna Bank Limited

Incorporate Date April 2, 2001
Date of commencement April 2, 2001
Swift JAMUBDDH
Chairman Mr. Shaheen Mahmud
Vice chairman Mr. Ismail HossainSiraji

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Directors Engr. AKM MosharaafHossain
Engr. Md. AtiqurRahman
Mr. GolamDastagirGazi
Mr. FazlurRahman
Al- HazNur Mohammad
Mr. Md. Tajul Islam
Mr. GaziGolamMurtaza
ASM Abdul Halim
Mr. Sakhawat Abu Khair Mohammad
Al- Haz Md. RezaulKarim Ansari
Mr. Md. Rafiqul Islam
Mr. Narayan Chandra Saha
Managing director Mr. ShafiqulAlam
Secretary Mr. Md. Anwar Hossain
Deputy Managing Director Mirza Elias Uddin Ahmed
A K M Saifuddin Ahmed
Mr. MoslehUddin Ahmed
Auditors A/S HawladarYunus and CA.(Chartered
Accountant)
Total number of employee 1928
Listing status Dhaka and Chittagong Stock Exchange

Sponsors:
The sponsors of Jamuna Bank Limited are highly successful leading entrepreneurs of
our country. They have stakes in different segments of the national economy. They
are eminent industrialist and businessmen having reputation both at home and abroad.
The names of the sponsors are given below:
1. Al – Haj M.A Khayer.
2. Mr. ArifurRahman
3. Mr. GolamDastagirGazi (Birprotik)
4. Mr. FazlurRahman
5. Mr. M N H Bulu
6. Md. Birajul Islam Varosha

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 7. Mr. IrshadKarim
8. Mr. Shaheen Mahmud
Corporate Culture:
 Employee of Jamuna Bank Limited.
 The client comes first.
 Search for professional.
 Openness to new ideas and new methods to encourage creativity.
 Quick decision making.
 A sense of professional ethics.

2.7 Corporate Strategies of Jamuna Bank Limited:

 To identify customers credit and other banking needs and monitor their
perceptions towards their performance in meeting those requirements.
 To review and update policies, procedures and practices to enhance the ability
to extend better services to customers.
 To strive for customer satisfaction through quality control and delivery of
timely services.
 To train and develop all employees and provide adequate resources so that
customer needs can be responsibly addressed.
 To manage and operate the bank in most efficient manner to enhance financial
performance and to control the cost of funds.
 To promote the organizational effectiveness by openly communicating
company plans, policies, practices and the procedures to all employees in a
timely fashion.
 To cultivate a working environment that foster positive motivation for
improved performance.
 To diversify portfolio both in the retail and wholesale market.
 To increase direct contrast with customers in order to cultivate a closer
relationship between the bank and its customers.

2.8 Corporate Objectives:

 To earn and maintain CAMEL Rating ‘’Strong’’.
 To establish relationship banking and improve service quality through
development of Strategic Management Plans.
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  To introduce fully automated systems through integration of information
technology.
 To ensure an adequate rate of return on investment.
 To keep risk position at an acceptable range (including any off balance sheet
risk).
 To maintain adequate liquidity to meet maturing obligations and
commitments.
 To maintain a healthy growth of business with desired image.
 To maintain adequate control systems and transparency in procedures.
 To develop and retain a quality work-force through an effective Human
Resources Management System.
 To ensure optimum utilization of all available resources.
 To pursue an effective system of management by ensuring compliance to
ethical norms, transparency and accountability at all levels.

2.9 Strategic policies:

 To manage and operate the bank in the most efficient manner to enhance financial
performance and to control cost of fund.
 To strive for customer satisfaction through quality control and delivery of timely
services.
 To identify customers credit and other banking needs and monitor their perception
towards our performance in meeting those requirements.
 To review and update policies, policies, procedures and practices to enhance the
ability to extend better service to customers.
 To train and develop all employees an provide them adequate resources so that
customers needs can be reasonably addressed.
 To promote organizational effectiveness by openly communicating company
plans, policies, practices and procedures to employees in a timely fashion.
 To cultivate a working environment that fosters positive motivation for improved
performance.
 To diversify portfolio both in the retail and wholesale market.
 To increase direct contact with customers in order to cultivate a closer relationship
between the bank and its customers.

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2.10 Hierarchy of Jamuna Bank Limited:

Figure: Hierarchy of Jamuna Bank Limited

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2.11 Branch Organogram:

Figure: Branch Organogram

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2.12 Number of Branches:
Currently the bank has 97 branches. More branches and service centre will be opened
at commercially important locations during the near future.
Year JBL
2014 35
2015 39
2016 73
2017 83
2018 97

120

100

80

60

40

20

0
2009 2010 2011 2012 2013 2014

Figure: Number of branches

2.13 Scheme Offered By Jamuna Bank Limited:

 Monthly benefit schemes (MBS)
 Monthly savings schemes (MSS)
 Education saving schemes (ESS)
 Marriage deposit schemes (MDS)
 Double growth deposit schemes (DGDS)
 Triple growth savings scheme (TGSS)
 Lakhpoti deposit schemes (LDS)
 Kotipoti deposit schemes (KDS)
 Millionaire deposit schemes (MDS)

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2.14 Types of Deposit Accounts:
 Current Deposit (CD)
 Savings Bank Limited (SBD)
 Fixed Deposit Rate (FDR)
 Monthly Term Deposit (MTD)
 Any other deposits as may be approved/advised by Head Office.

2.15 Financial Performance of Jamuna Bank Limited:

 Authorized capital:
Authorized capital of the bank remain unchanged at Tk.4000.00 million in the year
2014 to 2018 and the Paid-up capital of the bank is Tk.1225.71.00 million in 2009
ordinary shares of Tk.100 each. Except 2007 the number of ordinary share is same for
both years. Authorized capital is Tk.10000.00 million and paid-up capital is
Tk.5160.68 million as of 31st December 2018.
The data table with graph is graph is given below:
Year Authorized capital (in Paid-up capital (in
millions) millions)
2014 4000.00 1225.71
2015 4000.00 1313.27
2016 4000.00 1621.88
2017 10000.00 2230.09
2018 10000.00 3648.40

12000

10000

8000
authorized
6000
paid up
4000 Column1

2000

0
2009 2010 2011 2012 2013 2014

Figure: Authorized Capital and Paid-up Capital

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 Reserve fund and other reserve:
The total reserve was 430.78 million in the year 2014, in 2015 it was increased on
Tk.847.46 million so the difference is Tk.416.68 million. In 2017 it was reached at
Tk.4178.10 million and in 2018 it was reached to tk.3633.11 million. Here, we can
say that reserve fund of Jamuna Bank Limited is increasing gradually. Data table
along with graph is given below:
Year Reserve fund (in millions)
2014 430.78
2015 847.46
2016 2359.00
2017 4178.10
2018 3633.11

reserve

2014 2015 2016 2017 2018

Figure: Reserve Fund and Other Reserve of JBL

 Deposit of Jamuna Bank Limited:
Deposit is one of the important aspects of banking sector. It is terned as the life blood
of commercial banking. Jamuna Bank Limited was able to collect the deposit of
tk.14454.13 million. It was able to collect the deposit of tk.20924.02 million in the
year 2014. In the year 2015 it collected total deposit of tk.27307.94 million. The
performance of deposit collection is improving gradually. To present this situation
table along with graph are given below:

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Year Amount of deposit (in million)
2014 20924.02
2015 27307.94
2016 42356.02
2017 60676.56
2018 70508.05

80000

70000

60000

50000

40000
deposit
30000

20000

10000

0
2014 2015 2016 2017 2018

Figure: Amount of Deposit of Jamuna Bank Limited

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 Chapter-03
Credit Risk Management

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3.1 Credit Policy of JBL:
Risk is inherent in all aspects of commercial operation. However for banks and
financial institutions credit is an essential factor that needs to be managed. Credit risk
is the possibility that a borrower will fail to meet its obligation in accordance with
agreed terms. Credit risk, therefore arises from the bank’s dealing with or lending to
corporate, individual and other banks or financial institutions.
Credit risk management needs to be a robust process that enables banks to proactively
manage loan portfolio in order to minimize losses and earns an acceptable level of
return for shareholders. Central to this is a comprehensive IT system which should
have the ability to capture all key customer data, risk management and transaction
information. Jamuna Bank Limited has real time on-line banking systems which
enable to capture all the key customer data. Given the first changing dynamic global
economy and the increasing pressure globalization, liberalization, consolidation and
disintermediation, it is essential that banks have robust credit management policies
and procedures that are sensitive and responsive to those changes.Jamuna Bank
Limited being a progressive and dynamic private sector bank having very successful
and proven track record has a pragmatic credit policy guidelines to efficiently and
professionally manage risks arising out of its credit operation.

The major points covered by JBL credit policy are:

 Organizational Structure.
 Segregation of Duties.
 Implementation of the concept of relationship banking.
 Credit Principles.
 Credit facilities parameter.
 Preferred area of Business.
 Discouraged Business.
 Mode-wise Credit Exposure Ceiling.
 Large Loan Concentration Ceiling.
 Management of Classified Loans and Advances to keep it at the lowest level.
 Credit Budget with sect oral outlook and exposure ceiling.

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3.2 Credit Principles:
The bank shall provide suitable credit services mid products for the market in which it
operates. Product innovation shall be a continuous process. JBL mile’s the understand
credit principle for considering potential credit proposal.
 Loans and advances shall normally be financed from customers deposit and
not out of temporary fund or borrowing from money market.
 Credit facilities shall be allowed in a manner so that credit expansion goes on
ensuring quality i.e. no compromise with the Bank’s standard of excellence.
Credit is extend to customers who will complement such standards.
 All credit extension must comply with the requirements of Bank’s
Memorandum and Articles of Association, Bank Companies Act as Amended
from time to time, Bangladesh Bank’s instructions Circulars, Guidelines and
other applicable laws, rules and regulations.
 The conduct of the credit portfolio should contribute, within defined risk
limitation, to the achievement of profitable growth and superior return on the
Bank’s capital.
 Credit advancement shall focus on time development and enhancement of
customer’s relationship and shall be measured on the basis of the total yield
for each relationship with a customer (on the global basis), though individual
transactions should also be profitable.
 Credit facilities will be extended to those compares/persons, which can make
best use of the facility thus helping maximize our profit as well is economic
growth of the country.
If credit facilities are granted on a transaction one-off basis, the yield from the facility
should be commensurate with the risk pricing of credit shall depend on the level of
risk and type of securities offered. Rate of interest is the reflection of risk in the
transaction. The higher the risk, the higher is pricing. Interest rate may be revised
from time at time in view of the change it; the cost of Fund and Market condition.

Proper analysis of Credit proposal is complex and required high level of numerical as
well as analytical ability and common sense. To ensure effective understanding of the
concept and thus to make the overall credit port-folio of the Bank healthy, proper
staffing shall be made the through placement of qualified officials having appropriate

20
background, who have got the right aptitude, formal training in Credit Risk Analysis,
Bank’s credit procedures ae well as required experience.

3.3 Credit Facilities Parameter:

The main focus of Jamuna Bank Ltd. Credit Line/Program is financing business, trade
and industrial activities through an effective delivery system.Jamuna Bank Ltd. offers
credit to almost all sectors of commercial activities having productive purpose.The
loan portfolio of the Bank encompasses a wide range of credit programs. Credit is
also offered to major thrust sectors, as earmarked by the govt., at a reduced interest
rate to develop frontier industries. Credit facilities are offered to individuals including
housewives, businessmen, small and big business houses, traders, manufactures,
corporate bodies, etc.Loan is provided to the rural people for agricultural production
and other off-farm activities.
 Loan pricing system is customer friendly.
 Prime customers enjoy prime rate in lending and other services.
 Quick appreciation, appraisal, decision and disbursement are ensured.
 Credit facilities are extended as per guidelines of Bangladesh Bank (Central
Bank of Bangladesh) and operational procedures of the Bank.
Maximum Size:
I. Directive of Bangladesh Bank shall be meticulously complied in
respect of maximum size single customer/ group exposure as revised
time to time. Presently Bangladesh Bank vide BRPD Circular No. 05
dated 09.04.2005 decided that total outstanding financing ` facilities
to any single person or enterprise or organization of a group shall not
at any point of time exceed 35% of bank’s total capital subject to the
condition that the maximum outstanding against fund base financing
facilities do not exceed 15% of the total capital. However, in case of
export sector single borrower exposure limited shall be 50% of the
bank’s total capital.
II. Loan sanctioned to any individual enterprise for any organization of a
group amounting 10% or more of the banks total capital shall be
considered as large loan.

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 III. Credit limit in each case shall be fixed after assessment of actual
business need maintaining required Debt Equity Ratio, considering
Debt Service Coverage Ratio, Payback Period, Security Coverage.
Maximum Tenure:
I. Short Term Loan: Maximum period is 12 months. Actual loan period
shall be fixed on a case-to-case basis considering cycle of business and
requirement.
II. Medium Term Loan: Loan period shall be more than 12 months and up
to 36 months considering repayment capacity and projected cash flow.
III. Long Term Loan: Loan period shall be more than 36 months. Actual
loan period shall be fixed considering repayment capacity and
projected cash flow.
Securities:
All attempts should be made to cover loans by tangible securities as far as possible.
Security shall be stipulated on case-to-case basis.As per BRPD Circular No. 05 Dated
27.04.2005 following securities has been identified as eligible security for
determining base for classified loans:
I. Lien of Bank deposit-100%
II. Market value of gold/gold ornaments pledged to Bank-100%
III. Lie on Government Bond/ Sanchayapatra-100%
IV. Guarantee given by Government of Bangladesh-50%
V. Market value of easily marketed security/ Saleable goods pledged to
the Bank-50%
VI. Market value of Registered Mortgaged Land and Building along with
registered power of Attorney favoring the Bank to sell the property.
Covenants:
I. Ownership statement of the borrowing company shall not be changed without
the approval of the bank.
II. Current Ratio as mentioned in the credit application/ sanction term shall be
maintained.
III. The customer shall not go for borrow from any other sources without approval
of the bank.
IV. The customer shall not go for expansion without the consent of the bank.

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 V. The customer shall not withdraw profit/declare dividend without the consent
of the bank.
VI. The customer shall not submit financial statements withdraw profit/declare
dividend without the consent of the bank.
The customer shall not submit financial statements within 30 days from the year / half
year end.

3.4 Discouraged Business for Bank’s Finance:

In view of legal aspects, business risk and banking ethics following business are on
discouraged list for bank’s finance:
I. Military Equipment/ Weapon Finance.
II. Highly Leverage Transactions.
III. Finance of Speculative Investment.
IV. Logging, Mineral Extraction/ Mining or other activities that is ethically or
environmentally sensitive.
V. Lending to companies listed on CIB black list or known defaulter.
VI. Counter-parties in countries subject to UN sanction.
VII. Share lending.
VIII. Taking an equity stake in borrowers.
IX. Lending to holding companies.
X. Bridge loans relying on equity/ debt issuance as a source of repayment.
XI. Loans to parties whose integrity is questionable.
XII. Loans secured by stock that has no ready market.
XIII. Loans to business whose equity is substantially financed by preference shares.
XIV. Any other type, which bank, may identify as discourage from time to time.

3.5 Types of Credit Activities:

Depending on the various nature of financing, all the lending activities have been
brought under the Following major heads:
I. Loan (General):
Short term, medium term loans allowed to individual/firm/industries for a specific
purpose but for a definite period of time and generally repayable by installments fall
under this head. This type of lending mainly allowed to accommodate financing under
the categories:
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  Large and Medium Scale Industry.
 Small and Cottage Industry.
Very often term financing for:
 Agriculture and
 Others are also included here.
II. House Building Loan (General):
Loans allowed to individuals/enterprises for construction of houses (residential
or commercial) fall under this type of advance. The amount is repayable
monthly by installment within a specific period of time. Such advances are
known as loan (HBL-GEN).
III. House Building Loan (Staffs):
Loans allowed to own bank employees for purpose/ construction of houses
shall be known as (HBL-STAFFS).
Other Loans to Staffs: Loans allowed to employees other than for house
building shall be grouped under head-staff loan (Gen).
IV. Cash Credit (Hypo):
Advances allowed to individuals or firms for trading as well as wholesale
purpose or to industries to meet up the working capital requirements against
hypothecation of goods as primary security fall under this type of lending. It is
allowed under categories (1) ‘’Commercial Lending’’ when the customer is
other than an industry and (2) ‘’Working Capital’’ when the customer is an
industry.
V. Cash Credit (Pledge) :
Financial accommodation to individual/firms for trading as well as wholesale
or to industries as working capital against pledge of goods as primary security
fall under this head of advance. It is also a continuous credit and like the above
allowed under the categories (1) ‘’Commercial Lending’’ and (2) ‘’Working
Capital’’.
VI. Hire Purchase:
Hire-Purchase is a type of installment credit under which the hire-purchase
agrees to take the goods on hire at a stated rental, which is inclusive of the
repayment of principal as well as interest for adjustment of the loan within a
specific period.
VII. Lease Financing:
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 Lease financing is one of the most convenient sources of acquiring capital
machinery and equipment whereby a credit is given the opportunity to have an
exclusive right to use as asset usually for an agreed period of time against of
rent. It is a term financing repayable by installments.
VIII. Time Loan:
This is one time financial accommodation for short period maximum 12
months to meet some specific purpose. The loan is adjustment within the
validity and not renewable and no transaction is allowed.
IX. Consumers Credit Scheme:
It is a special credit scheme of the bank to finance purchase of consumers
durable to the fixed income group to raise their standard of living. The loans
are allowed on soft term against personal guarantee and deposit of specified of
equity by the customers. The loan is repayable by monthly installment within
a fixed period.
X. SOD (General):
Advances allowed to individuals/ firms against obligation that is lien on
FDR/PSP/BSP/Insurance policy/ Share etc. this may not be a continuous
credit.
XI. SOD (Others):
Advances allowed against assignment of work order for execution of
contractual works falls under this head. This advance is generally allowed for
a definite period and specific purpose that it is not a continuous credit. It falls
under the category ‘’Others’’.
XII. SOD (Export):
Advance allowed for purchasing foreign currency for payment against L/Cs
(Back to Back) where the exports do not materialize before the date of import
payment. This is also an advance for temporary period, which is known as
export finance.
XIII. PAD:
Payment made by the bank against lodgment of shipping document of goods
imported through L/C falls under this head. It is an interim advance connected
with import and is generally liquidated against payments usually made by the
party for retirement of the documents for release of imported goods from the
customs authority. It falls under the category (1) ‘’Commercial Lending’’.
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 XIV. LTR:
Advances allowed for retirement of shipping documents and release of goods
imported through L/C falls under this head. The goods are handed over to the
importer under trust with the arrangement that sale proceed should be
deposited to liquidate the advances within a given period. This is also
temporary advance connected with import and known as past-import finance
and falls under the category ‘’ Commercial Lending’’.
XV. LIM:
Advance allowed for retirement of shipping documents and release of goods
imported through L/C taking effective control over the goods by pledge in go
downs under bank’s lock and key fall under this type of advance.
XVI. IBP:
Payment made through purchase of inland bills/cheques to meet urgent
requirement of the customer falls under this type of credit facility. This
temporary advance is adjustable from the proceeds of bills/ cheques purchased
for collection. It falls under the category ‘’Commercial Lending’’.
XVII. Export Cash Credit:
Financial accommodation allowed to a customer for exports of goods fall
under this head and is categorized as ‘’Export Credit’’. The advances must be
liquidated out of export proceeds within 180 days.
XVIII. FBP:
Payment made to a customer through purchase or foreign currency cheque/
draft fall under this head. This temporary advance is adjustable from proceeds
of cheque/ draft.

26
3.6 Categories of Loans and Advances:
All loans and advances are grouped into three categories as follows:

Loan & Advances

Continuous Loan Demand Loan Term Loan

Figure: Categories of Loans and Advances

 Continuous Loan:
The loan account in which transaction may be made within certain limit and have
an expiry date for full adjustment is treated as Continuous Loan. Examples are:
Cash, Credit, Overdraft etc.
 Demand Loan:
The loans that become repayable on demand by the bank are treated as Demand
Loan. If any contingent or any other liabilities are turned to forced loans (that is
without any prior approval as regular loan) those too will be treated as Demand
Loan. Such as forced LIM, PAD, FDBP, LDBP, IBP, FBP etc.
 Fixed Term Loan:
The loans which are repayable within a specific time under a specific repayment
schedule are treated as Fixed Term Loan.

27
3.7 Credit Exposure of Jamuna Bank Limited:
Sl no. Sectoral structure of lending Outstanding as As % of total loans
31.12.2018 and advances
1 Agricultural and agro based 51.32 0.91%%
industries
2 RMG 235.40 4.16%
3 Textile 155.76 2.75%
4 Ship Building 00.00 0.00%
5 Other Manufacturing 73.45 1.30%
Industries
6 SME Loans 1030.70 18.21%
7 Construction 204.85 3.62%
8 Power, Gas 350.68 6.19%
9 Transport, Storage, 11.84 0.21%
Communication
10 Trade Service 174.03 3.07%
11 Commercial Real Estate 1421.39 25.11%
Financing
12 Consumer Credit 48.25 0.85%
13 Capital Market (loan provided 105.10 1.86%
for brokerage and
merchandise banking, to stock
dealers or any purpose of
loan)
14 Credit Card 113.01 2.00%
15 Non- Banking Financial 9.70 0.17%
Institutions
16 Residential Real Estate 129.02 2.28%
Financing
17 Banks Acceptance 21.01 0.37%
18 Others 1102.10 19.47%
19 Total Loans and Advances 566.99 100.00%

28
 %
155.76
agriculture and agro
51.32
21.01 235.4 0 RGM
73.45
9.7 TEXTILE
1102.1
113.01 SHIP BUILDING
1030.7
105.1
OTHER MANUFACTURING
48.26
SME

129.02 1421.39 CONSTRUCTION

204.85
POWER, GAS
350.68
11.84 TRANSPORT & STORAGE
174.03 TRADE SERVICE
COMMERCIAL REAL ESTATE

Figure: Credit Exposure

3.8 Credit Risk Management:

The world credit comes from the Latin ‘’credo’’ means ‘’I believe’’. It is a lender’s
trust in a person’s/firm’s/company’s ability to command goods or services of another
in returns for promise to pay such goods and services of another in return for promise
to pay such goods or services at some specified time in the future. The making of
loans and advances has always been prominent profitable function of the principal
services of a modern bank.

One of the most significant risks of a bank is exposed to is, what is generally termed
as ‘’credit risk’’, which is the primary risk in the banking system. Since the largest
slice of income generated by a bank and a major percentage of assets is subject to this
risk, it is obvious that prudent management of this risk is fundamental to the
sustainability of a bank. Management of credit risk a needs to be a robust process that
enables the banks to proactively manage the credit portfolio in order to minimize
losses and earns an acceptable level of return for the shareholders.
Risk is inherent in all aspects of commercial operation. However for banks credit risk
is the fundamental to the sustainability of a bank. Thus credit risk is an essential factor
that needs to be managed.

29
3.9 Types of Credit Risk:

CreditRisk

Transaction Risk
Portfolio Risk

Figure : Types of Credit Risk

1. Transaction Risk:
Risk arises from individual transaction borrower’s default in meeting
commitment.
 Non-payment
 Delayed payment.
2. Portfolio Risk:
There are two types of portfolio risk:
 Concentrate risk: Risk due to an exposure in few industries or lines of
business. Failure of any of the industry.
 Intrinsic risk: Risk is an activity due to operating environment.
 Sanction procedures.
 Credit policy.
 Credit risk policy.
 IT system.
Credit risk may be in the following form:
 In case of the direct lending.
 In case of the guarantees and the letter of credit.
 In case of the treasury operations.
 In case of the securities trading business.
 In case of the cross border exposure.

Traditionally credit risk has two components:

1. Solvency aspects of the credit risk-
The borrower is unable to pay.
30
 2. Liquidity aspects of the credit risk:
The risk is that arise due to the delay in the repayment by the borrower leading
to the cash flow problems for the leader.

3.10 Credit Risk Assessment:

A through credit risk assessment is conducted prior to the sanctioning of credit
facilities. Thereafter it is done annually for each relationship. The result of this
assessment shall be presented in the credit proposal originated from the relationship
manager (presently branch).
The relationship manager should be the owner of the customer relationship and must
ensure the accuracy of the entire credit proposal submitted for approval. Relationship
manager must be familiar with the bank’s lending guidelines and should conduct due
diligence on the borrower, principals and guarantors. They must conduct necessary
KYC (know your customer) part on the customer and money laundering guidelines be
adhered to.
Following risk areas in the credit proposal should be addressed and assessed before
sending to the head office:
1. Borrower Analysis:
 Shareholding.
 Reputation.
 Education.
 Experience-success history.
 Net worth.
 Age etc.
2. Industry Analysis:
 Industry position/threat/prospect.
 Risk factors pertaining to the industry.
 Borrower’s position and share in the industry.
 Strength, weakness of the borrower compared to the competitors etc.
Supplier / Buyer Risk Analysis:
 Demand supply position.
 Technical feasibilities / infrastructure facilities.
 Management team competence.

31
  Seasonally of Demand.
 Debt-equity ratio.
 Historical Financial Analysis:
 An analysis of 3 years historical financial statement.
 Earning- its sustainability.
 Cash flow.
 Profitability.
 Strength and reliability of balance sheet etc.
Projected Financials:
 Sufficiency of cash flow to service debt repayment.
 Debt Service Coverage Ratio.
 Trade Checking.
 Account conduct.
 Statement of account from present banker is required.
 Allied deposit with their bank.
 Other business with their bank.
 Pricing.
 Credit structuring.
 Security.

3.11 Effects of Management of Credit Risk in JBL:

Banks has been able to improve the quality of its assets significantly through efficient
management of credit risk, which is mentioned:
 The different areas of credit operation could rise the loans and advances
portfolios to tk.56611.79 million in 2018 with an increase of tk.6876.99
million being 13.83% over that of the preceding year. JBL’s investment
portfolio as on 31.12.2016 rise to tk.16314.92 million from tk10891.02 million
as on 31.12.2016 and the total assets of the bank as on 31.12.2016 rose to
tk.87065.13 million from tk.70013.89 million as on 31.12.2016 which
indicates 24.35% growth of assets over the preceding year.
 The bank has successfully developed an integrated and well-coordinated
system of analysis, appraisal and sanction of credits through its credit
operation division followed by proper and strict control and disbursement

32
 process through its credit administration division backed by fully automated
structure.
 The bulk of recently sanctioned credits sound good. Consequently, the bank
has been able to mark an upward trend in its operational and financial
performance.
 The bank is a way of proper governance structure risk and returns are
evaluated with a view to producing sustainable revenues, reducing volatility in
earnings and enhancing value to shareholders.

3.12 Problems of Management of Credit Risk in JBL:

 Competitive Banking Market:
Different kinds of commercial banks both local and foreign are serving in our
commercial banking market. Therefore, competing with other bank for weak
credit management it is hard to survive. Besides, the whole banking sector in
our country is undergoing a critical stage due to political unrest and depressed
economic conditions.
 Credit Sales:
Now a day, business person is bound for credit sales to increase their sales, in
competitive market. Resultantly, business organizations need less working
capital and banking companies are losing their opportunities to invest in
business organizations.
 Lack of trained personnel for credit related operations:
Jamuna Bank Limited suffers shortage of efficient and well-trained personnel
for its various credit related operations. JBL should arrange training. Through
JBL has its own training institute, it is not adequate for its employees.
 Lack of Marketing Activities:
The promotional activities and marketing of different products of JBL are not
sufficient for catering its services to the public or the business organizations.
 Lack of Scope:
Since the bulk of the deposit, capital and investible it funds have already been
enjoyed in different loans and advances out of which a laredrge portion has
been stuck up as classified and non-performing assets.

3.13 Credit Approval Process:

33
 Credit approval authority has the right to approve credit to its customer with
the permission of head office. Approval must be evidenced in writing or by
electronic signature. Approval records must be kept on file with the credit
application.
Any branches of lending authority should be reported to MD/ CEO, Head of
Internal Control and Head of Credit.
It is essential that executives charged with approving loans have relevant
training and experience to carry out their responsibilities effectively.

3.14 Loan Defaulter:

Defaulter occurs when a debtor has not met his or her legal obligations
according to the debt contract, for example has not made a scheduled payment
or has a violated a loan covenant (condition) of the debt contract. A default is
the failure to pay back a loan. Default may occur if the debtor is either
unwilling or unable to pay their debt. This can occur with all debt obligations
including bonds, mortgage, loans and promissory notes.
Volume of non-performing loans (NPL) of Jamuna Bank Limited in different
years is given below:
Particulars Year 2016 (in Year 2017 (in Year 2018 (in
million) million) million)
Volume of non- 710.86 905.52 1618.73
performing loans
(NPL’S)
% of NPLs to total 2.20 1.82 2.86
loans and
advances

34
3.15 SWOT ANALYSIS: Bank as a whole………

Strength Weakness

Opportunities Threats

Fig: SWOT Analysis

 Strengths:
1. Increased Financial Strength: The bank had to operate in a declining interest
rate environment, but was able to maintain a reasonable spread. The increased
earnings were driven by enlarged loans and advances portfolio, increase in
export and import business and efficient fund management. Non-interest
income continued to contribute higher share in the total income of the bank.
2. Technology: Bringing all branches under one umbrella, introducing SMS
Banking, Internet Banking, and Interfacing ATM Network through the Online
Banking Software has been major achievements of the bank. Jamuna Bank
Limited is the first bank to online the rural branches.
3. Investment: The bank closed a number of Syndicate Financing as the lead
arranger and also participated in a number of deals in the textiles, ship
breaking, sugar refining, health, telecom sectors.
4. Social Image: Jamuna Bank Limited is gradually setting new standards in the
banking sector in the matter of social image. Its poverty alleviation scheme
through the rural branches has been playing an effective role in elevating the
35
 financial condition of the rural poor. Recognizing education as the backbone
of the society and right of the poor to have access to education, the bank has
introduced scholarship schemes for the poor and meritorious students of the
rural areas for higher studies. The bank is also active in the sports are and two
of the leading national cricketers are on JBL’s payroll.
5. Human Resource Management:Jamuna Bank Limited has successfully
established a transparent process of recruitment seeking the best talent. In its
efforts towards continuous development of the human resources of the Bank, it
arranges training programs throughout the year. Both external and internal
trainers conduct these training programs and these training are continuously
updated to reflect the latest development in the banking as well as information
technology sectors.

 Weaknesses:
1. Poor Delivery Channels:The main weakness of JBL is its poor number of
branch network in the country. Along with customer service, the success of a
bank depends on the number of outlets i.e. branches through which the
customers can do banking in any location of the country.
2. Marketing Policy: Jamuna Bank Limited mainly focuses marketing for
liability products of the bank. The marketing programs for asset products are
comparatively poor at Bank Asia. For these products, the bank generally
focuses on internal marketing, among the existing clients of the bank; whereas
some other banks go for mass marketing for their products.
3. Unstructured Management:The management organization of JBL is not
properly structured. Most of the strategies that were obtained at JBM were
business related. Less focus was given to adequately structure the
management.
4. Unstructured Customer Service Department:Though JBL claims to have a
Customer Service Department, but the department is not eventually structured.
The Customer Service Department at JBL is a sub-function at JBL. The
centralized activities those are required for CSD, like Complaint Center is
absent at JBL. Again there is no separate managerial department for CSD at
JBL.

36
 5. Less Product Innovation:Though it’s an overall weakness of the industry,
Product Innovation is not also impressive at JBL. The JBL products and
services are already active in the banking industry.

 Opportunities:
1. Islami Banking:The Islami Banking System can be a prospective issue to
consider for Bank Asia Limited. Many local banks like ShahjalalIslami Banks,
City Bank Limited (Islami Bank Branch), Islami Bank and Foreign banks like
Standard Chartered Bank has initiated Islami Banking concept in their banking
service. The concept is very attractive to the customers of the Bangladesh
banking market.
2. Branches outside Dhaka:Most of the branches of Jamuna Bank Limited are
in the capital Dhaka. The opportunity that JBL is missing extending their
banking facilities throughout the country.
3. Opportunities for Enhancing Income:Jamuna Bank Limited has been
actively participating in the local money market as well as foreign currency
market without exposing the Bank to vulnerable positions. The Bank’s
investment in Treasury Bills and other securities went up noticeably opening
up opportunities for enhancing income in the context of a regime of gradual
interest rate decline.
4. Decision of Government Regarding Deposit: Lately the government of
Bangladesh has decided that they will withdraw their deposits from all the
banks that do not have any operational experience of at least five years. The
government will only invest in the banks that have banking experience for
over five years. Therefore, it is a great opportunity for an experienced bank
like JamunaBank Limited to grab the deposits of the government agencies.
5. Withdrawal of High Interest: The government has withdrawn all high
interest paid government savings scheme to encourage the investment in the
private sector. Rather than investing in the public sector, the government may
decide to invest in the private commercial banks. As a result, this is a huge
opportunity for a commercial bank like JBL to increase the collection of
deposit from the public sector.
6. Increase in Market Share: Jamuna Bank Limited has a huge opportunity to
expand its market and increase its market share. Since, the number of
37
 industries is increasing day by day, and many cities are being commercialized,
it is a great opportunity for JBL to attract new customers. JBL has the
opportunity to motivate the new clients to make huge investments. This will
help the company to increase its market share and the overall performance.
7. Opportunities for New Investments are Available: The primary investment
of JBL is in the textile and Garment sector. The company also makes
investments in export and import business, agriculture and housing. But new
investment sectors are booming rapidly. The company those untapped areas of
business and invest in those sectors.

 Threats
1. Cost of Fund:The interest rate on lending and deposit are directly linked to
the cost of fund. The higher the cost, the higher is the interest rate and the vice
versa. The access to the Government fund has also bearing on the cost of fund.
While the Non-Commercial Banks, first and second generation Private
Commercial Banks have access to the Government fund, the third generation
PCBs have been denied this facility. This is a discriminatory policy and is not
conducive to the growth of healthy competition in the banking sector. It is
indispensable that all the players in the market should enjoy uniform
opportunities without discrimination.
2. Changes in Tax Regulation: On the commission income of the banks, the
government of Bangladesh has implied VAT (value Added Tax). The
government may also imply a tax on the net income of all banks. During the
allocation of the budget, every year the government imposes changes in the
tax regulations. Changes in tax regulations are not always welcome by
companies and banks. These changes in tax regulation pose as a major threat
for JBL.

3. Loan Default Culture:The loan default culture is one of the major problems
for all commercial banks of Bangladesh. Many business people are being
blamed for irregular credit disbursement from different banks. This loan
default culture is a huge limitation for the development of commercial banks
like JBL.

38
4. Economic Recessions:Downturns in the world economy also pose as a major
threat to JBL. Economic recessions greatly affect the economy of Bangladesh
as well and this in turn decreases the rate of exports. Decrease in exports is a
major threat to JBL because this will reduce the foreign exchange earnings of
Bangladesh. JBL maintains foreign exchange accounts of different industries.
Therefore, the decrease in foreign exchange earnings will cause major
problems for the growth of JBL
5. Competitors may Overtake JBL: Thereare some major competitors of JBL
in Bangladesh. If the performance of JBL declines for some reason at any
time, the competitors might take over the entire market. The competitors also
have huge experience in the banking sector and are fully capable for capturing
the whole market.

39
 Chapte-04
Financial Performance Analysis

40
4.1 Common Size Balance Sheet
Particulars 31.12.2016 (%) 31.12.2016 31.12.2018
(%) (%)
Cash 6.59 6.41 5.60
Cash in Hand (including 0.96 1.43 0.79
foreign currency)
Balance with Bangladesh Bank 5.63 4.98 4.81
and its Agent Banks (including
foreign currency)
Balance with other Banks and 4.46 1.65 6.72
Financial Institutions
Inside Bangladesh 3.27 1.33 5.81
Outside Bangladesh 1.19 0.31 0.91
Money at call on Short Notice 1.03 0.00 0.00
Investments 17.45 15.56 18.74
Government 17.39 15.11 18.36
Asset pledge as securities 0.05 0.04 0.02
Others 0.01 0.41 0.35
Loans and Advances 66.26 71.04 65.02
Loans, Cash Credit, 60.80 60.73 51.55
Overdrafts etc
Bill purchased and discounted 5.42 10.31 13.47
Fixed assets including 1.40 2.60 2.26
premises, furniture’s and
fixtures
Non Banking Assets 0.00 0.00 0.00
Other assets 2.82 2.75 1.66
Total Properties and Assets 100.00 100.00 100.00
Liabilities and Capital
Borrowing from Bangladesh 0.25 0.72 6.61
Bank other Banks, Financial
Institutions and Agents

41
Deposit and Other accounts 86.92 86.66 80.98
Current accounts and other 9.68 10.02 9.04
accounts
Bill Payable 1.02 1.11 1.14
Savings Bank Deposits 5.93 5.67 5.14
Fixed Deposits 51.72 52.41 49.22
Short Notice Deposits 5.67 6.05 3.03
Deposits under special schemes 12.56 11.28 13.22
Foreign currency deposits 0.31 0.12 0.20
Other Liabilities 4.66 3.47 4.05
Total Liabilities 91.83 90.85 91.64

Capital and Shareholder’s

Equity
Paid up Capital 3.33 3.19 4.19
Statutory Reserve 1.68 1.76 1.98
Revaluation Reserve on 1.90 0.70 0.00
Investment in Securities
Asset Revaluation Reserve 0.00 1.52 1.22
Right Issue Subscription 0.00 1.05 0.00
Money
Retain Earnings 1.26 0.94 0.97
Total Shareholder’s Equity 8.17 9.15 8.36
Total Liabilities and Capital 100.00 100.00 100.00

42
4.2 Ratio Analysis
Ratio analysis is the most important and most widely used tool of financial statement
analysis. It is defined as the systematic use of ratio to interpret the financial statement
so that the strength and weakness of a firm as well as its historical performance and
current financial condition can be determined.
Debt Ratio:
Debt ratio is a ratio that indicates the proportion of a company’s debt to its total
assonance assets. It shows how much the company relies on debt to finance assets.
The debt ratio gives the users a quick measure of the amount of debt that the company
has on its balance sheet compared to its assets. The higher the ratio, the greater the
associated with the firms operation. A low debt ratio indicates conservative financing
with an opportunity to borrow in the future at no significant risk. Debt ratio can be
calculated by the following formula:
Debt Ratio=Total Liabilities/ Total Assets
Year Total Liabilities Total Assets Debt Ratio
2016 44750.08 48730.95 91.83%
2017 63605.71 70013.90 90.85%
2018 79783.62 87065.13 91.68%

92.00%
91.80%
91.60%
91.40%
91.20%
91.00%
90.80%
90.60%
90.40%
90.20%
2016 2017 2018

Figure: Debt Ratio

Credit Deposit Ratio:
Credit deposit ratio is use to calculate a lending institution’s ability to cover
withdrawals made by its customers. This ratio is also known as Loan to Deposit Ratio

43
(LTD). A lending institution that accepts deposits must have a certain measure of
liquidity to maintain its normal daily operation. If the ratio is too high, it means that
banks must not have enough liquidity to cover any unexpected fund requirements; if
the ratio is too low, banks may be earning as much as they could be. Credit deposit
ratio can be calculated by the following formula:
Credit Deposit Ratio= Loans and Advances/ Total Deposits
Year Loans and Total Deposits Credit Deposit
advances Ratio
2016 32287.66 42356.20 76.23%
2017 49734.80 60673.56 81.97%
2018 56611.79 70508.05 80.29%
Figure: Calculation of Credit Deposit Ratio
83.00%
82.00%
81.00%
80.00%
79.00%
78.00%
credit deposit ratio
77.00%
76.00%
75.00%
74.00%
73.00%
2016 2017 2018

Figure: Credit Deposit Ratio

Interpretation: From the above calculation, we can see that JBL’s credit deposit ratio
in the year of 2018 is the lowest that is this year the bank could not earn as much as
they can. In the year of 2018 the ratio is the highest which is a clear indication that,
JBL in 2018 didn’t have enough liquidity to cover any unexpected customer claims.
So, JBL has well as earn enough money from investing.
Operating Profit Margin:
Operating profit margin measures the percentage of each unit of money remaining
after all costs and expenses other than interest, taxes and preferred stock dividends are
deducted. A healthy operating profit margin required for to be able to pay for its fixed
costs, such as interest on debt. This indicates how effective a company is at

44
controlling the costs and expenses associated with their normal business operation.
Operation profit margin can be calculated by the following formula:
Operating Profit Margin=Operating Profit/ Interest Income
Year Operating Profit Interest Income Operating Profit
Margin
2016 1914 3788.90 50.52%
2017 2411 5207.52 46.25%
2018 2817 8473.44 33.25%

Table: Calculation of Operating Profit Margin

60.00%

50.00%

40.00%

30.00% OPM

20.00%

10.00%

0.00%
2016 2017 2018

Figure: Operating Profit Margin

Interpretation: From the above calculation, we can see that JBL’s operating profit
margin was decreasing from 2016 to 2018 that is they were generating less profit year
by year. Though interest income in 2018 was the highest, the margin was lowest was
lowest because of higher operating expenses.

Net Profit Margin:

Net profit margin measures the percentage of each unit of money remaining after all
costs and expenses including interest, taxes and preferred stock dividends have been
deducted. Net profit margin is very useful when comparing in similar industries. This
is an indicator of a company’s pricing strategies and how well in controls costs. A
profit margin indicates a more profitable company that has better control over its costs
compared to its competitors. Net profit margin can be calculated by the following
formula:

45
 Net Profit Margin= Net Profit/ Interest Income
Year Net Profit Interest Income Net Profit Margin
2016 923.12 3788.90 24.36%
2017 1066.38 5207.52 20.47%
2018 1330.20 8473.44 15.70%
Table: Calculation of Net Profit Margin

25.00%

20.00%

15.00%

NPM
10.00%

5.00%

0.00%
2016 2017 2018

Figure: Net Profit Margin

Interpretation: From the above calculation, we can see that JBL’s net profit margin
was decreasing from 2016 to 2018 that is they were generating less profit year by
year. So it seems that JBL is not able to have better control over its costs.
 Return on Investment (ROI) :
Return on investment is a performance measure used to evaluate the efficiency of an
investment or to compare the efficiency of a number of different investments. It is one
way of considering profit in relation to capital invested. Return on investment can be
calculated by the following formula:
Return on Investment (ROI) = Profit after tax/ Shareholders Equity+
Borrowings
Year Profit after tax Shareholders’ Borrowings ROI
equity
2016 923.12 7281.51 1230.31 10.85%

46
2017 1066.38 6408.55 5023.23 9.33%
2018 1330.20 7281.51 57507.13 2.05%
Table: Calculation of Return on Investment

12.00%

10.00%

8.00%

6.00% ROI

4.00%

2.00%

0.00%
2016 2017 2018

Figure: Return on Investment (ROI)

Interpretation: From the above calculation, we can see that JBL’s ROI is decreasing
from 2016 to 2018 because of higher borrowings and equity. In the year of 2018, ROI
is the lowest because JBL borrowed more than other years.

 Return on Assets (ROA):

Return on assets is an indicator of how profitable a company is relative to its total
assets that is how many unit of money they can derive from each unit of assets they
control. It gives an idea as to how efficient management is at using assets to generate
earnings. The higher the ROA number, the better , because the company is earning
more money on less investment. Return on assets can be calculated by the following
formula:
Return on assets (ROA) = Profit after tax/ Average total assets
Year Profit after tax Average total ROA
assets
2016 923.12 40188.79 2.30%
2017 1066.38 59742.16 1.78%
2018 1330.20 78539.52 1.69%
Table: Calculation of Return on Assets

47
 2.50%

2.00%

1.50%

1.00% ROA

0.50%

0.00%
2016
2017
2018

Figure: Return on Assets

Interpretation: From the above calculation, we can see that JBL’s ROA is
decreasing by year because they are not earning as much as they increases. So it
indicates that the management is not efficient enough to generate earnings by using its
assets.
 Return on Equity (ROE) :
Return on equity measures the rate of return on the shareholders equity of the
common stock owners. ROE shows a firm’s efficiently by revealing how much profit
a company generates with money of the shareholders have invested. Return on equity
can be calculated by the following formula:

Return on Equity=Profit after tax/ Average Shareholder’s Equity

Year Profit after tax Average ROE
Shareholder’s
Equity
2016 923.12 3070.81 30.60%
2017 1066.38 5194.51 20.53%
2018 1330.20 6844.85 19.43%
Table: Calculation of Return on Equity

48
 35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2016 2017 2018

Figure: Return on Equity

Interpretation: From the above calculation, we can see that JBL’s ROE is decreasing
year by year because they are not earnings as much as equity increases. So it indicates
that the firm is not efficient enough to generate earnings by using its shareholders
equity. But the percentage it holds is good enough to sustain in the market and they
also need to work efficiently to increase the rate so that they can retain their existing
shareholders.

 Earnings Per Share (EPS) :

The firm’s earning per share (EPS) is generally interest to present or prospective
stockholders and management. EPS represents the number of money earned during
the period on behalf of each outstanding share of common stock. It serves as an
indicator of a company’s profitability. Earnings per share can be calculated by the
following formula:
Earnings per share (EPS) =Profit available for common shareholders/ Number
of outstanding share
Year 2016 2017 2018
EPS 4.14 4.78 3.65

Table: Calculation of Earnings Per Share

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 5
4.5
4
3.5
3
2.5 EPS
2
1.5
1
0.5
0
2016 2017 2018

Figure: Earning Per Share (EPS)

Interpretation: From the above figure, we can see that JBL’s EPS is decreasing year
by year. So it indicates that the firm is not so much profitable for investment by the
investors.
4.3 Loans and Advances of Jamuna Bank Limited:All activities relating to credit
of the bank are being carried out as strictly and cautiously as before with proper risk
management strategy starting from the credit worthy quality borrowers followed by a
well-defined credit appraisal and approval process. Total loans and Advance in
different period shown in the following:
Year 2018 2017

Loans, cash credits, 70,487,739,818 60,352,010,715

overdrafts, etc./investments
Bills purchased and 8,544,557,123 8,087,828,819
discounted
Total 79,032,296,941 68,439,839,534

Table :Calculation of Loans and Advances

50
 80,000,000,000
70,000,000,000
60,000,000,000
50,000,000,000
40,000,000,000
30,000,000,000
20,000,000,000
10,000,000,000
0
2017 2018

Loans, cash credits, overdrafts, etc./investments

Bills purchased and discounted
Total

Figure: Loans and Advances

4.4 Type Wise Loans and Advances Portfolio:Jamuna Bank Limited Wise Loans and
Advances with types are below:

Loans and Advances Matrix 2018 in

million Taka
Loans, cash credits,
45% overdrafts,
50%
etc./investments
Bills purchased and
discounted

5%
Total

Figure: Loans and Advances Portfolio.

4.5 Industry wise loans and advances:

Sl Industry 2018 2017
No

01 Agriculture and Jute 51.32 0.91%

02 RMG 235.40 4.19%
03 Textile 155.76 2.75%

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 04 Ship Building 0.00 0.00%
05 Other 73.45 1.30%
Manufacturing
Industries
06 Construction 204.85 3.62%
07 Power, Gas 350.68 6.19%

Subtotal 1071.46 18.96%

4.6 Comparative Analysis of Jamuna Bank Limited vs. Mutual Trust Bank
Limited
At the end of each year there is a rating done by Bangladesh Bank called CAMEL
rating. CAMEL consists of five components, they are: C for capital, A for Asset, M
for management, E for earnings and L for liquidity. Those who are stronger on these
categories their number is 1. Satisfaction is 2. Fair is 3. Marginal is 4. Unsatisfactory
is and 5. CAMEL rating determines all banks position.
Now the reasons for which these two banks are selected for this comparison, is their
position in the CAMEL rating. JBL holds for marginal position where MTBL holds
the 2 or satisfactory position in the rating. Here I try to put our attention the reasons
for which MTBL hold number 2 positions and what are the wrongs with the MTBL
management that they hold only 2 or satisfactory position.

 MUTUAL TRUST BANK LIMITED:

Mutual trust bank is a very modern bank in the banking business area. It started its
operation just 11 years back. In 2015, the amount of total operation income was about
was tk.900.43 million but in 2016, it was vastly increased by tk.200 million and the
amount was tk.1100.46 million. In the year 2015 the total loan and advances and the
deposit was tk.6840.45 million and tk.9314.90 million which increased in year 2016
to tk.9738.42 and tk.12704.90 million.

 JAMUNA BANK LIMITED:

Jamuna bank limited is a third generation bank in Bangladesh banking business area.
The bank started its operation from 3rd June 2001. Jamuna bank limited is a highly
capitalizes new generation bank started its operation with an authorized capital of

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tk.1600.00 million as of December 2001 paid-up capital of tk.1072.50 million as of
December 2007, authorized capital increased and stood at tk.10000.00 million as of
December 2015, and paid-up capital is tk.3648.40 million.

4.7 Mutual Trust Bank at a glance:

Particulars 2017 (in million) 2018 (in million)
Deposits 9314.95 12704.90
Loans and advances 6804.45 9738.32
Total operating income 427.43 511.46
Profit 216.38 226.29
Loans as (%) of total 73.05% 76.65%
deposits
Provisions 47.89 69.97
Unclassified loans 6704.70 9579.68
Classified loans 120 128.97
Ratio of classified loans to 1.48% 1.32%
total loans

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4.8 Jamuna Bank Limited at a glance:
Sl. no Particulars 2017 (in million) 2018 (in million)
1 Paid up capital 2230.80 3648.40
2 Total capital 6350.01 7552.79
3 Capital surplus/ deficit 6015.51 6704.14
4 Total assets 70013.89 87065.19
5 Total deposits 60673.56 70508.05
6 Total loans and advances 49734.80 56611.79
7 Statutory reserve 412.98 494.00
8 % of classified loans against 1.83% 2.86%
total loans
9 Profit after tax 1066.02 1330.20
10 Amount of classified loans 9055.16 9427.76
11 Provision kept against 344.44 347.39
classified loans
12 Interest earning assets 1481.00 1795.44
13 Non-interest earning assets 1112.45 1296.77
14 Income from investment 1152.79 1772.08
15 Non- performing loans ratio 1.83 2.86
16 Operating profit 2410.96 2410.96

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4.9 Comparison with Different Ratios of JBL & MTBL:
Particulars JBL MTBL
2017 2018 2017 2018
Debt ratio 90.85% 91.68% 92.76% 93.68%
Credit deposit 81.97% 80.29% 85.08% 77.36%
ratio
Operating 46.25% 33.25% 39.26% 25.85%
profit margin
Net profit 20.47% 15.70% 17.63% 10.73%
margin
ROI 9.33% 2.05% 8.60% 6.89%
ROA 1.78% 1.69% 14.01% 9.48%
ROE 20.53% 19.43% 19.70% 14.12%
EPS 4.78 3.65 3.04 2.50

Here in this comparison, we can see that debt ratio and credit deposit ratio of JBL is
very close to MTBL, Operating profit margin and net profit margin of JBL is higher
than MTBL and also ROI, ROA, ROE, EPS of JBL is very close to MTBL. So, it
gives us a clear indication that Jamuna Bank Limited is performing well in our
banking system and it also needs to overcome its difficult through proper
management.

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 Chapter-05
Findings, Recommendations & Conclusions

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s5.1 Major Findings of JBL
While preparing the report and working in JBL credit division, foreign exchange
branch, I have attained different kinds of experience. After working practically, as
well as, collecting and analyzing the data empirically I have got some findings and
recommendations. These findings are completely out of my study and observations
that are as follows:
 The quality of assets of the bank start improving gradually as a result affective
management of credit risks in recent time which would help to recoup the
downturn and to boost up its overall financial conditions.
 Un favorable business environment due to political turmoil throughout the
year JBL was in constant efforts to explore different areas credit operation and
could who rise the loans and advances portfolios to tk.56611.00 million in
2016 with in increase an increase of tk.6876.99 million being 30.83% over
that of the presiding year.
 Jbl’s investment portfolio as on 31.122016 rose to tk.16314.92 million from
tk.10891.02 million as on 31.12.2015.
 Total assets of the bank as on 31.12.2016 rose to tk.87065.13 million from
tk.70013.89 million as on 31.12.2015which indicates 24.35% growth of assets
over the preceding year.
 Total liabilities of the bank stood at the tk.79783.62 million as on 31.12.2016
which was tk.63605.71 million as on 31.12.2015.
 The net profit after tax of the bank was tk.1330.20 million in 2016 while it
was tk.1066.02 in 2015. It indicated a steady and on excellent growth of the
bank.
 IT section is weak and sometimes it is hanged, as a result their employee face
problem at the time of their work.
 Improper allocation of employees and the number of employee in the branch is
few.
 Number of ATM booth is very low. As a result they have to use other bank
booth and bear the extra changes.
 Only tile urgent works are done and all normal works remain unattended and
pending.
 The working condition or the working facility for the employee is quite good.
 Branch gives emphasis on big clients like large amount depositors or creditors.
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 From the beginning of the operation branch face losses and from the beginning
of 2008 it started gaining profit.
 Behaviors of the employees are good to customers.
 They give working opportunities for interness.

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5.2 Recommendation:
JBL is a third generation bank in Bangladesh. Meanwhile, its contribution in socio-
economic aspect of Bangladesh has greater significance. During the preparation of the
report and working in the civil division, Foreign Exchange Branch of the bank , I have
found a fewer number of factor, which impede the achievement of ultimate goals of
JBL. It is not easy to find out the large solutions on the vast issue like ‘’ Overall
Credit Performance of JBL’’ through the study of an individual, but I do believe that
the suggestions and recommendations mention at below will obiousli increase the
efficiency of Jamuna Bank Limited in developing its performance
 For better credit performance the bank should emphasis on building cordial
relationship with the customer to ensure that neither the business or nor the
relationship between the banker and the customer does hamper in any manner
whatever. Rather, the enhance the same and improves the standard of
customer service of the bank.
 Interest expense on Deposit of the Bank may be tried to keep low with due
regard to balance Deposit mix for maximizing the cost and maximizing the
profit.
 For sustainable growth, the bank should identify and reinvest in productive
sector and terminate unproductive operations/ divisions.
 JBL should observe the competitors closely to analyze any new course of
actions taken by them and react competitively to that action. It can be
accomplish by the following ways:
 Can get information about a certain competitor’s business by recruiting their
employees.
 Can get information from the people who do business with the rivals.
 Can get information about other banks from published materials and published
documents.
 The bank has to increase their advertisement and also increase their social
activities. They have to go with people needs and demands, they have to
explore their name to the people that everyone can know about Jamuna Bank
Limited.
 If the authority give some power to the manager like ‘’for the purpose of loan
sanction then it’ll be good for the bank’’. Because when a potential customer
will want to take a loan in emergency basis. Then the manager can sanction to
59
 a certain limit. It can earn for that customer satisfaction and in future he/she
may do vast business with the bank.
 In the credit department strict supervision is necessary to avoid loan defaulter.
The bank official should go regular basis to the project.
 JBL very much conscious about the loan default. They have to increase the
loans. They have to give their best effort to minimize the classified loans.
 By increasing their paid up capital they can extend their loan sanction capacity
to a single borrowers.

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5.3 Conclusion
A bank is an economic institution whose main aim is to earn profit through exchange
of money and credit instruments. It is a service oriented as well as profit oriented
organization. To perform those two functions simultaneously, the bank divides its
operations mainly in three parts- General Banking, Loans and Advances and Foreign
Exchange. Bank also invests their money into different financial securities and also in
different types of project to diversify the risk and getting more profit.
The usefulness of bank financial statement depends on the quality and consistency of
the data. Ideally, bank would use the same accounting rules in each period and isolate
the effects of non recurring events.
Evaluation of bank performance is a complex is a process involving introduction
between environment, internal operations and external activities. The ultimate
objectives of management are to maximize the value of banks equity shares by
attaining optical mix of return and risks. In this respect, bank management needs to
develop a comprehensive plan in order to identify objectives, goals, budgets and
strategies that will be consistent with the maximization of share value.
The banking sector of Bangladesh is passing through a tremendous reform under the
economic deregulation and opening up the economy. Currently this sector is
becoming extremely competitive with the arrival of Mutual Trust Bank as well as
emerging and technical infrastructure, effective credit management, higher
performance level and almost customer satisfaction.
At the finale, I feel myself fortunate to get the chance of preparing a report on the
topic like ‘’Overall Credit Performance of JBL’’. The preparation of report will help
a lot to augment my experience and knowledge as to negotiating the risks associated
with the credits of the bank.
Jamuna Bank Limited is a growing and profitable bank in Bangladesh that has been
rendering service to customer since 2001 to till now. I have been working in the bank
and it was an immense pleasure for me to carry out the case study of the bank in
connection with management of credit risks.

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 Bibliography
Source:
 Jamuna Bank Limited.2018. Annual Report. Dhaka :Jamuna Bank Limited
2018.
 Jamuna Bank Limited.2017. Annual Report. Dhaka :Jamuna Bank Limited
2017.
 Jamuna Bank Limited.2016. Annual Report. Dhaka :Jamuna Bank Limited
2016.
 Jamuna Bank Limited.2015. Annual Report. Dhaka :Jamuna Bank Limited
2015.
Websites:
 http://bankinfobd.com/banks/index/page:1
 www.bangladesh-bank.org
 http://en.wikipedia.org/wiki/List_of_banks_in_Bangladesh
 www.jamunabankbd.com

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