Bank performance analysis

On
Jamuna Bank limited

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 A Term Paper on
Bank Performance Analysis on Jamuna Bank
Limited

Course Name : Commercial Bank Management

Course Code : F-402

Submitted To:

A.A. Mahboob Uddin Chowdhury

Professor,

Department of Finance.

Faculty of Business Studies.

University of Dhaka.

Submitted To:

Group-09

Submission Date:
18th June 2016

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 Group Profile: 09

Sl. Name ID Marks Remarks

No.
1. Sharmin Jahan 19-085
2. Momtaz Jahan 19-091
3. Shanjida Shoma 19-195
4. Tahsinun Nur 19-203
5. Sumaya Eysmin 19-205

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 Acknowledgement

First of all we express our gratitude from heart to the Beneficent, the Merciful & Almighty Allah for
giving us the strength and patience to prepare this term paper within the programmed time.

We are deeply indebted to our course teacher, A.A. Mahboob Uddin Chowdhury, Professor,
Department of Finance, Faculty of Business Studies, University of Dhaka, for her co-operation and
precious contribution in preparing the report. It gave us the opportunity to draw out an analysis on
Stress Testing on Jamuna Bank Limited.

We have taken help from internet & various books. We are thankful to those authors for the help we
have gathered from their resourceful work.

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 Letter of Transmittal
18th June, 2016
A.A. Mahboob Uddin Chowdhury
Assistant Professor,
Department of Finance
Faculty of Business Studies
University of Dhaka

Dear Sir,
Subject: Submission of report.
It is an immense pleasure for us to submit the Term Paper on Bank Performance Analysis on
Jamuna Bank Limited which is prepared as a partial requirement of the course named
"Commercial Bank Management" (F-402) of BBA program under Department of Finance of
Faculty of Business Studies, University of Dhaka. The study is mainly focused on valuation of share
prices. The experience that we gathered through this study will help us in our career indeed. It was
an opportunity of rediscovering our potentials. It was of excitements too.

We would like to convey our special thanks and gratitude to you for patronizing our effort & for
giving us proper guidance and valuable advice. We have tried our best to cover all the relevant
fields.

We thank you and look forward to receive your cordial approval of our submission.

Sincerely Yours,

(On behalf of all group members)

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 Executive Summary
Today, Private Commercial banking is considered as a service industry. In the process of
conducting its own activities to achieve its own goal, like making profit, a commercial bank gives
services to all types of customers. Actually, to culled saving from the general customer is the
normal function of all commercial bank. But the important activities of commercial banking are
sanctioning loan of different business organization to continue their business activities. Among
these activities, loan & advance and trade finance activities are the basic activities of all commercial
bank.
Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 with
its head office in 5, Rajuk Avenue, Dhaka-1000. 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 and paid up capital of Tk.390.00 million and number of
branches raised to 29 (Twenty nine).

In our study, we tried to identify all the key indicators of financial performance evaluation of the
JBL. This is quiet helpful for the investors, borrowers and other affiliated parties of the bank. In this
report, the general activities of JBL and its various products are also discussed.
We try to present a birds eye of their Operational Performance- Loan and Deposits. We present the
Financial statement of Jamuna Bank through Ratio Analysis.This report points out some very
important strength as well as the weaknesses of the bank.

In this report we have make an analysis of stress test on Jamuna Bank Limited, Emphasizing on
Credit Shock, Interest Rate shock, Equity Price Shock, Exchange rate Shock, Liquidity Shock.

The findings on some very important issues arid recommendations for the bank are also available at
the end of the report. This report will help the bank management to improve the financial position
and its overall performance to compete the existing & upcoming Banks in Bangladesh.

Thats how we tried to go for a valid conclusion and make some suggestions to improve the situations.

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 Table of Contents

Chapter Contents Page No.

1. Introduction 8-13

2. The Banking Industry inBangladesh 14-16

3. An Overview on Jamuna Bank Limited 17-22
4. Operational Performance of Jamuna 23-33
Bank Limited
5. Loan Evaluating & Sanctioning Process 34-47
6. SWOT Analysis 48-50
7. Financial Performance by Ratio 51-57
Analysis
8. Stress Testing on Jamuna Bank Limited 58-80
9. Finding And Recommendations 81-83
10. Conclusion 84-85
Bibliography 86
Appendix 87-88

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 Chapter 1: Introduction

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 1.1 Introduction

Bank is the lifeblood of an economy to keep the wheels moving forward and to play the pivotal role
in the economic development of the country. The present economic state of Bangladesh demands
immediate development of the financial institutions. Banking sector has lot of areas to improve upon.
One of the measures to improve this condition is to introduce tailor made professional programs that
are designed to develop the managerial efficiency.

Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 of
Bangladesh with its Head Office currently at Hadi Mansion, 2, Dilkusha C/A, Dhaka-1000,
Bangladesh. The Bank started its operation from 3rd June 2001.

The Bank provides all types of support to trade, commerce, industry and overall business of the
country. JBL's finances are also available for the entrepreneurs to set up promising new ventures and
BMRE of existing industrial units. Jamuna Bank Ltd., the only Bengali named 3rd generation private
commercial bank, was established by a group of local entrepreneurs who are well reputed in the field
of trade, commerce, industry and business of the country.

The report refers significantly to build a perception about day to day affairs of the bank. This report
attempts to describe the functions of a branch of commercial bank and some recommendation for
improvement and efficiency of some of those functions.

We here try to Find out the Financial ratios- profitability, Asset quality, Liquidity and operating
Efficiency ratios, To quantify the performance of Jamuna Bank Limited.

A bank stress test is an analysis conducted under unfavorable economic scenarios which is designed
to determine whether a bank has enough capital to withstand the impact of adverse developments.
Stress tests can either be carried out internally by banks as part of their own risk management, or by
supervisory authorities as part of their regulatory oversight of the banking sector. We develop Stress
testing on JBL, meant to detect weak spots in the banking system at an early stage, so that preventive
action can be taken by the bank and regulators.

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 1.2 Objectives of the Study

Primary objective:

The primary objective of the report is fulfilling the requirement of our course Commercial Bank
Management (F-402).

Specific objectives:

Analyze the company.

Analyze the risks.
Analyse the Banking Performance
Analyze the capital adequacy ratio.
Analysis of risk weighted assets.
Stress testing on Jamuna Bank.

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 1.3 Scope of the study

The report has been prepared by collecting information from study materials. The sources were
relevant to the main topics of the report. Much data and sources made the report simple. The scopes
of the report have very good influence to make it the perfect one.

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 1.4 Methodology of the study

We took help from the study material to understand the conceptual matters.

We also followed guidance of our course teacher.

Though the analysis in Microsoft word and Microsoft Excel we have tried to draw some
valid conclusions.

Relevant file study as provided by the officers concerned.

Annual report (2005-2008) of Jamuna Bank Limited.

Periodicals published by Bangladesh Bank,

Different publications regarding banking functions, foreign exchange operation and credit
policies.
The internet was also used as a theoretical source of information.

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 1.5 Limitations of the study

Lack of previous experience.

Complexity in assuming figures.

Time limitation.

Lack of information.

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 Chapter 2: The Banking Industry in
Bangladesh

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The Banking Industry-Past & Present
The banking industry of the country started its journey soon after the Liberation war in 1971.
After liberalization of the commercial banks, banking industry in Bangladesh started its journey
without any participation of the private sector in very restrictive financial systems. In early
eighties, few commercial banks were allowed aid private commercial banking system starts
functioning. Due to lack of experience and of supervisory as well as controlling environment, first
generation private banks faced various problems in the next few years. During the late eighties
and early nineties, with the passage of Financial Sector Reform Program, banking regulation
structure suggested by BIS and followed by the developed countries began to start incorporation
into the banking regulations of Bangladesh. In the following table a few snapshots as well as brief
history has been given which will help us in understanding the overall banking sector in
Bangladesh.
Credit Information Bureau (CID) Report from Bangladesh Bank
It stands for Credit Information Bureau in sport. CIS is a department by Bangladesh Bank to help
the all-banking and financial Institutions by providing the latest report in the customers, who
enjoy credit for facilities more than 10 Lac Taka. According to Bangladesh Bank order no bank
can provide only credit facilities more than Tk. 10 Lac, without having CIS report from
Bangladesh Bank. If there is any adverse report on raw customer, which represent-classified loan
no bank can provide any credit facilities to that customer. This is a unique facility provided by
Bangladesh Bank to its entire member Bank/Financial Institutions. Even the Central Bank of India
does not provide this type of facilities through is some credit rating agencies in India. This report
includes various latest informations on the customer having outstanding liability of Tk. 10 lac
and above and recently Bangladesh Bank is making arrangement to make it to Tk. 1 lack and
above. Li addition to legal obligation this report helps a credit officer to evaluate a customer along
with its all sister concerns/partners.

Financial System of Bangladesh

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 The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, 4
nationalized commercial banks (NCB), 5 government owned specialized banks, 30 domestic
private banks, 10 foreign banks and 28 non-bank financial institutions. The financial system also
embraces insurance companies, stock exchanges and co-operative banks.
Central Bank
Bank & FIs
Capital Market
Insurance
Microfinance
Institutions (MFIs)
Exchange Rate
The exchange rates of Taka for inter-bank and customer transactions are set by the dealer banks
themselves, based on demand-supply interaction. The Bangladesh Bank is not present in the
market on a day-to-day basis and undertakes purchase or sale transactions with the dealer banks
only as needed to maintain orderly market conditions
The exchange rates are used as reference rates to purchase or sale transactions for Bangladesh
Bank with Government or different International Organization. But USD/BDT buying and selling
rates represent previous day interbank markets highest and lowest exchange rates.

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 Chapter 3: An Overview of Jamuna Bank
Ltd

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The Bank
Being a 3rd generation Bank of Bangladesh, it focuses on

Remaining with time

Managing change
Developing human capital
Creating true customers value

Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 of
Bangladesh with its Head Office currently at Hadi Mansion, 2, Dilkusha C/A, Dhaka-1000,
Bangladesh. The Bank started its operation from 3rd June 2001.

The Bank provides all types of support to trade, commerce, industry and overall business of the
country. JBL's finances are also available for the entrepreneurs to set up promising new ventures and
BMRE of existing industrial units. Jamuna Bank Ltd., the only Bengali named 3rd generation private
commercial bank, was established by a group of local entrepreneurs who are well reputed in the field
of trade, commerce, industry and business of the country.

The Bank offers both conventional and Islamic banking through designated branches. The Bank is
being managed and operated by a group of highly educated and professional team with diversified
experience in finance and banking. The Management of the bank constantly focuses on understanding
and anticipating customers' needs. Since the need of customers is changing day by day with the
changes of time, the bank endeavors its best to device strategies and introduce new products to cope
with the change. Jamuna Bank Ltd. has already achieved tremendous progress within its past 10 years
of operation. The bank has already built up reputation as one of quality service providers of the
country.

At present the Bank has real-time Online banking branches (of both Urban and Rural areas) network
throughout the country having smart IT-backbone. Besides traditional delivery points, the bank has
ATMs of its own, sharing with other partner banks and consortium throughout the country.

The operation hour of the Bank is 10:00 A.M. To 6:00 P.M. from Sunday to Thursday with
transaction hour from 10:00 A.M. to 4:00 P.M. The Bank remains closed on Friday, Saturday and
government holidays.

Our Vision
To become a leading banking institution and to play a significant role in the development of the country.

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Our Mission
The Bank is committed for satisfying diverse needs of its customers through an array of products at a
competitive price by using appropriate technology and providing timely service so that a sustainable
growth, reasonable return and contribution to the development of the country can be ensured with a
motivated and professional work-force.

Strategic Priority
Delivering customer desired products and services to create true customers value.
Focusing on export of both traditional and nontraditional items and remittance to ensure a
comfortable position of foreign exchange all the time.
Doing businesses that have higher risk adjusted return.
Focusing on maintenance of assets quality rather than its aggressive expansion.
Changing the deposit mix thereby reduce the cost of deposits.
Ensuring all modern alternative delivery channels for easy access to our services by
customers.
Taking banking to the doorstep of our target group.
Restructuring existing products and introducing new products to meet the demand of time and
the target group.
Entering into new avenues of business to increase profitability.
Bringing unbanked people into our delivery channels.
Increasing fee based service/activities where costly capital is not changed.
Ensuring organizational efficiency by continuous improvement of human capital and
motivation level, dissemination of information and thereby ensuring a sustainable growth of
the organization.
Maximizing shareholders value at all times alongside ensuring a sustainable growth of the
organization.
Pursuing CSR activities for our continued support to future generation, distressed people and
for advancement of underprivileged people of the country.
Establishing the brand image as a growth supportive and pro-customers bank.
Strengthening risk management techniques and ensuring compliance culture.
Remaining cautious about environment and supporting for maintaining a green and clean soil.

Objectives
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 To earn and maintain CAMEL Rating 'Strong'
To establish relationship banking and improve service quality through development of
Strategic Marketing Plans.
To remain one of the best banks in Bangladesh in terms of profitability and assets quality.
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.

Values

Customer Focus
Integrity
Quality
Teamwork
Respect for the individual
Harmony
Fairness
Courtesy
Committment
Respectable Citizenship
Business Ethics
Unique Culture

Management

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Managerial Hierarchy Of Jamuna Bank LTD

Figureheads of Jamuna Bank Limited

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Audit Committee

In line with the guidelines of Bangladesh Bank, a three member audit committee of the Board of
Directors has been formed to assists the Board in matters related to audit and internal Control System
of the Bank

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 Chapter 4: operational Performance Of Jamuna
Bank Ltd.

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Role of the Jamuna Bank in the Economic
Development of Bangladesh:
Jamuna Bank is a leading banking institution and to play a pivotal role in the Economic
development of the country. Jamuna Bank has many deposit schemes, saving deposits scheme.
Some deposits scheme is only for poor people. That is rural deposit scheme, medium and small
saving scheme. The people are deposit money in the Jamuna bank. And the Jamuna bank removes
poverty of poor people by deposit schemes saving scheme. Jamuna Bank has vital role of the
export and import in the economic development of Bangladesh. Jamuna bank keep contribution
foreign remittance from Bangladeshi foreign citizen for economic develop m Bangladesh. Jamuna
bank has SME banking system. This Bank pay loan for the small arid medium business lower
interest rate. This interest rate is 16% of Jamuna Bank. Small and medium business owners are
taken loan from Jamuna bank for develop their business. Small and medium business are develop
Then the Bangladeshi economics will be developed. Overall we can see that Jamuna bank is
contributing the role of economics development of Bangladesh.

Products & Services

The products and services can be classifying in two ways & those are:
The deposit products & services
The lending products & services

Deposits products & services Lending/Investment products & services

Corporate Banking Hire Purchase

Personal Banking Lease Finance

Online Banking Persona! loan for woman
Monthly Savings Scheme Project Finance

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 Monthly Benefit Scheme Loan Syndication
Double/Triple Benefit Scheme Consumer Credit
Marriage Scheme Import and Export. Handling Financing
Education Scheme
Lichgate Deposit Scheme
Q-Cash ATM

Source: Jamuna Bank Ltd, Product & Service, available wwvv.jamunabankbd.com

Corporate Banking
The motto of JBLs Corporate Banking services is to provide personalized solutions to their
customers. The Bank distinguishes and identifies corporate customers need and designs tailored
solutions accordingly. Jamuna Bank Ltd, Driers a complete range of advisory, financing and
operational combining trade, treasury, investment and services to its corporate client groups coin
transactional banking activities in one package. Whether it is project finance, term loan, import or
export deal, a working capital requirement or a forward cover for a foreign currency transition,
there Corporate Banking Managers will offer you the accurate solution, their corporate Banking
specialists will render high class service for speedy approvals and efficient processing to satisfy
customer needs.
Corporate Banking business envelops a broad range of businesses and industries.
Personal Banking
Personal Banking of Jamuna Bank offers wide-ranging products and services matching the
requirement of every customer. Transactional accounts, savings schemes or loan facilities from
Jamuna Bank Ltd. make available to all a unique, mixture of easy and consummate service
quality. They make every endeavor to ensure their clients satisfaction. Their
cooperative & friendly professionals working in the branches will make your visit and enjoyable
experience.
JBL offers the following key Personal Banking Services
Current Deposit Account
Savings Deposit Account
Short Term Deposit Account
Fixed Deposit Account

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 Special features:
Special features:
No limit to the number of withdrawals.
No minimum balance fee.
Statement of account at your desired frequency.
Free cheque book.
Q-Cash Round the Clock Banking.
All types of general banking facilities.
Online Banking
Jamuna Bank Limited has introduced real-time any branch banking on April 05, 2005. Now,
customers can withdraw and deposit money from any of its 30 branches located at Dhaka,
Chittagorig, Sylhet/ Gazipur, Bogra, Naogapn, Naray.anganj and Munshigonj commila,
Sherajgong Nayakhali. Their valuevd customers can also enjoy 24 hours banking service through
ATM card from any of Q-cash ATMs located at Dhaka, Chittagong, Khulna, Sylhet and Bogra.
All the existing customers of Jamuna Bank Limited will enjoy this service by default. Monthly
Savings Scheme (MSS)
Savings is the best friend in bad days. Small savings can build up a prosperous future. Savings can
meet up any emergences. JBL has introduced Monthly Savings Scheme (MSS) that allows saving
on a monthly basis and getting a handsome return upon maturity. If anyone wants to build up a
significant savings to carry out youre cherished Dream, JBL MSS is the right solution.

Monthly Deposit 3 Years 5-Years 10- Years

Tk. 5007- Tk.21,1307- Tk.39,9907- Tk. 1,10,5007-

Tk. 10007- Tk.42,2607- Tk. 80,0007- Tk.2,21,0007-

Source: Jamuna Bank Ltd, Monthly Savings Schemes, Annual Report of Jarnuna Bank, 2015.
Monthly Benefit Scheme (MBS)
Jamuna Bank Limited has introduced Monthly Benefit Scheme (MBS) for the prudent persons
having ready cash and desiring to have fixed income on monthly basis out of it without talking
risk of loss and without enchasing the principal amount. This scheme offers highest return with
zero risk. Everyone can plan your monthly expenditure with the certain monthly income under the
scheme.

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 Tenor Monthly benefit/profit against deposit of Tk. 1.00 (one)
lac

5 years Tk. 10207-

3 years Tk. 10007-

1 year Tk.8757-

6-months Tk.8507-

Source: Jamuna Bank Ltd, Monthly Benefit Schemes., Annual Report of Jamuna Bank, 2015.
Double/Triple Growth Scheme
For people who have cash flow at this moment and want to get it doubied7tripled quickly JBL has
introduced Double/Triple Growth Deposit Scheme that offers to make double/triple money within
6(six) years and 9.5 (nine and a half) years respectively resulting a high rate of interest.
Education Savings Scheme
Todays higher education is becoming expired day by day. As such, JBI, has introduced
Education Savings Scheme which offers an opportunity to build up cherished fund by monthly
deposit of small amount it at affordable capacity or initial lump sum deposit to yield handsome
amount on a future date to meet the educational expenses. Under this Scheme there are different
attractive options to avail the future benefit i.e. withdrawal of the total amount accumulated in
lump sum or withdrawing monthly benefit to meet educational expense keeping die principal
amount intact or to withdraw both principal and accumulated profit monthly for a certain period.
Lease Finance
Lease means a contractual relationship between the owner of the asset and its utter- far a
specified period against mutually agreed upon rent. The owner is called the Lessor and the user is
called the Lessee. Lease finance is one of the most convenient sources of financing of assets e.g.
machinery, equipment vehicle, etc. The user of the assets i.e. Lessee is benefited through tax
advantages, conserving working capital and preserving debt capacity. Moreover, Lease is an off-

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 balance sheet item i.e lease amount is not shown in the balance sheet of the lessee and does not
affect borrowing capacity. (Annual Report of Jamuna Bank Ltd, 2008)
Project Finance
Project loan is .considered as long-term, investment of the bank. If the period is helpful to
improve the economy and has a wide market then the bank thinks about giving project loan. To
give this kind of loan the bank observes the willingness of the customer, his capacity and his
ability to run the project. Having obtained this kind of information the bank makes a credit report
about the customers loan proposal. Interest rate on loan varies from project Ratio of investment
of customer and bank varies from customer to customer and the customers relationship with the
bank.
Loan Syndication
Bank cannot invest more then 15% of its paid up capital: on one individual When the loan amount
exceeds 15% of its paid up capital then the bank share the loan with other bank for giving one
individual and this is call loan syndicate.
Consumer Credit
Consumer credit scheme is relatively new field of micro- credit activities. People with limited
income can avail of this credit facility to buy any household effects including car, computer and
other consumer durable. It is a special credit scheme and the customers allow the loan on soft
terms against personal guarantee and deposit of specified percentage of equity. The loan is
repayable by monthly installment within a fixed period.

Remittance Department
Remittance means transmission/transfer of money from one place to another, local remittance
represents remittance that takes place within the territory of a country.
Banks have a wide network of Branches all over the country and offer various types of remittance
facilities to the public/customer/client etc.
The main functions of the Exports are:
1) Getting the L/C Documents from Foreign Importers Bank.
2) Gives this L/C to Exporter.
3) Advising the L/C.

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 4) Opening the Bank-to-Bank L/C.
5) Collection and distribution of the payment of Bank to Bank.
When after shipment of goods the exporter submits all documents as per as L/C, this Department
scrutinizes those Documents and sent to the Importers Bank
Foreign Exchange
The main functions of Foreign Exchange Department are:
1) Deals with inward foreign Remittance.
2) Dealing of Traveler Checks.
3) Transfer money and currency through Western Orison.
4) Transfer fund through draft, Telegraphic Transfer, Mail Transfer etc.
5) Foreign Bills collection.
6) Foreign Bills purchase and discount.
Money gram:
10 ID (to receive money through Moneygrame).
Passport (not expired).
Driving License/
Ration Card.
Voters ID,
Pan Card.
Refugee Card.
Student ID (NationalizedUniversity and college).
Bank Passport (JBL).
Army Card.
Post office loyalty card, govt. employee ID card, local (W/C) ID card. All ID are valid only if
they have a photograph and the ID verifies the persons signature.

JAMUNA BANK PERFORMANCE EVALUATION

Jamuna Bank Ltd is one of the front-ranking new generation private sector commercial banks in
Bangladesh. JBL has been carrying out business through its 39 branches spreading all over the

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 country. It has maintained a strong market position by providing quality services to its customers
and adding value to the shares. The bank made moderate progress in all areas of business in 2015.

The rating has been done in the consideration of visible improvement in fundamentals such as
capital adequacy, liquidity position, profitability, introduction of real time online banking etc. The
above rating is- moderated, to some extent by limited marked share, increase in NPL, high cost of
fund, moderate corporate governance, dependency on term deposit etc. Financial institutions rated
in this category are adjudged to offer adequate safety repayment of financial obligations. (Credit
Rating Information and Services Ltd)
Balance with Bangladesh Bank (BB) Its Agents:
The balances maintained with Bangladesh bank and ,t agents are 966.67 million Taka and
increased by 3.57 percent at the end of December 2015 Due to the increase in deposit the bank
increased balances with Bangladesh Bank and its agents for maintaining proportionate Cash
Reserve Requirement (CRR).

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 Balance with Other Banks/Financial Institutions:
The balances maintained with other banks and financial institutions are 1,877.14 million Taka in
2015 and decreased by 23.12 percent mainly due to transfer of funds to different banks for
covering the payments against inward foreign remittances.

Money at Call & short Notice:

Money at call and short notice was decreased by 78.38 percent in 2015 over the previous year.
The fund placement was mainly made in 12 banks and financial institutions.
Investment:
The banks investment grew by 111.15% and stood at Tk. 539 crore in 2007-against Tk 252.27
crore in the previous year. It mostly invested in high yielding long-term government securities to
cover the increased statutory liquidity ratio (SLR) requirement arising from the growth of deposit
liabilities.
Deposits & Deposit Mix
The deposit vase of the bank registered a growth of 21.05% from Tk 1728.48 crore in 2006 to
tk.2092.40 crore in December 2014. Expanded branch network, innovative deposit products
including NMS and NDS attracted a huge number of customers, which contributed to the growth
of deposit the main customers include individuals, corporations, financial institutions, government
& autonomous bodies, etc.
Borrowings from other Banks, Financial Institutions and Agents
The bank registered 286.67% growth in borrowings from other banks, financial institutions and
agents In 2015. This growth was mainly due to borrowing from Bangladesh Bank under Export
Development Fund (EDF)
Other Liabilities
Other liabilities increased by tk. 83.40 crore due to current tax liability and for making provision
for loan loss. Provision for income tax was Tk. 31.59 crore m 2007 which was Tk. 24.66 crore in
the 2015.
Foreign Trade
Jamuna Bank Limited continued to be very active in international trade through financing export-
import business and mobilizing wage-earners remittances. In 2015 the bank handled import

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 business of Tk. 2219.18 crore compared to Tk. 1545.77 crore in the preceding year. The bank
handled export business worth Tk. 1399 crore in 2015. The bank has also expanded its external
business by undertaking export bill negotiations, realization of export proceeds, foreign
remittance, etc.
Imports
Import trade finance by JBL rose to Tk 2,219.18 crore in reporting year compared with Tk
1,545.77 crore in 2015. The growth increased by43.57%. Large LCs was opened mainly for
importing industrial raw materials, machinery, consumer goods, fabrics, accessories etc.

Risk Management
As a regulatory body Bangladesh Bank wants all banks to take effective measures for
implementation of risk management in banking operations covering the major risks in asset-
liability management, credit risk management, Foreign Exchange Risk Management, Internal
Control & Compliance and Money Laundering Prevention. As these risks are integral parts of
banking business JBL has put highest priority on management of such risks with intense
monitoring of credit portfolios. We believe these will improve our operational and financial
performance along with meeting the regulatory requirements. The Bank is in constant efforts to
establish superior monitoring of credit risks and returns. For bringing in harmonious matching
between assets and liabilities ALCO reviews these on a regular basis for keeping risk in this area
to an acceptable level. The Banks credit policy guidelines arid procedures are continuously
reviewed and upgraded by its internal committees. The Bank also pursues an effective internal
control system by establishing systems and procedures for scrutinizing the transactions
periodically, encompassing key back-up
Supports and commissioning regular contingency plans Through establishment of proper
governance structure risk and returns are evaluated with a view to producing sustainable revenues,
reducing volatility in earnings arid enhancing value to shareholders. Maintenance of quality of
assets is always the key issue to the JBL Management. Continuous efforts are made to maintain

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 earning assets at the highest possible level so as to maximize profits and minimize cost of
operation.
Information Technology
Importance of application of Information & Communication Technology (ICT) in banking is
needless to emphasize. Jamuna Bank is gradually adopting the most sophisticated centralized
Banking Solution to keep pace with changing developments meeting Bangladesh Bank regulatory
requirements on ICT.
On-Line Banking
JBL has launched a comprehensive and real time On-Line Banking solution. This Bank is just a
step behind to select the Centralized Online Banking Solution. Set up of Flora Bank On-line
Banking Software, switching software, servers, ATM, data storage system and other hardware to
set up equipped center in Computer Division bears testimony to adoption of technology.
Delivery channel of JBL online banking
Branch banking. Tele-Banking Network
ATM Network
POS(Point of Sales)
SMS Banking Network
Internet Banking Network 3,27 Employee Benefits:
Employee Benefits:
Employees are the blood of any organization. An institution cannot run properly without an
efficient and effective management learn. Jamuna Bank management team has provided its
efficiency by executing decisions and running the bank for the last 08 years. In recognition to
their contribution, the board has formulated a number of policies for the welfare of the employees.
The board has introduced superannuation fund, gratuity, medical scheme, car loan scheme, and
other benefits for executives/officere/staff of the bank.

33 | P a g e
 Chapter 5: Loan Evaluating and Sanctioning
Process

34 | P a g e
 Fundamentally, credit policies and procedures can never sufficiently capture all the complexities
of the product. Therefore, the following credit principles are the ultimate reference points for all
loan sanctioning:
Assess the customers character for integrity and willingness to repay
Only lend when the customer has capacity and ability to repay
Only extend credit if bank can sufficiently understand and manage the risk
Use common sense and past experience in conjunction with thorough evaluation and credit analysis.
Do not base decisions solely on customers reputation, accepted practice, other lenders risk assessment
or the recommendations of other officers
Be proactive in identifying, managing and communicating credit risk
Be diligent in ensuring that credit exposures and activities comply with the requirement set out in
Product Program
Product Program Guideline (PPG) for real estate product shall be framed based on market demand,
necessity and prospect.
Primary Selection criteria:
Income, Age, Educational Qualification, Number of Dependants, Spouses income, Assets Liabilities
stability, Monthly Income Expenditure, Continuity of Occupation, Savings history, conduct and
commitment, nature of profession/business etc.
Nature, Size and quality of construction.
Rental Income / earnings forecast / cash flow from the proposed building/flat/project.
Debt-Service Coverage ratio
Debt Burden ratio
Debt-Equity ratio
Communicational advantages and infra-structural facilities of the project
Socially reputed & financially sound/strength.
Banks may alter/ amend these guidelines in terms of the policy without compromising the
fundamentals of credit principles.
A- Sanctions of Consumer and Personal Loan:

Target Customer Segment Preferred customer segments area) Salaried Individuals and

Professionals of reputed institutions with minimum 03 [three]

years of continuous service. Service length may be relaxed able in

case of high net worth individuals and professionals.

b) Self Employed professionals who are self -employed and

35 | P a g e
 have at least 03[three] years of practice in relevant profession)

Businessman having high net worth with at least 5 [five] years of

continuous operation in relevant line of business.

d) Wage Earners or other professional serving abroad

having good income. Other specific criteria, security
and documentation formalities shall depend on the
overall status of the applicant.
e) Permanent Officers of Government, Semi
Government and Autonomous Bodies, Reputed
Multinational Companies, International Financial
Organizations, Donor Agencies, Foreign Embassies,
Local Established and reputed Public Limited
Companies.
f) Teachers of Universities including established
Private Universities and established private colleges.

In case of service holders, unexpired period of service

shall have to be minimum 5[five]

Discouraging Group Negative listed individuals as per JBL credit policy.

Purpose Construction/Extension/Renovation/Refurbishing/Installation of

Lift/Generators of residential building.

Nationality Bangladeshi by Birth.

Age Limit 1. Minimum age 25[twenty five] years/Maximum age 65

[sixty five] years.
2. Maximum age on maturity of the loan should not
exceed retirement age of the applicant i.e. 65 [sixty
five] years.
3. Loan tenor shall not exceed remaining service life in
case of salaried person.

36 | P a g e
 Minimum Income Net Income/Take home salary will be at least Tk. 40,000/-[forty

thousand] per month. However the customer must have sufficient

net cash flow to repay the loan installment based on Debt Burden

Ratio.

Net Worth Minimum 150% of the loan amount.

Loan size Minimum loan amount should not be less than Tk.5,00,000 (five

lac) and Maximum loan amount should not exceed Tk.

75,00,000/- (Seventy Five lac).

Debt Equity Ratio Maximum 60:40

Loan pricing ratio Financing up to maximum 60% of construction cost.

Security/ collateral i) Registered Mortgage /Registration of Assets in the name of the

Bank ii) Registered Irrevocable Power of Attorney (RIPA)

empowering the bank to sell the mortgaged property.

iii) Post- Dated Cheques favoring the bank for each

Installment (at least six) and one undated cheque for
full loan amount.
iv) Personal Guarantee of the customer and his/her
spouse combined Personal Net Wealth statement duly
signed.
v) Insured with Bank Mortgage Clause for a sum of
10% above the sanctioned limit covering the risks of
fire & RSD only at Construction cost. The Customer
shall provide an undertaking to bear any loss arising
out of the risk of flood and cyclone.

Charge documents v Demand promissory note Letter of Revival

v Letter of Arrangement
v Letter of Installment

37 | P a g e
 v Letter of Disbursement
letter of Disclaimer
v Letter of Authorization
v General Loan Agreement
v Complete standard Loan Document
v Other Usual Charge Documents duly executed

Interest Rate and : Other Fees Structure a) Interest Rate: Current indicative rate is 13% Per annum.

However Interest rate may be changed by ALCO from time to

time based on market conditions and to ensure product

competitiveness in the market.

b) Loan Processing Fee: 0.50% of the approved loan
amount or maximum Tk.10,000/- [Ten thousand].
c) Stamp Charges: All relevant stamp charge, VAT
etc. expenses should be borne by the customer and
wifi be debited from his/her account at the time of
disbursement.
d) Installment Failure Charge: Penal interest of 2%
Per annum on the past due amount will be realized.
e) Early Payment/Pre-Payment and Applicable Fee:
i) Final Settlement: The Customer may settle the loan
before the end of the loan tenure. A charge for early
full and final settlement is 0.25% (flat) of the
outstanding loan amount or Maximum Tk 5,000/-[five
thousand].
ii) Partial Pre-payment: Customer may make partial
pre-payment only after 06[six] months from the due
date of 1st installment. Partial pre-payment amount
must be at least 25% of the outstanding loan amount.
f) Expenditure for Survey/Vetting/Mortgage related

38 | P a g e
 Fees, Charges/Insurance Premium:
Expenses incurred for this purpose to be borne by the
applicant at actual.

Loan Tenure Minimum tenure of JBL Real Estate loan would be 03 [three]

years and maximum tenure would be 15 [fifteen] years including

grace period but total tenure of loan not exceed the un-expired

period of service of the borrower or beyond the age of 65 (sixty

five)

Grace Period Depend on construction status but not to exceed maximum

12(twelve) months.

Repayment Method Repayment[EMIs]. System will automatically debit the equated

monthly

installment [EMI] amount from the customers

personal/ company account [Current/ Savings/ STD]
maintained with JBL through standing instruction. In
order to realize EMI amount, customers must ensure
sufficient balance in the account each month.
Payment starts from the following month of expiry of
grace period.
Payment has to be made within 15th day of every
month.
Tk.200.00 shall be charged as penalty for each
bounced cheque.
Default in payment of consecutive 3(three) installment
shall constrain the bank to take legal measure.
Resignation/Termination of any salaried person from
present employment shall make the loan immediately
repayable.
The full value of the limit shall also be repayable on
demand, if the bank assumes that (1) the customer has
lost his repaying capacity, (2) the customer may lose

39 | P a g e
 his repaying capacity, (3) the customers conduct with
the bank does not remain at a satisfactory level and (4)
any other uncontrollable factor which may constrains
the bank for calling up the loan.

Disbursement pre-condition All documentation formalities should be fully completed as per

approved terms and conditions before disbursement of the loan.

Prior approval must be obtained for any deferrals, waiver/change

of documents, waiver/change of terms and conditions etc. before

disbursement. Disbursement permission should be obtained from

the CAD prior to loan disbursement.

Disbursement Mode Loan amount will be disbursed through account transfer from our

concerned branch under the following phases: Phase-I: 30% of

total loan will be disbursed after utilization of at least 50% of

equity of the customer/ Completion of Ground Floor.

Phase-Il: 30% of total loan will be disbursed after

proper utilization of previous disbursed amount and at
least 70% of equity of the customer/Completion of all
Roof Casting.
Phase-Ill: 40% of total loan for the finishing works
will be disbursed after proper utilization of previous
disbursed amount and 100% of equity of the
customer.

Visit report i) The Branch must submit visit report with photograph of the

proposed project and collateral securities containing photograph

of the visiting officials. However Head Office official finally visit

the proposed project before sanction ii) Before each and every

disbursement Branch Official should visit the site to ensure that

the project is running and fund utilized as per schedule. A visit

report should be there in respective file for branch record.

40 | P a g e
 Validity of Sanction Up to 90 (ninety) days from the date of sanction.

Debt Burden Ration (DBR %) Primarily 30% of monthly take home salary/ monthly net income

and 70% from the rental income of the proposed construction.

B. Sanctions of COMMERCIAL Loan:

.

Target Customer Segment Preferred customer segments area) Corporate Offices and Renowned

business house.

b) Any other professional acceptable to the loan.

Discouraging Group Negative listed Customers as per JBL credit policy.

Purpose a) Construction of Commercial Building) Construction/ Extension/ Renovation/

Refurbishing of commercial cum residential building.

c) Installation of Lift/ Generators/ Substation etc.

d) Office spaces, Chamber, shops etc.

Nationality Bangladeshi by Birth.

Age Minimum 25 (twenty five) years.

Minimum Income The customer must have sufficient net cash flow to repay the loan installment

based on Debt Burden Ratio.

Net Worth Minimum 150% of the loan amount.

Loan size Minimum loan amount should not be less than Tk.10,00,000 (Ten lac) and

Maximum loan amount should not exceed Tk. 5,00,00,000/- (Five crore).

Debt Equity Ratio Maximum 50:50

Loan pricing ratio Financing up to maximum 50% of construction cost.

Security/ collateral i) Registered Mortgage /Registration of Assets in the name of the Bank.ii)

Registered Irrevocable Power of Attorney (RIPA) empowering the bank to sell

41 | P a g e
 the mortgaged property.

iii) Post- Dated Cheques favoring the bank for each Installment (at
least six) and one undated cheque for full loan amount.
iv) Personal Guarantee of the customer and his/her spouse
combined Personal Net Wealth statement duly signed.
v) Insured with Bank Mortgage Clause for a sum of 10% above
the sanctioned limit covering the risks of fire & RSD only at
Construction cost. The Customer shall provide an undertaking to
bear any loss arising out of the risk of flood and cyclone.
vi) Notarized Irrevocable power of Attorney empowering the bank
to sell the hypothecated stock of construction materials.
vii) Corporate Guarantee of other reputed business firm (if
possible)

Charge documents v Demand promissory note Letter of Arrangement

v Letter of Installment
v Letter of Disbursement
vLetter of Disclaimer
v Letter of Authorization
v General Loan Agreement
v Complete standard Loan Document
v Other Usual Charge Documents duly executed

Interest Rate and : Other Fees a) Interest Rate: Current indicative rate is 13% Per annum.However Interest rate

Structure may be changed by ALCO from time to time based on market conditions and to

ensure product competitiveness in the market.

b) Loan Processing Fee: 0.50% of the approved loan amount or

maximum Tk.10,000/- [Ten thousand].
c) Stamp Charges: All relevant stamp charge, VAT etc. expenses
should be borne by the customer will be debited from his/her

42 | P a g e
 account at the time of disbursement.
d) Installment Failure Charge: Penal interest of 2% Per annum on
the past due amount will be realized.
e) Early Payment/Pre-Payment and Applicable Fee:
i) Final Settlement: The Customer may settle the loan before the
end of the loan tenure. A charge for early full and final settlement
is 0.25% (flat) of the outstanding loan amount or Maximum Tk
5,000/-[five thousand].
ii) Partial Pre-payment: Customer may make partial pre-payment
only after 06[six] months from the due date of 1st installment.
Partial pre-payment amount must be at least 25% of the
outstanding loan amount.
f) Expenditure for Survey/Vetting/Mortgage related Fees,
Charges/Insurance Premium:
Expenses incurred for this purpose to be borne by the applicant at
actual.

Loan Tenure Depends on construction status but maximum tenure would be 05 (five) years

including grace period.

Grace Period Depend on construction status but not to exceed maximum 24(twenty four)

months.

Repayment Method Repayment should be made through equated monthly installment (EMIs)/

Quarterly rest or deal-to-deal basis (one year). System will automatically debit

the equated monthly installment (EMI) amount from the customers company

account (Current/ Savings/ STD) maintained with JBL through standing

instruction. IN order to realize EMI amount, customes must ensure sufficient

balance in their account each month/ quarter/ Due date.

Payment starts from the following month of expiry of grace period.
Payment has to be made within 15th day of every month.
Tk.200.00 shall be charged as penalty for each bounced cheque.

43 | P a g e
 Default in payment of consecutive 3(three) installment shall
constrain the bank to take legal measure.
Resignation/Termination of any salaried person from present
employment shall make the loan immediately repayable.
The full value of the limit shall also be repayable on demand, if the
bank assumes that (1) the customer has lost his repaying capacity,
(2) the customer may lose his repaying capacity, (3) the customers
conduct with the bank does not remain at a satisfactory level and (4)
any other uncontrollable factor which may constrains the bank for
calling up the loan.

Disbursement pre-condition All documentation formalities should be fully completed as per approved terms

and conditions before disbursement of the loan. Prior approval must be obtained

for any deferrals, waiver/change of documents, waiver/change of terns and

conditions etc. before disbursement. Disbursement permission should be

obtained from the CAD prior to loan disbursement.

Disbursement Mode Loan amount will be disbursed through account transfer from our concerned

branch under the following phases:Phase-I: 40% of total loan will be

disbursed after utilization of at least 50% of equity of the customer/ Completion

of Ground Floor.

Phase-Il: 40% of total loan will be disbursed after proper

utilization of previous disbursed amount and at least 70% of
equity of the customer/Completion of all Roof Casting.
Phase-Ill: 20% of total loan for the finishing works will be
disbursed after proper utilization of previous disbursed amount
and 100% of equity of the customer.

Visit report i) The Branch must submit visit report with photograph of the proposed project

and collateral securities containing photograph of the visiting officials. However

Head Office official finally visit the proposed project before sanction.ii) Before

each and every disbursement Branch Official should visit the site to ensure that

the project is running and fund utilized as per schedule. A visit report should be

44 | P a g e
 there in respective file for branch record.

Validity of Sanction Up to 90 (ninety) days from the date of sanction.

Debt Burden Ration (DBR %) Primarily 30% of monthly take home salary/ monthly net income and 70% from

the rental income of the proposed construction.

Proof of Income Customer should properly substantiate all claims in the financial information

section of the Loan Application Form. Generally, the bank will accept original

or true copy of the original documents for this purpose.

3.6 Terms & Condition of JBL:

In consideration of Jamuna Bank Ltd. (herein after called the Bank unless the context otherwise
requires where such expression shall mean and include its successors and assignees) allowing
me/us, (hereinafter referred to as the Customer unless the context otherwise requires where such
expression shall mean and include its successors and assigns) to apply for the loan facility (the
facility) under Real Estate loan program I/We agree that I/we shall be bound by the following
terms and conditions:
i) The Facility shall be made available to the customer from date of the Banks acceptance of
the Banking Arrangement Letter by the Customer until such time as stipulated in any letter and
this Facility shall be a continuing one until full adjustment with the Bank with interest and other
charges.
ii) The above Facility will be made available to the Customer subject to a Clean CIB report
from Bangladesh Bank and compliance of Bangladesh Bank formalities (if any).
iii) As per Govt. rules the bank will realize VAT on all sorts of commission & fees for the
service.
iv) Customer will not use the Facility for any purpose other than those for which it is granted.
v) Customer hereby confirms that Customer is not engaged in activities that may be
appropriate authorities as money laundering and the Bank may safely accept such confirmation as
authenticate and true.
vi) Customer cannot prepay any part of whole of the facility within 06 (six) months from the
date of first installment due.

45 | P a g e
 vii) Any repayment or prepayment of facility whether in part or full will be attributable first to
cost, charges and expenses, then to interest, which has accrued on the facility, and then to
principal.
viii) All fees charges and other costs including legal fees incurred by the Bank in connection
with this facility and security documentation will be at the account of the customer.
ix) Customer hereby undertakes to the bank that customer will provide all documents related
with his/her income wherever appropriate on demand of the Bank.
x) Customer declares that there is no suit or proceeding against the customer by any person is
pending in any court of law that may affect the ability of the customer for repayment of the
facility and the customer has been adjudged as an insolvent or convicted by any appropriate court
of law and no receiver or administrator has been appointed over any property or assets of the
customer by any court of law or authority as the case may be.
xi) Customer hereby represents and warrants that the information which customer has provided
in this application forms are true and correct to the best of his/her knowledge and the Bank may
safely rely on such information.
xii) The bank is authorized to open and maintain Facility account(s) for the purpose of
administering and recording payments by the customer in respect of the facility.
xiii) Payment under the facility (in case of Flat/Apartment/Ready House/Purchase) shall be
made directly to the Developer or owner of the property (as the case may be), on the instruction of
the customer and as agreed by the bank considering the purpose of the facility.
xiv) If the bank demands at any time, Customer undertakes to deposit his/her/their
salary/wages/honorarium payable by his/her/their employer to the designated account maintained
with the Bank.
xv) The Banks statements and records shall be binding on the Customer and shall constitute
conclusive evidence of debt for all purposes.
xvi) If at any time, any provision hereof becomes if illegal, invalid or unenforceable iii any
respect neither the legality, validity nor enforceability of the remaining provisions shall be
affected or impaired thereby.

46 | P a g e
 xvii) Any notice made by the Bank in respect of the Facility shall be writing and made to the
address given by the Customer to the Bank and shall be deemed to have been served to the
customer within 24 hours from the date of posting.
xviii) If the declaration below is signed by more than one person as customer, the liability of each
such person there under, and these terms and conditions shall be joint and several.
xix) These terms and conditions shall be governed by and construed in accordance with the laws
of Bangladesh and the Bank and the Customer hereby irrevocably submit to the non-exclusive
jurisdiction of the court of Bangladesh.

47 | P a g e
 Chapter 6: SWOT Analysis

48 | P a g e
SWOT analysis
This is a technique used by the credit officers to evaluate credit proposal submitted by company
especially by the production concern. It is also very helpful to evaluate the present & future
performance of a firm.
Here, S stands for Strength.
W stands for Weakness.
O stands for Opportunity
T stands for Threats

Strength:
JBL provides its customers excellent and consistent quality in every service. It is of
highest priority that customer is totally satisfied.
Stable Source of Funds
Strong Liquidity Position
Low Cost Fund
Satisfactory profitability
JBL provides the Money gram money transfer service for these customers are easily
getting the foreign money.
JBL also provide debit card service facility.
Weakness
JBL has very limited human resources compared to its financial activities. There are not
many people to perform most of the tasks.
Lack of latest or improved technologies and skilled manpower -for operating foreign trade
business.
Some of the specific sector in financial analysis shown that Bank management efficiency is
poor then other bank.
Lack of Strong Initiative to Explore Investment Opportunity Through Research And
Marketing

49 | P a g e
 OPPORTUNITIES:
Government of Bangladesh has rendered its full support to the banking sector for a sound
financial status of the country, as it is becoming one of the vital sources of employment in
the country now such government concern will facilitate and support the long term vision
for JBL.
Emergence of e-banking will open more scope for JBL
For getting higher market share in foreign exchange business, JBL has to be more efficient
and swift in service.
Globalization and open market economy open the door to diversify areas and create
opportunity to run in home and abroad.
Credit Card Business
Threats
The worldwide trend of mergers and acquisition in financial institutions is causing
concentration the industry and competitors are increasing in power in their respective areas.
As previously mentioned, the world is advancing towards technology very fast. Through
JBL taken effort to join the stream, it is not possible to complete the mission due to the poor
technological infrastructure of our country,
Foreign Bank like Standard Chartered & HSBC have extensive network worldwide which
is an integral part in foreign trade. Both banks enjoy this competitive advantage. Government has
recently decided to convert some govt. bank to public limited company which will increase
intensity of the competition in the local market.

50 | P a g e
 Chapter 7: Financial Performance by Ratio
analysis

51 | P a g e
Ratio analysis

Ratio Formula Calculations

1. Return on Equity Net operating earnings available for common stock holders/ 1205106869/10830
Ratio Stockholders Equity 874235=11/13%
2. Return on Equity Net Income After Tax/ Total Asset 1642852581/14285
Ratio 9174768=1.15%
3.Profit Margin Net Income /Operating Revenue 1642852581/6,981,
Ratio 969,524=23.52%
4. Operating Margin (operating Income-Operating Revenue)/Total Asset (6981969524-
3353099574)/14285
9174768=2.54%
5.Net Interest (Interest Income-Interest Expense)/Total Assets (9812797708-
Margin ratio 10269609256)-
142859174768=1.13
%
6.Equity Multiplier Total assets/ Total Liabilities 142859174768/
127150822413=1.12
7. Provision For Loss Provision For Loan Loss/ Total Loan 1355425000/87252
280635=1.56%
8. Loan Ratio Net Loans/Total assets 87252280635/1428
59174768=61.08%
9. Operating Interest Expense/total Assets 8194848391/14285
Efficiency :Interest 9174768=5.77%
Expense
10. Operating PLL/total assets 1355425000/14285
Efficiency :Provision 9174768=.94%
For Loan Loss
11. Operating Other Expenses/ Total Assets 406289876/142859
Efficiency :Other 174768=.28%
Expenses
12. Liquidity :Cash Cash/Current Liabilities 11807405874/(1104
Ratio 724893+118849176
379)=9.84%
13. Cash and Cash+ Securities/Current Liabilities (1807405874+3472
Securities Ratio 2810886)/(1104724
893+118849176379)
=38.79%
14. Tax Rate Ratio Tax Expense/Taxable Income 500600976/
2186804930=
22.90%
15. Dollar Gap Ratio Interest Rate Sensitive Asset- Interest Sensitive Liabilities/ (34722810886+
Total Assets 87252280635)/14285
52 | P a g e
 9174768=

Ratios with Interpretation:

Return on Equity Ratio:

It indicates how well the company is utilizing its equity investment. Due to leverage, this
measurement will generally be higher than return on assets. ROE is considered to be one of the best
indicators of profitability. It is also a good figure to compare against competitors or an industry
average. Experts suggest that companies usually need at least 10-14 percent ROE in order to fund
future growth. If this ratio is too low, it can indicate poor management performance or a highly
conservative business approach. On the other hand, a high ROE can mean that management is doing a
good job, or that the firm is undercapitalized.

For Jamuna Bank LTD, It is 11.13% .it is in moderate percentage showing good managerial efficiency to turn
equity into profit.

Return on Asset Ratio:

Return on assets indicates how effectively the company is deploying its assets. A very low return on
asset, or ROA, usually indicates inefficient management, whereas a high ROA means efficient
management. However, this ratio can be distorted by depreciation or any unusual expenses.ROA tells
you what earnings were generated from invested capital (assets). ROA for public companies can vary
substantially and will be highly dependent on the industry. This is why when using ROA as a
comparative measure, it is best to compare it against a company's previous ROA Numbers or the
ROA of a similar company. The assets of the company are comprised of both debt and equity. Both
of these types of financing are used to fund the operations of the company. The ROA figure gives
investors an idea of how effectively the company is converting the money it has to invest into net
income. The higher the ROA number, the better, because the company is earning more money on less
investment.

For Jamuna Bank LTD, it is 1.15%. That means for every 1 taka asset it is generating 1.15 taka return. It is a
handsome amount in overall.

Profit Margin

53 | P a g e
The profit margin ratio, also called the return on sales ratio or gross profit ratio, is a profitability ratio
that measures the amount of net income earned with each dollar of sales generated by comparing the
net income and net sales of a company. In other words, the profit margin ratio shows what percentage
of sales are left over after all expenses are paid by the business. An extremely low profit margin
formula would indicate the expenses are too high and the management needs to budget and cut
expenses.

For Jamuna Bank LTD it is 23.52%. That means .23 tk earnings for 1 tk sale.

Net Operating Margin

Operating margin is a measurement of what proportion of a bank's revenue is left over after paying for
variable Interest Expenses. It can be calculated by dividing a companys operating interest income during
a given period by its net Loans during the same period.After removing operating interst expenses, Then
Divided by Total assets. It refers the efficiency of generating spread from banks total asset.

For Jamuna Bank Ltd, it is 2.54%.

Net Interest Margin

Net interest margin is a performance metric that examines how successful a firm's investment decisions are
compared to its debt situations. A negative value denotes that the firm did not make an optimal decision,
because interest expenses were greater than the amount of returns generated by investments.
For Jamuna Bank LTD, 1.13%

Risk Ratio: Equity Multiplier

The ratio of a companys total assets to its total liabilities. The equity multiplier is a measurement of a Banks
financial leverage. Companies finance the purchase of assets either through equity or debt, so a high equity
multiplier indicates that a larger portion of asset financing is being done through debt. The multiplier is a
variation of the debt ratio.

For Jamuna Bank Ltd, it 1.12

Asset Quality: Provision for Loan Loss Ratio

A loan loss provision is an expense set aside as an allowance for bad loans (customer defaults, or terms of a
loan have to be renegotiated, etc).Higher The Loan Loss Ratio refers a higher possibility of loan to be

54 | P a g e
outstanding.
for Jamuna Bank, It is 1.56%

Asset Quality: Loan Ratio

The Loan to total assets ratio is a measurement representing the percentage of a corporation's assets that
are financed with loans and financial obligations lasting more than one year. The ratio provides a general
measure of the financial position of a company, including its ability to meet financial requirements for
outstanding loans. A year-over-year decrease in this metric would suggest the company is progressively
becoming less dependent on debt to grow their business.

For Jamuna Bank LTD, it is 61.08%. it is indicating a high risk, with a high profit possibility.

Operating Efficiency: Interest Expense

Interest expense is a non-operating expense shown on the income statement. Close attention to solvency
ratios such as debt to equity and interest coverage. The interest Expense ratio is used to determine how
easily a company can pay interest expenses From Its Assets. The ratio is calculated by dividing the
company's interest expenses by total assets for the same period. The lower the ratio, the more the
company is burdened by debt expense.

For Jamuna Bank ltd, it is 5.77% that refers a high interest expense burden for the bank.

Operating Efficiency: PLL

A loan loss provision is an expense set aside as an allowance for bad loans (customer defaults, or terms of a
loan have to be renegotiated, etc). it refers how much a bank is keeping for its rainy day from the total asset.
Higher The Loan Loss Ratio refers a less possibility of default but it refers higher possibility of loan
outstanding.

For Jamuna Bank ltd, it is .94% that seems higher PLL from total asset.

Operating Efficiency: other expenses

55 | P a g e
Depending on the type of fund, operating expenses vary widely. The largest component of operating
expenses is the fee paid to a fund's investment manager/advisor. Other costs include recordkeeping,
custodial services, taxes, legal expenses, and accounting and auditing fees. Those are written as other
expense in financial statement. Higher the other expense ratio, lower the profit of the bank. It also refers
inefficiency of managements to fail to curtail the costs. It should in control.

For Jamuna Bank ltd, it is .28% that seems very little other expenses paid from total asset.

Liquidity: Cash ratio

The cash ratio is the most stringent and conservative of the three short-term liquidity ratios (current, quick
and cash). It only looks at the most liquid short-term asset, cash of the company, which can be most easily
used to pay off current obligations. It ignores inventory and receivables, as there are no assurances that
these two accounts can be converted to cash in a timely matter to meet current liabilities.

For Jamuna Bank ltd, it is 9.84% that seems a moderate level of cash liquidity to pay the current
obligations.

Liquidity: Cash and securities ratio

The cash asset ratio is the current value of marketable securities and cash, divided by the company's current
liabilities. Also known as the cash and securities ratio, the cash asset ratio compares the dollar amount of
highly liquid assets (such as cash and marketable securities) for every one dollar of short-term liabilities. This
figure is used to measure a firm's liquidity or its ability to pay its short-term obligations. Ideal ratios will be
different for different industries and for different sizes of corporations, and for many other reasons.

For Jamuna Bank ltd, it is 38.79% that seems a efficient level of cash liquidity to pay the current
obligations.

Tax rate ratio

This ratio is a measurement of a company's tax rate, which is calculated by comparing its income
tax expense to its pretax income. This amount will often differ from the company's stated
jurisdictional rate due to many accounting factors, including foreign exchange provisions. This
effective tax rate gives a good understanding of the tax rate the company faces.

After many years, the corporate tax rate for banks, insurance companies and non-banking financial
institutions was reduced to 40 percent (from 42.5 percent). But the effective tax rate for Jamuna
Bank LTD is 22.90% is quite low from the actual rate which it is paying now.

56 | P a g e
 Dollar Gap ratio
Dollar Gap ratio refers The value of all interest rate-sensitive assets subtracting from the value of all
interest rate-sensitive liabilities owned by a firm, relative to total assets.

There is a positive gap of 1.41%. We know that Asset generates earnings and liabilities generates
expenses. If the interest rate decreases it will decrease banks profit. Because asset revenue drops faster
than the borrowing cost, profit will drop. So, interest expense will be higher than the interest income. So,
bank will face loss.

57 | P a g e
 Chapter 8: Stress Testing on Jamuna Bank
Limited

58 | P a g e
Stress Testing:

Extreme market movements or crises in the past reveal the inadequacy of managing risks based only
on normal business conditions and historical trends. In particular, crises in the
1990s (e.g. Asian Crisis) and current financial turmoil have augmented the importance of better
understanding of potential vulnerabilities in the financial system and the measures to assess these
vulnerabilities for both the regulators and the bankers. The regulators and managers of the financial
system around the globe have developed a number of quantitative techniques to assess the potential
risks to the individual institutions as well as financial system. A range of quantitative techniques that
could serve the purpose is widely known as stress testing. IMF and Basel Committee on banking
supervision have also suggested for conducting stress tests on the financial sector.

Stress testing is a simulation technique, which are used to determine the reactions of different
financial institutions under a set of exceptional, but plausible assumptions through a series of battery
of tests. At institutional level, stress testing techniques provide a way to quantify the impact of
changes in a number of risk factors on the assets and liabilities portfolio of the institution. For
instance, a portfolio stress test makes a rough estimate of the value of portfolio using a set of
exceptional but plausible events in abnormal markets.

However, one of the limitations of this technique is that stress tests do not account for the probability
of occurrence of these exceptional events. For this purpose, other techniques, for example VAR
(value at risks) models etc, are used to supplement the stress tests. These tests help in managing risk
within a financial institution to ensure optimum allocation of capital across its risk profile.

At the system level, stress tests are primarily designed to quantify the impact of possible changes in
economic environment on the financial system. The system level stress tests also complement the
institutional level stress testing by providing information about the sensitivity of the overall financial
system to a number of risk factors. These tests help the regulators to identify structural vulnerabilities
and the overall risk exposure that could cause disruption of financial markets. Its prominence is on
potential externalities and market failures.

Techniques for Stress Testing:

a) Simple Sensitivity Analysis (single factor tests) measures the change in the value of portfolio for
shocks of various degrees to different independent risk factors while the underlying relationships
among the risk factors are not considered. For example, the shock might be the adverse movement of
interest rate by 100 basis points and 200 basis points.
Its impact will be measured only on the dependent variable i.e. capital in this case, while the impact
of this change in interest rate on NPLs or exchange rate or any other risk factor is not considered.

59 | P a g e
b) Scenario Analysis encompasses the situation where a change in one risk factor affects number of
other risk factors or there is a simultaneous move in a group of risk factors.
Scenarios can be designed to encompass both movements in a group of risk factors and the changes in
the underlying relationships between these variables (for example correlations and volatilities). Stress
testing can be based on the historical scenarios, a backward looking approach, or the hypothetical
scenario, a forwardlooking approach.

c) Extreme Value/ Maximum Shock Scenario measures the change in the risk factor in the
worstcase scenario, i.e. the level of shock which entirely wipes out the capital.

Framework for Regular Stress Testing:

The stresstesting framework involves the scope of the risks covered and the process/procedure to
carry out the stress test. This framework should be flexible enough to adopt advanced models for
stress testing. It involves:

A well constituted organizational structure defining clearly the roles and responsibilities of the
persons involved in the exercise. Preferably, it should be the part of the risk management functions of
the bank/FI. The persons involved should be independent from those who are actually involved in the
risk taking and should directly report the results to the senior management.

Defining the coverage and identifying the data required and available.
Identifying, analyzing and proper recording of the assumptions used for stress testing.
Calibrating the scenarios or shocks applied to the data and interpreting the results.
An effective management information system that ensures flow of information to the senior
management to take proper measures to avoid certain extreme conditions.
Setting the specific trigger points to meet the benchmarks/standards set by Bangladesh Bank.
Ensuring a mechanism for an ongoing review of the results of the stress test exercise and reflecting
in the policies and limits set by management and board of directors.
Taking this stress test as a starting point and developing inhouse stress test model to assess the
bank/FIs specific risks.

60 | P a g e
Scope of Stress Test:

As a starting point the scope of the stress test is limited to simple sensitivity analysis. Five
Different risk factors namely; interest rate, forced sale value of collateral, nonperforming
Loans (NPLs), stock prices and foreign exchange rate have been identified and used for the
Stress testing. Moreover, the liquidity position of the institutions has also been stressed
Separately. Though the decision of creating different scenarios for stress testing is a difficult one,
however, to start with, certain levels of shocks to the individual risk components have been specified
considering the historical as well as hypothetical movement in the risk factors.

Stress test shall be carried out assuming three different hypothetical scenarios:

Minor Level Shocks: These represent small shocks to the risk factors. The level for different risk
factors can, however, vary.

Moderate Level Shocks: It envisages medium level of shocks and the level is defined in each risk
factor separately.

Major Level Shocks: It involves big shocks to all the risk factors and is also defined separately for
each risk factor.

Assumptions behind each Scenario: The stress test at this stage is only a single factor sensitivity
analysis. Each of the five risk factors has been given shocks of three different levels. The magnitude
of shock has been defined separately for each risk factor for all the three levels of shocks.

Methodology and Calibration of Shocks:

Credit Risk:

The stress test for credit risk assesses the impact of increase in the level of nonperforming loans of
the bank/FI. This involves six types of shocks:

The first deals with the increase in the NPLs and the respective provisioning. The three scenarios
shall explain the impact of 1%, 2% and 3% of the total performing loans directly downgraded to
bad/loss category having 100% provisioning requirement.

The second deals with the negative shift in the NPLs categories and hence the increase in respective
provisioning. The three scenarios shall explain the impact of 50%, 80% and

61 | P a g e
100% downward shift in the NPLs categories. For example, for the first level of shock 50% of the
SMA shall be categorized under substandard, 50% of the substandard shall be categorized under
doubtful and 50% of the doubtful shall be added to the bad/loss category.

The third deals with the fall in the forced sale value (FSV) of mortgaged collateral. The forced sale
values of the collateral shall be given shocks of 10%, 20% and 40% decline in the forced sale value of
mortgaged collateral for all the three scenarios respectively.

The fourth deals with the increase of the NPLs in particular 1 or 2 sector i.e. garments & Textiles
and the respective provisioning. The three scenarios shall explain the impact of 5%, 7.5% and 10%
performing loans of particular 1 or 2 sectors directly downgraded to bad/loss category having 100%
provisioning requirement.

The fifth deals with the increase of the NPLs due to default of Top 10 large borrowers and the
respective provisioning. The three scenarios shall explain the impact of 5%, 7.5% and 10%
performing loans of Top 10 large borrowers directly downgraded to bad/loss category having 100%
provisioning requirement.

The sixth deals with extreme events in which due to increase in the certain percentage of
NPLs, the whole capital position of a bank will be wiped out to offset the increased amount of
provision due to cover respective loan losses. The forced sale value of the collaterals and taxadjusted
impact of the additional required provision (if any) will be calibrated in the CAR for the each
scenario under all categories.

Interest Rate Risk:

Interest rate risk is the potential that the value of the onbalance sheet and the off balance
Sheet positions of the bank/DFI would be negatively affected with the change in the interest rates.
The vulnerability of an institution towards the adverse movements of the interest rate can be gauged
by using duration GAP analysis.

The banks and FIs shall follow the following steps in carrying out the interest rate stress
Tests:

Estimate the market value of all onbalance sheet rate sensitive assets and liabilities of the bank/DFI
to arrive at market value of equity
Calculate the durations of each class of asset and the liability of the onbalance sheet portfolio
Arrive at the aggregate weighted average duration of assets and liabilities
Calculate the duration GAP by subtracting aggregate duration of liabilities from that of assets.
Estimate the changes in the economic value of equity due to change in interest rates on onbalance
sheet positions along the three interest rate changes.
Calculate surplus/(deficit) on offbalance sheet items under the assumption of three different interest
rate changes i.e. 1%, 2%, and 3%

62 | P a g e
 Estimate the impact of the net change (both for onbalance sheet and offbalance sheet) in the
market value of equity on the capital adequacy ratio (CAR).

Market value of the asset or liability shall be assessed by calculating its present value discounted at
the prevailing interest rate. The outstanding balances of the assets and
Liabilities should be taken along with their respective maturity or reprising period, whichever is
earlier.

Duration GAP & Price Sensitivity

Duration is the measure of a portfolios price sensitivity to changes in interest rates.

Longer the duration, larger the changes in the price for a given change in the interest rates. Larger the
coupon, lower would be the duration and smaller would be the change in the price for a given change
in the interest rates.

The duration GAP is measured by comparing the weighted average duration of assets with the
weighted average duration of liabilities (leverageadjusted)

The weighted average duration of assets and liabilities is calculated as follows:

Weighted Average Duration of Assets (DA) = WaDa

Weighted Average Duration of Liabilities (DL) = WlDl

Where

Wa = market value of the asset a divided by the market value of all the assets
Wl = market value of the liability l divided by the market value of all the liabilities
Da = duration of the asset a
Dl = duration of the liability l
n = total number of assets

63 | P a g e
m = total number of liabilities
The duration GAP indicates how the market value of equity (MVE) of a bank/FI will change with a
certain change in interest rates. If the weighted average duration of assets exceeds the weighted
average duration of liabilities (leverageadjusted), the duration GAP is said to be positive. A positive
duration gap signifies that the assets are relatively more interest rate sensitive than liabilities. Hence if
the interest rates rise, the value of assets will fall proportionately more than the value of liabilities and
the market value of equity will fall accordingly and vice versa. Duration Gap will be calculated as
under:

2 The leverage adjustment takes into account the existence of equity as a means of financing
assets.

The impact of interest rate change on interest bearing offbalance sheet contracts shall be separately
calculated. As a first step, the actual market price of each contract shall be determined which should
represent the actual price of the contract if sold immediately.
The second step involves calculating the market price again by marking to market each contract
separately assuming a change in interest rate. The difference between the two market prices would
determine the amount of revaluation surplus or deficit. The revaluation surplus would arise if the
actual market price of the contract is less than the price calculated after assuming a change in the
interest rate and revaluation deficit would result in, if otherwise. The revaluation surplus/deficit
arising due to the change in the interest rates of the offbalance sheet contracts should be subtracted/
added to the fall in market value of equity derived by the DGAP approach to arrive at the net change
in the market value of equity.

The impact of this net change in the market value of equity will then be calibrated in the CAR. The
taxadjusted impact of this net fall (if any) in the MVE shall be adjusted from the regulatory capital
and the riskweighted assets and the revised CAR shall be calculated under each of the above
scenarios.

Exchange Rate Risk:

The stress test for exchange rate assesses the impact of change in exchange rate on the value of
equity. To assess foreign exchange risk the overall net open position of the bank/FI including the
onbalance sheet and offbalance sheet exposures shall be charged by the weight age of 5%, 10% and
15% for minor, moderate and major levels respectively. The overall net open position is measured by
aggregating the sum of net short positions or the sum of net long positions; whichever is greater. For
example, the bank may have net long position of Tk.500 million in Yen, Euro and USD and the net
short position in GBP and Australian dollar of Tk.600 million. The total exposure will be the greater
of the two i.e. sum of the short positions of Tk.600 million. The impact of the respective shocks will
have to be calibrated in terms of the CAR. The taxadjusted loss if any arising from the shocked
position will be adjusted from the capital. The revised CAR will then be calculated after adjusting
total loss from the riskweighted assets of the bank/FI.

64 | P a g e
 Equity Price Risk:

The stress test for equity price risk assesses the impact of the fall in the stock market index.
Appropriate shocks will have to be absorbed to the respective securities if the current market value of
all the on balance sheet and off balance sheet securities listed on the stock exchanges including
shares, NIT units, mutual funds etc falls at the rate of 10%, 20% and 40% respectively. The impact of
resultant loss will be calibrated in the CAR.

Liquidity Risk:

The stress test for liquidity risk evaluates the resilience of the banks towards the fall in liquid
liabilities. The ratio liquid assets to liquid liabilities shall be calculated before and after the
application of shocks by dividing the liquid assets with liquid liabilities. Liquid assets are the assets
that are easily turned into cash without the threat of loss. They include cash, balances with
Bangladesh Bank and balances with banks, call money lending, lending under repo and investment in
government securities. Liquid liabilities include the deposits and the borrowings. Appropriate shocks
will have to be absorbed to the liquid liabilities if the current liquidity position falls at the rate of
10%, 20% and 30% respectively. The ratio of liquid assets to liquid liabilities shall be recalculated
under each scenario.

65 | P a g e
 Credit Risk:

% of Total 2014 2013 2012

Loan
Unclassified & Special Mentioned 94.32 73477641476 62535622700 49549160716
Account (SMA)
Sub Standard loan 0.5 387593000 238255000 1184110851
Doubtful 0.43 331892000 1571641000 1101189721
Bad Debt 4.75 3702664000 3323858000 3052572693
Total Loan 100% 77899790476 67669376700 54887033981

NPL 4422149000 5133754000 5337873265

2014 2013 2012
Core Capital (Tier I)
Paid up Capital 5160670000 4487540000 4487540000
Statutory Reserve 2966020000 2596540000 2139560000
Right Issue Subscription
Retained Earnings 983750000 679250000 629290000
Tier I Capital 9110440000 7763330000 7256390000

Supplementary Capital (Tier II)

General Provision Maintained 721720000 645330000 533110000
Against Unclassified loans and
advances
General Provision Maintained 376020000 292340000 281560000
Against Off balance Sheet Exposure
Revaluation Reserve of HFT 318320000 27050000 2470000
Securities
Asset Revaluation Reserve 531750000 531750000 531750000
Tier II Capital 1947810000 1496470000 1348890000

Tire I + II 11058250000 9259800000 8605280000

Tire I + II 11058250000 9259800000 8605280000

Total Risk Weighted Asset 98298680000 83421380000 70448890000

Required Capital 10% 10% 10%
Required Capital Amount 98861200000 8342140000 7044860000

66 | P a g e
 Capital Adequacy Ration 11.25% 11.10% 12.21%
Maintained
Core Capital to Risk Weighted 9.24% 9.31% 10.30%
Assets
Supplementary to Risk weighted 1.98% 1.79% 1.91%
assets

Required CAR (%) 9829868000 8342138000 7044889000

1. Increase in NPLs:

2014 2013 2012

Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 3
1% 2% 3% 1% 2% 3% 1% 2% 3%
Total Loan 73477641476 73477641476 73477641476 67669376700 67669376700 67669376700 54887033981 54887033981 548870339
81
Total 69055492476 69055492476 69055492476 62535622700 62535622700 62535622700 49549160716 49549160716 495491607
Performing Loan 16

NPL 4422149000 4422149000 4422149000 5133754000 5133754000 5133754000 5337873265 5337873265 533787326
5
NPL Ratio 0.0601836 0.0601836 0.0601836 0.075865247 0.075865247 0.075865247 10.28256597 10.28256597 10.282565
97
Increase in NPL 690554924.8 1381109850 2071664774 625356227 1250712454 1876068681 495491607.2 990983214.3 148647482
1
Increase in 690554924.8 1381109850 2071664774 625356227 1250712454 1876068681 495491607.2 990983214.3 148647482
Provision 1

Tax Adjusted 690554924.8 1381109850 2071664774 625356227 1250712454 1876068681 495491607.2 990983214.3 148647482
Provision 1

Revised Capital 10367695075 9677140150 8986585226 8634443773 8009087546 7383731319 8109788393 7614296786 711880517
9
Revised Risk 97608125075 96917570150 96227015226 82796023773 82170667546 81545311319 69953398393 69457906786 689624151
weighted Assets 79

Revised CAR 0.106217541 0.099849183 0.093389421 0.10428573 0.097468936 0.090547589 0.1159313 0.109624622 0.1032273
18
Revised CAR % 0.106217541 0.099849183 0.093389421 0.10428573 0.097468936 0.090547589 0.1159313 0.109624622 0.1032273
18
Fall in CAR 0.63% 1.27% 1.91% 0.67% 1.35% 2.05% 0.62% 1.25% 1.89%
Revised NPLs 5112703925 5803258850 6493813774 5759110227 6384466454 7009822681 5833364872 6328856479 682434808
6
Revised NPL 0.069581764 0.078979928 0.088378092 0.085106595 0.094347942 0.10358929 0.10627947 0.11530695 0.1243344
Ratio 3

We can see that due to the adverse change in NPL by 3 different percentages in 3 particular years
there are fall in Capital, Risk weighted Assets and CAR ratio. There are also increments in Provision

67 | P a g e
 regarding this purpose. As we know the required capital is 10% of Risk weighted assets, there is fall
from this rate in most of the shocks.

2. Downward Shift in NPL Categories

2014 2013

SMA Sub- Doubtful Bad debt Total SMA Sub- Doubtful

standard standard
NPLs 884430000 972873000 12382020 1768860000 4422150000 1026750000 1129425000 1437450000 Bad debt Total
00
FSV of 203164000 839366982 11535970 51214599 1805127581 311249000 1102830000 1395147500 2053500000 513375
Mortgaged 00 0000
collateral
Base for 681266000 133506018 84605000 1717645401 2617022419 715501000 26595000 42302500 335854599 263170
Provision 6099

Provision 6220000 26595000 42302500 1717645401 1792762901 22573000 122609187 188831226 1717645401 250204
3901

% of Base 0.00913006 0.19920450 0.5 1 0.031548523 4.610234518 4.463831357 1766396315 210040

Provision 1 3 9728

2012
SMA Sub-standard Doubtful Bad debt Total
NPLs 1067574653 1174332118 1494604514 2135149306 5337873265
FSV of Mortgaged collateral -1192416347 561286182.3 1116942062 368752991 320777562
Base for Provision 2259991000 613045936 377662452 1766396315 5017095703
Provision 33094964 98957800 394613000 1204682928 1731348692
% of Base Provision 0.014643848 0.161419878 1.044882799 0.682000363 0.345089828

2014 2013 2012

Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 1 Scenario 1 Scenario 2

50% 80% 100% 50% 80% 100% 50% 80% 100%
Weighted 1744094495 1744094495 1744094495 3224698751 3224698751 3224698751 428782729.6 428782729.6 428782729.6
Amount of
provision
Weighted 1915864375 581663221.6 1017936018 4370005038 3818245935 1083241468 1986695754 2659199397 1488067239
Amount of
Provision
after Shift
in
Categories
Increase 171769880.2 -1162431273 -726158477 1145306287 593547183.2 -2141457283 1557913025 2230416667 1059284509
in
Provision
Tax 171769880.2 -1162431273 -726158477 1145306287 593547183.2 -2141457283 1557913025 2230416667 1059284509
Adjusted
Provision
Revised 10886480120 12220681273 11784408477 8114493713 8666252817 11401257283 7047366975 6374863333 7545995491

68 | P a g e
 Capital
Revised 98126910120 99461111273 99024838477 82276073713 82827832817 85562837283 68890976975 68218473333 69389605491
Risk
Weighted
Assets
Revised 0.110942861 0.12286894 0.119004572 0.098625194 0.104629718 0.133250108 0.102297388 0.093447757 0.108748211
CAR
Fall in 0.16% -1.04% -0.65% 1.24% 0.64% -2.23% 1.98% 2.87% 1.34%
CAR

We can see that due to the adverse change in NPL category by 3 different percentages in 3 particular
years there are fall in Capital, Risk weighted Assets and CAR ratio. There are also increments in
Provision regarding this purpose. As we know the required capital is 10% of Risk weighted assets,
there is fall from this rate in most of the shocks.

3. Fall in the FSV of Mortgaged Collateral

2014 2013 2012

Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 3

10% 20% 40% 10% 20% 40% 10% 20% 40%
Total FSV of 2044178581 2044178581 2044178581 2833832099 2833832099 2833832099 485811897.5 485811897.5 485811897.5
mortgaged
collateral

Weighted FSV 795218781.7 795218781.7 795218781.7 11657395054 11657395054 11657395054 1240214732 1240214732 1240214732
of Collateral

Fall in FSV of 79521878.17 159043756.3 318087512.7 1165739505 2331479011 4662958021 124021473.2 248042946.4 496085892.8
Collateral

Tax Adjusted 79521878.17 159043756.3 318087512.7 1165739505 2331479011 4662958021 124021473.2 248042946.4 496085892.8
Provision

Revised 10978728122 10899206244 10740162487 8094060495 6928320989 4596841979 8481258527 8357237054 8109194107
Capital

Revised RWA 98219158122 98139636244 97980592487 82255640495 81089900989 78758421979

70324868527 70200847054 69952804107
Revised CAR 0.111777868 0.111058148 0.109615203 0.098401282 0.085439998 0.058366355
0.120601129 0.119047524 0.115923789
Fall in CAR 0.07% 0.14% 0.29% 1.26% 2.56% 5.26%
0.15% 0.31% 0.62%

We can see that due to the adverse change in FSV of Mortgaged collateral by 3 different percentages
in 3 particular years there are fall in Capital, Risk weighted Assets and CAR ratio. There are also
increments in Provision regarding this purpose. As we know the required capital is 10% of Risk
weighted assets, there is fall from this rate in most of the shocks.

69 | P a g e
 4. Increase in NPLs' in Particular 1 or 2 Sectors

2014 2013 2012

Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 3

5% 7.50% 10% 5% 7.50% 10% 5% 7.50% 10%
Loan to 17166300000 17166300000 17166300000 17606100000 17606100000 17606100000 20705200000 20705200000 20705200000
Trade
Service

Increase in 858315000 1287472500 1716630000 880305000 1320457500 1760610000 1035260000 1552890000 2070520000
NPLs under
categories

Increase in 858315000 1287472500 1716630000 880305000 1320457500 1760610000 1035260000 1552890000 2070520000
provisions

Tax 858315000 1287472500 1716630000 880305000 1320457500 1760610000 1035260000 1552890000 2070520000
Adjusted
provision

Revised 10199935000 9770777500 9341620000 8379495000 7939342500 7499190000 7570020000 7052390000 6534760000
Capital

Revised 97440365000 97011207500 96582050000 82541075000 82100922500 81660770000 62878870000 63396500000 63914130000
RWA

Revised 0.104678744 0.100718028 0.096722113 0.101519092 0.096702233 0.091833447 0.120390522 0.111242576 0.102242806
CAR

Fall in CAR 0.78% 1.18% 1.58% 0.95% 1.43% 1.92% 0.17% 1.09% 1.99%

We can see that due to the adverse change in the largest sector that is trade service by 3 different
percentages in 3 particular years there are fall in Capital, Risk weighted Assets and CAR ratio. There
are also increments in Provision regarding this purpose. As we know the required capital is 10% of
Risk weighted assets, there is fall from this rate in most of the shocks.

5. Increase in NPLs' Due To Top 10 Borrowers

2014 2013 2012

Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 3

70 | P a g e
 5% 7.50% 10% 5% 7.50% 10% 5% 7.50% 10%
Loan to top 18112651000 18112651000 18112651000 15880560000 15880560000 15880560000 9962582000 9962582000 9962582000
10 large
loan
borrowers

Increase in 905632550 1358448825 1811265100 794028000 1191042000 1588056000 498129100 747193650 996258200
NPLs

Increase in 905632550 1358448825 1811265100 794028000 1191042000 1588056000 498129100 747193650 996258200
provisions

Tax 905632550 1358448825 1811265100 794028000 1191042000 1588056000 498129100 747193650 996258200
Adjusted
provision

Revised 10152617450 9699801175 9246984900 -794028000 -1191042000 -1588056000 8107150900 7858086350 7609021800
Capital

Revised 97393047450 96940231175 96487414900 82627352000 82230338000 81833324000 69950760900 69701696350 69452631800
RWA

Revised 0.10424376 0.100059604 0.095836176 -0.009609748 -0.014484216 -0.019405982 0.115897966 0.112738811 0.109556997
CAR

Fall in CAR 0.83% 1.24% 1.67% 12.06% 12.55% 13.04% 0.62% 0.94% 1.25%

We can see that due to the adverse change in the NPLs of large borrowers by 3 different percentages
in 3 particular years there are fall in Capital, Risk weighted Assets and CAR ratio. There are also
increments in Provision regarding this purpose. As we know the required capital is 10% of Risk
weighted assets, there is fall from this rate in most of the shocks.

6. Increase in NPLs at the point to wipe out whole Capital

2014 2013 2012

Total NPLs 4422150000 5133750000 5337873265
NPL- % of total loan 0.056767162 0.075865188 0.09725199
Total capital 11058250000 9259800000 8605280000
Increase in NPL 11058250000 9259800000 8605280000
Increase in provision 11058250000 9259800000 8605280000
Revised capital 0 0 0
Revised RWA 87240430000 74161580000 8605280000
Revised CAR 0 0 0
Fall in CAR 11.25% 11.10% 12.21%
Revised NPL 15480400000 14393550000 13943153265
Revised NPL- % of total loan 0.198721972 0.212704043 0.254033644

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 We can see that due to the adverse change in the NPLs percentages in 3 particular years there are fall
in Capital, Risk weighted Assets and CAR ratio in an extent to wipe out the whole capital. Thats
why there is no revised capital and Revised CAR.

Capital after One or More Cumulative Shocks

A) Cumulative Impact of Credit Shocks

2014 2013 2012

Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 3 Scenario 1 Scenario 2 Scenario 3

Tax 2705794233 3023643657 5191488910 4610735019 6687238148 7746235419 4701798420 4778543264 4622148602
Adjusted
Provision

Revised 8352455767 8034606343 5866761090 4649064981 2572561852 1513564581 3903481580 3826736736 3983131398
Capital

Revised 95592885767 95275036343 93107191090 78810644981 76734141852 75675144581 65747091580 65670346736 65826741398
RWA

Revised 0.087375286 0.084330656 0.063010827 0.058990318 0.033525648 0.020000815 0.059371167 0.058271913 0.060509321
CAR

Fall in CAR 2.51% 2.82% 4.95% 5.20% 7.75% 9.10% 6.27% 6.38% 6.16%

We can see that due to the adverse changes of all the credit risk by 3 different percentages in 3
particular years there are fall in Capital, Risk weighted Assets and CAR ratio. There are also
increments in Provision regarding this purpose. As we know the required capital is 10% of Risk
weighted assets, there is fall from this rate in most of the shocks.

B) Cumulative Impact of All Shocks (2014):

Scenario 1 Scenario 2 Scenario 3

Tax adjusted provision / loss -290871788.7 -2969688386 -3776979017
Revised capital 11349121789 14027938386 14835229017
Revised RWA 98589551789 1.01268E+11 1.02076E+11
Revised CAR 0.115114853 0.138522409 0.145335618
Fall in CAR -0.26% -2.60% -3.28%

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 We can see that due to the adverse change in the all the impacts of all shocks by 3 different
percentages there are fall in Capital, Risk weighted Assets and CAR ratio. There are also increments
in Provision regarding this purpose. As we know the required capital is 10% of Risk weighted assets,
there is more than 10% CAR from this rate in most of the shocks.

Equity Price Risk:

2014
CMV of shares in listed co. 344482214
Total Capital 11058240000
RWA 98298680000
CAR 11.25%

Scenario 1 Scenario 2 Scenario 3

Magnitude of shock 10% 20% 40%

Total exposure in the stock market 344482214 344482214 344482214

Fall in the stock prices 34448221.4 68896442.8 137792885.6
Tax adjusted loss 21530138.38 43060276.75 86120553.5
Revised capital 11036709862 11015179723 10972119447
Revised risk weighted assets 98277149862 98255619723 98212559447
Revised CAR 0.112301892 0.112107376 0.111718089
Fall in CAR 0.02% 0.04% 0.08%

We can see that due to the adverse change in the equity price by 3 different percentages there are fall
in Capital, Risk weighted Assets and CAR ratio. There are also increments in Provision regarding this
purpose. There is more than 10% CAR after the shock

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 Interest Rate Risk:

Assumptions:
After analyzing the peer companies and instructions of Bangladesh Bank we have used the following
figures for interest rate purpose:

Coupon YTM
364 days Treasury Bills 4.92% 5%
5 years BGTB HTM 6.40% 7.20%
10 years BGTB HFT 6.70% 6.95%
15 years BGTB HFT 6.90% 10.30%
20 years BGTB HFT 7.10% 7.70%
Islami Bond(up to 364 days) 12.00% 12.35%

Loans, cash credit, overdrafts etc 12% 12.16%

Bills purchased & discounted 10% 11%

Borrowings One month within 6 months 9% 10%

Current 0%
Bills payables 4.75% 4.75%
Savings 7% 7%
Fixed 12.50% 12.50%
Short notice deposit 7.50% 7.50%
Scheme Deposits 6.90% 6.90%
Foreign currency deposit 9% 9%

Property Book value Coupon Frequencies Yield to Market Weight Duration Purchase Maturity
and Assets Maturity Value date date

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Assets:

cash 1246727668 1246727668 0.008937463

Balance 8794246707 8794246707 0.063043644

with
Bangladesh
Bank
Balance 6336937566 6336937566 0.045427841
with Other
Banks
Investments

364 days 661114783 4.92% 2 5% 661114783 0.004739358 0.985212963 1/1/2014 12/31/2014

Treasury Bills
5 years BGTB 7519934110 6.40% 2 7.20% 7519934110 0.053908432 5.050880482 1/1/2014 12/31/2019
HTM
10 years BGTB 10082027357 6.70% 1 6.95% 10082027357 0.072275405 8.088888566 1/1/2014 12/31/2024
HFT
15 years BGTB 9124325740 6.90% 1 10.30% 9124325740 0.065409894 9.175186353 1/1/2014 12/31/2029
HFT
20 years BGTB 8154737906 7.10% 1 7.70% 8154737906 0.058459174 11.21263269 1/1/2014 12/31/2034
HFT
Islami Bond(up 180000000 12.00% 2 12.35% 180000000 0.001290373 4.427904466 1/1/2014 12/31/2019
to 364 days)
Asset pledge as 3785720306 3785720306 0.027138834
security
Prize bonds 2148400 2148400 1.54013E-05

Others 453533367 453533367 0.003251262

Loan &
Advances
Loans, cash 69355233352 12% 2 12.16% 69355233352 0.497189447 4.424574737 1/1/2014 12/31/2019
credit,
overdrafts etc
Bills purchased 8544557123 10% 4 11% 8544557123 0.061253685 0.961034402 1/1/2014 12/31/2014
& discounted
Fixed Assets 2278501650 2278501650 0.01633398
Other 2974834511 2974834511 0.021325807
Assets
Total Assets 1.39495E+11

Liabilities Book value Coupon Frequencies Yield to Market Value Weight Duration Purchase Maturity date
Maturity date
Borrowing
from
Banks/Fis
Repayable 0
within one
month
Over one 9359855192 9% 2 10% 9359855192 0.072735238 6.872875353 1/1/2014 6/30/2024
month within
6 months

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 Over 1 year 0
but within 5
years

Deposits Current 12697597600 0% 12697597600 0.098672765

and other
accounts
Bills payables 2433040988 4.75% 2 4.75% 2433040988 0.01890711 0.3 10/12/2013 1/31/2014
Savings 7894489915 7% 2 7% 7894489915 0.061347915 0.336111111 12/12/2013 4/13/2014

Fixed 57955482168 12.50% 2 12.50% 57955482168 0.450370836 0.970588235 9/21/2013 9/21/2014

Short notice 5273922236 7.50% 2 7.50% 5273922236 0.040983539 1.338103014 10/20/2014 3/11/2016
deposit
Scheme 28061993298 6.90% 2 6.90% 28061993298 0.218069161 1.902157493 12/11/2013 12/11/2015
Deposits
Foreign 318601897 9% 1 9% 318601897 0.002475849 0.25 2/12/2014 5/12/2014
currency
deposit
Other 4688931293 4688931293 0.036437587
liabilities

Total 1.28684E+11
liabilities

Equity

Paid up 5160667110 5160667110

capital
Statutory 2966015833 2966015833
Reserve
Other 1700229160 1700229160
Reserve
Retained 983753856 983753856
Earnings
Total 10810665959 10810665959
Equity
Total 1.39495E+11
liability
and Equity

Duration(assets) 4.375929999

Duration(liabilities) 1.433577758

Duration gap 3.053452831

Weighted YTM for asset 0.087735594

Total Asset 1.39495E+11

Off balance sheet asset 37602082034

Tax Rate 37.50%

Risk Weighted asset 98298680000

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 Current CAR 11.25%

Regulatory Capital 11082500000

Interest Rate Shock Scenario 1 Scenario 2 Scenario 3

1% 2% 3%

Fall in MVE (on balance sheet) -3915842454 -7831684908 -11747527361

Fall in MVE (off balance sheet) -1055552328 -2111104655 -3166656983

Net fall in MVE -4971394781 -9942789563 -14914184344

Tax adjusted loss -3107121738 -6214243477 -9321365215

Revised regulatory capital 7975378262 4868256523 1761134785

Revised RWA 95191558262 92084436523 88977314785

Revised CAR 0.083782411 0.052867311 0.019793076

Fall in CAR 2.87% 5.96% 9.27%

We can see that due to the adverse change in the interest rate by 3 different percentages there are fall
in Capital, Risk weighted Assets and CAR ratio. There are also increments in Provision regarding this
purpose. As we know the required capital is 10% of Risk weighted assets, there is fall from this rate
in most of the shocks.

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 Exchange Rate Risk:

Short position 2014

Deposit in foreign currency 318601897
Bills for collection (foreign) 2479168828
Letters of guarantee(foreign) 47847777
284561850
2

Long position
Foreign Currency held in hand 17231874
Balances with BB in Foreign Currency 1579033538
159626541
2

Scenario 1 Scenario 2 Scenario 3

Magnitude of shock 5% 10% 15%

Net short position 2845618502 Net short position 2845618502 2845618502 2845618502
Net long position 1596265412 Loss on exchange rate 142280925.1 284561850.2 426842775.3
change
Net exposure in FX 2845618502 Tax adjusted loss 88925578.19 177851156.4 266776734.6
Total Capital 11058240000 Revised capital 10969314422 10880388844 10791463265
RWA 98298680000 Revised RWA 98209754422 98120828844 98031903265
CAR 11.25% Revised CAR 0.111692718 0.110887657 0.110081136
Fall in CAR 0.08% 0.16% 0.24%

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 We can see that due to the adverse change in the largest sector that is trade service by 3 different
percentages in 3 particular years there are fall in Capital, Risk weighted Assets and CAR ratio. There
are also increments in Provision regarding this purpose. As we know the required capital is 10% of
Risk weighted assets, there is more than 10% after the shock.

Liquidity Risk:

Liquid Assets
Cash 1246746019
Balance with Bangladesh Bank 8794246707
Balance with other Bank 6336937566
Call money lending 0
Investment in Govt. securities 39616508602
55994438894

Liquid Liabilities
Deposits 1.14626E+11
Borrowings 9359855192
1.23986E+11

Liquidity ratio 0.451617899

Scenario 1 Scenario 2 Scenario 3

Magnitude of change 10% 20% 30%

Liquid assets 55994438894 55994438894 55994438894

Liquid liabilities 1.23986E+11 1.23986E+11 1.23986E+11
Liquidity ratios (%) 45.16178988 45.16178988 45.16178988
Fall in liquid liabilities 12398631463 24797262925 37195894388
Revised liquid assets 43595807431 31197175969 18798544506
Revised liquid liabilities 1.11588E+11 99189051702 86790420239

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Revised liquidity ratios 39.06865542 31.45223735 21.65969983
Fall in liquidity ratios 6.093134458 13.70955253 23.50209005

There is dramatic fall in the liquidity ratio after the shock in 3 percentages.

Shock Revised CAR/ Liquidity Ratio

Scenario 1 Scenario 2 Scenario 3
Credit Shock 0.087375286 0.084330656 0.063010827
Equity Price Shock 0.112301892 0.112107376 0.111718089
Interest Rate Shock 0.112301892 0.112107376 0.111718089
Exchange Rate Shock 0.111692718 0.110887657 0.110081136
Liquidity Shock 39.06865542 31.45223735 21.65969983
Cumulative Risk of All Shocks 0.115114853 0.138522409 0.145335618

We can conclude from the table that the bank is very much vulnerable to the credit risk while it can
survive most of the other shocks.

The bank should take more precautionary measurements to avoid the lose in capital, Risk weighted
Assets and CAR due to the shock.

The bank also should keep an eye on the other shocks if any modifications of policy are needed.

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 Chapter 9: Findings & Recommendation

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Important Findings
1. Bank need to increase its quality of customers service.
2. Training & Development officers & higher Executives are required.
3. Need to speed up processing of loan application.
4. JBL provides high quality financial services to strengthen the well being and success of
individual industries & business communities.
5. JBL is a national bank not multinational bank. So for the international transaction, it has to
take help of others multinational banks.
6. Inter Banking Process is so fast and clean which as one of the reasons of success,
7. Flora On-line banking software is used by JBL and this is quite difficult to use for the
employee, as the employees are not well trained.
8. Present profit is high enough but a great scope to enhance this amount with some changes
9. Clients are not conscious about the new product of tins bank.

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Recommendations
o The entire department should be well informed regarding their goals and objectives.
It is essential to execute company objectives into individual target.
o There must be a clear allocation of responsibilities authority and accountability.
o The bank should introduce more promotional activities.
o The bank should take the initiative to develop an effective research and development
center to get innovative ideas to capture the competitive market.
o Now a days on-line banking is not a very uncommon service totally for private
commercial bank. JBI, provide On-line banking service but they take source charge
for it, if the customers do not use his/her mother branch. To encourage customers to
use On-line banking facility this service charge should not be taken charge from the
customers.
o Customer service of bank has a greater impact on its customer. To provide smarter
customer service they need a call center department is very popular now a day.
o Foreign exchange operations of other banks are more dynamic and less time
consuming. JBL should take some initiative to compete with those banks.
o Selection and training must be focused to develop and exploit leaders hip and
entrepreneurial qualities within the work place.
o JBL is not providing the Credit Card facilities, which is available in many other banks.So,
we think the bank should introduce this system very earlier.

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 Chapter10: Conclusion

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Conclusion
Jamuna Bank Limited is a popular and profitable bank in Bangladesh. It has been giving service to
customer since 2001 properly. The bank has already developed good image and goodwill among
its clients by offering excellent services. Today, the whole Banking sector is facing a tough
competition and challenge. In this situation our Branch is in good position than any other Bank of
its locality and day-by-day we are increasing our activities & goodwill.
With a bulk of qualified and experienced human resource, Jamuna Bank Limited can exploit any
opportunity in the banking sector. It is pioneer in introducing many new products and services in
the banking sector of the country. Moreover, in the overall-banking sector, it is unmatched with
any other banks because of its wide spread branch networking thought the country.
This report tries to figure out most of the indicators of problems and strengths of Jamuna Bank
Limited as a valid pretender in the competitive banking sector of Bangladesh. A severe cut throat
competition is going on currently in this sector and thats why Jamuna Bank Limited has to work
out with different dimensions like product diversification, market forecasting, proactive
activities undertaken by Jamuna Bank Limited and some suggestion to get rid of the predicaments
that exist.
JAMUNA Bank is trying to create an overall climate for the introduction of large scale Islamic
Banking environment in Bangladesh. It has taken up a program to spread its operations
throughout the country as early as possible. It is playing a significant role in various fields of
economy such as industry, agriculture, trade and commerce, transportation and many other fields.
It is acting as trigger to boost the economy by creating employment opportunity. It also
undertakes various welfare programs for the benefit of the society.

So it can be said that JAMUNA Bank was a dream in the past, it is the reality in the present and it
will be a concrete symbol of hope and aspirations for the future.

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 Bibliography:

Jamuna Bank Ltd.

Annual Report.pdf

Stress Testing of Banks of Bangladesh - Google Search

www.google.com

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 Appendix:

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